<PAGE>
[LOGO OF FIFTH THIRD FUNDS] Fifth Third Funds
[Picture]
Fifth Third Funds Quality Growth Fund
Stock and Bond Mutual Funds Equity Income Fund
Investment B Shares Pinnacle Fund
Working hard to build your wealth! Balanced Fund
Mid Cap Fund
International Equity Fund
Technology Fund
Quality Bond Fund
Ohio Tax Free Bond Fund
Prospectus
September 25, 2000
The Securities and Exchange Commission has not approved or disapproved the
shares described in this prospectus or determined whether this prospectus is
accurate or complete. Any representation to the contrary is a criminal offense.
<PAGE>
Fifth Third Funds Table of Contents
Objectives, Strategies and Risks
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3 Overview
4 Stock Funds
18 Bond Fund
Shareholder Fees and Fund Expenses
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22 Fee Tables
24 Expense Examples
Additional Information About the Funds' Investments
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26
Fund Management
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28 Investment Advisors and Subadvisor
29 Portfolio Managers
30 Fund Administration
Shareholder Information
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31 Purchasing and Selling Fund Shares
31 Purchasing and Adding to Your Shares
32 Selling Your Shares
33 Exchanging Your Shares
33 Distribution Arrangements/Sales Charges
35 Dividends and Capital Gains
35 Taxation
Financial Highlights
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37
Back Cover
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Where to learn more about Fifth Third Funds
2
<PAGE>
Objectives, Strategies and Risks
Overview
This section provides important information about each of the stock and bond
funds (the "Funds"), each a separate series of Fifth Third Funds (the "Trust"),
including:
. the investment objective
. principal investment strategies
. principal risks, and
. volatility and performance information
All Funds except Fifth Third Pinnacle Fund are managed by Fifth Third Bank.
Fifth Third Pinnacle Fund is managed by Heartland Capital Management, Inc.
("Heartland"). Morgan Stanley Asset Management, Inc. ("MSAM") serves as
investment subadvisor to Fifth Third International Fund.
Like all mutual funds (other than money market funds), share prices of the
Funds may rise and fall in value and you could lose money. There is no
guarantee that any Fund will achieve its objective.
3
<PAGE>
Fifth Third Quality Growth Fund
[GRAPHIC]
Fundamental Growth of capital. Income is a secondary objective.
Objective
Principal Under normal market conditions, the Fund invests at least
Investment 65% of total assets in common stocks of high quality
Strategies growth companies.
High quality growth companies are companies, in the
opinion of Fifth Third Bank, that offer excellent
prospects for consistent, above-average revenue and
earnings growth. To determine whether a company is of high
quality, the Fund generally looks for a strong record of
earnings growth, as well as its current ratio of debt to
capital and the quality of its management. Most of the
companies in which the Fund invests are U.S. companies
with a market capitalization greater than $100 million.
To achieve its secondary objective of income, the Fund may
rely on dividend income that it receives from common
stocks and interest income it receives from other
investments, including convertible securities. The Fund
reserves the right to invest up to 35% of total assets in
those securities. At the time of investment, those
securities are rated investment grade, that is, in the BBB
major rating category or higher by Standard & Poor's(R) or
in the Baa major rating category or higher by Moody's, or
their unrated equivalents.
Principal The principal risks of investing in the Fund include the
Investment Risks risks of investing in equity securities, such as the risk
of sudden and unpredictable drops in value and the
potential for extended periods of lackluster performance.
An investment in Stocks that pay regular dividends tend to be less volatile
the Fund is not than stocks that do not. A regular dividend provides
a deposit of investors some return of their investment, to an extent,
Fifth Third Bank supporting the stock's price, even during periods when the
or any other prices of equity securities generally are falling.
bank and is not However, dividend-paying stocks, especially those that pay
insured or significant dividends, also tend to appreciate less
guaranteed by quickly than stocks of companies in emerging markets,
the FDIC or any which tend to reinvest most profits into research,
other government development, plant and equipment to accommodate expansion.
agency.
Generally, growth oriented stocks may be sensitive to
market movements. The prices of growth stocks tend to
reflect future expectations, and when those expectations
change or are not met, share prices generally fall. Stocks
of smaller companies tend to be volatile and more
sensitive to long-term market declines than stocks of
larger companies, in part because they generally do not
have the financial resources that larger companies have.
Prices of convertible securities, which include bonds and
preferred stocks, may be affected by the prices of the
underlying security, which generally is common stock.
4
<PAGE>
Fifth Third Quality Growth Fund
[GRAPHIC]
Volatility and Performance Information
The bar chart and table provide an indication of the risks of an investment in
the Fund by showing its performance from year to year and over time, as well as
compared to a broad-based securities index. The Standard and Poor's 500
Composite Stock Price Index (the "S&P 500") is an unmanaged index of 500
selected common stocks, most of which are listed on the New York Stock Exchange.
The returns assume that Fund distributions have been reinvested.
Past performance does not indicate how the Fund will perform in the future.
[GRAPH]
Year-by-Year Total Returns as of 12/31 For Investment A Shares/1/
1990 5.12%
1991 34.38%
1992 8.03%
1993 -1.06%
1994 0.07%
1995 31.59%
1996 23.68%
1997 32.70%
1998 30.05%
1999 23.51%
The bar chart above does not reflect the impact
of any applicable sales charges or account fees,
which would reduce returns.
Best quarter: Q4 1998 28.18%
Worst quarter: Q4 1987 -21.61%
Year to Date Return (12/31/99 to 3/31/00) 7.22%
-------------------------
Average
Annual
Total
Returns
(for the
periods
ended
December
31,
1999)
----------
<TABLE>
<CAPTION>
Inception Date Past Year Past 5 Years Past 10 Years Since Inception
----------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Investment A Shares/1 1/1/83 17.95% 27.06% 17.48% 17.58%
/ (with 4.50% sales
charge)
----------------------------------------------------------------------
<CAPTION>
(Since 12/31/82)
<S> <C> <C> <C> <C> <C>
S&P 500(R) Index 21.04% 28.55% 18.20% 18.35%
</TABLE>
--------------------------------------------------------------------------------
------
/1/Return information is for Investment A shares, a class of shares of the
Fund not offered by this Prospectus. Investment A and Investment B shares,
however, would have substantially similar annual returns because the shares
are invested in the same portfolio of securities. The annual returns would
differ to the extent that the classes do not have the same expenses. The
annual returns also would differ to the extent that different sales charges
would apply.
5
<PAGE>
Fifth Third Equity Income Fund
[GRAPHIC]
Fundamental High level of current income consistent with capital
Objective appreciation.
Principal Under normal market conditions, the Fund invests at least
Investment 65% of total assets in common stocks of large-
Strategies capitalization companies, many of which are expected to
pay regular dividends, and convertible debt securities
that at the time of investment, have above-average current
yields. Large-capitalization companies have market
capitalizations no smaller than 90% of the market
capitalizations of the companies in the S&P 500 Index.
The Fund's investment approach generally is to purchase
stocks of companies, which demonstrate industry
leadership, sound management and long-term earnings
growth, and which have attractive dividend yields or the
prospects of increasing dividend rates. At the time of
investment, those convertible debt securities in which the
Fund invests are rated investment grade (that is, in the
BBB major rating category or higher by Standard & Poor's
or the Baa major rating category or higher by Moody's, or
their unrated equivalents).
The Fund reserves the right to invest up to 35% of total
assets in other securities, such as government and non-
convertible corporate bonds.
Principal The principal risks of investing in the Fund include the
Investment Risks risks of investing in equities and in debt securities. The
risks of investing in equity securities include the risk
of sudden and unpredictable drops in value or periods of
lackluster performance. The risks of investing in debt
securities include the tendency of bond prices to fall as
interest rates rise.
An investment in Significant investment in large companies also creates
the Fund is not various risks for the Fund. For instance, larger, more
a deposit of established companies tend to operate in mature markets,
Fifth Third Bank which often are very competitive. Larger companies also do
or any other not tend to respond quickly to competitive challenges,
bank and is not especially to challenges caused by technology and consumer
insured or preferences.
guaranteed by
the FDIC or any Stocks that pay regular dividends tend to be less volatile
other government than stocks that do not. A regular dividend provides
agency. investors some return of their investment, to an extent,
supporting the stock's price, even during periods when the
prices of equity securities generally are falling.
However, dividend-paying stocks, especially those that pay
significant dividends, also tend to appreciate less
quickly than stocks of companies in emerging markets,
which tend to reinvest profits into research, development,
plant and equipment to accommodate expansion.
The tendency of bond prices to fall when interest rates
rise becomes more significant as the average maturity of
the Fund's bond portfolio increases. A less significant
risk of bond investing is that an issuer could default on
principal or interest payments. Prices of convertible
securities, which include bonds and preferred stocks, may
be affected by the prices of the underlying security,
which generally is common stock.
6
<PAGE>
Fifth Third Equity Income Fund
[GRAPHIC]
Volatility and Performance Information
The bar chart and table provide an indication of the risks of an investment in
the Fund by showing its performance from year to year and over time, as well as
compared to a broad-based securities index. The Standard and Poor's 500
Composite Stock Price Index (the "S&P 500") is an unmanaged index of 500
selected common stocks, most of which are listed on the New York Stock Exchange.
The returns assume that Fund distributions have been reinvested.
Past performance does not indicate how the Fund will perform in the future.
[GRAPH]
Year-by-Year Total Returns as of 12/31 For Investment A Shares/1/
1990 -1.21%
1991 29.07%
1992 4.61%
1993 0.26%
1994 -0.65%
1995 30.73%
1996 16.83%
1997 38.15%
1998 17.82%
1999 -4.87%
The bar chart above does not reflect the
impact of any applicable sales charges or
account fees, which would reduce returns.
Best quarter: Q1 1986 16.67%
Worst quarter: Q4 1987 -19.80%
Year to Date Return (12/31/99 to 3/31/00) -6.84%
------------------------
Average
Annual
Total
Returns
(for the
periods
ended
December
31,
1999)
----------
<TABLE>
<CAPTION>
Inception Date Past Year Past 5 Years Past 10 Years Since Inception
----------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Investment A Shares/1 1/1/83 -9.17% 17.70% 11.62% 14.03%
/ (with 4.50% sales
charge)
----------------------------------------------------------------------
<CAPTION>
(Since 12/31/82)
<S> <C> <C> <C> <C>
S&P 500(R) Index 21.04% 28.55% 18.20% 18.35%
</TABLE>
--------------------------------------------------------------------------------
------
/1/Return information is for Investment A shares, a class of shares of the
Fund not offered by this Prospectus. Investment A and Investment B shares,
however, would have substantially similar annual returns because the shares
are invested in the same portfolio of securities. The annual returns would
differ to the extent that the classes do not have the same expenses. The
annual returns also would differ to the extent that different sales charges
would apply.
7
<PAGE>
Fifth Third Pinnacle Fund
[GRAPHIC]
Fundamental Long-term capital appreciation.
Objective
Principal Under normal market conditions, the Fund invests at least
Investment 65% of total assets in common stocks and convertible
Strategies securities that have the potential for long-term growth.
In selecting stocks, the Fund looks primarily at companies
that have historically reported better corporate earnings
than the earnings that market analysts have predicted.
Generally, those companies are expected to grow faster
than the economy as a whole. Those companies also tend to
be established companies that appear to be capable of
sustained growth. Although most of those companies are
large, the Fund may invest in stocks of companies of any
size. Current income is not a factor in stock selection.
The Fund reserves the right to invest up to 35% of total
assets in other securities, such as government and
corporate bonds.
Principal The principal risks of investing in the Fund include the
Investment Risks risks of investing in equity securities, such as the risk
of sudden and unpredictable drops in value or periods of
lackluster performance.
An investment in Generally, growth oriented stocks may be sensitive to
the Fund is not market movements. The prices of growth stocks tend to
a deposit of reflect future expectations, and when those expectations
Fifth Third Bank are not met, prices generally fall.
or any other
bank and is not Significant investment in large companies also creates
insured or various risks for the Fund. For instance, larger, more
guaranteed by established companies tend to operate in mature markets,
the FDIC or any which often are very competitive. Larger companies also do
other government not tend to respond quickly to competitive challenges,
agency. especially to changes caused by technology or consumer
preferences.
8
<PAGE>
Fifth Third Pinnacle Fund
[GRAPHIC]
Volatility and Performance Information
The bar chart and table provide an indication of the risks of an investment in
the Fund by showing its performance from year to year and over time, as well as
compared to a broad-based securities index. The Standard and Poor's 500
Composite Stock Price Index (the "S&P 500") is an unmanaged index of 500
selected common stocks, most of which are listed on the New York Stock Exchange.
The returns assume that Fund distributions have been reinvested.
Past performance does not indicate how the Fund will perform in the future.
[GRAPH]
Year-by-Year Total Returns as of 12/31 For Investment A Shares/1/,/2/
1990 -3.14%
1991 39.87%
1992 -0.73%
1993 3.31%
1994 -1.12%
1995 35.40%
1996 22.44%
1997 35.43%
1998 32.83%
1999 11.37%
The bar chart above does not reflect the
impact of any applicable sales charges or
account fees, which would reduce returns.
Best quarter: Q4 1998 24.87%
Worst quarter: Q3 1990 -15.34%
Year to Date Return (12/31/99 to 3/31/00) 3.51%
------------------------
Average
Annual
Total
Returns
(for the
periods
ended
December
31,
1999)
----------
<TABLE>
<CAPTION>
Inception Date Past Year Past 5 Years Past 10 Years Since Inception
-------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Investment A 3/4/85 6.34% 25.97% 15.86% 16.41%
Shares/1/ /2
/ (with 4.50% sales
charge)
-------------------------------------------------------------------
(Since 2/28/85)
S&P 500(R) Index 21.04% 28.55% 18.20% 18.46%
</TABLE>
--------------------------------------------------------------------------------
------
/1/Return information is for Investment A shares, a class of shares of the
Fund not offered by this Prospectus. Investment A and Investment B shares,
however, would have substantially similar annual returns because the shares
are invested in the same portfolio of securities. The annual returns would
differ to the extent that the classes do not have the same expenses. The
annual returns also would differ to the extent that different sales charges
would apply.
/2/For periods prior to March 6, 1998, reflects performance of Investment A
shares of The Pinnacle Fund. On March 6, 1998, The Pinnacle Fund, a
registered open-end investment company managed by Heartland Capital
Management, Inc., was merged into Fifth Third Pinnacle Fund.
9
<PAGE>
Fifth Third Balanced Fund
[GRAPHIC]
Fundamental Capital appreciation and income.
Objective
Principal Under normal market conditions, the Fund uses an asset
Investment allocation strategy, investing in three primary categories
Strategies of securities: stocks, bonds and money market instruments.
The Fund intends to invest between 50% to 75% of total
assets in common and preferred stocks and convertible
preferred stocks and convertible corporate bonds, 25% to
40% of total assets in non-convertible corporate bonds and
U.S. government securities and 0% to 25% in money market
instruments. By analyzing financial trends and market
conditions, the Fund may adjust its allocations from time
to time. However, the Fund takes a moderate to long-term
view of changing market conditions, and tends to avoid
large, sudden shifts in the composition of its portfolio.
The equity position of the Fund tends to be invested in
high quality growth companies that are either large or
mid-sized. While greater emphasis is placed on larger
companies, that is, companies with market capitalizations
comparable to the market capitalization of those companies
in the S&P 500 Index, the Fund may favor smaller
companies, that is, companies with market capitalization
comparable to the market capitalizations of those
companies in the S&P Mid Cap 400 Index, when Fifth Third
Bank believes that market conditions favor securities of
smaller companies.
The fixed income portion of the Fund tends to be invested
in high quality bonds with maturities ranging from
overnight to thirty years in length. The Fund will attempt
to maintain the average maturity of the bond portion of
the Fund from between 5 and 9 years. At the time of
investment, the corporate bonds and convertible securities
in which the Fund invests are rated investment grade, that
is, in the BBB major rating category or higher by Standard
& Poor's or in the Baa major rating category or higher by
Moody's, or their unrated equivalents.
Principal The principal risks of investing in the Fund include the
Investment Risks risks associated with following an asset allocation
strategy, such as the risk that the Fund will not
correctly anticipate the relative performance of the
different asset classes in which it may invest.
An investment To the extent the Fund invests in stocks and convertible
in the Fund securities, it assumes the risks of equity investing,
is not a including sudden and unpredictable drops in value and
deposit of periods of lackluster performance.
Fifth Third
Bank or any Significant investments in large companies also creates
other bank various risks for the Fund. For instance, larger, more
and is not established companies tend to operate in mature markets,
insured or which often are very competitive. Larger companies also do
guaranteed by not tend to respond quickly to competitive challenges,
the FDIC or especially to changes caused by technology or consumer
any other preferences.
government
agency. To the extent the Fund invests in bonds, it assumes the
risks of bond investing, including the tendency of prices
to fall as interest rates rise. That risk is greater for
bonds with longer maturities. Less significant is the risk
that a bond issuer will default on principal or interest
payments. Prices of convertible securities, which include
bonds and preferred stocks, may be affected by the prices
of the underlying security, which generally is common
stock.
10
<PAGE>
Fifth Third Balanced Fund
[GRAPHIC]
Volatility and Performance Information
The bar chart and table provide an indication of the risks of an investment in
the Fund by showing its performance from year to year and over time, as well as
compared to two broad-based securities indices. The Standard and Poor's 500
Composite Stock Price Index (the "S&P 500") is an unmanaged index of 500
selected common stocks, most of which are listed on the New York Stock Exchange.
The Lehman Brothers Aggregate Bond Index (the "LBAB Index") is an unmanaged
index generally representative of the performance of the bond market as a whole.
The returns assume that Fund distributions have been reinvested.
[GRAPH]
Year-by-Year Total Returns as of 12/31 For Investment A Shares/1/
1990 9.95%
1991 30.13%
1992 9.88%
1993 1.74%
1994 -1.03%
1995 26.53%
1996 14.23%
1997 24.08%
1998 17.87%
1999 15.30%
Past performance does not indicate how the Fund will perform in the future.
The bar chart above does not reflect the
impact of any applicable sales charges or
account fees, which would reduce returns.
Best quarter: Q4 1998 17.81%
Worst quarter: Q4 1987 -12.33%
Year to Date Return (12/31/99 to 3/31/00) 5.51%
------------------------
Average
Annual
Total
Returns
(for the
periods
ended
December
31,
1999)
----------
<TABLE>
<CAPTION>
Inception Date Past Year Past 5 Years Past 10 Years Since Inception
-----------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Investment A Shares/1 1/1/83 10.12% 18.41% 13.94% 15.97%
/ (with 4.50% sales
charge)
-----------------------------------------------------------------------
(Since 12/31/82)
S&P 500(R) Index 21.04% 28.55% 18.20% 18.35%
-----------------------------------------------------------------------
(Since 12/31/82)
LBAB Index 0.83% 7.73% 7.69% 9.50%
</TABLE>
--------------------------------------------------------------------------------
------
/1/Return information is for Investment A shares, a class of shares of the
Fund not offered by this Prospectus. Investment A and Investment B shares,
however, would have substantially similar annual returns because the shares
are invested in the same portfolio of securities. The annual returns would
differ to the extent that the classes do not have the same expenses. The
annual returns also would differ to the extent that different sales charges
would apply.
11
<PAGE>
Fifth Third Mid Cap Fund
[GRAPHIC]
Fundamental Growth of capital. Income is a secondary objective.
Objective
Principal Under normal market conditions, the Fund expects to invest
Investment at least 65% of total assets in common stocks of mid cap
Strategies companies. Mid cap companies are companies with market
capitalizations no larger than 110%, and no smaller than
90% of the market capitalizations of the companies in the
Standard & Poor's Mid Cap 400 Index (generally, between
$500 million and $10 billion).
The Fund intends to invest in companies that have the
potential for long-term revenue and earnings growth, solid
balance sheets and may have the potential to pay
dividends. The Fund generally selects its investments
using traditional research techniques, which include
projections of earnings and dividend growth and the
expected volatility of the markets in which the companies
do business.
To achieve its secondary objective of income, the Fund
relies on dividend and interest income. The Fund may
invest in up to 35% of total assets in common stocks of
large cap companies, many of which pay dividends, as well
as convertible securities which pay interest. At the time
of investment, those convertible securities are rated
investment grade, that is, in the BBB major rating
category or higher by Standard & Poor's, or in the Baa
major rating category or higher by Moody's, or their
unrated equivalents. The Fund may also invest in small cap
stocks.
Principal The principal risks of investing in the Fund include the
Investment risks of investing in equity securities, such as the risk
Risks of sudden and unpredictable drops in value or periods of
lackluster performance.
An investment in Stocks of medium-sized companies can be more sensitive to
the Fund is not long market declines than larger companies, in part
a deposit of because they generally do not have the financial resources
Fifth Third Bank that larger companies have. Generally, growth oriented
or any other stocks are sensitive to market movements. The prices of
bank and is not growth stocks tend to reflect future expectations, and
insured or when those expectations change or are not met, share
guaranteed by prices generally fall.
the FDIC or any
other government Stocks that pay regular dividends tend to be less volatile
agency. than stocks that do not. A regular dividend provides
investors some return on their investment, to an extent,
supporting a stock's price, even during periods when
prices of equity securities are falling. However, dividend
paying stocks, especially those that pay significant
dividends, also tend to appreciate less quickly than
stocks of companies in emerging markets, which tend to
reinvest profits into research, development, plant and
equipment to accommodate expansion.
To the extent the Fund invests in bonds, it assumes the
risks of bond investing, including the tendency of prices
to fall as interest rates rise. That risk is greater for
bonds with longer maturities. Less significant is the risk
that a bond issuer will default on principal or interest
payments, which may cause a loss for the Fund. Prices of
convertible securities, which include bonds and preferred
stocks, may be affected by the prices of the underlying
security, which generally is common stock.
12
<PAGE>
Fifth Third Mid Cap Fund
[GRAPHIC]
Volatility and Performance Information
The bar chart and table provide an indication of the risks of an investment in
the Fund by showing its performance from year to year and over time, as well as
compared to a broad-based securities index. The Standard and Poor's Mid Cap 400
Index (the "S&P Mid Cap 400") is an unmanaged index generally representative of
the performance of the mid cap sector of the U.S. stock market as a whole.
The returns assume that Fund distributions have been reinvested.
Past performance does not indicate how the Fund will perform in the future.
[GRAPH]
Year-by-Year Total Returns as of 12/31 For Investment A Shares/1/
1990 1.84%
1991 46.01%
1992 5.05%
1993 1.38%
1994 1.54%
1995 26.03%
1996 17.59%
1997 32.64%
1998 3.29%
1999 16.77%
The bar chart above does not reflect the
impact of any applicable sales charges or
account fees, which would reduce returns.
Best quarter: Q4 1999 23.18%
Worst quarter: Q4 1987 -20.37%
Year to Date Return (12/31/99 to 3/31/00) 13.14%
-------------------------
Average
Annual
Total
Returns
(for the
periods
ended
December
31,
1999)
----------
<TABLE>
<CAPTION>
Inception Date Past Year Past 5 Years Past 10 Years Since Inception
--------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Investment A Shares/1 1/1/85 11.54% 17.75% 13.79% 15.23%
/ (with 4.50% sales
charge)
--------------------------------------------------------------------------
(Since 12/31/84)
S&P Mid Cap 400(R) Index 14.72% 23.05% 17.32% 18.33%
</TABLE>
--------------------------------------------------------------------------------
------
/1/Return information is for Investment A shares, a class of shares of the
Fund not offered by this Prospectus. Investment A and Investment B shares,
however, would have substantially similar annual returns because the shares
are invested in the same portfolio of securities. The annual returns would
differ to the extent that the classes do not have the same expenses. The
annual returns also would differ to the extent that different sales charges
would apply.
13
<PAGE>
Fifth Third International Equity Fund
[GRAPHIC]
Fundamental Long-term capital appreciation.
Objective
Principal Under normal market conditions, the Fund invests at least
Investment 65% of total assets in equity securities of non-U.S.
Strategies companies. The companies whose securities are represented
in the Fund's portfolio are located in at least three
countries other than the U.S.
The Fund uses a top-down, bottom-up strategy of selecting
its portfolio. It allocates assets among geographic
regions and individual countries, investing primarily in
those areas that it believes have the greatest potential
for growth as well as stable exchange rates. Although the
Fund invests primarily in established foreign securities
markets, from time to time, it may also invest in emerging
markets. In selecting stocks in a specific country, the
Fund generally attempts to replicate a broad market index,
which usually is the Morgan Stanley Capital International
Index for that country. From time to time, however, the
Fund may overweight or underweight industries represented
in that index.
The Fund reserves the right to invest up to 35% of total
assets in other securities, such as equity securities of
U.S. companies, U.S. and non-U.S. government bonds and
U.S. and non-U.S. corporate bonds.
Principal The principal risks of investing in the Fund include the
Investment risks of investing in equity securities, such as, the risk
Risks of sudden and unpredictable drops in value or periods of
lackluster performance.
An investment in
the Fund is not Stocks of foreign companies present additional risks for
a deposit of U.S. investors. Stocks of international companies tend to
Fifth Third Bank be less liquid and more volatile than their U.S.
or any other counterparts, in part because accounting standards and
bank and is not market regulations tend to be less standardized and
insured or economic and political climates less stable. Fluctuations
guaranteed by in exchange rates also may reduce or eliminate gains or
the FDIC or any create losses. These risks usually are higher in emerging
other government markets, such as most countries in Africa, Asia, Latin
agency. America and the Middle East. To the extent that the Fund
invests in those kinds of stocks or in those areas, it
will be exposed to the risks associated with those kinds
of investments.
14
<PAGE>
Fifth Third International Equity Fund
[GRAPHIC]
Volatility and Performance Information
The bar chart and table provide an indication of the risks of an investment in
the Fund by showing its performance from year to year and over time, as well as
compared to a broad-based securities index. The Morgan Stanley Capital
International EAFE Index (the "EAFE Index") is an unmanaged index generally
representative of the performance of the market for foreign stocks as a whole.
The returns assume that Fund distributions have been reinvested.
Past performance does not indicate how the Fund will perform in the future.
[GRAPH]
Year-by-Year Total Returns as of 12/31 For Investment A Shares/1/
1995 11.29%
1996 8.54%
1997 7.96%
1998 19.34%
1999 25.74%
The bar chart above does not reflect the
impact of any applicable sales charges or
account fees, which would reduce returns.
Best quarter: Q4 1999 17.70%
Worst quarter: Q3 1998 -11.88%
Year to Date Return (12/31/99 to 3/31/00) -
2.43%
-------------------------
Average
Annual
Total
Returns
(for the
periods
ended
December
31,
1999)
----------
<TABLE>
<CAPTION>
Inception Date Past Year Past 5 Years Past 10 Years Since Inception
---------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Investment A Shares/1 8/18/94 20.10% 13.33% N/A 11.04%
/ (with 4.50% sales
charge)
---------------------------------------------------------------------
(Since 8/31/94)
EAFE Index 27.30% 13.15% N/A 11.41%
</TABLE>
--------------------------------------------------------------------------------
------
/1/Return information is for Investment A shares, a class
of shares of the Fund not offered by this Prospectus.
Investment A and Investment B shares, however, would
have substantially similar annual returns because the
shares are invested in the same portfolio of securities.
The annual returns would differ to the extent that the
classes do not have the same expenses. The annual
returns also would differ to the extent that different
sales charges would apply.
15
<PAGE>
Fifth Third Technology Fund
[GRAPHIC]
Fundamental Long-term capital appreciation.
Objective
Principal Under normal market conditions, the Fund invests at least
Investment 65% of total assets in the equity securities of U.S. and,
Strategies to a lesser extent, foreign technology companies.
Technology companies are those that are engaged in
developing products, processes or services that provide
technological advances. Those companies may be in any of a
variety of industries, such as computer hardware,
software, electronic components and systems,
telecommunications, Internet, and media and information
services companies. They also may include companies in
more traditional industries, such as certain securities
brokers and consumer products retailers, that have
extensively used technological advances to develop new or
to improve products or processes.
The Fund generally takes a growth approach to selecting
stocks, looking for established companies that appear
poised to grow because of new products, technology or
management, as well as new companies that are in the
developmental stage. Factors in identifying these
companies may include the quality of management, financial
strength, a strong position relative to competitors and a
stock price that appears reasonable relative to its
expected growth rate. The Fund may invest in companies of
any size, including small, high growth companies. The Fund
also may invest in companies whose shares are being, or
recently have been, offered to the public for the first
time.
The Fund reserves the right to invest up to 35% of total
assets in other securities, such as, corporate bonds and
government securities.
Principal The Fund, by concentrating in technology stocks, assumes
Investment the risks of holding technology stocks. For example,
Risks technology stocks tend to:
An investment in . fluctuate in price more widely and rapidly than the
the Fund is not market as a whole
a deposit of
Fifth Third Bank . underperform other types of stocks or be difficult to
or any other sell when the economy is not robust, during market
bank and is not downturns, or when technology stocks are out of favor
insured or
guaranteed by . decline in price due to sector specific developments
the FDIC or any
other government . be more vulnerable than most stocks to the obsolescence
agency. of existing technology, expired patents, short product
cycles, price competition, market saturation and new
market entrants.
To the extent that the Fund invests in mid cap and small
cap stocks, it takes on additional risks. For instance,
mid cap and small cap stocks tend to be less liquid and
more volatile than large cap stocks. Smaller companies
tend to be unseasoned issuers with new products and less
experienced management.
The prices of most growth stocks are based on future
expectations. As a result, those stocks tend to be more
sensitive than value stocks to negative earnings surprises
and changes in internal grow rates. Growth stocks in
particular may underperform during periods when the market
favors value stocks. The Fund's performance may also
suffer if certain stocks do not perform as the portfolio
management team expected.
Through active trading, the Fund may have a high portfolio
turnover rate, which can mean higher taxable distributions
and lower performance due to increased brokerage costs.
16
<PAGE>
Fifth Third Technology Fund
[GRAPHIC]
Volatility and Performance Information
The Fund is a new Fund, and as of the date of this prospectus, it did not have
a performance history of at least one year.
17
<PAGE>
Fifth Third Quality Bond Fund
[GRAPHIC]
Fundamental High current income. Capital growth is a secondary
Objective objective.
Principal Under normal market conditions, the Fund invests at least
Investment 65% of total assets in U.S. Treasury bills, notes and
Strategies bonds, securities of U.S. Government agencies and
instrumentalities and corporate debt securities, including
mortgage-backed securities. Mortgage-backed securities
generally offer higher interest rates than many types of
debt securities. At the time of investment, each of those
securities has a remaining maturity or average life of 30
years or less. Corporate bonds are rated as investment
grade. Investment grade securities are securities rated in
the BBB major rating category or higher by Standard &
Poor's, or in the Baa major rating category by Moody's, or
their unrated equivalents.
The Fund is managed for growth of capital but with less
volatility than the volatility generally associated with a
portfolio composed solely of stocks. In selecting
portfolio securities, the Fund generally considers, among
other things, remaining maturity, stated interest rates,
the price of the security, as well as the financial
condition of the issuer and its prospects for long-term
growth of earnings and revenues.
The Fund reserves the right to invest up to 35% of total
assets in other securities, such as high yield bonds.
The principal risks of investing in the Fund include the
risks of investing in debt securities, such as, the
tendency of bond prices to fall when interest rates rise
and the risk of an issuer defaulting on its obligations of
paying principal and interest. The prices of long-term
bonds (bonds with a remaining maturity of at least 10
years) tend to be more volatile then the prices of bonds
with a shorter remaining maturity.
Principal Generally, the price of a bond moves in the opposite
Investment direction from interest rates. New bonds issued after a
Risks rise in rates offer higher yields to investors. An
existing bond with a lower yield can appear attractive to
An investment in investors by selling it at a lower price. This process
the Fund is not works in reverse as well, as interest rates fall, the
a deposit of price of a bond tends to increase.
Fifth Third Bank
or any other The prices of mortgage-backed securities also are affected
bank and is not by changes in interest rates. Although mortgage-backed
insured or securities tend to pay higher interest rates, they also
guaranteed by carry additional risk. For instance, their prices and
the FDIC or any yields typically assume that the securities will be
other government redeemed at a given time before maturity. When interest
agency. rates fall substantially, they usually are redeemed early
because the underlying mortgages often are prepaid. The
Fund would then have to reinvest the proceeds it receives
because of those redemptions at a lower rate. The price or
yield of mortgage-backed securities also may fall if they
are redeemed after that date.
From time to time, the Fund's portfolio could be
significantly invested in some of the highest quality debt
securities, which tend not to provide the same opportunity
for current income or capital growth as lower grade
securities, or in BBB/Baa rated debt securities, which
generally have more speculative investment characteristics
than higher grade debt securities.
18
<PAGE>
Fifth Third Quality Bond Fund
[GRAPHIC]
Volatility and Performance Information
The bar chart and table provide an indication of the risks of an investment in
the Fund by showing its performance from year to year and over time, as well as
compared to a broad-based securities index. The Lehman Brothers Aggregate Bond
Index ("LBAB") is an unmanaged index generally representative of the performance
of the bond market as a whole.
The returns assume that Fund distributions have been reinvested.
Past performance does not indicate how the Fund will perform in the future.
[GRAPH]
Year-by-Year Total Returns as of 12/31 For Investment A Shares/1/
1990 8.04%
1991 14.65%
1992 6.00%
1993 7.52%
1994 -3.90%
1995 17.18%
1996 1.85%
1997 8.20%
1998 8.45%
1999 -2.34%
The bar chart above does not reflect the impact of any applicable sales
charges or account fees, which would reduce returns.
Best quarter: Q2 1985 9.19%
Worst quarter: Q1 1994 -3.16%
Year to Date Return (12/31/99 to
3/31/00) 1.46%
-----------------------------------
Average Annual Total Returns (for the
periods ended December 31, 1999)
-------------------------------------
<TABLE>
<CAPTION>
Inception Date Past Year Past 5 Years Past 10 Years Since Inception
---------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Investment A Shares/1 1/1/83 -6.77% 5.39% 5.84% 7.52%
/ (with 4.50% sales
charge)
---------------------------------------------------------------------
<CAPTION>
(Since 1/1/83)
<S> <C> <C> <C> <C> <C>
LBAB -0.83% 7.73% 7.69% 9.50%
</TABLE>
--------------------------------------------------------------------------------
------
/1/Return information is for Investment A shares, a class
of shares of the Fund not offered by this Prospectus.
Investment A and Investment B shares, however, would
have substantially similar annual returns because the
shares are invested in the same portfolio of securities.
The annual returns would differ to the extent that the
classes do not have the same expenses. The annual
returns also would differ to the extent that different
sales charges would apply.
19
<PAGE>
Fifth Third Ohio Tax Free Bond Fund
[GRAPHIC]
Fundamental Current income exempt from federal income tax and the
Objective personal income taxes imposed by the State of Ohio and
Ohio municipalities.
Principal Under normal market conditions, the Fund invests at least
Investment 80% of net assets in municipal securities which pay
Strategies interest that generally is exempt from personal income
taxes imposed by the State of Ohio and its municipalities.
The securities generally are issued by the State of Ohio,
as well as counties, cities, towns, territories and public
authorities in Ohio. At the time of investment, they are
rated as investment grade. Investment grade securities are
securities rated in the BBB major rating category or
higher by Standard & Poor's or in the Baa major rating
category by Moody's, or their unrated equivalents.
Among the securities in which the Fund may invest are
participation agreements, that is, interests in loans made
to municipalities, and general obligation and revenue
bonds of tax-exempt municipalities. The Fund also may
invest in limited obligation securities, from which
interest and principal payments are dependent on payments
from specific sources rather than the general obligations
of the government issuer. Limited obligation securities
include: lease obligations and installment contracts
(issued by government entities to obtain funds to lease or
acquire equipment and other property), project finance
obligations (issued in connection with the financing of
infrastructure projects) and industrial revenue bonds
(issued in the name of a public authority to finance
infrastructure used by a private entity).
In selecting portfolio securities, the Fund considers,
among other things, remaining maturity or average life,
stated interest rates and the price of a security. The
Fund attempts to manage volatility by maintaining a
portfolio with an intermediate average life.
Principal The principal risks of investing in the Fund include the
Investment risks of investing in debt securities, such as, the
Risks tendency of bond prices to fall when interest rates rise
and the risk of an issuer defaulting on its obligations of
An investment in paying principal and interest.
the Fund is not
a deposit of Generally, the price of a bond moves in the opposite
Fifth Third Bank direction from interest rates. New bonds issued after a
or any other rise in rates offer higher yields to investors. An
bank and is not existing bond with a lower yield can appear attractive to
insured or investors by selling it at a lower price. This process
guaranteed by works in reverse as well; as interest rates fall, the
the FDIC or any price of a bond tends to increase.
other government
agency. The Fund's performance may be affected by political and
economic factors at the state or regional level. Those
factors may include budgetary problems and declining tax
bases. Actual or proposed changes in tax rates also may
affect your net return. Limited obligation securities are
not general obligations of the issuers. As a result, in
the event of a default or termination, the security
holders may have limited recourse. Economic activity in
Ohio, as in many other states with a significant
industrial base, tends to be more cyclical than in other
states and in the nation as a whole.
This Fund is a non-diversified fund with regard to issuers
of securities. As a result, it does not have to invest in
as many issuers as a diversified fund and thus, could be
significantly affected by the performance of one or a
small number of issuers.
20
<PAGE>
Fifth Third Ohio Tax Free Bond Fund
[GRAPHIC]
Volatility and Performance Information
The bar chart and table provide an indication of the risks of an investment in
the Fund by showing its performance from year to year and over time, as well as
compared to a broad-based securities index. The Lehman Brothers Municipal Bond
Index ("LBMBI") is an unmanaged index that generally is representative of the
performance of the market for municipal bonds with intermediate maturities as a
whole.
The returns assume that Fund distributions have been reinvested.
Past performance does not indicate how the Fund will perform in the future.
[GRAPH]
Year by Year Total Returns as of 12/31 For Investment A Shares/1/
1990 5.70%
1991 9.46%
1992 6.24%
1993 6.71%
1994 (4.01%)
1995 13.72%
1996 3.48%
1997 6.92%
1998 5.50%
1999 (3.17%)
The bar chart above does not reflect the
impact of any applicable sales charges or
account fees, which would reduce returns.
Best quarter: Q1 1995 5.53%
Worst quarter: Q2 1987 -4.16%
Year to Date Return (12/31/99 to 3/31/00) 2.15%
Average Annual
Total Returns (for
the periods ended
December 31, 1999)
<TABLE>
<CAPTION>
Inception Date Past Year Past 5 Years Past 10 Years Since Inception
------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Investment A Shares/1/ 1/1/87 -7.52% 4.18% 4.45% 4.30%
(with 4.50% sales
charge)
------------------------------------------------------------------------
<CAPTION>
(Since 12/31/86)
<S> <C> <C> <C> <C> <C>
LBMBI -2.07% 6.91% 6.89% 7.01%
---------------------------------------------------------------------------------------------------
</TABLE>
------
/1/Return information is for Investment A shares, a class of shares of the
Fund not offered by this Prospectus. Investment A and Investment B shares,
however, would have substantially similar annual returns because the shares
are invested in the same portfolio of securities. The annual returns would
differ to the extent that the classes do not have the same expenses. The
annual returns also would differ to the extent that different sales charges
would apply.
21
<PAGE>
Shareholder Fees and Fund Expenses
Fee Tables
These tables describe the fees and expenses that you may pay if you buy and
hold Investment B shares of the Funds.
Shareholder fees are paid by you at the time you purchase or sell your shares.
Annual Fund operating expenses are paid out of Fund assets, and are reflected
in the share price. Each Fund's fees and expenses are based upon the Funds'
operating expenses for the fiscal year ended July 31, 1999, except Fifth Third
Technology Fund, which are estimates based upon the actual operating expenses
of other Fifth Third Funds.
<TABLE>
<CAPTION>
Stock Funds--Fee Table
----------------------
Fifth Third Fifth Third Fifth Third Fifth Third Fifth Third Fifth Third Fifth Third
Quality Growth Equity Income Pinnacle Balanced Mid Cap International Technology
Fund Fund Fund Fund Fund Equity Fund Fund
Shareholder Fees
<S> <C> <C> <C> <C> <C> <C> <C>
Maximum Sales Charge
(Load) Imposed on
Purchases None None None None None None None
------------------------------------------------------------------------------------------------------------------
Maximum Sales Charge
(Load) Imposed on
Reinvested Dividends None None None None None None None
------------------------------------------------------------------------------------------------------------------
Maximum Deferred Sales
Load/1/ 5.00% 5.00% 5.00% 5.00% 5.00% 5.00% 5.00%
------------------------------------------------------------------------------------------------------------------
Annual Fund Operating
Expenses (as a
percentage of average
net assets)
Management fees 0.80% 0.80% 0.80% 0.80% 0.80% 1.00% 1.00%
------------------------------------------------------------------------------------------------------------------
Distribution/Service
(12b-1) fees/2/ 1.00% 1.00% 1.00% 1.00% 1.00% 1.00% 1.00%
------------------------------------------------------------------------------------------------------------------
Other expenses 0.24% 0.32% 0.38% 0.29% 0.34% 0.45% 0.46%/3/
------------------------------------------------------------------------------------------------------------------
Total Annual Fund
Operating Expenses 2.04% 2.12% 2.18% 2.09% 2.14% 2.45% 2.46%
------------------------------------------------------------------------------------------------------------------
Fee Waivers/4/ 0.08% 0.10% 0.02% 0.06% 0.11% 0.18%
------------------------------------------------------------------------------------------------------------------
Net Total Annual Fund
Operating Expenses 1.96% 2.02% 2.16% 2.03% 2.03% 2.27%
------------------------------------------------------------------------------------------------------------------
/1/ 5% in the first year after purchase, declining to 4% in the second year, 3%
in the third and fourth years, 2% in the fifth year, 1% in the sixth year and
eliminated thereafter.
</TABLE>
/2/ Certain service organizations may receive fees from a Fund in amounts up to
an annual rate of 0.25% of the daily net asset value of the Fund shares owned
by the shareholders with whom the service organization has a servicing
relationship.
/3/ "Other Expenses" are based on estimated amounts for the current fiscal
year.
/4/ Fifth Third Bank and/or BISYS have contractually agreed to waive fees
and/or reimburse expenses through November 30, 2000.
22
<PAGE>
Shareholder Fees and Fund Expenses
Shareholder Fees
<TABLE>
<CAPTION>
Bond Funds--Fee Table
---------------------
Fifth Third Fifth Third
Quality Bond Ohio Tax Free
Fund Bond Fund
<S> <C> <C>
Maximum Sales Charge
(Load) Imposed on
Purchases None None
--------------------------------------------------------
Maximum Sales Charge
(Load) Imposed on
Reinvested
Dividends None None
--------------------------------------------------------
Maximum Deferred Sales
Load/1/ 5.00% 5.00%
--------------------------------------------------------
Annual Fund Operating
Expenses
(as a percentage of
average net assets)
Management fees 0.55% 0.55%
--------------------------------------------------------
Distribution/Service
(12b-1) fees/2/ 1.00% 1.00%
--------------------------------------------------------
Other expenses 0.29% 0.41%
--------------------------------------------------------
Total Annual Fund
Operating Expenses 1.84% 1.96%
--------------------------------------------------------
Fee Waivers/3/ 0.17% 0.21%
--------------------------------------------------------
Net Total Annual Fund
Operating Expenses 1.67% 1.75%
</TABLE>
--------------------------------------------------------------------------------
/1/ 5% in the first year after purchase, declining to 4% in the second year, 3%
in the third and fourth years, 2% in the fifth year, 1% in the sixth year and
eliminated thereafter.
/2/ Certain service organizations may receive fees from a Fund in amounts up to
an annual rate of 0.25% of the daily net asset value of the Fund shares owned
by the shareholders with whom the service organization has a servicing
relationship.
/3/ Fifth Third Bank and/or BISYS have contractually agreed to waive fees
and/or reimburse expenses through November 30, 2000.
23
<PAGE>
Shareholder Fees and Fund Expenses
Expense Examples
Use the tables below to compare fees and expenses with the fees and expenses of
other mutual funds. The tables illustrate the amount of your share of Fund fees
and expenses, assuming a $10,000 initial investment, 5% annual return, payment
of maximum sales charges, redemption at the end of each period, and the Fund's
operating expenses remaining the same. Because these examples are hypothetical
and for comparison only, actual amounts may be different.
Stock Funds
Fifth Third Quality
Growth 1 3 5 10
Fund Year Years Years Years
---------------------------------------------------
Investment B shares
---------------------------------------------------
Assuming redemption $707 $940 $1,298 $2,176
Assuming no redemption $207 $640 $1,098 $2,176
---------------------------------------------------
Fifth Third Equity 1 3 5 10
Income Fund Year Years Years Years
---------------------------------------------------
Investment B shares
---------------------------------------------------
Assuming redemption $715 $964 $1,339 $2,261
Assuming no redemption $215 $664 $1,139 $2,261
---------------------------------------------------
1 3 5 10
Fifth Third Pinnacle Fund Year Years Years Years
---------------------------------------------------
Investment B shares
---------------------------------------------------
Assuming redemption $721 $982 $1,369 $2,323
Assuming no redemption $221 $682 $1,169 $2,323
---------------------------------------------------
1 3 5 10
Fifth Third Balanced Fund Year Years Years Years
---------------------------------------------------
Investment B shares
---------------------------------------------------
Assuming redemption $712 $955 $1,324 $2,229
Assuming no redemption $212 $655 $1,124 $2,229
---------------------------------------------------
1 3 5 10
Fifth Third Mid Cap Fund Year Years Years Years
---------------------------------------------------
Investment B shares
---------------------------------------------------
Assuming redemption $717 $970 $1,349 $2,282
Assuming no redemption $217 $670 $1,149 $2,282
---------------------------------------------------
24
<PAGE>
Shareholder Fees and Fund Expenses
Fifth Third
International Equity 1 3 5 10
Fund Year Years Years Years
-------------------------------------------------
Investment B shares
Assuming redemption $748 $1,064 $1,506 $2,601
Assuming no redemption $248 $ 764 $1,306 $2,601
-------------------------------------------------
Fifth Third Technology 1 3
Fund Year Years
-------------------------------------------------
Investment B shares
Assuming redemption $749 $1,067
Assuming no redemption $249 $ 767
-------------------------------------------------
Bond Funds
Fifth Third Quality 1 3 5 10
Bond Fund Year Years Years Years
-------------------------------------------------
Investment B shares
Assuming redemption $687 $ 879 $1,195 $1,962
Assuming no redemption $187 $ 579 $ 995 $1,962
-------------------------------------------------
Fifth Third Ohio Tax 1 3 5 10
Free Bond Fund Year Years Years Years
-------------------------------------------------
Investment B shares
Assuming redemption $699 $ 915 $1,257 $2,091
Assuming no redemption $199 $ 615 $1,057 $2,091
-------------------------------------------------
25
<PAGE>
Additional Information About The Funds' Investments
The primary investments and investment strategies of the Funds are described
above. Below are descriptions of some additional investments and strategies of
the Funds, some of their risks as well as other risks of investing in the
Funds. A list of each Fund's investments is included in the Funds' most recent
annual or semi-annual report to shareholders. A Fund may be invested in any or
all of these investments, or use any or all of these strategies, at any one
time, and a Fund generally may adjust the composition of its portfolio as
market and economic conditions change.
The success of achieving each Fund's investment strategy depends on Fifth Third
Bank's, Heartland's or MSAM's ability to assess the potential of the securities
in which the Fund invests as well as to evaluate and anticipate changing
economic and market conditions.
International Many U.S. companies in which the Funds may invest
Exposure generate significant revenues and earnings from abroad.
(Applies to all As a result, those companies and the prices of their
Funds) equity and debt securities may be affected by weaknesses
in global and regional economies and the relative value
of foreign currencies to the U.S. dollar. Taken as a
whole, those factors could adversely affect the price of
Fund shares.
Foreign Foreign securities are generally more volatile than their
Securities domestic counterparts, in part because of higher
(Applies to Fifth political and economical risks, the general lack of
Third Quality reliable information and fluctuations in currency
Growth, Fifth exchange rates. Those risks are usually higher in less
Third Equity developed countries.
Income, Fifth
Third Mid Cap, In addition, foreign securities may be more difficult to
Fifth Third resell and the markets for them less efficient than for
International comparable U.S. securities. Even where a foreign security
Equity, Fifth increases in price in its local currency, the
Third Technology, appreciation may be diluted by the negative effect of
and Fifth Third exchange rates when the security's value is converted to
Quality Bond U.S. dollars. Foreign withholding taxes also may apply
Funds) and errors and delays may occur in the settlement process
for foreign securities.
Each Fund may use foreign currencies and related
instruments to hedge its foreign investments.
Repurchase Each Fund may enter into repurchase agreements. A
Agreements repurchase agreement is an agreement in which a Fund buys
(Applies to all securities from a bank or other financial institution and
Funds) agrees to sell it back at a specified time and place. The
risks of repurchase agreements include the risk that a
counterparty will not buy back the securities as required
and the securities decline in value. To mitigate those
risks, the Funds intend to enter repurchase agreements
only with high quality counterparties and purchase only
high quality, short-term debt securities.
Securities Each Fund may seek additional income or fees by lending
Lending portfolio securities to qualified institutions. By
(Applies to all reinvesting any cash collateral it receives in these
Funds) transactions, a Fund could realize additional gains or
losses. If the borrower fails to return the securities
and the invested collateral has declined in value, a Fund
could lose money.
26
<PAGE>
Additional Information About The Funds' Investments
Restricted and Any securities that are thinly traded or whose resale is
Illiquid restricted can be difficult to sell at a desired time and
Securities price. Some of those securities are new and complex, and
(Applies to all trade only among institutions; the markets for these
Funds) securities are still developing and may not function as
efficiently as established markets. Owning a large
percentage of restricted or illiquid securities could
hamper a Fund's ability to raise cash in order to meet
redemptions. Also, because there may not be an
established market price for these securities, a Fund may
have to estimate their value, which means that their
valuation (and, to a much smaller extent, the valuation
of the Fund) may have a subjective element.
Derivatives Derivatives, a category that includes warrants, options
(Applies to all and futures, are financial instruments whose value
Funds) derives from another security, an index or currency. Each
Fund may use derivatives for hedging (attempting to
offset a potential loss in one position by establishing
an interest in an opposite position). This includes the
use of currency-based derivatives for hedging its
positions in foreign securities. The Funds may also use
derivatives for speculation (investing for potential
income or capital gain).
While hedging can guard against potential risks, it adds
to a Fund's expenses and can eliminate some opportunities
for gains. There is also a risk that a derivative
intended as a hedge may not perform as expected.
The main risk with derivatives is that some types can
amplify a gain or loss, potentially earning or losing
substantially more money than the actual cost of the
derivative.
With some derivatives, whether used for hedging or
speculation, there is also the risk that the counterparty
may fail to honor its contract terms, causing a loss for
a Fund.
When-Issued Each Fund may invest in securities prior to their date of
Securities issue. These securities could fall in value by the time
(Applies to all they are actually issued, which may be any time from a
Funds) few days to over a year.
Bonds The value of any bond held by a Fund is likely to decline
(Applies to all when interest rates rise; this risk is greater for bonds
Funds) with longer maturities. A less significant risk is that a
bond issuer could default on principal or interest
payments, causing a loss for a Fund.
Short-Term While the Funds ordinarily do not trade securities for
Trading short-term profits, they may sell any security at any
(Applies to all time they believe best, which may result in short-term
Funds) trading. Short-term trading can increase a Fund's
transaction costs and may increase your tax liability if
there are capital gains.
Defensive During unusual market conditions, each Fund may place up
Investing to 100% of total assets in cash or high-quality, short-
(Applies to all term debt securities. To the extent that a Fund does
Funds) this, it is not pursuing its goal.
27
<PAGE>
Fund Management
INVESTMENT ADVISORS AND SUBADVISOR
Fifth Third Bank, 38 Fountain Square Plaza, Cincinnati, Ohio 45263, serves as
investment advisor to all Funds other than Fifth Third Pinnacle Fund. Heartland
Capital Management, Inc., 251 North Illinois Street, Suite 300, Indianapolis,
Indiana 46204, serves as investment advisor to Fifth Third Pinnacle Fund. As
investment advisor to one or more Funds, they generally are responsible for the
daily management of those Funds. Each of those two advisors is a subsidiary of
Fifth Third Bancorp. Morgan Stanley Asset Management, Inc., 1221 Avenue of the
Americas, New York, New York 46204, serves as investment subadvisor to Fifth
Third International Equity Fund, and generally is responsible for the daily
management of that Fund's portfolio, subject to Fifth Third Bank's oversight.
As of March 31, 2000, Fifth Third Bank had approximately $22 billion of assets
under management, including approximately $5.2 billion of assets of Fifth Third
Funds. As of March 31, 2000 Heartland had approximately $2.02 billion of assets
under management, including approximately $121.02 million of assets held by
mutual funds. As of March 31, 2000, MSAM had approximately $177.45 billion of
assets under management, including approximately $93.73 billion of assets held
by mutual funds.
The management and subadvisory fees paid by the Funds for the fiscal year ended
July 31, 1999 were as follows:
<TABLE>
<CAPTION>
As a percentage of
average net assets
---------------------------------------------------------
<S> <C>
Fifth Third Quality Growth Fund 0.80%
---------------------------------------------------------
Fifth Third Equity Income Fund 0.80%
---------------------------------------------------------
Fifth Third Pinnacle Fund 0.80%
---------------------------------------------------------
Fifth Third Balanced Fund 0.80%
---------------------------------------------------------
Fifth Third Mid Cap Fund 0.80%
---------------------------------------------------------
Fifth Third International Equity Fund 1.00%
(subadvisory fee) (0.45%)*
---------------------------------------------------------
Fifth Third Technology Fund 1.00%
---------------------------------------------------------
Fifth Third Quality Bond Fund 0.55%
---------------------------------------------------------
Fifth Third Ohio Tax Free Bond Fund 0.55%
---------------------------------------------------------
</TABLE>
* Fifth Third Bank was responsible for paying this fee from the fees it
received as investment manager to Fifth Third International Equity Fund.
28
<PAGE>
Fund Management
PORTFOLIO MANAGERS
Fifth Third Bank
Equity Funds
Steven E. Folker has been the portfolio manager for Fifth Third Quality Growth
Fund, Fifth Third Balanced Fund and Fifth Third Mid Cap Fund since 1993.
Currently, he is the Chief Equity Strategist for Fifth Third Investment
Advisors and is Vice President and Trust Officer of Fifth Third Bank. He is
also a Chartered Financial Analyst, has over 16 years of investment experience
and is a member of the Cincinnati Society of Financial Analysts. He earned a
B.B.A. in Finance & Accounting and an M.S. in Finance, Investments & Banking
from the University of Wisconsin.
John B. Schmitz has managed Fifth Third International Equity Fund since 1994,
and Fifth Third Equity Income Fund since 1997. He is a Vice President and Trust
Officer of Fifth Third Bank, a Chartered Financial Analyst and has over 12
years of experience. He is also a member of the Cincinnati Society of Financial
Analysts. Mr. Schmitz graduated with a B.B.A. in Finance & Real Estate from the
University of Cincinnati.
Steven J. Mygrant has been the co-portfolio manager for Fifth Third Technology
Fund since 2000. Since 1996, he has been the Director of Equity Analysis at
Fifth Third Bank. Prior to 1996, he was the Director of Equity Research at a
large Midwestern bank. He is a member of the Association for Investment
Management and Research and the Cincinnati Society of Security Analysts. He has
over 15 years of investment experience and is a Certified Financial Analyst.
Mr. Mygrant earned a B.S. and MBA from The Ohio State University.
Sunil M. Reddy has been the co-portfolio manager for the Fifth Third Technology
Fund since 2000. Since 1997, he has been an Equity Analyst covering
semiconductor, semiconductor equipment, enterprise hardware and software
sectors at Fifth Third Bank. Prior to 1997, he was a portfolio manager at a
large Midwestern bank. He is a Chartered Financial Analyst with over 10 years
of investment experience and is a member of the Cincinnati Society of Financial
Analysts. Mr. Reddy earned a B.S. in Electrical Engineering from The Ohio State
University and a MBA from Case Western Reserve University.
Bond Funds
Investment decisions for the Fifth Third bond funds as well as the bond portion
of Fifth Third Balanced Fund are made by a team of investment professionals,
all of whom are employees of Fifth Third Bank.
Heartland Capital Management, Inc.
Robert D. Markley, President and Chief Executive Officer of Heartland and
Thomas F. Maurath, Executive Vice President of Heartland, have been primarily
responsible for management of Fifth Third Pinnacle Fund and management of its
predecessor fund since 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 also is a Chartered Financial Analyst who
earned a B.B.A. in Accounting from the University of Notre Dame and a M.B.A.
from Indiana University.
Morgan Stanley Asset Management, Inc.
Barton M. Biggs has served as portfolio manager of the Fifth Third
International Equity Fund since 1994. He has been Chairman and a Director of
MSAM since 1980 and Managing Director of Morgan Stanley & Co. Incorporated
since 1975. He is also a Director of Morgan Stanley Group, Inc. and a Director
and Officer of six registered investment companies to which MSAM and certain of
its affiliates provides investment advisory services. Mr. Biggs holds a B.A.
from Yale University and an M.B.A. from New York University.
29
<PAGE>
Fund Management
Fund Administration
BISYS Fund Services Limited Partnership ("BISYS") serves as the administrator
of the Funds. The administrator generally assists in all aspects of the Funds'
administration and operation, including providing the Funds with certain
administrative personnel and services necessary to operate the Funds, such as
legal and accounting services. BISYS provides these at an annual rate as
specified below:
<TABLE>
<CAPTION>
Maximum Average Aggregate Daily
Aministrative Fee Net Assets of the Trust
----------------- -----------------------
<S> <C>
0.20% of the first $1 billion
0.18% of the next $1 billion
0.17% in excess of $2 billion
</TABLE>
BISYS may periodically waive all or a portion of its administrative fee, which
will cause the yield of a Fund to be higher than it would otherwise be in the
absence of such a waiver.
Pursuant to a separate agreement with BISYS, Fifth Third Bank performs sub-
administrative services on behalf of each Fund, including providing certain
administrative personnel and services necessary to operate the Funds. Fifth
Third Bank receives a fee from BISYS for providing sub-administrative services
at an annual rate of 0.035% of the average aggregate daily net assets of all
the Funds.
30
<PAGE>
Shareholder Information
PURCHASING AND SELLING FUND SHARES
Pricing Fund Shares
Each Fund's Net Asset Value (NAV) is calculated by dividing the Fund's net
assets by the number of its shares outstanding. The value of each portfolio
instrument held by the Funds generally is determined by using market prices.
Under special circumstances, the Fund may use fair value pricing, such as when
an event occurs after the close of the exchange on which a Fund's portfolio
securities are principally traded, which, in the investment manager's opinion,
has materially affected the prices of those securities.
To the extent the NAV is based on determinations of the fair value of the
Fund's portfolio securities, the NAV may reflect what Fifth Third Bank believes
to be the value of those securities rather than what the markets have
determined to be the value.
Each Fund's NAV is calculated at 4:00 p.m. Cincinnati time each day the New
York Stock Exchange is open for regular trading and the Federal Reserve Bank of
Cleveland is open for business. Each Fund's NAV may change on days when
shareholders will not be able to purchase or redeem Fund shares. The Funds will
be closed on those days that Fifth Third Bank is closed, including: 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.
PURCHASING AND ADDING TO YOUR SHARES
You may purchase shares on days when the New York Stock Exchange is open for
regular trading and the Federal Reserve Bank of Cleveland is open for business.
In determining the purchase price, each Fund will use the next NAV after your
purchase order, completed application and full payment have been received by
the Funds or its transfer agent. All orders must be received by the Funds or
its transfer agent prior to 4:00 p.m. Cincinnati time in order to receive that
day's NAV.
You may purchase Investment B shares through Fifth Third Securities, Inc. as
well as broker-dealers and financial institutions which have a sales agreement
with the distributor of Fund shares. In order to purchase Investment B shares
through Fifth Third Securities, Inc. or another financial institution, you must
open an account with that institution. That account will be governed by its own
rules and regulations, which may be more stringent than the rules and
regulations governing an investment in the Funds, and you should consult your
account documents for full details. Your shares in a Fund will be held in an
omnibus account in the name of that institution.
The entity through which you are purchasing your shares is responsible for
transmitting orders to the Funds by 4:00 p.m. Cincinnati time and it may have
an earlier cut-off time for purchase requests. Consult that entity for specific
information.
Minimum The minimum initial investment in Investment B shares of a
Investments Fund offered by this Prospectus is $1,000. Subsequent
investments must be in amounts of at least $50. The
maximum investment is $250,000 for total purchases of
Investment B shares of a Fund offered by this Prospectus.
Purchase Terms All purchases must be in U.S. dollars. A fee may be
charged for any checks that do not clear. Third-party
checks are not accepted.
For details, call 1-888-799-5353 or write to: Fifth Third
Funds, c/o Fifth Third Bank, 38 Fountain Square Plaza,
Cincinnati, Ohio 45263.
The Funds may reject a purchase order for any reason.
31
<PAGE>
Shareholder Information
Systematic You may make monthly systematic investments in Investment
Investment B shares of a Fund from your bank account. There is no
Program minimum amount required for initial amounts invested into
the Funds. You may elect to make systematic investments on
the 1st or 15th of each month, or both. If the 1st or 15th
of the month is not a day on which the Funds are open for
business, the purchase will be made on the previous day
the Funds are open for business. Please contact Fifth
Third Securities, Inc. or your financial institution for
more information.
Avoid 31% Tax Withholding
Each Fund is required to withhold 31% of taxable dividends, capital gains
distributions and redemptions paid to any shareholder who has not provided the
Fund with his or her certified Taxpayer Identification Number (your Social
Security Number for individual investors) in compliance with IRS rules. To
avoid this withholding, make sure you provide your correct Tax Identification
Number.
Selling Your Shares
You may sell your shares of any Fund on days when the New York Stock Exchange
is open for regular trading and the Federal Reserve Bank of Cleveland is open
for business. In determining the sale price, each Fund will use the next NAV
after your sell order is received by a Fund or its transfer agent, less any
applicable contingent deferred sales charge. All orders must be received by the
Funds or its transfer agent prior to the time the Fund calculates its NAV in
order to receive that day's NAV. If your order has been received by the Fund
prior to the time the Fund calculates its NAV, and your shares have been sold
you will not receive the dividend declared for that day. Normally you will
receive your proceeds within a week after your request is received.
You may sell Investment B shares through Fifth Third Securities, Inc. or the
financial institution through which you purchased them.
The entity through which you are selling your shares is responsible for
transmitting the order to the Funds or the transfer agent, and it may have an
earlier cut-off for sale requests. Consult that entity for specific
information.
Systematic Withdrawal Plan
You may make automatic withdrawals on a monthly, quarterly or annual basis on
the first day of that period that the Funds are open for business. Please
contact Fifth Third Securities, Inc. or your financial institution for more
information.
Postponement of Redemption Payments
Any Fund may delay sending to you redemption proceeds for up to 7 days, or
longer if permitted by the SEC. If you experience difficulty making a telephone
redemption during periods of dramatic economic or market change, you can send
to the Funds your request by regular mail to: Fifth Third Funds, P.O. Box
182706, Columbus, Ohio 43218-2706, or by express mail to: Fifth Third Funds,
c/o BISYS Fund Services, 3435 Stelzer Road, Columbus, Ohio 43219-3035.
32
<PAGE>
Shareholder Information
Exchanging Your Shares
You may exchange Notes on exchanges
your Fund shares
for the same To prevent disruption in the management of the Funds,
class of shares market timing strategies and frequent exchange activity
of any other may be limited by the Funds. Although not anticipated,
Fifth Third Fund the Funds may reject exchanges, or change or terminate
that offers rights to exchange shares at any time.
Investment B
shares. No Shares of the new Fund must be held in the same account
transaction fees name, with the same registration and tax identification
are charged for numbers, as the shares of the old Fund.
exchanges. Be
sure to read the The Exchange Privilege (including automatic exchanges)
prospectus may be changed or eliminated at any time.
carefully of any
Fund into which The Exchange Privilege is available only in states where
you wish to shares of the Funds may be sold.
exchange shares.
All exchanges are based on the relative net asset value
You must meet the next determined after the exchange order is received by
minimum the Funds.
investment
requirements for
the Fund into
which you are
exchanging.
Exchanges from
one Fund to
another are
taxable for
investors subject
to federal or
state income
taxation. These
procedures apply
only to exchanges
between existing
accounts.
Automatic Exchanges
To participate in
the Automatic
Exchange Program
or to change the
Automatic
Exchange
instructions on
an existing
account, contact
Fifth Third
Securities, Inc.
or your financial
institution.
Distribution This section describes the sales charges and fees you
Arrangements/ will pay as an investor in the Investment B shares and
Sales Charges what you would pay on Investment A shares after 8 years.
<TABLE>
<CAPTION>
Investment A Investment B
<S> <C> <C>
Sales Charge (Load) Front-end No front-end
sales charge sales charge.
(not A contingent
applicable on deferred sales
conversion charge (CDSC)
from B share will be
status); imposed on
reduced sales shares
charges redeemed
available; within 6 years
after
purchase;
Distribution/Service Subject to Subject to
(12b-1) Fee annual annual
distribution distribution
and and
shareholder shareholder
servicing fees servicing fees
of up to 0.25% of up to 1.00%
of the Fund's of the Fund's
assets. assets.
Conversion None Converts to
Investment A
shares after 8
years
</TABLE>
33
<PAGE>
Shareholder Information
Calculation of Investment B shares are offered at NAV, without any up-
Sales Charges front sales charge. Therefore, all of the money that you
send to the Funds is used to purchase Fund shares. If you
sell your Investment B shares before the end of the sixth
year after purchase, however, you will pay a contingent
deferred sales charge, or CDSC, at the time of
redemption. The CDSC will be based upon the lower of the
NAV at the time of purchase and the NAV at the time of
redemption. In any sale, certain shares not subject to
the CDSC (i.e., shares purchased with reinvested
dividends or distributions) will be redeemed first,
followed by shares subject to the lowest CDSC (typically
shares held for the longest time).
Investment B shares are subject to the following CDSC
schedule:
<TABLE>
<CAPTION>
% of NAV (at time of
purchase or sale if lower)
Year of Redemption After Purchase deducted from proceeds
<S> <C>
During the first year 5%
--------------------------------------------------------------
During the second year 4%
--------------------------------------------------------------
During the third or fourth years 3%
--------------------------------------------------------------
During the fifth year 2%
--------------------------------------------------------------
During the sixth year 1%
--------------------------------------------------------------
During the seventh or eighth year 0%
--------------------------------------------------------------
</TABLE>
Sales Charge The CDSC will be waived under certain circumstances,
Waivers including the following:
. Minimum required distributions from an IRA or other
qualifying retirement plan to a shareholder who has
attained age 70 1/2
. redemptions from accounts following the death or
disability of the shareholder
. Investors who purchased through a participant directed
defined benefit plan
. Returns of excess contributions to certain retirement
plans
. Distributions of less than 12% of the annual account
value under the Systematic Withdrawal Plan
. Shares issued in a plan of reorganization sponsored by
Fifth Third Bank, or shares redeemed involuntarily in a
similar situation
Distribution/Service 12b-1 fees are used to compensate the Distributor and
(12b-1) Fees other dealers and investment representatives for services
and expenses related to the sale and distribution of a
Fund's shares and/or for providing shareholder services.
In particular, these fees help to defray the
Distributor's costs of advancing brokerage commissions to
investment representatives.
12b-1 fees are paid from Fund assets on an ongoing basis,
and will increase the cost of your investment.
34
<PAGE>
Shareholder Information
12b-1 fees may cost you more than paying other types of
sales charges. Investment B shares pay a 12b-1 fee at an
annual rate of up to 1.00% of the average daily net
assets of the applicable Fund. The Distributor may use up
to 0.25% of the 12b-1 fee for shareholder servicing and
up to 0.75% for distribution.
Over time shareholders of a Fund may pay more than the
equivalent of the maximum permitted front-end sales
charge because 12b-1 distribution and service fees are
paid out of the Fund's assets on an on-going basis.
Conversion to Investment B shares convert automatically to Investment A
Investment shares 8 years after purchase. After conversion, the 12b-
A shares 1 fees applicable to your shares are reduced from 1.00%
to 0.25% of the average daily net assets.
Dealers The Distributor of Fund shares, in its discretion, may
Incentives pay all dealers selling Investment B shares all or a
portion of the sales charges it normally receives.
All dividends and capital gains will be automatically
reinvested unless you request otherwise. You can receive
them in cash or by electronic funds transfer to your bank
account if you are not a participant in an IRA account or
in a tax qualified plan.
Dividends and Distributions are made on a per share basis regardless of
Capital Gains how long you have owned your shares. Therefore, if you
invest shortly before the distribution date, some of your
investment will be returned to you in the form of a
taxable distribution.
Dividends, if any, are declared and paid monthly by the
following Funds: Fifth Third Quality Growth Fund, Fifth
Third Equity Income Fund, Fifth Third Quality Bond Fund,
and Fifth Third Ohio Tax Free Bond Fund. Dividends, if
any, are declared and paid quarterly by the following
Funds: Fifth Third Pinnacle Fund, Fifth Third Balanced
Fund, Fifth Third Mid Cap Fund and Fifth Third Technology
Fund. Dividends, if any, are declared and paid annually
by the following Fund: Fifth Third International Equity
Fund. Capital gains, if any, are distributed at least
annually.
Taxation
Federal Income Tax
Each Fund expects to distribute substantially all of its investment income
(including net capital gains and tax-exempt interest income, if any) to its
shareholders. Unless otherwise exempt or as discussed below, shareholders are
required to pay federal income tax on any dividends and other distributions,
including capital gains distributions received. This applies whether dividends
and other 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.
35
<PAGE>
Shareholder Information
This is a brief summary of certain federal income tax consequences relating to
an investment in the Funds, and shareholders are urged to consult their own tax
advisors regarding the taxation of their investments under federal, state and
local laws.
Additional Tax Information for Fifth Third Ohio Tax Free Bond Fund
Dividends from Fifth Third Ohio Tax Free Bond Fund representing interest from
obligations held by that Fund which are issued by the State of Ohio or its
subdivisions, which interest is exempt from federal income tax when received by
a shareholder, should also be exempt from Ohio individual income tax as well as
any Ohio municipal income tax even if the municipality is permitted under
current Ohio Law to levy a tax on intangible income. Income from the Fund is
not necessarily free from state income taxes in states other than Ohio or from
personal property taxes.
If a shareholder receives an exempt-interest dividend with respect to any share
and such share is held by the shareholder for six months or less, any loss on
the sale or exchange of such share will be disallowed to the extent of the
amount of such exempt-interest dividend. In certain limited instances, the
portion of social security benefits that may be subject to federal income
taxation may be affected by the amount of tax-exempt interest income, include
exempt-interest dividends, received by a shareholder.
Under state or local law, distributions of investment income may be taxable to
shareholders as dividend income even though a substantial portion of such
distribution may be derived from interest excluded from gross income for
federal income tax purposes that, if received directly, would be exempt from
such income taxes. State laws differ on this issue, and shareholders are urged
to consult their own tax advisors regarding the taxation of their investments
under state and local tax laws.
Interest income from certain types of municipal securities may be subject to
federal alternative minimum tax. To the extent either Fund invests in those
securities, individual shareholders, depending on their own tax status, may be
subject to alternative minimum tax on that part of the Fund's distributions
derived from those securities.
Additional Tax Information for Fifth Third International Equity Fund
Fifth Third International Equity Fund may invest in the stock of certain
foreign corporations that would constitute a passive foreign investment company
(PFIC). Federal income taxes at ordinary net income rates may be imposed on the
Fund upon disposition of PFIC investments.
Investment income received by the Fund from sources within foreign countries
may be subject to foreign taxes withheld at the source. The United States has
entered into tax treaties with many foreign countries that entitle the Fund to
reduced tax rates or exemption on this income. The effective rate of foreign
tax cannot be predicted since the amount of the Fund assets to be invested
within various countries is unknown. However, the Fund intends to operate so as
to qualify for treaty-reduced tax rates where applicable.
The Fund intends to qualify so as to allow shareholders to claim a foreign tax
credit or deduction on their federal income tax returns. Shareholders, however,
may be limited in their ability to claim a foreign tax credit. Shareholders who
elect to deduct their portion of the Fund's foreign taxes rather than take the
foreign tax credit must itemize deductions on their federal income tax returns.
36
<PAGE>
Financial Highlights
Prior to the date of this prospectus, Investment B shares have not been
offered. Below is certain financial information concerning Investment A shares
another class of each Fund. Investment A and Investment B shares would have
substantially similar annual returns because the shares are invested in the
same portfolio of securities. The annual returns would differ to the extent
that the classes do not have the same expenses. The annual returns also would
differ to the extent that different sales charges would apply.
The financial highlights table is intended to help you understand the Funds'
financial performance for the past 5 years or the period of the Funds'
operations, if shorter. Certain information reflects financial results for a
single Fund share. The total returns in the table represent the rate that an
investor would have earned or lost on an investment in each Fund (assuming
reinvestment of all dividends and distributions). With respect to financial
highlights for periods through July 31, 1999, the information has been audited
by Ernst & Young LLP, except that the financial highlights for the Pinnacle
Fund for each of the respective years or periods ended December 31, 1997 were
audited by other auditors whose report dated January 27, 1998 expressed an
unqualified opinion. Ernst & Young LLP's report, along with the Funds'
financial statements are included in the annual report, which is available upon
request. The information for the period ended January 31, 2000 has not been
audited.
Fifth Third Quality Growth Fund
Investment A Shares
<TABLE>
<CAPTION>
Six Months
Ended Year Ended July 31,
Jan. 31, 2000 ------------------------------------------------
(Unaudited) 1999 1998 1997 1996 1995
Per Share Data ------------- -------- -------- -------- -------- -------
<S> <C> <C> <C> <C> <C> <C>
Net Asset Value,
Beginning of Period $ 23.31 $ 20.26 $ 19.23 $ 13.16 $ 11.79 $ 9.70
--------------------------------------------------------------------------------------------
Income from Investment
Operations:
Net investment
income/(loss) (0.04) (0.06) 0.03 0.08 0.12 0.14
Net realized and
unrealized
gains/(losses) from
investments 2.15 5.06 2.49 6.75 1.37 2.09
--------------------------------------------------------------------------------------------
Total from Investment
Operations 2.11 5.00 2.52 6.83 1.49 2.23
--------------------------------------------------------------------------------------------
Distributions to
shareholders from:
Net investment income -- -- (0.03) (0.09) (0.12) (0.14)
Net realized gains on
vestments (1.17) (1.95) (1.46) (0.67) -- --
--------------------------------------------------------------------------------------------
Total Distributions (1.17) (1.95) (1.49) (0.76) (0.12) (0.14)
--------------------------------------------------------------------------------------------
--------------------------------------------------------------------------------------------
Net Asset Value, End of
Period $ 24.25 $ 23.31 $ 20.26 $ 19.23 $ 13.16 $ 11.79
--------------------------------------------------------------------------------------------
--------------------------------------------------------------------------------------------
Total Return (excludes
sales charge) 9.18 %(a) 26.48 % 14.12% 54.02% 12.69% 23.21%
--------------------------------------------------------------------------------------------
--------------------------------------------------------------------------------------------
Ratios/Supplemental Data
Ratios to Average Net
Assets:
Expenses 1.24 %(b) 1.21 % 1.00% 1.00% 0.99% 1.00%
Net investment
income/(loss) (0.36)%(b) (0.29)% 0.10% 0.45% 0.98% 1.44%
Expense
waiver/reimbursement(c) 0.02 %(b) 0.08 % 0.37% 0.36% 0.03% 0.05%
--------------------------------------------------------------------------------------------
Supplemental data:
Net Assets at end of
period (000s) $161,663 $116,963 $520,068 $399,683 $134,469 $82,594
Portfolio turnover(d) 7 % 34 % 45% 37% 37% 34%
--------------------------------------------------------------------------------------------
--------------------------------------------------------------------------------------------
</TABLE>
(a) Not annualized.
(b) Annualized.
(c) This voluntary expense decrease is reflected in both the expense and net
investment income ratios shown above.
(d) Portfolio turnover is calculated on the basis of the fund as a whole
without distinguishing between the classes of shares issued.
37
<PAGE>
Financial Highlights
Fifth Third Equity Income Fund
Investment A Shares
<TABLE>
<CAPTION>
Six Months Year Ended July
Ended 31, Period ended
Jan. 31, 2000 ----------------- July 31,
(Unaudited) 1999 1998 1997*
Per Share Data ------------- ------- -------- ------------
<S> <C> <C> <C> <C>
Net Asset Value, Beginning of
Period $ 15.18 $ 15.38 $ 14.44 $ 12.00
--------------------------------------------------------------------------------
Income from Investment
Operations:
Net investment income/(loss) 0.11 0.29 0.26 0.15
Net realized and unrealized
gains from investments (1.67) 1.19 2.43 2.43
--------------------------------------------------------------------------------
Total from Investment
Operations (1.56) 1.48 2.69 2.58
--------------------------------------------------------------------------------
Distributions to shareholders
from:
Net investment income (0.10) (0.23) (0.27) (0.14)
In excess of net investment
income -- -- -- --
Net realized gain on
investments (0.86) (1.45) (1.48) --
--------------------------------------------------------------------------------
Total Distributions (0.96) (1.68) (1.75) (0.14)
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
Net Asset Value, End of
Period $ 12.66 $ 15.18 $ 15.38 $ 14.44
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
Total Return (excludes sales
charge) (10.66)%(a) 9.90% 19.57% 21.64%(a)
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
Ratios/Supplemental Data
Ratios to Average Net Assets:
Expenses 1.27 %(b) 1.27% 1.01% 1.06%(b)
Net investment income 1.33 %(b) 1.58% 1.73% 2.32%(b)
Expense
waiver/reimbursement(c) 0.06 %(b) 0.10% 0.43% 0.42%(b)
--------------------------------------------------------------------------------
Supplemental data:
Net Assets at end of period
(000s) $14,636 $20,268 $150,404 $120,324
Portfolio turnover(d) 22 % 69% 41% 28%
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
</TABLE>
* Reflects operations for the period from January 27, 1997 (date of
commencement of operations) to July 31, 1997.
(a) Not annualized.
(b) Annualized.
(c) This voluntary expense decrease is reflected in both the expense and net
investment income ratios shown above.
(d) Portfolio turnover is calculated on the basis of the fund as a whole
without distinguishing between the classes of shares issued.
38
<PAGE>
Financial Highlights
Fifth Third Pinnacle Fund*
Investment A Shares
<TABLE>
<CAPTION>
Six Months
Ended Year Ended Period Ended Year Ended December 31,
Jan. 31, 2000 July 31, July 31, ----------------------------------
(Unaudited) 1999 1998** 1997 1996 1995 1994
------------- ---------- ------------ ------- ------- ------- -------
Per Share Data
<S> <C> <C> <C> <C> <C> <C> <C>
Net Asset Value,
Beginning of Period $ 37.20 $ 32.35 $ 27.71 $ 23.96 $ 22.47 $ 18.83 $ 21.15
----------------------------------------------------------------------------------------------------------
Income from Investment
Operations:
Net investment
income/(loss) (0.08) (0.09) (0.02) 0.13 0.05 0.11 0.09
Net realized and
unrealized gain from
investments 0.27 5.57 5.13 8.25 5.04 6.54 (0.34)
----------------------------------------------------------------------------------------------------------
Total from Investment
Operations 0.19 5.48 5.11 8.38 5.09 6.65 (0.25)
----------------------------------------------------------------------------------------------------------
Distributions to
shareholders from:
Net investment income -- -- -- (0.13) (0.05) (0.11) (0.09)
Net realized gain on
investments (0.55) (0.63) (0.47) (4.50) (3.55) (2.90) (1.98)
----------------------------------------------------------------------------------------------------------
Total Distributions (0.55) (0.63) (0.47) (4.63) (3.60) (3.01) (2.07)
----------------------------------------------------------------------------------------------------------
----------------------------------------------------------------------------------------------------------
Net Asset Value, End of
Period $ 36.84 $ 37.20 $ 32.35 $ 27.71 $ 23.96 $ 22.47 $ 18.83
----------------------------------------------------------------------------------------------------------
----------------------------------------------------------------------------------------------------------
Total Return (excludes
sales charge) 0.51 %(a) 17.18 % 18.58 %(a) 35.40% 22.50% 35.40% (1.10)%
----------------------------------------------------------------------------------------------------------
----------------------------------------------------------------------------------------------------------
<CAPTION>
Ratios/Supplemental Data
<S> <C> <C> <C> <C> <C> <C> <C>
Ratios to Average Net
Assets:
Expenses 1.31 %(b) 1.41 % 1.28 %(b) 1.12% 1.16% 1.14% 1.15%
Net investment
income/(loss) (0.44)%(b) (0.47)% (0.12)%(b) 0.46% 0.18% 0.44% 0.41%
Expense
waiver/reimbursement(c) 0.00 %(b) 0.02 % 0.30 %(b) 0.00% 0.00% 0.00% 0.00%
----------------------------------------------------------------------------------------------------------
Supplemental data:
Net Assets at end of
period (000s) $50,927 $49,936 $35,549 $22,272 $16,461 $14,673 $13,014
Portfolio turnover(d) 27 % 51 % 38 % 50% 44% 68% 91%
----------------------------------------------------------------------------------------------------------
----------------------------------------------------------------------------------------------------------
</TABLE>
* Information prior to the period March 9, 1998 is for the Pinnacle Fund, the
predecessor Fund of the Fifth Third Pinnacle Fund.
** Reflects the period of operations from January 1, 1998 to July 31, 1998.
(a) Not annualized.
(b) Annualized.
(c) This voluntary expense decrease is reflected in both the expense and net
investment income ratios shown above.
(d) Portfolio turnover is calculated on the basis of the fund as a whole
without distinguishing between the classes of shares issued.
39
<PAGE>
Financial Highlights
Fifth Third Balanced Fund
Investment A Shares
<TABLE>
<CAPTION>
Six Months
Ended Year Ended July 31,
Jan. 31, 2000 ---------------------------------------------
(Unaudited) 1999 1998 1997 1996 1995
Per Share Data ------------- ------- -------- -------- ------- -------
<S> <C> <C> <C> <C> <C> <C>
Net Asset Value, Beginning of Period $ 16.12 $ 14.99 $ 15.33 $ 11.75 $ 11.28 $ 9.70
---------------------------------------------------------------------------------------------------
Income from Investment Operations:
Net investment income 0.10 0.20 0.27 0.27 0.27 0.28
Net realized and unrealized from
investments 0.98 1.86 0.92 4.06 0.47 1.57
---------------------------------------------------------------------------------------------------
Total from Investment Operations 1.08 2.06 1.19 4.33 0.74 1.85
---------------------------------------------------------------------------------------------------
Distributions to shareholders from:
Net investment income (0.12) (0.19) (0.28) (0.26) (0.27) (0.27)
Net realized gain on investments (1.34) (0.74) (1.25) (0.49) -- --
---------------------------------------------------------------------------------------------------
Total Distributions (1.46) (0.93) (1.53) (0.75) (0.27) (0.27)
---------------------------------------------------------------------------------------------------
---------------------------------------------------------------------------------------------------
Net Asset Value, End of Period $ 15.74 $ 16.12 $ 14.99 $ 15.33 $ 11.75 $ 11.28
---------------------------------------------------------------------------------------------------
---------------------------------------------------------------------------------------------------
Total Return (excludes sales charge) 6.74%(a) 14.30% 8.41% 38.45% 6.52% 19.37%
---------------------------------------------------------------------------------------------------
---------------------------------------------------------------------------------------------------
Ratios/Supplemental Data
Ratios to Average Net Assets:
Expenses 1.25%(b) 1.28% 1.00% 1.00% 1.00% 1.00%
Net investment income/(loss) 1.22%(b) 1.22% 1.84% 2.05% 2.31% 2.73%
Expense waiver/reimbursement(c) 0.06%(b) 0.06% 0.43% 0.40% 0.06% 0.06%
---------------------------------------------------------------------------------------------------
Supplemental data:
Net Assets at end of period (000s) $88,591 $79,686 $173,177 $122,765 $92,808 $58,075
Portfolio turnover(d) 66% 128% 135% 101% 61% 58%
---------------------------------------------------------------------------------------------------
---------------------------------------------------------------------------------------------------
</TABLE>
(a) Not annualized.
(b) Annualized.
(c) This voluntary expense decrease is reflected in both the expense and net
investment income ratios shown above.
(d) Portfolio turnover is calculated on the basis of the fund as a whole
without distinguishing between the classes of shares issued.
40
<PAGE>
Financial Highlights
Fifth Third Mid Cap Fund
Investment A Shares
<TABLE>
<CAPTION>
Six Months
Ended Year Ended July 31,
Jan. 31, 2000 -------------------------------------------------
(Unaudited) 1999 1998 1997 1996 1995
Per Share Data ------------- ------- -------- -------- ------- -------
<S> <C> <C> <C> <C> <C> <C>
Net Asset Value,
Beginning of Period $ 15.82 $ 16.19 $ 16.98 $ 12.60 $ 12.59 $ 10.10
---------------------------------------------------------------------------------------------
Income from Investment
Operations:
Net investment
income/(loss) (0.05) (0.10) (0.03) 0.02 0.06 0.08
Net realized and
unrealized
gains/(losses) from
investments 0.76 1.17 0.98 5.55 0.11 2.48
---------------------------------------------------------------------------------------------
Total from Investment
Operations 0.71 1.07 0.95 5.57 0.17 2.56
---------------------------------------------------------------------------------------------
Distributions to
shareholders from:
Net investment income -- -- -- (0.02) (0.07) (0.07)
In excess of net
investment income -- -- -- (0.02) -- --
Net realized gains (1.18) (1.44) (1.74) (1.15) (0.09) --
---------------------------------------------------------------------------------------------
Total Distributions (1.18) (1.44) (1.74) (1.19) (0.16) (0.07)
---------------------------------------------------------------------------------------------
---------------------------------------------------------------------------------------------
Net Asset Value, End of
Period $ 15.35 $ 15.82 $ 16.19 $ 16.98 $ 12.60 $ 12.59
---------------------------------------------------------------------------------------------
---------------------------------------------------------------------------------------------
Total Return (excludes
sales charge) 4.38 %(a) 7.29 % 5.69 % 47.17 % 1.27 % 25.45 %
---------------------------------------------------------------------------------------------
---------------------------------------------------------------------------------------------
Ratios/Supplemental Data
Ratios to Average Net
Assets:
Expenses 1.25 %(b) 1.28 % 1.01 % 1.00% 1.00% 1.00%
Net investment
income/(loss) (0.58)%(b) (0.59)% (0.19)% 0.10% 0.42% 0.77%
Expense
waiver/reimbursement(c) 0.07 %(b) 0.11 % 0.40 % 0.37% 0.06% 0.18%
---------------------------------------------------------------------------------------------
Supplemental data:
Net Assets at end of
period (000s) $27,027 $27,966 $217,547 $186,066 $72,663 $47,184
Portfolio turnover(d) 23 % 49 % 44 % 52% 54% 23%
---------------------------------------------------------------------------------------------
---------------------------------------------------------------------------------------------
</TABLE>
(a) Not annualized.
(b) Annualized.
(c) This voluntary expense decrease is reflected in both the expense and net
investment income ratios shown above.
(d) Portfolio turnover is calculated on the basis of the fund as a whole
without distinguishing between the classes of shares issued.
41
<PAGE>
Financial Highlights
Fifth Third International Equity Fund
Investment A Shares
<TABLE>
<CAPTION>
Six Months
Ended Year ended July 31,
Jan. 31, 2000 ------------------------------------ Period ended
(Unaudited) 1999 1998 1997 1996 July 31, 1995*
Per Share Data ------------- ------ -------- -------- -------- --------------
<S> <C> <C> <C> <C> <C> <C>
Net Asset Value,
Beginning of Period $12.84 $12.56 $ 12.05 $ 10.74 $ 9.83 $ 10.00
-----------------------------------------------------------------------------------------------
Income from Investment
Operations
Net investment
income/(loss) (0.04) 0.03 0.09 0.04 0.01 0.05
Net realized and
unrealized
gains/(losses) from
investments 1.39 0.49 1.31 2.15 0.90 (0.22)
-----------------------------------------------------------------------------------------------
Total from Investment
Operations 1.35 0.52 1.40 2.19 0.91 (0.17)
-----------------------------------------------------------------------------------------------
Distributions to
shareholders from:
Net investment income -- (0.08) (0.59) (0.66) -- --
In excess of net
investment income -- (0.09) -- (0.16) -- --
Net realized gains (1.18) (0.07) (0.30) (0.06) -- --
-----------------------------------------------------------------------------------------------
Total Distributions (1.18) (0.24) (0.89) (0.88) -- --
-----------------------------------------------------------------------------------------------
-----------------------------------------------------------------------------------------------
Net Asset Value, End of
Period $13.01 $12.84 $ 12.56 $ 12.05 $ 10.74 $ 9.83
-----------------------------------------------------------------------------------------------
-----------------------------------------------------------------------------------------------
Total Return (excludes
sales charge) 10.57 %(a) 4.23% 13.29% 21.78% 9.26% (1.70)%(a)
-----------------------------------------------------------------------------------------------
-----------------------------------------------------------------------------------------------
Ratios/Supplemental Data
Ratios to Average Net
Assets:
Expenses 1.71 %(b) 1.52% 1.47% 1.38% 1.61% 1.65%(b)
Net investment
income/(loss) (0.54)%(b) 0.03% 0.66% 0.39% 0.32% 0.62%(b)
Expense
waiver/reimbursement(c) 0.00 %(b) 0.18% 0.35% 0.35% 0.05% 0.07%(b)
-----------------------------------------------------------------------------------------------
Supplemental data:
Net Assets at end of
period (000s) $6,667 $5,821 $163,297 $151,728 $120,349 $86,442
Portfolio turnover(d) 38 % 42% 39% 60% 41% 54%
-----------------------------------------------------------------------------------------------
-----------------------------------------------------------------------------------------------
</TABLE>
* Reflects operations for the period from August 19, 1994 (date of
commencement of operations) to July 31, 1995.
(a) Not annualized.
(b) Annualized.
(c) This voluntary expense decrease is reflected in both the expense and net
investment income ratios shown above.
(d) Portfolio turnovers is calculated on the basis of the fund as a whole
without distinguishing between the classes of shares issued.
42
<PAGE>
Financial Highlights
Fifth Third Quality Bond Fund
Investment A Shares
<TABLE>
<CAPTION>
Six Months
Ended Year Ended July 31,
Jan. 31, 2000 -------------------------------------------
(Unaudited) 1999 1998 1997 1996 1995
Per Share Data ------------- ------ -------- ------- ------- -------
<S> <C> <C> <C> <C> <C> <C>
Net Asset Value,
Beginning of Period $ 9.52 $ 9.96 $ 9.85 $ 9.52 $ 9.72 $ 9.55
-------------------------------------------------------------------------------------
Investment Operations
Net investment
income/(loss) 0.27 0.65 0.54 0.55 0.56 0.64
Net realized and
unrealized
gains/(losses) from
investments (0.25) (0.51) 0.12 0.32 (0.19) 0.17
-------------------------------------------------------------------------------------
Total from Investment
Operations 0.02 0.14 0.66 0.87 0.37 0.81
-------------------------------------------------------------------------------------
Distributions to
shareholders from:
Net investment income (0.27) (0.47) (0.55) (0.54) (0.57) (0.64)
In excess of net
investment income -- -- -- -- -- --
Net realized gains -- (0.11) -- -- -- --
-------------------------------------------------------------------------------------
Total Distributions (0.27) (0.58) (0.55) (0.54) (0.57) (0.64)
-------------------------------------------------------------------------------------
-------------------------------------------------------------------------------------
Net Asset Value, End of
Period $ 9.27 $ 9.52 $ 9.96 $ 9.85 $ 9.52 $ 9.72
-------------------------------------------------------------------------------------
-------------------------------------------------------------------------------------
Total Return (excludes
sales charge) 0.15%(a) 1.26% 6.91% 9.43% 3.86% 8.89%
-------------------------------------------------------------------------------------
-------------------------------------------------------------------------------------
Ratios/Supplemental Data
Ratios to Average Net
Assets:
Expenses 1.00%(b) 0.92% 0.75% 0.75% 0.75% 0.75%
Net investment
income/(loss) 5.60%(b) 4.85% 5.50% 5.71% 5.80% 6.72%
Expense
waiver/reimbursement(c) 0.08%(b) 0.17% 0.45% 0.41% 0.06% 0.09%
-------------------------------------------------------------------------------------
Supplemental data:
Net Assets at end of
period (000s) $9,698 $9,826 $107,794 $91,789 $83,422 $55,767
Portfolio turnover(d) 186% 349% 279% 181% 117% 138%
-------------------------------------------------------------------------------------
-------------------------------------------------------------------------------------
</TABLE>
(a) Not annualized.
(b) Annualized.
(c) This voluntary expense decrease is reflected in both the expense and net
investment income ratios shown above.
(d) Portfolio turnover is calculated on the basis of the fund as a whole
without distinguishing between the classes of shares issued.
43
<PAGE>
Financial Highlights
Fifth Third Ohio Tax Free Bond Fund
Investment A Shares
<TABLE>
<CAPTION>
Six Months
Ended Year Ended July 31,
Jan. 31, 2000 ---------------------------------------------
(Unaudited) 1999 1998 1997 1996 1995
Per Share Data ------------- ------- -------- -------- ------- -------
<S> <C> <C> <C> <C> <C> <C>
Net Asset Value,
Beginning of Period $ 10.02 $ 10.29 $ 10.31 $ 10.01 $ 9.99 $ 9.75
----------------------------------------------------------------------------------------
Income from Investment
Operations
Net investment income 0.19 0.46 0.42 0.43 0.40 0.42
Net realized and
unrealized
gains/(losses) from
investments (0.39) (0.29) 0.02 0.30 0.03 0.24
Total from Investment
Operations (0.20) 0.17 0.44 0.73 0.43 0.66
----------------------------------------------------------------------------------------
Distributions to
shareholders from:
Net investment income (0.19) (0.38) (0.42) (0.43) (0.41) (0.42)
In excess of net
investment income -- -- -- -- -- --
Net realized gains (0.02) (0.06) (0.04) -- -- --
Total Distributions (0.21) (0.44) (0.46) (0.43) (0.41) (0.42)
----------------------------------------------------------------------------------------
----------------------------------------------------------------------------------------
Net Asset Value, End of
Period $ 9.61 $ 10.02 $ 10.29 $ 10.31 $ 10.01 $ 9.99
----------------------------------------------------------------------------------------
----------------------------------------------------------------------------------------
Total Return (excludes
sales charge) (2.08)%(a) 1.63% 4.38% 7.49% 4.33% 7.02%
----------------------------------------------------------------------------------------
----------------------------------------------------------------------------------------
Ratios/Supplemental Data
Ratios to Average Net
Assets:
Expenses 1.02 %(b) 1.00% 0.74% 0.75% 0.74% 0.35%
Net investment
income/(loss) 3.79 %(b) 3.68% 4.09% 4.27% 4.01% 4.36%
Expense
waiver/reimbursement(c) 0.04 %(b) 0.21% 0.43% 0.37% 0.32% 0.77%
----------------------------------------------------------------------------------------
Supplemental data:
Net Assets at end of
period (000s) $18,027 $22,008 $188,966 $168,800 $35,463 $28,315
Portfolio turnover(d) 21 % 47% 42% 49% 30% 27%
----------------------------------------------------------------------------------------
----------------------------------------------------------------------------------------
</TABLE>
(a) Not annualized.
(b) Annualized.
(c) This voluntary expense decrease is reflected in both the expense and net
investment income ratios shown above.
(d) Portfolio turnover is calculated on the basis of the fund as a whole
without distinguishing between the classes of shares issued.
44
<PAGE>
<TABLE>
<S> <C>
Addresses
Fifth Third Quality Growth Fund Fifth Third Funds
Fifth Third Equity Income Fund c/o Fifth Third Bank
Fifth Third Pinnacle Fund 38 Fountain Square Plaza
Fifth Third Balanced Fund Cincinnati, Ohio 45263
Fifth Third Mid Cap Fund
Fifth Third International Equity Fund
Fifth Third Technology Fund
Fifth Third Quality Bond Fund
Fifth Third Ohio Tax Free Bond Fund
Investment Advisor Fifth Third Bank
38 Fountain Square Plaza
Cincinnati, Ohio 45263
Investment Advisor (Pinnacle Fund only) Heartland Capital Management Inc.
251 North Illinois Street, Suite 300
Indianapolis, Indiana 46204
Sub-Advisor (International Equity Fund only) Morgan Stanley Asset Management Inc.
1221 Avenue of the Americas
New York, New York 10020
Custodian, Transfer Agent, Dividend Fifth Third Bank
Disbursing Agent, and Sub-Administrator 38 Fountain Square Plaza
Cincinnati, Ohio 45263
Distributor and Administrator BISYS Fund Services L.P.
3435 Stelzer Road
Columbus, Ohio 43219
Independent Auditors Arthur Andersen LLP
Suite 1500
425 Walnut Street
Cincinnati, Ohio 45202
</TABLE>
<PAGE>
The following additional information is available to you upon request and
without charge.
Annual/Semiannual Reports (Reports):
The Funds' annual and semi-annual reports to shareholders contain additional
information on the Funds' investments.
Statement of Additional Information (SAI): The SAI provides more detailed
information about the Funds, including their operations and investment policies.
It is incorporated by reference and is legally considered a part of this
prospectus.
You can get free copies of Annual and Semi-Annual Reports, the SAI, prospectuses
of other Fifth Third Funds, or request other information and discuss your
questions about the Funds by contacting a broker or other financial institution
that sells the Funds. In addition, you may contact the Funds at:
Fifth Third Funds
c/o Fifth Third Bank
38 Fountain Square Plaza
Cincinnati, Ohio 45263
Telephone: 1-888-799-5353
Internet: http://www.53.com*
*The Funds' website is not part of this prospectus.
You can review the Annual and Semi-Annual Reports and the SAI at the Public
Reference Room of the Securities and Exchange Commission. You can get copies:
. For a fee, by writing the Public Reference Section of the Commission,
Washington, D.C. 20549-0102 or calling 1-202-942-8090 or by electronic
request, by e-mailing the SEC at the following address:
[email protected].
. At no charge from the Commission's Website at http://www.sec.gov.
[LOGO OF FIFTH THIRD FUNDS]
Investment Company Act file no. 811-5669
<PAGE>
[LOGO OF FIFTH THIRD FUNDS] Fifth Third Funds
[picture]
Prime Money Market Fund
Fifth Third Funds
Money Market Mutual Funds
Investment B Shares
Working hard to build your wealth!
Prospectus
September 25, 2000
The Securities and Exchange Commission has not approved or disapproved the
shares described in this prospectus or determined whether this prospectus is
accurate or complete. Any representation to the contrary is a criminal offense.
<PAGE>
Fifth Third Funds Table of Contents
Objectives, Strategies and Risks
-------------------------------------------------------------------------
3 Overview
4 Fifth Third Prime Money Market Fund
Shareholder Fees and Fund Expenses
-------------------------------------------------------------------------
6 Fee Table
7 Expense Example
Additional Information About the Fund's
Investments
-------------------------------------------------------------------------
8
Fund Management
-------------------------------------------------------------------------
10 Investment Advisor
10 Fund Administration
Shareholder Information
-------------------------------------------------------------------------
11 Purchasing and Selling Fund Shares
11 Purchasing and Adding to Your Shares
12 Selling Your Shares
13 Exchanging Your Shares
14 Distribution Arrangements/Sales
Charges
16 Dividends and Capital Gains
16 Taxation
Financial Highlights
-------------------------------------------------------------------------
17
Back Cover
-------------------------------------------------------------------------
Where to learn more about Fifth Third
Funds
2
<PAGE>
Objectives, Strategies and Risks
Overview
This section provides important information about Fifth Third Prime Money
Market Fund (the "Fund"), a separate series of Fifth Third Funds (the "Trust"),
including:
. the investment objective
. principal investment strategies
. principal risks, and
. volatility and performance information
The Fund is managed by Fifth Third Bank.
3
<PAGE>
Fifth Third Prime Money Market Fund
[GRAPHIC]
Fundamental Current income consistent with stability of principal.
Objective
Principal The Fund manages its portfolio subject to strict SEC
Investment guidelines, which are designed so that the Fund may
Strategies maintain a stable $1.00 per share price, although there is
no guarantee that it will do so. All of the Fund's
investments are expected to mature in the short term and
the dollar-weighted average portfolio maturity of the Fund
may not exceed 90 days.
The Fund invests at least 95% of its total assets in high-
quality securities called "first tier" securities. These
generally will be corporate securities, including
commercial paper, that at the time of purchase are rated
by such firms as Standard & Poor's and Moody's in their
highest short-term major rating categories, or are unrated
securities that are considered equivalent by the Fund's
investment manager. They also may include securities
issued or guaranteed as to principal or interest by the
U.S. Treasury or any U.S. Government agency or
instrumentality.
The Fund reserves the right to invest up to 5% of its
portfolio in "second tier" securities, which generally are
corporate securities that, at the time of purchase, are
rated by such firms as Standard & Poor's and Moody's in
their second highest short-term major rating categories,
or unrated securities that are considered equivalent by
the Fund's investment manager. Some corporate securities
purchased by the Fund may be restricted securities, that
is, they may be subject to limited resale rights.
Principal The Fund's principal risks are those risks that could
Investment Risks affect the overall yield of the Fund and thus, the return
on your investment. They include factors that cause short-
term interest rates to decline, such as a weak economy,
strong equity markets and changes by the Federal Reserve
in its monetary policies. The Fund's ability to meet
redemption obligations could be burdened by its
investments in securities restricted as to resale.
Restricted securities generally trade among institutions
in markets that are not as developed or that do not
function as efficiently as more established markets.
An investment in the Fund is not a deposit of Fifth Third Bank or any other
bank and 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 this Fund.
4
<PAGE>
Fifth Third Prime Money Market Fund
[GRAPHIC]
Volatility and Performance Information
The bar chart and table provide an indication of the risks of an investment in
the Fund by showing its performance from year to year and over time.
The returns assume that Fund distributions have been reinvested.
Past performance does not indicate how the Fund will perform in the future.
[GRAPH]
Year-by-Year Total Returns as of 12/31 For Investment A Shares/1/
1993 2.69%
1994 3.83%
1995 5.60%
1996 5.04%
1997 5.21%
1998 5.05%
1999 4.53%
The bar chart above does not reflect the
impact of any applicable sales charges or
account fees, which would reduce returns.
<TABLE>
<S> <C> <C>
Best quarter: Q2 1995 1.41%
Worst quarter: Q3 1992 0.00%
Year to Date Return (1/1/00 to 3/31/00): 1.27%
</TABLE>
------------------------------------------------
Average Annual
Total Returns (for
the periods ended
December 31,1999)
-------------------
<TABLE>
<CAPTION>
Inception Date Past Year Past 5 Years Past 10 Years Since Inception
-------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Investment A Shares/1/ 8/11/92 4.53% 5.09% N/A 4.47%
</TABLE>
--------------------------------------------------------------------------------
To obtain current yield information, call 1-888-799-5353.
------
/1/ Return information is for Investment A shares, a class of shares of the
Fund not offered by this Prospectus. Investment A and Investment B shares,
however, would have substantially similar annual returns because the shares
are invested in the same portfolio of securities. The annual returns would
differ to the extent that the classes do not have the same expenses. The
annual returns also would differ to the extent that different sales charges
would apply.
5
<PAGE>
Shareholder Fees and Fund Expenses
Fee Table
This table describes the fees and expenses that you may pay if you buy and hold
Investment B shares of the Fund.
Shareholder fees are paid by you at the time you purchase or sell your shares.
Annual fund operating expenses are paid out of Fund assets, and are reflected
in the share price. The Fund's fees and expenses are based upon the Fund's
operating expenses for the fiscal year ended July 31, 1999.
<TABLE>
<CAPTION>
Prime Money
Market Fund
Shareholder Fees (as a percentage of the lesser of offering price
or redemption price)
<S> <C>
Maximum Sales Charge (Load) Imposed on Purchases None
--------------------------------------------------------------------------------
Maximum Sales Charge (Load) Imposed on Reinvested Dividends None
--------------------------------------------------------------------------------
Maximum Deferred Sales Charge (Load)/1/ 5.00%
--------------------------------------------------------------------------------
Annual Fund Operating Expenses
(as a percentage of average net assets)
Management fees 0.40%
--------------------------------------------------------------------------------
Distribution/Service (12b-1) fees/2/ 1.00%
--------------------------------------------------------------------------------
Other expenses 0.23%
--------------------------------------------------------------------------------
Total Annual Fund Operating Expenses 1.63%
--------------------------------------------------------------------------------
Fee Waivers/3/ 0.13%
--------------------------------------------------------------------------------
Net Total Annual Operating Expenses 1.50%
--------------------------------------------------------------------------------
</TABLE>
/1/ 5% in the first year after purchase, declining to 4% in the second year, 3%
in the third and fourth years, 2% in the fifth year, 1% in the sixth year and
eliminated thereafter.
/2/ Certain service organizations may receive fees from the Fund in amounts up
to an annual rate of 0.25% of the daily net asset value of the Fund shares
owned by shareholders with whom the service organization has a servicing
relationship.
/3/ Fifth Third Bank and/or BISYS have contractually agreed to waive fees
and/or reimburse expenses through November 30, 2000.
6
<PAGE>
Shareholder Fees and Fund Expenses
Expense Example
Use the table below to compare fees and expenses with the fees and expenses of
other mutual funds. The table illustrates the amount of your share of Fund fees
and expenses, assuming a $10,000 initial investment, 5% annual return, payment
of maximum sales charges, redemption at the end of each period, and the Fund's
operating expenses remain the same. Because these examples are hypothetical and
for comparison only, actual amounts may be different.
<TABLE>
<CAPTION>
Fifth Third Prime
Money Market 1 3 5 10
Fund Year Years Years Years
---------------------------------------------
<S> <C> <C> <C> <C>
Investment B Shares
Assuming Redemption $666 $814 $1,087 $1,732
Assuming no Redemption $166 $514 $ 887 $1,732
---------------------------------------------
</TABLE>
7
<PAGE>
Additional Information About the Fund's Investments
The primary investments and investment strategies of the Fund are described
above. Below are descriptions of some additional investments and strategies of
the Fund, some of their risks as well as other risks of investing in the Fund.
A list of the Fund's investments is included in the Fund's most recent annual
or semi-annual report to shareholders. The Fund may be invested in any or all
of these investments, or use any or all of these strategies, at any one time,
and the Fund generally may adjust the composition of its portfolio as market
and economic conditions change.
The success of achieving the Fund's investment strategy depends on Fifth Third
Bank's ability to assess the potential of the securities in which the Fund
invests as well as to evaluate and anticipate changing economic and market
conditions.
Foreign Foreign bonds and instruments of foreign banks generally
Investments have more risk than their domestic counterparts, in part
because of higher political and economic risks and the
general lack of reliable information. All foreign
securities purchased by the Fund are denominated in U.S.
dollars.
Securities When securities are rated by one or more independent
Ratings rating agencies, the Fund uses these ratings to determine
credit quality. In cases where a security has received a
rating from only one independent rating agency, it may
rely on that rating. If a security has received ratings
from two or more rating agencies and at least two of the
ratings are equivalent, the Fund may rely on the two
equivalent ratings even if the other ratings are lower.
In cases where a security's two highest ratings are in
conflicting categories, the Fund must follow the lower
rating. If a security is unrated, the Fund may assign it
to a given category based on its own credit research.
Repurchase The Fund may enter into repurchase agreements. A
Agreements repurchase agreement is an agreement in which the Fund
buys securities from a bank or other financial
institution and agrees to sell it back at a specified
time and place. The risks of investing in repurchase
agreements include the risk that a counterparty will not
buy back the securities as required and the securities
decline in value. To mitigate those risks, the Fund
intends to enter repurchase agreements only with high
quality counterparties and purchase only high quality,
short-term debt securities.
Securities The Fund may seek additional income or fees by lending
Lending portfolio securities to qualified institutions. By
reinvesting any cash collateral it receives in these
transactions, the Fund could realize additional gains or
losses. If the borrower fails to return the securities
and the invested collateral has declined in value, the
Fund could lose money.
Restricted and Any securities that are thinly traded or whose resale is
Illiquid restricted can be difficult to sell at a desired time and
Securities price. Some of those securities are new and complex, and
trade only among institutions; the markets for these
securities are still developing and may not function as
efficiently as established markets. Owning a large
percentage of restricted or illiquid securities could
hamper the Fund's ability to raise cash in order to meet
redemptions. Also, because there may not be an
established market price for these securities, the Fund
may have to
8
<PAGE>
Additional Information About the Fund's Investments
estimate their value, which means that their valuation
(and, to a much smaller extent, the valuation of the
Fund) may have a subjective element.
Derivatives Derivatives are financial instruments whose value derives
from one or more securities. Certain instruments that are
"first" or "second tier" securities also may be
derivatives, such as short-term, high-quality asset-
backed securities. The Fund uses derivatives to invest
for potential income, and may purchase them to the extent
it can purchase any other type of "first" or "second
tier" security. The values of some derivatives are
difficult to determine because they are based on the
values of other securities and the markets for some
derivatives may be limited. With some derivatives, such
as certain option contracts, there is also the risk that
the counterparty may fail to honor its contract terms,
causing a loss for the Fund.
The Fund may invest in securities prior to their date of
When-Issued issue. These securities could fall in value by the time
Securities they are actually issued, which may be any time from a
few days to over a year.
9
<PAGE>
Fund Management
Investment Advisor
Fifth Third Bank, 38 Fountain Square Plaza, Cincinnati, Ohio 45263, serves as
investment advisor to the Fund and generally is responsible for the daily
management of the Fund. Fifth Third Bank is a subsidiary of Fifth Third
Bancorp.
As of March 31, 2000, Fifth Third Bank had approximately $22 billion of assets
under management, including approximately $5.2 billion of assets of Fifth Third
Funds.
The annual management fee paid by the Fund for the fiscal year ended July 31,
1999 was as follows:
As a percentage of
average net assets
------------------------------------------------------------------------------
Fifth Third Prime Money Market Fund 0.38%
------------------------------------------------------------------------------
Fund Administration
BISYS Fund Services Limited Partnership ("BISYS") serves as the administrator
of the Fund. The administrator generally assists in all aspects of the Fund'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 provides these at an annual rate as
specified below.
<TABLE>
<CAPTION>
Maximum Average Aggregate Daily
Administrative Fee Net Assets of the Trust
------------------ -----------------------
<S> <C>
0.20% of the first $1 billion
0.18% of the next $ 1 billion
0.17% in excess of $2 billion
</TABLE>
BISYS 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, Fifth Third Bank performs sub-
administrative services on behalf of the Fund, including providing certain
administrative personnel and services necessary to operate the Fund. Fifth
Third Bank receives a fee from BISYS for providing sub-administrative services
at an annual rate of 0.035% of the average aggregate daily net assets of the
Fund.
10
<PAGE>
Shareholder Information
Purchasing and Selling Fund Shares
Pricing Fund Shares
The Fund's Net Asset Value (NAV) is calculated by dividing the Fund's net
assets by the number of its shares outstanding. The Fund attempts to maintain a
NAV of $1 per share. The value of each portfolio instrument held by the Fund is
determined by using amortized cost.
Fifth Third Prime Money Market Fund calculates its NAV at 1:00 p.m. Cincinnati
time. The Fund's NAV is calculated each day the New York Stock Exchange is open
for regular trading and the Federal Reserve Bank of Cleveland is open for
business. The Fund will be closed on those days that Fifth Third Bank is
closed, including: 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.
Purchasing and Adding to Your Shares
You may purchase shares on days when the New York Stock Exchange is open for
regular trading and the Federal Reserve Bank of Cleveland is open for business.
Your purchase price will be the next NAV after your purchase order, completed
application and full payment have been received by the Fund or its transfer
agent. All orders must be received by the Fund or its transfer agent by 1:00
p.m. (Cincinnati time) in order to receive that day's NAV.
You may purchase Investment B shares through Fifth Third Securities, Inc. as
well as financial institutions which have a sales agreement with the
distributor of Fund shares. In order to purchase Investment B shares through
Fifth Third Securities, Inc. or another financial institution, you must open an
account with that institution. That account will be governed by its own rules
and regulations, which may be more stringent than the rules and regulations
governing an investment in the Fund, and you should consult your account
documents for full details. Your shares in the Fund will be held in an omnibus
account in the name of that institution.
The entity through which you are purchasing your shares is responsible for
transmitting the order to the Fund, and it may have an earlier cut-off time for
purchase requests. Consult that entity for specific information. If your
purchase order has been received by the Fund prior to the time designated by
the Fund for receiving orders on a specific day, you will receive the dividend
declared for that day.
Minimum The minimum initial investment in Investment B shares of
Investments the Fund offered by this Prospectus is $1,000. Subsequent
investments must be in amounts of at least $50. The
maximum investment is $250,000 for total purchases of
Investment B shares of the Fund offered by this
Prospectus.
Purchase Terms All purchases must be in U.S. dollars. A fee may be
charged for any checks that do not clear. Third-party
checks are not accepted.
For details, call 1-888-799-5353 or write to: Fifth Third
Funds, c/o Fifth Third Bank, 38 Fountain Square Plaza,
Cincinnati, Ohio 45263.
The Fund may reject a purchase order for any reason.
Systematic Investment Program
You may make monthly systematic investments in Investment B shares of the Fund
from your bank account. There is no minimum amount required for initial amounts
into the Fund. You may elect to make systematic investments on the 1st or 15th
of each month, or both. If the 1st or 15th of the month is not a day on which
the Fund is open for business, the purchase will be made on the previous day
the Fund is open for business. Please contact Fifth Third Securities, Inc. or
your financial institution for more information.
11
<PAGE>
Shareholder Information
Avoid 31% Tax Withholding
The Fund is required to withhold 31% of taxable dividends, capital gains
distributions and redemptions paid to any shareholder who has not provided the
Fund with his or her certified Taxpayer Identification Number (your Social
Security Number for individual investors) in compliance with IRS rules. To
avoid this withholding, make sure you provide your correct Tax Identification
Number.
Selling Your Shares
You may sell your shares on days when the New York Stock Exchange is open for
regular trading and the Federal Reserve Bank of Cleveland is open for business.
In determining the sale price, the Fund will use the next NAV after your sell
order is received by the Fund, its transfer agent, or your investment
representative, less any applicable contingent deferred sales load. All orders
must be received by the Fund or its transfer agent prior to the time the Fund
calculates its NAV in order to receive that day's NAV. If your order has been
received by the Fund prior to the time the Fund calculates its NAV, and your
shares have been sold you will not receive the dividend declared for that day.
Normally you will receive your proceeds within a week after your request is
received.
You may sell Investment B shares through Fifth Third Securities, Inc. or the
financial institution through which you purchased them.
The entity through which you are selling your shares is responsible for
transmitting the order to the Fund, and it may have an earlier cut-off for sale
requests. Consult that entity for specific information. If your sell order has
been received by the Fund prior to the time designated by the Fund for
receiving orders on a specific day, you will not receive the dividend declared
for that day.
Systematic Withdrawal Plan
You may make automatic withdrawals on a monthly, quarterly or annual basis on
the first day of that period that the Fund is open for business. Please contact
Fifth Third Securities, Inc. or your financial institution for more
information.
Postponement of Redemption Payments
The Fund may delay sending to you redemption proceeds for up to 7 days, or
longer if permitted by the SEC. If you experience difficulty making a telephone
redemption during periods of dramatic economic or market change, you can send
to the Fund your request by regular mail to: Fifth Third Funds, P.O. Box
182706, Columbus, Ohio 43218-2706, or by express mail to: Fifth Third Funds,
c/o BISYS Fund Services, 3435 Stelzer Road, Columbus, Ohio 43219-3035.
12
<PAGE>
Shareholder Information
Exchanging Your Shares
You may exchange Notes on exchanges
your Fund shares
for Investment B To prevent disruption in the
shares of any management of the Fund, market
other Fifth Third timing strategies and frequent
Fund that offers exchange activity may be limited by
Investment B the Fund. Although not anticipated,
shares. No the Fund may reject exchanges, or
transaction fees change or terminate rights to
are charged for exchange shares at any time.
exchanges. Be
sure to read the Shares of the new Fund must be held
prospectus in the same account names, with the
carefully of any same registration and tax
Fund into which identification numbers, as the
you wish to shares of the old Fund.
exchange shares.
The Exchange Privilege (including
You must meet the automatic exchanges) may be changed
minimum or eliminated at any time.
investment
requirements for The Exchange Privilege is available
the Fund into only in states where shares of the
which you are Fund may be sold.
exchanging.
Exchanges from All exchanges are based on the
one Fund to relative net asset value next
another are determined after the exchange order
taxable for is received by the Fund.
investors subject
to federal or
state income
taxation. These
procedures apply
only to exchanges
between existing
accounts.
Automatic Exchange Program
You can use the Funds' Automatic Exchange feature to purchase Class B Shares of
the Funds at regular intervals through regular, automatic redemptions from your
Fifth Third Fund account. Shareholders investing directly in Class B Shares of
the Fund, as opposed to Shareholders obtaining Class B Shares of the Fund upon
exchange of Class B Shares of any of the other Funds will be requested to
participate in the Auto Exchange Program and to set the time and amount of
their regular, automatic withdrawal in such a way that all of the Class B
Shares have been withdrawn from the Fund within 2 years of purchase. To
participate in the Automatic Exchange Program invest a minimum of $10,000 in
the Fund and $1,000 in the Fund whose shares you are buying. To add the
Automatic Exchange Program to your account or to change or terminate the
Automatic Exchange instructions on an existing account, contact Fifth Third
Securities, Inc. or your financial institution.
13
<PAGE>
Shareholder Information
Distribution This section describes the sales charges and fees you
Arrangements/ will pay as an investor in Investment B shares and what
Sales Charges you would pay upon conversion into Investment A shares
after 8 years.
Investment A Investment B
Sale Charge (Load) None A contingent
deferred sales
charge (CDSC)
will be
imposed on
shares
redeemed
within 6 years
after
purchase.
Distribution/Service Subject to Subject to
(12b-1) Fee annual annual
distribution distribution
and and to 1.00%
shareholder of the Fund's
servicing fees assets.
of up to 0.25%
of the Fund's
assets.
Conversion None Converts to
Investment A
shares after 8
years.
Calculation of Investment B shares are offered at NAV, without any up-
Sales Charges front sales charge. Therefore, all of the money that you
invest in the Fund is used to purchase Fund shares. If
you sell your Investment B shares before the end of the
6th year after purchase, you will pay a contingent
deferred sales charge, or CDSC, at the time of
redemption. The CDSC will be based upon the lower of the
NAV at the time of purchase and the NAV at the time of
redemption. In any sale, certain shares not subject to
the CDSC, such as shares purchased with reinvested
dividends and distributions, will be redeemed first,
followed by shares subject to the lowest CDSC.
Investment B shares are subject to the following CDSC
schedule:
% of NAV at time of
purchase (or sale,
Year of Redemption if lower) deducted
After Purchase from proceeds
During the first year 5%
---------------------------------------------------------
During the second year 4%
---------------------------------------------------------
During the third or fourth years 3%
---------------------------------------------------------
During the fifth year 2%
---------------------------------------------------------
During the sixth year 1%
---------------------------------------------------------
During the seventh or eighth years 0%
---------------------------------------------------------
Sales Charge The CDSC will be waived under certain circumstances,
Waivers including the following:
. Minimum required distributions from an IRA or other
qualifying retirement plan to a shareholder who has
attained age 70.
. Redemptions from accounts following the death or
disability of the shareholder.
. Investors who purchased through a participant directed
defined benefit plan.
14
<PAGE>
Shareholder Information
. Returns of excess contributions to certain retirement
plans.
. Distributions of less than 12% of the annual account
value under the Systematic Withdrawal Plan.
. Shares issued in a plan of reorganization sponsored by
Fifth Third Bank, or shares redeemed involuntarily in a
similar situation.
Distribution/Service 12b-1 fees compensate the Distributor and other dealers
(12b-1) Fees and investment representatives for services and expenses
related to the sale and distribution of the Fund's shares
and/or for providing shareholder services. In particular,
these fees help to defray the Distributor's costs of
advancing brokerage commissions to investment
representatives.
12b-1 fees are paid from Fund assets on an ongoing basis,
and will increase the cost of your investment. 12b-1 fees
may cost you more than paying other types of sales
charges.
Investment B shares pay a 12b-1 fee at an annual rate of
up to 1.00% of the average daily net assets of the Fund.
The Distributor may use up to 0.25% of the 12b-1 fee for
shareholder servicing and up to 0.75% for distribution.
Over time shareholders will pay more than the equivalent
of the maximum permitted front-end sales charge because
12b-1 distribution and service fees are paid out of the
Fund's assets on an on-going basis.
Conversion to Investment B shares convert automatically to Investment A
Investment A shares eight years after purchase. After conversion, the
Shares 12b-1 fees applicable to your shares are reduced from
1.00% to 0.25% of the average daily net assets of the
Fund's assets.
Dealers The Distributor of Fund shares, in its discretion, may
Incentives pay all dealers selling Investment B shares all or a
portion of the sales charges it normally receives.
15
<PAGE>
Shareholder Information
All dividends and capital gains will be automatically
Dividends and reinvested unless you request otherwise. You can receive
Capital Gains them in cash or by electronic funds transfer to your bank
account if you are not a participant in an IRA account or
in a tax qualified plan.
Dividends, if any, are declared daily and paid monthly.
Capital gains, if any, are distributed at least annually.
The Fund does not expect to pay any capital gains.
Taxation
Federal Income The Fund expects to distribute substantially all of its
Tax investment income (including net capital gains and tax-
exempt interest income, if any) to its shareholders.
Unless otherwise exempt, shareholders are required to pay
federal income tax on any dividends and other
distributions, including capital gains distributions
received. This requirement applies whether dividends and
other distributions are received in cash or as additional
shares. No federal income tax is due on any dividend
earned in an IRA or qualified retirement plan until
distributed.
This is a brief summary of certain federal income tax
consequences relating to an investment in the Fund, and
shareholders are urged to consult their own tax advisors
regarding the taxation of their investments under
federal, state and local laws.
16
<PAGE>
Financial Highlights
Prior to the date of this prospectus, Investment B shares have not been
offered. Below is certain financial information concerning Investment A shares
another class of the Fund. Investment A and Investment B shares, would have
substantially similar annual returns because the shares are invested in the
same portfolio of securities. The annual returns would differ to the extent
that the classes do not have the same expenses. The annual returns also would
differ to the extent that different sales charges would apply.
The financial highlights table is intended to help you understand the Fund's
financial performance for the past 5 years or the period of the Fund's
operations, if shorter. Certain information reflects financial results for a
single Fund share. The total returns in the table represent the rate that an
investor would have earned or lost on an investment in the Fund (assuming
reinvestment of all dividends and distributions). With respect to financial
highlights for periods through July 31, 1999, the information has been audited
by Ernst & Young LLP, whose report, along with the Fund's financial statements,
are included in the annual report, which is available upon request. The
information for the period ended January 31, 2000 has not been audited.
Fifth Third Prime Money Market Fund
Investment A Shares
<TABLE>
<CAPTION>
Six Months
Ended
Jan. 31, Year Ended July 31,
2000 -------------------------------------------
(Unaudited) 1999 1998 1997 1996 1995
Per Share Data ----------- ------- ------- ------- ------- -------
<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 0.04 0.05 0.05 0.05 0.05
Total from investment
operations 0.02 0.04 0.05 0.05 0.05 0.05
-------------------------------------------------------------------------------------
Less distributions
Distributions to
shareholders from net
investment income (0.02) (0.04) (0.05) (0.05) (0.05) (0.05)
-------------------------------------------------------------------------------------
Total distributions (0.02) (0.04) (0.05) (0.05) (0.05) (0.05)
-------------------------------------------------------------------------------------
-------------------------------------------------------------------------------------
Net asset value, end of
period $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00
-------------------------------------------------------------------------------------
-------------------------------------------------------------------------------------
Total return 2.43%(a) 4.53% 5.25% 5.11% 5.20% 5.25%
-------------------------------------------------------------------------------------
-------------------------------------------------------------------------------------
Ratios/Supplemental Data
Ratios to Average Net
Assets
Expenses 0.77%(b) 0.75% 0.52% 0.52% 0.49% 0.49%
Net investment income 4.81%(b) 4.39% 5.13% 4.99% 5.06% 5.12%
Expense
waiver/reimbursement(c) 0.10%(b) 0.13% 0.47% 0.44% 0.40% 0.44%
-------------------------------------------------------------------------------------
Supplemental data
Net assets, end of
period (000s) $115,042 $75,024 $36,552 $33,438 $19,341 $10,169
-------------------------------------------------------------------------------------
-------------------------------------------------------------------------------------
</TABLE>
(a) Not annualized.
(b) Annualized.
(c) This voluntary expense decrease is reflected in both the expense and net
investment income ratios shown above.
17
<PAGE>
Addresses
Fifth Third Prime Money Market Fund Fifth Third Funds
c/o Fifth Third Bank
38 Fountain Square Plaza
Cincinnati, Ohio 45263
Investment Advisor Fifth Third Bank
38 Fountain Square Plaza
Cincinnati, Ohio 45263
Custodian, Transfer Agent, Dividend Fifth Third Bank
Disbursing Agent, and Sub-Administrator 38 Fountain Square Plaza
Cincinnati, Ohio 45263
Distributor and Administrator BISYS Fund Services L.P.
3435 Stelzer Road
Columbus, Ohio 43219
Independent Auditors Arthur Andersen LLP
Suite 1500
425 Walnut Street
Cincinnati, Ohio 45202
<PAGE>
The following additional information is available to you upon request and
without charge.
Annual/Semiannual Reports (Reports):
The Fund's annual and semi-annual reports to shareholders contain additional
information on the Fund's investments.
Statement of Additional Information (SAI): The SAI provides more detailed
information about the Funds, including their operations and investment policies.
It is incorporated by reference and is legally considered a part of this
prospectus.
You can get free copies of Annual and Semi-Annual Reports, the SAI,
prospectuses of other Fifth Third Funds, or request other information and
discuss your questions about the Funds by contacting a broker or other financial
institution that sells the Funds. In addition, you may contact the Funds at:
Fifth Third Funds
c/o Fifth Third Bank
38 Fountain Square Plaza
Cincinnati, Ohio 45263
Telephone: 1-888-799-5353
Internet: http://www.53.com*
*The Funds' website is not part of this prospectus.
You can review the Annual and Semi-Annual Reports and the SAI at the Public
Reference Room of the Securities and Exchange Commission. You can get copies:
. For a fee, by writing the Public Reference Section of the Commission,
Washington, D.C. 20549-0102, or calling 1-202-942-8090, or by electronic
request, by e-mailing the SEC at the following address:
[email protected]
. At no charge from the Commission's Website at http://www.sec.gov.
[LOGO OF FIFTH THIRD FUNDS]
Investment Company Act file no. 811-5669
<PAGE>
FIFTH THIRD FUNDS
(formerly Fountain Square Funds)
Combined Statement of Additional Information
November 30, 1999
as revised February 1, 2000, June 1, 2000, and September 25, 2000
This Combined Statement of Additional Information (the "SAI") relates to
the following portfolios (the "Funds") of Fifth Third Funds (the "Trust"):
. Fifth Third Quality Growth Fund
. Fifth Third Cardinal Fund
. Fifth Third Pinnacle Fund
. Fifth Third Equity Income Fund
. Fifth Third Balanced Fund
. Fifth Third Mid Cap Fund
. Fifth Third International Equity Fund
. Fifth Third Technology Fund
. Fifth Third Bond Fund For Income
. Fifth Third Quality Bond Fund
. Fifth Third U.S. Government Securities Fund
. Fifth Third Municipal Bond Fund
. Fifth Third Ohio Tax Free Bond Fund
. Fifth Third Government Money Market Fund
. Fifth Third Ohio Tax Exempt Money Market Fund
. Fifth Third Prime Money Market Fund
. Fifth Third Tax Exempt Money Market Fund
. Fifth Third U.S. Treasury Money Market Fund
This SAI should be read with the Prospectuses of the Funds.
This SAI relates to the following prospectuses:
. Dated November 30, 1999 for Fifth Third Quality Growth Fund, Fifth Third
Equity Income Fund, Fifth Third Cardinal Fund, Fifth Third Pinnacle Fund,
Fifth Third Balanced Fund, Fifth Third Mid Cap Fund, Fifth Third
International Equity Fund, Fifth Third Bond Fund For Income, Fifth Third
Quality Bond Fund, Fifth Third U.S. Government Securities Fund, Fifth Third
Municipal Bond Fund and Fifth Third Ohio Tax Free Bond Fund with respect to
Investment A, Investment C, and Institutional Shares.
. Dated November 30, 1999 for Fifth Third Government Money Marked Fund, Fifth
Third Prime Money Market Fund and Fifth Third Tax Exempt Money Market Fund
with respect to Investment A Shares and Fifth Third Government Money Market
Fund, Fifth Third Prime Money Market Fund, Fifth Third Tax Exempt Money
Market Fund, and U.S. Treasury Money Market Fund with respect to
Institutional Shares.
. Dated June 1, 2000 for Fifth Third Technology Fund with respect to Investment
A, Investment C, and Institutional Shares.
. Dated September 25, 2000 for Fifth Third Quality Growth Fund, Fifth Third
Equity Income Fund, Fifth Third Pinnacle Fund, Fifth Third Balanced Fund,
Fifth Third Mid Cap Fund, Fifth Third International Equity Fund, Fifth Third
Technology Fund, Fifth Third Quality Bond Fund, and Fifth Third Ohio Tax Free
Bond Fund with respect to Investment B Shares.
To receive a copy of any Prospectus, you may write the Trust or call toll-free
(888) 799-5353. This SAI is not a prospectus.
Fifth Third Funds
c/o Fifth Third Bank
38 Fountain Square Plaza
Cincinnati, Ohio 45263
<PAGE>
TABLE OF CONTENTS
-----------------
<TABLE>
<CAPTION>
Page
----
<S> <C>
GENERAL INFORMATION ABOUT THE TRUST.................................................. 1
INVESTMENT OBJECTIVE AND POLICIES OF THE FUNDS....................................... 3
Investment Objectives............................................................... 3
Investment Limitations.............................................................. 3
Fundamental Limitations............................................................. 3
Non-fundamental Limitations......................................................... 5
Fundamental Limitations............................................................. 7
Non-Fundamental Limitations......................................................... 9
All Funds except Stock and Bond Funds............................................... 9
ADDITIONAL RISKS AND INFORMATION CONCERNING CERTAIN INVESTMENT TECHNIQUES............ 11
Types of Investments................................................................ 11
Portfolio Turnover.................................................................. 23
Investment Risks (Ohio Tax Free Fund and Ohio Money Market Fund..................... 23
Special Restriction on Fifth Third Government Money Market Fund..................... 24
Special Restriction on Fifth Third U.S. Treasury Money Market Fund.................. 24
FIFTH THIRD FUNDS MANAGEMENT......................................................... 24
Officers and Trustees............................................................... 24
Trust Ownership..................................................................... 25
Trustee Liability................................................................... 31
Codes of Ethics..................................................................... 31
INVESTMENT ADVISORY SERVICES......................................................... 32
Investment Advisors to the Trust.................................................... 32
Advisory Fees....................................................................... 32
Sub-advisor......................................................................... 33
Sub-advisory Fees................................................................... 33
Administrative Services............................................................. 33
Custody of Fund Assets.............................................................. 34
Transfer Agent and Dividend Disbursing Agent........................................ 35
BROKERAGE TRANSACTIONS............................................................... 35
PURCHASING SHARES.................................................................... 37
Distribution Plan and Administrative Services Agreement (Investment C Shares Only).. 38
Purchases with Proceeds from Redemptions of Unaffiliated Mutual Fund Shares......... 39
Conversion of Investment B Shares to Investment A Shares............................ 39
Conversion to Federal Funds......................................................... 39
Exchanging Securities for Fund Shares............................................... 39
Payments to Dealers................................................................. 40
REDEEMING SHARES..................................................................... 40
Redemption in Kind.................................................................. 41
Postponement of Redemptions......................................................... 41
DETERMINING NET ASSET VALUE.......................................................... 41
Determining Market Value of Securities.............................................. 41
Valuing Municipal Bonds............................................................. 42
Use of Amortized Cost............................................................... 42
Monitoring Procedures............................................................... 42
Investment Restrictions............................................................. 43
Trading in Foreign Securities....................................................... 43
TAX STATUS........................................................................... 44
The Funds' Tax Status............................................................... 44
Shareholders' Tax Status............................................................ 44
Capital Gains....................................................................... 44
State and Local Taxes............................................................... 45
Foreign Taxes....................................................................... 45
</TABLE>
i
<PAGE>
<TABLE>
<S> <C>
PERFORMANCE INFORMATION.............................................................. 46
Total Return........................................................................ 46
Tax-Equivalent Yield................................................................ 48
Tax Equivalency Table............................................................... 48
PERFORMANCE COMPARISONS.............................................................. 49
FINANCIAL STATEMENTS................................................................. 52
APPENDIX............................................................................. 53
</TABLE>
ii
<PAGE>
GENERAL INFORMATION ABOUT THE TRUST
The Trust was established as a Massachusetts business trust under a
Declaration of Trust dated September 15, 1988.
The Trust's Declaration of Trust permits the Trust to offer separate series
of shares of beneficial interest representing interests in separate portfolios
of securities, and it permits the Trust to offer separate classes of each such
series. Currently, the Trust offers shares of the following Funds and shares of
the following classes of each Fund:
<TABLE>
<CAPTION>
Funds Classes
-----------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Investment A Investment B Investment C Institutional
-----------------------------------------------------------------------------------------------------------------------
Fifth Third Quality Growth Fund ("Quality X X X X
Growth Fund")
-----------------------------------------------------------------------------------------------------------------------
Fifth Third Equity Income Fund ("Equity X X X X
Income Fund")
-----------------------------------------------------------------------------------------------------------------------
Fifth Third Cardinal Fund ("Cardinal X X* X X
Fund")
-----------------------------------------------------------------------------------------------------------------------
Fifth Third Pinnacle Fund ("Pinnacle X X X X
Fund")
-----------------------------------------------------------------------------------------------------------------------
Fifth Third Balanced Fund ("Balanced X X X X
Fund")
-----------------------------------------------------------------------------------------------------------------------
Fifth Third Mid Cap Fund ("Mid Cap Fund") X X X X
-----------------------------------------------------------------------------------------------------------------------
Fifth Third International Equity Fund X X X X
("International Equity Fund")
-----------------------------------------------------------------------------------------------------------------------
Fifth Third Bond Fund For Income ("Bond X X* X X
Fund Income")
-----------------------------------------------------------------------------------------------------------------------
Fifth Third Quality Bond Fund ("Quality X X X X
Bond Fund")
-----------------------------------------------------------------------------------------------------------------------
Fifth Third U.S. Government Securities X X* X X
Fund ("Government Securities Fund")
-----------------------------------------------------------------------------------------------------------------------
Fifth Third Municipal Bond Fund X X* X X
("Municipal Bond Fund")
-----------------------------------------------------------------------------------------------------------------------
Fifth Third Ohio Tax Free Bond Fund X X X X
("Ohio Tax Free Fund")
-----------------------------------------------------------------------------------------------------------------------
Fifth Third Technology Fund ("Technology X X X X
Fund")
-----------------------------------------------------------------------------------------------------------------------
Fifth Third Ohio Tax Exempt Money Market X X
Fund ("Ohio Money Market Fund")
-----------------------------------------------------------------------------------------------------------------------
Fifth Third Government Money Market Fund X X
("Government Money Market Fund")
-----------------------------------------------------------------------------------------------------------------------
Fifth Third Prime Money Market Fund X X X
("Prime Money Market Fund")
-----------------------------------------------------------------------------------------------------------------------
Fifth Third Tax Exempt Money Market Fund X X
("Tax Exempt Fund")
-----------------------------------------------------------------------------------------------------------------------
Fifth Third U.S. Treasury Money Market X
Fund ("U.S. Treasury Money Market Fund")
-----------------------------------------------------------------------------------------------------------------------
</TABLE>
<PAGE>
*These shares are currently not available to the public.
Each Fund, is an "open-end" management investment company, and other than
the Ohio Tax-Free Fund, is a "diversified" company, as those terms are defined
in the Investment Company Act of 1940, as amended (the "1940 Act"). Among other
things, a diversified fund must, with respect to 75% of its total assets, not
invest more than 5% of its total assets in any one issuer. A non-diversified
Fund, such as the Ohio Tax-Free Fund, may, with respect to 75% of its total
assets, invest more than 5% of its total assets in any one issuer.
The Trustees are responsible for managing the business and affairs of the
Trust. All Funds are advised by Fifth Third Bank (the "Advisor"), except
Pinnacle Fund, which is advised by Heartland Capital Management, Inc.
("Heartland"). Fifth Third Bank and Heartland are wholly-owned subsidiaries of
Fifth Third Bancorp. Morgan Stanley Asset Management, Inc. serves as investment
sub-advisor to the International Equity Fund. Fort Washington Investment
Advisors, Inc. serves as investment sub-advisor to the Ohio Money Market Fund
(collectively, the "Sub-advisors").
2
<PAGE>
INVESTMENT OBJECTIVES AND POLICIES OF THE FUNDS
The prospectuses state the investment objective of each Fund and discuss
certain investment policies employed to achieve those objectives. The following
discussion supplements the description of the Funds' investment policies in the
prospectus.
Investment Objectives
Each Fund's investment objective is fundamental and may not be changed
without shareholder approval.
Investment Limitations
Fundamental Limitations
Stock and Bond Funds
Except as provided below, each Fund has adopted the following fundamental
investment limitations. As fundamental investment limitations, they cannot be
changed with respect to a Fund without approval of the holders or a majority of
that Fund's Shares.
Issuing Senior Securities and Borrowing Money. None of the Funds described
---------------------------------------------
herein will issue senior securities, except that a Fund may borrow money
directly or through reverse repurchase agreements in amounts up to one-third of
the value of its total assets, including the amount borrowed; and except to the
extent that a Fund (with the exception of Ohio Tax Free Fund, Municipal Bond
Fund and Pinnacle Fund) may enter into futures contracts, as applicable.
The Funds described herein 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 a Fund to meet redemption requests when the liquidation of portfolio
securities is deemed to be inconvenient or disadvantageous. None of the Funds
described herein will purchase any securities while any borrowings in excess of
5% of its total assets are outstanding. Currently, none of the Funds described
herein intend to borrow money.
Selling Short and Buying on Margin. None of the Funds described herein
----------------------------------
will 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. The deposit or payment by a Fund described herein (with the
exception of Ohio Tax Free Fund, Municipal Bond Fund and Pinnacle Fund) of
initial or variation margin in connection with futures contracts or related
options transactions is not considered the purchase of a security on margin.
Pledging Assets. The Funds described herein will not mortgage, pledge, or
---------------
hypothecate any assets, except to secure permitted borrowings. In these cases, a
Fund may pledge assets as necessary to secure such borrowings. For purposes of
this limitation, where applicable, (a) the deposit of assets in escrow in
connection with the writing of covered put or call options and the purchase of
securities on a when-issued basis and (b) collateral arrangements with respect
to: (i)
3
<PAGE>
the purchase and sale of stock options (and options on stock indices) and (ii)
initial or variation margin for futures contracts, will not be deemed to be
pledges of a Fund's assets.
Lending Cash or Securities. The Funds described herein will not lend any
--------------------------
of their respective assets except portfolio securities up to one-third of the
value of total assets. This shall not prevent a Fund from purchasing or holding
U.S. government obligations, money market instruments, publicly or non-publicly
issued municipal bonds, variable rate demand notes, bonds, debentures, notes,
certificates of indebtedness, or other debt securities, entering into repurchase
agreements, or engaging in other transactions where permitted by a Fund's
investment objectives, policies and limitations or the Trust's Declaration of
Trust.
Investing in Commodities. None of the Funds described herein will purchase
------------------------
or sell commodities, commodity contracts, or commodity futures contracts except
to the extent that the Funds described herein (with the exception of Ohio Tax
Free Fund, Government Securities Fund, Municipal Bond Fund and Pinnacle Fund)
may engage in transactions involving futures contracts or options on futures
contracts.
Investing in Real Estate. None of the Funds described herein will purchase
------------------------
or sell real estate, including limited partnership interests, although each of
these Funds (with the exception of Government Securities Fund) may invest in
securities of issuers whose business involves the purchase or sale of real
estate or (with the exception of the Pinnacle Fund) in securities which are
secured by real estate or interests in real estate.
Diversification of Investments. With respect to 75% of the value of their
------------------------------
respective total assets, none of the Funds described herein (with the exception
of Ohio Tax Free Fund) will 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. None of the
Funds described herein will acquire more than 10% of the outstanding voting
securities of any one issuer.
Dealing in Puts and Calls. The Pinnacle Fund, Municipal Bond Fund and Ohio
-------------------------
Tax Free Fund will not buy or sell puts, calls, straddles, spreads, or any
combination of these.
Concentration of Investments. The Quality Growth Fund, Cardinal Fund,
----------------------------
Pinnacle Fund, Balanced Fund, Mid Cap Fund, Technology Fund and International
Equity Fund will not invest 25% or more of the values of their respective total
assets in any one industry, except that these Funds 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.
Neither the Ohio Tax Free Fund or the Municipal Bond Fund will purchase
securities if, as a result of such purchase, 25% or more of the value of its
respective total assets would be invested in any one industry or in industrial
development bonds or other securities, the interest upon which is paid from
revenues of similar types of projects. However, their Funds described herein may
invest as temporary investments more than 25% of the value of its total assets
in cash or cash items, securities issued or guaranteed by the U.S. government,
its agencies or
4
<PAGE>
instrumentalities, or instruments secured by these money market instruments,
i.e., repurchase agreements.
Underwriting. None of the Funds described herein will underwrite any issue
------------
of securities, except as a 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.
Non-Fundamental Limitations
Stock and Bond Funds
Except as provided below, each Fund has adopted the following non-
fundamental investment limitations. As non-fundamental investment limitations,
they may be changed by the Trustees without shareholder approval.
Investing in Restricted Securities. The Funds described herein will not
----------------------------------
invest more than 10% of the value of their respective net assets in securities
that are subject to restrictions on resale under federal securities law.
Investing in Illiquid Securities. The Funds described herein will not
--------------------------------
invest more than 15% of the value of their respective net assets in illiquid
securities, including, as applicable, repurchase agreements providing for
settlement more than seven days after notice, over-the-counter options, 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 Funds described
-----------------------------------------------------
herein will limit their respective 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 their respective total assets in any one investment
company, and will invest no more than 10% of their respective total assets in
investment companies in general. The Funds described herein 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 a Fund in shares of another investment company would be subject to
such expenses.
Investing in New Issuers. None of the Quality Growth Fund, Cardinal Fund,
------------------------
Pinnacle Fund, Balanced Fund, Mid Cap Fund, International Equity Fund, Quality
Bond Fund, Technology Fund or Government Securities Fund will invest more than
5% of the value of its respective total assets in securities of issuers which
have records of less than three years of continuous operations, including the
operation of any predecessor.
Neither the Ohio Tax Free Fund or the Municipal Bond Fund will invest more
that 5% of the value of its respective total assets in industrial development
bonds where the principal and
5
<PAGE>
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. None of the Funds described herein will purchase or retain the
---------
securities of any issuer if the officers and Trustees of the Trust, Fifth Third
Bank or (in the case of the Pinnacle Fund) 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. None of the Funds described herein Fund will
---------------------
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. None of the Funds described herein will enter into
----------------------
transactions for the purpose of engaging in arbitrage.
Purchasing Securities to Exercise Control. None of the Funds described
-----------------------------------------
herein will purchase securities of a company for the purpose of exercising
control or management.
Investing in Warrants. None of the Quality Growth Fund, Equity Income
---------------------
Fund, Cardinal Fund, Balanced Fund, Mid Cap Fund, or International Equity Fund
may invest more than 5% of its net assets in warrants, including those acquired
in units or attached to other securities. For purposes of this investment
restriction, warrants will be valued at the lower of cost or market, except that
warrants acquired by a Fund in units with or attached to securities may be
deemed to be without value.
Investing in Put Options. The International Equity Fund will not purchase
------------------------
put options on securities or futures contracts, unless the securities or futures
contracts are held in the Fund's portfolio or unless the Fund is entitled to
them in deliverable form without further payment or after segregating cash in
the amount of any further payment.
Writing Covered Call Options. The International Equity Fund will not write
----------------------------
call options on securities or futures contracts unless the securities of futures
contracts are held in the Fund's portfolio or unless the Fund is entitled to
them in deliverable form without further payment or after segregating cash in
the amount of any further payment.
Except with respect to a Fund's policy relating to borrowing money, if a
percentage limitation is adhered to at the time of investment, a later increase
or decrease in percentage resulting from any change in value or net assets will
not result in a violation of such restriction. For purposes of its policies and
limitations, the Trust 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."
The Ohio Tax Free Fund and the Municipal Bond Fund do not expect to borrow
money or pledge securities in excess of 5% of the value of their respective net
assets during the coming fiscal year.
6
<PAGE>
Fundamental Limitations
Money Market Funds
Except as provided below, each Fund has adopted the following fundamental
investment limitations. As fundamental investment limitations, they cannot be
changed with respect to a Fund without approval of the holders or a majority of
that Fund's Shares.
Selling Short and Buying on Margin. None of the Funds described herein
----------------------------------
will sell any securities short or purchase any securities on margin, but each
may obtain such short-term credit as may be necessary for clearance of purchases
and sales.
Issuing Senior Securities and Borrowing Money. None of the Funds described
---------------------------------------------
herein will issue senior securities, except that a Fund may borrow money
directly or through reverse repurchase agreements as a temporary measure for
extraordinary or emergency purposes and then only in amounts not in excess of 5%
of the value of its total assets (except for the Government Money Market Fund)
or in an amount up to one-third of the value of its total assets, including the
amount borrowed, in order to meet redemption requests without immediately
selling portfolio instruments. Any direct borrowings need not be collateralized.
None of the Funds described herein considers the issuance of separate classes of
shares to involve the issuance of "senior securities" within the meaning of this
investment limitation.
Neither the Government Money Market Fund, Ohio Money Market Fund nor the
Tax Exempt Money Market Fund will purchase any securities while borrowings in
excess of 5% of its total assets are outstanding. The U.S. Treasury Money Market
Fund will not borrow money or engage in reverse repurchase agreements for
investment leverage purposes. None of the Funds described herein has any present
intention to borrow money.
Pledging Securities or Assets. The Prime Money Market Fund will not pledge
-----------------------------
securities. None of the Government Money Market Fund, Tax Exempt Money Market
Fund, Ohio Money Market Fund or U.S. Treasury Money Market Fund will mortgage,
pledge, or hypothecate any assets except to secure permitted borrowings. In
those cases, it may pledge assets having a market value not exceeding the lesser
of the dollar amounts borrowed or 10% of the value of total assets at the time
of the pledge.
Investing in Commodities, Commodity Contracts, or Real Estate. Prime Money
-------------------------------------------------------------
Market Fund will not invest in commodities, commodity contracts, or real estate,
except that it may purchase money market instruments issued by companies that
invest in real estate or sponsor such interests. The Tax Exempt Money Market
Fund will not purchase or sell commodities, commodity contracts, commodity
futures contracts or real estate, including limited partnership interests,
although the Tax Exempt Money Market Fund may invest in the securities of
issuers whose business involves the purchase or sale of real estate or in
securities which are secured by real estate or interests in real estate.
Underwriting. The Prime Money Market Fund will not engage in underwriting
------------
of securities issued by others. The Tax Exempt Money Market Fund will not
underwrite any issue of securities, except as the Fund may be deemed to be an
underwriter under the Securities Act of
7
<PAGE>
1933 in connection with the sale of securities in accordance with its investment
objective, policies, and limitations.
Lending Cash or Securities. None of the Funds described herein will lend
--------------------------
any of its assets, except that the Government Money Market Fund may purchase or
hold U.S. government securities permitted by its investment objective, policies
and limitations, the Prime Money Market Fund may purchase or hold money market
instruments, including repurchase agreements and variable rate demand notes,
permitted by its investment objective and policies, the Tax Exempt Money Market
Fund may purchase or hold U.S. government securities permitted by its investment
objective, policies and limitations, and the U.S. Treasury Money Market Fund may
purchase or hold U.S. Treasury obligations, including repurchase agreements
permitted by its investment objective and policies.
Acquiring Voting Securities. The Prime Money Market Fund will not acquire
---------------------------
the voting securities of any issuer. It will not invest in securities of a
company for the purpose of exercising control or management.
The Tax Exempt Money Market Fund will not acquire more than 10% of the
outstanding voting securities of any one issuer. For purposes of this
limitation, non-governmental users of facilities financed by industrial
development or pollution control revenue bonds and banks issuing letters of
credit or comparable guarantees supporting variable rate demand municipal
securities are considered to be issuers.
Diversification of Investments. With respect to 75% of the value of its
------------------------------
total assets, the Prime Money Market Fund will not purchase securities issued by
any one issuer having a value of more than 5% of the value of its total assets
except repurchase agreements and U.S. government obligations. The total amount
of the remaining 25% of the value of the Prime Money Market Fund's total assets
may be invested in a single issuer if the Advisor believes such a strategy to be
prudent.
The Prime Money Market Fund considers the type of bank obligations it
purchases to be cash items.
With respect to 75% of the value of its total assets, the Tax Except Money
Market 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. For
purposes of this limitation, non-governmental users of facilities financed by
industrial development or pollution control revenue bonds and banks issuing
letters of credit or comparable guarantees supporting variable rate demand
municipal securities are considered to be issuers.
Concentration of Investments. The Prime Money Market Fund will not invest
----------------------------
more than 25% of the value of its total assets in any one industry except
commercial paper of finance companies. However, the Prime Money Market Fund
reserves the right to invest more than 25% of its net assets in domestic bank
instruments (such as time and demand deposits and certificates
8
<PAGE>
of deposit), U.S. government obligations or instruments secured by these money
market instruments, such as repurchase agreements. The Prime Money Market Fund
will not invest more than 25% of its net assets in instruments of foreign banks.
The Tax Exempt Money Market Fund will not purchase securities if, as a
result of such purchase, 25% or more of the value of its total assets would be
invested in any one industry; provided that, this limitation shall not apply to
industrial development bonds or other securities, the interest upon which is
paid from revenues of similar types of projects, securities issued or guaranteed
by the U.S. government, its agencies or instrumentalities, or variable rate
demand municipal securities supported by letters of credit or guarantees.
Dealing in Puts and Calls. The Tax Exempt Money Market Fund will not buy
-------------------------
or sell puts, calls, straddles, spreads, or any combination of these.
Investing in Securities of Other Investment Companies. Each of the Prime
-----------------------------------------------------
Money Market Fund and the U.S. Treasury Money Market Fund acquire up to 3% of
the total outstanding securities of other investment companies. Each of these
Funds will limit its investments in the securities of other investment companies
to those of money market funds having investment objectives and policies similar
to its own. Each of these Funds will purchase securities of other investment
companies only in open-market transactions involving no more than customary
broker's commissions. However, there is no limitation applicable to securities
of any investment company acquired in a merger, consolidation, or acquisition of
assets.
It should be noted that investment companies incur certain expenses such as
management fees, and, therefore, any investment by a Fund in such shares would
be subject to such customary expenses.
Non-Fundamental Limitations
Money Market Funds
Except as provided below, each Fund has adopted the following non-
fundamental investment limitations. As non-fundamental investment limitations,
they may be changed by the Trustees without shareholder approval.
Investing in Securities of Other Investment Companies. Each of the
-----------------------------------------------------
Government Money Market Fund, the Tax Exempt Money Market Fund and Ohio Money
Market Fund can acquire up to 3% of the total outstanding securities of other
investment companies. Each of these Funds will limit its investments in the
securities of other investment companies to those of money market funds having
investment objectives and policies similar to its own. Each of these Funds will
purchase securities of other investment companies only in open-market
transactions involving no more than customary broker's commissions. However,
there is on limitation applicable to securities of any investment company
acquired in a merger, consolidation, or acquisition of assets.
9
<PAGE>
It should be noted that investment companies incur certain expenses such as
management fees, and, therefore, any investment by a Fund in such shares would
be subject to such customary expenses.
Investing in Illiquid Securities. None of the Funds described herein will
--------------------------------
invest more than 10% of the value of its net assets in illiquid securities.
Investing in Restricted Securities. Neither the Prime Money Market nor the
----------------------------------
Tax Exempt Money Market Fund will invest more than 10% of the value of its net
assets in securities which are subject to restrictions on resale under federal
securities laws.
Investing in New Issuers. The Prime Money Market 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.
The Tax Exempt Money Market Fund will not invest more than 5% of the value
of its total assets in industrial development 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 Minerals. Neither the Prime Money Market nor the Tax Exempt
---------------------
Money Market Fund will purchase interests in oil, gas, or other mineral
exploration or development programs or leases, although it may purchase the
securities of issuers which invest in or sponsor such programs.
Investing in Issuers Whose Securities are Owned by Officers and Trustees of
---------------------------------------------------------------------------
the Trust. The Tax Exempt Money Market Fund will not purchase or retain the
---------
securities of any issuer if the officers and Trustees of the Trust or its
investment advisor, owning individually more than one half of one percent of the
issuer's securities, together own more than five percent of the issuer's
securities.
Except with respect to borrowing money, if a percentage limitation is
adhered to at the time of investment, a later increase or decrease in percentage
resulting from any change in value or net assets will not result in a violation
of such restriction.
For the purposes of its policies and limitations, each of the Funds
described herein 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."
10
<PAGE>
ADDITIONAL RISKS AND INFORMATION CONCERNING CERTAIN INVESTMENT TECHNIQUES
Types of Investments
Bank Instruments. The Prime Money Market Fund, the Tax Exempt Money
----------------
Market Fund, the Ohio Money Market Fund, the Quality Bond Fund, the Quality
Growth Fund, the Technology Fund, the Mid Cap Fund, the Balanced Fund, the
Equity Income Fund, the Bond Fund For Income, the Cardinal Fund, the Pinnacle
Fund and the Municipal Bond 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.
In addition to domestic bank obligations such as certificates of deposit;
demand and time deposits, and bankers' acceptances, the Prime Money Market Fund
may invest in: (a) Eurodollar Certificates of Deposit issued by foreign branches
of U.S. or foreign banks; (b) Eurodollar Time Deposits, which are U.S. dollar-
denominated deposits in foreign branches of U.S. or foreign banks; and (c)
Yankee Certificates of Deposit, which are U.S. dollar-denominated certificates
of deposit issued by U.S. branches of foreign banks and held in the United
States.
Futures and Options Transactions. All of the Funds except the Money Market
--------------------------------
funds may engage in futures and options transactions as described below to the
extent consistent with their investment objectives and policies.
As a means of reducing fluctuations in the net asset value of Shares of the
Funds, the Funds may attempt to hedge all or a portion of their portfolio
through the purchase of put options on portfolio securities and put options on
financial futures contracts for portfolio securities. The Funds may attempt to
hedge all or a portion of their portfolio by buying and selling financial
futures contracts and writing call options on futures contracts. The Funds may
also write covered call options on portfolio securities to attempt to increase
current income.
The Funds will maintain their position in securities, options, and
segregated cash subject to puts and calls until the options are exercised,
closed, or have expired. An option position may be closed out over-the-counter
or on an exchange which provides a secondary market for options of the same
series.
Futures Contracts. The Funds except the Money Market funds, the Ohio
-----------------
Tax Free Fund, the Municipal Bond Fund and the Pinnacle Fund, may enter into
futures contracts. A futures contract is a firm commitment by, the seller who
agrees to make delivery of the specific type of security called for in the
contract ("going short") and the buyer who agrees to take delivery of the
security ("going long") at a certain time in the future. However, a securities
index futures contract is an agreement pursuant to which two parties agree to
take or make delivery of an amount of cash equal to the difference between the
value of the index at the close of the last
11
<PAGE>
trading day of the contract and the price at which the index was originally
written. No physical delivery of the underlying security in the index is made.
Financial futures contracts call for the delivery of particular debt
instruments issued or guaranteed by the U.S. Treasury or by specified agencies
or instrumentalities of the U.S. government at a certain time in the future.
The purpose of the acquisition or sale of a futures contract by a Fund is
to protect it from fluctuations in the value of securities caused by
unanticipated changes in interest rates or stock prices without necessarily
buying or selling securities. For example, in the fixed income securities
market, price moves inversely to interest rates. A rise in rates means a drop in
price. Conversely, a drop in rates means a rise in price. In order to hedge its
holdings of fixed income securities against a rise in market interest rates, a
Fund could enter into contracts to "go short" to protect itself against the
possibility that the prices of its fixed income securities may decline during
the Fund's anticipated holding period. The Fund would "go long" to hedge against
a decline in market interest rates. The International Equity Fund may also
invest in securities index futures contracts when the Sub-advisor believes such
investment is more efficient, liquid or cost-effective than investing directly
in the securities underlying the index.
Stock Index Options. The Funds other than Fifth Third Money Market
-------------------
Funds, the Ohio Tax Free Fund, the Municipal Bond Fund and the Pinnacle Fund,
may purchase put options on stock indices listed on national securities
exchanges or traded in the over-the-counter market. A stock index fluctuates
with changes in the market values of the stocks included in the index.
The effectiveness of purchasing stock index options will depend upon the
extent to which price movements in the Funds' portfolio correlate with price
movements of the stock index selected. Because the value of an index option
depends upon movements in the level of the index rather than the price of a
particular stock, whether the Funds will realize a gain or loss from the
purchase of options on an index depends upon movements in the level of stock
prices in the stock market generally or, in the case of certain indices, in an
industry or market segment, rather than movements in the price of a particular
stock. Accordingly, successful use by the Funds of options on stock indices will
be subject to the ability of the Advisors to predict correctly movements in the
direction of the stock market generally or of a particular industry. This
requires different skills and techniques than predicting changes in the price of
individual stocks.
Put Options on Financial Futures Contracts. The Funds other than Fifth
------------------------------------------
Third Money Market funds, the Ohio Tax Free Fund, the Municipal Bond Fund and
the Pinnacle Fund, may purchase listed (and, in the case of International Equity
Fund, over-the-counter) put options on financial futures contracts. The Funds
would use these options only to protect portfolio securities against decreases
in value resulting from market factors such as anticipated increase in interest
rates, or in the case of the International Equity Fund when the Sub-advisor
believes such investment is more efficient, liquid or cost-effective than
investing directly in the futures contract or the underlying securities or when
such futures contracts or securities are unavailable for investment upon
favorable terms.
12
<PAGE>
Unlike entering directly into a futures contract, which requires the
purchaser to buy a financial instrument on a set date at a specified price, the
purchase of a put option on a futures contract entitles (but does not obligate)
its purchaser to decide on or before a future date whether to assume a short
position at the specified price. Generally, if the hedged portfolio securities
decrease in value during the term of an option, the related futures contracts
will also decrease in value and the option will increase in value. In such an
event, a Fund will normally close out its option by selling an identical option.
If the hedge is successful, the proceeds received by a Fund upon the sale of the
second option will be large enough to offset both the premium paid by a Fund for
the original option plus the realized decrease in value of the hedged
securities.
Alternatively, a Fund may exercise its put option to close out the
position. To do so, it would simultaneously enter into a futures contract of the
type underlying the option (for a price less than the strike price of the
option) and exercise the option. A Fund would then deliver the futures contract
in return for payment of the strike price. If a Fund neither closes out nor
exercises an option, the option will expire on the date provided in the option
contract, and only the premium paid for the contract will be lost.
The International Equity Fund may write listed put options on financial
futures contracts to hedge its portfolio or when the Sub-advisor believes such
investment is more efficient, liquid or cost-effective than investing directly
in the futures contract or the underlying securities or when such futures
contracts or securities are unavailable for investment upon favorable terms.
When the Fund writes a put option on a futures contract, it receives a premium
for undertaking the obligation to assume a long futures position (buying a
futures contract) at a fixed price at any time during the life of the option.
Call Options on Financial Futures Contracts. The Funds other than the
-------------------------------------------
Fifth Third Money Market funds, the Ohio Tax Free Fund, the Municipal Bond Fund
and the Pinnacle Fund, may write listed call options or over-the-counter call
options on futures contracts, to hedge their portfolios against an increase in
market interest rates, or in the case of International Equity Fund, when the
Sub-advisor believes such investment is more efficient, liquid or cost-effective
than investing directly in the futures contract or the underlying securities or
when such futures contracts or securities are unavailable for investment upon
favorable terms. When a Fund writes a call option on a futures contract, it is
undertaking the obligation of assuming a short futures position (selling a
futures contract) at the fixed strike price at any time during the life of the
option if the option is exercised. As market interest rates rise and cause the
price of futures to decrease, a Fund's obligation under a call option on a
future (to sell a futures contract) costs less to fulfill, causing the value of
a Fund's call option position to increase. In other words, as the underlying
future's price goes down below the strike price, the buyer of the option has no
reason to exercise the call, so that a Fund keeps the premium received for the
option. This premium can help substantially offset the drop in value of a Fund's
portfolio securities.
Prior to the expiration of a call written by a Fund, or exercise of it by
the buyer, a Fund may close out the option by buying an identical option. If the
hedge is successful, the cost of the second option will be less than the premium
received by a Fund for the initial option. The net premium income of a Fund will
then substantially offset the realized decrease in value of the hedged
securities.
13
<PAGE>
The International Equity Fund may buy listed call options on financial
futures contracts to hedge its portfolio. When the Fund purchases a call option
on a futures contract, it is purchasing the right (not the obligation) to assume
a long futures position (buy a futures contract) at a fixed price at any time
during the life of the option.
Limitation on Open Futures Positions. No Fund will maintain open
------------------------------------
positions in futures contracts it has sold or options it has written on futures
contracts if, in the aggregate, the value of the open positions (marked to
market) exceeds the current market value of its securities portfolio plus or
minus the unrealized gain or loss on those open positions, adjusted for the
correlation of volatility between the securities or securities index underlying
the futures contract and the futures contracts. If a Fund exceeds this
limitation at any time, it will take prompt action to close out a sufficient
number of open contracts to bring its open futures and options positions within
this limitation.
"Margin" in Futures Transactions. Unlike the purchase or sale of a
--------------------------------
security, the Funds do not pay or receive money upon the purchase or sale of a
futures contract. Rather, the Funds are required to deposit an amount of
"initial margin" in cash or U.S. Treasury bills with its custodian (or the
broker, if legally permitted). The nature of initial margin in futures
transactions is different from that of margin in securities transactions in that
a futures contract's initial margin does not involve the borrowing by a Fund to
finance the transactions. Initial margin is in the nature of a performance bond
or good faith deposit on the contract which is returned to a Fund upon
termination of the futures contract, assuming all contractual obligations have
been satisfied.
A futures contract held by a Fund is valued daily at the official
settlement price of the exchange on which it is traded. Each day a Fund pays or
receives cash, called "variation margin, "equal to the daily change in value of
the futures contract. This process is known as "marking to market." Variation
margin does not represent a borrowing or loan by a Fund but is instead
settlement between a Fund and the broker of the amount one would owe the other
if the futures contract expired. In computing its daily net asset value, a Fund
will mark to market its open futures positions. The Funds are also required to
deposit and maintain margin when they write call options on futures contracts.
Purchasing Put Options on Portfolio Securities. The Funds other than
----------------------------------------------
the Fifth Third Money Market funds, Ohio Tax Free Fund, Municipal Bond Fund and
Pinnacle Fund, may purchase put options on portfolio securities to protect
against price movements in particular securities in their respective portfolios.
A put option gives a Fund, in return for a premium, the right to sell the
underlying security to the writer (seller) at a specified price during the term
of the option.
Writing Covered Call Options on Portfolio Securities. The Funds other
----------------------------------------------------
than the Fifth Third Money Market funds, Ohio Tax Free Fund, Municipal Bond Fund
and Pinnacle Fund, may also write covered call options to generate income. As
the writer of a call option, a Fund has the obligation, upon exercise of the
option during the option period, to deliver the underlying security upon payment
of the exercise price. A Fund may sell call options either on securities held in
its portfolio or on securities which it has the right to obtain without payment
of
14
<PAGE>
further consideration (or securities for which it has segregated cash in the
amount of any additional consideration).
Over-the-Counter Options. The Funds other than the Fifth Third Money
------------------------
Market funds, Ohio Tax Free Fund, Municipal Bond Fund and the Pinnacle Fund, may
purchase and write over-the-counter options on portfolio securities in
negotiated transactions with the buyers or writers of the options for those
options on portfolio securities held by a Fund and not traded on an exchange.
Collateralized Mortgage Obligations ("CMOs"). The U.S. Government
--------------------------------------------
Securities Fund, the Quality Bond Fund, the Balanced Fund and the Bond Fund For
Income may invest in CMOs. Privately issued CMOs generally represent an
ownership interest in a pool of federal agency mortgage pass-through securities
such as those issued by the Government National Mortgage Association. The terms
and characteristics of the mortgage instruments may vary among pass-through
mortgage loan pools.
The market for such CMOs has expanded considerably since its inception. The
size of the primary issuance market and the active participation in the
secondary market by securities dealers and other investors make government-
related pools highly liquid.
Certain debt securities such as, but not limited to, mortgage-related
securities, collateralized mortgage obligations (CMO's), asset backed securities
and securitized loan receivables, as well as securities subject to prepayment of
principal prior to the stated maturity date, are expected to be repaid prior to
their stated maturity dates. As a result, the effective maturity of these
securities is expected to be shorter than the stated maturity. For purposes of
compliance with stated maturity policies and calculation of the Quality Bond
Fund's weighted average maturity, the effective maturity of such securities will
be used.
Convertible Securities. The Quality Growth Fund, the Technology Fund, the
----------------------
Mid Cap Fund, the Balanced Fund, the International Equity Fund, the Cardinal
Fund, the Pinnacle Fund and the Equity Income Fund may invest in convertible
securities. Convertible securities include fixed-income securities that may be
exchanged or converted into a predetermined number of shares of the issuer's
underlying common stock at the option of the holder during a specified period.
Convertible securities may take the form of convertible preferred stock,
convertible bonds or debentures, units consisting of "usable" bonds and warrants
or a combination of the features of several of these securities. The investment
characteristics of each convertible security vary widely, which allows
convertible securities to be employed for a variety of investment strategies.
Each of these Funds will exchange or convert the convertible securities
held in its portfolio into shares of the underlying common stock when, in the
Advisor's opinion, the investment characteristics of the underlying common
shares will assist the Fund in achieving its investment objectives. Otherwise
the Fund may hold or trade convertible securities.
In selecting convertible securities for the Fund, the Advisor evaluates the
investment characteristics of the convertible security as a fixed income
instrument and the investment
15
<PAGE>
potential of the underlying equity security for capital appreciation. In
evaluating these matters with respect to a particular convertible security, the
Advisor considers numerous factors, including the economic and political
outlook, the value of the security relative to other investment alternatives,
trends in the determinants of the issuer's profits, and the issuer's management
capability and practices.
Warrants. The Quality Growth Fund, the Technology Fund, the Mid Cap Fund,
--------
the Balanced Fund, the International Equity Fund, and the Equity Income Fund may
invest in warrants except as limited above. Warrants are basically options to
purchase common stock at a specific price (usually at a premium above the market
value of the optioned common stock at issuance) valid for a specific period of
time. Warrants may have a life ranging from less than a year to twenty years or
may be perpetual. However, most warrants have expiration dates after which they
are worthless. In addition, if the market price of the common stock does not
exceed the warrant's exercise price during the life of the warrant, the warrant
will expire as worthless. Warrants have no voting rights, pay no dividends, and
have no rights with respect to the assets of the corporation issuing them. The
percentage increase or decrease in the market price of the warrant may tend to
be greater than the percentage increase or decrease in the market price of the
optioned common stock.
Municipal Securities. The Ohio Tax Free Fund and the Ohio Money Market Fund
--------------------
may invest in Ohio municipal securities which have the characteristics set forth
in their respective prospectus. The Municipal Bond Fund and the Tax Exempt Money
Market Fund may invest in municipal securities of any state which have the
characteristics set forth in the prospectus of that Fund. Examples of Municipal
Securities are (a) governmental lease certificates of participation issued by
state or municipal authorities where payment is secured by installment payments
for equipment, buildings, or other facilities being leased by the state or
municipality; government lease certificates purchased by the Fund will not
contain nonappropriation clauses; (b) municipal notes and tax-exempt commercial
paper; (c) serial bonds; (e) tax anticipation notes sold to finance working
capital needs of municipalities in anticipation of receiving taxes at a later
date; (f) bond anticipation notes sold in anticipation of the issuance of long-
term bonds in the future; (g) pre-refunded municipal bonds whose timely payment
of interest and principal is ensured by an escrow of U.S. government
obligations; and (h) general obligation bonds.
Participation Interests. The Ohio Tax Free Fund, the Municipal Bond
-----------------------
Fund, the Ohio Money Market Fund and the Tax Exempt Money Market Fund may invest
in participation interests. Participation interests include the underlying
securities and any related guaranty, letter of credit, or collateralization
arrangement which a Fund would be allowed to invest in directly. The financial
institutions from which the Ohio Tax Free Fund, the Municipal Bond Fund, the
Ohio Money Market Fund and the Tax Exempt Money Market Fund may purchase
participation interests frequently provide or secure from another financial
institution irrevocable letters of credit or guarantees and give the Funds the
right to demand payment of the principal amounts of the participation interests
plus accrued interest on short notice (usually within seven days).
Variable Rate Municipal Securities. The Ohio Tax Free Fund, the
----------------------------------
Municipal Bond Fund, the Ohio Money Market Fund and the Tax Exempt Money Market
Fund may invest in variable rate municipal securities. Variable interest rates
generally reduce changes in
16
<PAGE>
the market value of municipal securities from their original purchase prices.
Accordingly, as interest rates decrease or increase, the potential for capital
appreciation or depreciation is less for variable rate municipal securities than
for fixed income obligations. Many municipal securities with variable interest
rates purchased by the Funds are subject to repayment of principal (usually
within seven days) on the Funds' demand. The terms of these variable-rate demand
instruments require payment of principal and accrued interest from the issuer of
the municipal obligations, the issuer of the participation interests, or a
guarantor of either issuer.
Municipal Leases. The Ohio Tax Free Fund, the Municipal Bond Fund, the
----------------
Ohio Money Market Fund and the Tax Exempt Money Market Fund may purchase
municipal securities in the form of participation interests which represent
undivided proportional interests in lease payments by a governmental or non-
profit entity. The lease payments and other rights under the lease provide for
and secure the payments on the certificates. Lease obligations may be limited by
municipal charter or the nature of the appropriation for the lease. In
particular, lease obligations may be subject to periodic appropriation. If the
entity does not appropriate funds for future lease payments, the entity cannot
be compelled to make such payments. Furthermore, a lease may provide that the
certificate trustee cannot accelerate lease obligations upon default. The
trustee would only be able to enforce lease payments as they become due. In the
event of a default or failure of appropriation, it is unlikely that the trustee
would be able to obtain an acceptable substitute source of payment. In
determining the liquidity of municipal lease securities, the Advisor, under the
authority delegated by the Trustees, will base its determination on the
following factors: (a) whether the lease can be terminated by the lessee; (b)
the potential recovery, if any, from a sale of the leased property upon
termination of the lease; (c) the lessee's general credit strength (e.g., its
debt, administrative, economic and financial characteristics and, prospects);
(d) the likelihood that the lessee will discontinue appropriating funding for
the leased property because the property is no longer deemed essential to its
operations (e.g., the potential for an "event of nonappropriation"); and (e) any
credit enhancement or legal recourse provided upon an event of nonappropriation
or other termination of the lease.
Cash. From time to time, such as when suitable securities are not
----
available, the Funds may retain a portion of their assets in cash. Any portion
of a Fund's assets retained in cash will reduce the Fund's return and, in the
case of a bond fund and Money Market fund, the Fund's yield.
Foreign Currency Transactions. The International Equity Fund may engage in
-----------------------------
foreign currency transactions.
Currency Risks. The exchange rates between the U.S. dollar and
--------------
foreign currencies are a function of such factors as supply and demand in the
currency exchange markets, international balances of payments, governmental
intervention, speculation and other economic and political conditions. Although
the International Equity Fund values its assets daily in U.S. dollars, the
International Equity Fund may not convert its holdings of foreign currencies to
U.S. dollars daily. The International Equity Fund may incur conversion costs
when it converts its holdings to another currency. Foreign exchange dealers may
realize a profit on the difference between the price at which the Fund buys and
sells currencies.
17
<PAGE>
The International Equity Fund will engage in foreign currency exchange
transactions in connection with its portfolio investments. The International
Equity Fund will conduct its foreign currency exchange transactions either on a
spot (i.e., cash) basis at the spot rate prevailing in the foreign currency
exchange market or through forward contracts to purchase or sell foreign
currencies.
Forward Foreign Currency Exchange Contracts. The International Equity
-------------------------------------------
Fund may enter into forward foreign currency exchange contracts in order to
protect against a possible loss resulting from an adverse change in the
relationship between the U.S. dollar and a foreign currency involved in an
underlying transaction. However, forward foreign currency exchange contracts may
limit potential gains which could result from a positive change in such currency
relationships. The Advisors believe that it is important to have the flexibility
to enter into forward foreign currency exchange contracts whenever it determines
that it is in the International Equity Fund's best interest to do so. The
International Equity Fund will not speculate in foreign currency exchange.
The International Equity Fund will not enter into forward foreign currency
exchange contracts or maintain a net exposure in such contracts when it would be
obligated to deliver an amount of foreign currency in excess of the value of its
portfolio securities or other assets denominated in that currency or, in the
case of a "cross-hedge" denominated in a currency or currencies that the
Advisors believe will tend to be closely correlated with that currency with
regard to price movements. Generally, the International Equity Fund will not
enter into a forward foreign currency exchange contract with a term longer than
one year.
Foreign Currency Options. A foreign currency option provides the
------------------------
option buyer with the right to buy or sell a stated amount of foreign currency
at the exercise price on a specified date or during the option period. The owner
of a call option has the right, but not the obligation, to buy the currency.
Conversely, the owner of a put option has the right, but not the obligation, to
sell the currency.
When the option is exercised, the seller (i.e., writer) of the option is
obligated to fulfill the terms of the sold option. However, either the seller or
the buyer may, in the secondary market, close its position during the option
period at any time prior to expiration. A call option on foreign currency
generally rises in value if the underlying currency appreciates in value, and a
put option on foreign currency generally rises in value if the underlying
currency depreciates in value. Although purchasing a foreign currency option can
protect the International Equity Fund against an adverse movement in the value
of a foreign currency, the option will not limit the movement in the value of
such currency. For example, if the International Equity Fund was holding
securities denominated in a foreign currency that was appreciating and had
purchased a foreign currency put to hedge against a decline in the value of the
currency, the International Equity Fund would not have to exercise their put
option. Likewise, if the International Equity Fund were to enter into a contract
to purchase a security denominated in foreign currency and, in conjunction with
that purchase, were to purchase a foreign currency call option to hedge against
a rise in value of the currency, and if the value of the currency instead
depreciated between the date of purchase and the settlement date, the
International Equity Fund would not have to
18
<PAGE>
exercise its call. Instead, the International Equity Fund could acquire in the
spot market the amount of foreign currency needed for settlement.
Special Risks Associated with Foreign Currency Options. Buyers and
------------------------------------------------------
sellers of foreign currency options are subject to the same risks that apply to
options generally. In addition, there are certain additional risks associated
with foreign currency options. The markets in foreign currency options are
relatively new, and the International Equity Fund's ability to establish and
close out positions on such options is subject to the maintenance of a liquid
secondary market. Although the International Equity Fund will not purchase or
write such options unless and until, in the opinion of the Advisors, the market
for them has developed sufficiently to ensure that the risks in connection with
such options are not greater than the risks in connection with the underlying
currency, there can be no assurance that a liquid secondary market will exist
for a particular option at any specific time.
In addition, options on foreign currencies are affected by all of those
factors that influence foreign exchange rates and investments generally.
The value of a foreign currency option depends upon the value of the
underlying currency relative to the U.S. dollar. As a result, the price of the
option position may vary with changes in the value of either or both currencies
and may have no relationship to the investment merits of a foreign security.
Because foreign currency transactions occurring in the interbank market involve
substantially larger amounts than those that may be involved in the use of
foreign currency options, investors may be disadvantaged by having to deal in an
odd lot market (generally consisting of transactions of less than $1 million)
for the underlying foreign currencies at prices that are less favorable than for
round lots.
There is no systematic reporting of last sale information for foreign
currencies or any regulatory requirement that quotations available through
dealers or other market sources be firm or revised on a timely basis. Available
quotation information is generally representative of very large transactions in
the interbank market and thus may not reflect relatively smaller transactions
(i.e., less than $1 million) where rates may be less favorable. The interbank
market in foreign currencies is a global, around-the-clock market. To the extent
that the U.S. option markets are closed while the markets for the underlying
currencies remain open, significant price and rate movements may take place in
the underlying markets that cannot be reflected in the options markets until
they reopen.
Foreign Currency Futures Transactions. By using foreign currency
-------------------------------------
futures contracts and options on such contracts, the International Equity Fund
may be able to achieve many of the same objectives as it would through the use
of forward foreign currency exchange contracts. The International Equity Fund
may be able to achieve these objectives possibly more effectively and at a lower
cost by using futures transactions instead of forward foreign currency exchange
contracts.
Special Risks Associated with Foreign Currency Futures Contracts and
--------------------------------------------------------------------
Related Options. Buyers and sellers of foreign currency futures contracts are
---------------
subject to the same risks that apply to the use of futures generally. In
addition, there are risks associated with foreign
19
<PAGE>
currency futures contracts and their use as a hedging device similar to those
associated with options on currencies, as described above.
Options on foreign currency futures contracts may involve certain
additional risks. Trading options on foreign currency futures contracts is
relatively new. The ability to establish and close out positions on such options
is subject to the maintenance of a liquid secondary market. To reduce this risk,
the International Equity Fund will not purchase or write options on foreign
currency futures contracts unless and until, in the opinion of the Advisors, the
market for such options has developed sufficiently that the risks in connection
with such options are not greater than the risks in connection with transactions
in the underlying foreign currency futures contracts. Compared to the purchase
or sale of foreign currency futures contracts, the purchase of call or put
options on futures contracts involves less potential risk to the International
Equity Fund because the maximum amount at risk is the premium paid for the
option (plus transaction costs). However, there may be circumstances when the
purchase of a call or put option on a futures contract would result in a loss,
such as when there is no movement in the price of the underlying currency or
futures contract.
U.S. Government Obligations. The types of U.S. government obligations in
---------------------------
which any of the Funds may invest include direct obligations of the U.S.
Treasury, such as U.S. Treasury bills, notes, and bonds, and obligations issued
or guaranteed by U.S. government agencies or instrumentalities. These securities
are backed by:
. the full faith and credit of the U.S. Treasury;
. the issuer's right to borrow from the U.S. Treasury;
. the discretionary authority of the U.S. government to purchase certain
obligations of agencies or instrumentality issuing the obligations.
Variable Rate U.S. Government Securities. Some of the short-term U.S.
----------------------------------------
government securities that the Money Market Fund may purchase carry variable
interest rates. These securities have a rate of interest subject to adjustment
at least annually. This adjusted interest rate is ordinarily tied to some
objective standard, such as the 91-day U.S. Treasury bill rate. Variable
interest rates will reduce the changes in the market value of such securities
from their original purchase prices. Accordingly, the potential for capital
appreciation or capital depreciation should not be greater than the potential
for capital appreciation or capital depreciation of fixed interest rate U.S.
government securities having maturities equal to the interest rate adjustment
dates of the variable rate U.S. government securities.
When-Issued and Delayed Delivery Transactions. Each Fund may enter into
---------------------------------------------
when-issued and delayed delivery transactions. These transactions are made to
secure what is considered to be an advantageous price or yield for a Fund. No
fees or other expenses, other than normal transaction costs, are incurred.
However, liquid assets of a 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 Funds
20
<PAGE>
do not intend to engage in when-issued and delayed delivery transactions to an
extent that would cause the segregation of more than 20% of the total value of
their assets.
Repurchase Agreements. Each Fund may enter into repurchase agreements. A
---------------------
repurchase agreement is an agreement whereby a fund takes possession of
securities from another party in exchange for cash and agrees to sell the
security back to the party at a specified time and price. To the extent that the
original seller does not repurchase the securities from a Fund, a 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 a Fund might be delayed pending court action.
The Funds will only enter into repurchase agreements with banks and other
recognized financial institutions such as broker/dealers which are deemed by the
Advisors to be creditworthy pursuant to guidelines established by the Trustees.
Reverse Repurchase Agreements. Except as provided above, the Funds, other
-----------------------------
than the Government Money Market Fund, may also enter into reverse repurchase
agreements. These transactions are similar to borrowing cash. In a reverse
repurchase agreement, a 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 a 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
a Fund will be able to avoid selling portfolio instruments at a disadvantageous
time.
When effecting reverse repurchase agreements, liquid assets of a Fund, in a
dollar amount sufficient to make payment for the obligations to be purchased,
are segregated on a 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. Each Fund (other than U.S. Treasury Money
-------------------------------
Market Fund) may lend portfolio securities. The collateral received when a 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 a Fund or the borrower. A 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. A 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.
Restricted and Illiquid Securities. Each 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 Funds, who agree that they are purchasing
such securities for investment purposes and not with a view to public
distributions. Any resale by
21
<PAGE>
the purchaser must be in an exempt transaction. Section 4(2) securities are
normally resold to other institutional investors like the Funds through or with
the assistance of the issuer or investment dealers who make a market in such
securities, thus providing liquidity. The Funds believe 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 Funds
intend, therefore, to treat the restricted securities which meet the criteria
for liquidity established by the Trustees, including Section 4(2) securities, as
determined by the Advisors, as liquid and not subject to the investment
limitation applicable to illiquid securities.
The ability of the Trustees to determine the liquidity of certain
restricted securities is permitted under the Securities and Exchange commission
("SEC") staff position set forth in the adopting release for Rule 144A under the
Securities Act of 1933 (the "Rule"). The Rule is a non-exclusive safe harbor for
certain secondary market transactions involving securities subject to
restrictions on resale under federal securities laws. The Rule provides an
exemption from registration for resales of otherwise restricted securities to
qualified institutional buyers. The Rule was expected to further enhance the
liquidity of the secondary market for securities eligible for resale under Rule
144A. The Fund believes that the Staff of the SEC has left the question of
determining the liquidity of all restricted securities to the Trustees. The
Trustees consider the following criteria in determining the liquidity of certain
restricted securities: the frequency of trades and quotes for the security; the
number of dealers willing to purchase or sell the security and the number of
other potential buyers; dealer undertakings to make a market in the security;
and the nature of the security and the nature of the marketplace trades.
Temporary and Defensive Investments. Each Fund (other than the Money
-----------------------------------
Market funds) may hold up to 100% of its assets in cash or short-term debt
securities for temporary defensive purposes. The Fund will adopt a temporary
defensive position when, in the opinion of the Advisor, such a position is more
likely to provide protection against adverse market conditions than adherence to
the Fund's other investment policies. The types of short-term instruments in
which the Fund may invest for such purposes include short-term money market
securities, such as repurchase agreements, and securities issued or guaranteed
by the U.S. Government or its agencies or instrumentalities, certificates of
deposit, time deposits and bankers' acceptances of certain qualified financial
institutions and corporate commercial paper, which at the time of purchase are
rated at least within the "A" major rating category by Standard & Poor's
Corporation ("S&P") or the "Prime" major rating category by Moody's Investor's
Service, Inc. ("Moody's"), or, if not rated, issued by companies having an
outstanding long-term unsecured debt issued rated at least within the "A"
category by S&P or Moody's.
22
<PAGE>
Portfolio Turnover
The Funds 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 Funds' investment objectives. The following is a list of the
portfolio turnover rates for the Funds except the Money Market funds and Funds
in existence for less than one year:
Fiscal year ended Fiscal year ended
July 31, 1999 July 31, 1998
------------------ ------------------
Government Securities Fund 93% 155%
Quality Bond Fund 349% 279%
Ohio Tax Free Fund 47% 42%
Quality Growth Fund 34% 45%
Mid Cap Fund 49% 44%
Balanced Fund 128% 135%
International Equity Fund 42% 39%
Equity Income Fund 69% 41%
Bond Fund For Income 104% 127%
Municipal Bond Fund 110% 121%
Cardinal Fund 15%* 15%**
Pinnacle Fund 51% 38%
__________________________
* reflects period October 1, 1998 through July 31, 1999.
** for the fiscal year ended September 30, 1998
Portfolio turnover for the Quality Bond Fund increased during the past
fiscal year from the immediately prior fiscal year because the Fund restructured
its portfolio to take advantage of the competitive pricing among new issues.
Investment Risks (Ohio Tax Free Fund and Ohio Money Market Fund)
The State of Ohio's economy is a leading industrial state and exporter of
manufactured goods. During the past two decades, both the number and percentage
of manufacturing jobs, particularly in durable goods, has been declining. Job
growth in the state has been primarily in business services and distribution
sectors. The state is largely concentrated in motor vehicles and equipment,
steel, rubber products and household appliances. Because the State of Ohio and
certain municipalities have large exposure to these industries, trends in these
industries, over the long term, may impact the demographic and financial
position of the State of Ohio and its municipalities. To the degree that
domestic manufacturers in industries to which Ohio municipalities have exposure
fail to make competitive adjustments, employment statistics and disposable
income of residents in Ohio may deteriorate, possibly leading to population
declines and erosion of municipality tax bases.
Both the economic trends above and the political climate in various
municipalities may have contributed to the decisions of various businesses and
individuals to relocate outside the state. A municipality's political climate in
particular may affect its own credit standing. For both the State of Ohio and
underlying Ohio municipalities, adjustment of credit ratings by the ratings
agencies may affect the ability to issue securities and thereby affect the
supply of obligations meeting the quality standards for investment by the Fund.
23
<PAGE>
The state ended fiscal year 1998 with a positive budgetary fund balance of
approximately $953 million. Personal taxes have been cut in recent years, a
result of the strong economy. As of March 1998 the Budget Stabilization Fund had
a balance of $862 million, up from $828 million the end of fiscal year 1997. A
March 24, 1997, Ohio Supreme Court decision requires major changes in Ohio's
school funding arrangements. These changes pose significant but manageable
challenges and should not threaten the overall fiscal stability of the state.
The state has established procedures for municipal fiscal emergencies under
which joint state/local commissions are established to monitor the fiscal
affairs of a financially troubled municipality. The act, established in 1979,
requires the municipality to develop a financial plan to eliminate deficits and
cure any defaults. These procedures have been applied to approximately twenty-
four cities and villages, including the city of Cleveland; in nineteen of these
communities, the fiscal situation has been resolved and the procedures
terminated. This fiscal emergency legislation has been amended to include
counties and townships.
The foregoing discussion only highlights some of the significant financial
trends and problems affecting the State of Ohio and underlying municipalities.
Special Restriction on Fifth Third Government Money Market Fund
The Fund will invest at least 65% of total assets in short-term obligations
issued or guaranteed as to principal or interest by the U.S. Government, its
agencies or instrumentalities.
Special Restriction on Fifth Third U.S. Treasury Money Market Fund
The Fund will invest at least 65% of total assets in short-term obligations
issued by the U.S. Treasury.
FIFTH THIRD FUNDS MANAGEMENT
Officers and Trustees
Officers and Trustees of the Trust are listed with their addresses,
principal occupations, and present positions. None of the Trustees are
"interested persons" of Fifth Third Bank (the "Advisor"), Fifth Third Bancorp,
The BISYS Group, Inc., BISYS Fund Services, Inc., BISYS Fund Services Ohio,
Inc., or BISYS Fund Services Limited Partnership, as that term is defined in
Section 2(a)(19) of the 1940 Act.
Albert E. Harris, 5905 Graves Road, Cincinnati, OH 45243. Birthdate: July
2, 1932. Chairman of the Board of Trustees of the Trust, formerly Chairman
of the Board EDB Holdings, Inc. (retired July, 1993).
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.
24
<PAGE>
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 of the Trust, employee of BISYS Fund Services,
Inc.
Jeffrey C. Cusick, 3435 Stelzer Road, Columbus, Ohio 43219-3035. Birthdate:
May 19, 1959. Vice President of the Trust, and formerly the Secretary and
Treasurer of the Trust, employee of BISYS Fund Services, Inc.; from
September 1993 to July 1995, Assistant Vice President, Federated
Administrative Services.
Rodney L. Ruehle, 3435 Stelzer Road, Columbus, Ohio 43219-3035. Birthdate:
April 26, 1968. Secretary of the Trust, and employee of BISYS Fund
Services, Limited Partnership.
Gary R. Tenkman, 3435 Stelzer Road, Columbus, Ohio 43219-3035. Birthdate:
September 16, 1970. Treasurer of the Trust, and employee of BISYS Fund
Services, Limited Partnership.
Karen L. Blair, 3435 Stelzer Road, Columbus, Ohio 43219-3035. Birthdate:
February 26, 1966. Assistant Secretary and Assistance Treasurer of the
Trust, and employee of BISYS Fund Services, Limited Partnership.
Trust Ownership
As of June 30, 2000, the Officers and Trustees owned less than 1% of any
class of any Fund.
As of June 30, 2000, the following persons owned 5% or more of any class of
Shares of a Fund:
Fifth Third Quality Growth Fund-Investment A Shares
---------------------------------------------------
FISERV Securities Inc. 7,638,983.462 97.99%
Trade House Account Club 53
2005 Market St.
Philadelphia, PA 19103
Fifth Third Quality Growth Fund-Investment C Shares
---------------------------------------------------
FISERV Securities Inc. 532,582.508 99.31%
Trade House Account Club 53
2005 Market St.
Philadelphia, PA 19103
Fifth Third Quality Growth Fund-Institutional Shares
----------------------------------------------------
Fifth Third Bank 16,348,588.761 53.10%
Trust and Investment Services C
38 Fountain Square Plaza
Cincinnati, OH 45263
25
<PAGE>
Fifth Third Bank 7,750,100.784 25.17%
Trust and Investment Services R
38 Fountain Square Plaza
Cincinnati, OH 45263
Fifth Third Bank 6,683,222.025 21.71%
Expediter
38 Fountain Square Plaza
Cincinnati, OH 45263
Fifth Third Cardinal Fund-Investment A Shares
---------------------------------------------
FISERV Securities Inc. 5,189,596.071 40.15%
One Commerce Square Club 53
2005 Market Street
Philadelphia, PA 19103
Fifth Third Cardinal Fund-Investment C Shares
---------------------------------------------
FISERV Securities Inc. 38,456.490 61.92%
Trade House Club 53
2005 Market St., 11th Floor
Philadelphia, PA 19103
Fifth Third Cardinal Fund-Institutional Shares
----------------------------------------------
Fifth Third Bank 98,341.395 62.27%
Trust and Investment Services C
38 Fountain Square Plaza
Cincinnati, OH 45263
Fifth Third Bank 59,270.988 37.53%
Trust and Investment Services R
38 Fountain Square
Cincinnati, OH 45263
Fifth Third Pinnacle Fund-Investment A Shares
---------------------------------------------
FISERV Securities Inc. 1,139,568.066 97.41%
Trade House Account Club 53
2005 Market St.
Philadelphia, PA 19103
Fifth Third Pinnacle Fund-Investment C Shares
---------------------------------------------
FISERV Securities Inc. 112,468.840 98.11%
Trade House Account Club 53
2005 Market St.
Philadelphia, PA 19103
Fifth Third Pinnacle Fund-Institutional Shares
----------------------------------------------
Fifth Third Bank 419,410.083 25.95%
Trust and Investment Services C
38 Fountain Square Plaza
Cincinnati, OH 45263
Fifth Third Bank 160,754.043 9.95%
Trust and Investment Services R
38 Fountain Square Plaza
Cincinnati, OH 45263
Fifth Third Bank 443,724.567 27.46%
Expediter
38 Fountain Square Plaza
Cincinnati, OH 45263
26
<PAGE>
Fifth Third Equity Income Fund-Investment A Shares
--------------------------------------------------
FISERV Securities Inc. 977,651.979 98.95%
Trade House Account Club 53
2005 Market St.
Philadelphia, PA 19103
Fifth Third Equity Income Fund-Investment C Shares
--------------------------------------------------
FISERV Securities Inc. 53,043.065 97.97%
Trade House Account Club 53
2005 Market St.
Philadelphia, PA 19103
Fifth Third Equity Income Fund-Institutional Shares
---------------------------------------------------
Fifth Third Bank 7,413,509.854 93.46%
Trust and Investment Services C
38 Fountain Square Plaza
Cincinnati, OH 45263
Fifth Third Balanced Fund-Investment A Shares
---------------------------------------------
FISERV Securities Inc. 5,570,324.084 94.13%
Trade House Account Club 53
2005 Market St.
Philadelphia, PA 19103
Fifth Third Balanced Fund-Investment C Shares
---------------------------------------------
FISERV Securities Inc. 444,398.308 97.13%
Trade House Account Club 53
2005 Market St.
Philadelphia, PA 19103
Fifth Third Balanced Fund-Institutional Shares
----------------------------------------------
Fifth Third Bank 1,479,373.190 15.22%
Trust and Investment Services C
38 Fountain Square Plaza
Cincinnati, OH 45263
Fifth Third Bank 3,491,615.490 35.92%
Trust and Investment Services R
38 Fountain Square Plaza
Cincinnati, OH 45263
Fifth Third Bank 4,749,863.625 48.86%
Expediter
38 Fountain Square Plaza
Cincinnati, OH 45263
Fifth Third Mid Cap Fund-Investment A Shares
--------------------------------------------
FISERV Securities Inc. 1,715,256.570 92.18%
Trade House Account Club 53
2005 Market St.
Philadelphia, PA 19103
Fifth Third Mid Cap Fund-Investment C Shares
--------------------------------------------
FISERV Securities Inc. 53,958.089 100.00%
Trade House Account
2005 Market St.
Philadelphia, PA 19103
27
<PAGE>
<TABLE>
<CAPTION>
Fifth Third Mid Cap Fund-Institutional Shares
---------------------------------------------
<S> <C> <C>
Fifth Third Bank 6,333,862.216 50.77%
Trust and Investment Services C
38 Fountain Square Plaza
Cincinnati, OH 45263
Fifth Third Bank 3,626,340.340 29.06%
Trust and Investment Services R
38 Fountain Square Plaza
Cincinnati, OH 45263
Fifth Third Bank 2,516,563.672 20.17%
Expediter
38 Fountain Square Plaza
Cincinnati, OH 45263
Fifth Third International Equity Fund-Investment A Shares
---------------------------------------------------------
FISERV Securities 568,464.538 98.91%
Trade House Account
2005 Market Street
Philadelphia, PA 19103
Fifth Third International Equity Fund-Investment C Shares
---------------------------------------------------------
FISERV Securities 19,583.171 87.84%
2005 Market Street
Philadelphia, PA 19103
Donaldson Lufkin Jenrette 1,980.741 8.88%
Securities Corporation Inc.
P.O. Box 2052
Jersey City, NJ 07303-9998
Fifth Third International Equity Fund-Institutional Shares
----------------------------------------------------------
Fifth Third Bank & Investment Services 10,294,057.214 62.93%
38 Fountain Square Plaza
Cincinnati, OH 45263
Fifth Third Bank & Investment Services 5,302,899.760 32.42%
38 Fountain Square Plaza
Cincinnati, OH 45263
Fifth Third Technology Fund-Investment A Shares
-----------------------------------------------
FISERV Securities Inc. 149,726.004 98.08%
Trade House Account Club 53
2005 Market Street
Philadelphia, PA 19103
Fifth Third Technology Fund-Investment C Shares
-----------------------------------------------
FISERV Securities Inc.
Trade House Account Club 53 2,616.197 99.96%
2005 Market Street
Philadelphia, PA 19103
Fifth Third Technology Fund-Institutional Shares
------------------------------------------------
Fifth Third Bank Trust 940,488.741 34.24%
38 Fountain Square 1090 F2
Cincinnati, OH 45263
</TABLE>
28
<PAGE>
<TABLE>
<S> <C> <C>
Fifth Third Bank Trust 1,796,622.129 65.40%
38 Fountain Square 1090 F2
Cincinnati, OH 45263
Fifth Third Bond Fund for Income-Investment A Shares
----------------------------------------------------
FISERV Securities Inc. 1,148,432.671 46.10%
Trade House Account Club 53
2005 Market St.
Philadelphia, PA 19103
Fifth Third Bond Fund for Income-Investment C Shares
----------------------------------------------------
FISERV Securities Inc. 34,778.587 100.00%
Trade House Account Club 53
2005 Market St.
Philadelphia, PA 19103
Fifth Third Bond Fund for Income-Institutional Shares
-----------------------------------------------------
Fifth Third Bank 16,035,044.216 96.53%
Trust and Investment Services C
38 Fountain Square Plaza
Cincinnati, OH 45263
Fifth Third Quality Bond Fund-Investment A Shares
-------------------------------------------------
FISERV Securities Inc. 1,014,720.158 99.84%
Trade House Account Club 53
2005 Market St.
Philadelphia, PA 19103
Fifth Third Quality Bond Fund-Investment C Shares
-------------------------------------------------
FISERV Securities Inc. 76,224.041 100.00%
Trade House Account Club 53
2005 Market St.
Philadelphia, PA 19103
Fifth Third Quality Bond Fund-Institutional Shares
--------------------------------------------------
Fifth Third Bank 11,780,650.979 55.49%
Trust and Investment Services C
38 Fountain Square Plaza
Cincinnati, OH 45263
Fifth Third Bank 7,954,677.767 37.47%
Trust and Investment Services R
38 Fountain Square Plaza
Cincinnati, OH 45263
Fifth Third Bank 1,381,683.495 6.51%
Expediter
38 Fountain Square Plaza
Cincinnati, OH 45263
Fifth Third Government Securities Fund-Investment A Shares
----------------------------------------------------------
FISERV Securities Inc. 307,043.899 99.06%
Trade House Account Club 53
2005 Market St.
Philadelphia, PA 19103
Fifth Third Government Securities Fund-Investment C Shares
----------------------------------------------------------
FISERV Securities Inc. 22,079.906 100.00%
Trade House Account Club 53
2005 Market St.
Philadelphia, PA 19103
</TABLE>
29
<PAGE>
<TABLE>
<S> <C> <C>
Fifth Third Government Securities Fund-Institutional Shares
-----------------------------------------------------------
Fifth Third Bank 2,494,774.778 51.22%
Trust and Investment Securities C
38 Fountain Square Plaza
Cincinnati, OH 45263
Fifth Third Bank 1,765,208.855 36.24%
Trust and Investment Securities R
38 Fountain Square Plaza
Cincinnati, OH 45263
Fifth Third Bank 610,977.102 12.54%
Expediter
38 Fountain Square Plaza
Cincinnati, OH 45263
Fifth Third Municipal Bond Fund-Investment A Shares
---------------------------------------------------
FISERV Securities Inc. 18,993.178 100.00%
Trade House Account Club 53
2005 Market St.
Philadelphia, PA 19103
Fifth Third Municipal Bond Fund-Institutional Shares
----------------------------------------------------
Fifth Third Bank 12,249,933.552 99.37%
Trust and Investment Securities C
38 Fountain Square Plaza
Cincinnati, OH 45263
Fifth Third Ohio Tax Free Fund-Investment A Shares
--------------------------------------------------
FISERV Securities Inc. 1,350,580.337 99.85%
Trade House Account Club 53
2005 Market St.
Philadelphia, PA 19103
Fifth Third Ohio Tax Free Fund-Investment C Shares
--------------------------------------------------
FISERV Securities Inc. 99,580.516 99.50%
Trade House Account Club 53
2005 Market St.
Philadelphia, PA 19103
Fifth Third Ohio Tax Free Fund-Institutional Shares
---------------------------------------------------
Fifth Third Bank 17,078,312.851 98.93%
Trust and Investment Services C
38 Fountain Square Plaza
Cincinnati, OH 45263
Fifth Third Government Money Market Fund-Investment A Shares
------------------------------------------------------------
Fifth Third Bank Trust Dept 238,199,646.870 90.47%
38 Fountain Square Plaza
Cincinnati, OH 45202
Fifth Third Government Money Market Fund-Institutional Shares
-------------------------------------------------------------
Fifth Third Bank Trust Dept 232,324,173.580 100.00%
38 Fountain Square Plaza
Cincinnati, OH 45202
Fifth Third Prime Money Market Fund-Investment A Shares
-------------------------------------------------------
Fifth Third Bank Trust Dept 201,950,739.040 100.00%
38 Fountain Square Plaza
Cincinnati, OH 45202
</TABLE>
30
<PAGE>
<TABLE>
<S> <C> <C>
Fifth Third Prime Money Market Fund-Institutional Shares
---------------------------------------------------------
Fifth Third Bank Trust Dept 430,539,497.670 95.59%
38 Fountain Square Plaza
Cincinnati, OH 45202
Fifth Third Tax Exempt Money Market Fund-Investment A Shares
------------------------------------------------------------
FISERV Investor Securities Inc. 24,805,398.440 90.82%
Non NSCC House Account
2005 Market St., 14th Floor
Philadelphia, PA 19103
Fifth Third Tax Exempt Money Market Fund-Institutional Shares
-------------------------------------------------------------
Fifth Third Bank 93,775,060.610 100.00%
Trust and Investment Services C
38 Fountain Square Plaza
Cincinnati, OH 45263
Fifth Third U.S. Treasury Money Market Fund-Institutional Shares
----------------------------------------------------------------
Fifth Third Bank Trust Dept 739,988,538.090 85.50%
38 Fountain Square Plaza
Cincinnati, OH 45202
BISYS Fund Services 125,542,260.830 14.50%
3435 Stelzer Rd.
Columbus, OH 43219
</TABLE>
Trustees' Compensation
<TABLE>
<CAPTION>
Aggregate Compensation
Name and Position with Trust from Trust*+
---------------------------- ------------
<S> <C>
Edward Burke Carey, Trustee $7,800
Lee A. Carter, Trustee $7,800
Albert E. Harris, Trustee, Chairman of the Board $9,800
</TABLE>
* Information is furnished for the fiscal year ended July 31, 1999. The
Trust is the only investment company in the Fund complex.
+ The aggregate compensation is provided for the Trust which is comprised of
sixteen 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.
Codes of Ethics
Each of the Trust , Fifth Third Bank, Heartland and Morgan Stanley Asset
Management, Inc., as investment advisor or investment sub-advisor to one or more
Funds, and BISYS, as
31
<PAGE>
distributor of Fund shares, has adopted a code of ethics pursuant to Rule 17j-1
under the 1940 Act. Each code permits personnel subject to the code to invest in
securities that may be purchased or held by the Funds.
INVESTMENT ADVISORY SERVICES
Investment Advisors to the Trust
Fifth Third Bank serves as investment advisor to all Funds other than
Pinnacle Fund. It provides investment advisory services through its Trust and
Investment Division. The Trust's advisor to the Pinnacle Fund is Heartland.
Fifth Third Bank and Heartland are wholly-owned subsidiaries of Fifth Third
Bancorp.
Neither advisor shall be liable to the Trust, a Fund, or any shareholder of
any of the Funds 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 and
Heartland to restrict the flow of non-public information, a Fund's investments
are typically made without any knowledge of Fifth Third Bank's, Heartland's or
affiliates' lending relationship with an issuer.
Advisory Fees
For its advisory services, Fifth Third Bank receives an annual investment
advisory fee as described in the prospectus. The following shows all investment
advisory fees incurred by the Funds (other than Funds in existence for less than
one year) and the amounts of those fees that were voluntarily waived or
reimbursed by the Advisor for the fiscal years ended July 31, 1999, July 31,
1998, and July 31, 1997 (amounts in thousands):
<TABLE>
<CAPTION>
Year ended Amount Year ended Amount Year ended Amount
FUND NAME July 31, 1999 Waived-1999 July 31, 1998 Waived-1998 July 31, 1997 Waived-1997
--------- -----------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Government Securities Fund $ 261 $ 38 $ 228 $ 33 $ 234 $ 46
Quality Bond Fund 680 -- 545 -- 483 --
Ohio Tax Free Bond Fund 1,122 79 980 -- 813 --
Quality Growth Fund 4,920 -- 3,810 -- 2,328 --
Mid Cap Fund 1,753 -- 1,725 -- 1,146 --
Balanced Fund 1,673 -- 1,217 -- 861 --
International Equity Fund 1,634 -- 1,471 -- 1,361 --
Equity Income Fund 1,311 -- 1,088 -- 442 --
Bond Fund For Income 1,369 -- 938 -- 411 --
Municipal Bond Fund 661 -- 591 -- 282 --
Cardinal Fund 1,364* -- n/a n/a n/a n/a
Pinnacle Fund 586 -- 129 -- n/a n/a
Government Money Market Fund 2,789 -- 1,284 52 986 135
Prime Money Market Fund 1,657 83 1,762 88 1,358 139
Tax Exempt Money Market Fund 185 *60 n/a n/a n/a n/a
U.S. Treasury Money Market Fund 3,707 1,298 2,795 978 1,966 655
</TABLE>
_______________
*Reflects operations for the period October 1, 1998 through July 31, 1999.
32
<PAGE>
Sub-advisors
Morgan Stanley Asset Management, Inc. is the sub-advisor to International
Equity Fund under the terms of a Sub-advisory Agreement between Fifth Third Bank
and Morgan Stanley Asset Management, Inc. Fort Washington Investment Advisors,
Inc. is the Sub-advisor to Ohio Money Market Fund under the terms of a Sub-
advisory Agreement between Fifth Third Bank and Fort Washington Investment
Advisors, Inc. Fort Washington Investment Advisors, Inc. is a subsidiary of The
Western and Southern Life Insurance Company.
Sub-advisory Fees
For its sub-advisory services, each of Morgan Stanley Asset Management,
Inc. and Fort Washington Investment Advisors, Inc. receives an annual sub-
advisory fee paid by the Advisor as described in the prospectus.
For the year ended July 31, 1997, Morgan Stanley Asset Management, Inc.
earned fees from International Equity Fund of $680,483, none of which was
waived. For the year ended July 31, 1998, Morgan Stanley Asset Management, Inc.
earned fees from International Equity Fund of $777,259, none of which was
waived. For the year ended July 31, 1999, Morgan Stanley Asset Management, Inc.
earned fees from International Equity Fund of $735,375, none of which was
waived. As of the date of this SAI, Fort Washington Advisors, Inc. had not
served a full year as sub-advisor to the Ohio Money Market Fund, and thus had
not received one year of fees.
Administrative Services
BISYS Fund Services L.P., 3435 Stelzer Road, Columbus, Ohio 43219, provided
administrative personnel and services to the Funds (other than Funds in
existence for less than one year) for the fees set forth in the prospectus. The
following shows all fees earned by BISYS for providing administrative services
to the Funds, and the amounts of those fees that were voluntarily waived, for
the years ended July 31, 1997, July 31, 1998 and July 31, 1999 (Amounts in
Thousands):
<TABLE>
<CAPTION>
Year ended Amount Year ended Amount Year ended Amount
Fund Name July 31, 1999 Waived-1999 July 31, 1998 Waived-1998 July 31, 1997 Waived-1997
--------- -----------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Government Securities Fund $ 83 $ 46 $ 76 $ 41 $ 55 $ 14
Quality Bond Fund 217 120 180 99 114 30
Ohio Tax Free Fund 358 176 324 142 198 11
Quality Growth Fund 1,079 290 865 100 397 17
Mid Cap Fund 385 156 383 116 192 16
Balanced Fund 367 91 277 116 141 30
International Equity Fund 292 -- 265 -- 166 --
Equity Income Fund 288 75 247 113 85 37
Bond Fund For Income 437 70 310 111 114 50
Municipal Bond Fund 211 116 196 108 77 33
Cardinal Fund 400* 25 n/a n/a n/a n/a
Pinnacle Fund 129 9 22 11 n/a n/a
Government Money Market Fund 1,245 697 582 321 301 84
Prime Money Market Fund 741 372 801 441 426 128
Tax Exempt Money Market Fund 66* 37 n/a n/a n/a n/a
U.S. Treasury Money Market Fund 1,659 927 1,267 699 610 177
</TABLE>
________________
*Reflects operations for the period October 1, 1998 through July 31, 1999.
33
<PAGE>
Fifth Third Bank performs sub-administration services on behalf of each
Fund (other than Funds in existence for less than one year), for which it
receives compensation from BISYS Fund Services L.P. For the years ended July 31,
1997, July 31, 1998 and July 31, 1999, Fifth Third Bank earned the following
sub-administrative fees (Amounts in Thousands):
<TABLE>
<CAPTION>
Year Ended Year Ended Year Ended
Fund Name July 31, 1997 July 31, 1998 July 31, 1999
--------- -------------------------------------------
<S> <C> <C> <C>
Government Securities Fund $ 11 $ 10 $ 12
Quality Bond Fund $ 22 $ 24 $ 31
Ohio Tax Free Fund $ 37 $ 44 $ 51
Quality Growth Fund $ 73 $118 $154
Mid Cap Fund $ 36 $ 53 $ 55
Balanced Fund $ 27 $ 38 $ 52
International Equity Fund $ 34 $ 36 $ 41
Equity Income Fund $ 14 $ 33 $ 41
Bond Fund for Income $ 19 $ 42 $ 62
Municipal Bond Fund $ 13 $ 27 $ 30
Cardinal Fund n/a n/a $ 68
Pinnacle Fund n/a $ 3 $ 18
Government Money Market Fund $ 62 $ 79 $174
Prime Money Market Fund $ 85 $109 $104
Tax Exempt Money Market Fund n/a n/a $ 11
U.S. Treasury Money Market Fund $123 $172 $232
</TABLE>
Custody of Fund Assets
Under the custodian agreement, Fifth Third Bank holds each Fund's portfolio
securities and keeps all necessary records and documents relating to its duties.
Pursuant to an agreement with Fifth Third Bank, The Bank of New York, acts as
the International Equity Fund's sub-custodian for foreign assets held outside
the United States and employs sub-custodians. Fees for custody services are
based upon the market value of Fund securities held in custody plus out-of-
pocket expenses. For fiscal years ended July 31, 1997, July 31, 1998 and July
31, 1999, those fees were approximately $388,000 $449,000 and $510,000
respectively, none of which was waived.
34
<PAGE>
Transfer Agent and Dividend Disbursing Agent
Fifth Third Bank serves as transfer agent and dividend disbursing agent for
the Funds. The fee paid to the transfer agent is based upon the size, type and
number of accounts and transactions made by shareholders. Fifth Third Bank also
maintains the Trust's accounting records. The fee paid for this service is based
upon the level of the Funds' average net assets for the period plus out-of-
pocket expenses. The following shows all fees earned by Fifth Third for
providing transfer agency and dividend disbursing agency services, and the
amounts of those fees that were voluntarily waived, for the years ended July 31,
1997, 1998 and 1999 (Amounts in thousands):
<TABLE>
<CAPTION>
Year Ended July 31, Year Ended July 31, Year Ended July 31,
Fund Name 1997 1998 1999
--------- ---------------------------------------------------------------
<S> <C> <C> <C>
Government Securities Fund $14 $12 $ 16
Quality Bond Fund $15 $19 $ 28
Ohio Tax Free Fund $13 $28 $ 44
Quality Growth Fund $25 $25 $ 90
Mid Cap Fund $19 $36 $ 51
Balanced Fund $18 $14 $ 32
International Equity Fund $41 $51 $ 73
Equity Income Fund $ 6 $24 $ 30
Bond Fund for Income $ 7 $22 $ 28
Municipal Bond Fund $ 6 $23 $ 25
Cardinal Fund n/a n/a $ 28
Pinnacle Fund n/a $10 $ 38
Government Money Market Fund $16 $14 $285
Prime Money Market Fund $29 $28 $ 23
Tax Exempt Money Market Fund n/a n/a $ 52
U.S. Treasury Money Market Fund $28 $25 $ 35
</TABLE>
BISYS Fund Services Limited Partnership ("BISYS") serves as the sub-
transfer agent for the Funds. The fee paid for this service is based upon the
level of the Fund's average daily net assets ("asset based fee") plus out-of-
pocket expenses. In the event, the combined net assets of all of the Funds fall
below $3.5 billion at any time during the period, the fee paid shall be the sum
of the asset-based fee and an account-based fee.
BROKERAGE TRANSACTIONS
When selecting brokers and dealers to handle the purchase and sale of
portfolio instruments, the Advisors and Sub-advisors look for prompt execution
of the order at a favorable price. In working with dealers, the Advisors and
Sub-advisors will generally use those who are recognized dealers in specific
portfolio instruments, except when a better price and execution of the order can
be obtained elsewhere. The Advisors and Sub-advisors make decisions on portfolio
transactions and selects brokers and dealers subject to guidelines established
by the Trustees.
The Advisors and Sub-advisors may select brokers and dealers who offer
brokerage and research services. These services may be furnished directly to the
Funds or to the Advisors and Sub-advisors and may include, advice as to the
advisability of investing in securities, security
35
<PAGE>
analysis and reports, economic studies, industry studies, receipt of quotations
for portfolio evaluations, and similar services.
The Advisors and Sub-advisors and their affiliates exercise reasonable
business judgment in selecting brokers who offer brokerage and research services
to execute securities transactions. They determine in good faith that
commissions charged by such persons are reasonable in relationship to the value
of the brokerage and research services provided. For the fiscal year ended July
31, 1999, the Funds paid brokerage commissions in exchange for brokerage and
research services described above in the following amounts: Ohio Tax Free Bond,
$2,767 of $2,767 total brokerage commissions paid; Quality Growth, $87,290 of
the $438,887 total brokerage commissions paid; Mid Cap, $44,181 of the $309,794
total brokerage commissions paid; Balanced, $26,749 of the $142,315 total
brokerage commissions paid; Equity Income, $67,699 of the $263,461 total
brokerage commissions paid; Bond Fund for Income, $700 of the $700 total
brokerage commissions paid; Municipal Bond, $2,740 of the $2,740 total brokerage
commissions paid; Cardinal, $196,608 of the $196,608 total brokerage commissions
paid; and Pinnacle, $134,823 of the $134,823 total brokerage commissions paid.
Research services provided by brokers may be used by the Advisors and Sub-
advisors in advising the Funds and other accounts. To the extent that receipt of
these services may supplant services for which the Advisors and Sub-advisors or
their affiliates might otherwise have paid, it would tend to reduce their
expenses.
Although investment decisions for the Funds are made independently from
those of the other accounts managed by the Advisors and Sub-advisors, the
Advisors and Sub-advisors may invest Fund assets in the same securities and at
the same time as they invest assets of other accounts that they manage. When one
of the Funds and one or more other accounts managed by the Advisors and Sub-
advisors are prepared to invest in, or desire to dispose of, the same security,
available investments or opportunities for sales will be allocated in a manner
believed by the Advisors and Sub-advisors to be equitable to each. In some
cases, this procedure may adversely affect the price paid or received by the
Funds or the size of the position obtained or disposed of by the Funds. In other
cases, however, it is believed that coordination and the ability to participate
in volume transactions will be to the benefit of the Funds.
36
<PAGE>
During the fiscal year ended July 31, 1999, some of the Funds acquired
securities of the Funds' regular brokers or dealers or their parents as follows:
<TABLE>
<CAPTION>
Fund Security Principal/Shares Market Value
---- -------- ---------------- ------------
<S> <C> <C> <C>
Quality Bond Fund Bear Stearns Co., Inc., 6.45% $5,000,000 $4,909,000
due 08/01/02
Balanced Fund Salomon Smith Barney Holdings, $3,000,000 $3,005,000
7.38%, due 05/15/07
T. Rowe Price Associates, Inc. 80,000 $2,800,000
common stock
A.G. Edwards, Inc. 30,000 $ 829,000
common stock
International Equity Deutsche Bank, AG 9,383 $ 595,000
Fund common stock
Equity Income Fund A.G. Edwards, Inc. 78,000 $2,155,000
common stock
Cardinal Fund T. Rowe Price Associates, Inc. 60,000 $2,100,000
common stock
Mid Cap Fund A.G. Edwards, Inc. 170,000 $4,696,000
common stock
T. Rowe Price Associates, Inc. 220,000 $7,700,000
common stock
</TABLE>
Brokerage commissions paid by the Funds (other than Funds that have been in
existence less than one year) in secondary trading are as follows:
<TABLE>
<CAPTION>
Fiscal Year Ended July 31
-------------------------
Fund Name 1997 1998 1999
--------- ---- ---- ----
<S> <C> <C> <C>
Government Securities Fund $ 188 $ 1,250 n/a
Quality Bond Fund $ 5,000 $ 300 n/a
Ohio Tax Free Fund $ 10,180 n/a $ 2,768
Quality Growth Fund $163,020 $495,026 $ 405,47
Mid Cap Fund $ 89,675 $230,000 $313,878
Balanced Fund $ 47,060 $111,172 $145,176
International Equity Fund $178,270 $163,055 $114,330
Equity Income Fund $ 45,890 $156,975 $281,046
Bond Fund For Income n/a $ 625 n/a
Municipal Bond Fund n/a $ 2,000 $ 2,740
Cardinal Fund $ 33,543 $118,629 $231,463
Pinnacle Fund n/a $ 16,967 $141,898
Government Money Market Fund n/a n/a n/a
Prime Money Market Fund n/a n/a n/a
Tax Exempt Money Market Fund n/a n/a n/a
U.S. Treasury Money Market Fund n/a n/a n/a
</TABLE>
PURCHASING SHARES
Shares of the Funds are sold at their net asset value, less any applicable
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, Investment B Shares, Investment C Shares or Institutional Class Shares
of the Funds is explained in the prospectus for such Fund and Class under
"Investing in the Funds."
37
<PAGE>
Distribution Plan and Administrative Services Agreement (Investment C Shares
Only)
With respect to Investment A Shares, Investment B Shares and Investment C
Shares of the Funds, the Trust has adopted a Plan pursuant to Rule l2b-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 a 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 Funds and their 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 Funds' 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 a 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 a Fund in seeking to achieve its
investment objective.
Pursuant to the Plan, with respect to Investment A Shares, the Funds are
authorized to compensate the distributor at the annual rate of up to 0.25% of
the average aggregate net asset value of the Investment A Shares of each
applicable Fund held during the month.
Pursuant to the Plan, with respect to Investment B Shares, the Funds which
offer Investment B Shares, are authorized to compensate the distributor at the
annual rate of up to 1.00% of the average aggregate net asset value of the
Investment B Shares of each applicable Fund held during the month. Investment B
Shares are new and the Funds have not accrued or paid any 12b-1 fees for these
Shares.
Pursuant to the Plan, with respect to Investment C Shares, the Funds are
authorized to compensate the distributor 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. For the fiscal year ended July 31, 1999,
the distributor received $119,000 pursuant to the Plan.
With respect to Investment C Shares, the Trust may enter into an
Administrative Service Agreement to permit the payment of fees to financial
institutions, including Fifth Third Bank, to
38
<PAGE>
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 Funds 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.
For the fiscal year ended July 31, 1999, the Funds paid $59,000 to Fifth
Third Bank to compensate BHC Securities, Inc. for providing administrative
services to Investment C Shares of the Funds.
Purchases with Proceeds from Redemptions of Unaffiliated Mutual Fund Shares
Investors may purchase Investment A Shares of the Funds 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 Funds must
be notified by the investor in writing, or by his financial institution, at the
time the purchase is made.
Conversion of Investment B Shares to Investment A Shares
A shareholder's Investment B Shares of the Fund, including all Shares
received as dividends or distributions with respect to such Shares, will
automatically convert to Investment A Shares of the Fund at the end of eight
years following the issuance of such Shares, consequently, they will no longer
be subject to the higher expenses borne by Investment B Shares. The conversion
rate will be determined on the basis of the relative per Share net asset values
of the two classes and may result in a shareholder receiving either a greater or
fewer number of Investment A Shares than the Shares so converted.
Conversion to Federal Funds
It is the Funds' 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 a Fund or
they may exchange a combination of securities and cash for Fund Shares. Any
securities to be exchanged must, in the opinion of the Advisor, meet the
investment objective and policies of each 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. A Fund will
notify the investor of its
39
<PAGE>
acceptance and valuation of the securities within five business days of
their receipt by the Advisor.
A Fund values such securities in the same manner as a Fund values its
assets. The basis of the exchange will depend upon the net asset value of
Shares of a Fund on the day the securities are valued. One Share of a 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 a Fund, along with the securities.
Payments to Dealers
Financial professionals who sell shares of Fifth Third Funds and
perform services for fund investors may receive sales commissions, annual
fees and other compensation. Such compensation is paid by the Distributor
using money from sales charges, distribution/service (12b-1) fees and its
other resources. From time to time, the Distributor may elect to pay up to
the following amounts:
AMOUNT OF INVESTMENT
INVESTMENT ($) A SHARES
-------------- --------
Under 50,000 3.825%
50,000 but under 100,000 3.40
100,000 but under 150,000 2.55
150,000 but under 250,000 1.70
250,000 but under 500,000 0.85
500,000 and above 0.50*
_________________
* A 1% contingent deferred sales charge shall apply on any portion redeemed
within one year of purchase. Such charge will be applied to the value of
the assets redeemed at the time of purchase or at the time of redemption,
whichever is lower. Payment is available to those financial professionals
with an agreement with the Distributor which provides for such payment. The
Distributor currently imposes no additional conditions on an any financial
professional to amend its agreement with the Distributor to provide for
such payment.
Brokers and agents may charge a transaction fee on the purchase or
sale of shares by shareholders.
REDEEMING SHARES
Shares are redeemed at the next computed net asset value after a Fund
receives the redemption request, less any contingent deferred sales charge.
Redemption procedures are explained in the prospectus under "Redeeming Shares."
Although the Funds do not charge for telephone redemptions, they reserve the
right to charge a fee for the cost of wire-transferred redemptions.
40
<PAGE>
Investment A Shares and Investment C Shares redeemed within one (1) year of
purchase and Investment B Shares redeemed within six (6) years 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 B and/or 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 a Fund's net
asset value during any 90-day period.
Any redemption beyond this amount will also be in cash unless the Trustees
determine that payments should be in kind. In such a case, the Trust will pay
all or a portion of the remainder of the redemption in portfolio instruments,
valued in the same way as the Fund determines net asset value. The portfolio
instruments will be selected in a manner that the Trustees deem fair and
equitable.
Postponement of Redemptions
No Fund may suspend the right of redemption or postpone the date of payment
of redemption proceeds for more than seven days, except that (a) it may elect to
suspend the redemption of shares or postpone the date of payment of redemption
proceeds: (1) during any period that the NYSE is closed (other than customary
weekend and holiday closings) or trading on the NYSE is restricted; (2) during
any period in which an emergency exists as a result of which disposal of
portfolio securities is not reasonably practicable or it is not reasonably
practicable to fairly determine the Fund's net asset values; or (3) during such
other periods as the SEC may by order permit for the protection of investors;
and (b) the payment of redemption proceeds may be postponed as otherwise
provided in this Statement of Additional Information.
DETERMINING NET ASSET VALUE
Net asset values of the Funds generally may change each day. The days on
which the net asset value is calculated by these Funds are described in the
prospectus. The Money Market funds attempt to maintain a net asset value per
share of $1.00.
Determining Market Value of Securities
The value of the Funds' portfolio securities (with the exception of the
Money Market funds) are determined as follows:
. for equity securities, according to the last sale price on a national
securities exchange, if available;
41
<PAGE>
. in the absence of recorded sales for listed equity securities, according to
the mean between the last closing bid and asked prices;
. for unlisted equity securities, the latest bid prices;
. for bonds and other fixed income securities, as determined by an independent
pricing service;
. 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
. 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.
The Funds will value futures contracts, options and put options on financial
futures at their market values established by the exchanges at the close of
option trading on such exchanges unless the Trustees determine in good faith
that another method of valuing option positions is necessary to appraise their
fair value.
Valuing Municipal Bonds
With respect to Ohio Tax Free Fund and Municipal Bond Fund, the Trustees use
an independent pricing service to value municipal bonds. The independent pricing
service takes into consideration yield, stability, risk, quality, coupon rate,
maturity, type of issue, trading characteristics, special circumstances of a
security or trading market, and any other factors or market data it considers
relevant in determining valuations for normal institutional size trading units
of debt securities, and does not rely exclusively on quoted prices.
Use of Amortized Cost
The Trustees have decided that the fair value of debt securities authorized
to be purchased by the Money Market funds and by the other 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 Trustees continually assess
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.
Monitoring Procedures
For the Money Market funds, the Trustees' procedures include monitoring the
relationship between the amortized cost value per share and the net asset value
per share based
42
<PAGE>
upon available indications of market value. The Trustees will decide what, if
any, steps should be taken if there is a difference of more than 0.50% of 1%
between the two value. The Trustees will take any steps they consider
appropriate (such as redemption in kind or shortening the average portfolio
maturity) to minimize any material dilution or other unfair results arising from
differences between the two methods of determining net asset value.
Investment Restrictions
For the Money Market funds, SEC rules require that a Money Market fund
limit its investments to instruments that, in the opinion of the Trustees or
their delegate, present minimal credit risks and if rated, have received the
requisite rating from one or more nationally recognized statistical rating
organizations. If the instruments are not related, the Trustees or their
delegate must determine that they are of comparable quality. Shares of
investment companies purchased by a Money Market fund will meet these same
criteria and will have investment policies consistent with the Rule. The Rule
also requires a Money Market fund to maintain a dollar-weighted average
portfolio maturity (not more than 90 days) appropriate to the objective of
maintaining a stable net asset value of $1.00 per share. In addition, no
instruments with a remaining maturity of more than 397 days can be purchased by
a Money Market fund.
Should the disposition of a portfolio security result in a dollar-weighted
average portfolio maturity of more than 90 days, a Money Market fund will invest
its available cash to reduce the average maturity to 90 days or less as soon as
possible.
A Money Market fund may attempt to increase yield by trading portfolio
securities to take advantage of short-term market variations. This policy may,
from time to time, result in high portfolio turnover. Under the amortized cost
method of valuation, neither the amount of daily income nor the net asset value
is affected by any unrealized appreciation or depreciation of the portfolio. In
periods of declining interest rates, the indicated daily yield on shares of a
Money Market fund computed by dividing the annualized daily income on the Fund's
portfolio by the net asset value computed as above may tend to be higher than a
similar computation made by using a method of valuation based upon market prices
and estimates.
In periods of rising interest rates, the indicated daily yield on shares of
a Money Market fund computed the same way may tend to be lower than a similar
computation made by using a method of calculation based upon market prices and
estimates.
Trading in Foreign Securities
Trading in foreign securities may be completed at times which vary from the
closing of regular trading on the New York Stock Exchange. In computing the net
asset value, the Funds (other than the Money Market Funds) value foreign
securities at the latest closing price on the exchange on which they are traded
immediately prior to the closing of the New York Stock Exchange. Certain foreign
currency exchange rates may also be determined at the latest rate prior to the
closing of the New York Stock Exchange. Foreign securities quoted in foreign
currencies are translated into U.S. dollars at current rates. Occasionally,
events that affect these values and exchange rates may occur between the times
at which they are determined and the closing of the
43
<PAGE>
New York Stock Exchange. If such events materially affect the value of portfolio
securities, these securities may be valued at their fair value as determined in
good faith by the Trustees, although the actual calculation may be done by
others.
TAX STATUS
The Funds' Tax Status
The Funds will pay no federal income tax because they expect 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, each Fund must, among other
requirements: derive at least 90% of its gross income from dividends, interest,
and gains from the sale of securities; invest in securities within certain
statutory limits; and distribute to its shareholders at least 90% of its net
income earned during the year.
Shareholders' Tax Status
With respect to all Funds except the Ohio Tax Free Fund, the Municipal Bond
Fund, Ohio Money Market Fund and the Tax Exempt Money Market Fund, shareholders
are subject to federal income tax on dividends received as cash or additional
Shares. No portion of any income dividend paid by a Fund is eligible for the
dividends received deduction available to corporations. These dividends, and any
short-term capital gains, are taxable as ordinary income.
With respect to Ohio Tax Free Fund, Municipal Bond Fund, Ohio Money Market
Fund and the Tax Exempt Money Market Fund, no portion of any income dividend
paid by a Fund is eligible for the dividends received deduction available to
corporations.
Capital Gains
With respect to all Funds except the Ohio Tax Free Fund, the Municipal Bond
Fund, Ohio Money Market Fund and the Tax Exempt Money Market Fund, long-term
capital gains distributed to shareholders will be treated as long-term capital
gains regardless of how long shareholders have held Shares.
With respect to Ohio Tax Free Fund, Ohio Money Market Fund and Municipal
Bond Fund, capital gains or losses may be realized by a Fund on the sale of
portfolio securities and as a result of discounts from par value on securities
held to maturity. Sales would generally be made because of: the availability of
higher relative yields; differentials in market values; new investment
opportunities; changes in creditworthiness of an issuer; or an attempt to
preserve gains or limit losses.
Distributions of long-term capital gains are taxed as such, whether they
are taken in cash or reinvested, and regardless of the length of time the
shareholder has owned Shares. Any loss
44
<PAGE>
by a shareholder on Shares held for less than six months and sold after a
capital distribution will be treated as a long-term capital loss to the extent
of the capital gains distribution.
State and Local Taxes
The Government Money Market Fund intends to limit its investments to U.S.
government securities paying interest which, if owned directly by shareholders
of the Fund, would generally be exempt from state personal income tax. However,
from time to time, the Fund may also invest in other U.S. government securities
if the Advisor deems it advantages to do so. Moreover, under the laws of some
states, the net investment income generally distributed by the Fund may be
taxable to shareholders. State laws differ on this issue, and shareholders are
urged to consult their own tax advisors regarding the status of their accounts
under state and local tax laws.
Foreign Taxes
Investment income on certain foreign securities in which the Funds (other
than the Money Market Funds) may invest may be subject to foreign withholding or
other taxes that could reduce the return on these securities. Tax treaties
between the United States and foreign countries, however, may reduce or
eliminate the amount of foreign taxes to which the Fund would subject.
45
<PAGE>
PERFORMANCE INFORMATION
Total Return (1)
Institutional Shares
Average Annual Total Return
For the Period Ended January 31, 2000
(Unaudited Information)
<TABLE>
<CAPTION>
Since
Fund Name 1 Year 5 Years 10 Years Inception
--------- ----- ------- -------- ---------
<S> <C> <C> <C> <C>
U.S. Government Securities Fund -0.83% 5.57% 5.61% 5.77%
Quality Bond Fund -3.03% 6.01% 6.43% 7.79%
Ohio Tax Free Bond Fund -4.65% 4.67% 4.96% 4.61%
Quality Growth Fund 14.64% 26.78% 18.32% 17.55%
Mid Cap Fund 8.74% 16.50% 14.18% 14.78%
Balanced Fund 7.92% 17.97% 14.36% 15.89%
International Equity Fund 18.15% 13.73% n/a 10.38%
Equity Income Fund -7.21% 17.21% 12.09% 13.91%
Bond Fund for Income -1.44% 5.99% 6.30% 7.96%
Municipal Bond Fund -4.92% 4.06% 4.73% 6.44%
Cardinal Fund 14.85% 23.89% 15.84% 16.03%
Pinnacle Fund 1.05% 25.62% 16.68% 16.25%
Government Money Market Fund 4.66% 5.03% n/a 4.42%
Prime Money Market Fund 4.85% 5.15% 4.90% 5.12%
Tax Exempt Money Market Fund 2.90% 2.78% 2.91% 3.66%
U.S. Treasury Money Market Fund 4.75% 5.14% 4.88% 5.27%
</TABLE>
Investment A Shares
Average Annual Total Returns
For the Period Ended January 31, 2000
(Unaudited Information)
<TABLE>
<CAPTION>
Since
Fund Name 1 Year 5 Years 10 Years Inception
--------- ----- ------- -------- ---------
<S> <C> <C> <C> <C>
U.S. Government Securities Fund -5.51% 4.51% 5.08% 5.39%
Quality Bond Fund -7.67% 4.86% 5.85% 7.44%
Ohio Tax Free Bond Fund -9.13% 3.62% 4.44% 4.22%
Quality Growth Fund 9.27% 25.53% 17.75% 17.21%
Mid Cap Fund 3.60% 15.34% 13.61% 14.41%
Balanced Fund 2.74% 16.81% 13.80% 15.56%
International Equity Fund 12.49% 12.61% n/a 9.38%
Equity Income Fund -11.71% 16.02% 11.52% 13.57%
Bond Fund for Income -6.00% 4.94% 5.77% 7.65%
Municipal Bond Fund -9.42% 3.03% 4.21% 6.14%
Cardinal Fund 8.04% 22.50% 15.19% 15.77%
Pinnacle Fund -3.76% 24.39% 16.11% 15.86%
Government Money Market Fund 4.45% 4.97% n/a 4.35%
Prime Money Market Fund 4.59% 5.08% n/a 4.48%
Tax Exempt Money Market Fund 2.84% 2.78% 2.91% 3.66%
</TABLE>
46
<PAGE>
Investment C Shares
Average Annual Total Return
For the Period Ended January 31, 2000
(Unaudited Information)
<TABLE>
<CAPTION>
Since
Fund Name 1 Year 5 Years 10 Years Inception
------ ------- -------- ---------
<S> <C> <C> <C> <C>
U.S. Government Securities Fund -1.49% 4.91% 5.16% 5.26%
Quality Bond Fund -3.77% 5.41% 6.01% 7.35%
Ohio Tax Free Bond Fund -5.36% 4.07% 4.51% 4.10%
Quality Growth Fund 13.88% 26.09% 17.87% 17.08%
Mid Cap Fund 7.97% 15.87% 13.74% 14.21%
Balanced Fund 7.15% 17.35% 13.93% 15.43%
International Equity Fund 17.23% 13.15% n/a 9.87%
Equity Income Fund -7.88% 16.26% 11.10% 12.87%
Bond Fund for Income -2.18% 5.08% 5.32% 6.93%
Cardinal Fund 12.15% 23.36% 15.59% 15.93%
Pinnacle Fund 0.27% 24.89% 16.34% 16.02%
</TABLE>
______________
(1) Investment B Shares are a new class of Shares, and as of the date of this
prospectus, there is no performance history.
Yield (1)
In addition to total returns, the Funds may advertise yields for each of
the share classes. The 30-day SEC yield for the 30 days ended January 31, 2000
were as follows:
<TABLE>
<CAPTION>
Institutional Shares Investment A Shares Investment C Shares
--------------------- -------------------- --------------------
<S> <C> <C> <C>
U.S. Government Securities Fund 5.63% 5.01% 4.88%
Quality Bond Fund 6.38% 5.90% 5.93%
Ohio Tax Free Bond Fund 4.36% 3.86% 3.60%
Balanced Fund 1.70% 1.39% 0.94%
Bond Fund for Income 6.58% 6.04% 5.81%
Municipal Bond Fund 4.52% 4.07% n/a
</TABLE>
_____________
(1) Investment B Shares are a new class of Shares, and as of the date of this
prospectus, there is no performance history.
For each share class, the yield for a 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 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 a Fund,
the performance will be reduced for those shareholders paying those fees.
47
<PAGE>
Tax-Equivalent Yield
The Ohio Tax Free Bond Fund, the Ohio Money Market Fund and the Municipal
Bond Fund may also advertise tax-equivalent yield. The tax-equivalent yield for
the Ohio Tax Free Bond Fund for the 30-day period ended January 31, 2000, was
6.84%, while the tax-equivalent yield for the Municipal Bond fund for the 30-day
period ended January 31, 2000, was 7.14%. The tax-equivalent yield of a Fund is
calculated similarly to the yield, but is adjusted to reflect the taxable yield
that the Fund would have had to earn to equal its actual yield, assuming a 39.6%
tax rate and assuming that income is 100% tax-exempt.
Tax Equivalency Table
The Ohio Tax Free Fund, the Ohio Money Market Fund and Municipal Bond Fund
may also use a tax-equivalency table in advertising and sales literature. The
interest earned by the municipal obligations in the Ohio Tax Free Fund's
portfolio generally remains free from federal regular income tax and is free
from income taxes imposed by the State of Ohio. The interest earned by the
Municipal Bond Fund's portfolio is generally free from federal regular income
tax. As the tables below indicates, a "tax-free" investment in the Ohio Tax Free
Fund is an attractive choice for investors, particularly in times of narrow
spreads between "tax-free" and taxable yields.
TAXABLE YIELD EQUIVALENT FOR 2000
STATE OF OHIO
FEDERAL TAX BRACKET:
15.00% 28.00% 31.00% 36.00% 39.60%
COMBINED FEDERAL AND STATE TAX BRACKET:
19.425% 33.012% 37.650% 43.228% 46.828%
<TABLE>
<CAPTION>
SINGLE $ 1- $26,251- $ 63,551- $132,601- OVER
RETURN 26,250 63,550 132,600 288,350 $288,351
Tax-Exempt Yield Taxable Yield Equivalent
<S> <C> <C> <C> <C> <C>
1.50% 1.86% 2.24% 2.41% 2.64% 2.82%
2.00% 2.48% 2.99% 3.21% 3.52% 3.76%
2.50% 3.10% 3.73% 4.01% 4.40% 4.70%
3.00% 3.72% 4.48% 4.81% 5.28% 5.64%
3.50% 4.34% 5.22% 5.61% 6.17% 6.58%
4.00% 4.96% 5.97% 6.42% 7.05% 7.52%
4.50% 5.58% 6.72% 7.22% 7.93% 8.46%
5.00% 6.21% 7.46% 8.02% 8.81% 9.40%
5.50% 6.83% 8.21% 8.82% 9.69% 10.34%
6.00% 7.45% 8.96% 9.62% 10.57% 11.28%
</TABLE>
The maximum marginal tax rate for each bracket was used in calculating the
taxable yield equivalent. Therefore, there is a possibility that your yield may
be higher than those disclosed in the table. Furthermore, additional state and
local taxes paid on comparable taxable investments were not used to increase
federal deductions.
The chart above is for illustrative purposes only. It is not an indicator of
past or future performance of Ohio Tax Free Bond Fund Shares.
48
<PAGE>
Some portion of Ohio Tax Free Fund's and Municipal Bond Fund's income may be
subject to the federal alternative minimum tax and state and local income taxes.
PERFORMANCE COMPARISONS
Each Fund's performance depends upon such variables as: portfolio quality;
average portfolio maturity; type of instruments in which the portfolio is
invested; changes in interest rates and market value of portfolio securities;
changes in each Fund's expenses; and various other factors.
Each 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:
. Dow Jones Industrial Average (the "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. (Quality Growth, Balanced, Mid Cap, and Equity
Income Funds)
. Europe, Australia, and Far East ("EAFE") is a market capitalization weighted
foreign securities index, which is widely used to measure the performance of
European, Australian, New Zealand, and Far Eastern stock markets. The index
covers approximately 1,020 companies drawn from 18 countries in the above
regions. The index values its securities daily in both U.S. dollars and local
currency and calculates total returns monthly. EAFE U.S. dollar total return
is a net dividend figure less Luxembourg withholding tax. EAFE is monitored
by Capital International, S.A., Geneva, Switzerland. (International Equity
Fund)
. Lehman Muni Bond Fund Index is a broad-based total return index comprised of
8,000 Investment grade, fixed rate, tax-exempt, with a remaining maturity of
at least one year, including state and local general obligation, revenue,
insured and pre-refunded bonds and are selected from issues larger than $50
million dated since January 1984. Bonds are added to the index and weights
are updated monthly, with a one month lag.
. Lehman Brothers Aggregate Bond Index is a total return index measuring both
the capital price changes and income provided by the underlying universe of
securities, weighted by market value outstanding. The Aggregate Bond Index is
comprised of the Lehman Brothers Government Bond Index, Corporate Bond Index,
Mortgage-Backed Securities Index and the
49
<PAGE>
Yankee Bond Index. These indices include: U.S. Treasury obligations,
including bonds and notes; U.S. agency obligations, including those of the
Federal Farm Credit Bank, Federal Land Bank and the Bank for Co-Operatives;
foreign obligations, U.S. investment-grade corporate debt and mortgage-backed
obligations. All corporate debt included in the Aggregate Bond Index has a
minimum S&P rating of BBB, a minimum Moody's rating of Baa, or a Fitch rating
of BBB. (Balanced, Quality Bond and Bond Fund For Income)
. Lehman Brothers 5-Year Municipal Bond Index includes fixed-rate debt
obligations of state and local government entities. The securities have
maturities not less than four years but no more than six years, are
investment grade and are selected from issues larger than $50 million dated
since 1984. (Ohio Tax Free and Municipal Bond Funds)
. Lehman Brothers Government Index is an unmanaged index comprised of all
publicly issued, non-convertible domestic debt of the U.S. government, or any
agency thereof, or any quasi-federal corporation and of corporate debt
guaranteed by the U.S. government. Only notes and bonds with a minimum
outstanding principal of $1 million and a minimum maturity of one year are
included. (Government Securities, Balanced, Quality Bond, and Bond Fund For
Income)
. Lehman Brothers Government/Corporate (Total) Index is comprised of
approximately 5,000 issues which include non-convertible bonds publicly
issued by the U.S. government or its agencies; corporate bonds guaranteed by
the U.S. government and quasi-federal corporations; and publicly issued,
fixed rate, non-convertible domestic bonds of companies in industry, public
utilities and finance. The average maturity of these bonds approximates nine
years. Tracked by Shearson Lehman Brothers, Inc., the index calculates total
returns for one month, three month, twelve month and ten year periods and
year-to-date. (Government Securities, Balanced, Quality Bond, and Bond Fund
For Income)
. Lehman Brothers Intermediate Government/Corporate Bond Index: An unmanaged
index comprised of all the bonds issued by the Lehman Brothers
Government/Corporate Bond Index with maturities between 1 and 9.99 years.
Total return is based on price appreciation/depreciation and income as a
percentage of the original investment. Indices are rebalanced monthly by
market capitalization. (Balanced, Quality Bond, Government Securities, and
Bond Fund For Income)
. Lehman Brothers 7-Year Municipal Bond Index includes fixed-rate debt
obligations of state and local government entities. The securities have
maturities between seven and eight years, are investment grade and are
selected from issues larger than $50 million dated since 1984. (Ohio Tax Free
Bond and Municipal Bond Funds)
. Lipper, 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. (All of the Funds)
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. Merrill Lynch Composite 1-5 Year Treasury Index is comprised of approximately
66 issues of U.S. Treasury securities maturing between 1 and 4.99 years, with
coupon rates of 4.25% or more. These total return figures are calculated for
one, three, six, and twelve month periods and year-to-date and include the
value of the bond plus income and any price appreciation or depreciation.
(Government Securities Fund)
. Merrill Lynch Corporate and Government Index includes issues which must be in
the form of publicly placed, nonconvertible, coupon-bearing domestic debt and
must carry a term of maturity of at least one year. Par amounts outstanding
must be no less than $10 million at the start and at the close of the
performance measurement period. Corporate instruments must be rated by S&P or
by Moody's as investment grade issues (i.e., in the BBB/Baa major rating
category or better). (Balanced, Quality Bond, and Bond Fund For Income)
. Merrill Lynch Domestic Master Index includes issues which must be in the form
of publicly placed, nonconvertible, coupon-bearing domestic debt and must
carry a term to maturity of at least one year. Par amounts outstanding must
be no less than $10 million at the start and at the close of the performance
measurement period. The Domestic Master Index is a broader index than the
Merrill Lynch Corporate and Government Index and includes, for example,
mortgage related securities. The mortgage market is divided by agency, type
of mortgage and coupon and the amount outstanding in each agency/type/coupon
subdivision must be no less than $200 million at the start and at the close
of the performance measurement period. Corporate instruments must be rated by
S&P or by Moody's as investment grade issues (i.e., in the BBB/Baa major
rating category or better). (Balanced, Quality Bond and Bond Fund For Income)
. Merrill Lynch 3-Year Treasury Yield Curve Index is an unmanaged index
comprised of the most recently issued 3-year U.S. Treasury notes. Index
returns are calculated as total returns for periods of one, three, six, and
twelve months as well as year-to-date. (Government Securities Fund)
. Merrill Lynch 3-5 Year Treasury Index is comprised of approximately 24 issues
of intermediate-term U.S. government and U.S. Treasury securities with
maturities between 3 and 4.99 years and coupon rates above 4.25%. Index
returns are calculated as total returns for periods of one, three, six and
twelve months as well as year-to-date. (Government Securities Fund)
. 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.
(All Funds)
. Salomon Brothers AAA-AA Corporate Index calculates total returns of
approximately 775 issues which include long-term, high-grade domestic
corporate taxable bonds, rated AAA-AA with maturities of twelve years or more
and companies in industry, public utilities, and finance. (Balanced, Quality
Bond, and Bond Fund For Income)
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. Salomon Brothers 3-5 Year Government Index quotes total returns for U.S.
Treasury issues (excluding flower bonds) which have maturities of three to
five years. These total returns are year-to-date figures which are calculated
each month following January 1. (Government Securities Fund)
. 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. (Quality Growth, Balanced, Mid Cap, and Equity
Income Funds)
. S&P Mid Cap 400 Index is comprised of the 400 common stocks issued by medium-
sized domestic companies whose market capitalizations range from $200 million
to $5 billion. The stocks are selected on the basis of the issuer's market
size, liquidity and industry group representation. (Mid Cap Fund)
. 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. (Quality Growth, Balanced, Mid Cap, Cardinal,
Pinnacle and Equity Income Funds)
. Wilshire Mid Cap 750 Index is a subset of the Wilshire 5000 index of common
stocks. The Mid Cap 750 index consists of those Wilshire 5000 companies
ranked between 501 and 1,250 according to market capitalization. The index
ranges in market capitalization from $400 million to $1.7 billion. (Mid Cap
Fund)
Advertisements and other sales literature for the Funds 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
Funds based on monthly/quarterly reinvestment of dividends over a specified
period of time.
Advertisements may quote performance information which does not reflect the
effect of the sales load.
FINANCIAL STATEMENTS
The financial statements for the Funds for the fiscal year ended July 31,
1999 are incorporated herein by reference to the Annual Report to Shareholders
of the Fifth Third Funds dated July 31, 1999. (File Nos. 33-24848 and 811-5669.)
A copy of the Annual Report may be obtained without charge by contacting the
Trust at the address located on the back cover of the prospectus.
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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
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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.
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- I +.
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/VMIGI--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.
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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-I+.
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- I + 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.
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:
. Leading market positions in well-established industries.
. High rates of return on funds employed.
. Conservative capitalization structure with moderate reliance on debt and
ample asset protection.
. Broad margins in earnings coverage of fixed financial charges and high
internal cash generation.
. 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.
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