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1933 Act File No. 333-49491
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SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM N-14
REGISTRATION STATEMENT
UNDER THE SECURITIES ACT OF 1933
Pre-Effective Amendment No. 1 .................................... X
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Post-Effective Amendment No. .................................
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FOUNTAIN SQUARE FUNDS
(Exact Name of Registrant as Specified in Charter)
3435 Stelzer Road, Columbus, Ohio 43219-3035
(Address of Principal Executive Offices)
(614) 470-8000
(Registrant's Telephone Number)
Copy to:
Joseph B. Hemker, Esq. Melanie Mayo West, Esq.
Howard & Howard Attorneys, P.C. Hertz, Schram & Saretsky, P.C.
100 Portage Road, Suite 200 1760 S. Telegraph Road, Suite 300
Kalamazoo, Michigan 49007 Bloomfield Hills, Michigan 48302-01831
(Name and Address of Agent for Service)
Approximate Date of Proposed Public Offering: as soon as practicable after the
effective date of this Registration Statement.
Registrant hereby amends this Registration Statement on such date or dates as
may be necessary to delay its effectiveness until Registrant shall file a
further amendment which specifically states that this Registration Statement
shall thereafter become effective in accordance with Section 8(a) of the
Securities Act of 1933, as amended, or until this Registration Statement shall
become effective on such date as the Commission, acting pursuant to such Section
8(a), shall determine.
Title of Securities Being Registered: Shares of Beneficial Interest.
Registrant has filed with the Securities and Exchange Commission a declaration
pursuant to Rule 24f-2 under the Investment Company Act of 1940, as amended, and
filed the Notice required by that Rule on September 25, 1997.
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FOUNTAIN SQUARE FUNDS
REGISTRATION STATEMENT ON FORM N-14
CROSS-REFERENCE SHEET
PART A. INFORMATION REQUIRED IN THE PROSPECTUS
ITEM NO. RULE 481(a) CROSS-REFERENCE
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1. Beginning of Registration Statement and Cross-Reference Sheet; Cover Page
Outside Front Cover Page of Prospectus
2. Beginning and Outside Back Cover Page of Table of Contents
Prospectus
3. Fee Table, Synopsis Information and Risk Comparative Fee Tables; Summary; Comparison of
Factors Investment Objectives, Investment Policies and Risk
Factors
4. Information About the Transaction Information Relating to the Proposed Reorganization;
Other Comparative Information
5. Information About the Registrant Other Comparative Information; Comparison of Investment
Objectives, Investment Policies and Risk Factors, Comparison
of Cardinal and FSF Investment Advisor and Other Service
Providers; Financial Statements; Incorporated by Reference
to Registrant's Annual Report dated July 31, 1998 (File No.
811-05669).
6. Information About the Company Being Other Comparative Information; Comparison of
Acquired Investment Objectives, Investment Policies and Risk
Factors, Comparison of Cardinal and FSF Investment
Advisor and Other Service Providers; Financial
Statements
7. Voting Information Summary; Information Relating to Voting Matters
8. Interest of Certain Persons and Experts Corporation of Cardinal and FSF Investment Advisor
and Other Service Providers
9. Additional Information Not Applicable
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PART B. INFORMATION REQUIRED IN A STATEMENT OF ADDITIONAL INFORMATION
10. Cover Page Cover Page
11. Table of Contents Table of Contents
12. Additional Information About the Registrant Incorporated by Reference to Registrant's Statement of Additional
Information dated September 30, 1997, as supplemented,
November 30, 1997, as supplemented and May 20, 1998, as
supplemented. (File No. 33-24848)
13. Additional Information About the Company Incorporated by Reference to Cardinal's Statement of
Being Acquired Additional Information dated January 30, 1998, as
supplemented. (File No. 33-59984).
14. Financial Statements Financial Statements
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THE CARDINAL GROUP
155 EAST BROAD STREET
COLUMBUS, OHIO 43215
May 27, 1998
Dear Cardinal Shareholder:
On behalf of the Board of Trustees of The Cardinal Group ("Cardinal"), we are
pleased to invite you to a special meeting of shareholders on July 10, 1998
(the "Special Meeting"), that has been called to consider matters that are
important to you. At the Special Meeting, you will be asked to consider a
proposed reorganization of the six Cardinal Funds (the "Cardinal Funds") into
six corresponding funds (the "Fountain Square Funds") of Fountain Square Funds
("FSF").
As a result of the proposed merger of a subsidiary of Fifth Third
Bancorp, the parent company of FSF's investment advisor Fifth Third Bank ("Fifth
Third") and The Ohio Company, the parent company of Cardinal's investment
advisor Cardinal Management Corp. ("CMC"), representatives of Fifth Third and
The Ohio Company recommended to the Board of Trustees of Cardinal that the
Trustees consider and approve combining the Cardinal Funds with the Fountain
Square Funds. This recommendation was made because Fifth Third and CMC believed
that combining the Cardinal Funds and the Fountain Square Funds would offer a
number of potential benefits to the shareholders of the two mutual fund groups.
CARDINAL'S BOARD OF TRUSTEES UNANIMOUSLY RECOMMENDS THAT YOU VOTE TO APPROVE THE
PROPOSED REORGANIZATION.
Background. It is currently anticipated that on or about June 5, 1998, Fifth
Third M Corp. will merge with The Ohio Company ("The Ohio Company merger"). By
law, this merger will result in the automatic termination of Cardinal's then
current investment advisory agreement with CMC. At a special meeting of
shareholders held on March 20, 1998, Cardinal shareholders approved a new
investment advisory agreement with CMC effective upon the close of The Ohio
Company merger.
At the upcoming Special Meeting, you will be asked to approve a reorganization
of each of your Cardinal Funds into corresponding Fountain Square Funds. Each
Fountain Square Fund is a series of FSF, an open-end management investment
company advised by Fifth Third. If all approvals are obtained, the Cardinal
Funds are expected to be reorganized into the corresponding Fountain Square
Funds on or about July 13, 1998, when shares of your Cardinal Funds, in effect,
will be exchanged for shares of the corresponding Fountain Square Funds of equal
value. The reorganization that you are being asked to approve should benefit
shareholders by:
o facilitating investment management, administration and
marketing by combining the Cardinal Funds and the Fountain
Square Funds;
o improving efficiency, including the potential for economies
of scale;
o eliminating duplicative costs; and
o making available to shareholders a greater number of
investment portfolio options.
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In considering these matters, you should note:
o SIMILAR OBJECTIVES AND POLICIES
Two of the six Cardinal Funds will be reorganized into new Fountain
Square Funds which have been created for purposes of the fund
reorganization, and the remaining four Cardinal Funds will be
reorganized into existing Fountain Square Funds. The objectives and
policies of each of the Fountain Square Funds are generally similar to
those of its corresponding Cardinal Fund. There are some differences,
however, which are discussed in the enclosed Combined Proxy
Statement/Prospectus, and you should consider these differences
carefully.
o SIMILAR ACCESS ARRANGEMENTS
You will enjoy access to the Fountain Square Funds through distribution
and shareholder servicing arrangements that are substantially similar
to Cardinal's current arrangements. To continue check writing access to
Money Market Fund balances, shareholders must establish a One Account
Advantage account with Fifth Third Securities.
o SAME VALUE OF SHARES
The total net asset value of the Fountain Square Fund shares that you
receive in the reorganization will be the same as the total net asset
value of the Cardinal Fund shares that you hold immediately before the
reorganization.
o EQUAL OR BETTER OPERATING EXPENSE RATIOS
The annual fund operating expense ratios (after waivers) for each of
the corresponding Fountain Square Funds after the reorganization are
expected to be equal to or less than the current annual fund operating
expense ratios of your Cardinal Fund through at least July 13, 2000.
The formal Notice of Special Meeting, a Combined Proxy Statement/Prospectus and
a Proxy Card are enclosed. If you own shares in more than one Cardinal Fund,
more than one Proxy Card accompanies these proxy materials.
YOUR VOTE IS VERY IMPORTANT TO US. WHETHER OR NOT YOU PLAN TO ATTEND THE
SPECIAL MEETING, PLEASE MARK, SIGN, DATE AND RETURN THE ENCLOSED PROXY
CARD(S) PROMPTLY.
The proposed reorganization and the reasons for the Cardinal Board of Trustees'
recommendation are discussed in detail in the enclosed materials, which you
should read carefully. If you have any questions about the reorganization,
please do not hesitate to call The Cardinal Group toll-free at (800) 282-9446.
Very truly yours,
/s/ Frank W. Siegel
Frank W. Siegel
President
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THE CARDINAL GROUP
NOTICE OF SPECIAL MEETING OF SHAREHOLDERS
To be held on July 10, 1998
Dear Cardinal Shareholder:
NOTICE IS HEREBY GIVEN THAT a Special Meeting of the Shareholders of
The Cardinal Fund, Cardinal Aggressive Growth Fund, Cardinal Balanced Fund,
Cardinal Government Obligations Fund, Cardinal Government Securities Money
Market Fund and Cardinal Tax Exempt Money Market Fund (each a "Cardinal Fund"),
series of The Cardinal Group ("Cardinal") will be held at the National City
Board Room, Third Floor, 155 East Broad Street, Columbus, Ohio on July 10, 1998,
at 9:00 a.m. Eastern Time for the following purposes:
ITEM 1. With respect to each Cardinal Fund:
To consider and act upon a proposal to approve or disapprove
an Agreement and Plan of Reorganization and Liquidation (the
"Reorganization Agreement") and the transactions contemplated
thereby, including the transfer of all of the assets and known
liabilities of each Cardinal Fund to a corresponding
investment portfolio of Fountain Square Funds ("FSF") in
exchange for shares of designated classes of the corresponding
Fountain Square Fund.
ITEM 2. With respect to each Cardinal Fund:
To transact such other business as may properly come before
the Special Meeting or any adjournment(s) thereof.
The proposed reorganization and related matters are described in the
attached Combined Proxy Statement/Prospectus. Appendix A to the Combined Proxy
Statement/Prospectus is a copy of the Reorganization Agreement.
Shareholders of record as of the close of business on May 12, 1998 are
entitled to notice of, and to vote at, the Special Meeting or any adjournment(s)
thereof.
SHAREHOLDERS ARE REQUESTED TO EXECUTE AND RETURN PROMPTLY IN THE
ENCLOSED ENVELOPE THE ACCOMPANYING PROXY CARD WHICH IS BEING SOLICITED BY
CARDINAL'S BOARD OF TRUSTEES. THIS IS IMPORTANT TO ENSURE A QUORUM AT THE
SPECIAL MEETING. PROXIES MAY BE REVOKED AT ANY TIME BEFORE THEY ARE EXERCISED BY
SUBMITTING TO CARDINAL A WRITTEN NOTICE OF REVOCATION OR A SUBSEQUENTLY EXECUTED
PROXY OR BY OTHERWISE GIVING NOTICE OF REVOCATION IN OPEN MEETING.
/s/ Karen J. Hipsher
Karen J. Hipsher
Secretary
May 27, 1998
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COMBINED PROXY STATEMENT/PROSPECTUS
DATED MAY 27, 1998
THE CARDINAL GROUP
155 East Broad Street
Columbus, Ohio 43215
Telephone Number: (800) 282-9446
FOUNTAIN SQUARE FUNDS
38 Fountain Square Plaza
Mail Drop: 1090Q6
Cincinnati, Ohio 45263
Telephone Number: (888) 799-5353
This Combined Proxy Statement/Prospectus is furnished in connection
with the solicitation of proxies by the Board of Trustees of The Cardinal Group
("Cardinal") in connection with a Special Meeting of Shareholders (the "Special
Meeting") of The Cardinal Fund, Cardinal Aggressive Growth Fund, Cardinal
Balanced Fund, Cardinal Government Obligations Fund, Cardinal Government
Securities Money Market Fund and Cardinal Tax Exempt Money Market Fund (each a
"Cardinal Fund") to be held on July 10, 1998, at 9:00 a.m. Eastern Time at the
National City Board Room, Third Floor, 155 East Broad Street, Columbus Ohio. At
the Special Meeting, shareholders will be asked to consider and approve a
proposed Agreement and Plan of Reorganization and Liquidation dated as of April
27, 1998 (the "Reorganization Agreement") by and between Cardinal, Cardinal
Management Corp. ("CMC"), Fifth Third Bank ("Fifth Third") and Fountain Square
Funds ("FSF"). Appendix A to the Combined Proxy Statement/Prospectus is a copy
of the Reorganization Agreement.
Cardinal and FSF are both open-end management investment companies
registered under the Investment Company Act of 1940, as amended (the "1940
Act"). CMC currently provides investment advisory services to Cardinal. Fifth
Third provides investment advisory services to FSF. In reviewing the proposed
reorganization (the "Reorganization"), the Cardinal Board of Trustees considered
the pending acquisition by a subsidiary of Fifth Third Bancorp of The Ohio
Company, CMC's parent corporation; the effect of such acquisition on Cardinal;
the recommendation of CMC and Fifth Third with respect to the proposed
consolidation of Cardinal and FSF; the fact that the Reorganization would
constitute a tax-free reorganization; the fact that the interests of
shareholders would not be diluted as a result of the Reorganization; the
portfolio managers, performance records and estimated expense ratios of the
Fountain Square Funds; and other factors.
The Reorganization Agreement provides for the transfer of all of the
assets and stated liabilities of each Cardinal Fund to a corresponding
investment portfolio of FSF (each a "Fountain Square Fund" and collectively the
"Fountain Square Funds") in exchange for shares of comparable classes of the
Fountain Square Funds having equal value. As a result of the Reorganization,
shareholders of the Cardinal Funds will become shareholders of the Fountain
Square Funds as follows:
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CARDINAL FUNDS FOUNTAIN SQUARE FUNDS
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The Cardinal Fund Fountain Square Cardinal Fund*
Cardinal Aggressive Growth Fund Fountain Square Mid Cap Fund
Cardinal Balanced Fund Fountain Square Balanced Fund
Cardinal Government Obligations Fund Fountain Square Bond Fund For Income
Cardinal Government Securities Money Market Fund Fountain Square Government Cash Reserves Fund
Cardinal Tax Exempt Money Market Fund Fountain Square Tax Exempt Money Market Fund*
*Fountain Square Cardinal Fund and Fountain Square Tax Exempt Money Market Fund
have been organized to facilitate the Reorganization and have not commenced
operations.
See "Information Relating to the Proposed Reorganization" for a discussion of
each Cardinal Fund and the corresponding Fountain Square Fund into which it will
be reorganized.
This Combined Proxy Statement/Prospectus sets forth concisely the
information that a shareholder of Cardinal should know before voting on the
Reorganization Agreement (and related transactions), and should be retained for
future reference.
For shareholders of the Cardinal Funds who will receive Investment A
Shares of Fountain Square Bond Fund For Income, Fountain Square Mid Cap Fund and
Fountain Square Balanced Fund as part of the Reorganization, this Combined Proxy
Statement/Prospectus is accompanied by applicable excerpts from FSF's Annual
Report to Shareholders dated July 31, 1997, applicable excerpts from FSF's
Semi-Annual Report to Shareholders dated January 31, 1998 and the Prospectus
dated November 30, 1997, as supplemented through the date hereof, relating to
Investment A Shares of each of these Fountain Square Funds. For shareholders of
Cardinal Government Securities Money Market Fund who will receive Investment A
Shares or Institutional Shares of Fountain Square Government Cash Reserves Fund
as part of the Reorganization, this Combined Proxy Statement/Prospectus is
accompanied by the Prospectus dated September 30, 1997, as supplemented through
the date hereof, relating to Investment A Shares (also known as Investment
Shares) and Institutional Shares (formerly known as Trust Shares) of Fountain
Square Government Cash Reserves Fund. Fountain Square Bond Fund For Income,
Fountain Square Mid Cap Fund, Fountain Square Balanced Fund and Fountain Square
Government Cash Reserves Fund are collectively referred to as the ("Operating
Fountain Square Funds.")
For shareholders of the Cardinal Funds who will receive Investment A
Shares of Fountain Square Cardinal Fund and Fountain Square Tax Exempt Money
Market Fund (the "New Fountain Square Funds"), as part of the Reorganization,
this Combined Proxy Statement/Prospectus is accompanied by one or more
applicable Prospectuses dated May 20, 1998, as supplemented through the date
hereof, relating to Investment A Shares of each of the New Fountain Square
Funds.
For shareholders of the Cardinal Funds who will receive Institutional
Shares of any of the Fountain Square Funds, except Fountain Square Government
Cash Reserves Fund as part of the Reorganization, this Combined Proxy
Statement/Prospectus is accompanied by one or more Prospectuses dated May 20,
1998, as supplemented through the date hereof, relating to Institutional Shares
of the Fountain Square Funds.
Additional information relating to this Combined Proxy
Statement/Prospectus is set forth in the Statement of Additional Information,
dated the date hereof, which is incorporated herein by reference, and in the
Prospectuses and Statement of Additional Information dated January 30, 1998, as
supplemented through the date hereof, for the Cardinal Funds. Each of these
documents is on file with the Securities and Exchange Commission (the "SEC"),
and is available without charge by writing or calling either Cardinal or FSF at
the respective addresses or telephone numbers indicated above. The information
contained in each of the Fountain Square Funds Prospectuses and Prospectuses
for the Cardinal Funds is incorporated herein by reference.
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This Combined Proxy Statement/Prospectus is Cardinal's proxy statement
for the Special Meeting, and FSF's Prospectus for the shares of the Fountain
Square Funds that have been registered with the SEC and are to be issued in
connection with the Reorganization.
This Combined Proxy Statement/Prospectus is expected to first be sent
to Cardinal shareholders on or about May 27, 1998.
THE SECURITIES OF FSF HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES
AND EXCHANGE COMMISSION NOR HAS THE SECURITIES AND EXCHANGE COMMISSION PASSED
UPON THE ACCURACY OR ADEQUACY OF THIS COMBINED PROXY STATEMENT/PROSPECTUS. ANY
REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.
NO PERSON HAS BEEN AUTHORIZED TO GIVEN ANY INFORMATION OR TO MAKE ANY
REPRESENTATIONS OTHER THAN THOSE CONTAINED IN THIS COMBINED PROXY
STATEMENT/PROSPECTUS AND IN THE MATERIALS EXPRESSLY INCORPORATED HEREIN BY
REFERENCE AND, IF GIVEN OR MADE, SUCH OTHER INFORMATION OR REPRESENTATIONS MUST
NOT BE RELIED UPON AS HAVING BEEN AUTHORIZED BY CARDINAL OR FSF.
SHARES OF FSF ARE NOT DEPOSITS OR OBLIGATIONS OF, OR GUARANTEED OR ENDORSED BY,
FIFTH THIRD BANK OR ANY OF ITS AFFILIATES. SHARES OF FSF ARE NOT FEDERALLY
INSURED BY, GUARANTEED BY, OR OBLIGATIONS OF OR OTHERWISE SUPPORTED BY THE U.S.
GOVERNMENT, THE FEDERAL DEPOSIT INSURANCE CORPORATION, THE FEDERAL RESERVE BOARD
OR ANY OTHER GOVERNMENTAL AGENCY. INVESTMENT RETURN AND PRINCIPAL VALUE WILL
VARY AS A RESULT OF MARKET CONDITIONS OR OTHER FACTORS SO THAT SHARES OF THE
FSF, WHEN REDEEMED, MAY BE WORTH MORE OR LESS THAN THEIR ORIGINAL COST. AN
INVESTMENT IN FSF INVOLVES INVESTMENT RISKS, INCLUDING POSSIBLE LOSS OF
PRINCIPAL AMOUNT INVESTED.
AN INVESTMENT IN ANY OF THE MONEY MARKET FUNDS IS NEITHER INSURED NOR
GUARANTEED BY THE U.S. GOVERNMENT AND THERE CAN BE NO ASSURANCE THAT ANY SUCH
FUNDS WILL BE ABLE TO MAINTAIN A STABLE NET ASSET VALUE OF $1.00 PER SHARE.
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TABLE OF CONTENTS
PAGE
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SUMMARY................................................................................................ 1
Proposed Reorganization....................................................................... 1
Reasons for the Reorganization................................................................ 1
Federal Income Tax Consequences............................................................... 1
Comparison of Shareholder Transactions and Services........................................... 2
Voting Information............................................................................ 2
Risk Factors.................................................................................. 3
COMPARISON OF CARDINAL AND FSF INVESTMENT ADVISOR
AND OTHER SERVICE PROVIDERS............................................................................ 3
The Cardinal Funds............................................................................ 3
Fountain Square Funds......................................................................... 4
COMPARATIVE FEE TABLES................................................................................. 6
Comparative Fee Tables - Non-Money Market Funds............................................... 6
Comparative Fee Tables - Money Market Funds (Retail Investors)................................ 13
Comparative Fee Tables - Money Market Funds (Institutional Investors)......................... 15
Expense Ratios - Cardinal Funds............................................................... 17
Expense Ratios - Fountain Square Funds........................................................ 17
INFORMATION RELATING TO THE PROPOSED REORGANIZATION.................................................... 20
Description of the Reorganization Agreement................................................... 20
Capitalization................................................................................ 22
Federal Income Tax Consequences............................................................... 26
COMPARISON OF INVESTMENT OBJECTIVES, INVESTMENT POLICIES AND RISK
FACTORS................................................................................................ 26
The Cardinal Fund and Fountain Square Cardinal Fund........................................... 26
Cardinal Aggressive Growth Fund and Fountain Square Mid Cap Fund.............................. 27
Cardinal Balanced Fund and Fountain Square Balanced Fund...................................... 28
Cardinal Government Obligations Fund and Fountain Square Bond Fund For Income................. 29
Cardinal Government Securities Money Market Fund and Fountain Square Government Cash
Reserves Fund............................................................................... 30
Cardinal Tax Exempt Money Market Fund and Fountain Square Tax Exempt Money Market
Fund........................................................................................ 31
Risk Factors.................................................................................. 32
OTHER COMPARATIVE INFORMATION.......................................................................... 33
Purchase and Redemption Information, Exchange Privileges, Distribution and Pricing............ 33
Other Information............................................................................. 36
INFORMATION RELATING TO VOTING MATTERS................................................................. 37
General Information........................................................................... 37
Shareholder and Board Approvals............................................................... 38
Appraisal Rights.............................................................................. 40
Quorum........................................................................................ 40
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Annual Meetings............................................................................... 40
ADDITIONAL INFORMATION ABOUT FSF....................................................................... 41
ADDITIONAL INFORMATION ABOUT CARDINAL.................................................................. 42
LITIGATION............................................................................................. 42
FINANCIAL STATEMENTS................................................................................... 42
OTHER BUSINESS......................................................................................... 43
SHAREHOLDER INQUIRIES.................................................................................. 43
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SUMMARY
The following is a summary of certain information relating to the
proposed Reorganization, the parties thereto and the related transactions, and
is qualified by reference to the more complete information contained elsewhere
in this Combined Proxy Statement/Prospectus, the Prospectuses and Statements of
Additional Information of Cardinal and FSF, and the Reorganization Agreement
attached to this Combined Proxy Statement/Prospectus as Appendix A. Cardinal's
Annual Report to Shareholders may be obtained free of charge by calling or
writing Cardinal.
PROPOSED REORGANIZATION. The Reorganization Agreement provides for: (i)
the transfer of all of the assets and stated liabilities of each Cardinal Fund
to a corresponding Fountain Square Fund in exchange for shares of comparable
classes of the corresponding Fountain Square Fund; and (ii) the distribution of
Fountain Square Fund shares so received to the shareholders of the Cardinal
Funds in liquidation of the Cardinal Funds. The Reorganization is subject to a
number of conditions with respect to each Cardinal Fund, including shareholder
approval and receipt of an exemptive order from the Securities and Exchange
Commission (the "SEC"). Following the Reorganization, Cardinal will wind up its
affairs and deregister as an investment company under the Investment Company Act
of 1940, as amended (the "1940 Act"). Based upon their evaluation of the
relevant information presented to them, and in light of their fiduciary duties
under federal and state law, Cardinal's and FSF's Boards, including their
members who are not "interested persons" within the meaning of the 1940 Act,
have determined that the proposed Reorganization is in the best interests of
Cardinal's and FSF's shareholders, respectively, and that the interests of
existing shareholders of Cardinal and FSF, respectively, will not be diluted as
a result of such Reorganization.
The Reorganization Agreement may be terminated at any time prior to the
closing of the Reorganization (a) by mutual written consent of Cardinal and FSF
or (b) by either Cardinal or FSF if either Board of Trustees determines that
proceeding with the Reorganization is not in the best interests of its
shareholders.
REASONS FOR THE REORGANIZATION. The primary reason for the
Reorganization is the pending acquisition of The Ohio Company, CMC's parent
corporation, by a subsidiary of Fifth Third Bancorp, Fifth Third's parent
corporation. In light of this acquisition, Fifth Third and The Ohio Company
have recommended that each of the Cardinal Funds be reorganized as described in
this Combined Proxy Statement/Prospectus shortly after the proposed acquisition
of The Ohio Company. In recognition of the fact that the Reorganization will be
tax-free and will not dilute the interests of Cardinal shareholders and for
other reasons more fully described herein, the Board of Trustees of Cardinal has
unanimously approved the Reorganization Agreement and has recommended its
approval to shareholders.
FEDERAL INCOME TAX CONSEQUENCES. Shareholders of the Cardinal Funds
will recognize no gain or loss for federal income tax purposes on their receipt
of shares of the Fountain Square Funds and shareholders of the Fountain Square
Funds will have no tax consequences from the Reorganization. The Cardinal Funds
will incur no federal tax liability as a result of the Reorganization, and the
Fountain Square Funds will recognize no gain or loss for federal tax purposes on
their issuance of shares in the Reorganization. See "Information Relating to the
Proposed Reorganization - Federal Income Tax Consequences."
OVERVIEW OF THE CARDINAL FUNDS AND THE FOUNTAIN SQUARE FUNDS. There are
no material differences between the investment objectives and policies of The
Cardinal Fund and Cardinal Tax Exempt Money Market Fund and the corresponding
New Fountain Square Funds. The investment objectives and policies of the
remaining Cardinal Funds are generally similar to those of the Operating
Fountain Square Funds.
Additional information is provided below under "Comparison of
Investment Objectives, Investment Policies and Risk Factors" and in the Cardinal
and FSF Prospectuses, which are incorporated herein by reference, relating to
the similarities and differences between the investment objectives and policies
of the Cardinal Funds and their corresponding Fountain Square Funds.
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As discussed more fully below under "Comparison of Cardinal and FSF -
Investment Advisor and Other Service Providers," Fifth Third currently serves as
the investment advisor to each of the Operating Fountain Square Funds, and will
serve as the investment advisor to the New Fountain Square Funds. In all cases,
the overall expense ratios of the Fountain Square Funds, after waivers, are
expected to be equal to or less than the overall expense ratios of the
corresponding Cardinal Funds. In addition, in this regard, Fifth Third and FSF
have agreed that for a period of two years after the Closing Date, FSF will not
enter into, participate in, or pay compensation in connection with any
arrangement that facilitates or is intended to facilitate the payment of direct
or indirect compensation to Fifth Third, CMC or any interested person of either
of them, or increase compensation payable to Fifth Third, CMC or any interested
person of either of them which results in an increase in the expense ratios of
any of the Fountain Square Funds described in the pro forma combined fee tables
(net of fee waivers) in this Combined Proxy Statement/Prospectus. In addition,
FSF and Fifth Third have represented to Cardinal's Board of Trustees that the
expense ratios for the Fountain Square Funds will not exceed those set forth in
such pro forma combined fee tables for a period of two years after the Closing
Date. Cardinal and FSF have different administrators, distributors, transfer
agents, independent public accountants and trustees.
Each of the Fountain Square Funds will issue Investment A Shares and
Institutional Shares in connection with the Reorganization. Each of Fountain
Square Cardinal Fund, Fountain Square Mid Cap Fund, Fountain Square Balanced
Fund and Fountain Square Bond Fund For Income (the "Fountain Square Non-Money
Market Funds") also offer Investment C Shares. Investment A Shares of the
Fountain Square Funds are sold to the general public and are subject to
front-end sales charges and Rule 12b-1 fees. Investment C Shares are sold at net
asset value, but are subject to a contingent deferred sales charge if sold
within one year after purchase. In addition, Investment C Shares are subject to
higher Rule 12b-1 fees than Investment A Shares. Institutional Shares are
offered only to clients of Fifth Third Bank who make purchases through Fifth
Third's Trust Department, certain qualified employee benefit plans, and
broker-dealers, investment advisors, financial planners and other financial
institutions who place trades for their own accounts or the accounts of their
clients for a management, consulting or other fee. Such shares are offered at
net asset value without any front-end or contingent deferred sales charge and
are not subject to any Rule 12b-1 fees. Each of The Cardinal Fund, Cardinal
Aggressive Growth Fund, Cardinal Balanced Fund and Cardinal Government
Obligations Fund (the "Cardinal Non-Money Market Funds") offers Investor Shares
and Institutional Shares. Investor Shares of the Cardinal Funds are similar to
Investment A Shares of the Fountain Square Funds. Such shares are offered at net
asset value, subject to a front-end sales charge and Rule 12b-1 fees.
Institutional Shares of the Cardinal Funds are similar to Institutional Shares
of the Fountain Square Funds, except that Institutional Shares of the Cardinal
Funds are subject to administrative services fees and Institutional Shares of
the Fountain Square Funds are not.
COMPARISON OF SHAREHOLDER TRANSACTIONS AND SERVICES. With certain
exceptions, the purchase, redemption, dividend, exchange and other policies and
procedures for the Fountain Square Funds and the Cardinal Funds are generally
similar. None of the Fountain Square Funds offers a check-writing redemption
feature, although investors may participate in the One Account Advantage program
at Fifth Third which permits check writing against Fountain Square Money Market
Fund balances.
VOTING INFORMATION. Only shareholders of record of the Cardinal Funds
at the close of business on May 12, 1998 will be entitled to notice of and to
vote at the Special Meeting or any adjournments thereof. Each dollar of value
invested in the Cardinal Funds or fraction of a dollar invested as of the close
of business on the record date is entitled to one vote or fraction thereof and
all shares will vote separately by Fund (but not by class). Shares represented
by a properly executed proxy will be voted in accordance with the specified
instructions, or if no specification is made, the persons named as proxies will
vote in favor of each proposal set forth in the Notice of Meeting. Shares
represented by proxies, unless previously revoked, will be voted at the Special
Meeting in accordance with the instructions of the shareholders. If no
instructions are given, the proxies will be voted in favor of the proposal. To
revoke a proxy, the shareholder giving such proxy must either submit to Cardinal
a subsequently dated proxy, deliver to Cardinal a written notice of revocation
or otherwise give notice of revocation in open meeting, in all cases prior to
the exercise of the authority granted in the proxy. For additional information,
including a description of the shareholder vote required for approval of the
Reorganization Agreement and related transactions, see "Information Relating to
Voting Matters."
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RISK FACTORS. Because of the similarities of the investment objectives,
policies and restrictions of the Cardinal Funds and their corresponding Fountain
Square Funds, an investment in a Fountain Square Fund involves risks that are
similar to those of the corresponding Cardinal Fund. In the case of Fountain
Square Cardinal Fund and Fountain Square Mid Cap Fund, the investment risks, in
general, are those typically associated with investing in a portfolio of common
stocks. In the case of Fountain Square Bond Fund For Income, the investment
risks, in general, are those typically associated with investing in a portfolio
of investment grade fixed income securities, including corporate debt
obligations. Funds which invest in corporate debt obligations involve credit
risks which are greater than investments in funds such as Cardinal Government
Obligations Fund which limits its investments to U.S. government securities. In
the case of Fountain Square Balanced Fund, the investment risks are those
typically associated with investing in a portfolio of both common stocks and
investment grade fixed income securities. Finally, with respect to Fountain
Square Government Cash Reserves Fund and Fountain Square Tax Exempt Money Market
Fund, the investment risks, in general, are those typically associated with
investing in a portfolio of high quality money market instruments. In addition,
these Money Market Funds attempt to maintain a stable net asset value of $1.00,
although there is no assurance that they will be able to do so. See "Comparison
of Investment Objectives, Investment Policies and Risk Factors."
COMPARISON OF CARDINAL AND FSF
INVESTMENT ADVISOR AND OTHER SERVICE PROVIDERS
THE CARDINAL FUNDS. CMC serves as investment advisor and manager of the
Cardinal Funds and is entitled to receive advisory and management fees
("advisory fees") from the Cardinal Funds, computed and paid monthly, at the
following annual rates, expressed as a percentage of average daily net assets:
MAXIMUM ACTUAL
ADVISORY FEE ADVISORY FEE
(% OF AVERAGE IN YEAR ENDED
CARDINAL FUNDS DAILY NET WORTH) SEPTEMBER 30, 1997
-------------- ---------------- ---------------
The Cardinal Fund 0.60% 0.60%
Cardinal Aggressive Growth Fund 0.75% 0.75%
Cardinal Balanced Fund 0.75% 0.75%
Cardinal Government Obligations Fund 0.50% 0.50%
Cardinal Government Securities Money Market Fund 0.50% 0.50%
Cardinal Tax Exempt Money Market Fund 0.50% 0.50%
Pursuant to the Cardinal Investment Advisory and Management Agreement
(the "Cardinal Advisory Agreement"), CMC conducts a continuous investment
program, including investment research and management with respect to all
securities and investments and cash equivalents in the Cardinal Funds. CMC
provides these services in accordance with the Cardinal Funds' investment
objectives, policies and restrictions. In addition, pursuant to the Cardinal
Advisory Agreement, CMC is responsible for overall management of the Cardinal
Funds' business affairs except those performed by Cardinal's custodian, transfer
agent and fund accountant.
Transfer agency services are provided to Cardinal by CMC. For services
in its capacity as transfer agent, CMC receives an annual fee per shareholder
account, computed daily and paid monthly, equal to $18 for The Cardinal Fund,
Cardinal Aggressive Growth Fund and Cardinal Balanced Fund and $21 for Cardinal
Government Obligations Fund, Cardinal Government Securities Money Market Fund
and Cardinal Tax Exempt Money Market Fund, plus out-of-pocket expenses.
Custodial services are provided to Cardinal by Fifth Third Bank, for
which it receives a base fee for each Cardinal Fund, plus applicable transaction
charges. Effective January 20, 1997, Fifth Third also began providing fund
accounting services to each Cardinal Fund for a fee of 0.03% on the
3
15
first $100 million of such Fund's average daily net assets, 0.02% on the next
$100 million, and 0.01% on assets above $200 million. A minimum monthly charge
of $2,500 for each Cardinal Fund applies, and there is a $7,000 surcharge for
additional classes of shares.
The Ohio Company, CMC's parent corporation, is the principal
underwriter for Cardinal. Under the distribution agreement, The Ohio Company
acts as the agent of Cardinal in connection with the offering of shares of each
Cardinal Fund.
Cardinal has adopted a Distribution Plan pursuant to Rule 12b-1 under
the 1940 Act (the "Cardinal 12b-1 Plan"). Under the Cardinal 12b-1 Plan,
Investor Shares of The Cardinal Fund, Cardinal Aggressive Growth Fund, Cardinal
Balanced Fund and Cardinal Government Obligation Fund bear the expense of
distribution fees payable to The Ohio Company at an annual rate of up to 0.25%
of the average daily net asset value of each Fund's outstanding Investor Shares
to finance activities which are principally intended to result in the sale of
such shares. The Cardinal 12b-1 Plan allows The Ohio Company to enter into
agreements with broker-dealers and other financial institutions which provide
shareholder services as agents for their customers who beneficially own Investor
Shares of these Funds. Shareholder services provided by such financial
institutions may include, without limitation: answering shareholder questions
concerning the Cardinal Funds; providing information to shareholders on their
investments in the Cardinal Funds; providing such personnel and communication
equipment as is necessary and appropriate to accomplish such matters; and such
other services as may reasonably be requested.
The Cardinal 12b-1 Plan is a compensation type plan as opposed to a
reimbursement type plan. Accordingly, payments by Investor Shares under the
12b-1 Plan are based on the expressed fee rather than on the specific amounts
expended by The Ohio Company for shareholder services. The Ohio Company may be
able to recover such amounts or may earn a profit from payments made by Investor
Shares of these Cardinal Funds under the Cardinal 12b-1 Plan.
Cardinal has also adopted an Administrative Services Plan (the
"Cardinal Administrative Services Plan"), pursuant to which The Ohio Company
receives an annual fee of up to 0.15% of the average net assets of the
Institutional Shares of The Cardinal Fund, Cardinal Aggressive Growth Fund,
Cardinal Balanced Fund and Cardinal Government Obligation Fund for which it
provides shareholder administrative services. Other financial institutions may
also receive fees under the Cardinal Administrative Services Plan.
FOUNTAIN SQUARE FUNDS. Fifth Third, which is a wholly-owned subsidiary
of Fifth Third Bancorp, a bank holding company organized under the laws of Ohio,
serves as investment advisor to FSF and is entitled to receive advisory fees
from FSF, computed daily and paid monthly, at the following annual rates:
ACTUAL
MAXIMUM ADVISORY FEE
ADVISORY FEE IN YEAR ENDED
(% OF AVERAGE JULY 31, 1997
FOUNTAIN SQUARE FUNDS DAILY NET ASSETS) (AFTER WAIVERS)
--------------------- ----------------- ---------------
Fountain Square Cardinal Fund.............................. 0.60% N/A*
Fountain Square Mid Cap Fund............................... 0.80% 0.80%
Fountain Square Balanced Fund.............................. 0.80% 0.80%
Fountain Square Bond Fund for Income....................... 0.55% 0.55%
Fountain Square Government Cash Reserves Fund.............. 0.40% 0.37%
Fountain Square Tax Exempt Money Market Fund............... 0.50% N/A*
* Fountain Square Cardinal Fund and Fountain Square Tax Exempt Money Market Fund
have been organized to facilitate the Reorganization and have not commenced
operations.
4
16
Fifth Third serves as investment advisor to FSF pursuant to the FSF
Advisory Contract which is similar in all material respects to the Cardinal
Investment Advisory Agreement with CMC, except that administration services
provided by Fifth Third to FSF are not covered by the FSF Advisory Contract,
but are provided to FSF by BISYS Fund Services, L.P., as described below.
Under the Cardinal Advisory Agreement, subject to the supervision of
the Cardinal Trustees, CMC has the authority and discretion to select brokers
and dealers to execute portfolio transactions for the Cardinal Funds. Similarly,
subject to the supervision of the FSF Trustees, Fifth Third has the authority
and discretion to select brokers and dealers to execute portfolio transactions
for the Fountain Square Funds. The Cardinal Advisory Agreement obligates CMC to
obtain prompt execution of orders in an effective manner at the most favorable
price. Consistent with this obligation, when the execution and price offered by
two or more brokers or dealers are comparable, CMC may, in its discretion,
purchase and sell portfolio securities to and from brokers and dealers who
provide CMC with research, advice and other services. The FSF Advisory Contract
contains no similar provision, although FSF and Fifth Third believe that Fifth
Third may, consistent with its fiduciary responsibility, purchase and sell
portfolio securities to and from brokers and dealers who provide Fifth Third
with research, advice and related services. In return for this research and
analysis, Fifth Third may pay those brokers and dealers a higher commission or
spread than may be charged by other brokers and dealers.
See "Fountain Square Funds Information - Management of the Trust -
Investment Advisor" in the FSF Prospectuses accompanying this Combined Proxy
Statement/Prospectus, which are incorporated herein by reference, for additional
information on FSF's Advisor.
Administration services are provided to FSF by BISYS Fund Services,
L.P. ("BISYS"), 3435 Stelzer Road, Columbus, Ohio 43219. For its services, BISYS
is entitled to receive a fee, computed daily and paid monthly, at the annual
rate of 0.20% of the first $1 billion of the combined average daily net assets
of all funds offered by FSF, 0.18% of the next $1 billion of such combined
average daily net assets, and 0.17% of such combined average daily net assets
in excess of $2 billion.
Pursuant to a separate agreement with BISYS, Fifth Third performs
sub-administration services on behalf of each Fountain Square Fund, including
providing certain administrative personnel and services necessary to operate the
Fountain Square Fund, for which Fifth Third receives a fee from BISYS computed
daily and paid periodically calculated at an annual rate of 0.025% of average
daily net assets. Fifth Third also serves as custodian for the securities and
cash of the Fountain Square Funds, transfer agent for the shares of the Fountain
Square Funds, and dividend disbursing agent for the Fountain Square Funds.
Finally, Fifth Third provides fund accounting services to each of the Fountain
Square Funds. For each of these services, Fifth Third receives a base fee per
Fund plus applicable transaction charges.
BISYS also serves as FSF's principal underwriter for all Fountain
Square Funds. Under the Distribution Agreement, BISYS may enter into dealer
agreements on behalf of FSF in order to sell Investment A Shares of the Fountain
Square Funds.
FSF has also adopted a Distribution Plan pursuant to Rule 12b-1 of the
1940 Act (the "FSF 12b-1 Plan"). Under the FSF 12b-1 Plan, as amended,
Investment A Shares of each Fountain Square Fund bear the expense of
distribution fees payable to BISYS at an annual rate of up to 0.25% of the
average daily net asset value of such Fund's outstanding Investment A Shares to
finance activities which are principally intended to result in the sale of such
shares. The FSF 12b-1 Plan allows BISYS, as distributor, to enter into
agreements with broker-dealers and other financial institutions to provide
shareholder services similar to those described with respect to the Cardinal
12b-1 Plan as well as distribution services.
5
17
Like the Cardinal 12b-1 Plan, the FSF 12b-1 Plan is a compensation type
plan as opposed to a reimbursement type plan. For the fiscal year ended July 31,
1997, FSF did not pay any fees to BISYS pursuant to the FSF 12b-1 Plan in
connection with the sale of the Investment A Shares of any of the Fountain
Square Funds. Beginning on or about July 13, 1998, each of the Fountain Square
Funds, except Fountain Square Tax Exempt Money Market Fund, expects to pay to
BISYS 0.25% of the average daily net asset value of its Investment A Shares.
Fountain Square Tax Exempt Money Market Fund only expects to pay 0.07% of the
average daily net asset value of its Investment A Shares.
See "Fountain Square Funds Information" in the FSF Prospectuses
accompanying this Combined Proxy/Prospectus, which are incorporated herein by
reference, for additional information on FSF's service providers.
COMPARATIVE FEE TABLES
COMPARATIVE FEE TABLES - NON-MONEY MARKET FUNDS. Set forth in the
tables below is (i) information regarding the fees and expenses paid by The
Cardinal Fund, Cardinal Aggressive Growth Fund, Cardinal Balanced Fund and
Cardinal Government Obligations Fund and of each corresponding Fountain Square
Fund which are expected to be incurred during the current fiscal year ending
July 31, 1998 and (ii) pro forma information for each combined Fund assuming the
Reorganization had taken place on September 30, 1997.
INFORMATION RELATING TO THE EXCHANGE OF
INVESTOR SHARES OF THE CARDINAL NON-MONEY MARKET FUNDS
FOR INVESTMENT A SHARES OF THE CORRESPONDING FOUNTAIN SQUARE FUNDS
COMPARATIVE FEE TABLES FOR EACH NON-MONEY MARKET FUND
FOUNTAIN PRO FORMA
CARDINAL SQUARE COMBINED
FUNDS FUNDS FUNDS
INVESTOR INVESTMENT A INVESTMENT A
SHARES SHARES SHARES
------ ------ ------
SHAREHOLDER TRANSACTION EXPENSES
Maximum Sales Load Imposed on Purchases................ 4.50% 4.50% 4.50%
Maximum Sales Load Imposed on Reinvested
Dividends (as a percentage of offering price)......... None None None
Contingent Deferred Sales Charge (as a percentage
of original purchase price or redemption
proceeds, as applicable).............................. None None None
Redemption Fee (as a percentage of amount
redeemed, if applicable).............................. None None None
Exchange Fee........................................... None None None
6
18
FOUNTAIN
THE CARDINAL SQUARE PRO FORMA
FUND CARDINAL FUND COMBINED FUND
INVESTOR INVESTMENT A INVESTMENT A
SHARES SHARES SHARES
------ ------ ------
ANNUAL FUND OPERATING EXPENSES
(as a percentage of average net assets)
Management Fees........................................ 0.60% 0.60% 0.60%
12b-1 Fees............................................. 0.25% 0.25% 0.25%
Other Expenses (after fee waivers)(1).................. 0.21% 0.19% 0.19%
----- ----- -----
Total Operating Expenses (after fee waivers)(2)...... 1.06% 1.04% 1.04%
===== ===== =====
(1) Other expenses for the Fountain Square Cardinal Fund and Pro Forma
Combined Fund have been reduced to reflect the anticipated voluntary
waiver of a portion of the administration fee. In the absence of such
waiver, other expenses would be 0.29%.
(2) Total Investment A Shares Operating Expenses for the Fountain Square
Cardinal Fund and Pro Forma Combined Fund would be 1.14%, absent the
voluntary waiver of a portion of the administration fee. All expenses
for the Fountain Square Cardinal Fund are based on estimates for such
Fund.
EXAMPLE: An investor would pay the following expense on a $1,000 investment,
assuming (1) 5% annual return, (2) redemption at the end of the following
periods, and (3) payment of the maximum sales charge:
1 YEAR 3 YEARS 5 YEARS 10 YEARS
------ ------- ------- --------
The Cardinal Fund - Investor Shares.......................... $55 $77 $101 $169
=== === ==== ====
Fountain Square Cardinal Fund - Investment A Shares.......... $55 $77 $100 $166
=== === ==== ====
Pro Forma Combined Fund - Investment A Shares................ $55 $77 $100 $166
=== === ==== ====
THE FOREGOING EXAMPLE SHOULD NOT BE CONSIDERED A REPRESENTATION OF PAST OR
FUTURE EXPENSES. ACTUAL EXPENSES MAY BE GREATER OR LESS THAN THOSE SHOWN.
CARDINAL FOUNTAIN
AGGRESSIVE SQUARE PRO FORMA
GROWTH FUND MID CAP FUND COMBINED FUND
INVESTOR INVESTMENT A INVESTMENT A
SHARES SHARES SHARES
------ ------ ------
ANNUAL FUND OPERATING EXPENSES
(as a percentage of average net assets)
Management Fees........................................ 0.75% 0.80% 0.80%
12b-1 Fees............................................. 0.25% 0.25% 0.25%
Other Expenses (after fee waivers)(3).................. 0.86% 0.20% 0.20%
----- ----- -----
Total Operating Expenses (after fee waivers)(4)...... 1.86% 1.25% 1.25%
===== ===== =====
(3) Other expenses for the Fountain Square Mid Cap Fund and Pro Forma
Combined Fund have been reduced to reflect the anticipated voluntary
waiver of a portion of the administration fee. In the absence of such
waiver, other expenses would be 0.27%.
7
19
(4) Total Investment A Shares Operating Expenses for the Fountain Square
Mid Cap Fund and Pro Forma Combined Fund would be 1.32%, absent the
voluntary waiver of a portion of the administration fee.
EXAMPLE: An investor would pay the following expense on a $1,000 investment,
assuming (1) 5% annual return, (2) redemption at the end of the following
periods, and (3) payment of the maximum sales charge:
1 YEAR 3 YEARS 5 YEARS 10 YEARS
------ ------- ------- --------
Cardinal Aggressive Growth Fund - Investor Shares............ $63 $101 $141 $253
=== ==== ==== ====
Fountain Square Mid Cap Fund - Investment A Shares........... $57 $83 $111 $189
=== === ==== ====
Pro Forma Combined Fund - Investment A Shares................ $57 $83 $111 $189
=== === ==== ====
THE FOREGOING EXAMPLE SHOULD NOT BE CONSIDERED A REPRESENTATION OF PAST OR
FUTURE EXPENSES. ACTUAL EXPENSES MAY BE GREATER OR LESS THAN THOSE SHOWN.
FOUNTAIN
CARDINAL SQUARE PRO FORMA
BALANCED FUND BALANCED FUND COMBINED FUND
INVESTOR INVESTMENT A INVESTMENT A
SHARES SHARES SHARES
------ ------ ------
ANNUAL FUND OPERATING EXPENSES
(as a percentage of average net assets)
Management Fees........................................ 0.75% 0.80% 0.80%
12b-1 Fees............................................. 0.25% 0.25% 0.25%
Other Expenses (after fee waivers)(5).................. 0.44% 0.20% 0.20%
----- ----- -----
Total Operating Expenses (after fee waivers)(6)...... 1.44% 1.25% 1.25%
===== ===== =====
(5) Other expenses for the Fountain Square Balanced Fund and Pro Forma
Combined Fund have been reduced to reflect the anticipated voluntary
waiver of a portion of the administration fee. In the absence of such
waiver, other expenses would be 0.29%.
(6) Total Investment A Shares Operating Expenses for the Fountain Square
Balanced Fund and Pro Forma Combined Fund would be 1.34%, absent the
voluntary waiver of a portion of the administration fee.
EXAMPLE: An investor would pay the following expenses on a $1,000 investment,
assuming (1) 5% annual return, (2) redemption at the end of the following
periods, and (3) payment of the maximum sales charge:
1 YEAR 3 YEARS 5 YEARS 10 YEARS
------ ------- ------- --------
Cardinal Balanced Fund - Investor Shares.......................... $59 $89 $120 $210
=== === ==== ====
Fountain Square Balanced Fund - Investment A Shares............... $57 $83 $111 $189
=== === ==== ====
Pro Forma Combined Fund - Investment A Shares..................... $57 $83 $111 $189
=== === ==== ====
THE FOREGOING EXAMPLE SHOULD NOT BE CONSIDERED A REPRESENTATION OF PAST OR
FUTURE EXPENSES. ACTUAL EXPENSES MAY BE GREATER OR LESS THAN THOSE SHOWN.
8
20
CARDINAL FOUNTAIN
GOVERNMENT SQUARE
OBLIGATIONS BOND FUND PRO FORMA
FUND FOR INCOME COMBINED FUND
INVESTOR INVESTMENT A INVESTMENT A
SHARES SHARES SHARES
------ ------ ------
ANNUAL FUND OPERATING EXPENSES
(as a percentage of average net assets)
Management Fees....................................... 0.50% 0.55% 0.55%
12b-1 Fees............................................ 0.25% 0.25% 0.25%
Other Expenses (after fee waivers)(7)................. 0.26% 0.21% 0.21%
----- ----- -----
Total Operating Expenses (after fee waivers)(8)..... 1.01% 1.01% 1.01%
===== ===== =====
(7) Other expenses for Investment A Shares of the Fountain Square Bond Fund
For Income and Pro Forma Combined Fund have been reduced to reflect the
anticipated voluntary waiver of a portion of the administration fee. In
the absence of such waiver, other expenses would be 0.27%.
(8) Total Investment A Shares Operating Expenses for the Fountain Square
Bond Fund For Income and Pro Forma Combined Fund would be 1.07%, absent
the voluntary waiver of a portion of the administration fee.
EXAMPLE: An investor would pay the following expense on a $1,000 investment,
assuming (1) 5% annual return, (2) redemption at the end of the following
periods, and (3) payment of the maximum sales charge:
1 YEAR 3 YEARS 5 YEARS 10 YEARS
------ ------- ------- --------
Cardinal Government Obligations Fund - Investor Shares $55 $76 $98 $163
=== === === ====
Fountain Square Bond Fund For Income Fund -
Investment A Shares.............................................. $55 $76 $98 $163
=== === === ====
Pro Forma Combined Fund - Investment A Shares.................... $55 $76 $98 $163
=== === === ====
THE FOREGOING EXAMPLE SHOULD NOT BE CONSIDERED A REPRESENTATION OF PAST OR
FUTURE EXPENSES. ACTUAL EXPENSES MAY BE GREATER OR LESS THAN THOSE SHOWN.
9
21
INFORMATION RELATING TO THE EXCHANGE OF
INSTITUTIONAL SHARES OF THE CARDINAL NON-MONEY MARKET FUNDS
FOR INSTITUTIONAL SHARES OF THE CORRESPONDING FOUNTAIN SQUARE FUNDS
COMPARATIVE FEE TABLES FOR EACH NON-MONEY MARKET FUND
FOUNTAIN PRO FORMA
CARDINAL SQUARE COMBINED
FUNDS FUNDS FUNDS
INSTITUTIONAL INSTITUTIONAL INSTITUTIONAL
SHARES SHARES SHARES
------ ------ ------
SHAREHOLDER TRANSACTION EXPENSES
Maximum Sales Load Imposed on Purchases................... None None None
Maximum Sales Load Imposed on Reinvested
Dividends (as a percentage of offering price)............ None None None
Contingent Deferred Sales Charge (as a percentage
of original purchase price or redemption
proceeds, as applicable)................................. None None None
Redemption Fee (as a percentage of amount
redeemed, if applicable)................................. None None None
Exchange Fee.............................................. None None None
FOUNTAIN
THE CARDINAL SQUARE PRO FORMA
FUND CARDINAL FUND COMBINED FUND
INSTITUTIONAL INSTITUTIONAL INSTITUTIONAL
SHARES SHARES SHARES
------ ------ ------
ANNUAL FUND OPERATING EXPENSES
(as a percentage of average net assets)
Management Fees........................................ 0.60% 0.60% 0.60%
Administrative Service Fees............................ 0.15% 0.00% 0.00%
Other Expenses (after fee waivers)(1).................. 0.25% 0.19% 0.19%
----- ----- -----
Total Operating Expenses (after fee waivers)(2)...... 1.00% 0.79% 0.79%
===== ===== =====
(1) Other expenses for the Fountain Square Cardinal Fund and Pro Forma
Combined Fund have been reduced to reflect the anticipated voluntary
waiver of a portion of the administration fee. In the absence of such
waiver, other expenses would be 0.29%. All expenses for the Fountain
Square Cardinal Fund are based on estimates for such Fund for its
current fiscal year.
(2) Total Institutional Shares Operating Expenses for the Fountain Square
Cardinal Fund and Pro Forma Combined Fund would be 0.89%, absent the
voluntary waiver of a portion of the administration fee.
EXAMPLE: An investor would pay the following expense on a $1,000 investment,
assuming (1) 5% annual return, and (2) redemption at the end of the following
periods:
10
22
1 YEAR 3 YEARS 5 YEARS 10 YEARS
------ ------- ------- --------
The Cardinal Fund - Institutional Shares..................... $10 $32 $55 $122
=== === === ====
Fountain Square Cardinal Fund - Institutional Shares......... $ 8 $25 $44 $ 98
=== === === ====
Pro Forma Combined Fund - Institutional Shares............... $ 8 $25 $44 $ 98
=== === === ====
THE FOREGOING EXAMPLE SHOULD NOT BE CONSIDERED A REPRESENTATION OF PAST OR
FUTURE EXPENSES. ACTUAL EXPENSES MAY BE GREATER OR LESS THAN THOSE SHOWN.
CARDINAL FOUNTAIN
AGGRESSIVE SQUARE PRO FORMA
GROWTH FUND MID CAP FUND COMBINED FUND
INSTITUTIONAL INSTITUTIONAL INSTITUTIONAL
SHARES SHARES SHARES
------ ------ ------
ANNUAL FUND OPERATING EXPENSES
(as a percentage of average net assets)
Management Fees........................................ 0.75% 0.80% 0.80%
Administrative Service Fees............................ 0.15% 0.00% 0.00%
Other Expenses (after fee waivers)(3).................. 1.21% 0.20% 0.20%
----- ----- -----
Total Operating Expenses (after fee waivers)(4)...... 2.11% 1.00% 1.00%
===== ===== =====
(3) Other expenses for the Fountain Square Mid Cap Fund and Pro Forma
Combined Fund have been reduced to reflect the anticipated voluntary
waiver of a portion of the administration fee. In the absence of such
waiver, other expenses would be 0.27%.
(4) Total Institutional Shares Operating Expenses for the Fountain Square
Mid Cap Fund and Pro Forma Combined Fund would be 1.07%, absent the
voluntary waiver of a portion of the administration fee.
EXAMPLE: An investor would pay the following expense on a $1,000 investment,
assuming (1) 5% annual return, and (2) redemption at the end of the following
periods:
1 YEAR 3 YEARS 5 YEARS 10 YEARS
------ ------- ------- --------
Cardinal Aggressive Growth Fund - Institutional Shares....... $21 $66 $113 $244
=== === ==== ====
Fountain Square Mid Cap Fund - Institutional Shares.......... $10 $32 $ 55 $122
=== === ==== ====
Pro Forma Combined Fund - Institutional Shares............... $10 $32 $ 55 $122
=== === ==== ====
THE FOREGOING EXAMPLE SHOULD NOT BE CONSIDERED A REPRESENTATION OF PAST OR
FUTURE EXPENSES. ACTUAL EXPENSES MAY BE GREATER OR LESS THAN THOSE SHOWN.
11
23
FOUNTAIN
CARDINAL SQUARE PRO FORMA
BALANCED FUND BALANCED FUND COMBINED FUND
INSTITUTIONAL INSTITUTIONAL INSTITUTIONAL
SHARES SHARES SHARES
------ ------ ------
ANNUAL FUND OPERATING EXPENSES
(as a percentage of average net assets)
Management Fees........................................ 0.75% 0.80% 0.80%
Administrative Service Fees............................ 0.15% 0.00% 0.00%
Other Expenses (after fee waivers)(5).................. 0.61% 0.20% 0.20%
----- ----- -----
Total Operating Expenses (after fee waivers)(6)...... 1.51% 1.00% 1.00%
===== ===== =====
(5) Other expenses for the Fountain Square Balanced Fund and Pro Forma
Combined Fund have been reduced to reflect the anticipated voluntary
waiver of a portion of the administration fee. In the absence of such
waiver, other expenses would be 0.29%.
(6) Total Institutional Shares Operating Expenses for the Fountain Square
Balanced Fund and Pro Forma Combined Fund would be 1.09%, absent the
voluntary waiver of a portion of the administration fee.
EXAMPLE: An investor would pay the following expenses on a $1,000 investment,
assuming (1) 5% annual return, and (2) redemption at the end of the following
periods:
1 YEAR 3 YEARS 5 YEARS 10 YEARS
------ ------- ------- --------
Cardinal Balanced Fund - Institutional Shares................ $15 $48 $82 $180
=== === === ====
Fountain Square Balanced Fund - Institutional Shares......... $10 $32 $55 $122
=== === === ====
Pro Forma Combined Fund - Institutional Shares............... $10 $32 $55 $122
=== === === ====
THE FOREGOING EXAMPLE SHOULD NOT BE CONSIDERED A REPRESENTATION OF PAST OR
FUTURE EXPENSES. ACTUAL EXPENSES MAY BE GREATER OR LESS THAN THOSE SHOWN.
CARDINAL FOUNTAIN
GOVERNMENT SQUARE
OBLIGATIONS BOND FUND PRO FORMA
FUND FOR INCOME COMBINED FUND
INSTITUTIONAL INSTITUTIONAL INSTITUTIONAL
SHARES SHARES SHARES
------ ------ ------
ANNUAL FUND OPERATING EXPENSES
(as a percentage of average net assets)
Management Fees........................................ 0.50% 0.55% 0.55%
Administrative Service Fees............................ 0.15% 0.00% 0.00%
Other Expenses (after fee waivers)(7).................. 0.28% 0.21% 0.21%
----- ----- -----
Total Operating Expenses (after fee waivers)(8)...... 0.93% 0.76% 0.76%
===== ===== =====
(7) Other expenses for the Fountain Square Bond Fund For Income and Pro
Forma Combined Fund have been reduced to reflect the anticipated
voluntary waiver of a portion of the administration fee. In the absence
of such waiver, other expenses would be 0.27%.
(8) Total Institutional Shares Operating Expenses for the Fountain Square
Bond Fund For Income and Pro Forma Combined Fund would be 0.82%, absent
the voluntary waiver of a portion of the administration fee.
EXAMPLE: An investor would pay the following expenses on a $1,000 investment,
assuming (1) 5% annual return, and (2) redemption at the end of the following
periods:
1 YEAR 3 YEARS 5 YEARS 10 YEARS
Cardinal Government Obligations Fund -
Institutional Shares........................... $9 $30 $51 $114
Fountain Square Bond Fund For Income -
Institutional Shares........................... $8 $24 $42 $ 94
Pro Forma Combined Fund - Institutional Shares... $8 $24 $42 $ 94
THE FOREGOING EXAMPLE SHOULD NOT BE CONSIDERED A REPRESENTATION OF PAST OR
FUTURE EXPENSES. ACTUAL EXPENSES MAY BE GREATER OR LESS THAN THOSE SHOWN.
12
24
COMPARATIVE FEE TABLES - MONEY MARKET FUNDS (RETAIL INVESTORS). (1) Set
forth in the tables below is (i) information regarding the fees and expenses
paid by certain investors holding shares of Cardinal Government Securities Money
Market Fund and Cardinal Tax Exempt Money Market Fund who are not eligible to
purchase Institutional Shares of Fountain Square Funds and therefore will
receive Investment A Shares of the corresponding Fountain Square Fund as part of
the Reorganization as of September 30, 1997, and of each corresponding Fountain
Square Fund which are expected to be incurred during the current fiscal year
ending July 31, 1998 and (ii) pro forma information for each combined Fund
assuming the Reorganization had taken place on September 30, 1997.
INFORMATION RELATING TO THE EXCHANGE OF
SHARES OF THE CARDINAL MONEY MARKET FUNDS
FOR INVESTMENT A SHARES OF THE CORRESPONDING FOUNTAIN SQUARE FUNDS
COMPARATIVE FEE TABLES FOR EACH MONEY MARKET FUND
FOUNTAIN PRO FORMA
CARDINAL SQUARE COMBINED
FUNDS FUNDS FUNDS
RETAIL INVESTMENT A INVESTMENT A
INVESTORS(1) SHARES SHARES
------------ ------ ------
SHAREHOLDER TRANSACTION EXPENSES
Maximum Sales Load Imposed on Purchases................ None None None
Maximum Sales Load Imposed on Reinvested
Dividends (as a percentage of offering price)......... None None None
Contingent Deferred Sales Charge (as a percentage
of original purchase price or redemption
proceeds, as applicable).............................. None None None
Redemption Fee (as a percentage of amount
redeemed, if applicable).............................. None None None
Exchange Fee........................................... None None None
(1) The term "retail investors" of any of the Cardinal Money Market Funds is
used to refer to all investors who are ineligible to purchase Institutional
Shares of the Fountain Square Funds. Persons who are eligible to purchase
Institutional Shares are clients of Fifth Third Bank who make purchases through
the Fifth Third Trust Department, certain qualified employee benefit plans, and
broker-dealers, investment advisors, financial planners and other financial
institutions who place trades for their own accounts or the accounts of their
clients for a management, consulting or other fee.
13
25
CARDINAL FOUNTAIN
GOVERNMENT SQUARE
SECURITIES GOVERNMENT
MONEY CASH RESERVES PRO FORMA
MARKET FUND FUND COMBINED FUND
RETAIL INVESTMENT A INVESTMENT A
INVESTORS SHARES SHARES
--------- ------ ------
ANNUAL FUND OPERATING EXPENSES
(as a percentage of average net assets)
Management Fees........................................ 0.50% 0.40% 0.40%
12b-1 Fees............................................. None 0.25% 0.25%
Other Expenses......................................... 0.38% 0.23% 0.23%
----- ----- -----
Total Operating Expenses............................. 0.88% 0.88% 0.88%
===== ===== =====
EXAMPLE: An investor would pay the following expense on a $1,000 investment,
assuming (1) 5% annual return, and (2) redemption at the end of the following
periods:
1 YEAR 3 YEARS 5 YEARS 10 YEARS
------ ------- ------- --------
Cardinal Government Securities Money Market Fund -
Retail Investors............................................. $9 $28 $49 $108
== === === ====
Fountain Square Government Cash Reserves Fund -
Investment A Shares.......................................... $9 $28 $49 $108
== === === ====
Pro Forma Combined Fund - Investment A Shares................ $9 $28 $49 $108
== === === ====
THE FOREGOING EXAMPLE SHOULD NOT BE CONSIDERED A REPRESENTATION OF PAST OR
FUTURE EXPENSES. ACTUAL EXPENSES MAY BE GREATER OR LESS THAN THOSE SHOWN.
FOUNTAIN
CARDINAL SQUARE
TAX EXEMPT TAX EXEMPT
MONEY MONEY PRO FORMA
MARKET FUND MARKET FUND COMBINED FUND
RETAIL INVESTMENT A INVESTMENT A
INVESTORS SHARES SHARES
--------- ------ ------
ANNUAL FUND OPERATING EXPENSES
(as a percentage of average net assets)
Management Fees (after waivers)(2)..................... 0.50% 0.40% 0.40%
12b-1 Fees (after waivers)(3).......................... None 0.07% 0.07%
Other Expenses......................................... 0.30% 0.33% 0.33%
----- ----- -----
Total Operating Expenses (after fee waivers)(4)...... 0.80% 0.80% 0.80%
===== ===== =====
(2) Management fees for the Fountain Square Tax Exempt Money Market Fund
and Pro Forma Combined Fund have been reduced to reflect the
anticipated voluntary waiver of a portion of the advisory fee. The
maximum management fee for the Fountain Square Tax Exempt Money Market
Fund is 0.50%. Subject to the terms of the Reorganization Agreement,
the advisor may terminate this voluntary waiver at any time.
(3) Rule 12b-1 fees for Investment A Shares of the Fountain Square Tax
Exempt Money Market Fund and Pro Forma Combined Fund have been reduced
to reflect the anticipated voluntary waiver of a portion of such fees.
Investment A Shares can pay up to 0.25% as Rule 12b-1 fees to the
distributor.
14
26
(4) Total Investment A Shares Operating Expenses for the Fountain Square
Tax Exempt Money Market Fund and Pro Forma Combined Fund would be
1.08%, absent the voluntary waivers of a portion of the advisory fee
and Rule 12b-1 fees. All expenses for Fountain Square Tax Exempt Money
Market Fund are based on estimates for such Fund for its current fiscal
year.
EXAMPLE: An investor would pay the following expense on a $1,000 investment,
assuming (1) 5% annual return, (2) redemption at the end of the following
periods, and (3) payment of the maximum sales charge:
1 YEAR 3 YEARS 5 YEARS 10 YEARS
------ ------- ------- --------
Cardinal Tax Exempt Money Market Fund - Retail
Investors.................................................... $8 $26 $44 $99
== === === ===
Fountain Square Tax Exempt Money Market Fund -
Investment A Shares.......................................... $8 $26 $44 $99
== === === ===
Pro Forma Combined Fund - Investment A Shares................ $8 $26 $44 $99
== === === ===
THE FOREGOING EXAMPLE SHOULD NOT BE CONSIDERED A REPRESENTATION OF PAST OR
FUTURE EXPENSES. ACTUAL EXPENSES MAY BE GREATER OR LESS THAN THOSE SHOWN.
COMPARATIVE FEE TABLES - MONEY MARKET FUNDS (INSTITUTIONAL
INVESTORS)(1). Set forth in the tables below is (i) information regarding the
fees and expenses paid by certain investors holding shares of Cardinal
Government Securities Money Market Fund and Cardinal Tax Exempt Money Market
Fund who are eligible to purchase Institutional Shares of Fountain Square Funds
as of September 30, 1997, and of each corresponding Fountain Square Fund which
are expected to be incurred during the current fiscal year ending July 31,
1998, and (ii) pro forma information for each combined Fund assuming the
Reorganization had taken place on September 30, 1997.
INFORMATION RELATING TO THE EXCHANGE OF
SHARES OF THE CARDINAL MONEY MARKET FUNDS
FOR INSTITUTIONAL SHARES OF THE CORRESPONDING FOUNTAIN SQUARE FUNDS
COMPARATIVE FEE TABLES FOR EACH MONEY MARKET FUND
FOUNTAIN PRO FORMA
CARDINAL SQUARE COMBINED
FUNDS FUNDS FUNDS
INSTITUTIONAL INSTITUTIONAL INSTITUTIONAL
INVESTORS(1) SHARES SHARES
------------ ------ ------
SHAREHOLDER TRANSACTION EXPENSES
Maximum Sales Load Imposed on Purchases................ None None None
Maximum Sales Load Imposed on Reinvested
Dividends (as a percentage of offering price)......... None None None
Contingent Deferred Sales Charge (as a percentage
of original purchase price or redemption
proceeds, as applicable).............................. None None None
Redemption Fee (as a percentage of amount
redeemed, if applicable).............................. None None None
Exchange Fee........................................... None None None
15
27
(1) The term "institutional investors" is used to refer to all clients of
Fifth Third Bank who make purchases through the Fifth Third Trust Department,
certain qualified employee benefit plans, and broker-dealers, investment
advisors, financial planners and other financial institutions who place
trades for their own accounts or the accounts of their clients for a
management, consulting or other fee.
CARDINAL FOUNTAIN
GOVERNMENT SQUARE
SECURITIES GOVERNMENT
MONEY CASH RESERVES PRO FORMA
MARKET FUND FUND COMBINED FUND
INSTITUTIONAL INSTITUTIONAL INSTITUTIONAL
INVESTORS SHARES SHARES
--------- ------ ------
ANNUAL FUND OPERATING EXPENSES
(as a percentage of average net assets)
Management Fees........................................ 0.50% 0.40% 0.40%
Other Expenses......................................... 0.38% 0.23% 0.23%
----- ----- -----
Total Operating Expenses............................. 0.88% 0.63% 0.63%
===== ===== =====
EXAMPLE: An investor would pay the following expense on a $1,000 investment,
assuming (1) 5% annual return, and (2) redemption at the end of the following
periods:
1 YEAR 3 YEARS 5 YEARS 10 YEARS
------ ------- ------- --------
Cardinal Government Securities Money Market Fund -
Institutional Investors...................................... $9 $28 $49 $108
== === === ====
Fountain Square Government Cash Reserves Fund -
Institutional Shares......................................... $6 $20 $35 $ 79
== === === ====
Pro Forma Combined Fund - Institutional Shares............... $6 $20 $35 $ 79
== === === ====
THE FOREGOING EXAMPLE SHOULD NOT BE CONSIDERED A REPRESENTATION OF PAST OR
FUTURE EXPENSES. ACTUAL EXPENSES MAY BE GREATER OR LESS THAN THOSE SHOWN.
CARDINAL FOUNTAIN
TAX EXEMPT SQUARE
MONEY TAX EXEMPT PRO FORMA
MARKET FUND FUND COMBINED FUND
INSTITUTIONAL INSTITUTIONAL INSTITUTIONAL
INVESTORS SHARES SHARES
--------- ------ ------
ANNUAL FUND OPERATING EXPENSES
(as a percentage of average net assets)
Management Fees (after waivers)(2)..................... 0.50% 0.40% 0.40%
Other Expenses......................................... 0.30% 0.33% 0.33%
----- ----- -----
Total Operating Expenses (after fee waivers)(3)...... 0.80% 0.73% 0.73%
===== ===== =====
(2) Management fees for the Fountain Square Tax Exempt Money Market Fund
and Pro Forma Combined Fund have been reduced to reflect the
anticipated voluntary waiver of a portion of the advisory fee. The
maximum management fee for the Fountain Square Tax Exempt Money Market
Fund is 0.50%. Subject to the terms of the Reorganization Agreement,
the advisor may terminate this voluntary waiver at any time.
16
28
(3) Total Institutional Shares Operating Expenses for the Fountain Square
Tax Exempt Money Market Fund and Pro Forma Combined Fund would be
0.83%, absent the voluntary waivers of a portion of the advisory fee.
All expenses for Fountain Square Tax Exempt Money Market Fund are based
on estimates for the Fund for its current fiscal year.
EXAMPLE: An investor would pay the following expense on a $1,000 investment,
assuming (1) 5% annual return, (2) redemption at the end of the following
periods, and (3) payment of the maximum sales charge:
1 YEAR 3 YEARS 5 YEARS 10 YEARS
------ ------- ------- --------
Cardinal Tax Exempt Money Market Fund -
Institutional Investors...................................... $8 $26 $44 $99
== === === ===
Fountain Square Tax Exempt Money Market Fund -
Institutional Shares......................................... $7 $23 $41 $91
== === === ===
Pro Forma Combined Fund - Institutional Shares............... $7 $23 $41 $91
== === === ===
THE FOREGOING EXAMPLE SHOULD NOT BE CONSIDERED A REPRESENTATION OF PAST OR
FUTURE EXPENSES. ACTUAL EXPENSES MAY BE GREATER OR LESS THAN THOSE SHOWN.
EXPENSE RATIOS - CARDINAL FUNDS. The following table sets forth the
ratios of operating expenses to average net assets of the Cardinal Funds for
the fiscal year ended September 30, 1997.
FISCAL YEAR ENDED SEPTEMBER 30, 1997
--------------------------------------
RATIO OF OPERATING RATIO OF OPERATING
EXPENSES TO AVERAGE EXPENSES TO AVERAGE
THE CARDINAL GROUP NET ASSETS AFTER FEE NET ASSETS ABSENT FEE
WAIVERS AND EXPENSE WAIVERS AND EXPENSE
REIMBURSEMENTS REIMBURSEMENTS
-------------- --------------
INVESTOR INSTITUTIONAL INVESTOR INSTITUTIONAL
SHARES SHARES SHARES SHARES
------ ------ ------ ------
The Cardinal Fund....................................... 1.06% 1.00% 1.12% 1.00%
Cardinal Aggressive Growth Fund......................... 1.86% 2.11% 1.93% 2.11%
Cardinal Balanced Fund.................................. 1.44% 1.51% 1.50% 1.51%
Cardinal Government Obligations......................... 1.01% 0.93% 1.08% 0.93%
Cardinal Government Securities Money Market
Fund(1)................................................. 0.88% 0.88% 0.88% 0.88%
Cardinal Tax Exempt Money Market Fund(1)................ 0.80% 0.80% 0.80% 0.80%
(1) Cardinal Government Securities Money Market Fund and Cardinal Tax
Exempt Money Market Fund only issue one class of shares which is
without any class designation.
EXPENSE RATIOS - FOUNTAIN SQUARE FUNDS. The following tables set forth
(i) the ratios of operating expenses to average net assets of Investment A
Shares of Fountain Square Funds for the fiscal year ended July 31,
17
29
1997 (a) after fee waivers and expense reimbursements, and (b) absent fee
waivers and expense reimbursements (ii) the annualized ratios of operating
expenses to average net assets of Investment A Shares of the Fountain Square
Funds for the six- month period ended January 31, 1998 (a) after fee waivers and
expense reimbursements, and (b) absent fee waivers and expense reimbursements
and (iii) the estimated annualized ratios of operating expenses to average net
assets of Institutional Shares of the Fountain Square Funds for the current
fiscal year (a) after fee waivers and expense reimbursements, and (b) absent fee
waivers and reimbursements.
FISCAL YEAR ENDED JULY 31, 1997
-----------------------------------------------------------
RATIO OF OPERATING RATIO OF OPERATING
EXPENSES TO AVERAGE EXPENSES TO AVERAGE
NET ASSETS AFTER NET ASSETS ABSENT
FEE WAIVERS AND FEE WAIVERS AND
EXPENSE EXPENSE
REIMBURSEMENTS REIMBURSEMENTS
-------------- --------------
FOUNTAIN SQUARE FUNDS INVESTMENT A INVESTMENT A
SHARES SHARES
------ ------
Fountain Square Cardinal Fund (1)............................. 1.04% 1.14%
==== ====
Fountain Square Mid Cap Fund.................................. 1.00% 1.37%
==== ====
Fountain Square Balanced Fund................................. 1.00% 1.40%
==== ====
Fountain Square Bond Fund For Income.......................... 0.79% 1.21%
==== ====
Fountain Square Government Cash Reserves Fund................. 0.51% 0.95%
==== ====
Fountain Square Tax Exempt Money Market Fund (1).............. 0.80% 1.08%
==== ====
SIX-MONTH PERIOD ENDED JANUARY 31, 1998
-----------------------------------------------------------
RATIO OF OPERATING RATIO OF OPERATING
EXPENSES TO AVERAGE EXPENSES TO AVERAGE
NET ASSETS AFTER NET ASSETS ABSENT
FEE WAIVERS AND FEE WAIVERS AND
EXPENSE EXPENSE
REIMBURSEMENTS REIMBURSEMENTS
-------------- --------------
FOUNTAIN SQUARE FUNDS INVESTMENT A INVESTMENT A
SHARES SHARES
------ ------
Fountain Square Cardinal Fund (1)............................. 1.04% 1.14%
==== ====
Fountain Square Mid Cap Fund.................................. 1.00% 1.40%
==== ====
Fountain Square Balanced Fund................................. 1.00% 1.42%
==== ====
Fountain Square Bond Fund For Income.......................... 0.75% 1.17%
==== ====
Fountain Square Government Cash Reserves Fund................. 0.52% 1.00%
==== ====
Fountain Square Tax Exempt Money Market Fund (1).............. 0.80% 1.08%
==== ====
18
30
ESTIMATED
----------------------------------------------------------
RATIO OF OPERATING RATIO OF OPERATING
EXPENSES TO AVERAGE EXPENSES TO AVERAGE
NET ASSETS AFTER NET ASSETS ABSENT
FEE WAIVERS AND FEE WAIVERS AND
EXPENSE EXPENSE
REIMBURSEMENTS REIMBURSEMENTS
-------------- --------------
INSTITUTIONAL INSTITUTIONAL
FOUNTAIN SQUARE FUNDS SHARES SHARES
------ ------
Fountain Square Cardinal Fund (1).............................. 0.79% 0.89%
==== ====
Fountain Square Mid Cap Fund................................... 1.00% 1.07%
==== ====
Fountain Square Balanced Fund.................................. 1.00% 1.09%
==== ====
Fountain Square Bond Fund For Income........................... 0.76% 0.82%
==== ====
Fountain Square Government Cash Reserves Fund.................. 0.63% 0.63%
==== ====
Fountain Square Tax Exempt Money Market Fund (1)............... 0.73% 0.83%
==== ====
(1) The Fountain Square Cardinal Fund and the Fountain Square Tax Exempt
Money Market Fund had not commenced operations as of January 31, 1998.
Figures shown represent estimated expense ratios for those Funds.
19
31
INFORMATION RELATING TO THE PROPOSED REORGANIZATION
Cardinal has entered into the Reorganization Agreement whereby its
investment portfolios are to be acquired by corresponding portfolios of FSF.
Significant provisions of this Reorganization Agreement are summarized below;
however, this summary is qualified in its entirety by reference to the
Reorganization Agreement, a copy of which is attached as Appendix A to this
Combined Proxy Statement/Prospectus.
DESCRIPTION OF THE REORGANIZATION AGREEMENT. There are six separate
Cardinal Funds. The assets of four of them, Cardinal Aggressive Growth Fund,
Cardinal Balanced Fund, Cardinal Government Obligations Fund and Cardinal
Government Securities Money Market Fund, are being acquired by similar
investment portfolios currently offered by FSF. Two of the Cardinal Funds, The
Cardinal Fund and Cardinal Tax Exempt Money Market Fund, will be acquired by two
new FSF portfolios which have been organized to continue the operations of these
Cardinal Funds.
The Reorganization Agreement provides that on the Closing Date of the
Reorganization all of the assets and stated liabilities of the Cardinal Funds
will be transferred to the Fountain Square Funds identified in the table below.
The holders of Investor Shares of The Cardinal Fund, Cardinal Aggressive Growth
Fund, Cardinal Balanced Fund and Cardinal Government Obligations Fund will
receive Investment A Shares of the corresponding Fountain Square Fund which will
issue Investment A Shares to such Cardinal Fund. The holders of Institutional
Shares of The Cardinal Fund, Cardinal Aggressive Growth Fund, Cardinal Balanced
Fund and Cardinal Government Obligations Fund will receive Institutional Shares
of the corresponding Fountain Square Fund which will issue Institutional Shares
to such Cardinal Fund. Holders of shares of Cardinal Government Securities Money
Market Fund and Cardinal Tax Exempt Money Market Fund will receive either
Investment A Shares or Institutional Shares, as applicable, of the corresponding
Fountain Square Fund which will issue the appropriate shares to such Cardinal
Funds. See "Information Relating to the Exchange of Shares of the Cardinal Money
Market Funds for Investment A Shares of the Corresponding Fountain Square Funds"
and "Information Relating to the Exchange of Shares of the Cardinal Money Market
Funds for Institutional Shares of the Corresponding Fountain Square Funds"
above. The series of shares to be issued by each Fountain Square Fund will have
an aggregate net asset value equal to the aggregate net asset value of the
corresponding shares of the particular Cardinal Fund as of the regular close of
the New York Stock Exchange, currently 4:00 p.m. New York time, on the last
business day preceding the Closing Date.
Cardinal Funds Fountain Square Funds
-------------- ---------------------
The Cardinal Fund....................................................... Fountain Square Cardinal Fund
Cardinal Aggressive Growth Fund......................................... Fountain Square Mid Cap Fund
Cardinal Balanced Fund.................................................. Fountain Square Balanced Fund
Cardinal Government Obligations Fund.................................... Fountain Square Bond Fund For Income
Cardinal Government Securities
Money Market Fund....................................................... Fountain Square Government Cash Reserves Fund
Cardinal Tax Exempt Money Market Fund................................... Fountain Square Tax Exempt Money Market Fund
Cardinal expects to liquidate a limited number of holdings of Cardinal
Government Securities Money Market Fund in light of the investment policies of
Fountain Square Government Cash Reserves Fund and the strategies of its
investment advisor. Similarly, in the case of Cardinal Government Obligations
Fund, Cardinal expects to liquidate all of the illiquid securities issued by the
Government National Mortgage Association ("GNMA") and certain other securities
held by that Fund in light of the investment policies of Fountain Square
20
32
Bond Fund For Income and the strategies of its investment advisor. The
transaction costs that will result from such sales are expected to be minimal.
As in the case of all sales, such Cardinal Funds may realize taxable gains or
losses.
The Reorganization Agreement provides that Cardinal will declare a
dividend or dividends prior to the Closing Date of the Reorganization which,
together with all previous dividends, will have the effect of distributing to
the shareholders of each of the Cardinal Funds all of the undistributed net
investment income earned and net capital gains realized up to the Closing
Date of the Reorganization.
Following the transfer of assets and liabilities from the Cardinal
Funds to the corresponding Fountain Square Funds, and the issuance of shares by
the Fountain Square Funds to the Cardinal Funds, each of the Cardinal Funds
will distribute the shares of the Fountain Square Funds so received pro rata to
the holders of the Cardinal Funds, as described above, in complete liquidation
of the Cardinal Funds. Each holder of shares of a Cardinal Fund on the Closing
Date of the Reorganization will receive an amount of the appropriate class of
shares of the corresponding Fountain Square Fund of equal value, plus the right
to receive any dividends or distributions which were declared before the
Closing Date of the Reorganization but which remained unpaid at that time.
Following the Reorganization, the registration of Cardinal as an investment
company under the 1940 Act will be terminated, and Cardinal will be terminated
under state law. The stock transfer books of Cardinal will be permanently
closed on the Closing Date of the Reorganization.
The Reorganization is subject to a number of conditions, including
approval of the Reorganization Agreement and the transactions contemplated
thereby described in this Combined Proxy Statement/Prospectus by the
shareholders of Cardinal; the receipt of an order of exemption by the SEC; the
receipt of certain legal opinions described in the Reorganization Agreement; the
receipt of certain certificates from the parties concerning the continuing
accuracy of the representations and warranties in the Reorganization Agreement
and other matters; and the parties' performance in all material respects of
their agreements and undertakings in the Reorganization Agreement. Assuming
satisfaction of the conditions in the Reorganization Agreement, the Closing Date
of the Reorganization is expected to occur on July 13, 1998, or such other date
as is agreed to by the parties.
The expenses of FSF and Cardinal incurred in connection with the
Reorganization will be borne by Fifth Third.
The Reorganization may be abandoned at any time prior to the Closing
Date of the Reorganization by mutual written consent of Cardinal and FSF or by
written notice of Cardinal or FSF if in the opinion of the Board of Trustees of
either Cardinal or FSF, proceeding with the Reorganization is not in the best
interests of that party's shareholders. The Reorganization Agreement provides
further that at any time (a) either Cardinal or FSF may, by written agreement
approved by their respective Boards of Trustees with or without the approval of
their shareholders, amend any of the provisions of the Reorganization Agreement,
provided, however, that any amendment occurring after shareholder approval shall
not substantially alter the terms of the Reorganization Agreement; and (b) the
Board of Trustees of Cardinal or FSF may waive any breach by the other party or
the failure to satisfy any of the conditions to its obligations with or without
the approval of such party's shareholders.
The Reorganization Agreement also provides that the Reorganization will
be contingent upon the consummation of the acquisition of The Ohio Company by
Fifth Third Bancorp's subsidiary.
In its consideration and approval of the Reorganization at a meeting on
March 12, 1998, the Board of Trustees of Cardinal considered the pending
acquisition of The Ohio Company by a subsidiary of Fifth Third Bancorp. In light
of the acquisition, The Ohio Company and Fifth Third recommended that each of
the Cardinal Funds be reorganized as described in this Combined Proxy
Statement/Prospectus shortly after the proposed acquisition transaction. The
Board of Trustees also considered the effect of the proposed acquisition
transaction; the recommendation of The Ohio Company and Fifth Third with respect
to the proposed consolidation of Cardinal and FSF; the portfolio managers and
performance
21
33
records of the Fountain Square Funds the investment objectives, policies and
restrictions of the Fountain Square Funds compared to those of the
corresponding Cardinal Funds; the different service providers; the expense
ratios of the Fountain Square Funds following the Reorganization; the expansion
of investment alternatives and other benefits of being part of FSF; the fact
that the reorganization would constitute a tax-free reorganization that the
Cardinal Funds' expenses incurred in connection with the Reorganization would
be borne by Fifth Third; and that the interests of shareholders would not be
diluted as a result of the reorganization.
Section 15(f) of the 1940 Act provides that when a change in the
control of an investment advisor occurs, the investment advisor or any of its
affiliated persons may receive any amount or benefit in connection therewith as
long as, among other things, no "unfair burden" is imposed on the investment
company as a result of the transaction relating to the change of control, or any
express or implied terms, conditions or understandings applicable thereto. The
term "unfair burden" as defined in the 1940 Act includes any arrangement during
the two-year period after the transaction whereby the investment advisor (or
predecessor or successor advisor), or any "interested person" of any such
advisor, receives or is entitled to receive any compensation, directly or
indirectly, from the investment company or its security holders (other than fees
for bona fide investment advisory or other services) or from any person in
connection with the purchase or sale of securities or other property to, from or
on behalf of the investment company (other than fees for bona fide principal
underwriting services.)
Each of Fifth Third and FSF has agreed that for a period of two years
after the Closing Date, FSF will not enter into, participate in, or pay
compensation in connection with any arrangement that facilitates or is intended
to facilitate the direct or indirect payment of compensation to Fifth Third, CMC
or any interested person of either of them proscribed by the Reorganization
Agreement, or increase compensation payable to Fifth Third, CMC or any
interested person of either of them which results in an increase in the expense
ratios of any Fountain Square Funds, as presented in the pro forma combined fee
tables (net of waivers) in this Combined Proxy Statement/Prospectus. In
addition, FSF and Fifth Third have represented to Cardinal's Board of Trustees
that the expense ratios for the Fountain Square Funds will not exceed those set
forth in such pro forma combined fee tables for a period of two years after the
Closing Date.
After consideration of all of the foregoing factors, together with
certain other factors and information considered to be relevant, Cardinal's
Board of Trustees determined that the Reorganization was in the best interests
of the shareholders and that the interests of the shareholders would not be
diluted as a result thereof, unanimously approved the Reorganization Agreement
and directed that it be submitted to shareholders of each Cardinal Fund for
approval. Cardinal's Board of Trustees unanimously recommends that shareholders
vote "FOR" approval of the Reorganization Agreement.
The Board of Trustees of Cardinal has not determined what action it
will take in the event the shareholders of any Cardinal Fund fail to approve the
Reorganization Agreement or for any reason the Reorganization is not
consummated. If the Reorganization is not consummated for any reason, the
Trustees may choose to consider approval of a new investment advisory agreement
with another investment advisor, including Fifth Third, alternative disposition
of Cardinal's assets, including the sale of assets to, or merger with, another
investment company, or the possible liquidation of any of the Cardinal Funds.
At a meeting held on March 23, 1998, the FSF Board of Trustees
considered the proposed Reorganization with respect to FSF. Based upon their
evaluation of the relevant information provided to them, and in light of their
fiduciary duties under federal and state law, the Board of Trustees unanimously
determined that the proposed Reorganization was in the best interests of the
Fountain Square Funds and their respective shareholders and that the interests
of existing shareholders of FSF would not be diluted as a result of effecting
the transaction.
CAPITALIZATION. As indicated in the tables below, the capitalization of
each of the Pro Forma Combined Funds is expected to be greater than the current
capitalizations of each of the Cardinal Funds, except with respect to The
Cardinal Fund and Cardinal Tax Exempt Money Market Fund, whose Pro Forma
Combined Fund capitalizations are expected to be identical to the
capitalizations of their corresponding Fountain Square Fund as of the Closing
Date. The following tables set forth as of January 31, 1998, (i) the unaudited
capitalizations of each of the Cardinal Funds, (ii) the unaudited
capitalizations of each of the corresponding Fountain Square Funds, and (iii)
the unaudited pro forma capitalizations of each
22
34
of the Fountain Square Funds as adjusted to give the effect to the
Reorganization. If consummated, the capitalizations are likely to be different
on the Closing Date of the Reorganization as a result of daily share purchase
and redemption activity in the Funds.
As of January 31, 1998
(unaudited)
----------------------
FOUNTAIN PRO FORMA
THE CARDINAL SQUARE COMBINED
FUND CARDINAL FUND FUND
Total Net Assets......................................... $297,788,000 $0 $297,788,000
Investor Shares/Investment A Shares............. $268,131,000 $0 $268,131,000
Investment C Shares............................. N/A $0 $0
Institutional Shares............................ $29,657,000 $0 $29,657,000
Shares Outstanding....................................... 18,853,684 0 18,853,684
Investor Shares/Investment A Shares............. 19,976,503 0 19,976,503
Investment C Shares............................. N/A 0 0
Institutional Shares............................ 1,877,181 0 1,877,181
Net Asset Value Per Share
Investor Shares/Investment A Shares............. $15.79 $0.00 $15.79
Investment C Shares............................. N/A $0.00 $0.00
Institutional Shares $15.80 $0.00 $15.80
FOUNTAIN
CARDINAL SQUARE PRO FORMA
AGGRESSIVE MID CAP COMBINED
GROWTH FUND FUND FUND
Total Net Assets......................................... $12,556,000 $212,635,000 $225,191,000
Investor Shares/Investment A Shares............. $8,751,000 $211,768,000 $220,519,000
Investment C Shares............................. N/A $867,000 $867,000
Institutional Shares............................ $3,805,000 $0 $3,805,000
Shares Outstanding....................................... 971,414 12,942,426 13,706,638
Investor Shares/Investment A Shares............. 677,132 12,889,105 13,421,729
Investment C Shares............................. N/A 53,321 53,321
Institutional Shares............................ 294,282 0 231,589
Net Asset Value Per Share
Investor Shares/Investment A Shares............. $12.92 $16.43 $16.43
Investment C Shares............................. N/A $16.26 $16.26
Institutional Shares $12.93 N/A $16.43
23
35
FOUNTAIN
SQUARE PRO FORMA
CARDINAL BALANCED COMBINED
BALANCED FUND FUND FUND
Total Net Assets......................................... $17,948,949 $151,906,157 $169,849,648
Investor Shares/Investment A Shares............. $15,982,908 $149,223,068 $165,200,518
Investment C Shares............................. N/A $2,683,089 $2,683,089
Institutional Shares............................ $1,966,041 $0 $1,966,041
Shares Outstanding....................................... 1,417,953 10,527,346 11,770,831
Investor Shares/Investment A Shares............. 1,262,751 10,341,510 11,448,748
Investment C Shares............................. N/A 185,836 185,836
Institutional Shares............................ 155,202 0 136,247
Net Asset Value Per Share
Investor Shares/Investment A Shares............. $12.66 $14.43 $14.43
Investment C Shares............................. N/A $14.44 $14.44
Institutional Shares $12.67 N/A $14.43
CARDINAL FOUNTAIN
GOVERNMENT SQUARE PRO FORMA
OBLIGATIONS BOND FUND COMBINED
FUND FOR INCOME FUND
Total Net Assets......................................... $124,648,018 $170,784,330 $295,404,355
Investor Shares/Investment A Shares............. $118,733,858 $170,670,669 $289,366,534
Investment C Shares............................. N/A $113,661 $113,661
Institutional Shares............................ $5,924,160 $0 $5,924,160
Shares Outstanding....................................... 15,079,957 13,938,047 24,117,546
Investor Shares/Investment A Shares............. 14,363,251 13,928,763 23,620,518
Investment C Shares............................. N/A 9,284 9,284
Institutional Shares............................ 716,706 0 483,592
Net Asset Value Per Share
Investor Shares/Investment A Shares............. $8.27 $12.25 $12.25
Investment C Shares............................. N/A $12.24 $12.24
Institutional Shares ........................... $8.27 N/A $12.25
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CARDINAL FOUNTAIN
GOVERNMENT SQUARE
SECURITIES GOVERNMENT PRO FORMA
MONEY MARKET CASH RESERVES COMBINED
FUND FUND FUND
Total Net Assets.................................. $520,809,000 $325,208,000 $846,017,000
Shares (Retail Investors)/Investment
A Shares................................. $432,292,942 $135,014,000 $567,306,942
Shares (Institutional
Investors)/Institutional Shares (1)...... $ 88,516,058 $190,194,000 $278,710,058
Shares Outstanding................................ 520,809,000 325,208,000 846,017,000
Shares (Retail Investors)/Investment
A Shares................................. 432,292,942 135,014,000 567,306,942
Shares (Institutional
Investors)/Institutional Shares (1)...... 88,516,058 190,194,000 278,710,058
Net Asset Value Per Share
Shares (Retail Investors)/
Investment A Shares...................... $1.00 $1.00 $1.00
Shares (Institutional Investors)/
Institutional Shares (1)................. $1.00 $1.00 $1.00
(1) Effective May 22, 1998, Trust Shares offered by Fountain Square Government
Cash Reserves Fund have been renamed Institutional Shares.
FOUNTAIN
SQUARE TAX
CARDINAL TAX EXEMPT PRO FORMA
EXEMPT MONEY MONEY COMBINED
MARKET FUND MARKET FUND FUND
Total Net Assets......................................... $61,524,000 $0 $61,524,000
Shares (Retail Investors)/Investment A
Shares.......................................... $55,393,248 $0 $55,393,248
Shares (Institutional Investors)/
Institutional Shares............................ $ 6,130,752 $0 $ 6,130,752
Shares Outstanding....................................... 61,524,000 0 61,524,000
Shares (Retail Investors)/Investment A
Shares.......................................... 55,393,248 0 55,393,248
Shares (Institutional Investors)/
Institutional Shares............................ 6,130,752 0 6,130,752
Net Asset Value Per Share
Shares (Retail Investors)/Investment A
Shares.......................................... $1.00 N/A $1.00
Shares (Institutional Investors)/
Institutional Shares............................ $1.00 N/A $1.00
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FEDERAL INCOME TAX CONSEQUENCES. Consummation of the Reorganization is
subject to the condition that Cardinal and FSF receive an opinion from Howard &
Howard Attorneys, P.C. to the effect that for federal income tax purposes: (a)
the transfer of all or substantially all of each Cardinal Fund's assets in
exchange for corresponding Fountain Square Fund shares and the distribution of
such Fountain Square Fund shares to the shareholders of the Cardinal Funds in
liquidation of the Cardinal Fund will constitute a "reorganization" within the
meaning of Section 368(a)(1) of the Code; (b) no gain or loss will be
recognized by a Fountain Square Fund upon the receipt of the assets of the
applicable Cardinal Fund solely in exchange for the Fountain Square Fund
Shares; (c) no gain or loss will be recognized by a Cardinal Fund upon the
transfer of the applicable Cardinal Fund assets to the Fountain Square Fund in
exchange for the Fountain Square Fund shares or upon the distribution (whether
actual or constructive) of the Fountain Square Fund shares to Cardinal Fund
shareholders in exchange for their shares of the Cardinal Fund; (d) no gain or
loss will be recognized by the Cardinal Fund shareholders upon the exchange for
their Cardinal Fund shares for the applicable Fountain Square Fund shares; (e)
the tax basis of each Cardinal Fund's assets acquired by the applicable
Fountain Square Fund will be the same as the tax basis of such assets to the
Cardinal Fund immediately prior to the Reorganization; (f) the tax basis of the
Fountain Square Fund shares received by each of the Cardinal Fund shareholders
pursuant to the Reorganization will be the same as the tax basis of the
Cardinal Fund shares held by such shareholder immediately prior to the
Reorganization; (g) the holding period of the assets of each Cardinal Fund in
the hands of the applicable Fountain Square Fund will include the period during
which those assets were held by the Cardinal Fund; and (h) the holding period
of the Fountain Square Fund shares to be received by each Cardinal Fund's
shareholders will include the period during which the Cardinal Fund shares
exchanged thereof were held by such shareholder (provided the Cardinal Fund
shares were held as capital assets on the date of the Reorganization).
FSF and Cardinal have not sought a tax ruling from the Internal Revenue
Service (the "IRS"), but are acting in reliance upon the opinion of counsel
discussed in the previous paragraph. That opinion is not binding on the IRS and
does not preclude the IRS from adopting a contrary position. Shareholders should
consult their own advisors concerning the potential tax consequences to them,
including state and local income taxes.
With respect to existing capital loss carry forwards of the Cardinal
Funds, such loss carry forwards will be available to the Fountain Square Funds
to offset capital gains recognized after the Reorganization, subject to
limitations imposed by the Code. These limitations provide generally that the
amount of loss carry forwards which may be used any year following the Closing
is an amount equal to the value of all of the outstanding shares of the
Cardinal Funds immediately prior to the Reorganization, multiplied by the
long-term tax-exempt bond rate determined monthly by the IRS.
COMPARISON OF INVESTMENT OBJECTIVES, INVESTMENT POLICIES AND RISK FACTORS
There are no material differences between the investment objectives and
policies of The Cardinal Fund and Cardinal Tax Exempt Money Market Fund and the
corresponding New Fountain Square Funds. The investment objectives and policies
of the remaining Cardinal Funds are generally similar to those of the Operating
Fountain Square Funds. Because of the similarities in the types of investments
in which the Cardinal Funds invest versus their corresponding Fountain Square
Funds, the risks associated with investment in such Funds are expected to be
substantially similar. With respect to each of the investment objectives,
investment policies and risk factors, however, there are some differences. The
following discussion summarizes some of the more significant similarities and
differences in the investment objectives, investment policies and risk factors
of the Cardinal Funds versus their corresponding Fountain Square Funds and is
qualified in its entirety by the discussion elsewhere herein, and in the
Prospectuses and Statements of Additional Information of the Cardinal Funds and
the Fountain Square Funds incorporated herein by reference.
Investment objectives, policies and limitations which are deemed
fundamental may not be changed without the vote of the holders of a majority of
the outstanding shares of the applicable Fund. Unless otherwise specified, all
investment objectives are fundamental and all policies and limitations are
non-fundamental and may be changed by the Board of Trustees without shareholder
approval.
THE CARDINAL FUND AND FOUNTAIN SQUARE CARDINAL FUND. The investment
objectives of both The Cardinal Fund and Fountain Square Cardinal Fund are to
achieve long-term growth of capital and income. Neither Fund may change its
investment objective without a vote of the holders of a majority of the
outstanding shares of the applicable Fund. The investment policies of the two
Funds, except as otherwise noted, may be changed by that Fund's Board of
Trustees without a vote of shareholders. Both Funds seek to achieve their
objectives by investing primarily in common stocks of companies having a market
capitalization of at least $10 million. Both Funds may also invest up to 25% of
their assets in American Depositary Receipts, invest in illiquid securities,
lend portfolio securities, enter into repurchase agreements or reverse
repurchase agreements, engage in options and futures transactions and, for
temporary defensive purposes, invest in cash and various money market
instruments, investment grade debt securities, U.S. government securities and
securities of other investment
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companies. The Cardinal Fund may invest in real estate investment trusts
("REITs"), although it does not currently do so, while Fountain Square Cardinal
Fund does not permit such investments. Fountain Square Cardinal Fund may lend
portfolio securities, enter into reverse repurchase agreements, invest up to 10%
of its net assets in restricted securities and engage in when-issued and delayed
delivery transactions with respect to up to 20% of the value of its total
assets. These types of transactions are not permitted for The Cardinal Fund.
The Cardinal Fund has several fundamental investment limitations which
may not be changed without a vote of the holders of a majority of the
outstanding shares of the Fund. These limitations affect the ability of The
Cardinal Fund to purchase securities of any one issuer, purchase securities of
one or more issuers in the same industry, borrow money or issue senior
securities, make loans, purchase securities on margin, underwrite securities
issued by other persons, purchase or sell real estate, or purchase or sell
commodities or commodities contracts. In addition, The Cardinal Fund has several
non-fundamental investment limitations which may be changed by the Cardinal
Board of Trustees. These limitations affect the ability of The Cardinal Fund to
invest in illiquid securities, purchase securities of other investment
companies, engage in short sales, invest in issuers whose securities are owned
by officers and Trustees/directors of Cardinal or CMC, mortgage or pledge the
Fund's assets, purchase participations or direct interests in oil, gas or other
mineral exploration or development programs, or invest in securities of issuers
which, together with any predecessors, have a record of less than three years'
continuous operations.
Fountain Square Cardinal Fund has fundamental investment limitations
which are substantially similar to those of The Cardinal Fund. Fountain Square
Cardinal Fund's limitation on borrowing money or issuing senior securities,
however, is less stringent in that it may borrow money directly or through
reverse repurchase agreements in amounts up to one-third of the value of its
total assets as opposed to the 10% imposed on The Cardinal Fund. Fountain Square
Cardinal Fund's ability to lend portfolio securities as an exception to the
prohibition on making loans is limited to one-third of the value of its total
assets, whereas The Cardinal Fund has no specific percentage limitation.
Fountain Square Cardinal Fund also categorizes its restriction on mortgaging,
pledging or hypothecating assets and its restriction on engaging in short sales
as fundamental investment limitations. Except with respect to those restrictions
and investing in unseasoned issuers, the non-fundamental investment limitations
of Fountain Square Cardinal Fund are also similar to those of The Cardinal Fund.
Investment in issuers with less than three years of continuous operations is
limited to 5% of the value of Fountain Square Cardinal Fund's total assets, as
opposed to a 10% limitation for The Cardinal Fund, and the restriction relating
to holdings of Cardinal or CMC officers and Trustees/directors applies to
Fountain Square Funds and Fifth Third. Other additional non-fundamental
investment limitations of Fountain Square Cardinal Fund include limitations on
investing in restricted securities, investing in issuers whose securities are
owned by officers and Trustees of Fountain Square Funds, engaging in
arbitrage transactions, purchasing securities for the purpose of exercising
control, and investing in warrants.
CARDINAL AGGRESSIVE GROWTH FUND AND FOUNTAIN SQUARE MID CAP FUND. The
investment objective of Cardinal Aggressive Growth Fund is to seek appreciation
of capital. The investment objective of Fountain Square Mid Cap Fund is to
provide growth of capital, with income as a secondary objective. Neither of
these investment objectives may be changed without the vote of the holders of a
majority of the outstanding shares of the applicable Fund. The investment
policies of these two Funds, except as otherwise noted, may be changed by that
Fund's Board of Trustees without a vote of shareholders. Both Funds seek to
achieve their objectives by investing primarily in common stocks and securities
convertible into common stocks. Cardinal Aggressive Growth Fund invests in
securities of companies having a market capitalization of at least $10 million
and may invest up to 10% of its net assets in non-investment grade convertible
debt securities, while Fountain Square Mid Cap Fund invests under normal market
conditions at least 65% of its assets in securities of companies with market
capitalizations (at the time of investment) between $100 million and $3 billion
and is limited to investment grade convertible securities. As a result, the
median market capitalization of Cardinal Aggressive Growth Fund is approximately
$5.2 billion, while the median market capitalization of Fountain Square Mid Cap
Fund is approximately $2.9 billion. Both Funds may invest in medium-grade
securities (i.e., securities rated in the fourth highest rating category by a
nationally recognized statistical rating organization ("NRSRO")). Both Funds may
also invest up to 25% of their assets in American Depositary Receipts, enter
into repurchase agreements, engage in options and futures transactions and, for
temporary defensive purposes, invest in cash and various money market
instruments, investment grade short-term debt securities, U.S. government
securities and securities of other investment companies. Cardinal Aggressive
Growth Fund may invest
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in REITs, although it does not currently do so, while Fountain Square Mid Cap
Fund does not permit such investments. Fountain Square Mid Cap Fund may lend
portfolio securities, invest up to 15% of its net assets in illiquid securities
invest up to 10% of its net assets in restricted securities and engage in
when-issued and delayed delivery transactions with respect to up to 20% of the
value of its total assets. These types of transactions are not permitted for
Cardinal Aggressive Growth Fund.
Cardinal Aggressive Growth Fund has several fundamental investment
limitations which may not be changed without a vote of the holders of a majority
of the outstanding shares of the Fund. These limitations affect the ability of
Cardinal Aggressive Growth Fund to purchase securities of any one issuer,
purchase securities of any one or more issuers in the same industry, borrow
money or issue senior securities, makes loans, purchase securities on margin,
underwrite the securities issued by other persons, purchase or sell real estate,
or purchase or sell commodities or commodities contracts. In addition, Cardinal
Aggressive Growth Fund has several non-fundamental investment limitations which
may be changed by the Cardinal Board of Trustees without shareholder approval.
These limitations affect the ability of Cardinal Aggressive Growth Fund to
invest in illiquid securities, purchase securities of other investment
companies, engage in short sales, invest in issuers whose securities are owned
by officers and Trustees/directors of Cardinal or CMC, mortgage or pledge the
Fund's assets, purchase participations or direct interests in oil, gas or other
mineral exploration or development programs, or invest in securities of issuers
which, together with any predecessors, have a record of less than three years'
continuous operations.
Fountain Square Mid Cap Fund has fundamental investment limitations
which are substantially similar to those of Cardinal Aggressive Growth Fund.
Fountain Square Mid Cap Fund's limitation on borrowing money or issuing senior
securities, however, is less stringent in that it may borrow directly or through
reverse repurchase agreements in amounts up to one-third of the value of its
total assets as opposed to the 10% exception imposed on Cardinal Aggressive
Growth Fund. Fountain Square Mid Cap Fund's ability to lend portfolio securities
as an exception to the prohibition on making loans is limited to one-third of
the value of its total assets, whereas Cardinal Aggressive Growth Fund has no
specific percentage limitation. Fountain Square Mid Cap Fund also categorizes
its restrictions on mortgaging, pledging or hypothecating assets and its
restriction on engaging in short sales as fundamental investment limitations.
Except with respect to those restrictions and investing in unseasoned issuers,
the non-fundamental investment limitations of Fountain Square Mid Cap Fund are
also similar to those of Cardinal Aggressive Growth Fund. Investment in issuers
with less than three years of continuous operations is limited to 5% of the
value of Fountain Square Mid Cap Fund's total assets, and the restriction
relating to holdings of Cardinal or CMC officers or Trustees/directors applies
to Fountain Square Funds and Fifth Third. Other additional non-fundamental
investment limitations of Fountain Square Mid Cap Fund include limitations on
investing in restricted securities, engaging in arbitrage transactions,
purchasing securities for the purpose of exercising control, and investing in
warrants.
CARDINAL BALANCED FUND AND FOUNTAIN SQUARE BALANCED FUND. The
investment objectives of Cardinal Balanced Fund are to seek current income and
long-term growth of both capital and income. The investment objective of
Fountain Square Balanced Fund is to pursue capital appreciation and income.
Neither of these investment objectives may be changed without the vote of the
holders of a majority of the outstanding securities of the applicable Fund. The
investment policies of the two Funds, except as otherwise noted, may be changed
by that Fund's Board of Trustees without a vote of shareholders. Both Funds seek
to achieve their objectives by investing in diversified portfolios of common
stocks, preferred stocks, securities convertible into common stocks, corporate
fixed income securities, U.S. government securities and money market
instruments. Each Fund, as a balanced fund, invests at least 25% of its assets
in fixed income senior securities. Cardinal Balanced Fund also invests in
certain foreign securities such as Yankee securities, Eurodollar securities, and
supranational agency bonds, mortgage-related securities, including
collateralized mortgage obligations ("CMOs"), and asset-backed securities.
Cardinal Balanced Fund invests in securities of companies having a market
capitalization of not less than $10 million and may invest up to 10% of its net
assets in non-investment grade convertible debt securities, while Fountain
Square Balanced Fund invests in securities of companies with market
capitalizations between $100 million and $3 billion and is limited to investment
grade convertible securities. Both Funds may also invest up to 25% of their
assets in American Depositary Receipts, invest in restricted and illiquid
securities, enter into repurchase agreements, engage
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in options and futures transactions, engage in when-issued and delayed delivery
transactions and, for temporary defensive purposes, invest in cash and various
money market instruments, U.S. government securities and securities of other
investment companies. In addition, Cardinal Balanced Fund may invest in REITs,
while Fountain Square Balanced Fund does not permit such investments. However,
Fountain Square Balanced Fund may lend portfolio securities and enter into
reverse repurchase agreements, while Cardinal Balanced Fund is not currently
permitted to do so.
Cardinal Balanced Fund has several fundamental investment limitations
which may not be changed without a vote of the holders of a majority of the
outstanding shares of the Fund. These limitations affect the ability of
Cardinal Balanced Fund to purchase securities of any one issuer, purchase
securities of any one or more issuers in the same industry, borrow money or
issue senior securities, make loans, purchase securities on margin, underwrite
the securities issued by other persons, purchase or sell real estate, or
purchase or sell commodities or commodities contracts. In addition, Cardinal
Balanced Fund has several non-fundamental investment limitations which may be
changed by the Cardinal Board of Trustees without shareholder approval. These
limitations affect the ability of Cardinal Balanced Fund to invest in illiquid
securities, purchase securities of other investment companies, engage in short
sales, invest in restricted securities, invest in issuers whose securities are
owned by officers and Trustees/directors of Cardinal or CMC, mortgage or pledge
the Fund's assets, purchase participations or direct interests in oil, gas or
other mineral exploration or development programs, or invest in securities of
issuers which, together with any predecessors, have a record of less than three
years' continuous operations.
Fountain Square Balanced Fund has fundamental investment limitations
which are substantially similar to those of Cardinal Balanced Fund. Fountain
Square Balanced Fund's limitation on borrowing money or issuing senior
securities, however, is less stringent in that it may borrow directly or through
reverse repurchase agreements in amounts up to one-third of the value of its
total assets, as opposed to the 10% limitation imposed on Cardinal Balanced
Fund. Fountain Square Balanced Fund's ability to lend portfolio securities as an
exception to the prohibition on making loans is limited to one-third of the
value of its total assets, whereas Cardinal Balanced Fund has no specific
percentage limitations. Fountain Square Balanced Fund also categorizes its
restrictions on mortgaging, pledging or hypothecating assets and engaging in
short sales as fundamental investment limitations. Except with respect to those
restrictions and investing in unseasoned issuers, the non-fundamental investment
limitations of Fountain Square Balanced Fund are also similar to those of
Cardinal Balanced Fund. Investment in issuers with less than three years of
continuous operations is limited to 5% of the value of Fountain Square Balanced
Fund's total assets, and the restriction relating to holdings of Cardinal or CMC
officers or Trustees/directors applies to Fountain Square Funds and Fifth Third.
Other additional non-fundamental investment limitations include limitations on
engaging in arbitrage transactions, purchasing securities for the purpose of
exercising control, and investing in warrants.
CARDINAL GOVERNMENT OBLIGATIONS FUND AND FOUNTAIN SQUARE BOND FUND FOR
INCOME. The investment objectives of Cardinal Government Obligations Fund are to
maximize safety of capital and, consistent with such objective, earn the highest
available current income obtainable from government securities. The investment
objective of Fountain Square Bond Fund For Income is to provide a high level of
current income. Neither of these investment objectives may be changed without
the vote of the holders of a majority of the outstanding securities of the
applicable Fund. The investment policies of the two Funds, except as otherwise
noted, may be changed by that Fund's Board of Trustees without a vote of
shareholders. Cardinal Government Obligations Fund seeks to achieve its
objectives by investing, under normal market conditions, substantially all, but
in no event less than 65% of its total assets in obligations issued or
guaranteed by the U.S. government or its agencies or instrumentalities. Fountain
Square Bond Fund For Income pursues its investment objective by investing in a
diversified portfolio of investment grade debt securities with remaining
maturities of ten years or less. This includes corporate debt obligations,
obligations issued or guaranteed by the U.S. government or its agencies or
instrumentalities, U.S. dollar-denominated issues of foreign corporations,
foreign governments and foreign government agencies and CMOs. Under normal
market conditions, Fountain Square Bond Fund For Income will invest at least 65%
of its assets in fixed income debt securities rated at least Baa by Moody's
Investors Service or BBB by Standard & Poor's. Both Funds may also invest in
repurchase agreements, engage in options and futures transactions, engage in
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when-issued and delayed delivery transactions, and, for temporary defensive
purposes, invest in cash and various money market instruments and securities of
other investment companies. In addition, Fountain Square Bond Fund For Income
may lend portfolio securities, enter into reverse repurchase agreements, invest
up to 15% of its net assets in illiquid securities and invest up to 10% of its
net assets in restricted securities. These activities are not permitted for
Cardinal Governmental Obligations Fund.
Cardinal Government Obligations Fund has several fundamental investment
limitations which may not be changed without a vote of the holders of a majority
of the outstanding shares of the Fund. These limitations affect the ability of
Cardinal Government Obligations Fund to purchase securities of any one issuer,
purchase securities of one or more issuers in the same industry, borrow money or
issue senior securities, make loans, purchase securities on margin, underwrite
securities issued by other persons, purchase or sell real estate, purchase or
sell commodities or commodities contracts, mortgage, pledge or hypothecate the
Fund's assets, or purchase participations or direct interests in oil, gas or
other mineral exploration or development programs. In addition, Cardinal
Government Obligations Fund has several non-fundamental investment limitations
which may be changed by the Cardinal Board of Trustees. These limitations affect
the ability of the Fund to invest in illiquid securities, purchase securities of
other investment companies, engage in short sales, and invest in issuers whose
securities are owned by officers and Trustees/directors of Cardinal or CMC.
Fountain Square Bond Fund For Income has fundamental investment
limitations which are substantially similar to those of Cardinal Government
Obligations Fund. Fountain Square Bond Fund For Income's limitation on borrowing
money or issuing senior securities, however, is less stringent in that it may
borrow money directly or through reverse repurchase agreements in amounts up to
one-third of the value of its total assets as opposed to the 10% exception
available to Cardinal Government Obligations Fund. Fountain Square Bond Fund For
Income also categorizes its restriction on engaging in short sales as a
fundamental investment limitation. Except with respect to that restriction,
Fountain Square Bond Fund For Income's non-fundamental investment limitations
are also similar to those of Cardinal Government Obligations Fund. The
restriction relating to holdings of Cardinal and CMC officers or
Trustees/directors applies to Fountain Square Funds and Fifth Third. Other
additional non-fundamental investment limitations of Fountain Square Bond Fund
For Income include limitations on purchasing participations or direct interests
in oil, gas or other mineral exploration or development programs, engaging in
arbitrage transactions and purchasing securities for the purpose of exercising
control.
CARDINAL GOVERNMENT SECURITIES MONEY MARKET FUND AND FOUNTAIN SQUARE
GOVERNMENT CASH RESERVES FUND. The investment objectives of Cardinal Government
Securities Money Market Fund are to maximize current income while preserving
capital and maintaining liquidity. The investment objective of Fountain Square
Government Cash Reserves Fund is high current income consistent with stability
of principal and liquidity. Neither of these investment objectives may be
changed without the vote of the holders of a majority of the outstanding
securities of the applicable Fund. The investment policies of the two Funds,
except as otherwise noted, may be changed by that Fund's Board of Trustees
without a vote of shareholders. Both Funds seek to achieve their objectives by
investing primarily in a portfolio of short-term securities issued or guaranteed
by the U.S. government, its agencies or instrumentalities. Cardinal Government
Securities Money Market Fund may also invest in repurchase agreements relating
to such obligations. Fountain Square Government Cash Reserves Fund presently
intends to limit its investments in only those U.S. government securities whose
interest is generally exempt from personal income tax in the various states if
owned directly. Both Funds may engage in when-issued and delayed delivery
transactions and invest in securities of other investment companies, although
Fountain Square Government Cash Reserves Fund may only invest in other
investment companies for temporary defensive purposes.
Cardinal Government Securities Money Market Fund has several
fundamental investment limitations which may not be changed without a vote of
the holders of a majority of the outstanding shares of the Fund. These
limitations affect the ability of Cardinal Government Securities Money Market
Fund to purchase securities of any
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one issuer, purchase securities of one or more issuers in the same industry,
make loans, borrow money or issue senior securities, pledge, mortgage or
hypothecate securities, underwrite securities issued by other persons, purchase
or sell real estate, purchase or sell commodities or commodities contracts,
purchase participations or other direct interests in oil, gas or other mineral
exploration or development programs, or purchase securities on margin. In
addition, Cardinal Government Securities Money Market Fund has several
non-fundamental investment limitations which may be changed by the Cardinal
Board of Trustees without shareholder approval. These limitations affect the
ability of Cardinal Government Securities Money Market Fund to invest in
illiquid securities, purchase securities of other investment companies, engage
in short sales, invest in illiquid or restricted securities, or invest in
issuers whose securities are owned by officers and Trustees/directors of
Cardinal or CMC.
Fountain Square Government Cash Reserves Fund has fundamental
investment limitations which are similar to those of Cardinal Government
Securities Money Market Fund. Fountain Square Government Cash Reserves Fund's
limitation on borrowing money or issuing senior securities, however, is less
stringent in that it may borrow money directly or through reverse repurchase
agreements in amounts up to one-third of the value of its total assets as
opposed to the 10% exception available to Cardinal Government Securities Money
Market Fund. Fountain Square Government Cash Reserves Fund also categorizes its
restriction on engaging in short sales as a fundamental investment limitation
and has not adopted any specific restrictions relating to investment in the
securities of any one issuer or any one industry or with respect to purchases of
sales of real estate, commodities or oil, gas or mineral exploration or
development programs. These limitations would generally not apply to the U.S.
government securities in which the Funds invest. The non-fundamental investment
limitations of Fountain Square Government Cash Reserves Fund are also similar to
those of Cardinal Government Securities Money Market Fund, except that, for the
same reasons explained above with respect to its fundamental investment
restrictions, Fountain Square Government Cash Reserves Fund has not adopted
specific restrictions on investing in restricted securities or securities owned
by officers or Trustees/directors of FSF or Fifth Third.
CARDINAL TAX EXEMPT MONEY MARKET FUND AND FOUNTAIN SQUARE TAX EXEMPT
MONEY MARKET FUND. The investment objectives of both Cardinal Tax
Exempt Money Market Fund and Fountain Square Tax Exempt Money Market Fund are to
maximize current income exempt from federal income tax while preserving capital
and maintaining liquidity. Neither Fund may change its investment objective
without a vote of the holders of a majority of the holders of the outstanding
shares of the applicable Fund. The investment policies of the two Funds, except
as otherwise noted, may be changed by that Fund's Board of Trustees without a
vote of shareholders. Both Funds seek to achieve their objectives by investing
primarily in a portfolio of high-grade short-term municipal bonds and notes,
including participation interests in such obligations, tax-exempt commercial
paper and tax-exempt short-term discount notes. Each of the Funds intends to
invest, under normal market conditions, at least 80% of its net assets in a
diversified portfolio of municipal securities, the interest on which is both
exempt from federal income tax and is not treated as a preference item for
purposes of federal alternative minimum tax. Both Funds may invest in variable
rate securities, enter into repurchase agreements, engage in when-issued and
delayed delivery transactions, and, for temporary defensive purposes, invest in
taxable money market securities. Both Funds may invest in securities of other
investment companies, although Fountain Square Tax Exempt Money Market Fund may
only do so for temporary defensive purposes.
Cardinal Tax Exempt Money Market Fund has several fundamental
investment limitations which may not be changed without a vote of the holders of
a majority of the outstanding shares of the Fund. These limitations affect the
ability of Cardinal Tax Exempt Money Market Fund to purchase securities of any
one issuer, purchase securities of one or more issuers in the same industry,
make loans, borrow money or issue senior securities, pledge, mortgage or
hypothecate securities, underwrite securities issued by other persons, purchase
or sell real estate, purchase or sell commodities or commodities contracts,
purchase securities on margin, engage in options transactions, purchase
participations or other direct interests in oil, gas or other mineral
exploration or development programs, or purchase securities which are subject to
federal income tax. In addition, Cardinal Tax Exempt Money Market Fund has
several non-fundamental investment limitations which may be changed by the
Cardinal Board of Trustees. These limitations affect the ability of Cardinal Tax
Exempt Money Market Fund to invest in illiquid securities, purchase securities
of other investment companies, engage in short sales, invest in restricted
securities, or invest in issuers whose securities are owned by officers and
Trustees/directors of Cardinal or CMC.
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43
Fountain Square Tax Exempt Money Market Fund has fundamental investment
limitations which are substantially similar to those of Cardinal Tax Exempt
Money Market Fund, except that Fountain Square Tax Exempt Money Market Fund has
not adopted a specific policy restricting the maximum percentage for investment
in securities subject to federal income taxation. Cardinal Tax Exempt Money
Market Fund limits its maximum investment in taxable securities to 20% of its
assets. The non-fundamental investment limitations of Fountain Square Tax Exempt
Money Market Fund are also similar to those of Cardinal Tax Exempt Money Market
Fund. An additional non-fundamental investment limitation is a limitation on
investing in issuers with less than three years of continuous operations.
Fountain Square Tax Exempt Money Market Fund's limitation on borrowing money and
issuing senior securities is less stringent than the Cardinal Tax Exempt Money
Market Fund in that it may borrow money directly or through reverse repurchase
agreements in amounts up to one-third of the value of its total assets as
opposed to the 10% exceptions for Cardinal Tax Exempt Money Market Fund.
Fountain Square Tax Exempt Money Market Fund also categorizes its restriction on
engaging in short sales as a fundamental investment limitation.
RISK FACTORS. Because of the similarities of the investment objectives,
policies and restrictions of the Cardinal Funds and their corresponding Fountain
Square Funds, an investment in a Fountain Square Fund involves risks that are
similar to those of the corresponding Cardinal Fund. In the case of Fountain
Square Cardinal Fund and Fountain Square Mid Cap Fund, the investment risks, in
general, are those typically associated with investing in a portfolio of common
stocks. Since equity markets tend to be cyclical, the possibility exists that
common stocks could decline over short or even extended periods of time. Because
these Funds invest in both small and medium capitalization stocks, there are
some additional risk factors associated with investment in the Funds. For small
or unseasoned companies, stocks tend to be more thinly traded and therefore
subject to more abrupt or erratic price movements than larger, well-established
companies. In general, stocks in the small and medium capitalization sectors of
the United States equity market tend to be more volatile in price than larger
capitalization stocks, such as those included in the Standard & Poor's 500 Index
(the "S&P 500). Investors should expect Fountain Square Cardinal Fund and
Fountain Square Mid Cap Fund to be more volatile than, and may fluctuate
independently of, broad stock market indices such as the S&P 500.
In the case of Fountain Square Bond Fund For Income, the investment
risks, in general, are those typically associated with investing in a portfolio
of investment grade fixed income securities, including corporate bonds. Fixed
income securities are subject to credit risk and market risk. Market risk
relates to changes in the value of a security as a result of changes in interest
rates. Credit risk relates to the ability of the issuer to make payments of
principal and interest. Because Fountain Square Bond Fund For Income invests in
a variety of corporate debt obligations, in additional to government obligations
and mortgage-related securities, it will be subject to greater credit risk than
Cardinal Government Obligations Fund. The mortgage-related securities, including
collateralized mortgage obligations ("CMOs") in which both Funds invest subject
them to prepayment risk. Cardinal Government Obligations Fund invests primarily
in mortgage-related securities and therefore is subject to greater prepayment
risk than Fountain Square Bond Fund For Income.
In the case of Fountain Square Balanced Fund, the investment risks are
those typically associated with investing in a portfolio of both common stocks
and investment grade fixed income securities.
With respect to Fountain Square Government Cash Reserves Fund and
Fountain Square Tax Exempt Money Market Fund, the investment risks, in general,
are those typically associated with investing in a portfolio of high quality
money market instruments. In addition, these Money Market Funds attempt to
maintain a stable net asset value of $1.00, although there is no assurance that
they will be able to do so. For Fountain Square Tax Exempt Money Market Fund,
the characteristics of short-term municipal securities are such that the price
stability and liquidity of the Fund may not be equal to that of a money market
fund which exclusively invests in taxable money market instruments.
As discussed above, several of the Fountain Square Funds may engage in
when-issued and delayed delivery transactions. These transactions are
arrangements in which a Fund purchases securities with payment and delivery
scheduled for a future time. The seller's failure to complete these transactions
may cause a Fund to miss a price or yield considered to be advantageous. In
addition, because settlement dates may be a month or more after entering into
the transaction, a Fund may pay more or less than the market value of the
securities on the settlement date.
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44
Lending portfolio securities also entails certain risks. Although the
Fountain Square Funds will only enter into loan arrangements with certain
approved broker/dealers, banks or other institutions and will receive no less
than 100% collateral on the securities loaned, there is the risk that loaned
securities may not be available to the lending Fund on a timely basis and the
Fund may, therefore, lose the opportunity to sell the securities at a desirable
price. In addition, in the event that a borrower of securities files for
bankruptcy or becomes insolvent, disposition of the securities may be delayed
pending court action.
The use of futures and options successfully will depend on the ability
of Fifth Third to predict pertinent market movements, and Fifth Third could be
incorrect in its expectations. In these events, a Fund could lose money on the
futures or option contract. In addition, where futures or options are
imperfectly correlated or not correlated at all with the related security, use
of futures and options for hedging purposes may not have the desired effect.
Finally, a Fund may not be able to close out a futures or options position where
no secondary market for such futures or options exists.
All of the Cardinal Funds and Fountain Square Funds may invest in
repurchase agreements. Repurchase agreements are arrangements in which banks,
broker/dealers, and other recognized financial institutions sell U.S. government
securities or other securities to the Funds and agree at the time of sale to
repurchase them at a mutually agreed upon time and price. To the extent that
the original seller does not repurchase the securities from a Fund, that Fund
could receive less than the repurchase price on any sale of such securities.
CMOs and other mortgage-related securities in which certain of the
Cardinal Funds and Fountain Square Funds may invest provide for a periodic
payment consisting of both principal and interest. These securities are often
subject to higher prepayment risks than most other types of debt instruments.
Prepayment risks on mortgage-related securities tend to increase during periods
of declining mortgage interest rates, because many borrowers refinance their
mortgages to take advantage of the more favorable rates. Depending upon market
conditions, the yield that a Fund receives from the reinvestment of such
prepayments, or any scheduled principal payments, may be lower than the yield
ohn the original mortgage-related security. Prepayments may result in a capital
loss to a fund to the extent that the prepaid mortgage securities were
purchased at a market premium over their stated principal amount. Conversely,
the prepayment of mortgage securtities purchased at a market discount from
their stated principal amount will accelerate the recognition of interest income
by a Fund, which would be taxed as ordinary income when distributed to the
shareholders.
Several of the Cardinal Funds and Fountain Square Funds may invest in
securities issued or guaranteed by the U.S. government, its agencies or
instrumentalities. Some obligations issued or guaranteed by the U.S. government
are backed by the full faith and credit of the U.S. Treasury. No assurances can
be given that the U.S. government will provide financial support or other
agencies or instrumentalities, since it is not obligated to do so.
OTHER COMPARATIVE INFORMATION
PURCHASE AND REDEMPTION INFORMATION, EXCHANGE PRIVILEGES, DISTRIBUTION
AND PRICING. Investor Shares of the Cardinal Funds are sold on a continuous
basis by its principal underwriter, The Ohio Company, and may be purchased at
the public offering price through The Ohio Company and National Association of
Securities Dealers, Inc. ("NASD") member broker-dealers having sales agreements
with The Ohio Company. The public offering price of Investor Shares is the net
asset value per share next computed after receipt of an order, plus a sales
charge of 4.50%. The amount of the sales charge is reduced incrementally on
purchases of $100,000 or more, depending upon the amount of the purchase, with a
minimum sales charge of 0.50% charged for purchases of $1,000,000 or more as
follows:
AS A PERCENTAGE OF OFFERING PRICE SALES CHARGE AS A
--------------------------------- PERCENTAGE OF THE NET
AMOUNT OF SINGLE TRANSACTION SALES CHARGE DEALER'S CONCESSION AMOUNT INVESTED
- ---------------------------- ------------ ------------------- ---------------
Less than $100,000..................... 4.50% 4.00% 4.71%
$100,000 but less than $250,000........ 3.50% 3.00% 3.63%
$250,000 but less than $500,000........ 2.50% 2.00% 2.56%
$500,000 but less than $1,000,000...... 1.50% 1.00% 1.52%
$1,000,000 or more..................... 0.50% 0.40% 0.50%
Sales charges are not imposed on purchases of Investor Shares by (i)
officers, trustees and employees of Cardinal, (ii) full-time employees of The
Ohio Company or CMC who have been such for at least 90 days or by qualified
retirement plans for such persons, or (iii) accounts with respect to which The
Ohio Company serves as either trustee or as investment advisor. Any applicable
sales charge may also be substantially reduced through quantity discounts, such
as rights of accumulation, letters of intent or concurrent purchases.
Institutional Shares of the Cardinal Funds are sold on a continuous
basis through procedures established by The Ohio Company in connection with
accounts for which banks, broker-dealers, savings and loan associations, trust
companies, qualified investment advisors and certain other financial
institutions serve in a fiduciary capacity
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45
on behalf of customers or beneficiaries. The public offering price of
Institutional Shares of the Cardinal Funds is the net asset value per share next
computed after receipt of an order, without a sales charge.
Shares of the Cardinal Money Market Funds are also sold on a continuous
basis by The Ohio Company without a sales charge at the net asset value next
determined after an order is received.
The minimum initial investment for Investor Shares of The Cardinal
Fund, Cardinal Aggressive Growth Fund, Cardinal Balanced Fund and Cardinal
Government Obligations Fund and for shares of the Cardinal Money Market Funds is
$1,000. Subsequent investments must be in amounts of at least $50 except for
shares of the Cardinal Money Market Funds which must be in amounts of at least
$100. There is no minimum investment for Institutional Shares of The Cardinal
Fund, Cardinal Aggressive Growth Fund, Cardinal Balanced Fund or Cardinal
Government Obligations Fund. Purchase orders for shares of the Cardinal Funds
are effected on any "business day," that is, a day on which the New York Stock
Exchange is open for business, (other than a day on which no shares of that
Cardinal Fund are tendered for redemption and no order to purchase shares of
that Cardinal Fund is received), and such other days on which there is a
sufficient degree of trading in a Fund's portfolio securities that such Fund's
net asset value might be materially affected by changes in the value of the
portfolio securities.
Investors may purchase shares of the Cardinal Funds by Federal Funds
Wire or by mail. Cardinal also offers an Automatic Investment Plan, pursuant to
which investors may make automatic monthly or quarterly investments in any of
the Cardinal Funds. Cardinal reserves the right to reject any purchase request
in whole or in part.
Investors may redeem shares of the Cardinal Funds by mail or telephone.
In addition, Cardinal offers a Systematic Withdrawal Plan, pursuant to which
holders of Investor Shares of The Cardinal Fund, Cardinal Balanced Fund and
Cardinal Aggressive Growth Fund with accounts valued at over $10,000, holders of
Investor Shares of Cardinal Government Obligations Fund with accounts valued at
over $25,000, and holders of shares of the Cardinal Money Market Funds may make
automatic periodic withdrawals from any of their Cardinal Fund holdings. By
Automatic Withdrawal, Cardinal shareholders may elect to have the proceeds from
redemptions transmitted to an authorized bank account. The Cardinal Money Market
Funds also offer check writing redemption and expedited redemption features. The
Cardinal Funds redeem shares at their net asset value next determined after CMC
receives the redemption request. Redemptions are made on days on which the
shares of the Cardinal Funds compute their net asset value.
Shareholders may exchange Investor Shares or Institutional Shares of
any of the Cardinal Funds for shares of the same class of any of the other
Cardinal Funds. In addition, shares of the Cardinal Money Market Funds may be
exchanged for Investor Shares or, assuming the owner qualifies, for
Institutional Shares of any of the other Cardinal Funds. When exchanging into
and out of Investor Shares of the Cardinal Funds, shareholders who have paid an
equal or greater sales charge once, or have had sales charges waived, will not
have to pay a sales charge on an exchange.
Investment A Shares of the Fountain Square Funds are sold on a
continuous basis by BISYS, and may be purchased through a financial institution
or directly through BISYS. The public offering price of Investment A Shares of
the Fountain Square Non-Money Market Funds is the net asset value per share next
computed after receipt of an order, plus a maximum sales charge of 4.50%. No
sales charge is imposed upon purchases of any of the Fountain Square Money
Market Funds. The amount of any sales charge is reduced incrementally on
purchases of $50,000 or more depending upon the amount of the purchase, with no
sales charge being charged on purchases of $500,000 or more as follows:
34
46
AS A PERCENTAGE OF OFFERING PRICE
--------------------------------- SALES CHARGE AS A
PERCENTAGE OF THE NET
AMOUNT OF SINGLE TRANSACTION SALES CHARGE DEALER'S CONCESSION AMOUNT INVESTED
- ---------------------------- ------------ ------------------- ---------------------
Less than $50,000...................... 4.50% 3.83% 4.71%
$50,000 but less than $100,000......... 4.00% 3.40% 4.17%
$100,000 but less than $150,000........ 3.00% 2.55% 3.09%
$150,000 but less than $250,000........ 2.00% 1.70% 2.04%
$250,000 but less than $500,000........ 1.00% 0.85% 1.01%
$500,000 or more....................... 0.00% 0.00% 0.00%
Sales charges will not be applicable to: (i) reinvestment of dividends
and distributions; (ii) purchases by directors, officers and employees of FSF's
distributor and of broker-dealers having agreements with FSF's distributor
pertaining to the sale of Investment A Shares; (iii) purchases by members of
FSF's Board of Trustees; and (iv) purchases by officers, directors, employees
and retirees of Fifth Third Bancorp and their spouses and children under 21. Any
applicable sales charge may also be substantially reduced through quantity
discounts, such as rights of accumulation, letters of intent, or concurrent
purchases, as well as through participation in certain programs offered by Fifth
Third, and purchases with proceeds from redemptions of any unaffiliated mutual
fund shares. No sales charge will be imposed, however, on Investment A Shares of
the Fountain Square Funds issued in the Reorganization.
Institutional Shares of the Fountain Square Funds are sold on a
continuous basis by BISYS without a sales charge at the net asset value next
determined after an order is received. Institutional Shares are only offered to
clients of Fifth Third Bank who make purchases through Fifth Third's Trust
Department, certain qualified employee benefit plans under the Internal Revenue
Code, and broker-dealers, investment advisors, financial planners and other
financial institutions who place trades for their own accounts or the accounts
of their clients for a management, consulting or other fee.
The minimum initial investment for each of the Fountain Square Funds is
$1,000. The minimum investment for subsequent purchases is $50. Purchase orders
for shares of Fountain Square Funds are effected on any day on which the New
York Stock Exchange and the Federal Reserve Bank of Cleveland are open for
business. Investors may purchase Investment A Shares of the Fountain Square
Funds by Federal Funds Wire or by mail. In addition, FSF offers a Systematic
Investment Program, pursuant to which investors may make automatic periodic
investments in any of the Fountain Square Funds. FSF reserves the right to
reject any purchase request in whole or in part.
Investors may redeem Investment A Shares of the Fountain Square Funds
by mail and telephone. Holders of Institutional Shares may redeem all or part of
their shares in accordance with procedures governing their accounts at such
institutions. In addition, FSF offers a Systematic Withdrawal Program, pursuant
to which investors with accounts valued at over $10,000 may make automatic
period withdrawals from any of their Fountain Square Fund holdings. FSF reserves
the right to redeem accounts involuntarily, upon 30 days' written notice, if the
account's net asset value falls below $1,000 as a result of redemptions.
Redemption orders are effected at the net asset value per share next determined
after receipt and acceptance of the order by the distributor. FSF reserves the
right to send redemption proceeds within seven days after receiving the
redemption order if, in its judgment, an earlier payment could adversely affect
the Fund.
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47
Shareholders may exchange Investment A Shares or Institutional Shares
of any of the Fountain Square Funds for shares of the same class of any of the
other Fountain Square Funds, including those not described in this Combined
Proxy Statement/Prospectus. When exchanging into and out of Investment A Shares
of the Fountain Square Funds, shareholders who have paid a sales charge once
upon purchasing Investment A Shares of any Fountain Square Fund will not have to
pay a sales charge again on an exchange. Exchanges of Investment A Shares of any
of the Fountain Square Non-Money Market Funds received in the Reorganization may
be exchanged for Investment A Shares of any of the other Fountain Square Funds
without the imposition of a sales charge. Any exchange must satisfy the
requirements relating to the minimum initial investment in the particular
Fountain Square Fund.
Each of The Cardinal Fund, Cardinal Aggressive Growth Fund and Cardinal
Balanced Fund declares dividends and makes distributions with such frequency and
in such amounts as Cardinal from time to time shall determine. It is the policy
of each of these Funds to distribute, at least annually, substantially all of
its net investment income and to distribute annually any net realized gains.
Cardinal Government Obligations Fund declares dividends daily consisting of net
investment income and pays such dividends monthly. Dividends consisting of
long-term capital gains normally will be distributed only once annually. Each of
the Cardinal Money Market Funds declares dividends daily consisting of
interest accrued on the portfolio plus realized net short-term capital gains or
losses due to portfolio transactions, less the accrued expenses of the Fund and
pays such dividends monthly.
Each of Fountain Square Cardinal Fund, Fountain Mid Cap Fund and
Fountain Square Balanced Fund declares and pays dividends quarterly. Fountain
Square Bond Fund For Income declares and pays dividends monthly. Each of
Fountain Square Government Cash Reserve Fund and Fountain Square Tax Exempt
Money Market Fund declare dividends daily and pay dividends monthly. In all
cases dividends are declared just prior to determining net asset value. Capital
gains realized by a Fountain Square Fund, if any, will be distributed at least
once every 12 months.
Both FSF and Cardinal determine net asset value for the Non-Money
Market Funds as of the close of regular trading on the New York Stock Exchange,
normally 4:00 p.m. (Eastern Time). For the Money Market Funds, FSF determines
net asset value as of 4:00 p.m. (Eastern time), while Cardinal determines net
asset value as of 12:00 p.m. (Eastern time). In all cases, net asset value per
share is determined on each day on which the New York Stock Exchange is open for
trading (and on certain other days as noted above). Currently, the New York
Stock Exchange is closed on New Year's Day, Martin Luther King, Jr. Day,
Presidents' Day, Good Friday, Memorial Day, Independence Day, Labor Day,
Columbus Day, Veterans Day, Thanksgiving Day and Christmas Day.
Net asset value per share for each class of each of the Fountain Square
Funds and the Cardinal Funds for purposes of pricing sales and redemptions is
calculated by dividing the value of all securities and other assets
attributable to the applicable class of the Fund, less the liabilities
attributable to the class of shares of that Fund, divided by the number of
outstanding shares of the Fund attributable to that class. The Non-Money Market
Funds are valued based on the market values of securities held by such Funds
determined in accordance with procedures adopted by the Board of Trustees. The
Money Market Funds are valued based on the amortized cost method provided for
under Rule 2a-7 of the 1940 Act.
OTHER INFORMATION. Financial highlights, information relating
shareholder rights and general information relating to Cardinal and FSF and
management of each of the Cardinal Funds and Fountain Square Funds is contained
in the Prospectuses for the applicable Funds incorporated by reference herein.
Management's discussion of performance for each of the Cardinal Funds and
Fountain Square Funds is contained in the Cardinal and FSF Annual Reports and
FSF Semi-Annual Report incorporated by reference herein.
FSF and Cardinal are registered as open-end management investment
companies under the 1940 Act. Currently, FSF offers sixteen investment
portfolios and Cardinal offers six investment portfolios. FSF was organized as a
Massachusetts business trust on September 15, 1988 and is subject to the
provisions of its Declaration of Trust and By-Laws. Cardinal is organized as an
Ohio business trust and is subject to Ohio law governing business trust and to
the provisions of its Declaration of Trust and By-Laws.
As discussed below, shareholders of the Cardinal Funds are entitled to
one vote for each dollar of value invested and a proportionate fractional vote
for any fraction of a dollar invested, and will vote in the aggregate and not by
series or class except as otherwise expressly required by law. Since the
Reorganization must be approved
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48
individually with respect to each Cardinal Fund, shareholders will vote on a
Fund by Fund basis and not by class for purposes of approving the
Reorganization Agreement.
By contrast, shareholders of the Fountain Square Funds are each
entitled to one vote for each one share held. All shares of each Fountain Square
Fund have equal voting rights, except that in matters affecting only a
particular Fund or class, only shares of that Fund or class are entitled to
vote.
None of the shares of the Cardinal Funds or the Fountain Square Funds
have any pre-emptive or conversion rights.
Each share of a Cardinal Fund and a Fountain Square Fund represents an
equal proportionate interest in that particular Fund with other shares of the
same Fund and is entitled to cash dividends and distributions earned on such
shares as are declared.
Under Massachusetts law, shareholders of the Fountain Square Funds
could, under certain circumstances, be held personally liable for the
obligations of FSF. FSF's Declaration of Trust, however, provides
indemnification and reimbursement of expenses from FSF assets for all
shareholders against liability arising solely by reason of having been a
shareholder.
Under Section 1746.13, Ohio Revised Code, liability to third persons
for any act, omission or obligation of an Ohio business trust, such as Cardinal,
which has made its requisite filings with the Ohio Secretary of State is limited
to trust assets and no such liability shall attach to the trustees, officers,
employees, agents or shareholders of the business trust. In addition, Cardinal's
Declaration of Trust provides for indemnification of shareholders from trust
assets similar to that provided by FSF.
Trustees and officers of FSF, pursuant to FSF's Declaration of Trust,
and Trustees and officers of Cardinal, pursuant to Cardinal's Declaration of
Trust, shall only be liable for the willful misfeasance, bad faith, gross
negligence or reckless disregard of the duties involved in the conduct of the
office of Trustee or officer, as the case may be, and for nothing else.
The foregoing is only a summary. Shareholders may obtain copies of the
Declaration of Trust and By-Laws of FSF and the Declaration of Trust and By-Laws
of Cardinal from FSF upon written request at the address shown on the cover page
of this Combined Proxy Statement/Prospectus.
INFORMATION RELATING TO VOTING MATTERS
GENERAL INFORMATION. This Combined Proxy Statement/Prospectus is being
furnished in connection with the solicitation of proxies by Cardinal's Board of
Trustees in connection with the Special Meeting. Cardinal has engaged Automatic
Data Processing Investor Communication Services ("ADP") to assist it in this
proxy solicitation at an estimated cost of $42,393. It is expected that the
solicitation of proxies will be primarily by mail. Officers and service
contractors of Cardinal, including representatives from ADP, may also solicit
proxies by telephone, electronic mail or personal interview. The costs of this
proxy solicitation are being borne by Fifth Third.
Shares represented by proxies, unless previously revoked, will be voted
at the Special Meeting in accordance with the instructions of the shareholders.
If no instructions are given and the proxy is properly executed, dated and
returned to Cardinal, the proxy returned will be voted in favor of the
proposal. To revoke a proxy, the shareholder giving such proxy must either
submit to Cardinal a subsequently dated proxy, deliver to Cardinal a written
notice of revocation or otherwise give notice of revocation in open meeting, in
all cases prior to the exercise of the authority granted in the proxy.
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49
Only shareholders of record at the close of business on May 12, 1998,
will be entitled to vote at the Special Meeting. On that date there were
outstanding and entitled to be voted 16,740,236 Investor Shares and 1,804,845
Institutional Shares of The Cardinal Fund, 660,413 Investor Shares and 267,857
Institutional Shares of Cardinal Aggressive Growth Fund, 1,232,756 Investor
Shares and 151,740 Institutional Shares of Cardinal Balanced Fund, 13,763,511
Investor Shares and 725,419 Institutional Shares of Cardinal Government
Obligations Fund, 531,967,297 shares of Cardinal Government Securities Money
Market Fund, and 58,775,066 shares of Cardinal Tax Exempt Money Market Fund. As
of such time, the net asset values of each share of the Cardinal Funds were as
follows: The Cardinal Fund, $17.83 per Investor Share and $ 17.84 per
Institutional Share; Cardinal Aggressive Growth Fund, $ 14.31 per Investor Share
and $ 14.31 per Institutional Share; Cardinal Balanced Fund $ 13.93 per Investor
Share and $ 13.93 per Institutional Share; Cardinal Government Obligations Fund,
$ 8.21 per Investor Share and $ 8.22 per Institutional Share; Cardinal
Government Securities Money Market Fund, $1.00 per share; and Cardinal Tax
Exempt Money Market Fund, $1.00 per share. Shareholders of the Cardinal Funds
are entitled to one vote for each dollar of value invested and a proportionate
fractional vote for any fraction of a dollar invested. Shareholders of each
Cardinal Fund will vote as a Fund, and not in the aggregate with other
shareholders of Cardinal, for purposes of approving the Reorganization Agreement
with respect to that particular Fund. For information on adjournment of the
Special Meeting, see "Quorum" below.
SHAREHOLDER AND BOARD APPROVALS. The Reorganization Agreement (and the
transactions contemplated thereby) are being submitted for approval at the
Special Meeting by a majority of all votes attributable to the outstanding
shares of The Cardinal Fund, Cardinal Aggressive Growth Fund, Cardinal Balanced
Fund, Cardinal Government Obligations Fund, Cardinal Government Securities Money
Market Fund and Cardinal Tax Exempt Money Market Fund in accordance with the
provisions of Cardinal's Declaration of Trust and the requirements of the 1940
Act. The term "majority of all votes attributable to the outstanding shares" of
a Cardinal Fund as used herein means the lesser of (a) 67% of all votes
attributable to the outstanding shares of the particular Cardinal Fund present
at the Special Meeting if the holders of more than 50% of the shares of such
Cardinal Fund are present in person or by proxy, or (b) more than 50% of the
votes attributable to the outstanding shares of such Fund.
In tallying shareholder votes, abstentions and broker non-votes (i.e.,
proxies sent in by brokers and other nominees that cannot be voted on a proposal
because instructions have not been received from the beneficial owners) will be
counted for purposes of determining whether or not a quorum is present for
purposes of convening the Special Meeting. On the Reorganization proposal,
abstentions and broker non-votes will be considered to be a vote against the
Reorganization proposal.
The vote of the shareholders of the corresponding Fountain Square Funds
is not being solicited because their approval or consent is not necessary for
the Reorganization to be consummated.
As of May 12, 1998, The Ohio Company, 155 East Broad Street, Columbus,
Ohio 43215, was the only shareholder of record who owned 5% or more of any
class of shares of the Cardinal Funds. The estimated percentage share ownership
of the corresponding Fountain Square Fund shares to be owned by The Ohio Company
upon consummation of the Reorganization, based upon its holdings and outstanding
shares as of May 12, 1998, is as follows:
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===============================================================================================================================
ESTIMATED
PERCENTAGE OF
PERCENTAGE FOUNTAIN
PERCENTAGE OF TOTAL SQUARE FUND TO
CARDINAL FUND CLASS OF OF CLASS SHARES BE OWNED AFTER
SHARES OWNED OWNED OWNED REORGANIZATION
- -------------------------------------------------------------------------------------------------------------------------------
The Cardinal Fund Institutional Shares 73.2% 7.1% 7.1%
- -------------------------------------------------------------------------------------------------------------------------------
Cardinal Aggressive Growth Fund Institutional Shares 91.6% 26.4% 1.4%
- -------------------------------------------------------------------------------------------------------------------------------
Cardinal Balanced Fund Institutional Shares 92.5% 10.1% 1.1%
- -------------------------------------------------------------------------------------------------------------------------------
Cardinal Government Obligations
Fund Institutional Shares 75.2% 3.8% 1.5%
- -------------------------------------------------------------------------------------------------------------------------------
Cardinal Government Securities
Money Market Fund Shares 9.6% 9.6% 5.9%
- -------------------------------------------------------------------------------------------------------------------------------
Cardinal Tax Exempt Money
Market Fund Shares 11.6% 11.6% 11.6%
===============================================================================================================================
As of May 12, 1998, Fifth Third Bank, 38 Fountain Square Plaza,
Cincinnati, Ohio 45263, a subsidiary of Fifth Third Bancorp, was the only
shareholder of record who owned more than 5% of any class of shares of the
Fountain Square Funds. As a result, Fifth Third Bank may be deemed to control
one or more Fountain Square Funds. The estimated share ownership upon
consummation of the Reorganization based upon Fifth Third Bank's holdings and
outstanding shares as of May 12, 1998 is as follows:
===============================================================================================================================
ESTIMATED
PERCENTAGE OF
PERCENTAGE FOUNTAIN
PERCENTAGE OF TOTAL SQUARE FUND TO
FOUNTAIN SQUARE FUND CLASS OF OF CLASS SHARES BE OWNED AFTER
SHARES OWNED OWNED OWNED REORGANIZATION
- -------------------------------------------------------------------------------------------------------------------------------
Fountain Square Mid Cap Fund Investment A Shares 88.2% 87.8% 86.9%
- -------------------------------------------------------------------------------------------------------------------------------
Fountain Square Balanced Fund Investment A Shares 73.7% 72.1% 69.7%
- -------------------------------------------------------------------------------------------------------------------------------
Fountain Square Bond Fund
For Income Investment A Shares 98.7% 98.6% 59.7%
- -------------------------------------------------------------------------------------------------------------------------------
Fountain Square Government Cash
Reserves Fund Investment A Shares 100.0% 57.2% 22.5%
===============================================================================================================================
As of May 12, 1998, there were no shareholders of Fountain Square
Cardinal Fund and Fountain Square Tax Exempt Money Market Fund and neither Fund
had any assets. Accordingly, the ownership interests of shareholders of The
Cardinal Fund in Fountain Square Cardinal Fund, and the ownership interests of
shareholders of Cardinal Tax Exempt Money Market Fund in Fountain Square Tax
Exempt Money Market Fund will not materially change upon consummation of the
Reorganization.
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As of May 12, 1988, Fifth Third Bank was the only shareholder of
record who owned 5% or more of the Fountain Square Funds not involved in the
Reorganization as follows:
INVESTMENT A SHARES PERCENTAGE OF
FUND PERCENTAGE OF OWNERSHIP TOTAL SHARES OWNED
- ---- ----------------------- ------------------
Fountain Square Quality Growth Fund 85.0% 83.7%
Fountain Square Equity Income Fund 93.9% 93.5%
Fountain Square International Equity Fund 96.7% 96.1%
Fountain Square Quality Bond Fund 92.3% 92.1%
Fountain Square U.S. Government Securities Fund 90.9% 90.7%
Fountain Square Municipal Bond Fund 99.9% 99.9%
Fountain Square Ohio Tax Free Bond Fund 88.2% 88.0%
Fountain Square Commercial Paper Fund 100.0% 91.5%
Fountain Square Treasury Fund 100.0% 100.0%
As of May 12, 1998, the trustees and officers of Cardinal, as a group,
owned less than 1% of the outstanding shares of each of the Cardinal Funds. As
of May 12, 1998, the trustees and officers of FSF owned less than 1% of the
outstanding shares of each of the corresponding Fountain Square Funds.
APPRAISAL RIGHTS. Shareholders are not entitled to any rights of share
appraisal under Cardinal's Declaration of Trust or under the laws of the State
of Ohio in connection with the Reorganization. Shareholders do, however, have
the right to redeem from Cardinal their Cardinal Funds shares at net asset value
until the business day immediately preceding the Closing Date of the
Reorganization. Thereafter, shareholders may redeem from FSF the Fountain Square
Funds shares acquired by them in the Reorganization at net asset value.
QUORUM. In the event that a quorum is not present at the Special
Meeting, or in the event that a quorum is present at the Special Meeting but
sufficient votes to approve the Reorganization Agreement and the transactions
contemplated thereby are not received, the persons named as proxies may propose
one or more adjournments of the Special Meeting to permit further solicitation
of proxies. Any such adjournment will require the affirmative vote of a majority
of those shares affected by the adjournment that are represented at the Special
Meeting in person or by proxy. The persons named as proxies will vote those
proxies which they are entitled to vote FOR the Reorganization Agreement in
favor of such adjournments, and will vote those proxies required to be voted
AGAINST such proposal against any adjournment. A shareholder vote may be taken
with respect to one or more Cardinal Funds (but not all Cardinal Funds) before
any such adjournments if sufficient votes have been received for approval. A
quorum is constituted with respect to a Cardinal Fund by the presence in person
or by proxy of the holders of more than 50% of the votes attributable to the
outstanding shares of the Fund entitled to vote at the Meeting. Cardinal proxies
properly executed and marked with a negative vote or an abstention will be
considered to be present at the Special Meeting for the purposes of determining
the existence of a quorum for the transaction of business.
ANNUAL MEETINGS. Neither Cardinal nor FSF presently intends to hold
annual meetings of shareholders for the election of trustees and other business
unless required by the 1940 Act or other applicable law. Shareholders have the
right to call
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a meeting of shareholders to consider the removal of one or more trustees or for
other matters. Such meetings will be called when requested in writing by the
holders of record of 10% or more of outstanding shares entitled to vote.
ADDITIONAL INFORMATION ABOUT FSF
Information about the Fountain Square Funds is included in the
Prospectuses accompanying this Combined Proxy Statement/Prospectus, which are
incorporated by reference herein. Additional information about the Fountain
Square Funds is included in their Statements of Additional Information dated
September 30, 1997, as supplemented to the date hereof, and dated November 30,
1997, as supplemented to the date hereof, which have been filed with the SEC.
Copies of the Statements of Additional Information may be obtained without
charge by writing to FSF at 38 Fountain Square Plaza, Mail Drop 1090Q6,
Cincinnati, Ohio 45263, or by calling FSF at (888) 799-5353. FSF is subject to
the informational requirements of the Securities Exchange Act of 1934 and the
1940 Act, as applicable, and, in accordance with such requirements, files proxy
materials, reports and other information with the SEC. These materials can be
inspected and copied at the Public Reference Facilities maintained by the SEC at
450 Fifth Street, N.W., Washington, D.C. 20549, and at the offices listed above
and at the SEC's Regional Offices at 500 West Madison Street, Suite 1400,
Chicago, Illinois 60661. Copies of such material can also be obtained from the
Public Reference Branch, Office of Consumer Affairs and Information Services,
Securities and Exchange Commission, Washington D.C. 20549, at prescribed rates.
In addition, these materials and other information regarding companies that file
electronically with the SEC are available on the SEC's Internet Web Site at
http:\\www.sec.gov.
The current trustees and officers of FSF will continue as trustees and
officers following the Reorganization. The names, addresses and birth dates of
each of the trustees as well as information concerning their principal
occupation during the past five years are as follows:
======================================================================================================================
NAME, ADDRESS POSITION(S) HELD PRINCIPAL OCCUPATION
AND BIRTH DATE WITH FSF DURING PAST FIVE YEARS
- ----------------------------------------------------------------------------------------------------------------------
Albert E. Harris Chairman and Trustee Formerly, Chairman of the Board of
5905 Graves Road EDB Holdings, Inc.
Cincinnati, OH 45263 (Retired July, 1993)
July 2, 1932
- ----------------------------------------------------------------------------------------------------------------------
Edward Burke Carey Trustee President of Carey Leggett Realty
394 East Town Street Advisors
Columbus, OH 43215
July 2, 1945
- ----------------------------------------------------------------------------------------------------------------------
Lee A. Carter Trustee Formerly, President of Local Marketing
425 Walnut Street Corporation
Cincinnati, OH 45202 (Retired December 31, 1993)
December 17, 1938
- ----------------------------------------------------------------------------------------------------------------------
Stephen G. Mintos President From January 1987 to present, employee
3435 Stelzer Road of BISYS Fund Services, Inc.
Columbus, OH 43219
February 5, 1954
- ----------------------------------------------------------------------------------------------------------------------
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- ----------------------------------------------------------------------------------------------------------------------
George R. Landreth Vice President From December 1992 to present,
3435 Stelzer Road employee of BISYS Fund Services, Inc.
Columbus, OH 43219
July 11, 1942
- ----------------------------------------------------------------------------------------------------------------------
Jeffrey C. Cusick Secretary and Treasurer From July 1995 to present, employee of
3435 Stelzer Road BISYS Fund Services, Inc.; from
Columbus, OH 43219 September 1993 to July 1995, Assistant
May 19, 1959 Vice President of Federated
Administrative Services; from 1989 to
September 1993, Manager of Client
Services, Federated Administrative
Services
======================================================================================================================
ADDITIONAL INFORMATION ABOUT CARDINAL
Information about Cardinal is incorporated herein by reference from its
Prospectuses and Statements of Additional Information, dated January 30, 1998,
copies of which may be obtained without charge by writing or calling Cardinal at
the address and telephone number shown on the cover page of this Combined Proxy
Statement/Prospectus. Cardinal is subject to the informational requirements of
the Securities Exchange Act of 1934 and the 1940 Act, and, in accordance with
such requirements, files proxy materials reports and other information with
the SEC. Reports and other information filed by Cardinal can be inspected and
copied at the Public Reference Facilities maintained by the SEC at 450 Fifth
Street, N.W., Washington, D.C. 20549, and copies of such material can be
obtained from the Public Reference Branch, Office of Consumer Affairs and
Information Serves, Securities and Exchange Commission, Washington, D.C. 20549,
at prescribed rates.
LITIGATION
Neither Cardinal nor FSF is involved in any litigation that would have
any material adverse financial effect upon either the Cardinal Funds or the
Fountain Square Funds.
FINANCIAL STATEMENTS
The financial statements and financial highlights for Investment A
Shares of Fountain Square Mid Cap Fund, Fountain Square Balanced Fund and
Fountain Square Bond Fund For Income for the fiscal year ended July 31, 1997 are
contained in FSF's Annual Report to Shareholders dated the same date. The
financial statements and financial highlights for Investment A Shares and
Institutional Shares (formerly Trust Shares) of Fountain Square Government Cash
Reserves Fund for the fiscal year ended July 31, 1997 are contained in that
Fund's Prospectus dated September 30, 1997. The financial statements and
financial highlights for Investment A Shares of Fountain Square Mid Cap Fund,
Fountain Square Balanced Fund, Fountain Square Bond Fund For Income and Fountain
Square Government Cash Reserves Fund for the six months ended January 31, 1998
are contained in FSF's Semi-Annual Report to Shareholders dated the same date.
The financial statements and financial highlights for shares of the Cardinal
Funds for the fiscal year ended September 30, 1997, are included in Cardinal's
Annual Report to Shareholders dated the same date.
The statements of assets and liabilities of the Fountain Square Funds,
including the portfolios of investments as of July 31, 1997, and the related
statements of operations, statements of changes in net assets and financial
highlights for the periods indicated in the financial statements included in
FSF's Annual Report to Shareholders and Money Market Funds Prospectuses and
incorporated by reference in FSF's Statements of Additional Information, are
incorporated by reference in this Combined Proxy Statement/Prospectus reliance
on the reports of Ernst & Young LLP, independent accountants, given on the
authority of that firm as experts in accounting and auditing.
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The statements of assets and liabilities of the Cardinal Funds,
including the portfolios of investments as of September 30, 1997, and the
related statements of operations, statements of changes in net assets and
financial highlights for the periods indicated in the financial statements
included in Cardinal's Annual Report to Shareholders and included in
Cardinal's Statement of Additional Information, are incorporated by reference
in this Combined Proxy Statement/Prospectus, have been incorporated herein in
reliance on the report of KPMG Peat Marwick LLP, independent accountants, given
on the authority of that firm as experts in accounting and auditing.
OTHER BUSINESS
Cardinal's Board knows of no other business to be brought before the
Meeting. However, if any other matters come before the Meeting, it is the
intention that proxies which do not contain specific restrictions to the
contrary will be voted on such matters in accordance with the judgment of the
persons named in the enclosed form of proxy.
SHAREHOLDER INQUIRIES
Shareholder inquiries may be addressed to Cardinal in writing at the
address on the cover page of this Combined Proxy Statement/Prospectus or by
telephoning (800) 282-9446.
* * *
SHAREHOLDERS WHO DO NOT EXPECT TO BE PRESENT AT THE MEETING ARE REQUESTED TO
DATE AND SIGN THE ENCLOSED PROXY CARD AND RETURN IT IN THE ENCLOSED ENVELOPE. NO
POSTAGE IS REQUIRED IF MAILED IN THE UNITED STATES.
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APPENDIX A
AGREEMENT AND PLAN OF REORGANIZATION AND LIQUIDATION
AGREEMENT AND PLAN OF REORGANIZATION AND LIQUIDATION dated as of April
27, 1998 (the "Agreement"), by and between FOUNTAIN SQUARE FUNDS, a
Massachusetts business trust ("Fountain Square"), on behalf of certain of its
portfolios now in existence or to be created, Fountain Square Government Cash
Reserves Fund, Fountain Square Tax Exempt Money Market Fund, Fountain Square
Cardinal Fund, Fountain Square Balanced Fund, Fountain Square Mid Cap Fund, and
Fountain Square Bond Fund For Income (the "Fountain Square Portfolios"), FIFTH
THIRD BANK, an Ohio state-chartered bank ("Fifth Third"), THE CARDINAL GROUP, an
Ohio business trust ("Cardinal"), on behalf of its portfolios, Cardinal
Government Securities Money Market Fund, Cardinal Tax Exempt Money Market Fund,
The Cardinal Fund, Cardinal Balanced Fund, Cardinal Aggressive Growth Fund, and
Cardinal Government Obligations Fund (the "Cardinal Portfolios"), and CARDINAL
MANAGEMENT CORP., an Ohio corporation ("CMC").
This Agreement is intended to be and is adopted as a plan of
reorganization and liquidation within the meaning of Section 368(a)(1) of the
United States Internal Revenue Code of 1986, as amended (the "Code"). The
reorganization (the "Reorganization") will consist of the transfer of all of the
Fund Assets and Stated Liabilities as hereinafter defined of Investor A Shares
of The Cardinal Fund, Cardinal Balanced Fund, Cardinal Aggressive Growth Fund,
and Cardinal Government Obligations Fund, and shares of Cardinal Government
Securities Money Market Fund and Cardinal Tax Exempt Money Market Fund held by
investors who are not eligible to invest in Institutional Shares of the Fountain
Square Portfolios, in exchange for Investment A Shares of the corresponding
Fountain Square Portfolios and of Investor Y Shares of The Cardinal Fund,
Cardinal Balanced Fund, Cardinal Aggressive Growth Fund, and Cardinal Government
Obligations Fund, and shares of Cardinal Government Securities Money Market Fund
and Cardinal Tax Exempt Money Market Fund held by investors who are eligible to
invest in Institutional Shares of the Fountain Square Portfolios, in exchange
for Institutional Shares of the corresponding Fountain Square Portfolios (as
described in Schedule A hereto) (all shares of the Fountain Square Portfolios
being collectively referred to as the "Acquiring Fund Shares") and the
distribution, after the Closing Date as hereinafter defined, of such shares of
the Fountain Square Portfolios to the shareholders of the corresponding
Cardinal Portfolios in liquidation of the Cardinal Portfolios as provided
herein, all upon the terms and conditions hereinafter set forth in this
Agreement.
WHEREAS, Cardinal and Fountain Square are registered open-end,
management investment companies and the Cardinal Portfolios own securities which
generally are assets of the character in which the Fountain Square Portfolios
are permitted to invest;
WHEREAS, Fountain Square is authorized to issue the Acquiring Fund
Shares and Cardinal is authorized to issue its shares of beneficial interest;
WHEREAS, Fifth Third serves as investment adviser to the Fountain
Square Portfolios;
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WHEREAS, CMC, an investment adviser registered as such under the
Investment Advisers Act of 1940, as amended, serves as investment adviser to the
Cardinal Portfolios;
WHEREAS, the parties intend that two of the Fountain Square Portfolios,
the Fountain Square Tax Exempt Fund, and the Fountain Square Cardinal Fund, will
have nominal assets and liabilities before the Reorganization and will continue
investment operations of the Cardinal Tax Exempt Money Market Fund, and The
Cardinal Fund, respectively, after the Reorganization;
WHEREAS, the Board of Trustees of Fountain Square, including a majority
of the Trustees who are not "interested persons" of Fountain Square as defined
under the Investment Company Act of 1940, as amended (the "1940 Act"), has
determined that the exchange of all of the Fund Assets (as defined below) and
assumption of all of the Stated Liabilities (as defined below) of the Cardinal
Portfolios for Acquiring Fund Shares is in the best interests of Fountain Square
and the Fountain Square Portfolios' shareholders and that the interests of the
existing shareholders of Fountain Square and the Fountain Square Portfolios
would not be diluted as a result of the Reorganization; and
WHEREAS, the Board of Trustees of Cardinal, including a majority of the
Trustees who are not "interested persons" (as defined under the 1940 Act) of
Cardinal, has determined that the exchange of all of the Fund Assets (as defined
below) and assumption of the Stated Liabilities of the Cardinal Portfolios for
the Acquiring Fund Shares is in the best interests of the Cardinal Portfolios'
shareholders, that the interests of the shareholders of the Cardinal Portfolios
would not be diluted as a result of the Reorganization and determined that,
subsequent to the Reorganization, the Cardinal Portfolios will cease operations;
NOW THEREFORE, for and in consideration of the mutual covenants and
agreements hereinafter set forth, the parties agree as follows:
1. TRANSFER OF ASSETS AND ASSUMPTION OF LIABILITIES OF THE
CARDINAL PORTFOLIOS IN EXCHANGE FOR THE ACQUIRING FUND SHARES
AND LIQUIDATION OF CARDINAL.
1.1 Subject to the terms and conditions contained herein, and
on the basis of the representations and warranties contained herein,
each Cardinal Portfolio shall assign, transfer, and convey to its
corresponding Fountain Square Portfolio identified in Schedule A (each,
an "Acquiring Fund"), all of the Fund Assets (as defined in paragraph
1.2) and Stated Liabilities (as defined in paragraph 1.3) of each of
the Cardinal Funds (each, an "Acquired Fund") at the time of the
Closing (defined below), and Fountain Square agrees in exchange
therefor to assume such Stated Liabilities and deliver to CMC, as
transfer agent for the benefit of Cardinal, the number of Acquiring
Fund Shares, including fractional Acquiring Fund Shares, determined as
set forth in paragraph 2.3 of this Agreement. Such transactions shall
take place at the closing (the "Closing") on the closing date (the
"Closing Date"), as provided in paragraph 3.1 of this Agreement. In
lieu of delivering certificates for the Acquiring Fund Shares, the
2
57
Acquiring Fund shall credit the Acquiring Fund Shares to the Acquired
Fund's account on the stock record books of the Acquiring Fund's
transfer agent and shall deliver a confirmation thereof to the
applicable Acquired Fund.
1.2 With respect to each Acquired Fund, the Fund Assets shall
consist of all property and assets of any nature whatsoever, including,
without limitation, all cash, except an amount necessary to pay any
unpaid dividends and distributions as provided in paragraph 5.6, cash
equivalents, securities, claims (whether absolute or contingent, known
or unknown, accrued or unaccrued) and receivables (including dividend
and interest receivables) owned by each Acquired Fund, and any deferred
or prepaid expenses shown as an asset on each Acquired Fund's books on
the Closing Date, all other intangible property and all books and
records belonging to the Acquired Funds.
1.3 With respect to each Acquired Fund, the Stated Liabilities
shall consist of all liabilities and obligations disclosed on an
unaudited statement of assets and liabilities for the Acquired Fund
prepared by or on behalf of Cardinal as of the Valuation Date (as
defined in paragraph 2.1), in accordance with generally accepted
accounting principles consistently applied from the prior audited
period. The Acquiring Fund shall assume only the Stated Liabilities of
its corresponding Acquired Fund, and no other liabilities or
obligations, whether absolute or contingent, known or unknown, accrued
or unaccrued. Notwithstanding the foregoing, unamortized organizational
expenses of each of the Acquired Funds shall not be transferred or
assumed hereunder. The parties have been advised that such expenses
will be paid to such Acquired Funds by one or more third parties and
will be eliminated from the balance sheets of such Acquired Funds prior
to the Closing. Each Acquired Fund will endeavor to discharge all of
its known liabilities and obligations prior to the Closing Date.
1.4 Delivery of the Fund Assets of each Acquired Fund to be
transferred shall be made on the Closing Date (defined below) and shall
be delivered to Fifth Third Bank, Cincinnati, Ohio, Fountain Square's
custodian (the "Custodian"), for the account of the corresponding
Acquiring Fund, together with proper instructions and all documents
necessary to transfer such assets to the account of the Acquiring Fund,
free and clear of all liens, encumbrances, rights, restrictions and
claims, except as may be indicated in a schedule delivered by the
Acquired Fund to the Acquiring Fund immediately prior to the Closing.
All cash delivered shall be in the form of currency or immediately
available funds payable to the order of the Custodian.
1.5 At least 15 business days prior to the Closing Date, each
Acquired Fund will provide the corresponding Acquiring Fund with a
schedule of its Fund Assets and its Stated Liabilities, and each
Acquiring Fund will provide the corresponding Acquired Fund with a copy
of its current investment objective and policies. Each Acquired Fund
reserves the right to sell any of the securities or other assets shown
on the schedule of Fund Assets prior to the Closing Date but will not,
without the prior approval of the corresponding Acquiring Fund, acquire
any additional securities other than securities
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which the Acquiring Fund is permitted to purchase in accordance with
its stated investment objective and policies. At least 10 business days
prior to the Closing Date, the Acquiring Fund will advise the
corresponding Acquired Fund of any investments shown on the schedule
provided by the Acquired Fund which the Acquiring Fund would not be
permitted to hold, pursuant to its stated investment objective and
policies or otherwise. In the event that the Acquired Fund holds any
investments that its corresponding Acquiring Fund would not be
permitted to hold under its stated investment objective or policies,
the Acquired Fund, if requested by the Acquiring Fund and, to the
extent permissible and consistent with the Acquired Fund's own
investment objective and policies, will dispose of such securities
prior to the Closing Date. In addition, if it is determined that the
holdings of the Acquired Fund and the Acquiring Fund, when aggregated,
would contain investments exceeding certain percentage limitations to
which the Acquiring Fund is or will be subject with respect to such
investments, the Acquired Fund, if requested by the Acquiring Fund and,
to the extent permissible and consistent with the Acquired Fund's own
investment objective and policies, will dispose of and/or reinvest a
sufficient amount of such investments as may be necessary to avoid
violating such limitations as of the Closing Date.
1.6 Each Acquired Fund will pay or cause to be paid to its
corresponding Acquiring Fund any dividends or interest received on or
after the Closing Date with respect to Fund Assets transferred to the
Acquiring Fund hereunder. Each Acquired Fund will transfer to the
Acquiring Fund any distributions, rights, or other assets received by
the Acquired Fund after the Closing Date as distributions on, or with
respect to, the Fund Assets transferred. Such distributions, rights or
other assets shall be deemed included in Fund Assets transferred to the
Acquiring Fund on the Closing Date and shall not be separately valued.
1.7 As soon after the Closing Date as is practicable (the
"Liquidation Date"), each Acquired Fund will liquidate and distribute
pro rata to such Acquired Fund's shareholders of record, determined as
of the close of business on the Closing Date (the "Acquired Fund
Shareholders"), the Acquiring Fund Shares received by the Acquired Fund
pursuant to paragraph 1.1. Such liquidation and distribution will be
accomplished by the Acquiring Fund or its transfer agent transferring
the Acquiring Fund Shares to an account for each shareholder on the
books of the Acquiring Fund's transfer agent in the name of each
Acquired Fund Shareholder and representing the pro rata number of the
Acquiring Fund Shares due each Acquired Fund Shareholder. All issued
and outstanding shares of each Acquired Fund will simultaneously be
canceled on the books of the Acquired Fund.
1.8 Any transfer taxes payable upon issuance of the Acquiring
Fund Shares in a name other than the registered holder of the Acquired
Fund shares on the books of the Acquired Fund as of the Closing Date
shall, as a condition of such issuance and transfer, be paid by the
person to whom such Acquiring Fund Shares are to be issued and
transferred.
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1.9 Following the transfer of Fund Assets by each Acquired
Fund to its corresponding Acquiring Fund, the assumption of the
Acquired Fund's Stated Liabilities by the Acquiring Fund, and the
distribution by the Acquired Fund of the Acquiring Fund Shares received
by it pursuant to paragraph 1.7, Cardinal shall terminate the
registration of such Acquired Fund and its shares at all appropriate
federal and state agencies. Upon the transfer of Fund Assets by all of
the Acquired Funds to their corresponding Acquiring Funds, the
assumption of all of the Acquired Funds' Stated Liabilities by the
Acquiring Funds, and the distribution by all of the Acquired Funds of
the Acquiring Fund Shares received, Cardinal shall dissolve the trust.
Any reporting responsibility of an Acquired Fund is and shall remain
the exclusive responsibility of the Acquired Fund up to and including
the date on which the particular Acquired Fund is terminated, dissolved
and deregistered with federal and state securities or "blue sky"
authorities.
1.10 The failure of one Acquired Fund to consummate the
transactions contemplated hereby shall not affect the consummation or
validity of the distribution of Acquiring Fund Shares to the
shareholders of any other Acquired Fund in liquidation of such Acquired
Fund, and the provisions of this Agreement shall be construed to effect
this intent.
2. VALUATION.
2.1 The value of the Fund Assets of each Acquired Fund to be
acquired by an Acquiring Fund hereunder shall be the current market
value of such Fund Assets computed as of the close of business on the
last business day preceding the Closing Date (such time and date being
hereinafter called the "Valuation Date"), using the valuation
procedures set forth in the Acquiring Fund's then-current prospectus or
statement of additional information.
2.2 The net asset value of an Acquiring Fund Share shall be
the net asset value per share computed as of the close of business on
the Valuation Date, using the valuation procedures set forth in the
Acquiring Fund's then-current prospectus or statement of additional
information, provided that if the Acquiring Fund has no assets or
liabilities as of the Valuation Date, the net asset value of an
Acquiring Fund Share shall equal the net asset value per share of the
corresponding Acquired Fund on the Valuation Date.
2.3 The number of Acquiring Fund Shares to be issued
(including fractional shares, if any) in exchange for each Acquired
Fund's assets shall be determined by dividing the value of the Fund
Assets attributable to the Acquired Fund, net of all known liabilities,
determined using the same valuation procedures referred to in paragraph
2.1, by the net asset value of one Acquiring Fund Share of the
corresponding Acquiring Fund, determined in accordance with
paragraph 2.2.
2.4 All computations of value contemplated by this Section 2
shall be made by Fifth Third in accordance with its regular practice
and shall be reviewed by its
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independent accountants. Fifth Third shall deliver a copy of a
valuation report reviewed by its independent accountants to Cardinal at
the Closing.
3. CLOSING AND CLOSING DATE.
3.1 The Closing Date shall be July 13, 1998, or such later
date as the parties may mutually agree. All acts taking place at the
Closing Date shall be deemed to take place simultaneously as of 9:00
a.m. on the Closing Date unless otherwise provided. The Closing shall
be held at 9:00 a.m. at the offices of Fifth Third, Cincinnati, Ohio,
or such other time and/or place as the parties may mutually agree.
3.2 If on the Valuation Date: (a) the primary trading market
for portfolio securities of an Acquiring Fund or the applicable
Acquired Fund shall be closed to trading or trading thereon shall be
restricted; or (b) trading or the reporting of trading shall be
disrupted so that accurate appraisal of the value of the net assets of
the Acquiring Fund or the Acquired Fund is impracticable, the Closing
Date shall be postponed with respect to the affected Acquired Fund
until the first business day after the day when trading shall have been
fully resumed and reporting shall have been restored, or such other
time as the parties may mutually agree.
3.3 Cardinal, on behalf of each Acquired Fund, shall instruct
CMC, as transfer agent for the Acquired Fund, to deliver to Fountain
Square at the Closing, a certificate of an authorized officer stating
that its records contain the names, addresses and taxpayer
identification numbers of the Acquired Fund Shareholders and the number
of outstanding shares owned by each such shareholder as of the close of
business on the Valuation Date. With respect to each Acquired Fund,
Cardinal shall provide Fountain Square and its transfer agent with
immediate access from and after the Closing Date to all documentation,
including computer, electronic or other similar forms, of such records.
Each Acquiring Fund shall issue and deliver on the Closing Date to the
Secretary of Cardinal a confirmation evidencing the Acquiring Fund
Shares to be credited, and that such Acquiring Fund Shares have been
credited to the respective accounts of the Acquired Fund Shareholders
on the books of the Acquiring Fund. At the Closing, each party shall
deliver to the other such bills of sale, checks, assignments, share
certificates, if any, receipts or other documents as such other party
or its counsel may reasonably request.
4. REPRESENTATIONS AND WARRANTIES.
4.1 Each of Cardinal and CMC represents and warrants to
Fountain Square as follows:
(a) Cardinal is a validly existing business trust,
duly organized under the laws of the State of Ohio and has the
power to carry on its business as it is now being conducted
and to carry out its obligations under this Agreement.
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Cardinal has qualified as a foreign business trust in each
jurisdiction where the ownership of its property or the
conduct of its business requires such qualification.
(b) Cardinal is registered under the 1940 Act as an
open-end, management investment company, and such registration
has not been revoked or rescinded and is in full force and
effect as of the date of this Agreement.
(c) Cardinal is not in material breach or violation
of, and the execution, delivery, and performance of this
Agreement, subject to approval by Cardinal's shareholders,
will not result in a material breach or violation of, its
Declaration of Trust or By-Laws or of any agreement,
indenture, instrument, contract, lease, or other undertaking
to which Cardinal is a party or by which it is bound.
(d) Cardinal has no contracts or other commitments
outstanding which will result in liability to it after the
Closing Date not reflected on the Acquired Funds' balance
sheets other than liabilities in the ordinary course of
business or otherwise disclosed to Fifth Third and Fountain
Square.
(e) No material litigation, administrative proceeding
or investigation of or before any court or governmental body
is currently pending or, to Cardinal's knowledge, threatened
against any Cardinal or Acquired Fund, or any of Cardinal's or
the Acquired Funds' properties or assets which, if adversely
determined, would materially and adversely affect Cardinal's
or the Acquired Fund's financial condition or the conduct of
its business. Neither CMC nor Cardinal knows of any facts
which might form the basis for the institution of such
proceedings, and neither Cardinal nor any Acquired Fund is a
party to or subject to the provisions of any order, decree or
judgment of any court or governmental body which materially
and adversely affects an Acquired Fund's business or
Cardinal's ability to consummate the transactions herein
contemplated.
(f) The Statement of Assets and Liabilities,
Statement of Operations and Statement of Changes in Net Assets
of each Acquired Fund as of and for the year ended September
30, 1997, have been audited by KPMG Peat Marwick LLP,
independent auditors, and have been prepared in accordance
with generally accepted accounting principles, consistently
applied, and such statements (copies of which have been or
will be furnished to Fountain Square) fairly reflect the
financial condition of each Acquired Fund as of such date, and
there are no liabilities of the Acquired Funds, known to
Cardinal or to CMC, contingent or otherwise, as of such date
not disclosed therein.
(g) Since September 30, 1997, there has not been any
material adverse change in any Acquired Fund's financial
condition, assets, liabilities, or business
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other than changes occurring in the ordinary course of
business, or any incurrence by any Acquired Fund of any
indebtedness for borrowed money, except indebtedness pursuant
to a line of credit established with Fifth Third or as
otherwise disclosed in writing to Fifth Third and Fountain
Square and accepted by the corresponding Acquiring Fund.
(h) At the Closing Date, all federal and other tax
returns and reports of each Acquired Fund required by law (or
permitted extensions thereto) will have been filed, and
related taxes will have been paid or provision will have been
made for the payment thereof for all periods ending on or
before the Closing Date, and to the best of Cardinal's
knowledge no such return is currently under audit and no
assessment has been asserted with respect to such returns. All
tax liabilities of Cardinal and each Acquired Fund have been
adequately provided for on its books, and no tax deficiency or
liability of Cardinal or each Acquired Fund has been asserted,
and no question with respect thereto has been raised, by the
Internal Revenue Service or by any state or local tax
authority for taxes in excess of those already paid.
(i) For each fiscal year (or part thereof) of its
operation, each Acquired Fund has met the requirements of
Subchapter M of the Code for qualification and treatment as a
regulated investment company and has taken and will take all
necessary and required actions to maintain such status.
(j) All issued and outstanding shares of each
Acquired Fund are, and at the Closing Date will be, duly
authorized, validly issued and outstanding, and fully paid and
non-assessable. All of the issued and outstanding shares of
each Acquired Fund will, at the time of the Closing, be held
by the persons and in the amounts set forth in the records of
its transfer agent as provided in paragraph 3.3 of this
Agreement. No Acquired Fund has outstanding any options,
warrants or other rights to subscribe for or purchase any
Acquired Fund shares, nor is there outstanding any security
convertible into Acquired Fund shares.
(k) All of the issued and outstanding shares of each
Acquired Fund have been, and as of the Closing Date will be,
duly registered under the Securities Act of 1933, as amended
(the "1933 Act"), and all appropriate notices, or exemptions
from registration, to the extent required thereby under each
state securities or "blue sky" law of every state in which
such Acquired Fund has offered or sold its shares, have been,
and as of the Closing Date, will be filed and maintained.
(l) At the Closing Date, each Acquired Fund will have
good and marketable title to its Fund Assets with full right,
power, and authority to sell, assign, transfer, and deliver
the Fund Assets and Stated Liabilities to be transferred by it
pursuant to this Agreement.
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(m) The execution, delivery, and performance of this
Agreement has been duly authorized by all necessary action on
the part of Cardinal's Board of Trustees and, subject to the
approval of each Acquired Fund's shareholders, this Agreement
constitutes the valid and legally binding obligation of
Cardinal enforceable in accordance with its terms, subject to
the effect of bankruptcy, insolvency, reorganization,
moratorium, fraudulent conveyance, and other similar laws
relating to or affecting creditors' rights generally and court
decisions with respect thereto, and to general principles of
equity and the discretion of the court before which a
proceeding is brought (regardless of whether the
enforceability is considered in a proceeding in equity or at
law).
(n) No consent, approval, authorization or order of
any court or governmental authority is required for the
consummation by Cardinal or any Acquired Fund of the
transactions contemplated by this Agreement, except such as
have been or will be obtained under the 1933 Act, the 1934 Act
and the 1940 Act and such as may be required under state
securities or "blue sky" laws.
(o) Materials and information provided by Cardinal,
in connection with the preparation of, or contained in the
Registration Statement (as defined in paragraph 5.5) will not,
on the effective date of the Registration Statement and on the
Closing Date, contain any untrue statement of material fact or
omit to state a material fact required to be stated therein or
necessary to make the statements therein, in light of the
circumstances under which such statements were made, not
misleading.
4.2 Each of Fountain Square and Fifth Third represents and warrants to
Cardinal as follows:
(a) Fountain Square is a validly existing business
trust, duly organized and in good standing under the laws of
the Commonwealth of Massachusetts and has the power to carry
on its business as it is now being conducted and to carry out
its obligations under this Agreement. Fountain Square has
qualified as a foreign business trust in each jurisdiction
where the ownership of its property or the conduct of its
business requires such qualification.
(b) Fountain Square is registered under the 1940 Act
as an open-end management investment company, and such
registration has not been revoked or rescinded and is in full
force and effect as of the date of this Agreement.
(c) Fountain Square is not in material breach or
violation of, and the execution, delivery, and performance of
this Agreement will not result in a material breach or
violation of, its Declaration of Trust or By-Laws or of any
agreement, indenture, instrument, contract, lease, or other
undertaking to which Fountain Square is a party or by which it
is bound.
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(d) Fountain Square has no contracts or other
commitments outstanding which will result in liability to it
after the Closing Date not reflected in the Acquiring Funds'
balance sheets other than liabilities in the ordinary course
of business or otherwise disclosed to CMC and Cardinal.
(e) No material litigation, administrative proceeding
or investigation of or before any court or governmental body
is currently pending or, to Fountain Square's knowledge,
threatened against Fountain Square or any Acquiring Fund, or
any of Fountain Square's or the Acquiring Funds' properties or
assets which, if adversely determined, would materially and
adversely affect Fountain Square's or the Acquiring Fund's
financial condition or the conduct of its business. Neither
Fifth Third nor Fountain Square knows of any facts which might
form the basis for the institution of such proceedings, and
neither Fountain Square nor any Acquiring Fund is a party to
or subject to the provisions of any order, decree or judgment
of any court or governmental body which materially and
adversely affects its business or its ability to consummate
the transactions herein contemplated.
(f) The Statement of Assets and Liabilities,
Statement of Operations and Statement of Changes in Net Assets
of each Acquiring Fund as of and for the year ended July 31,
1997, have been audited by Ernst & Young, LLP, independent
auditors, and have been prepared in accordance with generally
accepted accounting principles, consistently applied, and such
statements (copies of which have been or will be furnished to
Cardinal) fairly reflect the financial condition of each
Acquiring Fund as of such date, and there are no liabilities
of the Acquiring Funds, known to Fountain Square or Fifth
Third, contingent or otherwise, as of such date not disclosed
therein.
(g) Since July 31, 1997, there has not been any
material adverse change in any Acquiring Fund's financial
condition, assets, liabilities, or business other than changes
occurring in the ordinary course of business, or any
incurrence by any Acquiring Fund of any indebtedness for
borrowed money, except as disclosed in writing to CMC and
Cardinal and accepted by the corresponding Acquired Fund.
(h) The unaudited Statements of Assets and
Liabilities, Statement of Operations and Statements of Changes
in Net Assets for each Acquiring Funds for the six months
ended January 31, 1998 will be prepared in accordance with
generally accepted accounting principles and furnished to
Cardinal promptly upon completion thereof. Such statements
will fairly reflect the financial condition of each Acquiring
Fund as of such date.
(i) At the Closing Date, all federal and other tax
returns and reports of each Acquiring Fund required by law (or
permitted extensions thereto) will
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have been filed and related taxes will have been paid or
provision will have been made for the payment thereof for all
periods ending on or before the Closing Date, and to the best
of Fountain Square's knowledge, no federal or other tax return
is currently under audit and no assessment has been asserted
with respect to such returns. All tax liabilities of Fountain
Square and each Acquiring Fund have been adequately provided
for on its books, and no tax deficiency or liability of
Fountain Square or each Acquiring Fund has been asserted, and
no question with respect thereto has been raised, by the
Internal Revenue Service or by any state or local tax
authority for taxes in excess of those already paid.
(j) For each fiscal year (or part thereof) of its
operation, each Acquiring Fund has met the requirements of
Subchapter M of the Code for qualification and treatment as a
regulated investment company and has taken and will take all
necessary and required actions to maintain such status.
(k) All issued and outstanding shares of each
Acquiring Fund are, including the Acquiring Fund Shares to be
issued to the Acquired Fund Shareholders pursuant hereto, and
at the Closing Date will be, duly authorized, validly issued
and outstanding, and fully paid and non-assessable. No
Acquiring Fund has outstanding any options, warrants or other
rights to subscribe for or purchase any Acquiring Fund Shares,
nor is there outstanding any security convertible into
Acquiring Fund Shares.
(l) All of the issued and outstanding shares of each
Acquiring Fund are, and as of the Closing Date will be, duly
registered under the 1933 Act and all appropriate notices, or
exemptions from registration, to the extent required thereby
under each state securities or "blue sky" law of every state
in which such Acquiring Fund has offered or sold its shares,
have been, and as of the Closing Date, will be filed and
maintained.
(m) At the Closing Date, each Acquiring Fund will
have good and marketable title to its assets with full right,
power, and authority to purchase the Fund Assets and assume
the Stated Liabilities of each Acquired Fund to be transferred
to it pursuant to this Agreement.
(n) The execution, delivery, and performance of this
Agreement has been duly authorized by all necessary action on
the part of Fountain Square's Board of Trustees, and, subject
to the approval by each Acquired Fund's shareholders, this
Agreement constitutes the valid and legally binding obligation
of Fountain Square enforceable in accordance with its terms,
subject to the effect of bankruptcy, insolvency,
reorganization, moratorium, fraudulent conveyance and other
similar laws relating to or affecting creditors' rights
generally and court decisions with respect thereto, and to
general principles of equity and the
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discretion of the court before which a proceeding is brought
(regardless of whether the enforceability is considered in a
proceeding in equity or at law).
(o) No consent, approval, authorization or order of
any court or governmental authority is required for the
consummation by Fountain Square or any Acquiring Fund of the
transactions contemplated by this Agreement, except such as
have been or will be obtained under the 1933 Act, the 1934 Act
and the 1940 Act and such as may be required under state
securities or "blue sky" laws.
(p) The Registration Statement (as defined in
paragraph 5.5), except with respect to materials and
information provided by Cardinal and contained therein, will,
on the effective date of the Registration Statement and on the
Closing Date, not contain any untrue statement of material
fact or omit to state a material fact required to be stated
therein or necessary to make the statements therein, in light
of the circumstances under which such statements were made,
not misleading.
(q) The current prospectuses and statements of
additional information of each Acquiring Fund set forth in
Post-Effective Amendments to the Trust's registration
statement on Form N-1A, as supplemented, (collectively, the
"Acquiring Fund Prospectuses"), will as of their date conform
in all material respects to the applicable requirements of the
1933 Act and the 1940 Act and the rules and regulations of the
Securities and Exchange Commission (the "SEC") thereunder and
will not include any untrue statement of a material fact or
omit to state any material fact required to be stated therein
or necessary to make the statements therein, in light of the
circumstances under which they were made, not misleading.
(r) Fifth Third will assume all of Fountain Square's
expenses of the Reorganization, including legal fees of
Fountain Square.
(s) Fifth Third will assume all of Cardinal's
expenses of the Reorganization, including legal fees of
Cardinal, and the costs of preparing, printing, copying, and
mailing proxy solicitation materials to each Acquired Fund's
shareholders.
5. COVENANTS OF FOUNTAIN SQUARE, FIFTH THIRD, CARDINAL AND CMC.
5.1 Fountain Square and Cardinal each will operate its
business in the ordinary course between the date hereof and the Closing
Date, it being understood that such ordinary course of business will
include the customary payment of dividends and distributions.
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5.2 Subject to the provisions of this Agreement, Fountain
Square and Cardinal will each take, or cause to be taken, all action,
and do or cause to be done, all things reasonably necessary, proper, or
advisable to consummate and make effective the transactions
contemplated by this Agreement.
5.3 As promptly as practicable, but in any case within sixty
days after the Closing Date, Cardinal, on behalf of each Acquired Fund,
shall furnish its corresponding Acquiring Fund, in such form as is
reasonably satisfactory to Fountain Square, a statement of the earnings
and profits of each Acquired Fund for federal income tax purposes which
will be carried over to the applicable Acquiring Fund as a result of
Section 381 of the Code and which will be certified by an authorized
officer of Cardinal and an authorized officer of CMC.
5.4 On the Closing Date, Cardinal, on behalf of each Acquired
Fund, shall furnish to its corresponding Acquiring Fund, a final
statement of the total amount of Fund Assets and Stated Liabilities of
each Acquired Fund as of the Closing Date, which statement shall be
certified by an officer of Cardinal as being determined in accordance
with generally accepted accounting principles consistently applied and
as being valued in accordance with Section 2 hereof.
5.5 As promptly as practicable after the date hereof, Cardinal
will call a meeting of each Acquired Fund's shareholders to consider
and act upon this Agreement and to take all other action necessary and
appropriate to obtain approval of the transactions contemplated herein.
Fountain Square shall prepare and file with the SEC a Registration
Statement on Form N-14 complying in all material respects with the
requirements of the 1933 Act, the Securities Exchange Act of 1934, as
amended (the "1934 Act"), the 1940 Act, and applicable rules and
regulations thereunder (the "Registration Statement"), relating to such
meeting of the shareholders of each Acquired Fund. Fountain Square
shall take all necessary and reasonable actions to have such
Registration Statement declared effective by the SEC. Cardinal agrees
to provide Fountain Square with information relating to each Acquired
Fund which Fountain Square deems necessary, proper or advisable in the
preparation of the Registration Statement or consummation of the
transactions contemplated herein.
5.6 Prior to the Closing, each Acquired Fund shall have
declared a dividend or dividends which, together with all previous such
dividends, shall have the effect of distributing to its shareholders
all of its investment company taxable income for its taxable year ended
September 30, 1997 and the short taxable year beginning on October 1,
1997 and ending on the Closing Date (computed without regard to any
deduction for dividends paid), and all of its net capital gain realized
in its taxable year beginning on October 1, 1997 and ending on the
Closing Date (after reduction for any capital loss carryover).
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5.7 As soon after the Closing Date as is reasonably
practicable, Cardinal, on behalf of each Acquired Fund shall (i)
prepare and file all federal and other tax returns and reports of each
Acquired Fund required by law to be filed with respect to all periods
ending on or before the Closing Date but not previously filed, and (ii)
pay all federal and other taxes shown as due and/or all federal and
other taxes that were unpaid as of the Closing Date.
5.8 As soon after the Closing Date as is reasonably
practicable, Cardinal will file any final regulatory reports,
including, but not limited to, any Form N-SAR and Rule 24f-2 filings
with respect to the Acquired Funds, and will take all other steps as
are necessary and proper to effect the termination or declassification
of such Acquired Funds in accordance with the laws of the state of Ohio
and other applicable requirements.
5.9 For a period of three years after the Closing Date, at
least 75 percent of the Trustees of Fountain Square shall not be
"interested persons" (as defined in the 1940 Act) of Fifth Third or
CMC.
5.10 For a period of two years after the Closing Date no
unfair burden shall be imposed upon Fountain Square or an Acquiring
Fund as a result of the transactions contemplated herein; in
furtherance of such covenant, during such two-year period, Fountain
Square will not (a) pay, directly or indirectly, any compensation to
Fifth Third, CMC or any interested person of either of them (i) for
other than bona fide investment advisory or other services, which other
bona fide services may include, without limitation, serving as
administrator, sub-administrator, custodian, transfer agent, fund
accountant or a dealer under a Rule 12b-1 related agreement, or (ii)
for the purchase or sale of securities or other property to, from or on
behalf of Fountain Square, other than where such sales are permitted by
Section 15(f)(1)(B) of the 1940 Act, (b) enter into, participate in, or
pay compensation in connection with any arrangement that facilitates or
is intended to facilitate the payment of compensation proscribed by (a)
herein, or (c) increase compensation payable to Fifth Third, CMC or any
interested person of either of them which results in an increase in the
expense ratios of any of the Acquiring Funds, as presented to the
shareholders of the Acquired Funds in the Registration Statement.
5.11 Fountain Square agrees to use all best efforts to obtain
the approvals and authorizations required by the 1933 Act, the 1940
Act, and all applicable state securities or "blue sky" laws in order to
continue its operations after the Closing Date.
5.12 Cardinal, on behalf of each Acquired Fund, covenants that
the corresponding Acquiring Fund Shares to be issued hereunder are not
being acquired for the purpose of making any distribution thereof,
other than in accordance with the terms of this Agreement.
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6. CONDITIONS PRECEDENT TO OBLIGATIONS OF FOUNTAIN SQUARE.
The obligations of Fountain Square to consummate the transactions
provided for herein shall be subject to the performance by Cardinal and CMC of
all the obligations to be performed by them hereunder on or before the Closing
Date and, in addition thereto, the following conditions:
6.1 All representations and warranties of Cardinal and CMC
contained in this Agreement shall be true and correct in all material
respects as of the date hereof and, except as they may be affected by
the transactions contemplated by this Agreement, as of the Closing Date
with the same force and effect as if made on and as of the Closing
Date.
6.2 Cardinal shall have delivered to Fountain Square a
statement of the Fund Assets and Stated Liabilities of each Acquired
Fund, together with a list of each Acquired Fund's portfolio securities
showing the tax costs of such securities by lot and the holding periods
of such securities, as of the Closing Date, certified by an authorized
officer of Cardinal.
6.3 Cardinal and CMC shall have delivered to Fountain Square
on the Closing Date a certificate executed in their names by two of
their respective officers, in form and substance reasonably
satisfactory to Fountain Square, to the effect that the representations
and warranties of Cardinal and CMC made in this Agreement are true and
correct at and as of the Closing Date, except as they may be affected
by the transactions contemplated by this Agreement, and as to such
other matters as Fountain Square shall reasonably request.
6.4 On or before the Closing Date, all conditions to the
closing of the Agreement and Plan of Merger among The Ohio Company,
Fifth Third Bancorp and Fifth Third M Corp. dated December 22, 1997,
shall have been satisfied or waived and such closing shall have
occurred.
6.5 Fountain Square shall have received an opinion of Baker &
Hostetler LLP, in form reasonably satisfactory to Fountain Square and
its counsel and dated the Closing Date, to the effect that (i) Cardinal
is a validly existing business trust, duly organized under the laws of
the state of Ohio, its Report of Operation of Business Trust is in full
force and effect and Cardinal has the power to carry on its business as
it is now being conducted and to carry out its obligations under this
Agreement, (ii) this Agreement has been duly authorized, executed, and
delivered by Cardinal and, assuming due authorization, execution and
delivery of this Agreement by Fountain Square, CMC and Fifth Third, is
a valid and legally binding obligation of Cardinal, subject to the
effect of bankruptcy, insolvency, reorganization, moratorium,
fraudulent conveyance, and other similar laws relating to or affecting
creditors' rights generally and court decisions with respect thereto,
and to general principles of equity and the discretion of the court
before
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which a proceeding is brought (regardless of whether the enforceability
is considered in a proceeding in equity or at law), (iii) each Acquired
Fund has the full right, power and authority to sell, assign, transfer
and deliver the Fund Assets and Stated Liabilities, and, in accordance
with the terms of this Agreement, each Acquired Fund will have duly
sold, assigned, conveyed, transferred and delivered such assets and
liabilities to Fountain Square, (iv) the execution, delivery and
performance of this Agreement will not result in a material breach or
violation of Cardinal's Declaration of Trust or By-Laws, or any
agreement, indenture, instrument, contract, lease, or other undertaking
known to such counsel, to which Cardinal is a party or by which it is
bound; provided that, such counsel may rely upon a certificate of an
officer of Cardinal whose responsibility it is to advise Cardinal with
respect to such matters, (v) no consent, approval, authorization or
order of any court or governmental authority is required for the
consummation by Cardinal or any Acquired Fund of the transactions
contemplated by this Agreement, except such as have been obtained under
the 1933 Act, the 1934 Act and the 1940 Act and such as may be required
under state securities or "blue sky" laws; provided that such opinion
shall not be deemed to apply to Fountain Square's compliance
obligations under the 1933 Act, 1934 Act, 1940 Act, or state securities
or "blue sky" laws, and (vi) no material litigation, administrative
proceeding or investigation of or before any court or governmental body
is currently pending or, to such counsel's knowledge, threatened
against Cardinal or any Acquired Fund, or any of Cardinal's or the
Acquired Funds' properties or assets which, if adversely determined,
would materially and adversely affect the Acquired Fund's financial
condition or the conduct of its business.
6.6 With respect to each Acquired Fund, Cardinal's Board of
Trustees, including a majority of Trustees who are not "interested
persons" as defined under the 1940 Act, has determined that the
Reorganization is in the best interests of each Acquired Fund and that
the interests of the existing shareholders of each Acquired Fund would
not be diluted as a result of the Reorganization.
7. CONDITIONS PRECEDENT TO OBLIGATIONS OF CARDINAL.
The obligations of Cardinal to consummate the transactions provided for
herein shall be subject to the performance by Fountain Square and Fifth Third of
all the obligations to be performed by them hereunder on or before the Closing
Date and, in addition thereto, the following conditions:
7.1 All representations and warranties of Fountain Square and
Fifth Third contained in this Agreement shall be true and correct in
all material respects as of the date hereof and, except as they may be
affected by the transactions contemplated by this Agreement, as of the
Closing Date with the same force and effect as if made on and as of the
Closing Date.
7.2 Fountain Square and Fifth Third shall have delivered to
Cardinal on the Closing Date a certificate executed in their names by
two of their respective authorized
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officers, in form and substance reasonably satisfactory to Cardinal, to
the effect that the representations and warranties of Fountain Square
and Fifth Third made in this Agreement are true and correct at and as
of the Closing Date, except as they may be affected by the transactions
contemplated by this Agreement, and as to such other matters as
Cardinal shall reasonably request.
7.3 On or before the Closing Date, all conditions to the
closing of the Agreement and Plan of Merger among The Ohio Company,
Fifth Third Bancorp and Fifth Third M Corp. dated December 22, 1997,
shall have been satisfied or waived and such closing shall have
occurred.
7.4 Cardinal shall have received an opinion of Howard & Howard
Attorneys, P.C., counsel to Fountain Square in a form reasonably
satisfactory to Cardinal and its counsel and dated the Closing Date, to
the effect that (i) Fountain Square is a validly existing business
trust, duly organized and in good standing under the laws of the
Commonwealth of Massachusetts and has the power to carry on its
business as it is now being conducted and to carry out this Agreement,
(ii) the Acquiring Fund Shares to be issued to the Acquired Fund
Shareholders pursuant to this Agreement are duly authorized, validly
issued and outstanding, and fully paid and non-assessable and no
Acquiring Fund has outstanding any options, warrants or other rights to
subscribe for or purchase any Acquiring Fund Shares, nor is there
outstanding any security convertible into Acquiring Fund Shares, (iii)
this Agreement has been duly authorized, executed and delivered by
Fountain Square and, assuming due authorization, execution and delivery
of this Agreement by Cardinal, CMC and Fifth Third, is a valid and
legally binding obligation of Fountain Square, subject to the effect of
bankruptcy, insolvency, reorganization, moratorium, fraudulent
conveyance and other similar laws relating to or affecting the
enforcement of creditors' rights generally and court decisions with
respect thereto and to general principles of equity and the discretion
of the court before which a proceeding is brought (regardless of
whether the enforceability is considered in a proceeding in equity or
at law), (iv) the execution, delivery and performance of this Agreement
will not result in a material breach or violation of Fountain Square's
Declaration of Trust or By-Laws or of any agreement, indenture,
instrument, contract, lease, or other undertaking known to such counsel
to which Fountain Square or any Acquiring Fund is a party or by which
it is bound; provided that, such counsel may rely upon a certificate of
an officer of Fountain Square whose responsibility it is to advise
Fountain Square with respect to such matters, (v) no consent, approval,
authorization or order of any court or governmental authority is
required for the consummation by Fountain Square or any Acquiring Fund
of the transactions contemplated by this Agreement, except such as have
been obtained under the 1933 Act, the 1934 Act and the 1940 Act and
such as may be required under state securities or "blue sky" laws;
provided that, such opinion shall not be deemed to apply to Cardinal's
compliance obligations under the 1933 Act, 1934 Act, 1940 Act, or state
securities or "blue sky" laws, and (vi) no material litigation,
administrative proceeding or investigation of or before any court or
governmental body is currently pending or, to such counsel's knowledge,
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threatened against Fountain Square or any Acquiring Fund, or any of
Fountain Square's or the Acquiring Funds' properties or assets which,
if adversely determined, would materially and adversely affect the
Acquiring Fund's financial condition or the conduct of its business.
7.5 With respect to each Acquiring Fund, Fountain Square's
Board of Trustees, including a majority of Trustees who are not
"interested persons" as defined under the 1940 Act, has determined that
the Reorganization is in the best interests of each Acquiring Fund and
that the interests of the existing shareholders of each Acquiring Fund
would not be diluted as a result of the Reorganization.
8. FURTHER CONDITIONS PRECEDENT TO THE OBLIGATIONS OF FOUNTAIN SQUARE AND
CARDINAL.
If any of the conditions set forth below are not satisfied on or before
the Closing Date with respect to Cardinal or Fountain Square, the other party to
this Agreement shall, at its option, not be required to consummate the
transactions contemplated by this Agreement.
8.1 The Agreement and the transactions contemplated herein
shall have been approved by the requisite vote of the holders of
beneficial interest of each Acquired Fund in accordance with the laws
of the state of Ohio and Cardinal's Declaration of Trust and By-Laws.
8.2 On the Closing Date no action, suit or other proceeding
shall be pending before any court or governmental agency in which it is
sought to restrain or prohibit, or obtain damages or other relief in
connection with, this Agreement or the transactions contemplated
herein.
8.3 All consents, orders, permits, and exemptions of federal,
state, and local regulatory authorities (including those of the SEC and
of state "blue sky" securities authorities) deemed necessary by
Fountain Square or Cardinal to permit consummation, in all material
respects, of the transactions contemplated hereby shall have been
obtained, except where failure to obtain any such consent, order, or
permit would not involve a risk of a material adverse effect on the
assets or properties of Fountain Square or Cardinal.
8.4 The Registration Statement shall have been declared
effective under the 1933 Act by the SEC and no stop orders suspending
the effectiveness thereof shall have been issued and, to the best
knowledge of the parties hereto, no investigation or proceeding for
that purpose shall have been instituted or be pending, threatened, or
contemplated under the 1933 Act.
8.5 For each Acquiring Fund and corresponding Acquired Fund,
Fountain Square and Cardinal shall have received an opinion of Howard &
Howard Attorneys,
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P.C., substantially to the effect that, on the basis of written
representations made by Cardinal and Fountain Square, the existing
provisions of the Code, current administrative rules, and court
decisions, for federal income tax purposes:
(a) The transfer of all or substantially all of the
Acquired Fund's assets in exchange for shares of the
applicable Acquiring Fund and the distribution of such shares
to the shareholders of the Acquired Fund in liquidation of the
Acquired Fund will constitute a "reorganization" within the
meaning of Section 368(a)(1) of the Code; (b) no gain or loss
will be recognized by an Acquiring Fund upon the receipt of
the assets of the applicable Acquired Fund solely in exchange
for the Acquiring Fund Shares; (c) no gain or loss will be
recognized by an Acquired Fund upon the transfer of the
applicable Acquired Fund assets to the Acquiring Fund in
exchange for the Acquiring Fund Shares or upon the
distribution (whether actual or constructive) of the Acquiring
Fund Shares to Acquired Fund shareholders in exchange for
their shares of the Acquired Fund; (d) no gain or loss will be
recognized by the Acquired Fund shareholders upon the exchange
of their Acquired Fund shares for the applicable Acquiring
Fund Shares; (e) the tax basis of each Acquired Fund's assets
acquired by the applicable Acquiring Fund will be the same as
the tax basis of such assets to the Acquired Fund immediately
prior to the Reorganization; (f) the tax basis of the
Acquiring Fund Shares received by each of the Acquired Fund
shareholders pursuant to the Reorganization will be the same
as the tax basis of the Acquired Fund shares held by such
shareholder immediately prior to the Reorganization; (g) the
holding period of the assets of each Acquired Fund in the
hands of the applicable Acquiring Fund will include the period
during which those assets were held by the Acquired Fund; and
(h) the holding period of the Acquiring Fund Shares to be
received by each Acquired Fund's shareholders will include the
period during which the Acquired Fund shares exchanged
therefor were held by such shareholder (provided the Acquired
Fund shares were held as capital assets on the date of the
Reorganization).
9. TERMINATION OF AGREEMENT.
9.1 This Agreement may be terminated and the transactions
contemplated hereby may be abandoned at any time prior to the Closing
Date (a) by mutual written consent of Cardinal and Fountain Square or
(b) by either Cardinal or Fountain Square by written notice to the
other, without liability on the part of either party hereto, if
circumstances should develop that, in the opinion of either such Board
of Trustees, proceeding with the Reorganization is not in the best
interests of that party's shareholders.
9.2 If this Agreement is terminated and the transaction
contemplated hereby are abandoned pursuant to the provisions of this
Section 9, this Agreement shall become void and have no effect, without
any liability on the part of any party hereto or the
19
74
Trustees, officers or shareholders of Cardinal or of Fountain Square,
in respect of this Agreement.
10. WAIVER.
At any time prior to the Closing Date, any of the foregoing conditions
may be waived by the Board of Trustees of Cardinal or the Board of Trustees of
Fountain Square if, in the judgment of both Boards of Trustees, such waiver will
not alter the shares to be received by shareholders of Cardinal or otherwise
have a material adverse effect on the benefits intended under this Agreement to
the shareholders of Cardinal or of Fountain Square, as the case may be.
11. AMENDMENT.
This Agreement may be amended, modified or supplemented at any time in
such manner as may be mutually agreed upon in writing by Cardinal and Fountain
Square, authorized by their respective Boards of Trustees and notwithstanding
approval thereof by each Acquired Fund's shareholders; provided, that if so
approved by an Acquired Fund's shareholders, no amendment shall be made which
substantially changes the terms hereof.
12. NO BROKER'S OR FINDER'S FEE.
Cardinal and Fountain Square each represents that there is no person
with whom it has dealt who by reason of such dealings is entitled to any
broker's or finder's or other similar fee or commission arising out of the
transactions contemplated by this Agreement.
13. INDEMNIFICATION.
13.1
(a) Each Acquired Fund will indemnify and hold
harmless, out of its own assets and no others, the
corresponding Acquiring Fund and Fountain Square's Trustees
and officers (for purposes of this paragraph, the "Indemnified
Parties") against any and all expenses, losses, claims,
damages and liabilities at any time imposed upon or reasonably
incurred by any one or more of the Indemnified Parties in
connection with, arising out of, or resulting from any claim,
action, suit or proceeding in which any one or more of the
Indemnified Parties may be involved or with which any one or
more of the Indemnified Parties may be threatened by reason of
any untrue statement or alleged untrue statement of a material
fact relating to Cardinal or any Acquired Fund contained in
the Registration Statement, any Acquired Fund Prospectus or
related Statement of Additional Information, or any amendment
or supplement to any of the foregoing, or arising out of or
based upon the omission or alleged omission to state in any of
the foregoing a material fact relating to Cardinal or any
Acquired Fund
20
75
required to be stated therein or necessary to make the
statements relating to Cardinal or any Acquired Fund therein
not misleading, including, without limitation, any amounts
paid by any one or more of the Indemnified Parties in a
reasonable compromise or settlement of any such claim, action,
suit or proceeding, or threatened claim, action, suit or
proceeding made with the prior consent of Cardinal.
(b) The Indemnified Parties will notify Cardinal in
writing within ten days after the receipt by any one or more
of the Indemnified Parties of any notice of legal process or
any suit brought against or claim made against such
Indemnified Party as to any matters covered by this
paragraph 13.1. Cardinal shall be entitled to participate at
its own expense in the defense of any claim, action, suit or
proceeding covered by this paragraph 13.1, or, if it so
elects, to assume at its expense by counsel satisfactory to
the Indemnified Parties the defense of any such claim, action,
suit or proceeding, and if Cardinal elects to assume such
defense, the Indemnified Parties shall be entitled to
participate in the defense of any such claim, action, suit or
proceeding at their own expense. The obligation of each of the
Acquired Funds under this paragraph 13.1 to indemnify and hold
harmless the Indemnified Parties shall constitute a guarantee
of any expenses, losses, claims, damages and liabilities
required to be paid by it under paragraph 13.1 without the
necessity of the Indemnified Parties' first paying the same.
13.2
(a) Each Acquiring Fund will indemnify and hold
harmless, out of its own assets and no others, the
corresponding Acquired Fund and Cardinal's Trustees and
officers (for purposes of this paragraph, the "Indemnified
Parties") against any and all expenses, losses, claims,
damages and liabilities at any time imposed upon or reasonably
incurred by any one or more of the Indemnified Parties in
connection with, arising out of, or resulting from any claim,
action, suit or proceeding in which any one or more of the
Indemnified Parties may be involved or with which any one or
more of the Indemnified Parties may be threatened by reason of
any untrue statement or alleged untrue statement of a material
fact relating to Fountain Square or any Acquiring Fund
contained in the Registration Statement, any Acquiring Fund
Prospectus or related Statement of Additional Information, or
any amendment or supplement to any of the foregoing, or
arising out of or based upon the omission or alleged omission
to state in any of the foregoing a material fact relating to
Fountain Square or any Acquiring Fund required to be stated
therein or necessary to make the statements relating to
Fountain Square or any Acquiring Fund therein not misleading,
including, without limitation, any amounts paid by any one or
more of the Indemnified Parties in a reasonable compromise or
settlement of any such claim, action, suit
21
76
or proceeding, or threatened claim, action, suit or proceeding
made with the prior consent of Fountain Square.
(b) The Indemnified Parties will notify Fountain
Square in writing within ten days after the receipt by any one
or more of the Indemnified Parties of any notice of legal
process or any suit brought against or claim made against such
Indemnified Party as to any matters covered by this
paragraph 13.2. Fountain Square shall be entitled to
participate at its own expense in the defense of any claim,
action, suit or proceeding covered by this paragraph 13.2, or,
if it so elects, the assume at its expense by counsel
satisfactory to the Indemnified Parties the defense of any
such claim, action, suit or proceeding, and, if Fountain
Square elects to assume such defense, the Indemnified Parties
shall be entitled to participate in the defense of any such
claim, action, suit or proceeding at their own expense. The
obligation of each of the Acquiring Funds under this
paragraph 13.2 to indemnify and hold harmless the Indemnified
Parties shall constitute a guarantee of payment so that the
Acquiring Funds will pay in the first instance any expenses,
losses, claims, damages and liabilities required to be paid by
it under this paragraph 13.2 without the necessity of the
Indemnified Parties' first paying the same.
14. MISCELLANEOUS.
14.1 The representations, warranties and covenants included or
provided for herein shall survive consummation of the transactions
contemplated hereby.
14.2 This Agreement contains the entire agreement and
understanding between the parties hereto with respect to the subject
matter hereof, and merges and supersedes all prior discussions,
agreements, and understandings of every kind and nature between them
relating to the subject matter hereof. Neither party shall be bound by
any condition, definition, warranty, or representation, other than as
set forth or provided in this Agreement or as may be set forth in a
later writing signed by the party to be bound thereby.
14.3 This Agreement shall be governed and construed in
accordance with the internal laws of the state of Ohio, without giving
effect to such jurisdiction's conflicts of laws principles.
14.4 This Agreement may be executed in any number of
counterparts, each of which, when executed and delivered, shall be
deemed to be an original.
14.5 The article and paragraph headings contained herein are
for reference purposes only and shall not affect in any way the meaning
or interpretation of this Agreement.
22
77
14.6 This Agreement shall bind and inure to the benefit of the
parties hereto and their respective successors and assigns, but no
assignment or transfer hereof or of any rights or obligations hereunder
shall be made by any party without the written consent of the other
parties. Nothing herein expressed or implied is intended or shall be
construed to confer upon or give any person, firm, or corporation,
other than the parties hereto and their respective successors and
assigns, any rights or remedies under or by reason of this Agreement.
14.7 Cardinal and CMC are hereby expressly put on notice of
the limitation of liability as set forth in the Declaration of Trust of
Fountain Square and agrees that the obligations assumed by Fountain
Square pursuant to this Agreement shall be limited in any case to
Fountain Square and its assets and Cardinal shall not seek satisfaction
of any such obligation from the shareholders of Fountain Square, the
Trustees, officers, or employees of Fountain Square or any of them.
14.8 Fountain Square and Fifth Third are hereby expressly put
on notice of the limitation of liability as set forth in the
Declaration of Trust of Cardinal, which is on file with the Secretary
of State of Ohio, and agrees that the obligations assumed by Cardinal
pursuant to this Agreement shall be limited in any case to Cardinal and
its assets and Fountain Square shall not seek satisfaction of any such
obligation from the shareholders of Cardinal, the Trustees, officers,
or employees of Cardinal or any of them.
14.9 If the transactions contemplated by this Agreement and
Plan of Reorganization have not been completed by December 31, 1998,
the Agreement shall automatically terminate on that date unless a later
date is agreed to in writing by all parties to this Agreement.
IN WITNESS WHEREOF, each of Cardinal, CMC, Fountain Square, and Fifth
Third have caused this Agreement and Plan of Reorganization and Liquidation to
be executed and attested on its behalf by its duly authorized representatives as
of the date first above written.
Attest Cardinal:
THE CARDINAL GROUP
By:
- --------------------------------- ---------------------------------
Name:
-------------------------------
Title:
------------------------------
23
78
Attest CMC:
CARDINAL MANAGEMENT GROUP
By:
- --------------------------------- ---------------------------------
Name:
-------------------------------
Title:
------------------------------
Attest Foundation Square:
FOUNDATION SQUARE FUNDS
By:
- --------------------------------- ---------------------------------
Name:
-------------------------------
Title:
------------------------------
Attest Fifth Third:
FIFTH THIRD BANK
By:
- --------------------------------- ---------------------------------
Name:
-------------------------------
Title:
------------------------------
24
79
SCHEDULE A
TO THE
AGREEMENT AND PLAN OF REORGANIZATION AND LIQUIDATION
Acquired Fund Acquiring Fund
------------- --------------
1. Cardinal Government Securities Money 1. Fountain Square Government Cash Reserves
Market Fund Fund
Retail Portion of Shares(1) Investment A Shares
Institutional Portion of Shares(2) Institutional Shares(3)
2. Cardinal Tax Exempt Money Market Fund 2. Fountain Square Tax Exempt Money Market
Retail Portion of Shares(1) Fund(4)
Institutional Portion of Shares(2) Investment A Shares(4)
Institutional Shares(4)
3. The Cardinal Fund 3. Fountain Square Cardinal Fund(4)
Investor A Shares Investment A Shares(4)
Investor Y Shares Institutional Shares(4)
4. Cardinal Government Obligations Fund 4. Fountain Square Bond Fund for Income
Investor A Shares Investment A Shares
Investor Y Shares Institutional Shares(4)
5. Cardinal Aggressive Growth Fund 5. Fountain Square Mid Cap Fund
Investor A Shares Investment A Shares
Investor Y Shares Institutional Shares(4)
6. Cardinal Balanced Fund 6. Fountain Square Balanced Fund
Investor A Shares Investment A Shares
Investor Y Shares Institutional Shares(4)
(1) Holders of shares of Cardinal Government Securities Money Market Fund and
Cardinal Tax Exempt Money Market Fund who are not eligible to invest in
Institutional Shares of the Fountain Square Funds as of the Closing Date will
receive Investment A Shares.
(2) Holders of shares of Cardinal Government Securities Money Market Fund and
Cardinal Tax Exempt Money Market Fund who are eligible to invest in
Institutional Shares of the Fountain Square Funds as of the Closing Date will
receive Institutional Shares.
(3) Existing Trust Shares of Fountain Square Government Cash Reserves Fund will
be renamed Institutional Shares prior to the Closing Date.
(4) To be created prior to the Closing Date.
Note: Investment A Shares of the Funds are subject to Rule 12b-1 fees of 25 b.p.
and a front-end sales charge of 4.50%. Investment A Shares are sold to retail
customers.
Institutional Shares of the Funds are not subject to any Rule 12b-1 fees or
sales charges of any kind. Institutional Shares are sold only to clients of
Fifth Third Bank who make purchases through the Fifth Third Trust Department,
qualified employee benefit plans, and broker-dealers, investment advisors,
financial planners and certain other financial institutions who place trades for
their own accounts or the accounts of their clients for a management, consulting
or other fee.
80
THE CARDINAL GROUP
155 EAST BROAD STREET
COLUMBUS, OHIO 43215
[Name and Address of Shareholder]
Account Number:
Shares:
Control No:
TO VOTE, MARK BLOCKS BELOW IN BLUE INK AS FOLLOWS: X
KEEP THIS PORTION FOR YOUR RECORDS
- --------------------------------------------------------------------------------
THIS PROXY CARD IS VALID ONLY WHEN SIGNED AND DATED
THE CARDINAL GROUP
This Proxy is Solicited on Behalf of
the Board of Trustees of the Group
The undersigned hereby appoints H. Keith
Allen, Frank W. Siegel and James M
Schrack II, and each of them, with full
power of substitution, proxies to vote
and act with respect to all Shares of
[Name of Applicable Fund]
(the "Fund") of THE CARDINAL GROUP (the "Group"),
which the undersigned is entitled to vote, at the
Special Meeting of Shareholders of the Group to be
held Friday, July 10, 1998, at the National City
Board Room, 3rd Floor, 155 East Broad Street,
Columbus, Ohio, at 9:00 A.M. (Eastern Time) and at
any and all adjournments thereof, on the following
proposal and any other matters that may properly
come before the meeting.
PLEASE DATE, SIGN AND MAIL PROMPTLY
The Shares represented by this proxy will be voted upon the proposal
listed hereon in accordance with the instructions given by the shareholder, but
if no instructions are given, and this proxy is properly executed and returned
to the Group, this proxy will be voted FOR the proposal and in accordance with
the best judgment of the proxies on any other matter which properly comes before
the Meeting.
VOTE ON PROPOSAL
1 Approval of the Agreement and Plan of Reorganization and Liquidation by
and between Fountain Square Funds, Fifth Third Bank, The Cardinal Group
and Cardinal Management Corp.
[ ] FOR [ ] AGAINST [ ] ABSTAIN
The undersigned hereby acknowledges receipt of the Notice of Special
Meeting of Shareholders dated May 27, 1998, and the Proxy Statement attached
thereto.
(Please sign legibly exactly as the name is printed above or as it
appears on your account statement.)
- ----------------------------------- ----------------------------------
Signature Date Signature (Joint Owner) Date
81
STATEMENT OF ADDITIONAL INFORMATION
May 27, 1998
THE CARDINAL GROUP
155 East Broad Street
Columbus, Ohio 43215
Telephone Number: (800) 282-9446
FOUNTAIN SQUARE FUNDS
38 Fountain Square Plaza
Cincinnati, Ohio 45263
Telephone Number: (888) 799-5353
Relating to
Special Meeting of Shareholders
of
The Cardinal Group
July 10, 1998
This Statement of Additional Information is not a prospectus. A
Combined Proxy Statement/Prospectus, dated May 27, 1998, related to the
above-referenced matter may be obtained by writing to or calling The Cardinal
Group or Fountain Square Funds at the addresses and telephone numbers shown
above. This Statement of Additional Information should be read in conjunction
with such Combined Proxy Statement/Prospectus.
82
TABLE OF CONTENTS
INFORMATION INCORPORATED BY REFERENCE..............................B-1
GENERAL INFORMATION................................................B-2
INTRODUCTORY NOTE TO PRO FORMA FINANCIAL STATEMENTS................B-2
2
83
INFORMATION INCORPORATED BY REFERENCE
1. The information relating to Investment A Shares of Fountain Square
Mid Cap Fund, Fountain Square Balanced Fund, and Fountain Square Bond Fund For
Income, portfolios of Fountain Square Funds, contained in the Combined Statement
of Additional Information of Fountain Square Funds, dated November 30, 1997, as
supplemented, is incorporated by reference from Fountain Square's Post-Effective
Amendment No. 25 to its Registration Statement on Form N-1A (File No. 33-24848)
which was filed with the Securities and Exchange Commission on November 28,
1997.
2. The information relating to Investment A Shares and Institutional
Shares (formerly known as Trust Shares) of Fountain Square Government Cash
Reserves Fund, a portfolio of Fountain Square Funds, contained in the Combined
Statement of Additional Information of Fountain Square Government Cash Reserves
Fund, dated September 30, 1997, as supplemented, is incorporated by reference
from Fountain Square's Post-Effective Amendment No. 23 to its Registration
Statement on Form N-1A (File No. 33-24848) which was filed with the Securities
and Exchange Commission on September 30, 1997.
3. The information relating to each of the portfolios of The Cardinal
Group contained in the Statement of Additional Information of The Cardinal
Group, dated January 30, 1998, as supplemented, is incorporated by reference
from Cardinal's Post-Effective Amendment No. 10 to its Registration Statement on
Form N-1A (File No. 33-59984) which was filed with the Securities and Exchange
Commission on January 28, 1998.
4. The information relating to Investment A Shares of Fountain Square
Mid Cap Fund, Fountain Square Balanced Fund, and Fountain Square Bond Fund For
Income contained in the audited financial statements of Fountain Square, dated
July 31, 1997, is incorporated by reference from Fountain Square's Annual Report
to Shareholders which was filed with the Securities and Exchange Commission on
or about October 9, 1997 (File No. 811-05669).
5. The information relating to Investment A Shares and Institutional
Shares (formerly known as Trust Shares) of Fountain Square Government Cash
Reserves Fund contained in the audited financial statements of Fountain Square
Cash Reserves Fund, dated July 31, 1997, is incorporated by reference from
Fountain Square's Post-Effective Amendment No. 23 to its Registration Statement
on Form N-1A (File No. 33-24848) which was filed with the Securities and
Exchange Commission on September 30, 1997.
6. The information relating to Investment A Shares of Fountain Square
Mid Cap Fund, Fountain Square Balanced Fund, and Fountain Square Bond Fund For
Income, and Investment A Shares and Institutional Shares (formerly known as
Trust Shares) of Fountain Square Government Cash Reserves Fund contained in the
unaudited financial statements of Fountain Square, dated January 31, 1998, are
incorporated by reference from Fountain Square's Semi-Annual Report to
Shareholders which was filed with the Securities and Exchange Commission on or
about April 1, 1998 (File No. 811-05699).
B-1
84
7. The information relating to each of the portfolios of The Cardinal
Group contained in the audited financial statements of The Cardinal Group, dated
September 30, 1997, is incorporated by reference from Cardinal's Annual Report
to Shareholders which was filed with the Securities and Exchange Commission on
or about December 10, 1997 (File No. 811-07588).
8. The information relating to Investment A Shares and Institutional
Shares of Fountain Square Cardinal Fund and Fountain Square Tax Exempt Money
Market Fund and relating to Institutional Shares of Fountain Square Balanced
Fund, Fountain Square Mid Cap Fund and Fountain Square Bond Fund For Income,
contained in the applicable Statements of Additional Information, dated May 20,
1998, as supplemented, is incorporated by reference from Fountain Square's
Post-Effective Amendment No. 27 to its Registration Statement on Form N-1A
(File No. 33-24848) which was filed with the Securities and Exchange Commission
on March 6, 1998.
GENERAL INFORMATION
The proposed Reorganization contemplates: (i) the transfer of all of
the assets and stated liabilities of each of the Cardinal Funds to a
corresponding Fountain Square Fund in exchange for shares of comparable classes
of such corresponding Fountain Square Fund; and (ii) the distribution pro rata
of Fountain Square Fund shares to the shareholders of the Cardinal Funds in
complete liquidation of the Cardinal Funds. The Reorganization is subject to a
number of conditions with respect to each Cardinal Fund, including shareholder
approval. Following the Reorganization, The Cardinal Group will wind up its
affairs and deregister as an investment company under the 1940 Act.
As a result of the proposed Reorganization, a Cardinal Fund shareholder
will become a shareholder of its corresponding Fountain Square Fund and will
hold, immediately after the Reorganization, shares of the comparable class of
the corresponding Fountain Square Fund having a total dollar value equal to the
total dollar value of the shares of the Cardinal Fund that the shareholder held
immediately before the Reorganization.
INTRODUCTORY NOTE TO UNAUDITED PRO FORMA FINANCIAL STATEMENTS
The following unaudited pro forma information gives effect to the
proposed transfer of the assets and stated liabilities of the Cardinal Funds to
their corresponding Fountain Square Funds, accounted for as if the
Reorganization had occurred as of January 31, 1998 and as if the Fountain Square
Funds had operated for the periods then ended. In addition, each pro forma
combining statement has been prepared based upon the structure of the proposed
fee and expense structure of the applicable surviving Fountain Square Fund. Pro
forma financial information is not provided with respect to Fountain Square
Cardinal Fund and Fountain Square Tax Exempt Money Market Fund, as such Funds
have been organized to facilitate the Reorganization, have not commenced
operations and will have only nominal assets as of the date of the
Reorganization. In addition, the expenses for each of these Funds are not
expected to be materially different from the expenses of its corresponding
Cardinal Fund.
Pro forma financial information is not provided with respect to
Fountain Square Mid Cap Fund, as the assets of Cardinal Aggressive Growth Fund
amount to less than 10% of the assets of Fountain Square Mid Cap Fund.
The pro forma financial information should be read in conjunction with
the historical financial statements and notes thereto of the Cardinal Funds and
Fountain Square Funds incorporated by reference in this Statement of Additional
Information. Each combination of the above Cardinal Funds and Fountain Square
Funds will be accounted for as a tax-free reorganization.
B-2
85
FOUNTAIN SQUARE BALANCED FUND/CARDINAL BALANCED FUND
Pro Forma Combining Schedule of Portfolio Investments
January 31, 1998
(Unaudited)
Market Value
-------------------------------------
Shares or Principal Amount Fountain
------------------------------------------------ Cardinal Square
Cardinal Fountain Square Pro Forma Security Balanced Balanced Pro Forma
Balanced Fund Balanced Fund Combined Description Fund Fund Combined
------------- --------------- --------- ----------------------------- -------- ---------- ---------
Common Stocks (62.2%):
Banking (5.6%):
4,000 4,000 Ahmanson (HF) & Co. $233,250 $233,250
3,300 3,300 AmSouth Bancorp 178,200 178,200
2,000 2,000 Bank of Boston Corp. 179,000 179,000
3,500 55,000 58,500 Bank of New York Co., Inc. 189,655 $2,980,313 3,169,968
1,000 1,000 Citicorp 119,000 119,000
35,000 35,000 First Tennessee National Corp. 2,060,625 2,060,625
3,000 13,000 16,000 Mellon Bank Corp. 181,120 784,880 966,000
70,000 70,000 Norwest Corp. 2,555,000 2,555,000
--------- --------- ----------
1,080,225 8,380,818 9,461,043
--------- --------- ----------
Beverages (0.3%):
3,000 3,000 Coca Cola Co. 194,250 194,250
4,000 4,000 Pepsico, Inc. 144,250 144,250
3,000 3,000 Robert Mondavi, Class A (a) 108,563 108,563
--------- --------- ----------
447,063 447,063
--------- --------- ----------
Business Services (0.2%):
10,000 10,000 Cintas Corp. 417,500 417,500
--------- --------- ----------
Chemicals (1.9%):
2,000 2,000 Dupont de Nemours and Co. 113,250 113,250
4,500 4,500 Monsanto Co. 213,469 213,469
70,000 70,000 Praxair, Inc. 2,900,625 2,900,625
--------- --------- ----------
326,719 2,900,625 3,227,344
--------- --------- ----------
Computer Software & Services (5.8%):
2,000 2,000 Computer Sciences (a) 169,750 169,750
35,000 35,000 Electronics for Imaging, Inc. 586,250 586,250
65,000 65,000 First Data Corp. 1,990,625 1,990,625
50,000 50,000 Fiserv, Inc. (a) 2,593,749 2,593,749
4,000 4,000 HBO & Company 209,250 209,250
1,500 4,800 6,300 Microsoft Corp. (a) 223,781 716,100 939,881
84,000 84,000 Oracle Corp. (a) 1,953,000 1,953,000
25,000 25,000 Reynolds & Reynolds Co., Class A 496,875 496,875
20,000 20,000 Sun Microsystems, Inc. (a) 958,750 958,750
--------- --------- ----------
602,781 9,295,349 9,898,130
--------- --------- ----------
Computer Systems & Equipment (3.4%):
5,000 5,000 Applied Materials (a) 164,063 164,063
3,000 52,500 55,500 Cisco Systems (a) 189,187 3,310,781 3,499,968
6,000 6,000 Compaq Computer Corp. 180,375 180,375
16,000 16,000 Diebold, Inc. 796,000 796,000
86
FOUNTAIN SQUARE BALANCED FUND/CARDINAL BALANCED FUND
Pro Forma Combining Schedule of Portfolio Investments
January 31, 1998
(Unaudited)
Market Value
-------------------------------------
Shares or Principal Amount Fountain
------------------------------------------------ Cardinal Square
Cardinal Fountain Square Pro Forma Security Balanced Balanced Pro Forma
Balanced Fund Balanced Fund Combined Description Fund Fund Combined
------------- --------------- --------- ----------------------------- -------- ---------- ---------
3,000 16,000 19,000 Hewlett-Packard Co. 180,000 960,000 1,140,000
--------- ---------- ----------
713,625 5,066,781 5,780,406
--------- ---------- ----------
Construction (0.2%):
4,500 4,500 Crane Co. 194,344 194,344
3,000 3,000 Deere & Co. 158,250 158,250
--------- ---------- ----------
352,594 352,594
--------- ---------- ----------
Consumer Cyclicals (0.3%):
4,500 4,500 Avery Dennison Corp. 201,938 201,938
3,000 3,000 Kohls Corp. (a) 208,125 208,125
3,000 3,000 Service Corporation Intl. 117,000 117,000
--------- ---------- ----------
527,063 527,063
--------- ---------- ----------
Consumer Products (3.2%):
29,000 29,000 Conagra, Inc. 917,125 917,125
38,000 38,000 Crown Cork & Seal Co., Inc. 1,881,000 1,881,000
40,000 40,000 Newell Co. 1,642,500 1,642,500
2,000 4,000 6,000 Procter & Gamble Co. 156,750 313,500 470,250
20,000 20,000 Sherwin Williams Co. 570,000 570,000
--------- ---------- ----------
156,750 5,324,125 5,480,875
--------- ---------- ----------
Distributors (0.3%):
12,000 12,000 Fastenal Co. 527,250 527,250
--------- ---------- ----------
Eating & Drinking Places
(0.1%):
7,000 7,000 Wendy's Intl. 156,188 156,188
--------- ---------- ----------
Electrical Equipment (2.3%):
20,000 20,000 Belden, Inc. 762,500 762,500
3,000 25,000 28,000 Emerson Electric Co. 181,500 1,512,500 1,694,000
4,000 14,000 18,000 General Electric Co. 310,000 1,085,000 1,395,000
--------- ---------- ----------
491,500 3,360,000 3,851,500
--------- ---------- ----------
Electronics (6.7%):
105,000 105,000 Adaptec, Inc. (a) 2,342,813 2,342,813
60,000 60,000 Computer Products, Inc. (a) 1,447,500 1,447,500
20,000 20,000 Flextronics, International (a) 712,500 712,500
2,600 50,000 52,600 Intel Corp. 210,600 4,049,999 4,260,599
2,500 2,500 Lucent Technologies 221,250 221,250
50,000 50,000 Molex, Inc. 1,362,500 1,362,500
15,000 15,000 QLogic Corp. (a) 485,625 485,625
27,562 27,562 Vishay Intertechnology, Inc. (a) 578,802 578,802
--------- ---------- ----------
431,850 10,979,739 11,411,589
--------- ---------- ----------
Entertainment & Leisure (0.1%):
1,900 1,900 The Walt Disney Co. 202,469 202,469
--------- ---------- ----------
87
FOUNTAIN SQUARE BALANCED FUND/CARDINAL BALANCED FUND
Pro Forma Combining Schedule of Portfolio Investments
January 31, 1998
(Unaudited)
Market Value
-------------------------------------
Shares or Principal Amount Fountain
------------------------------------------------ Cardinal Square
Cardinal Fountain Square Pro Forma Security Balanced Balanced Pro Forma
Balanced Fund Balanced Fund Combined Description Fund Fund Combined
------------- --------------- --------- ----------------------------- -------- ---------- ---------
Financial (2.2%):
2,000 2,000 Am. Express 167,375 167,375
77,000 77,000 Federal Home Loan Mortgage Corp. 3,426,500 3,426,500
2,500 2,500 Federal National Mortage Assn. 154,375 154,375
--------- ---------- ----------
321,750 3,426,500 3,748,250
--------- ---------- ----------
General Building Contractors (0.4%):
45,000 45,000 Clayton Homes Inc. 753,750 753,750
--------- ---------- ----------
Healthcare (1.5%):
17,000 17,000 First Health Group Corp. 809,624 809,624
9,000 9,000 Healthsouth Corp. (a) 201,938 201,938
5,000 5,000 Medtronic, Inc. 255,313 255,313
2,000 2,000 Merck & Company, Inc. 234,500 234,500
4,500 4,500 Quorum Health Group (a) 112,500 112,500
15,000 15,000 STERIS Corp. (a) 785,625 785,625
4,000 4,000 Tenet Healthcare Corporation 138,000 138,000
--------- ---------- ----------
942,251 1,595,249 2,537,500
--------- ---------- ----------
Holding & Other Investment
Offices (0.1%): 4,000 4,000 Am. General Hospitality 110,250 110,250
--------- ---------- ----------
Insurance (4.1%):
10,000 10,000 Allstate Corp. 885,000 885,000
40,000 40,000 American Bankers Insurance
Group, Inc. 2,209,999 2,209,999
1,500 1,500 American International
Group, Inc. 165,469 165,469
8,000 8,000 Cincinnati Financial Corp. 1,020,000 1,020,000
36,000 36,000 MGIC Investment Corp. 2,434,499 2,434,499
3,999 3,999 Traveler's Group 197,951 197,951
--------- ---------- ----------
363,420 6,549,498 6,912,918
--------- ---------- ----------
Manufacturing (2.5%):
40,000 40,000 Federal Signal Corp. 897,500 897,500
35,000 35,000 Illinois Tool Works 1,949,063 1,949,063
50,000 50,000 Zebra Technologies Corp.,
Class A (a) 1,387,500 1,387,500
---------- ----------
4,234,063 4,234,063
--------- ---------- ----------
Media/Publishing (1.2%):
42,000 42,000 Interpublic Group of Cos., Inc. 2,060,625 2,060,625
--------- ---------- ----------
Medical Devices (1.4%):
38,000 38,000 Guidant Corp. 2,441,500 2,441,500
--------- ---------- ----------
Medical Distribution (0.6%):
2,000 2,000 Bergen Brunswig Corp. 91,125 91,125
2,000 9,000 11,000 Cardinal Health, Inc. 154,875 696,938 851,813
--------- ---------- ----------
246,000 696,938 942,938
--------- ---------- ---------
88
FOUNTAIN SQUARE BALANCED FUND/CARDINAL BALANCED FUND
Pro Forma Combining Schedule of Portfolio Investments
January 31, 1998
(Unaudited)
Market Value
-------------------------------------
Shares or Principal Amount Fountain
------------------------------------------------ Cardinal Square
Cardinal Fountain Square Pro Forma Security Balanced Balanced Pro Forma
Balanced Fund Balanced Fund Combined Description Fund Fund Combined
------------- --------------- --------- ----------------------------- -------- ---------- ---------
Miscellaneous Manufacturing
Industries (0.1%): 5,000 5,000 Tyco International Ltd. 221,875 221,875
--------- ---------- ----------
Oil & Gas (2.7%):
8,000 8,000 Chevron Corp. 598,500 598,500
18,000 18,000 ENSCO International 488,250 488,250
3,000 3,000 Exxon Corp. 177,938 177,938
25,000 25,000 Global Marine 573,438 573,438
2,000 22,000 24,000 Mobil Corp. 136,250 1,498,749 1,634,999
2,000 2,000 Schlumberger Ltd. 147,375 147,375
4,000 4,000 Transocean Offshore, Incorporated 159,000 159,000
40,000 40,000 Varco International, Inc. (a) 820,000 820,000
--------- ---------- ----------
620,563 3,978,937 4,599,500
--------- ---------- ----------
Pharmaceuticals (8.2%):
27,000 27,000 American Home Products 2,576,813 2,576,813
2,000 8,000 10,000 Amgen, Inc. 100,000 400,000 500,000
3,000 3,000 Colgate-Palmolive Co. 219,750 219,750
2,500 2,500 Gillette Co. 246,875 246,875
3,000 47,000 50,000 Johnson & Johnson 200,813 3,146,061 3,346,874
2,000 20,000 22,000 Pfizer, Inc. 163,875 1,638,750 1,802,625
40,000 40,000 Schering - Plough Corp. 2,895,000 2,895,000
14,000 14,000 Warner Lambert, Inc. 2,107,000 2,107,000
--------- ---------- ----------
931,313 12,763,624 13,694,937
--------- ---------- ----------
Printing & Publishing
(0.3%): 3,500 3,500 New York Times Co., Class A 227,719 227,719
4,000 4,000 Tribune Co. 243,000 243,000
--------- ---------- ----------
470,719 470,719
--------- ---------- ----------
Retail (3.1%):
4,000 60,000 64,000 Consolidated Stores Corp. (a) 164,500 2,467,500 2,632,000
20,000 20,000 Dollar General 727,500 727,500
33,000 33,000 Home Depot, Inc. 1,990,313 1,990,313
--------- ---------- ----------
164,500 5,185,313 5,349,813
--------- ---------- ----------
Security & Commodity Brokers
(0.3%): 4,600 4,600 Ben Franklin Resources 206,138 206,138
3,500 3,500 T. Rowe Price Association 226,625 226,625
--------- ---------- ----------
432,763 432,763
--------- ---------- ----------
Telecommunications (1.4%):
15,000 15,000 Century Telephone Enterprises 791,250 791,250
32,000 32,000 Cincinnati Bell 1,148,000 1,148,000
5,100 5,100 MCI Communications Corp. 236,831 236,831
89
FOUNTAIN SQUARE BALANCED FUND/CARDINAL BALANCED FUND
Pro Forma Combining Schedule of Portfolio Investments
January 31, 1998
(Unaudited)
Market Value
-------------------------------------
Shares or Principal Amount Fountain
------------------------------------------------ Cardinal Square
Cardinal Fountain Square Pro Forma Security Balanced Balanced Pro Forma
Balanced Fund Balanced Fund Combined Description Fund Fund Combined
------------- --------------- --------- ----------------------------- -------- ---------- ----------
7,000 7,000 Worldcom, Inc. (a) 250,688 250,688
--------- ---------- ----------
487,519 1,939,250 2,426,769
--------- ---------- ----------
Transportation (1.5%)
1,500 1,500 Burlington Northern Santa Fe 130,125 130,125
80,000 80,000 Comair Holdings, Inc. 2,255,000 2,255,000
2,500 2,500 Federal Express (a) 162,656 162,656
--------- ---------- ----------
292,781 2,255,000 2,547,781
--------- ---------- ----------
Transportation Equipment
(0.1%) 2,400 2,400 Textron, Inc. 143,550 143,550
--------- ---------- ----------
Utility (0.1%):
6,000 6,000 Williams Cos. 171,000 171,000
--------- ---------- ----------
Total Common Stocks 11,409,081 94,132,434 105,541,515
---------- ---------- -----------
Preferred Stocks (0.1%):
Banking (0.1%):
3,000 3,000 Glendale Federal Bank 8.750%
Preferred Series E 238,500 238,500
---------- ---------- ----------
Total Preferred Stocks 238,500 238,500
---------- ---------- ----------
Asset Backed Securities
(1.4%):
Financial (1.4%):
$1,500,000 $1,500,000 Cityscape, Series, 1996-3,
7.15%, 8/25/11 1,547,299 1,547,299
750,000 750,000 GE Capital Management, 6.94%,
3/25/27 763,500 763,500
---------- ---------- ----------
Total Asset Backed Securities 2,310,799 2,310,799
---------- ---------- ----------
Corporate Bonds (6.6%):
Beverages (0.2%):
$250,000 250,000 Anheuser Busch Co., 7.00%,
9/01/05 261,250 261,250
---------- ---------- ----------
Consumer Products (0.1%):
200,000 200,000 Dole Foods Company, 7.00%,
5/15/03 207,000 207,000
---------- ---------- ----------
Financial (3.9%):
46,000 46,000 Bankers Trust New York Corp.,
9.20%, 7/15/99 48,040 48,040
1,500,000 1,500,000 CIT Group Holdings, 6.25%, 3/28/01 1,517,382 1,517,382
2,000,000 2,000,000 First Union Corp., 7.00%, 3/15/06 2,076,147 2,076,147
500,000 500,000 Ford Motor Credit, Floating Rate
Note, 11/9/98 (5.65%, 2/9/98)(b) 499,518 499,518
200,000 200,000 General Motors Acceptance Corp.,
7.00%, 9/15/02 208,500 208,500
1,000,000 1,000,000 General Motors Acceptance Corp.,
6.63%, 10/1/02 1,026,027 1,026,027
250,000 250,000 Kemper Corporation, 6.875%,
9/15/03 260,000 260,000
1,000,000 1,000,000 Sears Roebuck, 6.54%, 2/20/03 1,024,002 1,024,002
---------- --------- ----------
468,500 6,191,116 6,659,616
---------- --------- ----------
90
FOUNTAIN SQUARE BALANCED FUND/CARDINAL BALANCED FUND
Pro Forma Combining Schedule of Portfolio Investments
January 31, 1998
(Unaudited)
Market Value
-------------------------------------
Shares or Principal Amount Fountain
------------------------------------------------ Cardinal Square
Cardinal Fountain Square Pro Forma Security Balanced Balanced Pro Forma
Balanced Fund Balanced Fund Combined Description Fund Fund Combined
------------- --------------- --------- ----------------------------- -------- ---------- ---------
Manufacturing (0.9%):
500,000 500,000 IBP, Inc., 6.13%, 2/1/06 499,679 499,679
1,000,000 1,000,000 Texas Instruments, 6.88%, 1,026,119 1,026,119
-------- --------- ---------
7/15/00 1,525,798 1,525,798
-------- --------- ---------
Retail (0.3%):
250,000 250,000 Limited Inc., 7.50%, 3/15/23 249,375 249,375
250,000 250,000 Nordstrom Inc., 6.70%, 7/01/05 258,438 258,438
-------- --------- ---------
507,813 507,813
-------- --------- ---------
Transportation (0.3%):
250,000 250,000 American Airlines, 10.18%,
1/02/13 318,365 318,365
250,000 250,000 CSX Transportation, 6.72%,
6/01/06 259,375 259,375
-------- --------- --------
577,740 577,740
-------- --------- ---------
Utility (0.9%):
300,000 300,000 Consumers Power, 7.50%, 6/01/02 304,875 304,875
1,000,000 1,000,000 Georgia Power, 6.88%, 9/1/02 1,016,669 1,016,669
150,000 150,000 United States Filter Corp.,
4.50%, 12/15/01 162,562 162,562
--------- ---------- ----------
467,439 1,016,667 1,484,106
--------- ---------- ----------
2,489,740 8,733,583 11,223,323
Total Corporate Bonds --------- ---------- ----------
Mortgage Backed Securities (0.4%):
U.S. Government Agencies (0.4%):
5,177 5,177 Federal Home Loan Mortgage Corp.,
9.50%, 10/1/02, Pool #38-0009 5,352 5,352
11,117 11,117 Federal Home Loan Mortgage Corp.,
8.00%, 8/1/08, Pool #27-2525 11,528 11,528
653,243 653,243 Federal National Mortgage Assn.,
6.00%, 4/1/11, Dwarf Pool 344185 647,396 647,396
--------- ---------- ----------
664,276 664,276
--------- ---------- ----------
Total Mortgage Backed Securities
U.S. Government Securities (17.0%):
U.S. Government Agencies (8.1%):
250,000 250,000 Federal National Mortgage
Assn., 7.00%, 9/03/03 254,388 254,388
250,000 250,000 Federal National Mortgage
Assn., 7.03%, 10/25/06 264,343 264,343
250,000 250,000 Federal National Mortgage
Assn., 7.50%, 11/15/06 256,650 256,650
250,000 250,000 Federal National Mortgage
Assn., 7.09%, 3/13/07 260,388 260,388
250,000 250,000 Federal National Mortgage
Assn., 6.99%, 7/09/07 262,165 262,165
500,000 500,000 Federal National Mortgage
Assn., 6.94%, 3/14/11 504,665 504,665
2,000,000 2,000,000 Federal National Mortgage
Assn., 6.80%, 8/27/12 2,113,167 2,113,167
1,939,700 1,939,700 Federal National Mortgage
Assn., 7.00%, 7/18/27 1,963,248 1,963,248
1,244,595 1,244,595 Government National Mortgage
Assn., 7.50%, 8/15/27,
Pool #449006 1,282,182 1,282,182
6,457,081 6,457,081 Government National Mortgage
Assn., 7.50%, 9/15/27,
Pool #451459 6,652,084 6,652,084
--------- ---------- ----------
1,802,599 12,010,681 13,813,280
--------- ---------- ----------
91
FOUNTAIN SQUARE BALANCED FUND/CARDINAL BALANCED FUND
Pro Forma Combining Schedule of Portfolio Investments
January 31, 1998
(Unaudited)
Market Value
-------------------------------------
Shares or Principal Amount Fountain
------------------------------------------------ Cardinal Square
Cardinal Fountain Square Pro Forma Security Balanced Balanced Pro Forma
Balanced Fund Balanced Fund Combined Description Fund Fund Combined
------------- --------------- --------- ----------------------------- -------- ---------- ---------
U.S. Treasury Bonds (5.2%):
8,750,000 8,750,000 6.00%, 2/15/26, 6.00%, 2/15/26 8,892,188 8,892,188
--------- ---------- ----------
U.S. Treasury Notes (3.4%):
5,000,000 5,000,000 6.5%, 8/31/01 5,178,125 5,178,125
500,000 500,000 5.875%, 2/15/04 512,020 512,020
--------- ---------- ----------
512,020 5,178,125 5,690,145
--------- ---------- ----------
U.S. Treasury Strips (0.3%):
1,000,000 1,000,000 11.25%, 2/15/09 533,190 533,190
--------- ---------- ----------
Total U.S. Government Securities 2,847,808 26,080,995 28,928,803
--------- ---------- ----------
Repurchase Agreement (14.3%):
811,804 811,804 Fifth Third 811,804 811,804
23,444,000 23,444,000 UBS Securities 23,444,000 23,444,000
Total Repurchase Agreement 811,804 23,444,000 24,255,804
Total Investments (Cost
$14,338,007, $128,997,043,
and $143,335,050, respectively) (a)
(a) - 102.0% $17,796,933 $155,366,087 $173,163,020
=========== ============ ============
(b) Current rate and next reset date shown.
92
FOUNTAIN SQUARE BOND FUND FOR INCOME/CARDINAL GOVERNMENT OBLIGATIONS FUND
Pro Forma Combining Schedule of Portfolio Investments
January 31, 1998
(Unaudited)
Principal Amount Market Value
- ------------------------------------------------------ ------------------------------------
Fountain
Cardinal Cardinal Square
Government Fountain Square Pro Forma Security Government Bond for Pro Forma
Obligations Bond for Income Combined Description Obligations Income Combined
- ----------------------- --------------- --------- ----------------------------------- ----------- --------- ----------
Asset Backed Securities
(1.7%):
Financial (1.7%):
$5,000,000 $5,000,000 GE Capital Management, 6.94%, $5,090,000 $5,090,000
3/25/27 --------- --------- ----------
Total Asset Backed Securities 5,090,000 5,090,000
--------- --------- ----------
Corporate Bonds (26.0%):
Chemicals (1.8%):
5,000,000 5,000,000 Engelhard Corp., 7.00%, 8/1/01 5,178,535 5,178,535
--------- --------- ----------
Financial (17.2%):
5,000,000 5,000,000 American General Finance Corp.,
7.25%, 4/15/00 5,139,135 5,139,135
5,000,000 5,000,000 Bear Stearns, Inc., 7.25%, 10/15/06 5,264,825 5,264,825
5,000,000 5,000,000 Chrysler Corp., Medium Term Note,
6.37%, 6/21/99 5,038,120 5,038,120
5,000,000 5,000,000 CIT Group Holdings, 6.25%, 3/28/01 5,057,940 5,057,940
5,000,000 5,000,000 DLJ, Medium Term Note, 6.38%, 5/26/00 5,059,050 5,059,050
5,000,000 5,000,000 IBM, 6.45%, 8/1/07 5,043,340 5,043,340
5,000,000 5,000,000 Metropolitan Life, 6.30%, 11/1/03 5,004,150 5,004,150
5,000,000 5,000,000 Morgan Stanley, 6.38%, 8/1/02 5,069,105 5,069,105
5,000,000 5,000,000 Paine Webber Group, 6.68%, 2/10/04 5,068,145 5,068,145
5,000,000 5,000,000 Southern National Corp.,
7.05%, 5/23/03 5,237,515 5,237,515
--------- --------- ----------
50,981,325 50,981,325
--------- --------- ----------
Manufacturing (4.8%):
5,000,000 5,000,000 Amgen, Inc., 6.50%, 12/1/07 5,101,200 5,101,200
4,000,000 4,000,000 Archers Danial Midland Co.,
6.25%, 5/15/03 4,057,496 4,057,496
5,000,000 5,000,000 Tyco International, Ltd.,
6.38%, 1/15/04 5,102,010 5,102,010
--------- --------- ----------
14,260,706 14,260,706
--------- --------- ----------
Telecommunications (1.8%):
5,000,000 5,000,000 British Telecommunications, Inc.,
9.38%, 2/15/99 5,198,515 5,198,515
Utilities (0.4%):
1,000,000 1,000,000 Southern New England, 8.00%, 1,074,509 1,074,509
11/20/01 --------- --------- ----------
Total Corporate Bonds 76,693,590 76,693,590
--------- --------- ----------
U.S. Government Securities
(69.9%):
U.S. Government Agencies
(47.4%):
126 126 Federal Home Loan Mortgage Corp.,
7.50%, 2/1/02 129 129
$2,970,000 2,970,000 Federal Home Loan Mortgage Corp.
#574, 7.00% Due 12/01/27 $3,015,471 3,015,471
12,500,000 12,500,000 Federal National Mortgage Assoc.,
6.85%, 7/2/02 12,568,563 12,568,563
5,000,000 5,000,000 Federal National Mortgage Assoc.,
7.33%, 6/19/07 5,171,635 5,171,635
122,003 122,003 Government National Mortgage
Association, 10.00%, 12/20/21,
Pool #1742 132,868 132,868
774,126 774,126 Government National Mortgage
Association, 9.00%, 03/15/33,
Pool #362593 842,582 842,582
370,759 370,759 Government National Mortgage
Association, 7.375%, 07/15/98,
Pool #419389 381,878 381,878
93
FOUNTAIN SQUARE BOND FUND FOR INCOME/CARDINAL GOVERNMENT OBLIGATIONS FUND
Pro Forma Combining Schedule of Portfolio Investments
January 31, 1998
(Unaudited)
PrincipAL Amount Market Value
- ---------------------------------------------- ------------------------------------
Fountain
Cardinal Cardinal Square
Government Fountain Square Pro Forma Security Government Bond for Pro Forma
Obligations Bond for Income Combined Description Obligations Income Combined
- --------------- --------------- --------- ----------------------------------- ----------- --------- ----------
2,241,841 2,241,841 Government National Mortgage Association,
7.35%, 07/15/98, Pool #419389 2,309,074 2,309,074
165,384 165,384 Government National Mortgage Association,
8.00%, 10/15/98, Pool #419426 176,134 176,134
2,470,232 2,470,232 Government National Mortgage Association,
8.00%, 10/15/98, Pool #419426 2,630,797 2,630,797
142,512 142,512 Government National Mortgage Association,
7.75%, 12/15/98, Pool #419398 150,839 150,839
417,432 417,432 Government National Mortgage Association,
8.125%, 05/15/99, Pool #425872 441,693 441,693
3,384,748 3,384,748 Government National Mortgage Association,
8.125%, 05/15/99, Pool #425672 3,581,470 3,581,470
63,726 63,726 Government National Mortgage Association,
10.00%, 01/20/14, Pool #107928 69,401 69,401
60,016 60,016 Government National Mortgage Association,
10.00%, 05/20/14, Pool #112459 65,361 65,361
991,779 991,779 Government National Mortgage Association,
10.50%, 7/15/14, Pool #321016 1,038,254 1,038,254
112,304 112,304 Government National Mortgage Association,
10.00%, 03/20/15, Pool #125173 122,305 122,305
75,035 75,035 Government National Mortgage Association,
10.00%, 03/20/16, Pool #147588 81,718 81,718
85,762 85,762 Government National Mortgage Association,
10.00%, 04/20/16, Pool #529 93,401 93,401
36,268 36,268 Government National Mortgage Association,
8.50%, 05/15/16, Pool #139537 38,750 38,750
350,763 350,763 Government National Mortgage Association,
9.00%, 05/15/16, Pool #159879 382,219 382,219
177,945 177,945 Government National Mortgage Association,
8.50%, 6/15/16, Pool #164477 190,122 190,122
206,924 206,924 Government National Mortgage Association,
8.50%, 06/15/16, Pool #161999 221,084 221,084
185,001 185,001 Government National Mortgage Association,
8.50%, 06/15/16, Pool #160405 197,661 197,661
410,592 410,592 Government National Mortgage Association,
9.00%, 06/15/16, Pool #153293 447,414 447,414
124,475 124,475 Government National Mortgage Association,
10.00%, 06/20/16, Pool #152054 135,560 135,560
768,636 768,636 Government National Mortgage Association,
8.50%, 7/15/16, Pool #164894 821,233 821,233
489,160 489,160 Government National Mortgage Association,
9.00%, 7/15/16, Pool #166416 533,028 533,028
369,872 369,872 Government National Mortgage Association,
9.00%, 07/15/16, Pool #146518 403,042 403,042
333,430 333,430 Government National Mortgage Association,
9.00%, 07/15/16, Pool #160341 363,332 363,332
228,198 228,198 Government National Mortgage Association,
9.00%, 8/15/16, Pool #169792 248,663 248,663
932,810 932,810 Government National Mortgage Association,
9.00%, 8/15/16, Pool #164699 1,016,464 1,016,464
1,186,997 1,186,997 Government National Mortgage Association,
9.00%, 8/15/16, Pool #179713 1,293,447 1,293,447
287,001 287,001 Government National Mortgage Association,
8.50%, 09/15/16, Pool #156438 306,641 306,641
387,258 387,258 Government National Mortgage Association,
8.50%, 9/15/16, Pool #175882 413,758 413,758
87,326 87,326 Government National Mortgage Association,
9.00%, 9/15/16, Pool #174976 95,157 95,157
116,689 116,689 Government National Mortgage Association,
9.00%, 10/15/16, Pool #193400 127,153 127,153
321,052 321,052 Government National Mortgage Association,
9.00%, 10/15/16, Pool #176776 349,844 349,844
139,052 139,052 Government National Mortgage Association,
9.00%, 10/15/16, Pool #163761 151,522 151,522
1,365,997 1,365,997 Government National Mortgage Association,
9.00%, 10/15/16, Pool #164652 1,488,500 1,488,500
44,556 44,556 Government National Mortgage Association,
9.00%, 10/15/16, Pool #186431 48,552 48,552
56,964 56,964 Government National Mortgage Association,
10.00%, 10/20/16, Pool #190434 62,037 62,037
106,899 106,899 Government National Mortgage Association,
10.00%, 10/20/16, Pool #182759 116,419 116,419
315,134 315,134 Government National Mortgage Association,
8.50%, 11/15/16, Pool #174441 336,699 336,699
143,828 143,828 Government National Mortgage Association,
9.00%, 11/15/16, Pool #190624 156,726 156,726
281,442 281,442 Government National Mortgage Association,
9.00%, 11/15/16, Pool #192560 306,681 306,681
361,451 361,451 Government National Mortgage Association,
9.00%, 11/15/16, Pool #181604 393,866 393,866
94
FOUNTAIN SQUARE BOND FUND FOR INCOME/CARDINAL GOVERNMENT OBLIGATIONS FUND
Pro Forma Combining Schedule of Portfolio Investments
January 31, 1998
(Unaudited)
Principal Amount Market Value
- ---------------------------------------------- ------------------------------------
Fountain
Cardinal Cardinal Square
Government Fountain Square Pro Forma Security Government Bond for Pro Forma
Obligations Bond for Income Combined Description Obligations Income Combined
- --------------- --------------- --------- ----------------------------------- ----------- --------- ----------
251,135 251,135 Government National Mortgage Association,
9.00%, 11/15/16, Pool #152872 273,657 273,657
293,624 293,624 Government National Mortgage Association,
10.00%, 1/20/16, Pool #662 319,775 319,775
200,217 200,217 Government National Mortgage Association,
9.00%, 12/15/16, Pool #192257 218,172 218,172
124,779 124,779 Government National Mortgage Association,
9.00%, 12/15/16, Pool #183880 135,969 135,969
313,169 313,169 Government National Mortgage Association,
8.50%, 1/15/17, Pool #196004 334,599 334,599
119,411 119,411 Government National Mortgage Association,
8.50%, 1/15/17, Pool #194021 127,582 127,582
194,353 194,353 Government National Mortgage Association,
8.50%, 1/15/17, Pool #194160 207,653 207,653
187,596 187,596 Government National Mortgage Association,
8.50%, 1/15/17, Pool #198032 200,433 200,433
344,693 344,693 Government National Mortgage Association,
8.50%, 1/15/17, Pool #190648 368,281 368,281
232,931 232,931 Government National Mortgage Association,
8.50%, 1/15/17, Pool #186456 248,870 248,870
113,271 113,271 Government National Mortgage Association,
9.00%, 1/15/17, Pool #195250 123,429 123,429
89,995 89,995 Government National Mortgage Association,
9.00%, 1/15/17, Pool #174479 98,066 98,066
173,090 173,090 Government National Mortgage Association,
9.00%, 1/15/17, Pool #173118 188,613 188,613
134,764 134,764 Government National Mortgage Association,
8.50%, 2/15/17, Pool #201264 143,986 143,986
88,006 88,006 Government National Mortgage Association,
8.50%, 2/15/17, Pool #195882 94,028 94,028
597,928 597,928 Government National Mortgage Association,
8.50%, 2/15/17, Pool #195618 638,845 638,845
228,039 228,039 Government National Mortgage Association,
8.50%, 2/15/17, Pool #197425 243,643 243,643
123,970 123,970 Government National Mortgage Association,
8.50%, 2/15/17, Pool #186814 132,453 132,453
240,757 240,757 Government National Mortgage Association,
9.00%, 2/15/17, Pool #208070 262,348 262,348
194,375 194,375 Government National Mortgage Association,
9.00%, 2/15/17, Pool #200724 211,807 211,807
232,758 232,758 Government National Mortgage Association,
9.00%, 2/15/17, Pool #200847 253,632 253,632
124,161 124,161 Government National Mortgage Association,
9.00%, 2/15/17, Pool #181754 135,296 135,296
353,826 353,826 Government National Mortgage Association,
9.00%, 3/15/17, Pool #191314 385,557 385,557
214,206 214,206 Government National Mortgage Association,
8.50%, 4/15/17, Pool #205815 228,864 228,864
182,105 182,105 Government National Mortgage Association,
9.00%, 4/15/17, Pool #211288 198,436 198,436
103,484 103,484 Government National Mortgage Association,
8.50%, 5/15/17, Pool #189313 110,565 110,565
148,362 148,362 Government National Mortgage Association,
8.50%, 5/15/17, Pool #184722 158,514 158,514
216,985 216,985 Government National Mortgage Association,
9.00%, 5/15/17, Pool #214259 236,444 236,444
231,163 231,163 Government National Mortgage Association,
9.00%, 5/15/17, Pool #204622 251,894 251,894
343,380 343,380 Government National Mortgage Association,
8.50%, 6/15/17, Pool #192269 366,877 366,877
414,805 414,805 Government National Mortgage Association,
8.50%, 6/15/17, Pool #224868 443,191 443,191
215,595 215,595 Government National Mortgage Association,
8.50%, 6/15/17, Pool #214028 230,348 230,348
233,008 233,008 Government National Mortgage Association,
8.50%, 6/15/17, Pool #225776 248,953 248,953
153,153 153,153 Government National Mortgage Association,
9.00%, 6/15/17, Pool #206523 166,887 166,887
138,104 138,104 Government National Mortgage Association,
9.00%, 6/15/17, Pool #204594 150,489 150,489
164,823 164,823 Government National Mortgage Association,
9.00%, 6/15/17, Pool #205962 179,605 179,605
416,154 416,154 Government National Mortgage Association,
8.50%, 7/15/17, Pool #218605 444,632 444,632
263,881 263,881 Government National Mortgage Association,
8.50%, 8/15/17, Pool #232813 281,938 281,938
205,760 205,760 Government National Mortgage Association,
9.00%, 8/15/17, Pool #226935 224,212 224,212
119,053 119,053 Government National Mortgage Association,
9.00%, 9/15/17, Pool #221595 129,729 129,729
95
FOUNTAIN SQUARE BOND FUND FOR INCOME/CARDINAL GOVERNMENT OBLIGATIONS FUND
Pro Forma Combining Schedule of Portfolio Investments
January 31, 1998
(Unaudited)
Principal Amount Market Value
- ---------------------------------------------- ------------------------------------
Fountain
Cardinal Cardinal Square
Government Fountain Square Pro Forma Security Government Bond for Pro Forma
Obligations Bond for Income Combined Description Obligations Income Combined
- --------------- --------------- --------- ----------------------------------- ----------- --------- ----------
251,135 251,135 Government National Mortgage Association,
9.00%, 11/15/16, Pool #152872 273,657 273,657
119,419 119,419 Government National Mortgage Association,
10.00%, 9/20/17, Pool #837 130,054 130,054
103,906 103,906 Government National Mortgage Association,
10.00%, 11/20/17, Pool #872 113,160 113,160
204,088 204,088 Government National Mortgage Association,
9.00% 12/15/17, Pool, #234549 222,391 222,391
122,953 122,953 Government National Mortgage Association,
10.00% 12/20/17, Pool #246373 133,903 133,903
118,490 118,490 Government National Mortgage Association,
10.00%, 1/20/18, Pool #227354 129,042 129,042
149,187 149,187 Government National Mortgage Association,
10.00%, 1/20/18, Pool #227352 162,474 162,474
244,599 244,599 Government National Mortgage Association,
10.00%, 1/20/18, Pool #247511 266,383 266,383
310,045 310,045 Government National Mortgage Association,
10.00%, 01/20/18, Pool #908 337,658 337,658
61,009 61,009 Government National Mortgage Association,
10.00%, 2/20/18, Pool #227356 66,442 66,442
139,016 139,016 Government National Mortgage Association,
10.00%, 3/20/18, Pool #250752 151,397 151,397
704,940 704,940 Government National Mortgage Association,
10.00%, 3/20/18, Pool #237233 767,722 767,722
231,691 231,691 Government National Mortgage Association,
10.00%, 3/20/18, Pool #237233 252,325 252,325
141,260 141,260 Government National Mortgage Association,
10.00%, 3/20/17, Pool #216068 153,841 153,841
34,042 34,042 Government National Mortgage Association,
9.00%, 4/15/18, Pool #246622 37,094 37,094
103,254 103,254 Government National Mortgage Association,
9.00%, 5/15/18, Pool #253054 112,514 112,514
81,292 81,292 Government National Mortgage Association,
9.00%, 5/15/18, Pool #235318 88,582 88,582
78,129 78,129 Government National Mortgage Association,
9.00%, 5/15/18, Pool #216072 85,135 85,135
95,478 95,478 Government National Mortgage Association,
9.00%, 7/15/18, Pool #255277 104,041 104,041
141,476 141,476 Government National Mortgage Association,
9.00%, 8/15/18, Pool #248940 154,163 154,163
169,418 169,418 Government National Mortgage Association,
10.00%, 10/20/18, Pool #249978 184,506 184,506
184,737 184,737 Government National Mortgage Association,
9.00%, 11/15/18, Pool #266921 201,304 201,304
183,964 183,964 Government National Mortgage Association,
9.50%, 1/15/19, Pool #268159 194,082 194,082
87,532 87,532 Government National Mortgage Association,
10.00%, 1/20/19, Pool #26988 95,328 95,328
340,987 340,987 Government National Mortgage Association,
10.00%, 02/20/19, Pool #1138 371,355 371,355
120,708 120,708 Government National Mortgage Association,
10.00%, 03/20/19, Pool #1154 131,458 131,458
2,325,594 2,325,594 Government National Mortgage Association,
8.00%, 06/15/19, Pool #413902 2,487,642 2,487,642
153,763 153,763 Government National Mortgage Association,
9.00%, 10/15/19, Pool #277461 167,553 167,553
491,314 491,314 Government National Mortgage Association,
10.00%, 10/20/19, Pool #1274 535,071 535,071
17,371 17,371 Government National Mortgage Association,
10.00%, 11/20/19, Pool #1292 18,919 18,919
132,553 132,553 Government National Mortgage Association,
9.00%, 12/15/2019, Pool #202664 144,440 144,440
242,284 242,284 Government National Mortgage Association,
9.00%, 12/15/19, Pool #278194 264,012 264,012
219,998 219,998 Government National Mortgage Association,
10.00%, 01/20/20, Pool #1328 239,591 239,591
105,867 105,867 Government National Mortgage Association,
10.00%, 02/20/20, Pool #1346 115,295 115,295
118,290 118,290 Government National Mortgage Association,
10.00%, 03/20/20, Pool #1364 128,825 128,825
201,406 201,406 Government National Mortgage Association,
10.00%, 04/20/20, Pool #1382 219,343 219,343
60,745 60,745 Government National Mortgage Association,
10.00%, 7/20/20, Pool #195423 66,155 66,155
58,108 58,108 Government National Mortgage Association,
10.00%, 07/20/20, Pool #1436 63,283 63,283
51,961 51,961 Government National Mortgage Association,
10.00%, 09/20/20, Pool #1472 56,588 56,588
51,375 51,375 Government National Mortgage Association,
10.00%, 12/20/20, Pool #1526 55,951 55,951
75,886 75,886 Government National Mortgage Association,
10.00%, 02/20/21, Pool #1562 82,645 82,645
96
FOUNTAIN SQUARE BOND FUND FOR INCOME/CARDINAL GOVERNMENT OBLIGATIONS FUND
Pro Forma Combining Schedule of Portfolio Investments
January 31, 1998
(Unaudited)
Principal Amount Market Value
- ---------------------------------------------- ------------------------------------
Fountain
Cardinal Cardinal Square
Government Fountain Square Pro Forma Security Government Bond for Pro Forma
Obligations Bond for Income Combined Description Obligations Income Combined
- --------------- --------------- --------- ----------------------------------- ----------- --------- ----------
179,317 179,317 Government National Mortgage Association,
10.00%, 03/20/21, Pool #1580 195,287 195,287
225,480 225,480 Government National Mortgage Association,
9.00%, 4/15/21, Pool #305932 245,701 245,701
87,787 87,787 Government National Mortgage Association,
10.00%, 04/20/21, Pool #1598 95,605 95,605
3,335,682 3,335,682 Government National Mortgage Association,
8.00%, 05/15/21, Pool #422982 3,568,112 3,568,112
19,593 19,593 Government National Mortgage Association,
10.00%, 9/20/21, Pool #266 21,338 21,338
1,751,876 1,751,876 Government National Mortgage Association,
9.00%, 10/15/21, Pool #168090 1,825,770 1,825,770
237,095 237,095 Government National Mortgage Association,
10.00%, 10/20/21, Pool #1706 258,210 258,210
182,008 182,008 Government National Mortgage Association,
10.00%, 11/20/21, Pool #45 198,217 198,217
281,555 281,555 Government National Mortgage Association,
10.00%, 11/20/21, Pool #1724 306,630 306,630
918,243 918,243 Government National Mortgage Association,
8.25%, 3/15/22, Pool #20824 948,371 948,371
924,743 924,743 Government National Mortgage Association,
8.50%, 6/15/22, Pool #220207 981,670 981,670
1,615,973 1,615,973 Government National Mortgage Association,
10.25%, 12/15/22, Pool #246963 1,711,816 1,711,816
5,218,710 5,218,710 Government National Mortgage Association,
8.50%, 1/15/23, Pool #249895 5,539,975 5,539,975
613,608 613,608 Government National Mortgage Association,
9.50%, 02/15/23, Pool #250803 647,927 647,927
1,470,657 1,470,657 Government National Mortgage Association,
9.00%, 08/15/24, Pool #389588 1,586,927 1,586,927
1,066,321 1,066,321 Government National Mortgage Association,
9.00%, 08/15/24, Pool #403527 1,150,624 1,150,624
546,631 546,631 Government National Mortgage Association,
9.00%, 06/15/25, Pool #410533 589,848 589,848
1,824,274 1,824,274 Government National Mortgage Association,
7.50%, 10/15/25, Pool #412507 1,882,414 1,882,414
1,903,613 1,903,613 Government National Mortgage Association,
7.50%, 11/15/26, Pool #436723 1,964,281 1,964,281
1,862,541 1,862,541 Government National Mortgage Association,
7.50%, 11/15/26, Pool #437107 1,921,900 1,921,900
934,610 934,610 Government National Mortgage Association,
7.50%, 12/15/26, Pool #423689 964,396 964,396
989,321 989,321 Government National Mortgage Association,
7.50%, 12/15/26, Pool #436821 1,020,851 1,020,851
981,175 981,175 Government National Mortgage Association,
7.50%, 02/15/27, Pool #429857 1,012,445 1,012,445
1,978,794 1,978,794 Government National Mortgage Association,
7.50%, 02/15/97, Pool #440209 2,041,858 2,041,858
2,761,551 2,761,551 Government National Mortgage Association,
8.25%, 7/15/27, Pool #396628 2,874,581 2,874,581
5,975,702 5,975,702 Government National Mortgage Association,
7.50%, 10/15/27 6,166,149 6,166,149
9,900,000 9,900,000 Government National Mortgage Association,
7.00%, 01/15/28, Pool #449506 10,048,501 10,048,501
4,040,000 4,040,000 Government National Mortgage Association,
7.00%, 01/15/28, Pool #427237 4,100,600 4,100,600
2,019,913 2,019,913 Government National Mortgage Association,
7.00%, 01/15/28, Pool #463389 2,050,212 2,050,212
2,145,275 2,145,275 Government National Mortgage Association,
8.50%, 09/15/29, Pool #394093 2,322,925 2,322,925
1,756,367 1,756,367 Government National Mortgage Association,
8.50%, 03/15/30, Pool #362585 1,799,714 1,799,714
812,934 812,934 Government National Mortgage Association,
9.25%, 03/15/30, Pool #361587 885,585 885,585
1,196,125 1,196,125 Government National Mortgage Association,
8.00%, 08/15/31, Pool #415672 1,279,471 1,279,471
1,969,356 1,969,356 Government National Mortgage Association,
7.75%, 05/15/32 2,029,047 2,029,047
831,072 831,072 Government National Mortgage Association,
9.25%, 5/15/33, Pool #165345 905,869 905,869
753,605 753,605 Government National Mortgage Association,
9.00%, 03/15/33, Pool #363408 820,247 820,247
1,978,493 1,978,493 Government National Mortgage Association,
8.25%, 11/15/34, Pool #394098 2,128,720 2,128,720
3,267,829 3,267,829 Government National Mortgage Association,
8.00%, 8/15/35, Pool #3333 3,475,107 3,475,107
2,421,168 2,421,168 Government National Mortgage Association,
8.25%, 10/15/36, Pool #406703 2,605,008 2,605,008
1,022,729 1,022,729 Government National Mortgage Association,
8.00%, 04/15/37 1,088,245 1,088,245
97
FOUNTAIN SQUARE BOND FUND FOR INCOME/CARDINAL GOVERNMENT OBLIGATIONS FUND
Pro Forma Combining Schedule of Portfolio Investments
January 31, 1998
(Unaudited)
Principal Amount Market Value
- ---------------------------------------------- ------------------------------------
Fountain
Cardinal Cardinal Square
Government Fountain Square Pro Forma Security Government Bond for Pro Forma
Obligations Bond for Income Combined Description Obligations Income Combined
- --------------- --------------- --------- ----------------------------------- ----------- --------- ----------
2,725,156 2,725,156 Government National Mortgage Association,
8.00%, 11/15/37, Pool #419429 2,898,012 2,898,012
------------ ------------ ------------
122,626,925 17,740,327 140,367,252
------------ ------------ ------------
U.S. Treasury Notes
(22.5%):
2,500,000 2,500,000 9.00%, 5/15/98 2,525,000 2,525,000
2,580,000 2,580,000 9.25%, 8/15/98 2,631,600 2,631,600
1,750,000 1,750,000 7.13%, 10/15/98 1,770,781 1,770,781
2,000,000 2,000,000 8.00%, 8/15/99 2,076,876 2,076,876
8,500,000 8,500,000 5.63%, 11/30/99 8,537,188 8,537,188
6,000,000 6,000,000 6.13%, 7/31/00 6,106,878 6,106,878
4,000,000 4,000,000 7.75%, 2/15/01 4,265,000 4,265,000
11,500,000 11,500,000 6.13%, 12/31/01 11,787,500 11,787,500
17,000,000 17,000,000 5.88%, 9/30/02 17,313,446 17,313,446
5,000,000 5,000,000 5.75%, 8/15/03 5,070,315 5,070,315
4,000,000 4,000,000 6.50%, 10/15/06 4,252,500 4,252,500
66,337,084 66,337,084
------------ ------------ ------------
Total U.S. Government
Securities 122,626,925 84,077,411 206,704,336
------------ ------------ ------------
Repurchase Agreement (2.7%):
2,943,551 2,943,551 Fifth Third 2,943,551 2,943,551
4,922,000 4,922,000 UBS Securities 4,922,000 4,922,000
------------ ------------ ------------
Total Repurchase Agreement 2,943,551 4,922,000 7,865,551
============ ============ ============
Total Investments (Cost $122,423,420,
$167,472,033, and $289,895,453,
respectively) 100.3% $125,570,476 $170,783,001 $296,353,477
============ ============ ============
98
FOUNTAIN SQUARE GOVERNMENT CASH RESERVES FUND/CARDINAL GOVERNMENT SECURITIES
MONEY MARKET FUND
Pro Forma Combining Schedule of Portfolio Investments
January 31, 1998
(Unaudited)
Principal Amount Amortized Cost
- ----------------------------------------------------- -------------------------------------
Fountain
Cardinal Fountain Square Cardinal Square
Government Government Pro Forma Security Government Government Pro Forma
Securities Cash Reserves Combined Description Securities Cash Reserves Combined
- ----------------------- ------------- --------- ----------------------------- ---------- ------------- ---------
U.S. Government Agencies
(86.7%):
Federal Farm Credit Bank
(22.1%):
$25,000,000 $25,000,000 Discount Note, 2/2/98 $25,000,000 $25,000,000
7,500,000 7,500,000 Discount Note, 2/2/98 7,500,000 7,500,000
$5,991,000 5,991,000 Discount Note, 2/18/98 $5,975,440 5,975,440
4,000,000 4,000,000 Discount Note, 2/20/98 3,988,368 3,988,368
5,000,000 5,000,000 Discount Note, 2/23/98 4,983,408 4,983,408
25,000,000 25,000,000 Discount Note, 3/2/97 25,000,000 25,000,000
9,000,000 9,000,000 Discount Note, 3/23/98 8,932,875 8,932,875
5,000,000 5,000,000 Discount Note, 4/1/98 5,000,000 5,000,000
10,000,000 10,000,000 Discount Note, 4/15/98 9,891,919 9,891,919
5,000,000 5,000,000 Discount Note, 5/1/98 5,000,000 5,000,000
6,000,000 6,000,000 Discount Note, 5/15/98 5,906,441 5,906,441
10,000,000 10,000,000 Discount Note, 6/2/98 10,010,928 10,010,928
30,000,000 30,000,000 Discount Note, 7/1/98 30,000,000 30,000,000
30,000,000 30,000,000 Discount Note, 8/3/98 30,000,000 30,000,000
10,000,000 10,000,000 Discount Note, 8/18/98 10,000,000 10,000,000
------------ ---------- -----------
147,510,928 39,678,451 187,189,379
------------ ---------- -----------
Federal Home Loan Bank
(39.5%):
20,000,000 20000000 Discount Note, 2/4/98 19,991,067 19,991,067
15,248,000 15248000 Discount Note, 2/6/98 15,236,412 15,236,412
5,000,000 5000000 Discount Note, 2/10/98 4,993,213 4,993,213
12,000,000 12000000 Discount Note, 2/13/98 11,978,553 11,978,553
10,000,000 10,000,000 Discount Note, 2/13/98 10,000,000 10,000,000
15,000,000 15,000,000 Discount Note, 2/18/97 14,960,817 14,960,817
11,000,000 11,000,000 Discount Note, 2/20/98 10,968,666 10,968,666
7,250,000 7,250,000 Discount Note, 2/25/97 7,223,054 7,223,054
10,000,000 10,000,000 Discount Note, 3/4/98 10,000,000 10,000,000
10,000,000 10,000,000 Discount Note, 3/5/98 9,951,378 9,951,378
10,000,000 10,000,000 Discount Note, 3/10/98 9,944,808 9,944,808
4,000,000 4,000,000 Discount Note, 3/11/98 3,977,411 3,977,411
10,000,000 10,000,000 Discount Note, 3/13/98 9,998,868 9,998,868
10,000,000 10,000,000 Discount Note, 3/18/98 9,931,875 9,931,875
99
FOUNTAIN SQUARE GOVERNMENT CASH RESERVES FUND/CARDINAL GOVERNMENT SECURITIES
MONEY MARKET FUND
Pro Forma Combining Schedule of Portfolio Investments
January 31, 1998
(Unaudited)
Principal Amount Amortized Cost
- ----------------------------------------------------- -------------------------------------
Fountain
Cardinal Fountain Square Cardinal Square
Government Government Pro Forma Security Government Government Pro Forma
Securities Cash Reserves Combined Description Securities Cash Reserves Combined
- ----------------------- ------------- --------- ----------------------------- ---------- ------------- ---------
10,000,000 10,000,000 Discount Note, 3/19/98 9,929,850 9,929,850
13,000,000 13,000,000 Discount Note, 3/20/98 12,907,658 12,907,658
15,455,000 15,455,000 Discount Note, 3/25/98 15,335,502 15,335,502
5,000,000 5,000,000 Discount Note, 4/1/98 4,956,037 4,956,037
10,000,000 10,000,000 Discount Note, 4/8/98 9,901,550 9,901,550
4,000,000 4,000,000 Discount Note, 4/15/98 3,956,524 3,956,524
4,000,000 4,000,000 Discount Note, 4/17/98 3,954,750 3,954,750
5,000,000 5,000,000 Floating Rate Note, 5.61%, 2/4/98(a) 5,000,000 5,000,000
10,000,000 10,000,000 Discount Note, 4/23/98 9,875,688 9,875,688
10,000,000 10,000,000 Discount Note, 4/29/98 9,870,225 9,870,225
10,000,000 10,000,000 Discount Note, 6/5/98 9,810,211 9,810,211
5,000,000 5,000,000 Discount Note, 6/10/98 4,901,817 4,901,817
10,000,000 10,000,000 Discount Note, 6/16/98 10,000,000 10,000,000
10,000,000 10,000,000 Discount Note, 6/17/98 9,793,356 9,793,356
10,000,000 10,000,000 Discount Note, 6/30/98 9,995,182 9,995,182
20,000,000 20,000,000 Discount Note, 9/2/98 19,999,999 19,999,999
5,000,000 5,000,000 Discount Note, 9/16/98 5,000,000 5,000,000
15,000,000 15,000,000 Discount Note, 9/18/98 15,006,377 15,006,377
15,000,000 15,000,000 Discount Note, 12/23/98 15,000,000 15,000,000
------------ ----------- -----------
105,000,426 229,350,422 334,350,848
------------ ----------- -----------
Student Loan Marketing
Association (24.5%):
3,000,000 3000000 Floating Rate Note, 5.41%, 2/3/98(a) 2,997,210 2997210
30,000,000 10,000,000 40,000,000 Floating Rate Note, 5.42%, 2/3/98(a) 30,000,000 10,000,000 40,000,000
20,000,000 20,000,000 Floating Rate Note, 5.47%, 2/3/98(a) 20,000,000 20,000,000
5,000,000 10,000,000 15,000,000 Floating Rate Note, 5.56%, 2/3/98(a) 5,000,000 10,000,000 15,000,000
30,000,000 30,000,000 Floating Rate Note, 5.56%, 2/3/98(a) 30,000,000 30,000,000
30,000,000 30,000,000 Floating Rate Note, 5.61%, 2/3/98(a) 30,000,000 30,000,000
30,000,000 30,000,000 Floating Rate Note, 5.52%, 2/3/98(a) 30,000,000 30,000,000
5,000,000 5,000,000 Master Note, 5.90%, 12/10/98(b) 5,000,000 5,000,000
5,000,000 5,000,000 Master Note, 5.56%, 01/27/99(b) 5,000,000 5,000,000
29,050,000 29,050,000 Master Note, 5.46%, 7/1/00(b) 29,050,000 29,050,000
------------ ----------- ------------
155,000,000 52,047,210 207,047,210
------------ ----------- ------------
100
FOUNTAIN SQUARE GOVERNMENT CASH RESERVES FUND/CARDINAL GOVERNMENT SECURITIES
MONEY MARKET FUND
Pro Forma Combining Schedule of Portfolio Investments
January 31, 1998
(Unaudited)
Principal Amount Amortized Cost
- ----------------------------------------------------- -------------------------------------
Fountain
Cardinal Fountain Square Cardinal Square
Government Government Pro Forma Security Government Government Pro Forma
Securities Cash Reserves Combined Description Securities Cash Reserves Combined
- ----------------------- ------------- --------- ----------------------------- ---------- ------------- ---------
Tennessee Valley
Authority (0.6%):
5,000,000 5000000 Discount Note, 2/13/98 4,990,700 4,990,700
----------- ----------- -----------
Total U.S. Government
Agencies 407,511,354 326,066,783 733,578,137
----------- ----------- -----------
Repurchase
Agreements (16.8%):
2,892,699 2,892,699 Fifth Third 2,892,669 2,892,669
33,000,000 33,000,000 Merril Lynch 33,000,000 33,000,000
48,000,000 48,000,000 Paine Webber 48,000,000 48,000,000
30,000,000 30,000,000 Prudential 30,000,000 30,000,000
28,000,000 28,000,000 Smith Barney 28,000,000 28,000,000
----------- ----------- -----------
Total Repurchase Agreements Prudential 141,892,669 141,892,669
----------- ----------- -----------
Total Investments (Amortized
Cost $549,404,023,
$326,066,783, and $875,470,806,
respectively) 103.5% $549,404,023 $326,066,783 $875,470,806
------------ ------------ ------------
(a) Current rate and next demand date shown.
(b) Current rate shown
101
Fountain Square Funds/The Cardinal Group
Pro Forma Combining Statements of Assets and Liabilities
January 31, 1998 Pro Forma
(Unaudited) Combined
Fountain Square Cardinal Fountain Square
Balanced Balanced Pro Forma Balanced
Fund Fund Adjustments Fund
--------------- ------------ ----------- ---------------
Assets:
Investments, at value (Cost $105,553,043; $13,526,203;) $131,922,087 $ 16,985,129 $ $148,907,216
Repurchase agreements (Cost $23,444,000; $811,804;) 23,444,000 811,804 24,255,804
------------ ------------ --------- ------------
Total Investments 155,366,087 17,796,933 173,163,020
Cash 928 -- 928
Interest and dividends receivable 747,061 100,184 847,245
Receivable for investments sold 82 67,858 67,940
Receivable for Fund shares sold 243,087 -- -- 243,087
Unamortized organizational costs -- 5,458 (5,458) --
Prepaid expenses and other assets 6,847 32,418 39,265
------------ ------------ --------- ------------
Total Assets 156,364,092 18,002,851 (5,458) 174,361,485
------------ ------------ --------- ------------
Liabilities:
Payable for investments purchased 4,246,647 -- 4,246,647
Payable for Fund shares redeemed 55,742 2,685 -- 58,427
Accrued expenses and other payables:
Investment advisory fees 98,943 10,558 109,501
Administration fees 12,738 1,393 14,131
Distribution Services - Investment C Shares 7,512 3,912 11,424
Shareholder Servicing - Investment C Shares 3,302 -- 3,302
Accounting and transfer agent fees 7,357 -- 7,357
Custodian fees 900 8,176 9,076
Legal and audit fees 5,519 2,098 7,617
Printing fees 3,828 8,191 12,019
Registration & Filing 8,231 -- 8,231
Other 7,216 16,889 24,105
------------ ------------ --------- ------------
Total Liabilities 4,457,935 53,902 -- 4,511,837
------------ ------------ --------- ------------
Net Assets :
Paid-in capital 122,601,467 14,496,388 (5,458) 137,092,397
Net unrealized appreciation (depreciation)
on investments and foreign currency 26,369,044 3,458,926 -- 29,827,970
Accumulated net realized gains (losses)
on investment and foreign currency transactions 2,716,946 35,312 -- 2,752,258
Undistributed net investment income(loss) 218,700 (41,677) -- 177,023
------------ ------------ --------- ------------
Net Assets $151,906,157 $ 17,948,949 $ (5,458) $169,849,648
============ ============ ========= ============
Net Assets
Investment A Shares $149,223,068 $ 15,982,908 $ (5,458) $165,200,518
Investment C Shares 2,683,089 -- -- 2,683,089
Institutional Class -- 1,966,041 -- 1,966,041
------------ ------------ --------- ------------
Total $151,906,157 $ 17,948,949 $ (5,458) $169,849,648
============ ============ ========= ============
Outstanding units of beneficial interest (shares)
Investment A Shares 10,341,510 1,262,751 (155,513) 11,448,748
Investment C Shares 185,836 -- -- 185,836
Institutional Class -- 155,202 (18,955) 136,247
------------ ------------ --------- ------------
Total 10,527,346 1,417,953 (174,468) 11,770,831
============ ============ ========= ============
Net asset value
Redemption price per share-Investment A Shares $ 14.43 $ 12.66 $ 14.43
============ ============ ========= ============
Offering price per shares-Investment C Shares* $ 14.44 $ -- $ 14.44
============ ============ ========= ============
Redemption price per share-Institutional $ 14.43 $ 12.67 $ 14.43
============ ============ ========= ============
Maximum Sales Charge 4.50% $ 4.00% 4.50%
============ ============ ========= ============
Maximum Offering Price (100%/(100%-Maximum Sales Charge)
of net asset value adjusted to nearest cent)
per share (Investment A Shares) $ 15.11 $ 13.19 $ 15.11
============ ============ ========= ============
* Redemption price per share varies by length of time shares are held.
(See Notes which are an integral part of the Financial Statements)
102
Fountain Square Funds/The Cardinal Group
Pro Forma Combining Statements of Assets and Liabilities
January 31, 1998 Pro Forma
(Unaudited) Combined
Fountain Square Fountain Square
Bond Fund Cardinal Bond Fund
For Gov't Obligations Pro Forma For
Income Fund Adjustments Income
--------------- ------------- ----------- -------------
Assets:
Investments, at value (Cost $162,549,040; $119,478,876;) $ 165,861,001 $ 122,626,925 $- $ 288,487,926
Repurchase agreements (Cost $4,922,000; $2,943,551;) 4,922,000 2,943,551 -- 7,865,551
------------- ------------- ----------- -------------
Total Investments 170,783,001 125,570,476 -- 296,353,477
Cash 561 -- -- 561
Interest and dividends receivable 3,222,647 789,254 -- 4,011,901
Receivable for investments sold 7,259,005 7,417,929 -- 14,676,934
Receivable for Fund shares sold -- 53,202 -- 53,202
Unamortized organizational costs 7,197 27,993 (27,993) 7,197
Prepaid expenses and other assets 8,011 131,426 -- 139,437
------------- ------------- ----------- -------------
Total Assets 181,280,422 133,990,280 (27,993) 315,242,709
------------- ------------- ----------- -------------
Liabilities:
Payable for investments purchased 10,166,434 8,505,358 -- 18,671,792
Payable for Fund shares redeemed 2,500 -- -- 2,500
Interest Payable 214,244 687,386 -- 901,630
Accrued expenses and other payables:
Investment advisory fees 78,681 53,515 -- 132,196
Administration fees 17,579 3,693 -- 21,272
Distribution Services - Investment C Shares 233 28,373 -- 28,606
Shareholder Servicing - Investment C Shares 97 -- -- 97
Accounting and transfer agent fees 3,141 16,111 -- 19,252
Custodian fees 725 16,025 -- 16,750
Legal and audit fees 5,519 6,611 -- 12,130
Printing fees 2,704 8,954 -- 11,658
Registration & Filing 3,012 -- -- 3,012
Other 1,223 16,236 -- 17,459
------------- ------------- ----------- -------------
Total Liabilities 10,496,092 9,342,262 -- 19,838,354
------------- ------------- ----------- -------------
Net Assets :
Paid-in capital 166,628,408 144,757,349 (27,993) 311,357,764
Net unrealized appreciation (depreciation)
on investments and foreign currency 3,311,961 3,147,056 -- 6,459,017
Accumulated net realized gains (losses) on investment
and foreign currency transactions 850,765 (23,321,461) -- (22,470,696)
Undistributed net investment income(loss) (6,804) 65,074 -- 58,270
------------- ------------- ----------- -------------
Net Assets $ 170,784,330 $ 124,648,018 $ (27,993) $ 295,404,355
============= ============= =========== =============
Net Assets
Investment A Shares $ 170,670,669 $ 118,723,858 $ (27,993) $ 289,366,534
Investment C Shares 113,661 -- -- 113,661
Institutional Class -- 5,924,160 -- 5,924,160
------------- ------------- ----------- -------------
Total $ 170,784,330 $ 124,648,018 $ (27,993) $ 295,404,355
============= ============= =========== =============
Outstanding units of beneficial interest (shares)
Investment A Shares 13,928,763 14,363,251 (4,673,793) 23,618,221
Investment C Shares 9,284 -- -- 9,284
Institutional Class -- 716,706 (233,101) 483,605
------------- ------------- ----------- -------------
Total 13,938,047 15,079,957 (4,906,894) 24,111,110
============= ============= =========== =============
Net asset value
Redemption price per share-Investment A Shares $ 12.25 $ 8.27 $ 12.25
============= ============= =========== =============
Offering price per shares-Investment C Shares* $ 12.24 $ -- $ 12.24
============= ============= =========== =============
Redemption price per share-Institutional Shares $ $ 8.27 $ 12.25
============= ============= =========== =============
Maximum Sales Charge 4.50% 4.00% 4.50%
============= ============= =========== =============
Maximum Offering Price (100%/(100%-Maximum Sales Charge)
of net asset value adjusted to nearest cent)
per share (Investment A Shares) $ 12.83 $ 8.61 $ 12.83
============= ============= =========== =============
* Redemption price per share varies by length of time shares are held.
(See Notes which are an integral part of the Financial Statements)
103
Fountain Square Funds/The Cardinal Group
Pro Forma Combining Statements of Assets and Liabilities
January 31, 1998 Pro Forma
(Unaudited) Combined
Fountain Square Cardinal Fountain Square
Gov't Cash Gov't Securities Gov't Cash
Reserves Money Market Pro Forma Reserves
Fund Fund Adjustments Fund
-------------- --------------- ----------- ---------------
Assets:
Investments, at value
(Amortized Cost $326,066,783; $407,511,354;) $326,066,783 $ 407,511,354 $- $ 733,578,137
Repurchase agreements
(Amortized Cost $0; $141,892,669;) -- 141,892,669 -- 141,892,669
------------ ------------- --------- -------------
Total Investments 326,066,783 549,404,023 -- 875,470,806
Cash 3,517 31 -- 3,548
Interest and dividends receivable 691,560 6,132,741 -- 6,824,301
Receivable for investments sold -- -- -- --
Receivable for Fund shares sold -- 239,509 -- 239,509
Unamortized organizational costs -- 113,365 (113,365) --
Prepaid expenses and other assets 8,521 352,690 -- 361,211
------------ ------------- --------- -------------
Total Assets 326,770,381 556,242,359 (113,365) 882,899,375
------------ ------------- --------- -------------
--
Liabilities: --
Interest and dividends Payable 1,388,282 -- -- 1,388,282
Payable for investments purchased -- 35,053,318 -- 35,053,318
Payable for Fund shares redeemed -- -- -- --
Accrued expenses and other payables: --
Investment advisory fees 103,993 227,180 -- 331,173
Administration fees 22,677 -- -- 22,677
Distribution Services - Investment C Shares -- -- -- --
Shareholder Servicing - Investment C Shares -- -- -- --
Accounting and transfer agent fees 7,200 99,409 -- 106,609
Custodian fees 1,688 12,149 -- 13,837
Legal and audit fees 5,519 27,129 -- 32,648
Printing fees 3,908 13,526 -- 17,434
Registration & Filing 15,320 12,378 -- 27,698
Other 13,749 58,194 -- 71,943
------------ ------------- --------- -------------
Total Liabilities 1,562,336 35,503,283 -- 37,065,619
------------ ------------- --------- -------------
-------------
-------------
Net Assets : --
Paid-in capital 325,206,515 521,954,727 (113,365) 847,047,877
Net unrealized appreciation (depreciation)
on investments and foreign currency -- -- -- --
Accumulated net realized gains (losses)
on investment and foreign currency transactions 1,530 (1,553,942) -- (1,552,412)
Undistributed net investment income(loss) -- 338,291 -- 338,291
------------ ------------- --------- -------------
Net Assets 325,208,045 $ 520,739,076 $(113,365) $ 845,833,756
============ ============= ========= =============
Net Assets
Investment A Shares 190,194,107 $ 520,739,076 $(113,365) $ 710,819,818
Investment C Shares 135,013,938 -- -- 135,013,938
------------ ------------- --------- -------------
Total 325,208,045 $ 520,739,076 $(113,365) $ 845,833,756
============ ============= ========= =============
-------------
Outstanding units of beneficial interest (shares) --
Investment A Shares 190,193,410 520,809,044 (113,365) 710,889,089
Investment C Shares 135,013,100 -- -- 135,013,100
------------ ------------- --------- -------------
Total 325,206,510 520,809,044 (113,365) 845,902,189
============ ============= ========= =============
Net asset value
Redemption price per share-Investment A Shares $ 1.00 $ 1.00 $ 1.00
============ ============= ========= =============
Offering price per shares-Investment C Shares* $ -- $ -- $ 1.00
============ ============= ========= =============
Maximum Sales Charge 0.00% 0.00% 0.00%
============ ============= ========= =============
Maximum Offering Price (100%/(100%-Maximum Sales Charge)
of net asset value adjusted to nearest cent)
per share (Investment A Shares) $ 1.00 $ 1.00 $ 1.00
============ ============= ========= =============
* Redemption price per share varies by length of time shares are held.
(See Notes which are an integral part of the Financial Statements)
104
Fountain Square Funds/The Cardinal Group
Pro Forma Combining Statements of Operations
For the year ended January 31, 1998
(Unaudited) Pro Forma
Combined
Fountain Square Cardinal Fountain Square
Balanced Balanced Pro Forma Balanced
Fund Fund Adjustments Fund
-------------- ---------- ------------ ----------------
INVESTMENT INCOME:
Interest income $ 2,877,796 $ 378,469 $ -- $ 3,256,265
Dividend income 792,924 147,004 -- 939,928
----------- ---------- -------- -----------
Total Income 3,670,720 525,473 -- 4,196,193
----------- ---------- -------- -----------
EXPENSES:
Investment advisory fees 986,064 120,256 9,896 1,116,216
Administrative fees 209,194 -- (68,629) 140,565
Distribution & service fees - Investment A 424,772 36,315 17,273 478,360
Distribution & service fees - Investment C 10,847 -- -- 10,847
Shareholder servicing - Investment C 3,616 1,590 (1,590) 3,616
Organization expense 3,270 10,585 (10,585) 3,270
Custodian fees 10,036 8,896 (8,182) 10,750
Portfolio accounting fees 42,551 17,937 (23,768) 36,720
Transfer and dividend disbursing
agent fees and expenses 17,569 16,748 1,750 36,067
Directors'/Trustees' fees 1,204 2,102 (2,006) 1,300
Audit fees 8,779 64 657 9,500
Legal fees 7,725 697 1,328 9,750
Fund share registration costs 11,099 9,514 (3,209) 17,404
Printing and postage expense 7,075 -- 946 8,021
Insurance expense 896 1,095 1,002 2,993
Other 1,366 1,228 (500) 2,094
----------- ---------- -------- -----------
Total Expenses 1,746,063 227,027 (85,617) 1,887,473
----------- ---------- -------- -----------
Less fees voluntarily reduced (509,332) -- -- (509,332)
----------- ---------- -------- -----------
Net Expenses 1,236,731 227,027 (85,617) 1,378,141
----------- ---------- -------- -----------
Net Investment Income (Loss) 2,433,989 298,446 85,617 2,818,052
----------- ---------- -------- -----------
Realized and Unrealized Gains
(Losses) from Investments and
Foreign Currency Transactions:
Net realized gains(losses) from investments
and foreign currency transactions 13,660,190 486,645 -- 14,146,835
Net change in unrealized appreciation (depreciation)
from investments and translation of assets
and liabilities in foreign securities 7,155,154 3,458,926 -- 10,614,080
----------- ---------- -------- -----------
Net realized and unrealized gains(losses)
from investments and foreign currency 20,815,344 3,945,571 -- 24,760,915
----------- ---------- -------- -----------
Change in net assets resulting
from operations $23,249,333 $4,244,017 $ 85,617 $27,578,967
=========== ========== ======== ===========
(See Notes which are an integral part of the Financial Statements)
105
Fountain Square Funds/The Cardinal Group
Pro Forma Combining Statements of Operations
For the year ended January 31, 1998
(Unaudited) Pro Forma
Combined
Fountain Square Cardinal Fountain Square
Bond Fund Gov't Obligations Pro Forma Bond Fund
For Income Fund Adjustments For Income
--------------- ----------------- ----------- ---------------
INVESTMENT INCOME:
Interest income $10,274,593 $10,144,635 $ -- $20,419,228
Dividend income (3,946) -- -- (3,946)
----------- ----------- -------- -----------
Total Income 10,270,647 10,144,635 -- 20,415,282
----------- ----------- -------- -----------
EXPENSES:
Investment advisory fees 851,218 640,945 62,116 1,554,279
Administrative fees 262,971 -- 85,754 348,725
Distribution & service fees - Investment A 541,536 279,289 147,503 968,328
Distribution & service fees - Investment C 437 3,694 (437) 3,694
Shareholder servicing - Investment C 116 -- 159 275
Organization expense 1,830 8,395 (8,395) 1,830
Custodian fees 8,652 34,281 (34,033) 8,900
Portfolio accounting fees 42,080 50,133 (14,113) 78,100
Transfer and dividend disbursing
agent fees and expenses 19,586 106,500 (71,939) 54,147
Directors'/Trustees' fees 3,031 20,421 (21,071) 2,381
Audit fees 14,020 12,119 (16,639) 9,500
Legal fees 9,539 22,020 (21,809) 9,750
Fund share registration costs 64,207 24,829 (40,518) 48,518
Printing and postage expense 19,314 24,759 (36,052) 8,021
Insurance expense 2,882 8,307 (4,792) 6,397
Other 60 25,274 (23,053) 2,281
----------- ----------- -------- -----------
Total Expenses 1,841,479 1,260,966 2,681 3,105,126
----------- ----------- -------- -----------
Less fees voluntarily reduced (650,208) -- -- (650,208)
----------- ----------- -------- -----------
Net Expenses 1,191,271 1,260,966 2,681 2,454,918
----------- ----------- -------- -----------
Net Investment Income (Loss) 9,079,376 8,883,669 (2,681) 17,960,364
----------- ----------- -------- -----------
Realized and Unrealized Gains
(Losses) from Investments and
Foreign Currency Transactions:
Net realized gains(losses) from investments
and foreign currency transactions 1,686,155 604,849 -- 2,291,004
Net change in unrealized appreciation(depreciation)
from investments and translation of assets and
liabilities in foreign securities 1,256,890 3,147,056 -- 4,403,946
----------- ----------- -------- -----------
Net realized and unrealized gains(losses)
from investments and foreign currency 2,943,045 3,751,905 -- 6,694,950
----------- ----------- -------- -----------
Change in net assets resulting
from operations $12,022,421 $12,635,574 $ (2,681) $24,655,314
=========== =========== ======== ===========
(See Notes which are an integral part of the Financial Statements)
106
Fountain Square Funds/The Cardinal Group
Pro Forma Combining Statements of Operations
For the year ended January 31, 1998
(Unaudited) Pro Forma
Cardinal Combined
Fountain Square Gov't Securities Fountain Square
Gov't Cash Money Market Pro Forma Gov't Cash
Reserves Fund Fund Adjustments Reserves Fund
--------------- ---------------- ----------- ---------------
INVESTMENT INCOME:
Interest income $15,214,437 $28,264,156 $ -- $43,478,593
Dividend income -- -- -- --
----------- ----------- ---------- -----------
Total Income 15,214,437 28,264,156 -- 43,478,593
----------- ----------- ---------- -----------
EXPENSES:
Investment advisory fees 1,104,723 2,639,807 (582,271) 3,162,259
Administrative fees 468,052 -- 208,547 676,599
Distribution & service fees - Investment A 400,037 -- 1,290,779 1,690,816
Distribution & service fees - Investment C -- -- -- --
Shareholder servicing - Investment C -- -- -- --
Organization expense -- 34,675 (34,675) --
Custodian fees 14,834 26,497 (23,131) 18,200
Portfolio accounting fees 56,504 63,832 (9,935) 110,401
Transfer and dividend disbursing
agent fees and expenses 23,018 1,072,372 (657,774) 437,616
Directors'/Trustees' fees 2,598 54,107 (49,754) 6,951
Audit fees 8,600 68,566 (67,666) 9,500
Legal fees 7,725 62,787 (60,762) 9,750
Fund share registration costs 48,199 9,801 74,224 132,224
Printing and postage expense 14,866 112,898 (115,826) 11,938
Insurance expense 2,337 43,475 (32,137) 13,675
Other 352 327,461 (327,012) 801
----------- ----------- ---------- -----------
Total Expenses 2,151,845 4,516,278 (387,393) 6,280,730
----------- ----------- ---------- -----------
Less fees voluntarily reduced (729,406) -- -- (729,406)
----------- ----------- ---------- -----------
Net Expenses 1,422,439 4,516,278 (387,393) 5,551,324
----------- ----------- ---------- -----------
Net Investment Income (Loss) 13,791,998 23,747,878 387,393 37,927,269
----------- ----------- ---------- -----------
Realized and Unrealized Gains
(Losses) from Investments and
Foreign Currency Transactions:
Net realized gains(losses) from investments
and foreign currency transactions 961 (91,324) -- (90,363)
Net change in unrealized appreciation(depreciation)
from investments and translation of assets and
liabilities in foreign securities -- -- -- --
----------- ----------- ---------- -----------
Net realized and unrealized gains(losses)
from investments and foreign currency 961 (91,324) -- (90,363)
----------- ----------- ---------- -----------
Change in net assets resulting
from operations $13,792,959 $23,656,554 $ 387,393 $37,836,906
=========== =========== ========== ===========
(See Notes which are an integral part of the Financial Statements)
107
FOUNTAIN SQUARE FUNDS/THE CARDINAL GROUP
NOTES TO PRO FORMA FINANCIAL STATEMENTS
(Unaudited)
-------
1. BASIS OF COMBINATION:
The unaudited Pro Forma Combining Statements of Assets and Liabilities,
Statements of Operations, and Schedules of Portfolio Investments reflect the
accounts of three investment portfolios offered by Fountain Square Funds (the
"Company"): the Balanced Fund, the Bond Fund For Income and the Government Cash
Reserves Fund and three investment portfolios offered by The Cardinal Group: the
Balanced Fund, the Government Obligations Fund and the Government Securities
Money Market Fund (collectively, "Funds") as if the proposed reorganization
occurred as of and for the year ended January 31, 1998. These statements have
been derived from books and records utilized in calculating daily net asset
value at January 31, 1998.
The Reorganization Agreement provides that on the Closing Date of the
Reorganization, all of the assets and liabilities will be transferred as follows
such that at and after the Reorganization, the assets and liabilities of the
applicable Cardinal Fund will become the assets and liabilities of the
corresponding Fountain Square Fund: the Cardinal Balanced Fund assets and
liabilities will be transferred to the Fountain Square Balanced Fund, the
Cardinal Government Obligations Fund assets and liabilities will be transferred
to the Fountain Square Bond Fund For Income and the Cardinal Government
Securities Money Market Fund assets and liabilities will be transferred to the
Fountain Square Government Cash Reserves Fund. In exchange for the transfer of
assets and liabilities,FSF will issue to the Cardinal Funds full and fractional
shares of the corresponding Fountain Square Funds, and the Cardinal Funds will
make a liquidating distribution of such shares to its shareholders. The number
of shares of the Fountain Square Funds so issued will be equal in value to the
full and fractional shares of the Cardinal Funds that are outstanding
immediately prior to the Reorganization. At and after the Reorganization, all
debts, liabilities and obligations of the Cardinal Funds will attach to the
Fountain Square Funds and may thereafter be enforced against the Fountain Square
Funds to the same extent as if they had been incurred by such Funds. The pro
forma statements give effect to the proposed transfer described above.
Under the purchase method of accounting for business combinations under
generally accepted accounting principles, the basis on the part of the Fountain
Square Funds, of the assets of the Cardinal Funds will be the fair market value
of such assets on the Closing Date of the Reorganization. The Fountain Square
Funds will recognize no gain or loss for federal tax purposes on its issuance
of shares in the reorganization, and the basis to the Fountain Square Funds of
the assets of the Cardinal Funds received pursuant to the Reorganization will
equal the fair market value of the consideration furnished by the Fountain
Square Funds in the reorganization -- i.e., the sum of the
(CONTINUED)
108
FOUNTAIN SQUARE FUNDS/THE CARDINAL GROUP
NOTES TO PRO FORMA FINANCIAL STATEMENTS
(Unaudited)
-------
liabilities assumed, the fair market value of the Fountain Square Funds shares
issued. For accounting purposes, the Operating Fountain Square Funds are
the surviving Funds of this Reorganization. The pro forma statements reflect
the combined results of operations of the Cardinal Funds and the Fountain
Square Funds. However, should such Reorganization be effected, the statements
of operations of the Fountain Square Funds will not be restated for
precombination period results of the corresponding Cardinal Funds.
The Pro Forma Combining Statements of Assets and Liabilities, Statements
of Operations, and Schedules of Portfolio Investments should be read in
conjunction with the historical financial statements of the Funds incorporated
by reference in the Statement of Additional Information.
The Cardinal Funds and the Fountain Square Funds are each separate
portfolios of The Cardinal Group and the Fountain Square Funds, respectively,
which are registered as an open-end management investment companies under the
Investment Company Act of 1940 (the "1940 Act"). The investment objective of the
Cardinal Balanced Fund is to seek current income and long-term growth of both
capital and income. The investment objective of the Fountain Square Balanced
Fund is to pursue capital appreciation and income. The investment objective of
the Cardinal Government Obligations is to maximize safety of capital and,
consistent with such objective, earn the highest available current income
obtainable from government securities. The investment objective of the Fountain
Square Bond Fund For Income is to provide a high level of current income. The
investment objective of the Cardinal Government Securities Money Market Fund is
to maximize current income while preserving capital and maintaining liquidity.
The investment objective of Fountain Square Government Cash Reserves Fund is
high current income consistent with stability of principal and liquidity.
EXPENSES
Fifth Third Bank (the "Advisor"), serves as the Fountain Square Funds'
investment advisor. BISYS Fund Services L.P. (the "Administrator"), an
indirect, wholly-owned subsidiary of The BISYS Group, Inc. (BISYS) serves as
the administrator and distributor to the Fountain Square Funds. Fifth Third
Bank serves as transfer and dividend disbursing agent, fund accountant and
custodian for the Fountain Square Funds.
Cardinal Funds:
Cardinal Balanced Fund and Cardinal Government Obligations Fund each
issues two classes of shares. The Investor Shares of these Funds have rights
and privileges analogous to those of Investment A Shares of the corresponding
Fountain Square Funds. The Institutional Shares of these Cardinal Funds
(CONTINUED)
109
FOUNTAIN SQUARE FUNDS/THE CARDINAL GROUP
NOTES TO PRO FORMA FINANCIAL STATEMENTS
(Unaudited)
-------
have rights and privileges analogous to those of the Institutional Shares of
the corresponding Fountain Square Funds. Shares of the Government Securities
Money Market Fund have rights and privileges analogous to those of
Institutional Shares (formerly known as Trust Shares) of Fountain Square
Governmental Cash Reserves Fund.
Under the terms of the investment advisory agreement between The Cardinal Group
and Cardinal Management Corp. (the "Advisor"), the Advisor is entitled to
receive fees computed at the annual rate of 0.75% for the Balanced Fund, 0.50%
for the Government Obligations Fund and 0.50% of Government Securities Money
Market Fund. Such fees are accrued daily and paid monthly. For the 12-month
period ended January 31, 1998, total investment advisory fees incurred by these
Funds were as follows:
Total Fees
----------
Balanced Fund 120,256
Government Obligations 640,945
Government Securities 2,639,807
Fountain Square Funds:
The Fountain Square Balanced Fund and Bond Fund For Income issue three
class of shares: Investment A Shares, Investment C Shares and Institutional
Shares. The Government Cash Reserves Fund issues two classes of shares:
Investment A Shares and Institutional Shares (formerly Trust Shares). Each
class of shares has identical rights and privileges except with respect to fees
paid under shareholder servicing or distribution plans, expenses allocable
exclusively to each class of shares, voting rights on matters affecting a
single class of shares, and the exchange privilege of each class of shares.
Investment A Shares are subject to an initial sales charge upon purchase
(except for the Government Cash Reserves Fund). Investment C Shares are subject
to a contingent deferred sales change (CDSC).
Under the terms of the investment advisory agreement between Fountain Square
Funds and Fifth Third Bank (the "Advisor"), the Advisor is entitled to receive
fees computed at the annual rate of 0.80% for the Balanced Fund, 0.55% for the
Bond Fund For Income and 0.40% of Government Cash Reserves Fund. Such fees are
accrued daily and paid monthly. For the 12-month period ended January 31, 1998,
total investment advisory fees incurred by these Funds were as follows:
(CONTINUED)
110
FOUNTAIN SQUARE FUNDS/THE CARDINAL GROUP
NOTES TO PRO FORMA FINANCIAL STATEMENTS
(Unaudited)
-------
Total Fees
----------
Balanced Fund 1,116,216
Bond Fund For Income 1,554,279
Government Cash Reserves Fund 3,162,259
Under the terms of the administration agreement the Administrator's fees are
computed, at the annual rate of 0.20% of first $1 billion of net assets of the
Trust, 0.18% of net assets of the Trust between $1 billion and $2 billion, and
0.17% of more than $2 billion of the net assets of the Trust. For the 12-month
period ended January 31, 1998, the Administrator's fees earned from these Funds
were as follows:
Total Fees
----------
Balanced Fund 140,565
Bond Fund For Income 348,725
Government Cash Reserves Fund 676,599
PRO FORMA ADJUSTMENTS AND PRO FORMA COMBINED COLUMNS
The pro forma adjustments and pro forma combined columns of the
statements of operations reflect the adjustments necessary to show expenses at
the rates which would have been in effect if the Cardinal Funds were included in
the Fountain Square Funds for the 12-month period ended January 31, 1998.
Investment advisory and shareholder service and 12b-1 fees in the pro forma
combined column are calculated at the rates in effect for the Fountain Square
Funds based upon the combined net assets of the Cardinal Funds and the Fountain
Square Funds. Certain pro forma adjustments were made to estimate the benefit
of combining operations of separate funds into one survivor fund. The
unamortized organizational expenses of the Cardinal Funds that would be written
off if the Reorganization had occurred as of January 31, 1998 are as follows:
The Cardinal Fund, $43,495; Cardinal Aggressive Growth Fund, $5,195; and
Cardinal Balanced Fund, $19,700.
The pro forma schedules of portfolio investments give effect to the
proposed transfer of such assets as if the reorganization had occurred at
January 31, 1998.
(CONTINUED)
111
FOUNTAIN SQUARE FUNDS/THE CARDINAL GROUP
NOTES TO PRO FORMA FINANCIAL STATEMENTS
(Unaudited)
-------
2. PORTFOLIO VALUATION, SECURITIES TRANSACTIONS AND RELATED INCOME:
Investments in equity securities are determined on the basis of the mean between
the latest available bid and asked prices in the principal market (last sales
price on a national securities exchange). For unlisted securities, value is
determined on the basis of the latest bid prices. Investments in other open-end
investment companies are valued at net asset value. Bonds and other fixed income
securities are valued at prices provided by an independent pricing service.
Value of all other securities is determined at fair value in good faith in
accordance with procedures adopted by the Board of Trustees.
Securities transactions are accounted for on the date the security is purchased
or sold (trade date). Interest income is recognized on the accrual basis and
includes, where applicable, the pro rata amortization of premium or discount.
Dividend income is recorded on the ex-dividend date. Gains or losses realized on
sales of securities are determined by comparing the identified cost of the
security lot sold with the net sales proceeds.
3. CAPITAL SHARES:
The pro forma net asset values per share assume the issuance of shares
of the Fountain Square Funds which would have occurred at January 31, 1998 in
connection with the proposed reorganization. The pro forma number of shares
outstanding consists of the following:
- ----------------------------------------- -------------------- ------------------------ ---------------------
Additional Shares
Shares outstanding Assumed in the
at January 31, 1998 Reorganization Proforma Shares at
(000) (000) January 31, 1998
- ----------------------------------------- -------------------- ------------------------ ---------------------
Balanced Fund 10,528 1,243 11,771
- ----------------------------------------- -------------------- ------------------------ ---------------------
Bond Fund For Income 13,938 10,173 24,111
- ----------------------------------------- -------------------- ------------------------ ---------------------
Government Cash Reserves 325,207 520,695 845,902
- ----------------------------------------- -------------------- ------------------------ ---------------------
112
PART C. OTHER INFORMATION
Item 15. Indemnification
Indemnification is provided to Officers and Trustees of the Registrant
pursuant to Article IX of Registrant's By-Laws. The Investment Advisory
Contracts between the Registrant and Fifth Third Bank ("Fifth Third") (with
respect to all of the Fountain Square Funds except Fountain Square Pinnacle
Fund) and Heartland Capital Management, Inc. ("Heartland") (with respect to the
Fountain Square Pinnacle Fund) (Fifth Third and Heartland, each the "Adviser")
each provide that, in the absence of willful misfeasance, bad faith, gross
negligence, or reckless disregard of the obligations or duties under the
Investment Advisory Contracts on the part of the Adviser, the Adviser shall not
be liable to the Registrant or to any shareholder for any act or omission in the
course of or connected in any way with rendering services or for any losses that
may be sustained in the purchase, holding, or sale of any security. Registrant's
Trustees and Officers are covered by an Errors and Omissions Policy.
Insofar as indemnification for liabilities arising under the Securities
Act of 1933, as amended (the "Act"), may be permitted to Trustees, Officers, and
controlling persons of the Registrant by the Registrant pursuant to the
Declaration of Trust or otherwise, the Registrant is aware that in the opinion
of the Securities and Exchange Commission, such indemnification is against
public policy as expressed in the Act and, therefore, is unenforceable. In the
event that a claim for indemnification against such liabilities (other than the
payment by the Registrant of expenses incurred or paid by Trustees, Officers, or
controlling persons of the Registrant in connection with the successful defense
of any act, suit, or proceeding) is asserted by such Trustees, Officers, or
controlling persons in connection with the shares being registered, the
Registrant will, unless in the opinion of its counsel the matter has been
settled by controlling precedent, submit to a court of appropriate jurisdiction
the question whether such indemnification by it is against public policy as
expressed in the Act and will be governed by the final adjudication of such
issues.
Insofar as indemnification for liabilities may be permitted pursuant to
Section 17 of the Investment Company Act of 1940, as amended, for Trustees,
Officers, and controlling persons of the Registrant by the Registrant pursuant
to its Declaration of Trust and By-Laws, or otherwise, the Registrant is aware
of the position of the Securities and Exchange Commission as set forth in
Investment Company Act Release No. IC-11330. Therefore, the Registrant
undertakes that in addition to complying with the applicable provisions of its
Declaration of Trust and ByLaws, or otherwise, in the absence of a final
decision on the merits by a court or other body before which the proceeding was
brought, that an indemnification payment will not be made unless in the absence
of such a decision, a reasonable determination based upon factual review has
been made: (i) by a majority vote of a quorum of non-party Trustees who are not
interested persons of the Registrant, or (ii) by independent legal counsel for
an act of willful misfeasance, bad faith, gross negligence, or reckless
disregard of duties. The Registrant further undertakes that advancement of
expenses incurred in the defense of a proceeding (upon undertaking for repayment
unless it is ultimately determined that indemnification is appropriate) against
an Officer, Trustee, or controlling person of the Registrant will not be made
absent the
113
fulfillment of at least one of the following conditions: (i) the indemnitee
provides security for his undertaking; (ii) the Registrant is insured against
losses arising by reason of any lawful advances; or (iii) a majority of a quorum
of disinterested non-party Trustees or independent legal counsel in a written
opinion makes a factual determination that there is reason to believe the
indemnitee will be entitled to indemnification.
Item 16. Exhibits
(1) Conformed Copy of Declaration of Trust of the Registrant
including Amendments No. 1 through 7.(1)
(i) Conformed Copy of Amendment No. 8 to the Declaration
of Trust.(2)
(ii) Conformed Copy of Amendment No. 9 to the Declaration
of Trust.(3)
(iii) Conformed Copy of Amendment No. 10 to the Declaration
of Trust.(4)
(iv) Conformed Copy of Amendment No. 11 to the Declaration
of Trust.(5)
(v) Conformed Copy of Amendment No. 12 to the Declaration
of Trust.(10)
(2) Copy of By-Laws of the Registrant.(1)
(3) Not Applicable.
(4) Agreement and Plan of Reorganization and Liquidation, dated as
of March 23, 1997, by and among Fountain Square Funds, Fifth
Third Bank, The Cardinal Group and Cardinal Management Corp.
is included as Exhibit A to the Combined Proxy
Statement/Prospectus forming a part of this Registration
Statement.(11)
(5) The instruments defining the rights of holders of shares of
the Fountain Square Funds are the Registrant's Declaration of
Trust and By-Laws. See Exhibits (1) and (2), above.
(6) (i) Conformed Copy of Investment Advisory Contract of the
Registrant through and including Exhibit J.(1)
(a) Conformed Copy of Exhibits K-M to Investment
Advisory Contract of Registrant.(4)
(b) Conformed Copy of Exhibits N-O to Investment
Advisory Contract of Registrant.(10)
(ii) Conformed Copy of Sub-Advisory Agreement.(6)
(iii) Conformed Copy of Investment Advisory Contract of the
Registrant with respect to Fountain Square Pinnacle
Fund.(10)
(7) (i) Conformed Copy of Distribution Agreement of the
Registrant.(7)
(a) Conformed Copy of amended Schedules A-C to
Distribution Agreement.(10)
(ii) Copy of Administrative Service Agreement of the
Registrant.(2)
(a) Conformed Copy of amended Exhibit A to
Administrative Service Agreement.(10)
114
(8) Not Applicable.
(9) (i) Conformed Copy of Custody Agreement of the
Registrant(8).
(a) Conformed Copy of amended Exhibit B to Custody
Agreement.(4)
(ii) Conformed Copy of (Sub-)Custody Agreement.(1)
(10) (i) Conformed Copy of Rule 12b-1 Plan through and including
Exhibits A and B.(7)
(a) Conformed Copy of amended Exhibits A and B to
Rule 12b-1 Plan.(10)
(ii) Form of Rule 12b-1 Agreement.(7)
(a) Copy of amended Exhibit A to Rule 12b-1
Agreement.(10)
(iii) Conformed Copy of Amended and Restated Multiple Class
Plan.(10)
(11) Conformed Copy of Opinion and Consent of Hertz, Schram &
Saretsky, P.C. as to legality of shares being registered.(11)
(12) Form of Opinion and Consent of Howard & Howard Attorneys, P.C.
as to tax matters.(11)
(13) (i) Conformed Copy of Transfer Agency and Accounting
Services Agreement of the Registrant.(1)
(a) Conformed Copy of amended Schedule A to Transfer
Agency and Accounting Services Agreement.(10)
(ii) Conformed Copy of Management and Administration
Agreement of the Registrant.(4)
(a) Conformed Copy of amended Schedule A to
Management and Administration Agreement.(10)
(iii) Conformed Copy of Sub-Administration Agreement.(4)
(a) Conformed Copy of amended Schedule A to
Sub-Administration Agreement.(10)
(14) (i) Conformed Copy of Consent of KPMG Peat Marwick LLP,
independent auditors of Cardinal.*
(ii) Conformed Copy of Consent of Ernst & Young LLP.*
(15) Not Applicable.
(16) Conformed Copy of Power of Attorney.(7)
(17) (i) Prospectus dated November 30, 1997 for Investment A
Shares and Investment C Shares of Fountain Square
Funds.(11)
(ii) Prospectus dated September 30, 1997 for Fountain Square
Government Cash Reserves Fund.(11)
(iii) Prospectuses dated May 20, 1998 for Institutional
Shares of Fountain Square Funds, Investment A Shares
and Institutional Shares of Fountain Square Cardinal
Fund and Investment A Shares and Institutional Shares
of Fountain Square Tax Exempt Money Market Fund.*
(iv) Prospectuses dated January 30, 1998 for Investor Shares
and Institutional Shares of each of the Funds of The
Cardinal Group.(11)
(v) Combined Statement of Additional Information dated
November 30, 1997 for Fountain Square Funds.(11)
(vi) Combined Statement of Additional Information dated
September 30, 1997 for Fountain Square Government
Cash Reserves Fund.(11)
(vii) Statements of Additional Information dated May 20, 1998
for Institutional Shares of Fountain Square Funds,
Investment A Shares and Institutional Shares of
Fountain Square Cardinal Fund and Investment A Shares
and Institutional Shares of Fountain Square Tax Exempt
Money Market Fund.*
(viii) Statement of Additional Information dated January 30,
1998 for The Cardinal Group.(11)
(ix) Annual Report dated July 31, 1997 for Fountain Square
Funds.(11)
(x) Semi-Annual Report dated January 31, 1998 for Fountain
Square Funds.*
(xi) Annual Report dated September 30, 1997 for The
Cardinal Group.(11)
(xii) Financial Data Schedules.(12)
*Filed electronically herewith.
(1) Response is incorporated by reference to Registrant's Post-Effective
Amendment No. 15 on Form N-1A filed February 28, 1995 (File Nos.
811-5669 and 33-24848).
115
(2) Response is incorporated by reference to Registrant's Post-Effective
Amendment No. 19 on Form N-1A filed on or about October 28, 1996 (File
Nos. 811-5669 and 33-24848).
(3) Response is incorporated by reference to Registrant's Post-Effective
Amendment No. 18 on Form N-1A filed on or about October 1, 1996 (File
No. 811-5669 and 33-24848).
(4) Response is incorporated by reference to Registrant's Post-Effective
Amendment No. 22 on Form N-1A filed on or about September 30, 1997
(File Nos. 811-5669 and 33-24848).
(5) Response is incorporated by reference to Registrant's Post-Effective
Amendment No. 26 on Form N-1A filed on or about January 21, 1998 (File
Nos. 811-5669 and 33-24898).
(6) Response is incorporated by reference to Registrant's Post-Effective
Amendment No. 13 on Form N-1A filed June 1, 1994. (File Nos. 811-5669
and 33-24848).
(7) Response is incorporated by reference to Registrant's Post-Effective
Amendment No. 17 on Form N-1A filed on or about January 18, 1996. (File
Nos. 811-5669 and 33-24848).
(8) Response is incorporated by reference to Registrant's Post-Effective
Amendment No. 25 on Form N-1A filed on or about November 26, 1997.
(9) Response is incorporated by reference to Registrant's Post-Effective
Amendment No. 16 on Form N-1A filed on or about September 30, 1995.
(File Nos. 811-5669 and 33-24848).
(10) To be filed by post-effective amendment to Registrant's Registration
Statement on Form N-1A.
(11) Response is incorporated by reference to Registrant's Form N-14 filed
on or about April 6, 1998 (File No. 333-49491).
(12) Response is incorporated by reference to Registrant's Post-Effective
Amendment Nos. 23 and 25 on Form N-1A filed on or about September 30,
1997 and November 26, 1997 (File Nos. 811-5669 and 33-24848) and The
Cardinal Group's Post-Effective Amendment No. 10 on Form N-1A filed on
or about January 28, 1998 (File Nos. 811-07588 and 33-59984).
Item 17. Undertakings
(1) The undersigned Registrant agrees that prior to any public reoffering
of the securities registered through the use of a prospectus which is
part of this Registration Statement by any person or party who is
deemed to be an underwriter within the meaning of Rule 145(c) of the
Securities Act of 1933, as amended, the reoffering prospectus will
contain the information called for by the applicable registration form
for the reofferings by persons who may be deemed underwriters, in
addition to the information called for by the other items of the
applicable form.
(2) The undersigned Registrant agrees that every prospectus that is filed
under paragraph (1) above will be filed as part of an amendment to the
Registration Statement and will not be used until the amendment is
effective, and that in determining any liability under the Securities
Act of 1933, as amended, each post-effective amendment shall be deemed
to be a new Registration Statement for the securities offered therein;
and the offering of the securities at that time shall be deemed to be
the initial bona fide offering of them.
116
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, as amended,
the Registrant, FOUNTAIN SQUARE FUNDS, certifies that it meets all of the
requirements for effectiveness of this Registration Statement pursuant to Form
N-14 under the Securities Act of 1933 and has duly caused this Registration
Statement to be signed on its behalf by the undersigned, thereto duly
authorized, in the city of Columbus and state of Ohio, on the 26th day of May,
1998.
FOUNTAIN SQUARE FUNDS
By: /s/ Stephen G. Mintos*
----------------------
Stephen G. Mintos
President
Pursuant to the requirements of the Securities Act of 1933, this
Registration Statement has been signed below by the following person in the
capacity and on the date indicated:
Name Title Date
---- ----- ----
By: /s/ Stephen G. Mintos President May 26, 1998
--------------------- (Principal Executive
Stephen G. Mintos Officer); Attorney-In-Fact
For the Persons Listed
Below
Name Title
---- -----
/s/ Jeffrey C. Cusick Treasurer and Secretary May 26, 1998
- --------------------- (Principal Financial and
Jeffrey C. Cusick Accounting Officer)
Edward Burke Carey* Trustee
Lee A. Carter* Trustee
Albert E. Harris* Trustee
- -----------------------------------------------
*By Power of Attorney
117
EXHIBIT LIST
14 (i) Conformed Copy of Consent of KPMG Peat Marwick LLP
14 (ii) Conformed Copy of Consent of Ernst & Young LLP
17 (iii) Prospectuses dated May 20, 1998 for Institutional
Shares of Fountain Square Funds, Investment A Shares
and Institutional Shares of Fountain Square Cardinal
Fund, and Investment A Shares and Institutional Shares
of Fountain Square Tax Exempt Money Market Fund.
(vii) Statements of Additional Information dated May 20, 1998
for Institutional Shares of Fountain Square Funds,
Investment A Shares and Institutional Shares of
Fountain Square Cardinal Fund and Investment A Shares
and Institutional Shares of Fountain Square Tax Exempt
Money Market Fund.
(x) Semi-Annual Report dated January 31, 1998 for Fountain
Square Funds.