<PAGE>
AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON JANUARY 22 , 1996
REGISTRATION NO. 2-
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
------------------------
FORM N-14
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
------------------------
/ / PRE-EFFECTIVE AMENDMENT NO.
/ / POST-EFFECTIVE AMENDMENT NO.
(CHECK APPROPRIATE BOX OR BOXES)
------------------------
THE ONE GROUP-REGISTERED TRADEMARK-
(Exact Name of Registrant as Specified in Charter)
3435 STELZER ROAD
COLUMBUS, OH 43219
(Address of Principal Executive Offices)
(800) 554-3862
(Area Code and Telephone Number)
------------------------
GEORGE MARTINEZ
3435 STELZER ROAD
COLUMBUS, OH 43219
(Name and Address of Agent for Service)
------------------------
COPIES TO:
<TABLE>
<S> <C>
ALAN G. PRIEST, ESQUIRE MICHAEL V. WIBLE, ESQUIRE
Ropes & Gray BANC ONE CORPORATION
1301 K Street, N.W., Suite 800 East 100 East Broad Street
Washington, D.C. 20005 Columbus, OH 43271-0158
</TABLE>
APPROXIMATE DATE OF PROPOSED PUBLIC OFFERING:
AS SOON AS PRACTICABLE AFTER THIS REGISTRATION STATEMENT BECOMES EFFECTIVE.
It is proposed that this filing will become effective on February 22, 1996
pursuant to Rule 488.
An indefinite amount of the Registrant's securities has been registered
under the Securities Act of 1933 pursuant to Rule 24f-2 under The Investment
Company Act of 1940. In reliance upon such Rule, no filing fee is being paid at
this time. A Rule 24f-2 notice for the Registrant for the year ended June 30,
1995 was filed on August 29, 1995.
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
<PAGE>
CROSS-REFERENCE SHEET
<TABLE>
<CAPTION>
FORM N-14 ITEM CAPTION IN COMBINED PROSPECTUS/PROXY STATEMENT
- --------------- -------------------------------------------------------------------------------------------------
<S> <C>
PART A
- ---------------
1 Cross-Reference Sheet; Front Cover
2 Table of Contents
3 Synopsis; Risk Factors
4 Proposal (1) -- Approval of Reorganization of the Paragon Funds; Information about the Proposed
Transaction
5 Front Cover -- Incorporated by reference to specified documents; Synopsis; Management Discussion
of Fund Performance; Financial Statements; Information filed with the Securities and Exchange
Commission;
6 Front Cover -- Incorporated by reference to specified documents; Synopsis; Management Discussion
of Fund Performance; Interest of Certain Persons in the Transaction; Financial Statements;
Information filed with the Securities and Exchange Commission
7 Proposal (1) -- Approval of the Reorganization of the Paragon Funds; Information about the
Proposed Transaction; Voting Information
8 Interest of Certain Persons in the Transaction
9 Not applicable
<CAPTION>
PART B
- ---------------
<S> <C>
10,11 Cover Page
12,13,14 Cover Page -- Incorporated by reference to specified documents
<CAPTION>
PART C
- ---------------
</TABLE>
The information required to be included in Part C is set forth under the
appropriate Item, so numbered, in Part C to this Registration Statement.
<PAGE>
PARAGON PORTFOLIO
4900 SEARS TOWER
CHICAGO, IL 60606
February , 1996
To the Shareholders:
Enclosed you will find several documents furnished to you in connection with
a special meeting of the shareholders of Paragon Treasury Money Market Fund
("Paragon Money Market"), Paragon Short-Term Government Fund ("Paragon
Government"), Paragon Intermediate-Term Bond Fund ("Paragon Bond"), Paragon
Value Equity Income Fund ("Paragon Equity"), Paragon Louisiana Tax-Free Fund
("Paragon Louisiana"), Paragon Value Growth Fund ("Paragon Growth") and Paragon
Gulf South Growth Fund ("Paragon Gulf South") (collectively, the "Paragon
Funds") to be held on Wednesday, March 25, 1996 at 4900 Sears Tower, Chicago, IL
60606. We hope this material will receive your immediate attention and that, if
you cannot attend the meeting in person, you will vote your proxy promptly.
The Trustees of Paragon Portfolio are recommending that shareholders of the
Paragon Funds approve a reorganization in which Paragon Money Market, Paragon
Government, Paragon Bond, Paragon Equity, Paragon Louisiana, Paragon Growth and
Paragon Gulf South will transfer all of their assets to The One Group-Registered
Trademark- U.S. Treasury Securities Money Market Fund ("One Group Money
Market"), The One Group-Registered Trademark- Limited Volatility Bond Fund ("One
Group Limited Volatility"), The One Group-Registered Trademark- Government Bond
Fund ("One Group Bond"), The One Group-Registered Trademark- Income Equity Fund
("One Group Equity"), The One Group-Registered Trademark- Louisiana Municipal
Bond Fund ("One Group Louisiana"), The One Group-Registered Trademark- Value
Growth Fund ("One Group Growth") and The One Group-Registered Trademark- Gulf
South Growth Fund ("One Group Gulf South") (collectively, the "One Group
Funds"), respectively, in return for Class A, Class B, and Fiduciary Class
shares of the corresponding One Group Funds. At the same time, One Group Money
Market, One Group Limited Volatility, One Group Bond, One Group Equity, One
Group Louisiana, One Group Growth and One Group Gulf South will assume all of
the liabilities of the corresponding Paragon Funds. After the transfer, shares
of the One Group Funds will be distributed to the corresponding Paragon Funds'
shareholders tax-free in liquidation of the Paragon Funds.
As a result of these transactions, your shares of Paragon Money Market,
Paragon Government, Paragon Bond, Paragon Equity, Paragon Louisiana, Paragon
Growth and Paragon Gulf South would, in effect, be exchanged at net asset value
and on a tax-free basis for shares of One Group Money Market, One Group Limited
Volatility, One Group Bond, One Group Equity, One Group Louisiana, One Group
Growth and One Group Gulf South, respectively. If the Paragon Fund shareholder
of record is a financial organization authorized to act in a fiduciary,
advisory, agency, custodial or similar capacity, that shareholder will receive
One Group Fiduciary Class shares. All other Paragon Fund Class A shareholders
will receive One Group Class A shares. Shareholders of record holding Paragon
Fund Class B shares, other than Class B shareholders of Paragon Money Market,
will receive One Group Class B shares. Paragon Money Market Class B shareholders
will receive One Group Money Market Class A shares.
We believe that the proposed transaction offers shareholders of Paragon
Money Market, Paragon Government, Paragon Bond, Paragon Equity, Paragon
Louisiana, Paragon Growth and Paragon Gulf South the opportunity to pursue
similar investment objectives in a more efficient manner and with greater
economies of scale.
THE TRUSTEES BELIEVE THAT THE PROPOSED COMBINATION OF PARAGON MONEY MARKET,
PARAGON GOVERNMENT, PARAGON BOND, PARAGON EQUITY, PARAGON LOUISIANA, PARAGON
GROWTH AND PARAGON GULF SOUTH WITH ONE GROUP MONEY MARKET, ONE GROUP LIMITED
VOLATILITY, ONE GROUP BOND, ONE GROUP EQUITY, ONE GROUP LOUISIANA, ONE GROUP
GROWTH AND ONE GROUP GULF SOUTH IS IN THE BEST INTERESTS OF THE PARAGON FUNDS
AND THEIR SHAREHOLDERS AND RECOMMEND THAT YOU VOTE IN FAVOR OF SUCH PROPOSAL.
<PAGE>
The Notice of Special Meeting of Shareholders, the accompanying Combined
Prospectus/Proxy Statement, Prospectuses for the One Group Money Market, One
Group Limited Volatility, One Group Bond, One Group Equity, One Group Louisiana,
One Group Growth and One Group Gulf South, the Prospectus for Paragon Portfolio,
and the form of proxy are enclosed. Please read them carefully. If you are
unable to attend the meeting in person, we urge you to sign, date, and return
the proxy card so that your shares may be voted in accordance with your
instructions.
Sincerely
Paragon Portfolio
<PAGE>
PARAGON PORTFOLIO
NOTICE OF SPECIAL MEETING OF SHAREHOLDERS
To the Shareholders of Paragon Portfolio
NOTICE IS HEREBY GIVEN that a Special Meeting of Shareholders (Special
Meeting and any adjournment thereof, the "Meeting") of Paragon Treasury Money
Market Fund ("Paragon Money Market"), Paragon Short-Term Government Fund
("Paragon Government"), Paragon Intermediate-Term Bond Fund ("Paragon Bond"),
Paragon Value Equity Income Fund ("Paragon Equity"), Paragon Louisiana Tax-Free
Fund ("Paragon Louisiana"), Paragon Value Growth Fund ("Paragon Growth") and
Paragon Gulf South Growth Fund ("Paragon Gulf South")(collectively, the "Paragon
Funds") will be held on Wednesday, March 25, 1996 at 9:00 a.m. Central standard
time at, 4900 Sears Tower, Chicago, IL, for the following purpose:
1. To approve an Agreement and Plan of Reorganization pursuant to which all
of the assets and liabilities of Paragon Money Market, Paragon
Government, Paragon Bond, Paragon Equity, Paragon Louisiana, Paragon
Growth and Paragon Gulf South will be transferred to The One
Group-Registered Trademark- U.S. Treasury Securities Money Market Fund
("One Group Money Market"), The One Group-Registered Trademark- Limited
Volatility Bond Fund ("One Group Limited Volatility"), The One
Group-Registered Trademark- Bond Fund ("One Group Bond"), The One
Group-Registered Trademark- Income Equity Fund ("One Group Equity"), The
One Group-Registered Trademark- Louisiana Municipal Bond Fund ("One Group
Louisiana"), The One Group-Registered Trademark- Value Growth Fund ("One
Group Growth") and the One Group-Registered Trademark- Gulf South Growth
Fund ("One Group Gulf South") (collectively, the "One Group Funds"),
respectively, in return for Class A, Class B, and Fiduciary Class shares
of the corresponding One Group Fund. Following the transfer, Paragon
Money Market, Paragon Government, Paragon Bond, Paragon Equity, Paragon
Louisiana, Paragon Growth and Paragon Gulf South will be dissolved and
shares of One Group Money Market, One Group Limited Volatility, One Group
Bond, One Group Equity, One Group Louisiana, One Group Growth and One
Group Gulf South will be distributed to the corresponding Paragon Fund
shareholders in liquidation of Paragon Money Market, Paragon Government,
Paragon Bond, Paragon Equity, Paragon Louisiana, Paragon Growth and
Paragon Gulf South.
2. To transact any other business as properly comes before the Meeting.
The proposed transaction is described in the attached Combined
Prospectus/Proxy Statement. A copy of the Agreement and Plan of Reorganization
is attached as Exhibit A to the Prospectus/Proxy Statement.
Pursuant to instructions of the Board of Trustees of Paragon Portfolio, the
close of business on February 22, 1996, has been designated as the record date
for determination of shareholders entitled to notice of, and to vote at, the
Meeting.
Each shareholder who does not expect to attend in person is requested to
date, execute, sign, and promptly return the enclosed form of proxy.
By Order of the Trustees
Paragon Portfolio
Chicago, Illinois
February , 1996
Your prompt attention to the enclosed form of proxy will help avoid the expense
of additional mailings.
<PAGE>
COMBINED PROSPECTUS/PROXY STATEMENT
February , 1996
<TABLE>
<S> <C>
The One Group-Registered Trademark- Paragon Portfolio
3435 Stelzer Road 4900 Sears Tower
Columbus, OH 43219 Chicago, IL 60606
Tel. No. 1-800-480-4111 Tel. No. 1-800-525-7907
</TABLE>
COMBINED PROSPECTUS/PROXY STATEMENT
This Combined Prospectus/Proxy Statement is furnished in connection with the
solicitation of proxies from the owners of shares of the following Funds of
Paragon Portfolio:
Paragon Treasury Money Market Fund ("Paragon Money Market")
Paragon Short-Term Government Fund ("Paragon Government")
Paragon Intermediate-Term Bond Fund ("Paragon Bond")
Paragon Value Equity Income Fund ("Paragon Equity")
Paragon Louisiana Tax-Free Fund ("Paragon Louisiana")
Paragon Value Growth Fund ("Paragon Growth")
Paragon Gulf South Growth Fund ("Paragon Gulf South")
The proxies will be used at a Special Meeting of Shareholders ("Meeting") to
approve an Agreement and Plan of Reorganization between Paragon Portfolio and
The One Group dated as of January 19, 1996, a copy of which is attached as
Exhibit A, and the consummation of the transactions (collectively, the
"Transaction") contemplated in the Agreement and Plan of Reorganization. The
Agreement and Plan of Reorganization contemplates the transfer of all the assets
and liabilities of each Paragon Fund to corresponding One Group Fund in exchange
for shares of the corresponding One Group Fund as follows:
<TABLE>
<CAPTION>
SHAREHOLDERS OF WILL RECEIVE SHARES OF
- -------------------------------- --------------------------------------------------------------------------
<S> <C>
Paragon Money Market The One Group-Registered Trademark- U.S. Treasury Securities Money Market
Fund ("One Group Money Market")
Paragon Government Fund The One Group-Registered Trademark- Limited Volatility Bond Fund ("One
Group Limited Volatility")
Paragon Bond The One Group-Registered Trademark- Government Bond Fund ("One Group
Bond")
Paragon Equity The One Group-Registered Trademark- Income Equity Fund ("One Group
Equity")
Paragon Louisiana The One Group-Registered Trademark- Louisiana Municipal Bond Fund ("One
Group Louisiana")
Paragon Growth The One Group-Registered Trademark- Value Growth Fund ("One Group Growth")
Paragon Gulf South The One Group-Registered Trademark- Gulf South Growth Fund ("One Group
Gulf South")
</TABLE>
Following the transfer of assets, shares of each One Group Fund will be
distributed to shareholders of each corresponding Paragon Fund. The Paragon
Funds will then be dissolved and liquidated. As a result of the transactions,
each shareholder of a Paragon Fund will receive on a tax-free basis, a number of
full and fractional shares of the corresponding One Group Fund equal at the date
of the exchange to the value of the net assets of each Paragon Fund attributable
to the shareholder.
If the Paragon Fund shareholder of record is a financial organization
authorized to act in a fiduciary, advisory, custodial or similar capacity, that
shareholder will receive One Group Fiduciary Class shares. All other Paragon
Fund Class A shareholders will receive One Group Class A shares. Shareholders of
record holding Paragon Fund Class B shares, other than Class B shareholders of
Paragon Money Market, will receive One Group Class B shares. Paragon Money
Market Class B shareholders will receive One Group Money Market Class A shares.
<PAGE>
In this Combined Proxy/Prospectus, One Group Money Market, One Group Limited
Volatility, One Group Bond, One Group Equity, One Group Louisiana, One Group
Growth and One Group Gulf South are each referred to as a "One Group Fund" and
collectively as "One Group Funds". Likewise, Paragon Money Market, Paragon
Government, Paragon Bond, Paragon Equity, Paragon Louisiana, Paragon Growth and
Paragon Gulf South, are each referred to as a "Paragon Fund" and collectively as
"Paragon Funds".
The Paragon Funds are portfolios of Paragon Portfolio, an open-end
management investment company consisting of eleven funds. Likewise, the One
Group Funds are portfolios of The One Group, an open-end management investment
company consisting of thirty-two separate funds.
This Combined Prospectus/Proxy Statement explains concisely what you should
know before investing in One Group Money Market, One Group Limited Volatility,
One Group Bond, One Group Equity, One Group Louisiana, One Group Growth and One
Group Gulf South Funds. Please read it carefully and keep it for future
reference.
This Combined Prospectus/Proxy Statement is accompanied by prospectuses for
the One Group Money Market, One Group Limited Volatility, One Group Bond, and
One Group Equity Funds, which are dated November 1, 1995, and the One Group
Louisiana, One Group Growth and One Group Gulf South Funds, which are dated
February 7, 1996, as well as the current prospectus relating to Paragon Money
Market, Paragon Government, Paragon Bond, Paragon Equity, Paragon Louisiana,
Paragon Growth and Paragon Gulf South, which is dated March 30, 1995. The
prospectuses for the One Group Funds and the Paragon Funds are incorporated into
this Combined Prospectus/Proxy Statement by reference. The current Statement of
Additional Information of The One Group, dated November 1, 1995, as amended
February 7, 1996, has been filed with the Securities and Exchange Commission and
is incorporated herein by reference. The Statement of Additional Information of
The One Group may be obtained, without charge, by writing to The One Group
Services Company, 3435 Stelzer Road, Columbus, OH 43219 or by calling
1-800-480-4111 during business hours. The current Statement of Additional
Information of Paragon Portfolio, dated March 30, 1995, has been filed with the
Securities and Exchange Commission and is incorporated herein by reference. The
Statement of Additional Information of Paragon Portfolio can be obtained without
charge by writing to Goldman Sachs & Co., 4900 Sears Tower, Chicago, IL 60606,
or by calling 1-800-525-7907. In addition, a Statement of Additional Information
dated February 22, 1996 relating to the reorganization of the Paragon Funds
described in this Combined Prospectus/Proxy Statement, has been filed with the
Securities and Exchange Commission and is incorporated herein by reference. Such
Statement of Additional Information may be obtained, without charge, by writing
or calling The One Group Services Company at the address or telephone number
provided above.
SHARES OF THE ONE GROUP OFFERED HEREBY ARE NOT DEPOSITS OR OBLIGATIONS OF,
OR ENDORSED BY BANC ONE CORPORATION OR ITS BANK OR NON-BANK AFFILIATES. THE
SHARES OF THE ONE GROUP OFFERED HEREBY ARE NOT INSURED BY THE FEDERAL DEPOSIT
INSURANCE CORPORATION OR BY ANY OTHER GOVERNMENTAL AGENCY OR GOVERNMENT
SPONSORED AGENCY OF THE FEDERAL GOVERNMENT OR ANY STATE. AN INVESTMENT IN MUTUAL
FUND SHARES INVOLVES INVESTMENT RISKS, INCLUDING THE POSSIBLE LOSS OF THE
PRINCIPAL AMOUNT INVESTED. BANC ONE INVESTMENT ADVISORS CORPORATION RECEIVES
FEES FROM THE ONE GROUP FOR INVESTMENT ADVISORY SERVICES.
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE SECURITIES
AND EXCHANGE COMMISSION PASSED UPON THE ACCURACY OR ADEQUACY OF THIS PROSPECTUS.
ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.
<PAGE>
NO PERSON HAS BEEN AUTHORIZED TO GIVE ANY INFORMATION OR TO MAKE ANY
REPRESENTATIONS NOT CONTAINED IN THIS COMBINED PROSPECTUS/PROXY STATEMENT IN
CONNECTION WITH THE OFFER MADE BY THIS COMBINED PROSPECTUS/PROXY STATEMENT AND,
IF GIVEN OR MADE, SUCH INFORMATION OR REPRESENTATIONS MUST NOT BE RELIED UPON AS
HAVING BEEN AUTHORIZED BY THE ONE GROUP. THIS COMBINED PROSPECTUS/PROXY
STATEMENT DOES NOT CONSTITUTE AN OFFERING BY THE ONE GROUP IN ANY JURISDICTION
IN WHICH SUCH OFFERING MAY NOT LAWFULLY BE MADE.
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
------------
<S> <C>
Proposal (1) Approval of the Agreement and Plan of Reorganization................................... 1
Synopsis............................................................................................ 2
Risk Factors........................................................................................ 37
Management Discussion of Fund Performance........................................................... 44
Information About the Proposed the Transaction...................................................... 60
Federal Income Tax Consequences..................................................................... 62
Voting Information.................................................................................. 65
Interests of Certain Persons in the Transaction..................................................... 68
Financial Statements................................................................................ 68
Information filed with the Securities and Exchange Commission....................................... 69
Plan of Reorganization.............................................................................. Exhibit A
</TABLE>
<PAGE>
PROPOSAL (1): APPROVAL OF THE REORGANIZATION OF THE PARAGON FUNDS
On October 31, 1995, the Board of Trustees ("Trustees") of Paragon Portfolio
approved an Agreement and Plan of Reorganization pursuant to which Paragon Money
Market, Paragon Government, Paragon Bond, Paragon Equity, Paragon Louisiana,
Paragon Growth and Paragon Gulf South would be merged with and into One Group
Money Market, One Group Limited Volatility, One Group Bond, One Group Equity,
One Group Louisiana, One Group Growth and One Group Gulf South, respectively, on
or about March 22, 1996 (the "Exchange Date"). On the Exchange Date, each
Paragon Fund will transfer all of its assets and liabilities to the
corresponding One Group Fund, in exchange for shares of the corresponding One
Group Fund having an aggregate net asset value equal to the aggregate value of
the net assets acquired from the corresponding Paragon Fund. The assets and
liabilities of the Paragon Funds and The One Group Funds will be valued as of
the close of trading on the New York Stock Exchange on the business day next
preceding the Exchange Date. Following the transfer, the Paragon Funds will be
dissolved and shares of the respective One Group Fund received by the
corresponding Paragon Fund will be distributed to Paragon Fund shareholders in
liquidation of the Paragon Funds. As a result of the proposed transaction, a
Paragon Money Market, Paragon Government, Paragon Bond, Paragon Equity, Paragon
Louisiana, Paragon Growth or Paragon Gulf South shareholder will receive, on a
tax-free basis, a number of full and fractional shares equal in value at the
date of the exchange to the value of the net assets of the respective Paragon
Fund transferred to One Group Money Market, One Group Limited Volatility, One
Group Bond, One Group Equity, One Group Louisiana, One Group Growth and One
Group Gulf South respectively, attributable to the shareholder. If the Paragon
Fund shareholder of record is a financial organization authorized to act in a
fiduciary, advisory, agency, custodial or similar capacity, that shareholder
will receive One Group Fiduciary Class shares. All other Paragon Fund Class A
shareholders will receive One Group Class A shares. Shareholders of record
holding Paragon Fund Class B shares, other than Class B shareholders of Paragon
Money Market, will receive One Group Class B shares. Paragon Money Market Class
B shareholders will receive One Group Money Market Class A shares.
The Trustees have concluded that participation in the proposed transaction
is in the best interests of the Paragon Funds, the One Group Funds and their
respective existing shareholders. The Trustees have further concluded that the
economic interests of shareholders of the Paragon Funds and the One Group Funds
will not be diluted as a result of the proposed transaction. In reaching this
conclusion, the Trustees considered, among other things, the similarity of the
investment objectives of Paragon Portfolio and the One Group Funds; the expense
ratios of Paragon Portfolio and the One Group Funds; the performance of Paragon
Portfolio as compared to the One Group Funds; the potential economies of scale
which could be realized as a result of the increase in size of the One Group
Funds; and the fact that the transaction will be free of federal income taxes.
1
<PAGE>
SYNOPSIS
FEE TABLE
Below are fee tables showing the current fees for the Paragon Funds and the
One Group Funds.
SHAREHOLDER AND FUND EXPENSES (NOTE 1)
PARAGON TREASURY MONEY MARKET FUND
<TABLE>
<CAPTION>
CLASS A CLASS B+
-------- ---------
<S> <C> <C>
SHAREHOLDER TRANSACTION EXPENSES
(as a percentage of offering price)
Maximum Sales Charge Imposed on Purchases (Note
2)............................................... None None
Sales Charge Imposed on Reinvested
Distributions.................................... None None
Maximum Deferred Sales Charge (Note 2)............ None 5.0%
Redemption Fee.................................... None None
Exchange Fee (Note 3)............................. $5 $5
ANNUAL FUND OPERATING EXPENSES
(as a percentage of average net assets after
adjustments)
Management Fees................................... .20% .20%
Administration Fees............................... .15% .15%
12b-1 Fees........................................ None .75%
Other Expenses.................................... .08% .08%
-------- ---------
TOTAL FUND OPERATING EXPENSES....................... .43% 1.18%
-------- ---------
-------- ---------
</TABLE>
PARAGON SHORT-TERM GOVERNMENT FUND
<TABLE>
<CAPTION>
CLASS A CLASS B
-------- ---------
<S> <C> <C>
SHAREHOLDER TRANSACTION EXPENSES
(as a percentage of offering price)
Maximum Sales Charge Imposed on Purchases (Note
2)............................................... 4.5% None
Sales Charge Imposed on Reinvested
Distributions.................................... None None
Maximum Deferred Sales Charge (Note 2)............ None 5.0%
Redemption Fee.................................... None None
Exchange Fee (Note 3)............................. $5 $5
ANNUAL FUND OPERATING EXPENSES
(as a percentage of average net assets after
adjustments)
Management Fees................................... .50% .50%
Administration Fees............................... .15% .15%
12b-1 Fees........................................ None .75%
Other Expenses.................................... .12% .12%
-------- ---------
TOTAL FUND OPERATING EXPENSES....................... .77% 1.52%
-------- ---------
-------- ---------
</TABLE>
2
<PAGE>
PARAGON INTERMEDIATE-TERM BOND FUND
<TABLE>
<CAPTION>
CLASS A CLASS B
-------- ---------
<S> <C> <C>
SHAREHOLDER TRANSACTION EXPENSES
(as a percentage of offering price)
Maximum Sales Charge Imposed on Purchases (Note
2)............................................... 4.5% None
Sales Charge Imposed on Reinvested
Distributions.................................... None None
Maximum Deferred Sales Charge (Note 2)............ None 5.0%
Redemption Fee.................................... None None
Exchange Fee (Note 3)............................. $5 $5
ANNUAL FUND OPERATING EXPENSES
(as a percentage of average net assets after
adjustments)
Management Fees................................... .50% .50%
Administration Fees............................... .15% .15%
12b-1 Fees........................................ None .75%
Other Expenses.................................... .11% .11%
-------- ---------
TOTAL FUND OPERATING EXPENSES....................... .76% 1.51%
-------- ---------
-------- ---------
</TABLE>
PARAGON LOUISIANA TAX-FREE FUND (NOTE 4)
<TABLE>
<CAPTION>
CLASS A CLASS B
-------- ---------
<S> <C> <C>
SHAREHOLDER TRANSACTION EXPENSES
(as a percentage of offering price)
Maximum Sales Charge Imposed on Purchases (Note
2)............................................... 4.5% None
Sales Charge Imposed on Reinvested
Distributions.................................... None None
Maximum Deferred Sales Charge (Note 2)............ None 5.0%
Redemption Fee.................................... None None
Exchange Fee (Note 3)............................. $5 $5
ANNUAL FUND OPERATING EXPENSES
(as a percentage of average net assets after
adjustments)
Management Fees................................... .40% .40%
Administration Fees............................... .10% .10%
12b-1 Fees........................................ None .75%
Other Expenses.................................... .15% .15%
-------- ---------
TOTAL FUND OPERATING EXPENSES....................... .65% 1.40%
-------- ---------
-------- ---------
</TABLE>
3
<PAGE>
PARAGON VALUE GROWTH FUND
<TABLE>
<CAPTION>
CLASS A CLASS B
-------- ---------
<S> <C> <C>
SHAREHOLDER TRANSACTION EXPENSES
(as a percentage of offering price)
Maximum Sales Charge Imposed on Purchases (Note
2)............................................... 4.5% None
Sales Charge Imposed on Reinvested
Distributions.................................... None None
Maximum Deferred Sales Charge (Note 2)............ None 5.0%
Redemption Fee.................................... None None
Exchange Fee (Note 3)............................. $5 $5
ANNUAL FUND OPERATING EXPENSES
(as a percentage of average net assets after
adjustments)
Management Fees................................... .65% .65%
Administration Fees............................... .15% .15%
12b-1 Fees........................................ None .75%
Other Expenses.................................... .16% .16%
-------- ---------
TOTAL FUND OPERATING EXPENSES....................... .96% 1.71%
-------- ---------
-------- ---------
</TABLE>
PARAGON VALUE EQUITY INCOME FUND
<TABLE>
<CAPTION>
CLASS A CLASS B
-------- ---------
<S> <C> <C>
SHAREHOLDER TRANSACTION EXPENSES
(as a percentage of offering price)
Maximum Sales Charge Imposed on Purchases (Note
2)............................................... 4.5% None
Sales Charge Imposed on Reinvested
Distributions.................................... None None
Maximum Deferred Sales Charge (Note 2)............ None 5.0%
Redemption Fee.................................... None None
Exchange Fee (Note 3)............................. $5 $5
ANNUAL FUND OPERATING EXPENSES
(as a percentage of average net assets after
adjustments)
Management Fees................................... .65% .65%
Administration Fees............................... .15% .15%
12b-1 Fees........................................ None .75%
Other Expenses.................................... .13% .13%
-------- ---------
TOTAL FUND OPERATING EXPENSES....................... .93% 1.68%
-------- ---------
-------- ---------
</TABLE>
4
<PAGE>
PARAGON GULF SOUTH GROWTH FUND
<TABLE>
<CAPTION>
CLASS A CLASS B
--------- ---------
<S> <C> <C>
SHAREHOLDER TRANSACTION EXPENSES
(as a percentage of offering price)
Maximum Sales Charge Imposed on Purchases (Note
2)............................................... 4.5% None
Sales Charge Imposed on Reinvested
Distributions.................................... None None
Maximum Deferred Sales Charge (Note 2)............ None 5.0%
Redemption Fee.................................... None None
Exchange Fee (Note 3)............................. $5 $5
ANNUAL FUND OPERATING EXPENSES
(as a percentage of average net assets after
adjustments)
Management Fees................................... .65% .65%
Administration Fees............................... .15% .15%
12b-1 Fees........................................ None .75%
Other Expenses.................................... .20% .20%
--------- ---------
TOTAL FUND OPERATING EXPENSES....................... 1.00% 1.75%
--------- ---------
--------- ---------
</TABLE>
5
<PAGE>
EXAMPLE OF FUND EXPENSES
You would pay the following expenses on a hypothetical $1,000 investment,
assuming a 5% annual return and redemption at the end of each time period:
<TABLE>
<CAPTION>
1 YEAR 3 YEARS 5 YEARS 10 YEARS
------ ------- ------- --------
<S> <C> <C> <C> <C>
Paragon Treasury Money Market Fund
Class A Shares............................ $ 4 $14 $ 24 $ 54
Class B Shares
-- Assuming complete redemption at end of
period................................... $62 $67 $ 75 $112
-- Assuming no redemption................. $12 $37 $ 65 $112
Paragon Short-Term Government Fund
Class A Shares............................ $53 $68 $ 86 $136
Class B Shares
-- Assuming complete redemption at end of
period................................... $65 $78 $ 93 $151
-- Assuming no redemption................. $15 $48 $ 83 $151
Paragon Intermediate-Term Bond Fund
Class A Shares............................ $52 $68 $ 85 $135
Class B Shares
-- Assuming complete redemption at end of
period $65 $78 $ 92 $150
-- Assuming no redemption................. $15 $48 $ 82 $150
Paragon Louisiana Tax-Free Fund
Class A Shares............................ $51 $65 $ 80 $122
Class B Shares
-- Assuming complete redemption at end of
period................................... $64 $74 $ 87 $138
-- Assuming no redemption................. $14 $44 $ 77 $138
Paragon Value Growth Fund
Class A Shares............................ $54 $74 $ 96 $158
Class B Shares
-- Assuming complete redemption at end of
period................................... $67 $84 $103 $172
-- Assuming no redemption................. $17 $54 $ 93 $172
Paragon Value Equity Income Fund
Class A Shares............................ $54 $73 $ 94 $154
Class B Shares
-- Assuming complete redemption at end of
period................................... $67 $83 $101 $169
-- Assuming no redemption................. $17 $53 $ 91 $169
Paragon Gulf South Growth Fund
Class A Shares............................ $55 $75 $ 98 $162
Class B Shares
-- Assuming complete redemption at end of
period................................... $68 $85 $105 $177
-- Assuming no redemption................. $18 $55 $ 95 $177
</TABLE>
- ------------------------
NOTES:
(1) The purpose of the table provided above is to assist investors in
understanding the various costs and expenses that a shareholder in the Funds
will bear directly or indirectly. Except as described in Note (4), the costs
and expenses included in the table and hypothetical example are based on
actual fees and expenses of the Class A shares for the fiscal year ended
November 30, 1994. The costs and expenses in the table and hypothetical
example for the Class B shares are based on estimated fees and expenses of
the Class B Shares assuming that such Shares were outstanding throughout the
fiscal year ended November 30, 1994. Other expenses and total fund operating
expenses actually incurred by Class B shares during the period from
commencement of operations of the respective Class B shares to November 30,
1994 were as follows: Paragon Government
6
<PAGE>
-- 0.13% and 1.53%, respectively; Paragon Intermediate -- 0.12% and 1.52%,
respectively; Paragon Louisiana -- 0.16% and 1.41%, respectively; Paragon
Growth -- 0.16% and 1.71%, respectively; Paragon Equity -- 0.12%; and 1.67%,
respectively; and Paragon Gulf South -- 0.20% and 1.75%, respectively. The
costs and expenses included in the table and hypothetical example should not
be considered as representative of past or future expenses. Actual expenses
may be greater or less than those indicated. Moreover, while the example
assumes a 5% annual return, the Fund's actual performance will vary and
might result in actual return greater or less than 5%. See "The Adviser,
Administrator and Distributor," "Purchase of Shares" and "Class B
Distribution Plan" in the Paragon Funds Prospectuses accompanying this
Combined Prospectus/Proxy Statement.
(2) Paragon Portfolio's transfer agent may impose a transaction fee of $7.50 for
each wire purchase.
(3) In addition to free reinvestments of dividends and distributions in shares
of the other Funds and free automatic exchanges pursuant to the Automatic
Exchange Program, five free exchanges are permitted in each twelve month
period without the imposition of any transaction fee; a fee of $5 is charged
for each subsequent exchange during such period.
(4) During the fiscal year ended November 30, 1994, Paragon's former adviser,
Premier Investment Adviser, L.L.C., ("Premier") voluntarily reduced its
advisory fee to 0.40% of Paragon Louisiana's average daily net assets and
Goldman Sachs Asset Management voluntary agreed to reduce its administration
fee to 0.10% of Paragon Louisiana's average daily net assets. During such
fiscal year, the Paragon Louisiana Tax-Free Fund's total operating expenses
attributable to the Class A Shares of the Paragon Louisiana Tax-Free Fund
were 0.65% of its average daily net assets. The estimated total operating
expenses attributable to the Class B Shares of Paragon Louisiana were 1.40%
of its average daily net assets, assuming that such Class B Shares were
outstanding throughout the fiscal year ended November 30, 1994. Had the
reduction of fees for the fiscal year ended November 30, 1994 otherwise
payable not been reflected in the above table, the advisory fees would be
0.50%, its administration fees would be 0.15%, and its total operating
expenses attributable to the Class A Shares would be 0.80% of its average
daily net assets. Without such fee reductions, the estimated total operating
expenses attributable to the Class B Shares of Paragon Louisiana would be
1.55% of its average daily net assets, assuming that such Class B Shares
were outstanding throughout the fiscal year ended November 30, 1994.
+ Investors wishing to purchase shares of Paragon Money Market are generally
required to purchase Class A shares. Class B shares of Paragon Money Market
will typically be issued only in exchange for Class B shares of any of the
other Funds.
* Class B shares convert to Class A shares seven years after purchase;
therefore, Class A expenses are used in the hypothetical example after year
seven.
Investors should be aware that, due to distribution fees, a long-term holder
of Class B shares of the Funds may pay over time more than the economic
equivalent of the maximum front-end sales charge permitted under the rules of
the National Association of Securities Dealers, Inc. ("NASD").
7
<PAGE>
THE ONE GROUP-REGISTERED TRADEMARK- U.S. TREASURY SECURITIES MONEY MARKET FUND
<TABLE>
<CAPTION>
FIDUCIARY SERVICE
CLASS A CLASS CLASS
- ----------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
SHAREHOLDER TRANSACTION EXPENSES(1)...................................... none none none
ANNUAL OPERATING EXPENSES(2)
(as a percentage of average daily net assets)
Investment Advisory Fees (after fee waivers)(3).......................... .22% .22% .22%
12b-1 Fees (after fee waivers)(4)........................................ .25% none .55%
Other Expenses........................................................... .22% .22% .22%
- ----------------------------------------------------------------------------------------------------------------
TOTAL OPERATING EXPENSES(5).............................................. .69% .44% .99%
- ----------------------------------------------------------------------------------------------------------------
</TABLE>
(1) A person who purchases shares through an account with a financial
institution or broker/dealer may be charged separate transaction fees by the
financial institution or broker/dealer. In addition, a wire redemption
charge, currently $7.00, is deducted from the amount of a wire redemption
payment made at the request of a shareholder.
(2) The expense information in the table has been restated to reflect current
fees that would have been applicable had they been in effect during the
previous fiscal year.
(3) Investment Advisory Fees have been revised to reflect fee waivers effective
as of the date of this Combined Prospectus/Proxy Statement. The Adviser may
voluntarily agree to waive a part of its fees. Absent this voluntary
reduction, Investment Advisory Fees would be .35% for all classes of shares.
(4) Absent the voluntary waiver of fees under the Trust's Distribution and
Shareholder Services Plans, 12b-1 fees (as a percentage of average daily net
assets) would be .35% for Class A shares and .75% for Service Class shares.
There are no 12b-1 fees charged to Fiduciary Class shares. The 12b-1 fees
include a shareholder servicing fee of .25% of average daily net assets of
the Fund's Class A and Service Class shares. See "The Distributor" in the
One Group Funds prospectuses accompanying this Combined Prospectus/Proxy
Statement.
(5) Total Operating Expenses have been revised to reflect waivers effective as
of the date of this Prospectus. Other Expenses are based on the Fund's
expenses during the most recent fiscal year. Absent the voluntary reduction
of Investment Advisory and 12b-1 fees, Total Operating Expenses would be
.92% for Class A shares, .57% for Fiduciary Class shares and 1.32% for
Service Class shares.
EXAMPLE: An investor would pay the following expense on a $1,000 investment in
Class A, Fiduciary Class and Service Class shares of the U.S. Treasury Money
Market Fund, assuming: (1) 5% annual return; and (2) redemption at the end of
each time period.
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------------
1 YEAR 3 YEARS 5 YEARS 10 YEARS
- -----------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Class A $ 7 $ 22 $ 38 $ 86
Fiduciary Class $ 5 $ 14 $ 25 $ 55
</TABLE>
Absent the voluntary reduction of fees, the dollar amounts in the above example
would be as follows:
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------------
1 YEAR 3 YEARS 5 YEARS 10 YEARS
- -----------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Class A $ 9 $ 29 $ 51 $113
Fiduciary Class $ 6 $ 18 $ 32 $ 71
- -----------------------------------------------------------------------------------
- -----------------------------------------------------------------------------------
</TABLE>
Service Class shares are offered to investors requiring additional
administrative and/or accounting services, such as sweep processing. It is not
intended that a shareholder would remain in the Service Class for more than a
very limited period of time. However, a shareholder investing on a continual
basis in the Service Class for a period of one (1) month would pay $1, three (3)
months would pay $3, one (1) year would pay $13. Absent the voluntary fee
reduction a shareholder would pay for a period of one (1) month $1, three (3)
months $3, one (1) year $17.
THESE EXAMPLES SHOULD NOT BE CONSIDERED A REPRESENTATION OF PAST OR FUTURE
EXPENSES AND ACTUAL EXPENSES MAY BE GREATER OR LESS THAN THOSE SHOWN. The
purpose of these tables is to assist the investor in understanding the various
costs and expenses that may be directly or indirectly borne by investors in the
Trust.
Investors in the Fund ("Shareholders") who are long-term Shareholders of Class A
shares and Service Class shares may pay more than the equivalent of the maximum
front-end sales charges otherwise permitted by the National Association of
Securities Dealers' Rules.
8
<PAGE>
THE ONE GROUP-REGISTERED TRADEMARK- LIMITED VOLATILITY BOND FUND
<TABLE>
<CAPTION>
FIDUCIARY
CLASS A CLASS B CLASS
- ----------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
SHAREHOLDER TRANSACTION EXPENSES(1)
Maximum Sales Charge Imposed on Purchases
(as a percentage of offering price).................................... 3.00% none none
Maximum Contingent Deferred Sales Charge
(as a percentage of original purchase price or
redemption proceeds, as applicable).................................... none 3.00% none
Redemption Fees.......................................................... none none none
Exchange Fees............................................................ none none none
ANNUAL OPERATING EXPENSES(2)
(as a percentage of average daily net assets)
Investment Advisory Fees (after fee waivers)(3).......................... .30% .30% .30%
12b-1 Fees (after fee waivers)(4)........................................ .25% .75% none
Other Expenses........................................................... .25% .25% .25%
- ----------------------------------------------------------------------------------------------------------------
TOTAL OPERATING EXPENSES(5).............................................. .80% 1.30% .55%
- ----------------------------------------------------------------------------------------------------------------
</TABLE>
(1) A person who purchases shares through an account with a financial
institution or broker/dealer may be charged separate transaction fees by the
financial institution or broker/dealer. In addition, a wire redemption
charge, currently $7.00, is deducted from the amount of a wire redemption
payment made at the request of a Shareholder.
(2) The expense information in the table has been restated to reflect current
fees that would have been applicable had they been in effect during the
previous fiscal year.
(3) Investment Advisory Fees have been revised to reflect fee waivers effective
as of the date of this Combined Prospectus/Proxy Statement. The Adviser may
voluntarily agree to waive a part of its fees. Absent this voluntary
reduction, Investment Advisory Fees would be .60% for all classes of shares.
(4) Absent the voluntary waiver of fees under the Trust's Distribution and
Shareholder Services Plans, 12b-1 fees (as a percentage of average daily net
assets) would be .35% for Class A shares and 1.00% for Class B shares. There
are no 12b-1 fees charged to Fiduciary Class shares. The 12b-1 fees include
a Shareholder servicing fee of .25% of the average daily net assets of the
Fund's Class B shares and may include a Shareholder servicing fee of .25% of
the average daily net assets of the Fund's Class A shares.
(5) Total Operating Expenses have been revised to reflect waivers effective as
of the date of this Prospectus. Absent the voluntary reduction of Investment
Advisory and 12b-1 fees, Total Operating Expenses would be 1.20% for Class A
shares, 1.84% for Class B shares, and .85% for Fiduciary Class shares.
EXAMPLE: An investor would pay the following expenses on a $1,000 investment in
Class A and Fiduciary Class shares of the Fund, assuming: (1) imposition of the
maximum sales charge for Class A shares; (2) 5% annual return; and (3)
redemption at the end of each time period.
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------------
1 YEAR 3 YEARS 5 YEARS 10 YEARS
- -----------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Class A $ 38 $ 55 $ 73 $126
Fiduciary Class $ 6 $ 18 $ 31 $ 69
</TABLE>
Absent the voluntary reduction of fees, the dollar amounts in the above example
would be as follows:
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------------
1 YEAR 3 YEARS 5 YEARS 10 YEARS
- -----------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Class A $ 42 $ 67 $ 94 $171
Fiduciary Class $ 9 $ 27 $ 47 $105
- -----------------------------------------------------------------------------------
- -----------------------------------------------------------------------------------
</TABLE>
9
<PAGE>
EXAMPLE: An investor would pay the following expenses on a $1,000 investment in
Class B shares, assuming: (1) deduction of the applicable maximum Contingent
Deferred Sales Charge; and (2) 5% annual return.
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------------
1 YEAR 3 YEARS 5 YEARS 10 YEARS
- -----------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Assuming a complete redemption at end of
period $ 43 $ 61 $ 71 $130
Assuming no redemption $ 13 $ 41 $ 71 $130
</TABLE>
Absent the voluntary reduction of fees, the dollar amounts in the above example
would be as follows:
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------------
1 YEAR 3 YEARS 5 YEARS 10 YEARS
- -----------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Assuming a complete redemption at each of
period $ 49 $ 78 $100 $184
Assuming no redemption $ 19 $ 58 $100 $184
- -----------------------------------------------------------------------------------
- -----------------------------------------------------------------------------------
</TABLE>
Class B shares automatically convert to Class A shares after six (6) years.
Therefore, the "10 Years" examples above reflect the effect of such conversion.
THESE EXAMPLES SHOULD NOT BE CONSIDERED A REPRESENTATION OF PAST OR FUTURE
EXPENSES AND ACTUAL EXPENSES MAY BE GREATER OR LESS THAN THOSE SHOWN. The
purpose of these tables is to assist the investor in understanding the various
costs and expenses that may be directly or indirectly borne by investors in the
Trust.
The rules of the Securities and Exchange Commission (the "SEC") require that the
maximum sales charge be reflected in the above table. However, investors of the
Fund may, under certain circumstances, qualify for reduced sales charges. See
"How to Invest in The One Group-Registered Trademark-" with the One Group
Prospectuses accompanying this Combined Prospectus/Proxy Statement. Long-term
shareholders of Class A shares and Class B shares may pay more than the
equivalent of the maximum front-end sales charges otherwise permitted by the
National Association of Securities Dealers' Rules.
10
<PAGE>
THE ONE GROUP-REGISTERED TRADEMARK- GOVERNMENT BOND FUND
<TABLE>
<CAPTION>
FIDUCIARY
CLASS A CLASS B CLASS
- ----------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
SHAREHOLDER TRANSACTION EXPENSES(1)
Maximum Sales Charge Imposed on Purchases
(as a percentage of offering price).................................... 4.50% none none
Maximum Contingent Deferred Sales Charge
(as a percentage of original purchase price or redemption proceeds, as
applicable)............................................................ none 5.00% none
Redemption Fees.......................................................... none none none
Exchange Fees............................................................ none none none
ANNUAL OPERATING EXPENSES(2)
(as a percentage of average daily net assets)
Investment Advisory Fees(4).............................................. .45% .45% .45%
12b-1 Fees (after fee waivers)(3)........................................ .25% .90% none
Other Expenses........................................................... .26% .26% .26%
- ----------------------------------------------------------------------------------------------------------------
TOTAL OPERATING EXPENSES(4).............................................. .96% 1.61% .71%
- ----------------------------------------------------------------------------------------------------------------
</TABLE>
(1) A person who purchases shares through an account with a financial
institution or broker/dealer may be charged separate transaction fees by the
financial institution or broker/dealer. In addition, a wire redemption
charge, currently $7.00, is deducted from the amount of a wire redemption
payment made at the request of a Shareholder.
(2) The expense information in the table has been restated to reflect current
fees that would have been applicable had they been in effect during the
previous fiscal year.
(3) Absent the voluntary waiver of fees under the Trust's Distribution and
Shareholder Services Plans, 12b-1 fees (as a percentage of average daily net
assets) would be .35% for Class A shares and 1.00% for Class B shares. There
are no 12b-1 fees charged to Fiduciary Class shares. The 12b-1 fees include
a Shareholder servicing fee of .25% of average daily net assets of the
Fund's Class B shares and may include a Shareholder servicing fee of .25% of
the average daily net assets of the Fund's Class A shares.
(4) Total Operating Expenses have been revised to reflect waivers effective as
of the date of this Combined Prospectus/Proxy Statement. The Adviser may
voluntarily agree to waive a part of its fees. Absent the voluntary 12b-1
waiver, Total Operating Expenses would be 1.06% for Class A shares and 1.71%
for Class B shares.
EXAMPLE: An investor would pay the following expenses on a $1,000 investment in
Class A and Fiduciary Class shares of the Fund, assuming: (1) imposition of the
maximum sales charge for Class A shares; (2) 5% annual return; and (3)
redemption at the end of each time period.
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------------
1 YEAR 3 YEARS 5 YEARS 10 YEARS
- -----------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Class A $ 54 $ 74 $ 96 $158
Fiduciary Class $ 7 $ 23 $ 40 $ 88
</TABLE>
Absent the voluntary reduction of 12b-1 fees, the dollar amounts in the above
example would be as follows:
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------------
1 YEAR 3 YEARS 5 YEARS 10 YEARS
- -----------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Class A $ 55 $ 77 $101 $169
- -----------------------------------------------------------------------------------
- -----------------------------------------------------------------------------------
</TABLE>
11
<PAGE>
EXAMPLE: An investor would pay the following expenses on a $1,000 investment in
Class B shares, assuming: (1) deduction of the applicable maximum Contingent
Deferred Sales Charge; and (2) 5% annual return.
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------------
1 YEAR 3 YEARS 5 YEARS 10 YEARS
- -----------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Assuming a complete redemption at end of
period $ 66 $ 81 $108 $174
Assuming no redemption $ 16 $ 51 $ 88 $174
</TABLE>
Absent the voluntary reduction of 12b-1 fees, the dollar amounts in the above
example would be as follows:
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------------
1 YEAR 3 YEARS 5 YEARS 10 YEARS
- -----------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Assuming a complete redemption at each of
period $ 67 $ 84 $113 $185
Assuming no redemption $ 17 $ 54 $ 93 $185
</TABLE>
Class B shares automatically convert to Class A shares after eight (8) years.
Therefore, the "10 Years" examples above reflect the effect of such conversion.
THESE EXAMPLES SHOULD NOT BE CONSIDERED A REPRESENTATION OF PAST OR FUTURE
EXPENSES AND ACTUAL EXPENSES MAY BE GREATER OR LESS THAN THOSE SHOWN. The
purpose of these tables is to assist the investor in understanding the various
costs and expenses that may be directly or indirectly borne by investors in the
Trust.
The rules of the SEC require that the maximum sales charge be reflected in the
above table. However, investors of the Fund may, under certain circumstances,
qualify for reduced sales charges. See "How to Invest in The One
Group-Registered Trademark-" in the One Group Prospectuses accompanying this
Combined Prospectus/Proxy Statement. Long-term Shareholders of Class A shares
and Class B shares may pay more than the equivalent of the maximum front-end
sales charges otherwise permitted by the National Association of Securities
Dealers' Rules.
12
<PAGE>
THE ONE GROUP-REGISTERED TRADEMARK- LOUISIANA MUNICIPAL BOND FUND
<TABLE>
<CAPTION>
FIDUCIARY
CLASS A CLASS B CLASS
- ----------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
SHAREHOLDER TRANSACTION EXPENSES(1)
Maximum Sales Charge Imposed on Purchases
(as a percentage of offering price).................................... 4.50% none none
Maximum Contingent Deferred Sales Charge
(as a percentage of original purchase price or redemption proceeds, as
applicable)............................................................ none 5.00% none
Redemption Fees.......................................................... none none none
Exchange Fees............................................................ none none none
ANNUAL OPERATING EXPENSES(2)
(as a percentage of average daily net assets)
Investment Advisory Fees (after fee waivers)(3).......................... .40% .40% .40%
12b-1 Fees (after fee waivers)(4)........................................ .25% .90% none
Other Expenses........................................................... .31% .31% .31%
- ----------------------------------------------------------------------------------------------------------------
TOTAL OPERATING EXPENSES(3).............................................. .96% 1.61% .71%
- ----------------------------------------------------------------------------------------------------------------
</TABLE>
(1) A person who purchases shares through an account with a financial
institution or broker/dealer may be charged separate transaction fees by the
financial institution or broker/dealer. In addition, a wire redemption
charge, currently $7.00, is deducted from the amount of a wire redemption
payment made at the request of a Shareholder.
(2) The expense information in the table has been restated to reflect current
fees that would have been applicable had they been in effect during the
previous fiscal year.
(3) Investment Advisory Fees and Total Operating Expenses reflect fee waivers
effective as of the date of this Combined Prospectus/Proxy Statement. The
Adviser may voluntarily agree to waive a part of its fees. Absent this
voluntary reduction, Investment Advisory Fees would be .60% for all classes
of shares, and Total Operating Expenses would be 1.26% for Class A shares,
1.91% for Class B shares and .91% for Fiduciary Class shares.
(4) Absent the voluntary waiver of fees under the Trust's Distribution and
Shareholder Services Plans, 12b-1 fees (as a percentage of average daily net
assets) would be .35% for Class A shares and 1.00% for Class B shares. There
are no 12b-1 fees charged to Fiduciary Class shares. The 12b-1 fees include
a Shareholder servicing fee of .25% of average daily net assets of the
Fund's Class B shares and may include a Shareholder servicing fee of .25% of
the average daily net assets of the Class A shares of the Fund.
EXAMPLE: An investor would pay the following expenses on a $1,000 investment in
Class A and Fiduciary Class shares of the Fund, assuming: (1) imposition of the
maximum sales load for Class A shares; (2) 5% annual return; and (3) redemption
at the end of each time period.
<TABLE>
<CAPTION>
- --------------------------------------------------------------
1 YEAR 3 YEARS
- --------------------------------------------------------------
<S> <C> <C>
Class A $ 54 $ 74
Fiduciary Class $ 7 $ 23
</TABLE>
Absent the voluntary reduction of fees, the dollar amounts in the above example
would be as follows:
<TABLE>
<CAPTION>
- --------------------------------------------------------------
1 YEAR 3 YEARS
- --------------------------------------------------------------
<S> <C> <C>
Class A $ 57 $ 83
Fiduciary Class $ 9 $ 29
- --------------------------------------------------------------
- --------------------------------------------------------------
</TABLE>
13
<PAGE>
EXAMPLE: An investor would pay the following expenses on a $1,000 investment in
Class B shares of the Fund, assuming: (1) deduction of the applicable maximum
Contingent Deferred Sales Charge; and (2) 5% annual return.
<TABLE>
<CAPTION>
- --------------------------------------------------------------
1 YEAR 3 YEARS
- --------------------------------------------------------------
<S> <C> <C>
Assuming a complete redemption at end of
period $ 66 $ 81
Assuming no redemption $ 16 $ 51
</TABLE>
Absent the voluntary reduction of fees, the dollar amounts in the above example
would be as follows:
<TABLE>
<CAPTION>
- --------------------------------------------------------------
1 YEAR 3 YEARS
- --------------------------------------------------------------
<S> <C> <C>
Assuming a complete redemption at each of
period $ 69 $ 90
Assuming no redemption $ 19 $ 60
</TABLE>
THESE EXAMPLES SHOULD NOT BE CONSIDERED A REPRESENTATION OF PAST OR FUTURE
EXPENSES AND ACTUAL EXPENSES MAY BE GREATER OR LESS THAN THOSE SHOWN. The
purpose of these tables is to assist the investor in understanding the various
costs and expenses that may be directly or indirectly borne by investors in the
Trust.
The rules of the SEC require that the maximum sales charge be reflected in the
above table. However, investors of the Fund may, under certain circumstances,
qualify for reduced sales charges. See "How to Invest in The One
Group-Registered Trademark-" in the One Group Prospectuses accompanying this
Combined Prospectus/Proxy Statement. Long-term Shareholders of Class A shares
and Class B shares may pay more than the equivalent of the maximum front-end
sales charges otherwise permitted by the National Association of Securities
Dealers' Rules.
14
<PAGE>
THE ONE GROUP-REGISTERED TRADEMARK- VALUE GROWTH FUND
<TABLE>
<CAPTION>
FIDUCIARY
CLASS A CLASS B CLASS
- ----------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
SHAREHOLDER TRANSACTION EXPENSES(1)
Maximum Sales Charge Imposed on Purchases
(as a percentage of offering price).................................... 4.50% none none
Maximum Contingent Deferred Sales Charge
(as a percentage of original purchase price or redemption proceeds, as
applicable)............................................................ none 5.00% none
Redemption Fees.......................................................... none none none
Exchange Fees............................................................ none none none
ANNUAL OPERATING EXPENSES(2)
(as a percentage of average daily net assets)
Investment Advisory Fees(4).............................................. .65% .65% .65%
12b-1 Fees (after fee waivers)(3)........................................ .25% 1.00% none
Other Expenses........................................................... .31% .31% .31%
- ----------------------------------------------------------------------------------------------------------------
TOTAL OPERATING EXPENSES(4).............................................. 1.21% 1.96% .96%
- ----------------------------------------------------------------------------------------------------------------
</TABLE>
(1) A person who purchases shares through an account with a financial
institution or broker/dealer may be charged separate transaction fees by the
financial institution or broker/dealer. In addition, a wire redemption
charge, currently $7.00, is deducted from the amount of a wire redemption
payment made at the request of a Shareholder.
(2) The expense information in the table has been restated to reflect current
fees that would have been applicable had they been in effect during the
previous fiscal year.
(3) Absent the voluntary waiver of fees under the Trust's Distribution and
Shareholder Services Plans, 12b-1 fees (as a percentage of average daily net
assets) would be .35% for Class A shares. There are no 12b-1 fees charged to
Fiduciary Class shares. The 12b-1 fees include a Shareholder servicing fee
of .25% of average daily net assets of the Fund's Class B shares and may
include a Shareholder servicing fee of .25% of the average daily net assets
of the Class A shares of the Fund.
(4) Investment Advisory Fees and Total Operating Expenses have been revised to
reflect fee waivers effective as of the date of this Combined
Prospectus/Proxy Statement. The Adviser may voluntarily agree to waive a
part of its fees. Absent this voluntary reduction, Investment Advisory Fees
would be .74% for all classes of shares, and Total Operating Expenses would
be 1.40% for Class A shares, 2.05% for Class B shares and 1.05% for
Fiduciary Class shares.
EXAMPLE: An investor would pay the following expenses on a $1,000 investment in
Class A and Fiduciary Class shares of the Fund, assuming: (1) imposition of the
maximum sales load for Class A shares; (2) 5% annual return; and (3) redemption
at the end of each time period.
<TABLE>
<CAPTION>
- --------------------------------------------------------------
1 YEAR 3 YEARS
- --------------------------------------------------------------
<S> <C> <C>
Class A $ 57 $ 82
Fiduciary Class $ 10 $ 31
</TABLE>
Absent the voluntary reduction of 12b-1 fees, the dollar amounts in the above
example would be as follows:
<TABLE>
<CAPTION>
- --------------------------------------------------------------
1 YEAR 3 YEARS
- --------------------------------------------------------------
<S> <C> <C>
Class A $ 59 $ 87
Fiduciary Class $ 11 $ 33
- --------------------------------------------------------------
- --------------------------------------------------------------
</TABLE>
15
<PAGE>
EXAMPLE: An investor would pay the following expenses on a $1,000 investment in
Class B shares of the Fund, assuming: (1) deduction of the applicable maximum
Contingent Deferred Sales Charge; and (2) 5% annual return.
<TABLE>
<CAPTION>
- --------------------------------------------------------------
1 YEAR 3 YEARS
- --------------------------------------------------------------
<S> <C> <C>
Assuming a complete redemption at end of
period $ 70 $ 92
Assuming no redemption $ 20 $ 62
</TABLE>
Absent the voluntary reduction of fees, the dollar amounts in the above example
would be as follows:
<TABLE>
<CAPTION>
- --------------------------------------------------------------
1 YEAR 3 YEARS
- --------------------------------------------------------------
<S> <C> <C>
Assuming a complete redemption at each of
period $ 71 $ 94
Assuming no redemption $ 21 $ 64
- --------------------------------------------------------------
- --------------------------------------------------------------
</TABLE>
THESE EXAMPLES SHOULD NOT BE CONSIDERED A REPRESENTATION OF PAST OR FUTURE
EXPENSES AND ACTUAL EXPENSES MAY BE GREATER OR LESS THAN THOSE SHOWN. The
purpose of these tables is to assist the investor in understanding the various
costs and expenses that may be directly or indirectly borne by investors in the
Trust.
The rules of the SEC require that the maximum sales charge be reflected in the
above table. However, investors of the Fund may, under certain circumstances,
qualify for reduced sales charges. See "How to Invest in The One
Group-Registered Trademark-" in the One Group Prospectuses accompanying this
Combined Prospectus/Proxy Statement. Long-term Shareholders of Class A shares
and Class B shares may pay more than the equivalent of the maximum front-end
sales charges otherwise permitted by the National Association of Securities
Dealers' Rules.
16
<PAGE>
THE ONE GROUP-REGISTERED TRADEMARK- INCOME EQUITY FUND
<TABLE>
<CAPTION>
FIDUCIARY
CLASS A CLASS B CLASS
- ----------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
SHAREHOLDER TRANSACTION EXPENSES(1)
Maximum Sales Charge Imposed on Purchases
(as a percentage of offering price).................................... 4.50% none none
Maximum Contingent Deferred Sales Charge
(as a percentage of original purchase price or redemption proceeds, as
applicable)............................................................ none 5.00% none
Redemption Fees.......................................................... none none none
Exchange Fees............................................................ none none none
ANNUAL OPERATING EXPENSES(2)
(as a percentage of average daily net assets)
Investment Advisory Fees................................................. .74% .74% .74%
12b-1 Fees (after fee waivers)(3)........................................ .25% 1.00% none
Other Expenses........................................................... .31% .31% .31%
- ----------------------------------------------------------------------------------------------------------------
TOTAL OPERATING EXPENSES(4).............................................. 1.30% 2.05% 1.05%
- ----------------------------------------------------------------------------------------------------------------
</TABLE>
(1) A person who purchases shares through an account with a financial
institution or broker/dealer may be charged separate transaction fees by the
financial institution or broker/dealer. In addition, a wire redemption
charge, currently $7.00, is deducted from the amount of a wire redemption
payment made at the request of a Shareholder.
(2) The expense information in the table has been restated to reflect current
fees that would have been applicable had they been in effect during the
previous fiscal year.
(3) Absent the voluntary waiver of fees under the Trust's Distribution and
Shareholder Services Plans, 12b-1 fees (as a percentage of average daily net
assets) would be .35% for Class A shares. There are no 12b-1 fees charged to
Fiduciary Class shares. The 12b-1 fees include a Shareholder servicing fee
of .25% of average daily net assets of the Fund's Class B shares and may
include a Shareholder servicing fee of .25% of the average daily net assets
of the Fund's Class A shares. See "The Distributor."
(4) Total Operating Expenses have been revised to reflect waivers effective as
of the date of this Combined Prospectus/Proxy Statement. The Adviser may
voluntarily agree to waive a part of its fees. Absent the voluntary 12b-1
waiver, Total Operating Expenses would be 1.40% for Class A shares.
EXAMPLE: An investor would pay the following expense on a $1,000 investment in
Class A and Fiduciary Class shares of the Fund, assuming: (1) imposition of the
maximum sales charge for Class A shares; (2) 5% annual return; and (3)
redemption at the end of each time period.
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------------
1 YEAR 3 YEARS 5 YEARS 10 YEARS
- -----------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Class A $ 58 $ 84 $113 $195
Fiduciary Class $ 11 $ 33 $ 58 $128
</TABLE>
Absent the voluntary reduction of 12b-1 fees, the dollar amounts in the above
example would be as follows:
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------------
1 YEAR 3 YEARS 5 YEARS 10 YEARS
- -----------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Class A $ 59 $ 87 $118 $205
- -----------------------------------------------------------------------------------
- -----------------------------------------------------------------------------------
</TABLE>
17
<PAGE>
EXAMPLE: An investor would pay the following expenses on a $1,000 investment in
Class B shares, assuming: (1) deduction of the applicable maximum Contingent
Deferred Sales Charge; and (2) 5% annual return.
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------------
1 YEAR 3 YEARS 5 YEARS 10 YEARS
- -----------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Assuming a complete redemption at end of
period $ 71 $ 94 $130 $219
Assuming no redemption $ 21 $ 64 $110 $219
</TABLE>
Class B shareholders do not receive a voluntary reduction in 12b-1 fees.
However, after eight (8) years, Class B shares automatically convert to Class A
shares, which do receive a voluntary reduction in fees. Therefore, a purchaser
of Class B shares remaining in the Fund for ten (10) years would pay $219 with
the voluntary reduction applicable to Class A shareholders, and $221 absent the
voluntary reduction.
THESE EXAMPLES SHOULD NOT BE CONSIDERED A REPRESENTATION OF PAST OR FUTURE
EXPENSES AND ACTUAL EXPENSES MAY BE GREATER OR LESS THAN THOSE SHOWN. The
purpose of these tables is to assist the investor in understanding the various
costs and expenses that may be directly or indirectly borne by investors in the
Trust.
The rules of the SEC require that the maximum sales charge be reflected in the
above table. However, investors of the Fund may, under certain circumstances,
qualify for reduced sales charges. See "How to Invest in The One
Group-Registered Trademark-" in the One Group Prospectuses accompanying this
Combined Prospectus/Proxy Statement. Long-term Shareholders of Class A shares
and Class B shares may pay more than the equivalent of the maximum front-end
sales charges otherwise permitted by the National Association of Securities
Dealers' Rules.
18
<PAGE>
THE ONE GROUP-REGISTERED TRADEMARK- GULF SOUTH GROWTH FUND
<TABLE>
<CAPTION>
FIDUCIARY
CLASS A CLASS B CLASS
- ----------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
SHAREHOLDER TRANSACTION EXPENSES(1)
Maximum Sales Charge Imposed on Purchases
(as a percentage of offering price).................................... 4.50% none none
Maximum Contingent Deferred Sales Charge
(as a percentage of original purchase price or redemption proceeds, as
applicable)............................................................ none 5.00% none
Redemption Fees.......................................................... none none none
Exchange Fees............................................................ none none none
ANNUAL OPERATING EXPENSES(2)
(as a percentage of average daily net assets)
Investment Advisory Fees(4).............................................. .65% .65% .65%
12b-1 Fees (after fee waivers)(3)........................................ .25% 1.00% none
Other Expenses........................................................... .32% .32% .32%
- ----------------------------------------------------------------------------------------------------------------
TOTAL OPERATING EXPENSES(4).............................................. 1.22% 1.97% .97%
- ----------------------------------------------------------------------------------------------------------------
</TABLE>
(1) A person who purchases shares through an account with a financial
institution or broker/dealer may be charged separate transaction fees by the
financial institution or broker/dealer. In addition, a wire redemption
charge, currently $7.00, is deducted from the amount of a wire redemption
payment made at the request of a Shareholder.
(2) The expense information in the table has been restated to reflect current
fees that would have been applicable had they been in effect during the
previous fiscal year.
(3) Absent the voluntary waiver of fees under the Trust's Distribution and
Shareholder Services Plans, 12b-1 fees (as a percentage of average daily net
assets) would be .35% for Class A shares. There are no 12b-1 fees charged to
Fiduciary Class shares. The 12b-1 fees include a Shareholder servicing fee
of .25% of average daily net assets of the Fund's Class B shares and may
include a Shareholder servicing fee of .25% of the average daily net assets
of the Class A shares of the Fund.
(4) Investment Advisory Fees and Total Operating Expenses have been revised to
reflect fee waivers effective as of the date of this Combined
Prospectus/Proxy Statement. The Adviser may voluntarily agree to waive a
part of its fees. Absent this voluntary reduction, Investment Advisory Fees
would be .74% for all classes of shares, and Total Operating Expenses would
be 1.41% for Class A shares, 2.06% for Class B shares and 1.06% for
Fiduciary Class shares.
EXAMPLE: An investor would pay the following expenses on a $1,000 investment in
Class A and Fiduciary Class shares of the Fund, assuming: (1) imposition of the
maximum sales load for Class A shares; (2) 5% annual return; and (3) redemption
at the end of each time period.
<TABLE>
<CAPTION>
- --------------------------------------------------------------
1 YEAR 3 YEARS
- --------------------------------------------------------------
<S> <C> <C>
Class A $ 57 $ 82
Fiduciary Class $ 10 $ 31
</TABLE>
Absent the voluntary reduction of 12b-1 fees, the dollar amounts in the above
example would be as follows:
<TABLE>
<CAPTION>
- --------------------------------------------------------------
<S> <C> <C>
1 YEAR 3 YEARS
<CAPTION>
- --------------------------------------------------------------
<S> <C> <C>
Class A $ 59 $ 88
Fiduciary Class $ 11 $ 34
- --------------------------------------------------------------
- --------------------------------------------------------------
</TABLE>
19
<PAGE>
EXAMPLE: An investor would pay the following expenses on a $1,000 investment in
Class B shares of the Fund, assuming: (1) deduction of the applicable maximum
Contingent Deferred Sales Charge; and (2) 5% annual return.
<TABLE>
<CAPTION>
- --------------------------------------------------------------
<S> <C> <C>
1 YEAR 3 YEARS
<CAPTION>
- --------------------------------------------------------------
<S> <C> <C>
Assuming a complete redemption at end of
period $ 70 $ 92
Assuming no redemption $ 20 $ 62
</TABLE>
Absent the voluntary reduction of fees, the dollar amounts in the above example
would be as follows:
<TABLE>
<CAPTION>
- --------------------------------------------------------------
<S> <C> <C>
1 YEAR 3 YEARS
<CAPTION>
- --------------------------------------------------------------
<S> <C> <C>
Assuming a complete redemption at each of
period $ 71 $ 95
Assuming no redemption $ 21 $ 65
- --------------------------------------------------------------
- --------------------------------------------------------------
</TABLE>
THESE EXAMPLES SHOULD NOT BE CONSIDERED A REPRESENTATION OF PAST OR FUTURE
EXPENSES AND ACTUAL EXPENSES MAY BE GREATER OR LESS THAN THOSE SHOWN. The
purpose of these tables is to assist the investor in understanding the various
costs and expenses that may be directly or indirectly borne by investors in the
Trust.
The rules of the SEC require that the maximum sales charge be reflected in the
above table. However, investors of the Fund may, under certain circumstances,
qualify for reduced sales charges. See "How to Invest in The One
Group-Registered Trademark-" in the One Group Prospectuses accompanying this
Combined Prospectus/Proxy Statement. Long-term Shareholders of Class A shares
and Class B shares may pay more than the equivalent of the maximum front-end
sales charges otherwise permitted by the National Association of Securities
Dealers' Rules.
20
<PAGE>
INVESTMENT OBJECTIVES AND POLICIES
Below is a brief discussion of the investment objectives and policies of the
Paragon Funds and the corresponding One Group Funds. The discussion is qualified
in its entirety by the disclosure on such subjects contained in The One Group
Prospectuses and the Paragon Funds Prospectus accompanying this Combined
Prospectus/Proxy Statement. The securities currently held by each Paragon Fund
are substantially similar to those securities which the corresponding One Group
Fund may hold. Consequently, the proposed reorganization of Paragon Money
Market, Paragon Government, Paragon Bond, Paragon Equity, Paragon Louisiana,
Paragon Growth and Paragon Gulf South should not result in significant portfolio
turnover or transaction expenses due to the corresponding One Group Fund's
disposal of investment securities.
PARAGON MONEY MARKET AND ONE GROUP MONEY MARKET
The investment objective of Paragon Money Market is to maximize current
income to the extent consistent with preservation of capital and the maintenance
of liquidity. Paragon Money Market pursues its objective by limiting its
investments to securities issued or guaranteed by the U.S. Treasury and
repurchase agreements relating to such securities. As a matter of fundamental
policy, at least 65% of the Paragon Money Market Fund's total assets will
consist of such securities. Similarly, One Group Money Market seeks current
income with liquidity and stability of principal. Investments by One Group Money
Market are limited to short-term U.S. Treasury obligations and repurchase
agreements collaterized by such obligations, reverse repurchase agreements, and
when-issued securities. One Group Money Market and Paragon Money Market also may
engage in securities lending.
Each Fund seeks to maintain a stable net asset value of $1.00 per share,
although there is no assurance that the Funds will be able to achieve this
objective. In addition, each Fund's portfolio securities are valued by the
amortized cost method in compliance with regulations of the SEC. Consequently,
both Paragon Money Market and One Group Money Market invest only in U.S. dollar-
denominated securities, maintain an average maturity on a dollar-weighted basis
of 90 days or less, and acquire only "eligible securities" that present minimal
credit risk and have a maturity of 397 days or less.
PARAGON GOVERNMENT AND ONE GROUP LIMITED VOLATILITY
The investment objective of Paragon Government is to seek a high level of
current income consistent with stability of principal by investing primarily in
a diversified portfolio of securities of the U.S. Government, its agencies,
authorities and instrumentalities. Similarly, One Group Limited Volatility seeks
current income consistent with preservation of capital through investment in
high and medium-grade fixed-income securities.
One Group Limited Volatility normally invests at least 80% of total assets
in debt securities of all types with short to intermediate maturities. Under
normal market conditions, it is anticipated that the One Group Limited
Volatility's average weighted maturity will range between one and five years.
Paragon Government's portfolio normally consists of securities with remaining
maturities of six years or less.
At least 65% of the total assets of One Group Limited Volatility will
consist of bonds and at least 65% of total assets will consist of obligations
issued by the U.S. government or its agencies or instrumentalities, some of
which may be subject to repurchase agreements.
As a matter of fundamental policy, at least 65% of Paragon Government's
total assets will consist of securities issued or guaranteed as to principal and
interest by the U.S. Government, its agencies, authorities and instrumentalities
with a dollar-weighted average portfolio maturity of one to three years. As a
matter of nonfundamental policy, under normal market conditions, at least 80% of
the value of Paragon Government's total assets will be invested in securities
that are issued or guaranteed as to principal and interest by the U.S.
Government, its agencies, authorities or instrumentalities, including
mortgage-related securities, ("U.S. Government Securities") and repurchase
agreements
21
<PAGE>
relating to U.S. Government Securities. Although Paragon Government intends to
invest all of its total assets in such securities, up to 20% of its total assets
may be held in cash or invested in other investment grade fixed-income
securities and cash equivalents.
In addition to the permissible investments described above, One Group
Limited Volatility may invest in U.S. Treasury obligations, including Separately
Traded Registered Interest and Principal Securities ("STRIPS") and Coupon Under
Book Entry Safekeeping ("CUBES"); receipts, including Treasury Receipts ("TRS"),
Treasury Investment Growth Receipts ("TIGRS"), and Certificates of Accrual on
Treasury Securities ("CATS"); certificates of deposit, time deposits, reverse
repurchase agreements, securities of other investment companies, when-issued
securities, forward commitments, variable and floating rate notes, bankers'
acceptances, commercial paper, mortgage dollar rolls, and securities of foreign
issuers, including sponsored and unsponsored American Depository Receipts
("ADRs"). One Group Limited Volatility also may invest in securities subject to
demand features, mortgage-backed securities, including collateralized mortgage
obligations ("CMOs") and real estate mortgage investment conduits ("REMICs"),
adjustable rate mortgage loans ("ARMS"), fixed rate mortgage loans, asset backed
securities, guaranteed investment contracts, corporate securities, and
restricted securities. One Group Limited Volatility also may engage in
securities lending transactions. Paragon Government also may invest in the above
instruments, other than CUBES, TRS, reverse repurchase agreements, securities of
other investment companies, mortgage dollar rolls, and guaranteed investment
contracts.
The above list of permissible investments includes select securities that
may be commonly considered to be derivatives, including: mortgage dollar rolls,
multiple class pass-through securities and collateralized mortgage obligations
(CMOs and REMICs) and asset backed securities.
PARAGON BOND AND ONE GROUP BOND
The investment objective of Paragon Bond is to provide a high level of
current income, consistent with prudent investment risk, by investment in a
diversified portfolio of investment grade fixed-income securities. One Group
Bond seeks a high level of current income with liquidity and safety of
principal.
As a matter of fundamental policy, at least 65% of Paragon Bond's total
assets normally consist of investment grade bonds and debentures with a
dollar-weighted average portfolio maturity of three to ten years. The average
weighted remaining maturity of One Group Bond is expected to be between three
and fifteen years; however, average remaining maturity may be outside this range
if warranted by market conditions.
Paragon Bond may invest its assets in: (i) U.S. Government Securities; (ii)
U.S. dollar denominated debt securities issued by foreign governments and their
political subdivisions and other foreign issuers; (iii) foreign and domestic
corporate debt securities, some of which may involve equity features; (iv)
asset-backed securities; and (v) obligations of banks or savings and loan
associations.
As a matter of nonfundamental policy, under normal market conditions, at
least 80% of the value of Paragon Bond's total assets are invested in the
fixed-income securities described above. For this purpose, Paragon Bond
considers convertible debt securities to be fixed-income securities. Paragon
Bond intends to invest all of its assets in fixed-income securities.
One Group Bond intends to seek to achieve its investment objective
principally through investment in securities issued by the U.S. government and
its agencies and instrumentalities. Accordingly, at least 65% of the total
assets of One Group Bond will be invested in obligations guaranteed as to
principal and interest by the U.S. government or its agencies and
instrumentalities, some of which may be subject to repurchase agreements, and
other securities representing an interest in or collateralized by mortgages that
are issued or guaranteed by the U.S. government, its agencies or
instrumentalities. The primary issuers or guarantors of such securities
currently include the Government National Mortgage Association ("Ginnie Mae"),
the Federal National Mortgage Association ("Fannie Mae"), and the Federal Home
Loan Mortgage Corporation ("Freddie Mac"), although One Group
22
<PAGE>
Bond may invest in securities issued or guaranteed by other agencies or
instrumentalities in the future. One Group Bond's ability to achieve higher
income is not as great as that of funds that may invest in lower-quality
instruments.
The balance of One Group Bond's assets may be invested in debt securities
and municipal securities. Debt securities generally will be rated in one of the
three highest rating categories by at least one nationally recognized
statistical rating organization ("NRSRO") at the time of investment (for
example, A or better by Standard & Poor's Rating Group ("S&P") or Moody's
Investors Service ("Moody's") or, if unrated, determined to be of comparable
quality. However, One Group Bond reserves the right to invest in debt securities
which present attractive opportunities and are rated in the fourth highest
rating category by at least one NRSRO at the time of investment (for example,
BBB by S&P or Baa by Moody's). Preferred stock must be rated in one of the four
highest rating categories by at least one NRSRO at the time of investment (for
example, BBB or better by S&P or Baa or better by Moody's) or, if unrated,
determined by the adviser to be of comparable quality. Securities that are rated
in the fourth highest rating category by an NRSRO are deemed by these ratings
services to have some speculative characteristics.
Paragon Bond invests only in investment grade debt securities, which are
those rated Baa or higher by Moody's or BBB or higher by S&P or, if unrated,
determined to be of comparable quality. In the event that the rating for any
security held in Paragon Bond's portfolio drops below the minimal acceptable
rating, such change will be considered by Premier in evaluating the overall
composition of the Paragon Bond's portfolio.
One Group Bond and Paragon Bond also may purchase taxable or tax-exempt
municipal securities ("Municipal Securities"). Municipal Securities, if bonds,
must be rated in one of the four highest rating categories by at least one NRSRO
at the time of investment (for example, BBB or better by S&P or Baa or better by
Moody's) or, if unrated, is determined to be of comparable quality. Other
Municipal Securities, such as tax-exempt commercial paper, notes or variable
rate demand obligations must be rated in one of the three highest rating
categories by at least one NRSRO at the time of investment (such as A-2 by S&P
or P-2 by Moody's with respect to tax-exempt commercial paper; SP-2 by S&P or
MIG-2 by Moody's, with respect to notes; and A-2 by S&P or VMIG-2 by Moody's,
with respect to variable rate demand obligations) or, if unrated, determined to
be of comparable quality.
In addition to the permissible investments described above, One Group Bond
also may invest in mortgage-backed securities, securities purchased on a
when-issued basis and forward commitments, variable and floating rate notes,
restricted securities, time deposits, certificates of deposit, receipts, which
may include Treasury Receipts ("TRS"), Treasury Investment Growth Receipts
("TIGRS") and Certificates of Accrual on Treasury Securities ("CATS"), U.S.
Treasury obligations, which may include Separately Traded Registered Interest
and Principal Securities ("STRIPS") and Coupon Under Book Entry Safekeeping
("CUBES"), securities of other investment companies, bankers' acceptances,
commercial paper, repurchase agreements, reverse repurchase agreements, and
mortgage dollar rolls. One Group Bond also may invest in: options, futures
contracts, options on futures contracts, municipal securities, securities
subject to demand features, multiple class pass-through securities and
collateralized mortgage obligations ("CMOs"), real estate mortgage investment
conduits ("REMICs"), adjustable rate mortgage loans "(ARMS"), stripped
mortgage-backed securities, fixed rate mortgage loans, inverse floating rate
instruments, asset-backed securities, corporate securities, swap transactions,
structured instruments, and municipal leases. One Group Bond also may engage in
securities lending transactions. Paragon Bond may also invest in the above
instruments, other than CUBES, TRS, reverse repurchase agreements, securities of
other investment companies, mortgage dollar rolls, guaranteed investment
contracts, swap transactions, and structured instruments.
In addition, One Group Bond may invest in new options, futures contracts and
other financial products that may be developed, to the extent that these
products are consistent with One Group Bond's investment objective and policies.
23
<PAGE>
This list of permissible investments includes select securities that may be
commonly considered to be derivatives, including: mortgage dollar rolls,
options, futures contracts, options on futures contracts, multiple class
pass-through securities and collateralized mortgage obligations (CMOs and
REMICs), stripped mortgage-backed securities (IOs and POs), inverse floating
rate instruments, asset-backed securities, swap, cap and floor transactions, new
financial products and structured instruments.
PARAGON LOUISIANA AND ONE GROUP LOUISIANA
The investment objective of both Paragon Louisiana and One Group Louisiana
is to seek as high a level of current income exempt from Federal and Louisiana
income tax as is consistent with preservation of capital. Paragon Louisiana is a
diversified mutual fund. One Group Louisiana is a non-diversified mutual fund
and, to the extent permitted by the Internal Revenue Code (the "Code"), is not
limited in the proportion of its assets that may be invested in the securities
of a single issuer.
As a matter of fundamental policy at least 80% of the net assets of Paragon
Louisiana consist of investment grade municipal securities issued by or on
behalf of the State of Louisiana and its political subdivisions, agencies and
instrumentalities, the interest on which is exempt from both Federal income tax
and Louisiana state income tax.
Both Paragon Louisiana and One Group Louisiana anticipate that they normally
will invest in long-term municipal securities and that the dollar-weighted
average maturity of their portfolios generally will vary between five and 15
years, although they may invest in securities of any maturity. The municipal
securities in which Paragon Louisiana and One Group Louisiana invest may carry
fixed rates of return or have floating or variable rates. Although Paragon
Louisiana and One Group Louisiana intend to invest all of their assets in the
municipal securities described above, up to 20% of its assets may be held in
cash or invested in municipal securities of other states, short-term taxable
investments including repurchase agreements, U.S. Government Securities or other
cash equivalents and Louisiana municipal securities such as "private activity"
bonds the interest on which may be treated as a tax preference item under the
Federal alternative minimum tax.
Both Paragon Louisiana and One Group Louisiana may invest their assets in:
(i) general obligation bonds; (ii) revenue bonds, including industrial
development revenue bonds; (iii) short-term municipal securities of all types,
including tax anticipation notes, revenue anticipation notes, and bond
anticipation notes; and (iv) certificates of participation in a pool of
municipal securities held by a bank or other financial institution, the interest
from which is, in the opinion of counsel to the issuer, exempt from Federal and
Louisiana income tax. As a matter of nonfundamental policy, at least 50% of
Paragon Louisiana's and One Group Louisiana's total assets will be invested in
escrow secured bonds and bonds insured as to principal and interest.
All bonds purchased by Paragon Louisiana and One Group Louisiana are
investment grade, which are those rated at least Baa by Moody's or BBB by S&P,
or short-term tax-exempt municipal securities rated at least MIG-3 (VMIG-3) by
Moody's or SP-2 by S&P or, if unrated, are determined to be of comparable
quality. Securities rated Baa, BBB, MIG-3 (VMIG-3) and SP-2 may have speculative
elements as well as investment grade characteristics.
In order to enhance the liquidity, stability, or quality of a municipal
security meeting the standards described above, both Paragon Louisiana and One
Group Louisiana may acquire the right to sell the security to another party at a
guaranteed price and date. These rights may be referred to as puts, demand
features, or standby commitments, depending on their characteristics, and may
involve letters of credit issued by domestic or foreign banks supporting the
other party's ability to purchase the security from Paragon Louisiana and One
Group Louisiana. The right to sell may be exercisable on demand or at specified
intervals, and may form part of a security or be acquired separately by Paragon
Louisiana and One Group Louisiana. In considering whether a security meets
Paragon Louisiana's
24
<PAGE>
and One Group Louisiana's quality standards, Paragon Louisiana and One Group
Louisiana will look to the creditworthiness of the party providing Paragon
Louisiana and One Group Louisiana with the right to sell as well as the quality
of the security itself.
In addition to the investments described above, One Group Louisiana also may
invest in securities purchased on a when-issued basis and forward commitments,
variable and floating rate notes, time deposits, certificates of deposit,
receipts, which may include Treasury Receipts ("TRS"), Treasury Investment
Growth Receipts ("TIGRS") and Certificates of Accrual on Treasury Securities
("CATS"), U.S. Treasury obligations, which may include Separately Traded
Registered Interest and Principal Securities ("STRIPS") and Coupon Under Book
Entry Safekeeping ("CUBES"), securities of other investment companies, bankers'
acceptances, commercial paper, repurchase agreements, and reverse repurchase
agreements One Group Louisiana also may invest in options, futures contracts,
options on futures contracts, securities subject to demand features, zero coupon
obligations, swap transactions, structured instruments, municipal leases and
participation interests. One Group Louisiana and Paragon Louisiana also may
engage in securities lending transactions. Paragon Louisiana also may invest in
the above instruments, other than TRS, CUBES, securities of other investment
companies, reverse repurchase agreements, swap transactions, and structured
instruments.
In addition, One Group Louisiana may invest in new options, futures
contracts and other financial products that may be developed, to the extent that
these products are consistent with One Group Louisiana's investment objective
and policies.
This list of permissible investments includes select securities that may be
commonly considered to be derivatives, including: options, futures contracts,
options on futures contracts, swap, cap and floor transactions, new financial
products and structured instruments.
PARAGON GROWTH AND ONE GROUP GROWTH
The investment objective of both Paragon Growth and One Group Growth is to
seek long-term capital growth and growth of income while, as a secondary
objective, providing a moderate level of current income. Paragon Growth and One
Group Growth pursue their objectives by investing primarily in a diversified
portfolio of common stocks, debt securities, preferred stocks, convertible
securities, warrants and other equity securities of companies that show the
potential for growth of earnings over time. Stock selection is guided by current
valuation relative to a stock's historical valuation and relative to estimates
of future growth of earnings and dividends. Over the long term, continued
earnings growth tends to lead to both higher dividends and capital appreciation.
Both Paragon Growth and One Group Growth expect to invest in securities
currently paying a moderate level of income, although they may invest in
non-income producing securities when the potential for growth of capital or
future income is promising. Paragon Growth and One Group Growth diversify their
investments among different industries and companies and change their portfolio
securities for investment considerations and not for trading purposes.
Paragon Growth ordinarily invests at least 80% of the value of its total
assets in securities with the characteristics described above. Although Paragon
Growth intends to invest all of its assets in such securities, up to 20% of its
total assets may be held in cash or invested in U.S. Government Securities,
other investment grade fixed-income securities and cash equivalents.
One Group Growth ordinarily invests at least 65% of the value of its total
assets in securities with the characteristics described above. Although One
Group Growth intends to invest all of its assets in such securities, up to 35%
of its total assets may be held in cash or invested in U.S. Government
Securities, other investment grade fixed-income securities and cash equivalents.
One Group Growth may also enter into futures contracts, provided that the value
of these contracts does not exceed 25% of One Group Growth's total assets. In
addition, One Group Growth may write covered call options on securities it owns
and enter into related closing purchase transactions when such activity will
further One Group Growth's investment objective. One Group Growth may also
engage in other options
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transactions in furtherance of its investment objective. The balance of One
Group Growth's assets will be held in cash equivalents rated within one of the
highest two rating categories assigned by at least one NRSRO.
In addition to the permissible investments described above, One Group Growth
may invest in U.S. Treasury obligations, including Separately Traded Registered
Interest and Principal Securities ("STRIPS") and Coupon Under Book Entry
Safekeeping ("CUBES"), receipts, including Treasury Receipts ("TRS"), Treasury
Investment Growth Receipts ("TIGRS"), and Certificates of Accrual on Treasury
Securities ("CATS"), certificates of deposit, time deposits, U.S. government
agency securities, repurchase agreements, reverse repurchase agreements,
securities of other investment companies, when-issued securities, forward
commitments, options, futures contracts, and options on futures contracts. One
Group Growth may also invest in variable and floating rate notes, bankers'
acceptances, commercial paper and securities of foreign issuers, including
sponsored and unsponsored American Depository Receipts ("ADRs"). One Group
Growth and Paragon Growth also may engage in securities lending transactions.
Paragon Growth also may invest in the above instruments other than TRS, CUBES,
reverse repurchase agreements, securities of other investment companies,
mortgage dollar rolls, guaranteed investment contracts, swap transactions and
structured instruments.
This list of permissible investments includes select securities that may be
commonly considered to be derivatives, including: options, futures contracts and
options on futures contracts.
PARAGON EQUITY AND ONE GROUP EQUITY
The investment objective of Paragon Equity is to seek capital growth and
current income. One Group Equity seeks current income through regular payments
of dividends with the secondary goal of achieving capital appreciation by
investing primarily in equity securities. Paragon Equity pursues its objective
by investing primarily in a diversified portfolio of common stocks, preferred
stocks, convertible securities, warrants and other equity securities of
companies which are undervalued relative to their intrinsic value and to the
stock market in general due to an overly pessimistic appraisal by the
marketplace. A low price-earnings ratio is the dominant factor in the selection
of investments for Paragon Equity's portfolio. Paragon Equity expects to
maintain a dividend yield equal to or in excess of the composite yield on the
securities comprising the Standard & Poor's Index of 500 Common Stocks.
As a matter of nonfundamental policy Paragon Equity ordinarily invests at
least 80% of the value of its total assets in securities with the
characteristics described above. Although Paragon Equity intends to invest all
of its assets in such securities, up to 20% of its total assets may be held in
cash or invested in U.S. Government Securities, other investment grade
fixed-income securities, and cash equivalents.
One Group Equity will, under normal conditions, invest at least 80% of the
value of its total assets in equity securities consisting of common stocks, and
debt securities and preferred stocks which are convertible into common stocks.
One Group Equity also may enter into futures contracts, provided that the value
of these contracts does not exceed 25% of the Fund's total assets. In addition,
One Group Equity may write covered call options on securities it owns and enter
into related closing purchase transactions when such activity will further One
Group Equity's investment objective, and also may engage in other options
transactions in furtherance of its investment objective. The balance of One
Group Equity's assets will be held in cash equivalents.
Like Paragon Equity, One Group Equity will select investments with a view to
keeping its yield above the Standard & Poor's 500 Composite Stock Price
Index.(1) Achieving such a yield will be the primary consideration in selecting
securities. However, to the extent not inconsistent with this
- ------------------------
(1) "Standard & Poor's 500" is a registered service mark of Standard & Poor's
Corporation, which does not sponsor and is in no way affiliated with one
Group Equity.
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primary consideration, a security's potential for capital appreciation will also
be considered. Investments will be made in common stocks of corporations which
regularly pay dividends, although continued payment of dividends cannot be
assured. One Group Equity will invest primarily in stocks with favorable,
long-term fundamental characteristics, but stocks of companies that are out of
favor in the financial community also may be purchased. One Group Equity may
eliminate its holdings of a stock when there is a significant fundamental change
that impairs a company's ability to pay dividends.
In addition to the permissible investments described above, One Group Equity
may invest in U.S. Treasury obligations, including Separately Traded Registered
Interest and Principal Securities ("STRIPS") and Coupon Under Book Entry
Safekeeping ("CUBES"), receipts, including Treasury Receipts ("TRS"), Treasury
Investment Growth Receipts ("TIGRS)", and Certificates of Accrual on Treasury
Securities ("CATS"), certificates of deposit, time deposits, U.S. government
agency securities, repurchase agreements, reverse repurchase agreements,
securities of other investment companies, when-issued securities, forward
commitments, options, futures contracts, and options on futures contracts. One
Group Equity also may invest in variable and floating rate notes, bankers'
acceptances, commercial paper and securities of foreign issuers, including
sponsored and unsponsored American Depository Receipts ("ADRs"). One Group
Equity and Paragon Equity also may engage in securities lending transactions.
All of One Group Equity's investments, where applicable, must at the time of
investment possess one of the ratings described in "Description of Ratings" in
the One Group Equity Prospectus accompanying this Combined Prospectus/Proxy
Statement or, if unrated, determined by he Adviser to be of comparable quality.
Paragon Equity also may invest in the above instruments other than CUBES,
TRS, reverse repurchase agreements, and securities of other investment
companies.
This list of permissible investments includes select securities that may be
commonly considered to be derivatives, including: options, futures contracts and
options on futures contracts.
PARAGON GULF SOUTH AND ONE GROUP GULF SOUTH
The investment objective of both Paragon Gulf South and One Group Gulf South
is to seek long-term capital growth. Paragon Gulf South and One Group Gulf South
pursue their objectives by investing primarily in a portfolio of common stocks,
preferred stocks, convertible securities, warrants and other equity securities
of small capitalization, emerging growth and medium capitalization growth
companies, which are either headquartered in or whose primary market is in the
southeastern region of the United States. The portfolios of Paragon Gulf South
and One Group Gulf South will normally consist of securities of approximately
twenty to forty emerging growth companies from Virginia, North Carolina, South
Carolina, Florida, Georgia, Tennessee, Alabama, Mississippi, Arkansas,
Louisiana, Kentucky and Texas. One Group Gulf South's portfolio will normally
consist of securities of approximately twenty-five to sixty emerging growth
companies from those same states. In selecting portfolio securities, Paragon
Gulf South and One Group Gulf South analyze emerging growth companies whose
securities have been analyzed by several regional brokerage firms. Stock
selection is guided by a company's earnings forecasts over a one to two year
period, as well as by its financial strength. In addition, on an ongoing basis,
Paragon Gulf South and One Group Gulf South review a stock's current valuation
relative to (1) the entire stock market, (2) that of other companies in the same
industry, and (3) its recent and expected earnings growth rate. It is expected
that companies selected would generally have market capitalizations ranging from
$50,000,000 to $2,000,000,000, though Paragon Gulf South and One Group Gulf
South may occasionally hold securities of companies whose market capitalizations
are considerably larger if doing so contributes to Paragon Gulf South's and One
Group Gulf South's investment objectives. Companies selected would also be
expected to show earnings growth over time that is well above the growth rate of
the overall economy and the rate of inflation.
As a matter of nonfundamental policy, Paragon Gulf South ordinarily invests
at least 75% of the value of its total assets in securities with the
characteristics described above. Although Paragon Gulf
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South intends to invest all of its assets in such securities, up to 25% of its
total assets may be held in cash or invested in U.S. Government Securities,
other investment grade fixed-income securities and cash equivalents, when the
Adviser's assessment of the attractiveness of the entire stock market and
individual market sectors changes.
As a matter of nonfundamental policy, One Group Gulf South will ordinarily
invest at least 65% of the value of its total assets in securities with the
characteristics described above. Although One Group Gulf South intends to invest
all of its assets in such securities, up to 35% of its total assets may be held
in cash or invested in U.S. Government Securities, other investment grade
fixed-income securities and cash equivalents, when the Adviser's assessment of
the attractiveness of the entire stock market and individual market sectors
changes.
One Group Gulf South also may enter into futures contracts, provided that
the value of these contracts does not exceed 25% of the Fund's total assets. In
addition, One Group Gulf South may write covered call options on securities it
owns and enter into related closing purchase transactions when such activity
will further the One Group Gulf South's investment objective. One Group Gulf
South also may engage in other options transactions in furtherance of its
investment objective. The balance of the One Group Gulf South's assets will be
held in cash equivalents rated within one of the highest two rating categories
assigned by at least one NRSRO, at the time of investment or, if unrated, are
determined to be of comparable quality. See "Description of Ratings," in the One
Group Gulf South prospectus accompanying this Combined Prospectus/Proxy
Statement.
In addition to the permissible investments described above, One Group Gulf
South may invest in U.S. Treasury obligations, including Separately Traded
Registered Interest and Principal Securities ("STRIPS") and Coupon Under Book
Entry Safekeeping ("CUBES"), receipts, including Treasury Receipts ("TRS"),
Treasury Investment Growth Receipts ("TIGRS"), and Certificates of Accrual on
Treasury Securities ("CATS"), certificates of deposit, time deposits,
mortgage-backed securities, zero coupon obligations, U.S. government agency
securities, repurchase agreements, reverse repurchase agreements, securities of
other investment companies, when-issued securities, forward commitments,
options, futures contracts, and options on futures contracts. One Group Gulf
South also may invest in variable and floating rate notes, bankers' acceptances,
commercial paper and securities of foreign issuers, including sponsored and
unsponsored American Depository Receipts ("ADRs"). One Group Gulf South also may
engage in securities lending transactions. All of One Group Gulf South's
investments, where applicable, must possess one of the ratings described in the
"Description of Ratings" in the One Group Gulf South Prospectus accompanying
this Combined Prospectus/Proxy Statement, at the time of investment or, if
unrated, to be of comparable quality.
Paragon Gulf South also may invest in U.S. Treasury obligations, STRIPS,
receipts, including TIGRS and CATS, certificates of deposit, time deposits, U.S.
government agency securities, repurchase agreements, when-issued securities,
forward commitments, restricted securities, municipal leases, options, futures
contracts, and options on futures contracts. Paragon Growth also may invest in
bankers' acceptances, variable and floating rate notes, zero coupon obligations,
commercial paper and securities of foreign issuers, including sponsored and
unsponsored ADRs. Paragon Gulf South also may engage in securities lending.
This list of permissible investments includes select securities that may be
commonly considered to be derivatives, including: options, futures contracts and
options on futures contracts.
The foregoing discussions of the investment objective and policies of the
Paragon Funds and the One Group Funds are merely summaries. For a full and
detailed description of permitted investments of the Paragon Funds and the One
Group Funds see the applicable Paragon Fund Prospectus and One Group Prospectus.
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INVESTMENT RESTRICTIONS
The Paragon Funds and the One Group Funds have each adopted certain
FUNDAMENTAL investment restrictions. These restrictions may be changed only by a
majority vote of the outstanding shares of each Paragon Fund and each One Group
Fund. Neither the Paragon Funds nor the One Group Funds may:
1. Purchase securities of any issuer (except securities issued or
guaranteed by the United States, it agencies or instrumentalities and, if
consistent with the Fund's investment objective and policies, repurchase
agreements involving such securities) if as a result more than 5% (25% for
One Group Louisiana and One Group Gulf South) of the total assets of the
Fund would be invested in the securities of such issuer or the Fund would
own more than 10% of the outstanding voting securities of such issuer. These
restrictions apply to 75% (50% in the case of Paragon Gulf South, One Group
Louisiana and One Group Gulf South) of the Fund's assets.
2. Purchase any securities that would cause more than 25% of the total
assets of the Fund to be invested in the securities of one or more issuers
conducting their principal business activities in the same industry,
provided that this limitation does not apply to investments in the
obligations issued or guaranteed by the U.S. government or its agencies or
instrumentalities and repurchase agreements involving such securities.
3. Borrow money, except that the Paragon Funds and the One Group Funds
may borrow money from banks for temporary or emergency purposes. Such
borrowings by the Paragon Funds are limited to an aggregate amount not
exceeding one-third of the value of each Paragon Fund's total assets.
Further, a Paragon Fund may not pledge more than 15% of its total assets in
connection with such borrowings. Borrowings by the One Group Funds is
limited to an aggregate amount not exceeding 10% of the value of each One
Group Fund's total assets. Further, a One Group Fund may not pledge any
assets, except in connection with such borrowing and in amounts not in
excess of the lesser of the dollar amounts borrowed or 10% of the value of
the Fund's total assets are the time of its borrowing. Neither the Paragon
Funds nor the One Group Funds may purchase securities while such borrowings
exceed 5% of the value of the Funds' total assets.
4. Underwrite the securities of other issuers except to the extent that
a Paragon Fund and a One Group Fund may be deemed to be an underwriter under
certain securities laws in the disposition of "restricted securities."
5. Purchase or sell real estate, including limited partnership
interests (however, each fund other than the One Group Money Market may
purchase securities secured by real estate or interests therein).
6. Make loans, except that a Fund may (i) purchase or hold debt
instruments in accordance with its investment objective and policies; (ii)
enter into repurchase agreements; and (iii) engage in securities lending.
7. Purchase participation or other direct interests in oil, gas or
mineral exploration or development programs (although investments by the One
Group Funds, other than One Group Money Market, in marketable securities of
companies engaged in such activities are not hereby precluded).
In addition, as a matter of fundamental policy, the One Group Funds may not:
1. Purchase securities on margin, sell securities short, or participate
on a joint or joint and several basis in any securities trading account,
except, in the case of One Group Louisiana, for use of short-term credit
necessary for clearance of purchase of portfolio securities.
2. Invest in any issuer for purposes of exercising control or
management.
3. Purchase securities of other investment companies except as
permitted by the Investment Company Act of 1940 (the "1940 Act") and the
rules and regulations thereunder.
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<PAGE>
4. Purchase or sell commodities or commodity contracts (including
futures contracts), except that for bona fide hedging and other permissible
purposes the Funds may purchase or sell financial futures contracts and may
purchase call or put options on financial futures contracts.
5. With respect to One Group Money Market, buy common stocks or voting
securities, or state, municipal or private activity bonds.
In addition, as a matter of fundamental policy, the Paragon Funds may not:
1. Purchase or sell commodities or commodities contracts (except
futures contracts, including but not limited to contracts for the future
delivery of securities or currency and futures contracts based on securities
indexes or related options thereon).
The following investment restrictions are NONFUNDAMENTAL and therefore can
be changed by the Board of Trustees without prior shareholder approval.
As a matter of nonfundamental policy, the One Group Funds may not:
1. Purchase or retain securities of any issuer if the officers or
Trustees of The One Group or the officers or directors of its investment
adviser owning beneficially more than one-half of 1% of the securities of
such issuer together own beneficially more than 5% of such securities.
2. Invest more than 5% of a Fund's total assets in the securities of
issuers which together with any predecessors have a record of less than
three years continuous operation. (This restriction shall not apply to
investments in asset-backed securities and other mutual funds authorized for
purchase by such Fund, as described in its Prospectus. For purposes of this
restriction, an "Asset-Backed Security" means a debt obligation issued by a
limited-purpose entity whose primary business activity is acquiring and
holding financial assets).
3. Invest in illiquid securities in an amount exceeding, in the
aggregate 15% of the Fund's net assets (10% of net assets for One Group
Money Market). An illiquid security is a security which cannot be disposed
of promptly (within seven days) and in the usual course of business without
a loss, and includes repurchase agreements maturing in excess of seven days
and time deposits with a withdrawal penalty, non-negotiable instruments and
instruments for which no market exists.
4. Acquire securities that are subject to restrictions on resale
because they are not registered under the Securities Act of 1933, if such
investments would exceed 5% of the Fund's total assets.
5. With respect to One Group Money Market:
(i) write or purchase call options.
(ii) write or purchase put options.
6. So long as their shares are registered under the securities laws of
the State of Texas and such restrictions are required as a consequence of
such registration, each One Group Fund shall not (1) invest more than 5% of
its net assets in warrants; provided that, of this 5%, no more than 2% will
be in warrants that are not listed on the New York Stock Exchange or the
American Stock Exchange or (2) invest more than 15% of its net assets in
securities which are not readily marketable. For purposes of restriction (1)
in the preceding sentence, warrants acquired by the One Group Funds in units
or attached to other securities may be deemed to be without value.
7. So long as the One Group Fund shares are registered under the
securities laws of the State of California and such restrictions are
required as a consequence of such registration, the One Group Funds may
purchase securities of other open-end investment companies, provided that
the adviser to the One Group Funds waives its fee on that portion of the
assets placed in such open-end investment companies.
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8. So long as their shares are registered under the securities laws of
the State of Arkansas and such restrictions are required as a consequences
of such registration, One Group Money Market, One Group Limited Volatility,
One Group Bond, and One Group Louisiana may not acquire securities that are
subject to restrictions on resale because they are not registered under the
Securities Act of 1933, if such investment would exceed 10% of such Fund's
total assets.
As a matter of nonfundamental policy, the Paragon Funds may not:
1. purchase securities of any issuer with a record of less than three
years' continuous operation, including predecessors, except U.S. Government
securities, securities of such issuers which are rated by at least one
NRSRO, municipal obligations, and obligations issued or guaranteed by any
foreign government or its agencies or instrumentalities, if such purchase
would cause the investments of a Fund in all such issuers to exceed 5% of
the value of the total assets of that Fund;
2. purchase from or sell portfolio securities of a Fund to any of the
officers or Trustees of the Trust, its adviser(s), its principal underwriter
or the members, officers or directors of its adviser(s) or principal
underwriter;
3. invest in other companies for the purpose of exercising control or
management;
4. purchase warrants of any issuer, except on a limited basis if, as a
result of such purchases by a Fund, no more than 2% of the value of its
total assets would be invested in warrants which are not listed on the New
York Stock Exchange or the American Stock Exchange and no more than 5% of
the value of the total assets of a Fund would be invested in warrants,
whether or not so listed, such warrants in each case to be valued at the
lesser of cost or market, but assigning no value to warrants acquired by a
Fund in units with or attached to debt securities;
5. knowingly purchase or retain securities of an issuer any of whose
officers, partners, directors, trustees or securities holders is an officer
or Trustee of the Trust or a member, officer or director of an investment
adviser of the Trust if one or more of such individuals owns beneficially
more than one-half of one percent (1/2 of 1%) of the securities (taken at
market value) of such issuer and such individuals owning more than one half
of one percent (1/2 of 1%) of such securities together own beneficially more
than 5% of such securities;
6. purchase securities on margin or make short sales, except in
connection with arbitrage transactions or unless, by virtue of its ownership
of other securities, a Fund has the right to obtain securities equivalent in
kind and amount to the securities sold and, if the right is conditional, the
sale is made upon the same conditions, except that a Fund may obtain such
short-term credits as may be necessary for the clearance of purchases and
sales of securities and in connection with transactions involving forward
foreign currency exchange contracts;
7. invest in repurchase agreements maturing in more than seven days and
securities which are not readily marketable if as a result thereof, more
than 15% (10% in the case of Paragon Money Market) of the net assets of a
Fund (taken at market value) would be invested in such investment, or
8. purchase puts, calls, straddles, spreads and any combination thereof
if the value of the Fund's aggregate investment in such securities exceeds
5% of its total assets.
PURCHASE PROCEDURES
Shares of both the Paragon Funds and the One Group Funds are sold on a
continuous basis. Shares of the Paragon Funds may be purchased by wire or by
check through securities dealers located in Investment Centre Networks ("ICN
Centres") which are located in the offices of Premier Bank, N.A., among other
places, and through certain authorized dealers. Shares of the One Group Funds
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<PAGE>
may be purchased directly from their distributor, the One Group Services Company
(the "Distributor") by mail, telephone or wire. One Group shares also may be
purchased through a financial institution, such as a bank or savings and loan
association or insurance company.
Purchases and redemptions of shares of the Paragon Funds and the One Group
Funds may be made on any day that the New York Stock Exchange is open for
trading ("Business Days"). The minimum initial and subsequent investments in the
One Group Funds are $1,000 and $100, respectively ($100 and $25, respectively,
for employees of BANC ONE CORPORATION and its affiliates). Initial and
subsequent investment minimums may be waived at the Distributor's discretion.
Investors may purchase up to a maximum of $250,000 of Class B shares per
individual purchase order. The minimum initial and subsequent investment in the
Paragon Funds are $250 and $50, respectively. The minimums may be waived at the
discretion of Paragon Portfolio's officers.
The One Group Funds offer four classes of shares: Class A, Class B,
Fiduciary Class and Service Class. Class A and Class B shares are offered to the
general public. Fiduciary Class shares are offered to institutional investors,
including affiliates of BANC ONE CORPORATION and any bank, depository
institution, insurance company, pension plan or other organization authorized to
act in fiduciary, advisory, agency, custodial or similar capacities. Service
Class shares are offered to entities purchasing such shares on behalf of
investors requiring additional administrative and/or accounting services, such
as sweep processing. For further information, see "How to Invest in The One
Group" and "Alternative Sales Arrangements" in the One Group Prospectuses
accompanying this Combined Prospectus/ Proxy Statement.
The Paragon Funds offer two classes of shares: Class A and Class B. Class A
and Class B shares are offered to the general public. Class A shares also are
held by Premier Bank, N.A. as fiduciary for its customers. Investors purchasing
shares of Paragon Money Market are generally required to purchase Class A
shares. Class B shares of Paragon Money Market will be typically issued only
upon an exchange of Class B shares of any of the other Paragon Funds. For
further information, see "Alternative Purchase Agreements" in the Paragon Funds
Prospectus accompanying this Combined Prospectus/Proxy Statement.
SALES CHARGE
The One Group Funds and the Paragon Funds have similar sales charge
structures. Both One Group Class A and Paragon Fund Class A shares, other than
One Group Money Market and Paragon Money Market, are subject to a 4.5% (3% for
One Group Limited Volatility) initial sales charge based on a percentage of the
offering price. One Group Class A shares, including One Group Money Market, also
are subject to a distribution and shareholder services fee ("12b-1 fee")
assessed pursuant to a distribution and shareholder services plan. The 12b-1 fee
is equal to .25% of average daily net assets. Absent a waiver, the 12b-1 fee
would be .35% of average daily net assets.
The One Group Services Company, in its role as Distributor, receives the
12b-1 fee from Class A shareholders for marketing and distribution. For this
fee, the Distributor provides comprehensive services, including: wholesaling and
telewholesaling, sales training, and strategic and tactical marketing support.
Shareholders benefit from such activities through asset growth, which could
ultimately enhance fund performance. Goldman, Sachs & Co., the Distributor for
Paragon Portfolio, currently does not provide these services.
Both Paragon Class B Shares and One Group Class B shares, other than One
Group Money Market Class B shares, are subject to a Contingent Deferred Sales
Charge ("CDSC") and a 12b-1 fee. One Group and Paragon shareholders redeeming
Class B shares prior to the sixth (fourth for One Group Limited Volatility)
anniversary of purchase are assessed a contingent deferred sales charge on an
amount equal to the lesser of the then current market value or the cost of the
shares being redeemed. The amount of the Contingent Deferred Sales Charge for
both the One Group and the
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Paragon Funds begins at 5% (3% for One Group Limited Volatility) and declines
over time. The One Group Class B shares are assessed a 12b-1 fee ranging from
.90% to 1.00% of average daily net assets. The Paragon Fund Class B shares are
assessed a 12b-1 fee equal to .75% of average daily net assets.
One Group Fiduciary Class shares are not subject to a sales charge at the
time of purchase or redemption, nor are they subject to a distribution and
shareholder services fee.
One Group Service Class shares are not subject to a sales charge at the time
of purchase or redemption, but are subject to a distribution and shareholder
services fee.
No sales charge will be imposed on any class of shares of the One Group
Funds distributed in the reorganization.
For additional information regarding sales charges for the One Group Funds
and the Paragon Funds see, "Fee Table" in this Combined Prospectus/Proxy
Statement.
EXCHANGE PRIVILEGES
Shareholders in the Paragon Funds and the One Group Funds enjoy different
exchange privileges.
One Group Fiduciary Class shareholders may exchange their shares for Class A
shares of that One Group Fund or for Class A or Fiduciary Class shares of
another fund of The One Group. The exchange of One Group Fiduciary Class shares
for One Group Class A shares may require the payment of a sales charge.
One Group Class A shareholders may exchange their shares for One Group
Fiduciary Class shares of that One Group Fund or for Fiduciary Class or Class A
shares of another Fund of The One Group, if the shareholder is eligible to
purchase such shares.
One Group Class B shareholders of a One Group Fund may exchange their shares
for Class B shares of any other fund of The One Group on the basis of the net
asset value of the exchanged Class B shares, without the payment of any CDSC
that might otherwise be due upon redemption of the outstanding Class B shares.
The newly acquired Class B shares will be subject to the higher CDSC of either
the Fund from which the shares were exchanged or the Fund into which the shares
were exchanged.
One Group Service Class shareholders may not exchange their Service Class
shares for shares of any other class, nor may shares of any other class be
exchanged for Service Class shares.
Shareholders in the One Group Funds are not assessed an exchange fee.
Shares of the Paragon Funds may be exchanged only for shares of the same
class of another Paragon Fund. No sales charge is imposed on exchanges except
that the applicable initial sales charge may be imposed on exchanges of Class A
shares of Paragon Money Market not previously acquired by exchange from one of
the other Paragon Funds. An exchange of Paragon Fund Class B shares will not be
subject to the applicable CDSC at the time of the exchange. However, Class B
shares acquired in an exchange will be subject to the CDSC of the shares
originally held. The Paragon Funds permit five free exchanges in each twelve
month period. Shareholders making additional exchanges may incur a $5.00
exchange fee.
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For further information on exchange privileges, see "Exchanges" in the One
Group Funds and Paragon Funds Prospectuses accompanying this Combined
Prospectus/Proxy Statement.
AUTOMATIC CONVERSION
One Group Class B shares automatically convert to Class A shares eight years
(six years for One Group Limited Volatility) after the shares were purchased,
and are then subject to the lower 12b-1 fees charged to Class A shares. Such
conversion will be on the basis of the relative net asset values of the two
classes, without the imposition of any sales charge, fee or other charge.
Paragon Fund Class B shares automatically convert to Class A shares seven years
after their initial purchase. Like One Group conversions, the Paragon Fund
conversions are on the basis of the relative net asset values of the two
classes. See "Conversion Feature" in the One Group Prospectuses and "Class B
Shares" in the Paragon Funds Prospectus accompanying this Combined
Prospectus/Proxy Statement.
REDEMPTION PROCEDURES
Both the Paragon Funds and the One Group Funds permit shareholders to redeem
their shares without charge (except for the CDSC assessed Class B shares, as
described above under "Sales Charge") on any Business Day; shares may ordinarily
be redeemed by mail, telephone or wire. All redemption orders are effected at
the net asset value per share next determined for One Group and Paragon Class A
shares and One Group Fiduciary Class shares, and at net asset value per share
next determined reduced by any applicable CDSC for Paragon and One Group Class B
shares, after receipt of a valid request for redemption. Payment to One Group
shareholders for shares redeemed are made within seven days after receipt by the
One Group Transfer Agent of the request for redemption. The Paragon Funds
normally will mail redemption proceeds to shareholders on the next Business Day
following the redemption request, provided such redemption request is received
by 3:00 p.m. Louisiana time. For additional information on redemption
procedures, see "Redemptions" in the One Group Prospectuses and "Redemption of
Shares" in the Paragon Funds Prospectus, both accompanying this Combined
Prospectus/Proxy Statement.
DISTRIBUTIONS
On the last Business Day of each month, One Group Equity, One Group Growth
and One Group Gulf South declare substantially all net investment income
(exclusive of capital gains) as a dividend for shareholders of record as of the
close of business on that day. Net investment income is distributed in the form
of periodic dividends to shareholders of record of each Fund on the first
business day of each month. Currently, capital gains, if any, will be
distributed at least annually. Shareholders of the One Group Equity, One Group
Growth, and One Group Gulf South automatically receive all income dividends and
capital gain distributions in additional Class A, Class B and Fiduciary Class
shares, as applicable, at the net asset value next determined following the
record date, unless the shareholder has elected to take such payment in cash.
For further information, see "Dividends" in the One Group Equity, One Group
Growth and One Group Gulf South Prospectuses accompanying this Combined
Prospectus/Proxy Statement.
Substantially all of the net investment income (exclusive of capital gains)
of One Group Money Market is determined and declared on each Business Day as a
dividend for shareholders of record as of the close of business on that day and
is distributed in the form of periodic dividends to such shareholders of One
Group Money Market on the first Business Day of each month. Any capital gains
will be distributed at least annually. Shareholders automatically receive all
income dividends and capital gain distributions in additional Class A, Service
Class or Fiduciary Class shares, as applicable, at the net asset value next
determined following the record date, unless the shareholder has elected to take
such payment in cash. Reinvested dividends and distributions receive the same
tax treatment as dividends and distributions paid in cash.
For One Group Limited Volatility, One Group Bond and One Group Louisiana,
net investment income (exclusive of capital gains) is determined and declared
daily, and is distributed in the form of periodic dividends to shareholders of
One Group Limited Liability, One Group Bond and One Group Louisiana on the first
Business Day of each month. Capital gains of the Fund, if any, will be
distributed
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at least annually. To maintain a relatively even rate of distributions from
these Funds rather than having substantial fluctuations from period to period,
the monthly distributions level from the One Group Limited Liability, One Group
Bond and One Group Louisiana may be fixed from time to time at rates consistent
with the Adviser's long-term earnings expectations. Shareholders automatically
receive all income dividends and capital gain distributions in additional Class
A, Class B, or Fiduciary Class shares, as applicable, at the net asset value
next determined following the record date, unless the shareholder has elected to
take such payment in cash. Reinvested dividends and distributions receive the
same tax treatment as dividends and distributions paid in cash.
Each of Paragon Money Market, Paragon Government, Paragon Bond and Paragon
Louisiana declares a dividend of its net investment income daily and distribute
such dividend on or about the last calendar day of the month. All or
substantially all long-term and short-term capital gains in excess of available
capital losses, if any, of Paragon Government, Paragon Bond and Paragon
Louisiana are distributed at least annually.
Net short-term capital gains, if any, of the Paragon Money Market are
distributed in accordance with the requirements of the Code, as amended, and may
be reflected in this Fund's daily distributions. Each of Paragon Growth and
Paragon Equity typically declares and distributes a dividend of net investment
income on or about the last calendar day of every month and distributes all
long-term and short-term capital gains in excess of available capital losses, if
any, at least annually. Paragon Gulf South typically declares and distributes a
dividend of its net investment income semi-annually and distributes all
long-term and short-term capital gains in excess of available capital losses, if
any, at least annually.
A shareholder in a Paragon Fund may elect to have dividends, capital gains
distributions or both either paid in cash or reinvested in shares of the same
class of that Fund or one of the other Paragon Funds, as described under
"Purchase of Shares -- Cross-Reinvestment of Dividends and Distributions" in the
Paragon Fund prospectus accompanying this Combined Prospectus/Proxy Statement.
Such reinvestments will be made at the net asset value per share and will not be
subject to any initial or contingent deferred sales charge.
NET ASSET VALUE
The net asset value of shares of One Group Limited Volatility, One Group
Bond, One Group Equity, One Group Louisiana, One Group Growth, One Group Gulf
South, Paragon Government, Paragon Bond, Paragon Equity, Paragon Louisiana,
Paragon Growth and Paragon Gulf South is determined as of 4:00 p.m., Eastern
time, on the days that the New York Stock Exchange is open for trading. The net
asset value of One Group Money Market is determined daily at 2:00 p.m. and 4:00
p.m., Eastern time on the days that the New York Stock Exchange is open for
trading. The net asset value of Paragon Money Market is determined daily at 4:00
p.m., Eastern time, and immediately after the determination of net investment
income earned by shareholders of record at 4:00 p.m. Eastern time, on each
Business Day.
Both Paragon Money Market and One Group Money Market value securities based
on the amortized cost method of valuation pursuant to Rule 2a-7 under the
Investment Company Act of 1940.
One Group Limited Volatility, One Group Bond, One Group Equity, One Group
Louisiana, One Group Growth, and One Group Gulf South value securities, the
principal market for which is a securities exchange, at their market values
based upon the latest available sales price, or absent such a price, by
reference to the latest available bid and asked prices in the principal market
in which such securities are traded. Securities the principal market for which
is not a securities exchange are valued at the mean of their latest bid and ask
quotations in such principal market. The Funds value securities and other assets
for which quotations are not readily available at their fair value as determined
in good faith under consistently applied procedures established by and under the
general supervision of the One Group Trustees. The Funds value short-term
securities at either amortized cost or original
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cost plus accrued interest, which approximates current value. The value of a
foreign security is determined in its national currency as of the close of
trading on the foreign exchange or other principal market on which it is traded,
which value is then converted into its U.S. dollar equivalent at the foreign
exchange closing mid-market rate reported in the FINANCIAL TIMES as the closing
rate for that date. When an occurrence subsequent to the time a value of a
foreign security was so established is likely to have changed the value, then
the fair value of those securities will be determined by consideration of other
factors by or under the direction of the Trustees of The One Group or their
delegates.
The Paragon Funds value securities in a substantially similar but slightly
different manner. Portfolio securities of Paragon Government, Paragon Bond,
Paragon Equity, Paragon Louisiana, Paragon Growth and Paragon Gulf South are
valued as follows: (a) stocks which are traded on any U.S. stock exchange or the
Nasdaq National Market ("NASDAQ") are valued at the last sale price on the
principal exchange on which they are traded on NASDAQ (if NASDAQ is the
principal market for such securities) on the valuation day or, if no sale
occurs, at the mean between the closing bid and closing asked price; (b)
over-the-counter stocks not quoted on NASDAQ are valued at the last sale price
on the valuation day or, if no sale occurs, at the mean between the last bid and
asked price; (c) securities listed or traded on foreign exchanges (including
foreign exchanges whose operations are similar to the U.S. over-the-counter
market) are valued at the last sale price on the exchange where they are
principally traded on the valuation day or, if no sale occurs, at the official
bid price (both the last sale price and the official bid price are determined as
of the close of the London Foreign Exchange); (d) debt securities are valued at
prices supplied by a pricing agent selected by the Paragon Portfolio's Trustees,
which prices reflect broker/dealer-supplied valuations and electronic data
processing techniques, if those prices are deemed to be representative of market
values at the close of business of the New York Stock Exchange; (e) options
contracts are valued at the last sale price on the market where any such options
contract is principally traded; and (f) all other securities and other assets,
including debt securities, for which prices are supplied by a pricing agent but
are not deemed by the relevant Adviser to be representative of market values,
but excluding money market instruments with a remaining maturity of sixty days
or less and including restricted securities and securities for which no market
quotation is available, are valued at fair value under procedures established by
the Trustees or the Valuation Committee, if any, although the actual calculation
may be done by others. Portfolio securities traded on more than one United
States national securities exchange or foreign securities exchange are valued at
the last sale price on each Business Day at the close of the exchange
representing the principal market for such securities.
TAX CONSIDERATIONS
Consummation of this transaction is subject to the condition that the One
Group Funds and the Paragon Funds receive an opinion of Ropes & Gray, counsel to
The One Group, to the effect that the transaction will not result in the
recognition of gain or loss for Federal income tax purposes by the Funds under
Sections 361 and 1032 of the Internal Revenue Code of 1986, as amended, (the
"Code") or their respective shareholders under Section 354 of the Code.
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RISK FACTORS
Because of the similarities in investment objectives and policies, the
Paragon Funds and the One Group Funds (for purposes of this discussion only,
collectively the "Funds") are subject to substantially similar investment risk
factors.
For One Group Equity, One Group Growth, One Group Gulf South, Paragon
Equity, Paragon Growth, and Paragon Gulf South, changes in the value of
portfolio securities will not affect cash income, if any, derived from those
securities but will affect the Funds' net asset value. Because the Funds invest
primarily in equity securities, which fluctuate in value, the Funds' shares will
fluctuate in value.
Certain investment management techniques that the Funds may use, such as the
purchase and sale of futures, options and forward commitments, could expose the
Funds to potentially greater risk of loss than more traditional equity
investments. Futures contracts may be closed out only on an exchange which
provides a secondary market for such futures. However, there can be no assurance
that a liquid secondary market will exist for any particular futures contract at
any specific time. Thus, it may not be possible to close a futures position. In
the event of adverse price movements, the Funds would be required to make daily
cash payments to maintain the required margin. In such situations, if the Funds
have insufficient cash, they may have to sell portfolio securities to meet daily
margin requirements at a time when it may be disadvantageous to do so. In
addition, the Funds may be required to make delivery of the instruments
underlying futures contracts that they hold. The One Group Funds will enter into
futures contracts only for bona fide hedging purposes and will not enter into
futures contracts to the extent that the value of the futures contracts held
would exceed 25% of the respective One Group Fund's total assets.
The risk associated with options transactions is that the Adviser may
incorrectly predict movements in the prices of individual securities,
fluctuations in markets, and movements in interest rates. In addition, there may
be imperfect correlation, or no correlation, between the changes in market value
of the securities held by the Funds and the price of options. Further, there may
not be a liquid secondary market for the options. Finally, while the Funds will
receive a premium when they write covered call options, they may not participate
fully in a rise in the market value of the underlying security. Each One Group
Fund will limit the writing of call and put options to 25% of its total assets.
The purchase of securities on a when-issued or forward commitment basis
involves a risk of loss if the value of the security to be purchased declines
prior to settlement. In addition, the Funds bear the risk that a seller may not
consummate the trade, resulting in the Funds incurring a loss or missing the
opportunity to obtain an advantageous price. Commitments to purchase when-issued
securities will not, under normal market conditions, exceed 25% of any Funds'
total assets, and a commitment will not exceed 90 days.
The Funds may enter into repurchase agreements and the One Group Funds may
enter into reverse repurchase agreements. With a reverse repurchase agreement,
the One Group Funds bear the risk that the market value of the securities sold
by the Fund may decline below the price at which the Fund is obligated to
repurchase the securities. With a repurchase agreement, the Funds bear the risk
of loss in the event that the other party defaults on its obligations and the
Funds are either delayed or prevented from disposing of the collateral
securities, or the Funds realize a loss on the sale of the collateral
securities. The Funds will enter into repurchase agreements only with financial
institutions deemed to present a minimal risk of bankruptcy during the term of
the agreement.
As stated above, the Funds may purchase U.S. government agency securities.
Obligations of certain agencies and instrumentalities of the U.S. government are
supported by the full faith and credit of the U.S. Treasury. Other obligations
are supported by (l) the right of the issuer to borrow from the Treasury; (2)
the discretionary authority of the U.S. government to purchase the agency's
obligations; and (3) the credit of the instrumentality. No assurance can be
given that the U.S.
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government will provide financial support to U.S. government-sponsored agencies
or instrumentalities if it is not obligated to do so by law. The Funds will
invest in the obligations of such agencies or instrumentalities only when the
Adviser believes that the credit risk is minimal.
The One Group Funds may invest in separately traded interest and principal
components of U.S. Treasury obligations known as STRIPS, CUBES, TIGRS, TRS, and
CATS. The Paragon Funds may invest in STRIPS, TIGRS, and CATS. These instruments
are sold as zero coupon securities, which means that they are sold at a
substantial discount and redeemed at face value at their maturity date without
interim cash payments of principal and interest. Consequently, these securities
may be subject to greater interest rate volatility than interest-paying U.S.
Treasury obligations. The One Group Funds not may invest more than 20% of their
total assets in STRIPES, CUBES, TIGRS, TRS, and CATS.
In order to generate additional income, the Funds may lend up to 33% of the
securities held in their portfolios. The loans will be collateralized to at
least 100% of market value plus accrued interest on the securities lent. These
loans carry the risk of delay in recovery of the securities or even loss of
rights in the collateral should the borrower of the securities fail financially.
Investments in variable and floating rate instruments present the risk that
current interest rates on such obligations may not accurately reflect existing
market rates. The One Group Funds will not invest more than 15% of their total
assets (10% for One Group Money Market) in variable and floating rate
instruments for which no readily available market exists.
Investments in securities of foreign issuers may involve greater risks than
are present in U.S. investments. In general, issuers in many foreign countries
are not subject to accounting, auditing and financial reporting standards,
practices and requirements comparable to those applicable to U.S. companies.
There is generally less information publicly available about, and less
regulation of, foreign issuers than U.S. companies. Transaction costs are
generally higher for investments in foreign issuers. Securities of some foreign
companies are less liquid, and their prices are more volatile, than securities
of comparable U.S. companies. Settlement of transactions in some foreign markets
may be delayed or may be less frequent than in the United States, which could
adversely affect the liquidity of the Funds. In addition, with respect to some
foreign countries, there are the possibilities of expropriation or confiscatory
taxation; the imposition of additional taxes or tax withholding; limitations on
the removal of securities, property or other assets of the Funds; political or
social instability, and diplomatic developments, which could affect the value of
investments in those countries. Investments in all types of foreign obligations
or securities will not exceed 25% of the net assets of the One Group Funds.
Because Paragon Gulf South, One Group Gulf South, and One Group Louisiana
are non-diversified, their share price may be subject to greater fluctuations as
a result of changes in an issuer's financial condition or the market's
assessment of an individual issuer. In addition, Paragon Gulf South and One
Group Gulf South invest in emerging growth companies. Investing in emerging
growth companies involves greater risk than is customarily associated with
investments in more established companies. Emerging growth companies often have
limited product lines, markets, or financial resources, and they may be
dependent on fewer management resources. The securities of emerging growth
companies may have limited marketability and may be subject to more abrupt or
erratic market movements than securities of larger, more established growth
companies or the market averages in general. Shares of Paragon Gulf South and
One Group Gulf South, therefore, are subject to greater fluctuation in value
than shares of a growth fund which invests entirely in proven growth stocks.
Paragon Gulf South and One Group Gulf South are intended for investors who can
bear the risk of losing a portion or all of their investment.
One Group Louisiana and Paragon Louisiana invest in securities issued by the
State of Louisiana and its political subdivision and instrumentalities.
Louisiana's general obligation bonds are currently rated Baa1 by Moody's and A
by S&P. S&P upgraded Louisiana from BBB+ in December 1990. Both S&P and Moody's
affirmed their ratings for the State in March, 1995. Louisiana's ratings reflect
an ongoing recovery process from the severe financial problems which developed
after oil prices declined
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in the mid-to-late 1980s. Also, both rating agencies have commended the State
for enacting constitutional reforms in the fall of 1993 that curb borrowing and
require that non-recurring revenues be applied to debt reduction. However,
Louisiana remains one of the weakest states in terms of its credit fundamentals.
While ratings of individual cities, parishes, agencies and special districts
vary, most Louisiana issuers have been affected to some degree by Louisiana's
economy.
It should be noted that the General Fund of the State of Louisiana could be
impacted by certain pending Medicaid issues. Currently, Louisiana is eligible to
receive up to $1.27 billion in Medicaid disproportionate share payments for
hospitals. In the past, Louisiana has used a portion of the amounts paid to the
public hospitals in the State to return to the Medicaid program to help finance
this health care. The 1993 amendments to the Federal disproportionate share law
severely restrict the State's ability to continue to help finance health care in
this manner. It is estimated that a total of approximately $940 million in
disproportionate share funding will be paid out in State fiscal year 1995,
compared to the total capped amount available to Louisiana of $1.271 billion.
Thus, the 1993 amendments reduced Louisiana's disproportionate share funding by
over $300 million. In fiscal year 1996, the estimated loss of disproportionate
share funding is over $270 million.
The Health Care Financing Administration ("HCFA") has recently notified
Louisiana that it has questions concerning the provider fee legislation enacted
in 1993. If HCFA disallows the provider fee, there could be a negative $112
million effect as of June 30, 1994. The State is expected to aggressively object
to any disallowance by HCFA.
Economically, Louisiana will continue to be affected by world energy
markets. Approximately 15% of the nation's crude oil and approximately 28% of
its natural gas are produced in Louisiana. In the past the state has estimated
that up to 25% of its economy is directly or indirectly related to energy. This
is despite the fact that only 5.5% of employment is in oil and gas extraction,
chemicals and allied products and petroleum refining. Oil and oil related jobs
also tend to be at relatively high wages, magnifying their economic effect.
Similarly, although severance taxes and royalties accounted for almost 4.3% of
operating revenues for fiscal year 1993-1994, compared with almost 25% ten years
ago, energy related activity affects individual and corporate taxes, which
together with sales taxes account for 21.3% of general revenues. Unemployment
declined in Louisiana from 12% in 1987 to 6.2% in 1990. This was due in part to
increased employment but also to out-migration of population and a decline in
labor force. Louisiana's jobless rate has since risen to 7.4% as of December 31,
1994. The comparable national unemployment rate was 6.8%. In addition to oil and
gas, major contributors to Louisiana's economy include chemical production,
shipping, agriculture and tourism.
Louisiana's debt burden is well above that of other states, while wealth and
income indicators are below the national average. In 1993, for example, the most
recent year for which data is available, Louisiana's per capita personal income
was 80% of the United States average. According to Moody's, Louisiana's
state-level tax supported debt is the sixth highest in the nation as a
percentage of property value, sixth highest as a percentage of personal income
and eighth highest on a per-capita basis.
Municipal obligations are subject to the provisions of bankruptcy,
insolvency and other laws affecting the rights and remedies of creditors, such
as the Federal Bankruptcy Code, and laws, if any, which may be enacted by
Congress or state legislatures extending the time for payment of principal or
interest, or both, or imposing other constraints upon enforcement of such
obligations or upon municipalities to levy taxes. There is also the possibility
that as a result of litigation or other conditions the power or ability of any
one or more issuers to pay when due principal or interest on its or their
municipal obligations may be materially affected.
There are a number of important differences among the agencies and
instrumentalities of the U.S. government that issue mortgage-related securities
and among the securities that they issue. Mortgage-related securities issued by
the Government National Mortgage Association ("Ginnie Mae") include Ginnie Mae
Mortgage Pass-Through Certificates which are guaranteed as to the timely payment
of principal and interest by Ginnie Mae and such guarantee is backed by the full
faith and credit of the United States. Ginnie Mae is a wholly-owned U.S.
government corporation within the
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Department of Housing and Urban Development. Ginnie Mae certificates also are
supported by the authority of Ginnie Mae to borrow funds from the U.S. Treasury
to make payments under its guarantee. Mortgage-related securities issued by the
Federal National Mortgage Association ("Fannie Mae") include Fannie Mae
Guaranteed Mortgage Pass-Through Certificates which are solely the obligations
of Fannie Mae and are not backed by or entitled to the full faith and credit of
the United States. Fannie Mae is a government-sponsored organization owned
entirely by private stock-holders. Fannie Mae Certificates are guaranteed as to
timely payment of the principal and interest by Fannie Mae. Mortgage-related
securities issued by the Federal Home Loan Mortgage Corporation ("Freddie Mac")
include Freddie Mac Mortgage Participation Certificates. Freddie Mac is a
corporate instrumentality of the United States, created pursuant to an Act of
Congress, which is owned entirely by Federal Home Loan Banks. Freddie Mac
Certificates are not guaranteed by the United States or by any Federal Home Loan
Banks and do not constitute a debt or obligation of the United States or of any
Federal Home Loan Bank. Freddie Mac Certificates entitle the holder to timely
payment of interest, which is guaranteed by Freddie Mac. Freddie Mac guarantees
either ultimate collection or timely payment of all principal payments on the
underlying mortgage loans. When Freddie Mac does not guarantee timely of
principal, Freddie Mac may remit the amount due on account of its guarantee of
ultimate payment of principal at any time after default on an underlying
mortgage, but in no event later than one year after it becomes payable.
An issuer's obligations under its municipal securities are subject to the
provisions of bankruptcy, insolvency, and other laws affecting the rights and
remedies of creditors, such as the federal bankruptcy code, and laws, if any,
which may be enacted by Congress or state legislatures extending the time for
payment of principal or interest, or both, or imposing other constraints upon
the enforcement of such obligations. The power or ability of an issuer to meet
its obligations for the payment of interest on and principal of its municipal
securities may be materially adversely affected by litigation or other
conditions. Such litigation or conditions may from time to time have the effect
of introducing uncertainties in the market for tax-exempt obligations or certain
segments thereof, or may materially affect the credit risk with respect to
particular bonds or notes. Adverse economic, business, legal or political
developments might affect all or a substantial portion of a Fund's municipal
securities in the same manner. From time to time, proposals have been introduced
before Congress for the purpose of restricting or eliminating the Federal income
tax exemption for interest on tax exempt bonds, and similar proposals may be
introduced in the future. A recent decision of the United States Supreme Court
has held that Congress has the constitutional authority to enact such
legislation. It is not possible to determine what effect the adoption of such
proposals could have on (i) the availability of municipal securities for
investment by the Funds, and (ii) the value of the investment portfolios of the
Funds. In addition, the Code imposes certain continuing requirements on issuers
of tax-exempt bonds regarding the use, expenditure and investment of Bond
proceeds and the payment of rebates to the United States of America. Failure by
the issuer to comply subsequent to the issuance of tax-exempt bonds with certain
of these requirements could cause interest on the bonds to become includable in
gross income retroactive to the date of issuance.
Because swap contracts are individually negotiated, they remain the
obligation of the respective counterparties, and there is a risk that a
counterparty will be unable to meet its obligations under a particular swap
contract. If a counterparty defaults on a swap contract with a Fund, the Fund
may suffer a loss. To address this risk, each Fund will usually enter into
interest rate swaps on a net basis, which means that the two payment streams
(one from the Fund to the counterparty, one to the Fund from the counterparty)
are netted out, with the Fund receiving or paying, as the case may be, only the
net amount of the two payments. Interest rate swaps do not involve the delivery
of securities, other underlying assets, or principal, except for the purposes of
collateralization as discussed below. Accordingly, the risk of loss with respect
to interest rate swaps entered into on a net basis would be limited to the net
amount of the interest payments that the Fund is contractually obligated to
make. If the other party to an interest rate swap defaults, the Fund's risk of
loss consists of the net amount of interest payments that a Fund is
contractually entitled to receive. To protect against losses related to
counterparty default, the Funds may enter into swaps that require transfers of
collateral for changes
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in market value. In contrast, currency swaps and other types of swaps may
involve the delivery of the entire principal value of one designated currency or
financial instrument in exchange for the other designated currency or financial
instrument. Therefore, the entire principal value of such swaps may be subject
to the risk that the other party will default on its contractual delivery
obligations.
In addition, because swap contracts are individually negotiated and
ordinarily non-transferable, there also may be circumstances in which it would
be impossible for a Fund to close out its obligations under the swap contract
prior to its maturity. Under such circumstances, the Fund might be able to
negotiate another swap contract with a different counterparty to offset the risk
associated with the first swap contract. Unless the Fund is able to negotiate
such an offsetting swap contract, however, the Fund could be subject to
continued adverse developments, even after the Adviser has determined that it
would be prudent to close out or offset the first swap contract.
Caps and floors are variations on swaps. The purchase of a cap entitles the
purchaser to receive a principal amount from the party selling the cap to the
extent that a specified index exceeds a predetermined interest rate or amount.
The purchase of an interest rate floor entitles the purchaser to receive
payments on a notional principal amount from the party selling the floor to the
extent that a specified index falls below a predetermined interest rate or
amount. Caps and floors are similar in many respects to over-the-counter options
transactions, and may involve investment risks that are similar to those
associated with options transactions and options on futures contracts.
While structured instruments may offer the potential for a favorable rate of
return from time to time, they also entail certain risks. Structured instruments
may be less liquid than other debt securities, and the price of structured
instruments may be more volatile. If the value of the reference index changes in
a manner other than that expected by the Adviser, principal and/or interest
payments on the structured instrument may be substantially less than expected.
The One Group Funds will invest only in structured securities that are
consistent with each Fund's investment objective, policies and restrictions and
the Adviser's outlook on market conditions. In some cases, depending on the
terms of the reference index, a structured instrument may provide that the
principal and/or interest payments may be adjusted below zero; however, the
Funds will not invest in structured instruments if the terms of the structured
instrument provide that the Funds may be obligated to pay more than their
initial investment in the structured instrument, or to repay any interest or
principal that has already been collected or paid back. Structured instruments
that are registered under the Federal securities laws may be treated as liquid.
In addition, many structured instruments may not be registered under the federal
securities laws. In that event, a Fund's ability to resell such a structured
instrument may be more limited than its ability to resell other Fund securities.
The Funds will treat such instruments as illiquid, and will limit their
investments in such instruments to no more than 15% of each Fund's net assets,
when combined with all other illiquid investments of each Fund. In addition,
although structured instruments may be sold in the form of a corporate debt
obligation, they may not have some of the protection against counterparty
default that may be available with respect to publicly traded debt securities
(i.e., the existence of a trust indenture). In that respect, the risks of
default associated with structured instruments may be similar to those
associated with swap contracts.
New options and futures contracts and other financial products continue to
be developed for the One Group Funds. These various products may be used to
adjust the risk and return characteristics of each Fund's investments. These
various products may increase or decrease exposure to security prices, interest
rates, commodity prices, or other factors that affect security values,
regardless of the issuer's credit risk. If market conditions do not perform
consistent with expectations, the performance of each Fund would be less
favorable than it would have been if these products were not used. In addition,
losses may occur if counterparties involved in transactions do not perform as
promised. These products may expose the Fund to potentially greater return as
well as potentially greater risk of loss than more traditional fixed income
investments.
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As with other extensions of credit there are risks in lending portfolio
securities of delay in recovering or even loss of rights in the collateral
should the borrower of the securities fail financially. However, the loans would
be made only to firms deemed by the Adviser to be of good standing, and when, in
the judgment of the Adviser, the consideration which can be earned currently
form securities loans of this type justifies the attendant risk. If the Adviser
determines to make securities loans, it is intended that the value of the
securities loaned would not exceed 33 1/3% of the value of the total assets of
the lending Fund.
The purchase price and subsequent valuation of restricted securities
normally reflect a discount from the price at which such securities trade when
they are not restricted, since the restriction makes them less liquid. The
amount of the discount from the prevailing market price is expected to vary
depending upon the type of security, the character of the issuer, the party who
will bear the expenses of registering the restricted securities and prevailing
supply and demand conditions.
The above discussion is qualified in its entirety by the disclosure in the
One Group Funds and Paragon Funds Prospectuses accompanying this Combined
Prospectus/Proxy Statement.
MANAGEMENT OF THE FUNDS
THE ADVISER
The One Group and Banc One Investment Advisors Corporation (the "Adviser")
have entered into an investment advisory agreement (the "Advisory Agreement").
Under the Advisory Agreement, the Adviser makes the investment decisions for the
assets of The One Group, including those of One Group Money Market, One Group
Limited Volatility, One Group Bond, One Group Equity, One Group Louisiana, One
Group Growth and One Group Gulf South, and continuously reviews, supervises and
administers The One Group's investment program. The Adviser discharges its
responsibilities subject to the supervision of, and policies established by, the
Board of Trustees of The One Group. The Adviser is an indirect, wholly-owned
subsidiary of BANC ONE CORPORATION, a bank holding company incorporated in the
State of Ohio.
Paragon Portfolio and the Adviser also have entered into an investment
advisory agreement (the "Advisory Agreement"). Under the Advisory Agreement, the
Adviser makes the investment decisions for the assets of Paragon Portfolio,
including those of Paragon Money Market, Paragon Government, Paragon Bond,
Paragon Equity, Paragon Louisiana, Paragon Growth and Paragon Gulf South, and
continuously reviews, supervises and administers Paragon's investment program.
The Adviser discharges its responsibilities subject to the supervision of, and
policies established by, the Board of Trustees of Paragon Portfolio.
Goldman Sachs Asset Management ("GSAM") currently serves as Sub-Adviser to
Paragon Money Market pursuant to a Sub-Advisory Agreement ("Agreement") between
the Adviser and GSAM. The Agreement terminates in May, 1996 and will not be
renewed.
Richard R. Jandrain, III, Senior Managing Director of Equity Securities, is
responsible for the development and implementation of the equity investment
policies for The One Group, including One Group Equity, One Group Growth and One
Group Gulf South. Mr. Jandrain also serves as Co-Manager of One Group Gulf
South. Mr. Jandrain has over 18 years of investment experience and has served in
various investment management positions with the Adviser and its affiliates for
the past five years.
R. Lynn Yturri is the Manager of One Group Equity, having served in that
position since July 1993. Mr. Yturri also is Manager of The One Group Large
Company Growth Fund, having served in that position since the Fund commenced
operations in January, 1994 as the successor fund to the Sun Eagle Equity Growth
Fund, which was acquired by The One Group. Prior to January, 1994, Mr. Yturri
served as the Director of Portfolio Management at Banc One Investment Advisors
Corporation in Arizona. Mr. Yturri also served as Manager of Trust Investments
at The Valley National Bank
42
<PAGE>
of Arizona before the bank was acquired by BANC ONE CORPORATION in 1993 and as
Portfolio Manager of the predecessor funds to One Group Equity since 1981.
Following the reorganization, Mr. Yturri will continue to manage One Group
Equity.
Michael D. Weiner has served as Manager of One Group Growth since its
inception in February, 1996. Mr. Weiner has served as Director of Equity
Research with the Adviser since June 1994. Prior to joining the Adviser, Mr.
Weiner served as Director of Research and Head of U.S. Equities for the Dupont
Pension Fund Investment Company of Wilmington, Delaware from 1986 to 1994.
Donald E. Allred serves as Co-Manager of One Group Gulf South. Mr. Allred
joined the Adviser in January, 1996 when BANC ONE CORPORATION acquired Premier
Bancorp, Premier's parent. Prior to joining the Adviser, Mr. Allred served as
Chief Investment Officer for Premier since 1985. In addition, Mr. Allred was
manager of Premier Bank's Value Growth and Gulf South strategies at the tme of
conversion to the Paragon Value Growth Fund and Paragon Gulf South Growth Fund.
Gary J. Madich, Senior Managing Director of Fixed Income Securities, is
responsible for the development and implementation of the fixed income policies
for The One Group, including One Group Money Market, One Group Bond, One Group
Limited Volatility, and One Group Louisiana. Mr. Madich joined the Adviser in
February 1995. Prior to joining the Adviser, Mr. Madich was a Senior Vice
President and Portfolio Manager with Federated Investors. Mr. Madich has
seventeen years of investment management experience.
James Sexton has been Manager of One Group Limited Volatility since March
1995. In addition, Mr. Sexton has managed The One Group Intermediate Bond Fund
since its inception in January 1994. Mr. Sexton has been employed by the Adviser
and its affiliates since 1980.
Thomas E. Donne has been Manager of One Group Bond since January 1995. Mr.
Donne has held various investment management positions with the Adviser or its
affiliates for the past seven years.
All investment decisions with respect to One Group Money Market and One
Group Louisiana are made by a committee, and no one person is primarily
responsible for making recommendations to that committee.
THE DISTRIBUTOR AND ADMINISTRATOR
The One Group Services Company, Inc., a wholly-owned subsidiary of BISYS
Fund Services, Inc., (the "Distributor" and the "Administrator") currently
serves as the distributor and administrator of the One Group Funds. The
Distributor also serves as Distributor of The Paragon Funds, which are
administered by Goldman Sachs Asset Management. The Distributor and
Administrator will continue to serve in those capacities following the
reorganization. The Adviser serves and will continue to serve as
Sub-Administrator to each of the One Group Funds, and as of March 1, 1996 will
serve as Sub-Administrator to each of the Paragon Funds.
THE TRANSFER AGENT AND CUSTODIAN
State Street Bank and Trust Company currently acts as Custodian for the One
Group Funds and the Paragon Funds. The Custodian will not change as a result of
the reorganization. State Street Bank and Trust Company also serves as Transfer
Agent to the One Group Funds. The Transfer Agent for the Paragon Funds is
Goldman, Sachs & Co. Following the reorganization, State Street Bank & Trust
Company will remain as Transfer Agent.
COUNSEL AND INDEPENDENT ACCOUNTANTS
Ropes & Gray currently serves, and after the reorganization will continue to
serve, as counsel to the One Group Funds. Hale and Dorr currently serves as
counsel to the Paragon Funds. Coopers & Lybrand L.L.P. serves as the independent
accountants to the One Group Funds. Coopers & Lybrand L.L.P. will continue in
this capacity after the reorganization. Price Waterhouse LLP currently serves as
independent accountants to the Paragon Funds.
43
<PAGE>
MANAGEMENT DISCUSSION OF FUND PERFORMANCE
Below is a discussion by the management of The One Group and Paragon
Portfolio of Fund performance. This section does not include a discussion of the
performance of One Group Louisiana, One Group Growth and One Group Gulf South
because these Funds have not yet commenced operations.
ONE GROUP MONEY MARKET FUND
The following information was provided by The One Group Annual Report to
Shareholders ("Annual Report") for the period ended June 30, 1995. The
Management Discussion contained in the Annual Report in its entirety, is as
follows:
THE ONE GROUP U.S. TREASURY SECURITIES MONEY MARKET FUND
The seven-day yield on The One Group U.S. Treasury Securities Money Market
Fund Fiduciary share class was 5.62% on June 30, 1995, up from 3.69% on June 30,
1994.
As short-term interest rates rapidly increased during the last six months of
1994, the Fund's earning power increased, as reflected by its yield. Similarly,
as short-term interest rates decreased somewhat during the first six months of
1995, the Fund's yield has stabilized.
The Fund's focus on repurchase agreements coupled with selected longer-dated
maturities helped its performance throughout the one-year period. In
anticipation of the Federal Reserve's aggressive moves to tighten the Federal
Funds rate, the Treasury yield curve remained relatively steep during the final
six months of 1994 and into early 1995. Subsequently, yields on repurchase
agreements increased.
As we moved further into 1995, a slowing economy and expectations that the
Fed soon may ease its monetary policy caused the Treasury yield curve to
flatten. In this environment, there is little to no yield difference between
overnight securities and those with one-year maturities. Consequently, we
increased the Fund's holdings of overnight repurchase agreements, which have
offered the same yield as money market securities with longer maturities but
with less relative risk.
This strategy of focusing on repurchase agreements caused the Fund's average
maturity to decrease to 36 days, down from 49 days on June 30, 1994.
In the months ahead, we do not anticipate making any major changes to the
Fund until the economic outlook becomes clearer. Some signs point to a further
slowing of economic activity, while others point to a possible economic rebound
later in the year. The Fund's future strategy also will be influenced by the
politics surrounding the U.S. budget, ongoing trade disputes with Japan and
worldwide economic conditions.
Roger C. Hale, CFA, CFP
FUND MANAGER
Gary J. Madich, CFA
SENIOR MANAGING DIRECTOR OF FIXED-INCOME SECURITIES
<TABLE>
<CAPTION>
1-YEAR TOTAL RETURN 5-YEAR TOTAL RETURN AVERAGE ANNUAL
CLASS OF 7-DAY YIELD AT AT AT TOTAL RETURN SINCE
SHARES JUNE 30, 1995 JUNE 30, 1995 JUNE 30, 1995 INCEPTION
- -------------- --------------- --------------------- --------------------- -------------------
<S> <C> <C> <C> <C>
Fiduciary 5.62% 5.07% 4.39% 5.58%
Class A 5.37% 4.81% NA 3.37%
</TABLE>
44
<PAGE>
ONE GROUP LIMITED VOLATILITY FUND
The following information was provided by the Annual Report to Shareholders
for the period ended June 30, 1995. The Management Discussion contained in the
Annual Report in its entirety, is as follows:
THE ONE GROUP LIMITED VOLATILITY BOND FUND
For the fiscal year ended June 30, 1995, The One Group Limited Volatility
Bond Fund Fiduciary share class showed a solid total return of 7.96%). Interest
rates, as measured by the two-year U.S. Treasury note, fell by approximately
0.4% during the period. This resulted in a 20-cent gain in the Fund's net asset
value (NAV). (For information on other share classes, please see page 8.)
Despite the sizable decline in interest rates, the Fund's 30- day SEC yield
for the Fiduciary share class rose modestly from June 30, 1994, when it was
5.55%, to June 30, 1995, when it was 5.97%. The Fund's yield benefited from
allocations to investment-grade asset-backed and U.S. agency mortgage-backed
securities.
At 7.96%, the Fund's one-year total return performance compares favorably to
the 8.30% total return on the Lehman Brothers 1- to 3-Year Government index,
which consists of U.S. government and agency securities with maturities of one
to three years (see chart on page 8). The Fund was able to outperform the index
by diversifying into U.S. agency mortgage securities and investment-grade
asset-backed securities. In addition, the Fund's duration, at 2.17 years, is
slightly greater than the index's 1.7 years. (Duration is a measure of a fund's
sensitivity to interest rate changes; a lower number indicates less sensitivity,
a higher number indicates more sensitivity.) While interest rates showed a
steady increase during the last half of 1994 and into early 1995, they
experienced an overall decline during the entire one-year period from July 1,
1994, to June 30, 1995. As a result, investments with higher durations showed
relatively greater price appreciation than those with shorter durations.
During the year, the Fund's prospectus was changed, raising the minimum U.S.
government investment position from 50% to 65%. In practice, the Fund always
held a sizable position in these securities, so the change had little impact.
The Fund also holds up to 35% in investment-grade asset-backed and corporate
securities, and this diversification tends to enhance the Fund's overall return
while controlling risk.
The Fund's overall strategy during the period was to seek a high level of
interest income within the parameters of a short duration and a government- and
high-quality-corporate-bond framework. On June 30, 1995, the Fund was invested
in U.S. Treasury and agency securities (42.7% of portfolio), U.S. agency
mortgage securities (22.5%), corporate securities (17.0%), asset-backed
securities (14.2%) and U.S. government money market securities (3.5%). The
mortgage, corporate and asset-backed components were held to boost the Fund's
interest income. In addition, timely shifting between these sectors as well as
our core position in U.S. Treasury obligations helped to boost total return over
the period.
Within the Treasury component, the Fund held a small percentage of assets in
intermediate-maturity obligations. The overall decline in interest rates during
the period resulted in an approximately 5% price increase for some of these
holdings, in addition to the interest income they also earned. The Fund also
held select floating-rate, investment-grade corporate obligations that earned
high interest income, which helped overall Fund performance.
In the mortgage securities market, the decline in interest rates so far this
year has increased the prospect that mortgage-holders will prepay their existing
loans. Recently, this has caused mortgage-backed securities with the highest
interest rates to lag the market. We have viewed this as an opportunity to add
to the Fund's mortgage securities position, primarily in securities with
mid-level interest rates and relatively low prepayment risk.
45
<PAGE>
We do not expect to make any significant changes to the Fund's investment
policy or strategy over the near term. We will continue to rely on sector
diversification and security selection strategies in the Fund to strive to add
value for shareholders.
James A. Sexton, CFA,
FUND MANAGER
Gary J. Madich, CFA,
SENIOR MANAGING DIRECTOR OF FIXED-INCOME SECURITIES
46
<PAGE>
THE ONE GROUP LIMITED VOLATILITY BOND FUND
EDGAR REPRESENTATION OF DATA POINTS USED IN PRINTED GRAPHIC
<TABLE>
<CAPTION>
AVERAGE ANNUAL TOTAL RETURN AS OF JUNE 30,
1995
<S> <C> <C>
Since Inception
1 Year (9/4/90)
Fiduciary 7.96% 7.57%
Value of $10,000 Investment
Fiduciary Index
09/04/90 10,000 10,000
06/30/91 10,799 10,768
06/30/92 12,068 11,881
06/30/93 13,066 12,658
06/30/94 13,169 12,850
06/30/95 14,218 13,836
</TABLE>
EDGAR REPRESENTATION OF DATA POINTS USED IN PRINTED GRAPHIC
<TABLE>
<CAPTION>
AVERAGE ANNUAL TOTAL RETURN AS OF JUNE 30,
1995
<S> <C> <C> <C>
Since Inception
1 Year (2/18/92)
Class A 7.67% 5.84%
Class A* 4.43% 4.88%
*Reflects 3.00% Sales Charge
Value of $10,000 Investment
Class A Class A* Index
2/18/92 10,000 9,698 10000
6/30/92 10,356 10,043 10294
6/30/93 11,188 10,851 10967
6/30/94 11,243 10,904 11134
6/30/95 12,105 11,740 11988
</TABLE>
EDGAR REPRESENTATION OF DATA POINTS USED IN PRINTED GRAPHIC
<TABLE>
<CAPTION>
AVERAGE ANNUAL TOTAL RETURN AS OF JUNE 30,
1995
<S> <C> <C> <C>
Since Inception
1 Year (1/14/94)
Class B 7.18% 3.56%
Class B** 4.18% 1.56%
**Reflects Contingent Deferred Sales Charge
Value of $10,000 Investment
Class B Class B** Index
1/14/94 10,000 9,600 10,000
6/30/94 9,819 9,433 9,951
6/30/95 10,524 10,229 10,715
</TABLE>
47
<PAGE>
ONE GROUP BOND FUND
The following information was provided by the Annual Report to Shareholders
for the period ended June 30, 1995. The Management Discussion contained in the
Annual Report in its entirety, is as follows:
THE ONE GROUP GOVERNMENT BOND FUND
The One Group Government Bond Fund Fiduciary share class showed a total
return of 12.04% for the one-year period ended June 30, 1995. (For information
on other share classes, please see page 12.)
Despite the overall decline in interest rates during the period, the Fund's
30-day SEC yield remained relatively stable from June 30, 1994, when it was
6.48%, to June 30, 1995, when it was 6.23%.
On a total return basis, the Fiduciary share class of the Fund performed
better than the 10.82% total return of a comparable market benchmark, the
Solomon Brothers 3- to 7-year Treasury index, which consists of U.S. government
agency and Treasury securities and agency mortgage-backed securities for the
year ended June 30, 1995. (See performance chart for comparisons.)
For the most part, by successfully shifting the portfolio's weightings
between Treasury and mortgage-backed securities, the Fund was able to provide
its attractive one-year total return. During the last half of 1994, all sectors
of the bond market performed poorly. Accordingly, the Fund's Treasury weighting
was increased and its mortgage-security weighting was decreased during this
period.
By returning a significant exposure to the mortgage-backed securities market
during the early part of 1995, the Fund benefited when these bonds rebounded
slightly. Then, as the overall bond market rallied, Treasury securities began
outperforming mortgage securities. We had increased the Fund's weighting toward
Treasury securities and were able to take advantage of this performance. We
maintained this weighting into mid-May, when mortgage-backed securities again
looked relatively more attractive. At the end of May and into June 1995, the
mortgage position once again was increased.
The Fund's performance also benefited from a neutral maturity structure that
allowed it to take advantage of the flattening yield curve. (The Fund's average
duration changed little from June 30, 1994, when it was 4.77 years, to June 30,
1995, when it was 4.60 years.) We also made occasional moves to purchase
securities at the long end of the Treasury market, which modestly helped the
Fund's performance.
To protect the portfolio from 1994's bear market and enable the portfolio to
take advantage of 1995's bull market, we made modest adjustments to the Fund's
duration. (Duration is a measure of a fund's sensitivity to interest rate
changes; a lower number indicates less sensitivity, a higher number indicates
more sensitivity.) Going into 1994 the Fund had a relatively short duration. As
interest rates rose, we gradually increased duration to lock in higher yields.
As interest rates fell during the spring, we gradually lowered duration attempt
to control volatility and preserve portfolio income.
As we look toward the next one-year period, we are enthusiastic about
mortgage-backed securities, and we will continue to adjust the Fund's Treasury
and mortgage securities positions as market conditions warrant.
Thomas E. Donne, CFA,
FUND MANAGER
Gary J. Madich, CFA,
SENIOR MANAGING DIRECTOR OF FIXED-INCOME SECURITIES
48
<PAGE>
THE ONE GROUP GOVERNMENT BOND FUND
EDGAR REPRESENTATION OF DATA POINTS USED IN PRINTED GRAPHIC
<TABLE>
<CAPTION>
AVERAGE ANNUAL TOTAL RETURN AS OF JUNE 30,
1995
<S> <C> <C>
Since Inception
1 Year (2/8/93)
Fiduciary 12.04% 5.17%
Value of $10,000 Investment
Fiduciary Index
02/08/93 10,000 10,000
06/30/93 10,351 10,100
06/30/94 10,068 9,995
06/30/95 11,281 11,076
</TABLE>
EDGAR REPRESENTATION OF DATA POINTS USED IN PRINTED GRAPHIC
<TABLE>
<CAPTION>
AVERAGE ANNUAL TOTAL RETURN AS OF JUNE 30,
1995
<S> <C> <C> <C>
Since Inception
1 Year (3/5/93)
Class A 11.84% 4.25%
Class A* 6.81% 2.20%
*Reflects 4.50% Sales Charge
Value of $10,000 Investment
Class A Class A* Index
03/05/93 10,000 9,549 10,000
06/30/93 10,171 9,713 10,100
06/30/94 9,849 9,405 9,995
06/30/95 11,015 10,518 11,076
</TABLE>
EDGAR REPRESENTATION OF DATA POINTS USED IN PRINTED GRAPHIC
<TABLE>
<CAPTION>
AVERAGE ANNUAL TOTAL RETURN AS OF JUNE 30,
1995
<S> <C> <C> <C>
Since Inception
1 Year (1/14/94)
Class B 11.20% 3.85%
Class B** 7.20% 1.20%
**Reflects Contingent Deferred Sales Charge
Value of $10,000 Investment
Class B Class B** Index
1/14/94 10,000 9,600 10,000
6/30/94 9,501 9,129 9,684
6/30/95 10,566 10,715 10,731
</TABLE>
49
<PAGE>
ONE GROUP EQUITY FUND
The following information was provided by the Annual Report to Shareholders
for the period ended June 30, 1995. The Management Discussion contained in the
Annual Report in its entirety, is as follows:
THE ONE GROUP INCOME EQUITY FUND
The One Group Income Equity Fund fiduciary share class showed a total return
of 21.04% for the one-year period ended June 30, 1995. (For information on other
share classes, please see page 8.) The Fund, on average, held 82% of its assets
in stocks, 12% of its assets in convertible securities and 5% in cash during the
period.
During the past year the financial markets were highly volatile, with
investors consistently showing their preference for high-quality growth
companies. Our bias toward these high-quality companies allowed the Fund to
weather difficult market conditions during the second half of 1994 and take
advantage of the strong stock market during the first half of 1995.
The Fund performed well against the 16.33% one-year total return of its
benchmark, the Lipper Income Equity Fund average, but lagged the one-year total
return of 26.07% for the S&P 500 index. The difference in performance was due to
volatility in interest rates and its subsequent impact on the income-oriented
nature of the Fund. During the first half of the period interest rates rose,
negatively affecting the portion of the portfolio invested in interest-rate
sensitive companies, such as electrical utilities. In the second half, the Fund
was able to regain some of its earlier losses as short-term rates stayed high
while long-term rates declined. Overall, though, these volatile conditions
caused investors to react nervously.
The Fund's primary strategy during the period was to conduct a focused
industry review designed to maintain a high-quality portfolio. We intensively
reviewed each holding in the Fund according to strict growth and quality
parameters. As a result, we removed eight issues whose fundamentals were
deteriorating and purchased one new issue with improving fundamentals,
specifically greater financial strength and better dividend growth prospects.
Only three of the top 10 issues remained in the top 10 throughout the year. On
June 30, 1995, the Fund's top 10 holdings were Philip Morris Companies, Inc.,
Sears Roebuck & Co., Lincoln National Corp., Warner-Lambert Co., Bristol-Myers
Squibb Co., Baxter International, Inc., Exxon Corp., McGraw-Hill Companies,
Inc., Dow Chemical, and AT&T. We believe that these companies add higher
quality, better earnings prospects, dividend growth potential and
diversification to the portfolio.
Along with the sector review and upgrading process, we maintained a highly
diversified posture during the year, with most market sectors represented in the
Fund. There were many outstanding performances from individual holdings,
particularly among such high-quality growth holdings as Coca-Cola, Boeing,
Browning-Ferris and Xerox. The Fund's performance also benefited from the
mid-1994 takeover of McKesson Corp., a drug distribution company. For the 1994
calendar year, this stock was up 81%, making it the Fund's biggest winner for
the year.
Given the all-time highs recently experienced in the market, we are looking
for new investments in areas that have lagged but also have good value and
improving fundamentals. In addition, we will continue to monitor the economic
and interest rate climates as they influence fund performance. Since there
remains a chance that the U.S. economy will weaken in the coming months, we have
reduced the portion of the portfolio heavily affected by economic activity.
R. Lynn Yturri,
FUND MANAGER
Richard R. Jandrain III,
SENIOR MANAGING DIRECTOR OF EQUITY SECURITIES
50
<PAGE>
THE ONE GROUP INCOME EQUITY FUND
EDGAR REPRESENTATION OF DATA POINTS USED IN PRINTED GRAPHIC
<TABLE>
<CAPTION>
AVERAGE ANNUAL TOTAL RETURN AS OF JUNE 30,
1995
<S> <C> <C> <C>
Since Inception
1 Year 5 Year (7/2/87)
Fiduciary 21.04% 10.99% 9.73%
Value of $10,000 Investment
Fiduciary Index
7/2/87 10,000 10,000
6/30/88 9,331 8,858
6/30/89 11,065 10,674
6/30/90 12,480 12,430
6/30/91 13,414 13,344
6/30/92 15,072 15,136
6/30/93 16,815 17,195
6/30/94 17,365 17,440
6/30/95 21,019 21,978
</TABLE>
EDGAR REPRESENTATION OF DATA POINTS USED IN PRINTED GRAPHIC
<TABLE>
<CAPTION>
AVERAGE ANNUAL TOTAL RETURN AS OF JUNE 30,
1995
<S> <C> <C> <C>
Since Inception
1 Year (2/18/92)
Class A 20.79% 10.43%
Class A* 15.37% 8.93%
*Reflects 4.50% Sales Charge
Value of $10,000 Investment
Class A Class A* Index
02/18/92 10,000 9,551 10,000
06/30/92 10,079 9,926 9,993
06/30/93 11,226 10,722 11,353
06/30/94 11,557 11,039 11,515
06/30/95 13,961 13,334 14,511
</TABLE>
EDGAR REPRESENTATION OF DATA POINTS USED IN PRINTED GRAPHIC
<TABLE>
<CAPTION>
AVERAGE ANNUAL TOTAL RETURN AS OF JUNE 30,
1995
<S> <C> <C> <C>
Since Inception
1 Year (1/14/94)
Class B 19.91% 10.63%
Class B** 15.91% 8.00%
**Reflects Contingent Deferred Sales Charge
Value of $10,000 Investment
Class B Class B** Index
1/14/94 10,000 9,600 10,000
6/30/94 9,663 9,280 9,658
6/30/95 11,587 11,187 12,171
</TABLE>
51
<PAGE>
PARAGON GOVERNMENT FUND
The following information was provided by the Semi-Annual Report to
Shareholders for the period ended May 31, 1995. The Management Discussion
contained in the Annual Report in its entirety, is as follows:
PARAGON SHORT-TERM GOVERNMENT FUND
For the six months ended May 31, 1995, the Class A shares of the Fund
achieved a total return of 5.6% based on net asset value ("NAV"). This compares
with the Lipper Short U.S. Government Fund average of 6.4% and the Lehman
Brothers Mutual Fund Short (1-3) Government Index return of 6.2% for the same
period. Class B shares of the Fund recorded a total return of 5.2% based on NAV
for the six months ended May 31, 1995.
The Fund underperformed these benchmarks due to its large holdings in
floating rate securities. These securities served the Fund well in 1994, but
produce a lower total return than comparable fixed rate securities when interest
rates decline. All the floating rate securities except those tied to the prime
rate were sold in May. We anticipate selling the prime-based floaters and moving
into longer fixed rate securities soon. The amount of callable bonds in the
portfolio has also been reduced since these bonds tend to lag behind fixed rate
securities in total return as well.
The portfolio should benefit should the anticipated decline in interest
rates continue.
Further performance information is contained in the Paragon Portfolio Annual
Report, which may be obtained by writing to the address on the cover of this
Combined Prospectus/Proxy Statement.
52
<PAGE>
PARAGON BOND
The following information was provided by the Semi-Annual Report to
Shareholders for the period ended May 31, 1995. The Management Discussion
contained in the Annual Report in its entirety, is as follows:
PARAGON INTERMEDIATE-TERM BOND FUND
For the six months ended May 31, 1995, the Class A shares of the Fund
achieved a total return of 11.6% based on NAV. This compares with the Lipper
Intermediate U.S. Government Fund average of 9.5% and the Lehman Brothers
Intermediate Government/Corporate Index return of 9.2% for the same time period.
Class B shares of the Fund recorded a total return of 11.3% based on NAV for the
six months ended May 31, 1995.
Several changes have been made in the portfolio to further enhance the total
return should interest rates continue to move downward. The first was to replace
the majority of the callable issues with similar fixed rate securities that will
perform better in the current market environment. The other significant change
is in the mortgage-backed sector where CMO PAC securities are being replaced
with conventional pass-through pools. This change is due to inefficiency in the
current CMO market and the ability of the pools to more closely track the
returns of their corresponding Treasury bonds along the yield curve.
Further performance information is contained in the Paragon Portfolio Annual
Report, which can be obtained by writing to the address on the cover of this
Combined Prospectus/Proxy Statement.
53
<PAGE>
PARAGON EQUITY
The following information was provided by the Semi-Annual Report to
Shareholders for the period ended May 31, 1995. The Management Discussion
contained in the Annual Report in its entirety, is as follows:
PARAGON VALUE EQUITY INCOME FUND
For the six months ended May 31, 1995, the Class A shares of the Fund
achieved a total return of 17.2% based on NAV, compared with the S&P 500 return
of 19.2% and the Lipper Equity Income Fund Index return of 14.4%. The Class B
shares recorded a total return of 16.7% based on NAV for the same six-month
period. We believe the Fund trailed the performance of the S&P 500 for the
following reasons: (1) Market capitalization was strongly correlated with
returns during the period. The Fund's average market capitalization is less than
the S&P 500. (2) The Fund maintained an underweighted position in the financial
sector, which outperformed the S&P 500 during the last six months. (3) The Fund
held a 6% weighting in convertible bonds, which performed positively, but lagged
behind the S&P 500 returns.
A number of changes were made in the Fund during the reporting period.
Consumer cyclical stocks were reduced from 14% to 9% of net assets due to the
sale of shares in Consolidated Stores Corp., a close-out retailing company, at a
gain of 59%. General Motors Corp. shares were sold at a 31% loss, while
Whirlpool Corp. common shares were sold at a 43% capital gain. We reduced the
Fund's exposure to discretionary consumer spending, which has been slowing in
1995. We remain underweighted in this sector, which makes up 15% of the S&P 500.
The consumer noncyclical stocks were increased from 12% to 18% of net
assets. We moved closer to the S&P 500 weighting of 21% in this sector. As the
economy shows signs of slowing, these stocks should exhibit good relative
performance. Johnson & Johnson shares were sold at a 41% profit, and the
proceeds were used to purchase Baxter International, Inc., another hospital
supply stock. We added to the holdings of Bristol-Myers Squibb Co., a
pharmaceutical manufacturer, and also purchased shares of Columbia/HCA
Healthcare Corp., the nation's largest private acute-care hospital management
company. Finally, we added to our position in Premark International, Inc.,
bringing the Fund's weighting in this security to approximately 3% of net
assets. The consumer noncyclical stocks in the Fund performed nearly as well as
the S&P 500 during the period, rising an average of 16%.
The technology sector experienced significant change during the period. The
Fund's weighting in this sector grew from 8% to 11% of net assets, with most of
this gain arising from price appreciation. Shares of IBM Corp. were purchased
during the period in an effort to increase exposure in this sector. We are
continually searching for stocks with valuation measures which suit the Fund's
investment criteria; however, these stocks are increasingly rare. IBM Corp. is
one security that now meets the Fund's criteria for purchase. The Fund's
holdings in technology achieved returns averaging 30% in the year's first half.
Shareholders benefitted from an overweighted position in this sector which has
been the market leader in the current rally.
54
<PAGE>
The Fund's six-month performance was positively affected by healthy gains in
the Fund's top ten stock holdings. The following table lists the Fund's ten
largest positions as of May 31, 1995.
<TABLE>
<CAPTION>
PERCENT OF PRICE
SECURITY NET ASSETS APPRECIATION*
- ----------------------------------------------------- ------------- ---------------
<S> <C> <C>
Mobil Corp. 3.8% 16.7%
Lockheed Martin Corp. 3.5 33.8
Citicorp Convertible Preferred 3.2 30.0
Raytheon Co. 3.2 23.3
Dow Chemical Co. 3.1 14.4
Philip Morris Companies, Inc. 3.1 21.9
DuPont (E.I.) de Nemours & Co. 3.1 26.0
Premark International, Inc. 3.0 9.6
IBP, Inc. 3.0 11.5
Ford Motor Co. Preferred A 2.9 8.4
</TABLE>
- ------------------------
* For the period from the latter of December 1, 1994 or the purchase date, to
May 31, 1995.
Further performance information is contained in the Paragon Portfolio Annual
Report, which can be obtained by writing to the address on the cover of this
Combined Prospectus/Proxy Statement.
55
<PAGE>
PARAGON LOUISIANA
The following information was provided by the Semi-Annual Report to
Shareholders for the period ended May 31, 1995. The Management Discussion
contained in the Annual Report in its entirety, is as follows:
PARAGON LOUISIANA TAX-FREE FUND
For the six months ended May 31, 1995, the Class A shares of the Fund
achieved a total return of 8.6% based on NAV. This compares with the Lipper
Intermediate Municipal Debt Fund Average of 9.3% and the Lehman Brothers 7-Year
Municipal Bond Index return of 10.0% for the same time period. Class B shares of
the Fund recorded a total return of 8.4% based on NAV for the six months ended
May 31, 1995.
Lingering problems concerning state funding of Medicaid, as well as
continued rising budget demands, dampened the performance of the returns in the
Louisiana market, compared with the returns in the national market. In an effort
to react to these pressures, we reduced the Fund's exposure to uninsured
hospital debt. The credits remaining are insured issues of the predominately
large hospitals located in Louisiana's larger population centers. We also
reduced the holdings of uninsured Louisiana State general obligation debt and
replaced it with new insured state general obligation debt that was issued in
the first quarter of 1995.
As interest rates decline, refunding of municipal debt should increase,
providing pockets of opportunities for purchasing portfolio securities in the
second half of the year. Current levels of duration and average maturity should
help reduce volatility of the Fund's NAV should concerns continue in the
Louisiana bond market.
Further performance information is contained in the Paragon Portfolio Annual
Report, which can be obtained by writing to the address on the cover of this
Combined Prospectus/Proxy Statement.
56
<PAGE>
PARAGON GROWTH FUND
The following information was provided by the Semi-Annual Report to
Shareholders for the period ended May 31, 1995. The Management Discussion
contained in the Annual Report in its entirety, is as follows:
PARAGON VALUE GROWTH FUND
During the six-month period ended May 31, 1995, the Paragon Value Growth
Fund Class A shares achieved a total return of 12.9% based on NAV, while the S&P
500 Index ("S&P 500") earned a total return of 19.2%. The Lipper Growth & Income
Mutual Fund Index total return for the same period was 15.4%. Class B shares of
the Fund recorded a total return of 12.6% based on NAV for the six months ended
May 31, 1995.
We can cite several factors that contributed to the Fund's return trailing
that of the S&P 500. First of all, the Fund's median market capitalization as of
March 31, 1995 (the most recent data available) was $8.9 billion, compared with
the S&P 500 median market capitalization of $14.2 billion. As stated previously
in this letter, market capitalization has been strongly correlated with
investment results in 1995. In addition, the Fund held underweighted positions
in some market sectors that experienced strong price gains, causing the Fund's
return to lag behind the index. These include the capital equipment and services
sector, the consumer noncyclical sector and the financial sector. We will
discuss some of these sectors in more detail shortly.
The consumer cyclical sector, which was slightly overweighted in the Fund
versus the S&P 500, underperformed the index. In addition, the Fund's specific
holdings in this group did worse than the sector as a whole. Since this sector
made up over 16% of net assets, there was a noticeable effect on investment
results.
Further performance information is contained in the Paragon Portfolio Annual
Report, which can be obtained by writing to the address on the cover of this
Combined Prospectus/Proxy Statement.
57
<PAGE>
PARAGON GULF SOUTH FUND
The following information was provided by the Semi-Annual Report to
Shareholders for the period ended May 31, 1995. The Management Discussion
contained in the Annual Report in its entirety, is as follows:
PARAGON GULF SOUTH GROWTH FUND
For the six months ended May 31, 1995, the Class A shares of the Fund
achieved a total return of 11.4% based on NAV, compared with the Russell 2000
Index return of 11.7%. The S&P 500 Index returned 19.2% for the same period. An
appropriate peer group index for this Fund is the Lipper Small Company Growth
Fund Index, which rose 11.2% during the six month period. Class B shares of the
Fund recorded a total return of 11.0% based on NAV for the six months ended May
31, 1995.
We believe the reason for the Fund's lagging performance versus the S&P 500
Index is the unusually strong correlation between market capitalization and
investment results in 1995. The S&P 500, having a much larger average
capitalization than the Fund, experienced greater returns. Note that the S&P 500
also substantially outperformed the other small-capitalization indices listed
above.
The fact that the Fund achieved results similar to the Lipper Small Company
Growth Fund Index ("Lipper Small Company Index") for the six months ended May
31, 1995, hides the substantial volatility relative to this index that occurred
during this period. The Fund performed relatively well during the period from
November 30, 1994 through February 28, 1995. A performance advantage over the
Lipper Small Company Index of approximately 480 basis points was achieved during
these months. Then during March 1995, much of this lead was given up as the Fund
remained flat, while the Lipper Small Company Index rose 2.7%. The first two
weeks of April were positive, as the Fund gained 2%, while the Lipper Small
Company Index gained 1.1%. Then on April 14, the Fund experienced a setback when
the value of its holdings in Health Maintenance Organization ("HMO") stocks
dropped precipitously due to some negative developments that affected a north
central U.S. HMO, but that worried investors in all HMO stocks. The Gulf South
Growth Fund's holdings in this industry include Coastal Healthcare, Coventry
Corporation and HealthWise of America, Inc. During the last two weeks of April,
the Fund declined over 3%, while the Lipper Small Company Index rose slightly
less than 1%. We are encouraged to see that since then, the Fund has regained
the ground lost in April with a return of 2.61% in May, approximately 1% more
than its comparative index. The gain has been fairly broad-based, with numerous
issues contributing.
Sectors that positively affected the Fund's results during the first six
months of the fiscal year include the energy sector, which made up about 7.9% of
net assets as of May 31, 1995. Within this group of stocks we sold two oil
service companies, American Oilfield Divers and Global Industries, while adding
a small exploration and production company, Benton Oil & Gas Co. The energy
group exhibited an average return of 43%, due to a large gain in the price of
Input/Output, Inc., which is the largest holding in the group and the Fund's
fifth largest holding.
Financial stocks, which make up over 21% of net assets as of May 31, 1995,
also performed well, achieving an average return of 49%. Stocks appreciating
strongly include United Companies Financial Corp., Medaphis Corp. and Regional
Acceptance Corp. Some sales were made in this group to recognize substantial
profits. Coral Gables Fedcorp was sold following an announced buy-out of the
company. PMT Services, a payment services company, was bought and sold during
the period for a gain of 50.9%.
Holdings that negatively affected the period's results include some natural
resources/basic materials issues such as Georgia Gulf Corp., Nucor Corp. and
Image Industries, Inc. Industry conditions in which these companies operate were
responsible for these declines. We believe the outlook for these companies
remains promising.
Consumer cyclical issues showed the worst performance of any group of stocks
held in the Fund. A combination of factors involving slowing consumer spending
on discretionary and big-ticket items seems to have weakened the demand for
these stocks. However, we doubt this situation will last long.
58
<PAGE>
The Fund's ten largest holdings are listed below.
<TABLE>
<CAPTION>
PRICE
PERCENT OF APPRECIATION
SECURITY NET ASSETS (DEPRECIATION)*
- ---------------------------------------------------- ------------- ----------------
<S> <C> <C>
Medaphis Corp. 5.5% 53.5%
WorldCom, Inc. 5.3 29.2
First Financial Management Corp. 4.4 20.6
United Companies Financial Corp. 3.9 60.9
Input/Output, Inc. 3.8 75.5
Office Depot, Inc. 3.7 1.1
Atlantic Southeast Airlines, Inc. 3.3 58.2
Autozone, Inc. 3.2 (9.3)
Coventry Corp. 2.9 (17.5)
Stewart Enterprises, Inc. 2.9 26.3
</TABLE>
- ------------------------
* For the period from the latter of December 1, 1994, or the purchase date, to
May 31, 1995.
We are generally pleased with the Fund's progress this year, though it is
obvious that we must await the return to favor of small-capitalization stocks
before the Gulf South Growth Fund can truly shine.
Further performance information is contained in the Paragon Portfolio Annual
Report, which can be obtained by writing to the address on the cover of this
Combined Prospectus/Proxy Statement.
59
<PAGE>
INFORMATION ABOUT THE PROPOSED TRANSACTION
INTRODUCTION
This Combined Prospectus/Proxy Statement is furnished in connection with the
solicitation of proxies from the shareholders of Paragon Money Market, Paragon
Government, Paragon Bond, Paragon Equity, Paragon Louisiana, Paragon Growth and
Paragon Gulf South by and on behalf of the Trustees of Paragon Portfolio for use
at a Special Meeting of Shareholders (the Special Meeting and any adjournment
thereof, the "Meeting") to approve the reorganization of the Paragon Funds. The
Meeting will be held on Wednesday, March 25, 1996 at 4900 Sears Tower, Chicago,
IL 60606. This Combined Prospectus/Proxy Statement and the enclosed form of
proxy are being mailed to shareholders of the Paragon Funds on or about February
21, 1996.
Any shareholder may revoke a proxy once the proxy is given. The shareholder
revoking such proxy must either submit to the appropriate Paragon Fund a
subsequently dated proxy, deliver to the appropriate Paragon Fund a written
notice of revocation, or otherwise give written notice of revocation in person
at the Meeting. All properly executed proxies received in time for the Meeting
will be voted as specified in the proxy, or, if no specification is made, FOR
the proposal (set forth in Item (1) of the Notice of Special Meeting of
Shareholders).
Only shareholders of record on February 22, 1996 will be entitled to notice
of and to vote at the Meeting. Each share as of the close of business on
February 22, 1996, is entitled to one vote.
The Trustees of Paragon Portfolio know of no matters other than those set
forth herein to be brought before the Meeting. If, however, any other matters
properly come before the Meeting, it is the Trustees' intention that proxies
will be voted on such matters in accordance with the judgment of the persons
named in the enclosed form of proxy.
TERMS OF THE PROPOSED REORGANIZATION
Shareholders of Paragon Money Market, Paragon Government, Paragon Bond,
Paragon Equity, Paragon Louisiana, Paragon Growth and Paragon Gulf South are
being asked to approve or disapprove of an Agreement and Plan of Reorganization
involving the Paragon Funds and the One Group Funds. Pursuant to the Agreement
and Plan of Reorganization, Paragon Money Market, Paragon Government, Paragon
Bond, Paragon Equity, Paragon Louisiana, Paragon Growth and Paragon Gulf South
would be merged with and into One Group Money Market, One Group Limited
Volatility, One Group Bond, One Group Equity, One Group Louisiana, One Group
Growth and One Group Gulf South, respectively, on or about March 26, 1996 (the
"Exchange Date"). On the Exchange Date, the Paragon Funds will transfer all of
their assets and liabilities to the corresponding One Group Funds in exchange
for shares of the corresponding One Group Fund having an aggregate net asset
value equal to the aggregate value of the net assets acquired from the
corresponding Paragon Fund. The assets and liabilities of the Paragon Funds and
The One Group Funds will be valued as of the close of trading on the New York
Stock Exchange on the business day next preceding the Exchange Date. The
following discussion is qualified in its entirety by the full text of the
Agreement and Plan of Reorganization which is attached as Exhibit A to this
Combined Prospectus/Proxy Statement.
Following the transfer, the Paragon Funds will be dissolved and shares of
the respective One Group Funds received by the corresponding Paragon Fund will
be distributed to Paragon Fund shareholders in liquidation of the Paragon Funds.
As a result of the proposed transaction, a Paragon Money Market, Paragon
Government, Paragon Bond, Paragon Equity, Paragon Louisiana, Paragon Growth or
Paragon Gulf South shareholder will receive, on a tax-free basis, a number of
full and fractional shares equal in value at the date of the exchange to the
value of the net assets of the respective Paragon Fund transferred to One Group
Money Market, One Group Limited Volatility, One Group Bond, One Group Equity,
One Group Louisiana, One Group Growth and One Group Gulf South respectively,
attributable to the shareholder. If the Paragon Fund shareholder of record is a
financial organization authorized to act in a fiduciary, advisory, agency,
custodial or similar capacity, that
60
<PAGE>
shareholder will receive One Group Fiduciary Class shares. All other Paragon
Fund Class A shareholders will receive One Group Class A shares. Shareholders of
record holding Paragon Fund Class B shares, other than Class B shareholders of
Paragon Money Market, will receive One Group Class B shares. Paragon Money
Market Class B shareholders will receive One Group Money Market Class A shares.
Paragon Portfolio, on behalf of the Paragon Funds, will pay to the
respective One Group Funds any interest and cash dividends received by the
corresponding Paragon Fund after the Exchange Date with respect to the
investments transferred to the respective One Group Fund. In addition, Paragon
Portfolio, on behalf of the Paragon Funds, will transfer to the respective One
Group Fund any rights, stock dividends or other securities received by the
corresponding Paragon Fund after the Exchange Date as stock dividends or other
distributions with respect to the investments transferred. Such rights, stock
dividends and other securities shall be deemed included in the assets
transferred to the One Group Funds at the Exchange Date and shall not be
separately valued, in which case any such distribution that remains unpaid as of
the Exchange Date shall be included in the determination of the value of the
assets of the respective Paragon Funds acquired by the corresponding One Group
Funds.
At a meeting on October 31, 1995, the Trustees of Paragon Portfolio
unanimously approved the Agreement and Plan of Reorganization and determined
that the reorganization of the Paragon Funds and the One Group Funds would be in
the best interests of each Fund. The Trustees further determined that the
interests of existing shareholders of each Fund would not be diluted upon
effectuation of the reorganization. Consequently, the Trustees recommend
approval of the Agreement and Plan of Reorganization for the following reasons:
1. ENHANCED RANGE OF INVESTMENT OPTIONS
Currently, Paragon shareholders may only exchange shares of one Paragon Fund
for shares of the same class of one of the other six Paragon Funds. The One
Group, however, permits exchanges between the funds comprising The One Group, as
well as between share classes of the Funds. Thus, a Fiduciary Class shareholder
of a One Group Fund may exchange his or her shares for Class A shares of the
same One Group Fund or for Class A or Fiduciary Class shares of another One
Group Fund. One Group Class A shareholders may exchange their shares for
Fiduciary Class shares of the same One Group Fund, or for Fiduciary or Class A
shares of another One Group Fund, if the shareholder is eligible to purchase
such shares. There are currently thirty-two One Group Funds among which
exchanges may be made, excluding The One Group Institutional Money Market Funds.
The One Gpoup offers ten different equity funds, each with a distinct style or
strategy. This range of strategies permits an investor in The One Group to
participate at any point in time in the styles currently prevelant in the
market. Thus, if the Agreement and Plan of Reorganization is approved, Paragon
Fund shareholders will have increased investment options and greater flexibility
to change investments.
2. TAX-FREE CONVERSION OF PARAGON FUND SHARES
If a shareholder of a Paragon Fund were to redeem an investment in a Paragon
Fund in order to invest in a One Group Fund or another investment product, gain
or loss would be recognized by that shareholder for Federal income tax purposes
upon the redemption of those shares. By contrast, the proposed reorganization of
each Paragon Fund will permit shareholders of the Paragon Funds to exchange
their investment in the Paragon Funds for an investment in the One Group Funds
without recognition of gain or loss for Federal income tax purposes. After the
reorganization, as shareholders of an open-end fund, shareholders will continue
to be free to redeem any or all of their shares at net asset value at any time,
at which point a taxable gain or loss would be recognized.
3. INVESTMENT LEVERAGE AND MARKET PRESENCE
The merger is expected to result in greater investment leverage and market
presence for the One Group Funds. If the Agreement and Plan of Reorganization is
approved, The One Group would have
61
<PAGE>
approximately $12 billion in assets under management. Fund expenses normally
decline as assets increase. Consequently, Paragon Fund shareholders would
benefit from the resulting economies of scale attributable to the larger asset
size of the One Group Funds.
4. PERFORMANCE
The total returns of the One Group Money Market, One Group Limited
Volatility, One Group Bond, and One Group Equity, are competitive with those of
Paragon Money Market, Paragon Government, Paragon Bond, and Paragon Equity,
respectively (One Group Growth, One Group Louisiana, and One Group Gulf South
have not yet commenced operations). The Adviser presently serves as investment
adviser to both The One Group and Paragon Portfolio. The individuals managing
the Paragon Portfolios will continue to be associated with The One Group
following the proposed reorganization. For information regarding the total
returns of each of the Funds in question, see "Financial Highlights" in the One
Group and Paragon Prospectuses accompanying this Combined Prospectus/ Proxy
Statement. Of course, past performance does not predict future results.
5. MANAGEMENT FEES
Following the merger of the Paragon Funds with the One Group Funds,
investment advisory fees will generally remain the same or decline. Below is a
comparison of the current investment advisory fee paid by each of the Paragon
Funds and the fee that will be assessed following the merger:
<TABLE>
<CAPTION>
CURRENT PROPOSED (2)
------------ ---------------
<S> <C> <C> <C>
Paragon Government.................... .50% One Group Limited Volatility.......... .30%
Paragon Equity........................ .65% One Group Equity...................... .74%
Paragon Bond.......................... .50% One Group Bond........................ .45%
Paragon Money Market.................. .20% One Group Money Market................ .22%
Paragon Louisiana..................... .40% One Group Louisiana................... .40%
Paragon Gulf South.................... .65% One Group Gulf South.................. .65%
Paragon Growth........................ .65% One Group Growth...................... .65%
</TABLE>
- ------------------------
(2) Investment Advisory fees have been revised to reflect fee waivers as of the
date of this Combined Prospectus/Proxy Statement. Absent this voluntary
waiver, investment advisory fees would be .60% for One Group Limited
Volatility, .35% for One Group Money Market, .60% for One Group Louisiana,
.74% for One Group Gulf South and .74% for One Group Growth.
Although the advisory fees for One Group Equity and One Group Money Market
are higher than those paid by the corresponding Paragon Funds, BOIA possesses
superior investment management resources that enable the One Group Funds to
achieve and sustain a high level of performance. In order to develop and
maintain a money market expertise, BOIA invested a substantial amount of
resources in attracting and retaining qualified investment professionals, as
well as system supports. Significant investments also have been made to develop
a dynamic equity research group that has fifteen dedicated analysts that follow
eleven major market sectors and 37 specific industries. In addition, a highly
efficient and effective trading operation exists which ultimately benefits the
Funds through securities trades executed at costs lower than industry standards.
FEDERAL TAX CONSEQUENCES
As part of the reorganization, The One Group will have receive an opinion of
Ropes & Gray, counsel to The One Group addressed to The One Group and each One
Group Fund and to Paragon Portfolio and each Paragon Fund, in a form reasonably
satisfactory to The One Group and Paragon Portfolio and dated the Exchange Date,
to the effect that for Federal income tax purposes (i) no gain or loss will be
recognized by any Paragon Fund upon the transfer of its assets to the
corresponding One Group Fund in exchange for shares of such One Group Fund and
the assumption by such One Group Fund of the liabilities of the Paragon Fund or
upon the distribution of shares by the Paragon Fund to its shareholders in
liquidation; (ii) no gain or loss will be recognized by the shareholders of any
Paragon Fund upon the exchange of their shares for shares of the corresponding
One Group Fund (iii) the basis of the shares a Paragon Fund shareholder receives
in connection with the transaction
62
<PAGE>
will be the same as the basis of his or her Paragon Fund shares exchanged
therefor; (iv) a Paragon shareholder's holding period for his or her shares will
be determined by including the period for which he or she held the Paragon Fund
shares exchanged therefor, provided that he or she held such Paragon Fund shares
as capital assets; (v) no gain or loss will be recognized by any One Group Fund
upon the receipt of the assets of the corresponding Paragon Fund in exchange for
shares and the assumption by the One Group Fund of the liabilities of the
corresponding Paragon Fund; and (vi) the basis in the hands of the One Group
Fund of the assets of the corresponding Paragon Fund transferred to the One
Group Fund will be the same as the basis of the assets in the hands of the
corresponding Paragon Fund immediately prior to the transfer.
FEES AND EXPENSES OF REORGANIZATION
All fees and expenses, including accounting expenses, portfolio transfer
taxes (if any) or other similar expenses incurred in connection with the
consummation by One Group and Paragon Portfolio of the transactions contemplated
by this Agreement and Plan of Reorganization will be paid by the party directly
incurring such fees and expenses, except that the costs of proxy materials and
proxy solicitation, including legal expenses, will be borne by One Group;
PROVIDED HOWEVER, that such expenses will in any event be paid by the party
directly incurring such expenses if and to the extent that the payment by the
other party of such expenses would result in the disqualification of any One
Group or Paragon Fund, as the case may be, as a "regulated investment company"
within the meaning of Section 851 of the Code.
COMPARISON OF SHAREHOLDER RIGHTS
Both the One Group Funds and the Paragon Funds are series of open-end
management investment companies. As shown above, each Fund has substantially
similar purchase and redemption procedures, sales charge structure, exchange and
conversion privileges, and voting rights. While the Paragon Funds offer two
classes of shares, the One Group Funds offer four classes of shares.
EXISTING AND PRO FORMA CAPITALIZATION
The following tables set forth as of December 31, 1995, (l) the
capitalization of the Paragon Funds and the One Group Funds and (ii) the pro
forma capitalization of the Paragon Funds and the One Group Funds as adjusted
giving effect to the proposed acquisition of assets at net asset value:
PARAGON TREASURY MONEY MARKET FUND AND ONE GROUP U.S. TREASURY SECURITIES MONEY
MARKET FUND
<TABLE>
<CAPTION>
PARAGON ONE GROUP PRO FORMA COMBINED
------------------------ ------------------------ --------------------------
CLASS A CLASS B FIDUCIARY CLASS A FIDUCIARY CLASS A
----------- ----------- ------------- --------- ------------- -----------
<S> <C> <C> <C> <C> <C> <C>
Net Assets (000s).................. $348,338 $4 $1,324,613 $91,995 $1,362,930 $402,020
Shares (000s)...................... 348,338 4 1,324,613 91,995 1,362,930 402,020
Net Asset Value.................... $1.00 $1.00 $1.00 $1.00 $1.00 $1.00
</TABLE>
Paragon Class A shareholders that are financial organizations authorized to
act in a fiduciary, advisory, agency, custodial or similar capacity receive One
Group Fiduciary Class shares. All other Paragon shareholders receive One Group
Class A shares.
PARAGON SHORT-TERM GOVERNMENT FUND AND ONE GROUP LIMITED VOLATILITY BOND FUND
<TABLE>
<CAPTION>
PARAGON ONE GROUP PRO FORMA COMBINED
---------------------- ------------------------------------- -------------------------------------
CLASS A CLASS B FIDUCIARY CLASS A CLASS B FIDUCIARY CLASS A CLASS B
--------- ----------- ----------- ----------- ----------- ----------- ----------- -----------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Net Assets (000s)..... $128,343 $312 $420,247 $13,311,935 $2,991 $463,884 $13,396,642 $3,303
Shares (000s)......... 12,525 30 39,386 1,248,774 279 43,476 1,256,721 308
Net Asset Value....... $10.25 $10.25 $10.67 $10.66 $10.73 $10.67 $10.66 $10.73
</TABLE>
Paragon Class A shareholders that are financial organizations authorized to
act in a fiduciary, advisory, agency, custodial or similar capacity receive One
Group Fiduciary Class shares. All other Paragon Class A shareholders receive One
Group Class A shares. Paragon Class B shareholders receive One Group Class B
shares.
63
<PAGE>
PARAGON INTERMEDIATE-TERM BOND FUND AND ONE GROUP GOVERNMENT BOND FUND
<TABLE>
<CAPTION>
PARAGON ONE GROUP PRO FORMA COMBINED
---------------------- ------------------------------------- -----------------------------------
CLASS A CLASS B FIDUCIARY CLASS A CLASS B FIDUCIARY CLASS A CLASS B
--------- ----------- ----------- ----------- ----------- ----------- --------- -----------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Net Assets (000s)........... $314,374 $1,523 $414,298 $11,261 $5,044 $536,904 $203,029 $6,567
Shares (000s)............... 29,915 145 41,060 1,115 500 53,211 20,102 651
Net Asset Value............. $10.51 $10.53 $10.09 $10.10 $10.09 $10.09 $10.10 $10.09
</TABLE>
Paragon Class A shareholders that are financial organizations authorized to
act in a fiduciary, advisory, agency, custodial or similar capacity receive One
Group Fiduciary Class shares. All other Paragon Class A shareholders receive One
Group Class A shares. Paragon Class B shareholders receive One Group Class B
shares.
PARAGON VALUE EQUITY INCOME FUND AND ONE GROUP INCOME EQUITY FUND
<TABLE>
<CAPTION>
PARAGON ONE GROUP PRO FORMA COMBINED
---------------------- ------------------------------------- -------------------------------------
CLASS A CLASS B FIDUCIARY CLASS A CLASS B FIDUCIARY CLASS A CLASS B
--------- ----------- ----------- ----------- ----------- ----------- ----------- -----------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Net Assets (000s)............ $129,625 $1,028 $181,271 $21,419 $9,109 $237,010 $95,305 $10,137
Shares (000s)................ 8,986 71 10,979 1,300 551 14,356 5,783 614
Net Asset Value.............. $14.42 $14.42 $16.51 $16.48 $16.52 $16.51 $16.48 $16.52
</TABLE>
Paragon Class A shareholders that are financial organizations authorized to
act in a fiduciary, advisory, agency, custodial or similar capacity receive One
Group Fiduciary Class shares. All other Paragon Class A shareholders receive One
Group Class A shares. Paragon Class B shareholders receive One Group Class B
shares.
64
<PAGE>
VOTING INFORMATION
Proxies are being solicited from shareholders of Paragon Money Market,
Paragon Government, Paragon Bond, Paragon Equity, Paragon Louisiana, Paragon
Growth and Paragon Gulf South by the Trustees of Paragon Portfolio for the
Meeting to be held on Wednesday, March 25, 1996 at 9:00 a.m. Central Standard
Time at, 4900 Sears Tower, Chicago, IL, or at such later time made necessary by
adjournment. A proxy may be revoked at any time at or before the meeting by
submitting to the appropriate Paragon Fund a subsequently dated proxy,
delivering a written notice of revocation to the appropriate Paragon Fund, 4900
Sears Tower, Chicago, IL 60606, or as otherwise described in the "Introduction"
above. Unless revoked, all valid proxies will be voted in accordance with the
instructions thereon or, in the absence of instructions, will be voted FOR
approval of the Agreement and Plan of Reorganization. The transaction
contemplated by the Agreement and Plan of Reorganization will be consummated
only if approved by the affirmative vote of a majority of all votes attributable
to the voting securities of each class of each Paragon Fund voting separately as
a class. In the event the shareholders do not approve the reorganization, the
Paragon Trustees will consider possible alternative arrangements in the best
interests of the Paragon Funds and their shareholders. Shares of the Paragon
Funds are redeemable for cash at net asset value on Monday through Friday,
except Federal holidays and Good Friday. See "Redemption Procedures" in the One
Group and Paragon Prospectuses accompanying this Combined Prospectus/Proxy
Statement.
Proxies are being solicited by mail. Shareholders of record of Paragon Money
Market, Paragon Government, Paragon Bond, Paragon Equity, Paragon Louisiana,
Paragon Growth and Paragon Gulf South, on the close of business on February 19,
1996 (the "Record Date"), will be entitled to vote at the Meeting or any
adjournment thereof. The holders of a majority of votes attributable to the
outstanding voting shares of Paragon Money Market, Paragon Government, Paragon
Bond, Paragon Equity, Paragon Louisiana, Paragon Growth and Paragon Gulf South
represented in person or by proxy at the Meeting will constitute a quorum for
the Meeting; however, the affirmative vote of the lesser of (a) 67% or more of
the votes attributable to all voting securities of each class of each Paragon
Fund present at such Meeting if holders of more than 50% of the votes
attributable to all voting securities of each class of each Paragon Fund are
present or represented by proxy or (b) more than 50% of the votes attributable
to the outstanding voting securities of each class of each Paragon Fund is
necessary to approve the reorganization. Shareholders are entitled to one vote
per share and a proportionate fractional vote for any fractional share.
Votes cast by proxy or in person at the Meeting will be counted by the
Inspector of Election appointed by Paragon Portfolio. The Inspector of Election
will count the total number of votes cast FOR approval of the proposal for
purposes of determining whether sufficient affirmative votes have been cast. The
Inspector of Election will count shares represented by proxies that reflect
abstentions as shares that are present and entitled to vote on the matter for
purposes of determining the presence of a quorum; however, the Inspector of
Election will not count "broker non-votes" (I.E., shares held by brokers or
nominees as to which (i) instructions have not been received from the beneficial
owners or the persons entitled to vote and (ii) the broker or nominee does not
have the discretionary voting power on a particular matter) as shares that are
present and entitled to vote on the matter for purposes of determining the
presence of a quorum. For purposes of determining whether an issue has been
approved, abstentions have the effect of a negative vote on the proposal, and
broker non-votes are treated as "against" votes in those instances where
approval of an issue requires a certain percentage of all votes outstanding, but
are given no effect in those instances where approval of an issue requires a
certain percentage of the votes constituting the quorum for such issue.
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As of February 22, 1996, as shown on the books of Paragon, there were issued
and outstanding shares of beneficial interest of the Paragon Funds
allocated among the Funds and classes as follows:
PARAGON MONEY MARKET
a. Class A Shares
b. Class B Shares
PARAGON GOVERNMENT
a. Class A Shares
b. Class B Shares
PARAGON BOND
a. Class A Shares
b. Class B Shares
PARAGON EQUITY
a. Class A Shares
b. Class B Shares
PARAGON LOUISIANA
a. Class A Shares
b. Class B Shares
PARAGON GROWTH
a. Class A Shares
b. Class B Shares
PARAGON GULF SOUTH
a. Class A Shares
b. Class B Shares
As of February 22, 1996, the officers and Trustees of Paragon as a group
beneficially owned less than 1% of the outstanding Class shares of the Paragon
Funds. As of February 22, 1996, to the best of the knowledge of Paragon
Portfolio, owned beneficially 5% or more of the outstanding Class
shares of the following Paragon Funds:
In addition, as of February 22, 1996, the following persons were the
beneficial owners of more than 25% of the outstanding shares of the following
class of shares of the following funds:
<TABLE>
<CAPTION>
NAME AND ADDRESS FUND/CLASS PERCENTAGE OWNERSHIP TYPE OF OWNERSHIP
- ------------------------ ------------------------ ------------------------ ------------------------
<S> <C> <C> <C>
</TABLE>
The votes of the shareholders of the One Group Funds are not being
solicited, since their approval or consent is not necessary for approval of the
Agreement and Plan of Reorganization. However, the vote required for approval of
the proposal, including the treatment of abstention and "broker non-votes" would
be the same as that of the Paragon Funds. Also, whole shares of One Group Money
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<PAGE>
Market, One Group Limited Volatility, One Group Bond, One Group Equity, One
Group Louisiana, One Group Growth and One Group Gulf South are entitled to one
vote and fractional shares are entitled to a proportionate fractional vote. As
of February 22, 1996, as shown on the books of The One Group, there were issued
and outstanding shares of beneficial interest of the One Group Funds
allocated between the Funds and classes as follows:
ONE GROUP MONEY MARKET
a. Class A Shares
b. Fiduciary Shares
c. Service Class Shares
ONE GROUP LIMITED VOLATILITY
a. Class A Shares
b. Class B Shares
c. Fiduciary Shares
ONE GROUP BOND
a. Class A Shares
b. Class B Shares
c. Fiduciary Shares
ONE GROUP EQUITY
a. Class A Shares
b. Class B Shares
c. Fiduciary Shares
ONE GROUP LOUISIANA
a. Class A Shares
b. Class B Shares
c. Fiduciary Shares
ONE GROUP GROWTH
a. Class A Shares
b. Class B Shares
c. Fiduciary Shares
ONE GROUP GULF SOUTH
a. Class A Shares
b. Class B Shares
c. Fiduciary Shares
As of February 22, 1996, the officers and Trustees of The One Group as a
group beneficially owned less than 1% of the outstanding shares of Class A,
Class B, Fiduciary Class and Service Class shares of The One Group Funds. As of
February 22, 1996, to the best of the knowledge of The One Group,
beneficially owned 5% or more of the outstanding Class shares
of the One Group Fund.
In addition, as of February 22, 1996, the following persons were the
beneficial owners of more than 25% of the outstanding shares of the following
class of shares of the following funds:
<TABLE>
<CAPTION>
NAME AND ADDRESS FUND/CLASS PERCENTAGE OWNERSHIP TYPE OF OWNERSHIP
- ------------------------ ------------------------ ------------------------ ------------------------
<S> <C> <C> <C>
</TABLE>
67
<PAGE>
INTERESTS OF CERTAIN PERSONS IN THE TRANSACTION
BOIA may be deemed to have an interest in the reorganization because it
provides investment advisory services to the One Group Funds pursuant to an
advisory agreement with The One Group and Paragon Portfolio. Future growth of
assets of The One Group can be expected to increase the total amount of fees
payable to BOIA and to reduce the amount of fees required to be waived to
maintain total fees of the Funds at agreed upon levels.
FINANCIAL STATEMENTS
The audited financial statements of Paragon Money Market, Paragon
Government, Paragon Bond, Paragon Equity, Paragon Louisiana, Paragon Growth and
Paragon Gulf South as of November 30, 1994, the statement of operations for the
year then ended, and statement of changes in net assets for each of the two
years in the period then ended and financial highlights, are have been
incorporated by reference into this Prospectus/Proxy Statement in reliance on
the reports of Price Waterhouse LLP, independent accountants, given on the
authority of such firm as an expert in accounting and auditing. Unaudited
financial statements for Paragon Money Market, Paragon Government, Paragon Bond,
Paragon Equity, Paragon Louisiana, Paragon Growth and Paragon Gulf South for the
period ended May 31, 1995, are contained in the Statement of Additional
Information relating to the reorganization of the Paragon Portfolio described in
this Combined Prospectus/Proxy Statement.
The audited financial statements of One Group Money Market, One Group
Limited Volatility, One Group Bond and One Group Equity as of June 30, 1995, and
the statements of operations, changes in net assets and financial highlights for
the year then ended, have been incorporated by reference into this
Prospectus/Proxy Statement in reliance on the reports of Coopers & Lybrand,
L.L.P., independent accountants, given on authority of such firm as an expert in
accounting and auditing. One Group Louisiana, One Group Growth and One Group
Gulf South had not commenced operations as of June 30, 1995.
Unadudited pro forma combined financial statements of Paragon Money Market,
Paragon Government, Paragon Bond and Paragon Equity and One Group Money Market,
One Group Limited Volatility, One Group Bond and One Group Equity as of and for
the twelve month period ending June 30, 1995 are included in the Statement of
Additional Information. Also included in the Statement of Additional Information
are unaudited pro forma combined financial statements of Paragon Louisiana,
Paragon Growth and Paragon Gulf South, and One Group Louisiana, One Group Growth
and One Group Gulf South as of and for the twelve month period ended May 31,
1995. Because the Agreement and Plan of Reorganization provides that the One
Group Funds will be the surviving funds following the reorganization and because
the One Group Funds' investment objectives and policies will remain unchanged,
the pro forma combined financial statements reflect the transfer of the assets
and liabilities of each Paragon Fund to the corresponding One Group Fund as
contemplated by the Agreement and Plan of Reorganization.
In addition, prospectuses for One Group Money Market, One Group Limited
Volatility, One Group Bond, and One Group Equity Funds, dated November 1, 1995,
and the One Group Louisiana, One Group Growth and One Group Gulf South Funds,
dated February 7, 1996; as well as the current prospectus relating to Paragon
Money Market, Paragon Government, Paragon Bond, Paragon Equity, Paragon
Louisiana, Paragon Growth and Paragon Gulf South, dated March 30, 1995; and the
current Statement of Additional Information of The One Group, dated November 1,
1995, as amended February 7, 1996; and the current Statement of Additional
Information for Paragon Portfolio, dated March 30, 1995, have been incorporated
by reference into this Combined Prospectus/Proxy Statement.
THE BOARD OF TRUSTEES, INCLUDING THE INDEPENDENT TRUSTEES, UNANIMOUSLY
RECOMMEND APPROVAL OF THE AGREEMENT AND PLAN OF REORGANIZATION.
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<PAGE>
INFORMATION FILED WITH THE SECURITIES AND EXCHANGE COMMISSION
This Combined Prospectus/Proxy Statement and the related Statement of
Additional Information do not contain all of the information set forth in the
registration statements and the exhibits relating thereto which The One Group
has filed with the Securities and Exchange Commission ("SEC") under the
Securities Act of 1933 and the Investment Company Act of 1940, to which
reference is hereby made. The file number for The One Group Prospectuses and the
related Statement of Additional Information which are incorporated herein by
reference is Registration No. 2-95973. The file number for the Paragon Portfolio
Prospectus and the related Statement of Additional Information which are
incorporated herein by reference is Registration No. 33-31334.
The One Group and Paragon Portfolio are subject to the informational
requirements of the Securities Exchange Act of 1934 and in accordance therewith
file reports and other information with the SEC. Proxy material, reports, proxy
and information statements, registration statements and other information filed
by The One Group and Paragon Portfolio can be inspected and copied at the SEC's
public reference facilities located at 450 Fifth Street, N.W. Washington, D.C.
20549. Copies of such filings may be available at the following SEC regional
offices: 90 Devonshire Street, Suite 700, Boston, MA 02109; 500 West Madison
Street, Suite 1400, Chicago, IL 60611; and 601 Walnut Street, Suite 1005E,
Philadelphia, PA 19106. Copies of such materials can also be obtained by mail
from the Public Reference Branch, Office of Consumer Affairs and Informational
Services, SEC, Washington, D.C. 20549 at prescribed rates.
69
<PAGE>
EXHIBIT A
AGREEMENT AND PLAN OF REORGANIZATION
This Agreement and Plan of Reorganization (the "Agreement") is made as of
January 19, 1996 by and between The One Group-Registered Trademark-, a
Massachusetts business trust, ("One Group") and Paragon Portfolio, a
Massachusetts business trust ("Paragon"). The capitalized terms used herein
shall have the meaning ascribed to them in this Agreement.
I. PLAN OF REORGANIZATION
(a) Paragon will sell, assign, convey, transfer and deliver to One Group,
and One Group will acquire, on the Exchange Date all of the properties and
assets existing at the Valuation Time in Paragon Treasury Money Market Fund
("Paragon Money Market"), Paragon Short-Term Government Fund ("Paragon
Government"), Paragon Intermediate-Term Bond Fund ("Paragon Bond"), Paragon
Value Equity Income Fund ("Paragon Equity"), Paragon Louisiana Tax-Free Fund
("Paragon Louisiana"), Paragon Value Growth Fund ("Paragon Growth") and Paragon
Gulf South Growth Fund ("Paragon Gulf South") (Paragon Money Market, Paragon
Government, Paragon Bond, Paragon Equity, Paragon Louisiana, Paragon Growth and
Paragon Gulf South, each is a "Paragon Fund" and are collectively the "Paragon
Funds"), such acquisition to be made by The One Group Treasury Securities Money
Market Fund ("One Group Money Market"), The One Group Limited Volatility Bond
Fund ("One Group Limited Volatility"), The One Group Government Bond Fund ("One
Group Bond"), One Group Income Equity Fund ("One Group Equity"), The One Group
Louisiana Municipal Bond Fund ("One Group Louisiana"), The One Group Value
Growth Fund ("One Group Growth") and The One Group Gulf South Fund ("One Group
Gulf South") (One Group Money Market, One Group Limited Volatility, One Group
Bond, One Group Income Equity, One Group Louisiana, One Group Growth and One
Group Gulf South, each is a "One Group Fund" and are collectively the "One Group
Funds"), respectively, of One Group. For purposes of this Agreement the
respective Paragon Funds correspond to the One Group Funds as follows: Paragon
Money Market corresponds to One Group Money Market; Paragon Government
corresponds to One Group Limited Volatility; Paragon Bond corresponds to One
Group Bond; Paragon Equity corresponds to One Group Income Equity; Paragon
Louisiana corresponds to One Group Louisiana; Paragon Growth corresponds to One
Group Growth; and One Group Gulf South corresponds to Paragon Gulf South. In
consideration therefor, each One Group Fund shall, on the Exchange Date, assume
all of the liabilities of the corresponding Paragon Fund in exchange for a
number of full and fractional One Group Class A, Fiduciary Class or Class B
shares of the corresponding One Group Fund (collectively, "Shares") having an
aggregate net asset value equal to the value of all of the assets of each
Paragon Fund transferred to the corresponding One Group Fund on such date less
the value of all of the liabilities of each Paragon Fund assumed by the
corresponding One Group Fund on that date. It is intended that each
reorganization described in this Agreement shall be a tax-free reorganization
under the Internal Revenue Code of 1986, as amended (the "Code").
(b) Upon consummation of the transactions described in paragraph (a) of this
Agreement, each Paragon Fund shall distribute in complete liquidation to its
respective shareholders of record as of the Exchange Date the Shares received by
it, each shareholder being entitled to receive that number of Shares equal to
the proportion which the number of shares of beneficial interest of the
applicable class of the Paragon Fund held by such shareholder bears to the
number of such shares of such class of the Paragon Fund outstanding on such
date. If the Paragon shareholder of record is a financial organization
authorized to act in a fiduciary, advisory, custodial or similar capacity, that
shareholder will receive One Group Fiduciary Class Shares. All other Paragon
Class A shareholders will receive One Group Class A Shares. Shareholders of
record holding Paragon Class B Shares, other than Class B shareholders of
Paragon Money Market, will receive One Group Class B shares. Paragon Money
Market Class B Shares will receive One Group Money Market Class A shares.
A-1
<PAGE>
II. AGREEMENT
One Group and Paragon represent, warrant and agree as follows:
1. REPRESENTATIONS AND WARRANTIES OF PARAGON. Paragon and each Paragon
Fund jointly and severally represent and warrant to and agree with One Group and
each One Group Fund that:
(a) Paragon is a business trust duly established and validly existing
under the laws of the Commonwealth of Massachusetts and has power to own all
of its properties and assets and to carry out its obligations under this
Agreement. Paragon and each Paragon Fund is not required to qualify as a
foreign association in any jurisdiction. Paragon and each Paragon Fund has
all necessary federal, state and local authorizations to carry on its
business as now being conducted and to fulfill the terms of this Agreement,
except as set forth in Section 1(l).
(b) Paragon is registered under the Investment Company Act of 1940, as
amended (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. Each Paragon Fund has elected to qualify and has qualified as a
regulated investment company under Part I of Subchapter M of the Code, as of
and since its first taxable year, and qualifies and intends to continue to
qualify as a regulated investment company for its taxable year ending upon
its liquidation. Each Paragon Fund has been a regulated investment company
under such sections of the Code at all times since its inception.
(c) The statements of assets and liabilities, statements of operations,
statements of changes in net assets and schedules of portfolio investments
(indicating their market values) for each Paragon Fund at and for the year
ended November 30, 1995, such statements and schedules having been audited
by Price Waterhouse LLP, independent accountants to Paragon, have been
furnished to One Group.
(d) The combined prospectus of the Paragon Funds dated March 30, 1995
(the "Paragon Prospectus") and the Statement of Additional Information for
the Paragon Funds dated March 30, 1995 and on file with the Securities and
Exchange Commission (the "Commission"), which have been previously furnished
to One Group, did not as of their dates and do not as of the date hereof
contain any untrue statement of a material fact or omit to state a material
fact required to be stated therein or necessary to make the statements
therein not misleading.
(e) There are no material legal, administrative or other proceedings
pending or, to the knowledge of Paragon or any Paragon Fund, threatened
against Paragon or any Paragon Fund which assert liability on the part of
Paragon or any Paragon Fund.
(f) There are no material contracts outstanding to which Paragon or any
Paragon Fund is a party, other than as disclosed in the Paragon Prospectus
and the corresponding Statement of Additional Information, or in the
Registration Statement and the Proxy Statement as defined herein.
(g) Neither Paragon nor any Paragon Fund has any known liabilities of a
material nature, contingent or otherwise, other than those shown as
belonging to it on its statement of assets and liabilities as of November
30, 1995, and those incurred in the ordinary course of Paragon's business as
an investment company since that date. Prior to the Exchange Date, Paragon
will advise One Group of all known material liabilities, contingent or
otherwise, incurred by it and each Paragon Fund subsequent to November 30,
1995, whether or not incurred in the ordinary course of business.
(h) As used in this Agreement, the term "Investments" shall mean each
Paragon Fund's investments shown on the schedule of its portfolio
investments as of November 30, 1995 referred to in Section 1(c) hereof, as
supplemented with such changes as Paragon or each Paragon Fund shall make
after November 30, 1995, which changes have been disclosed to One Group, and
A-2
<PAGE>
changes made on and after the date of this Agreement after advising One
Group of such proposed changes, and changes resulting from stock dividends,
stock split-ups, mergers and similar corporate actions.
(i) Each Paragon Fund has filed or will file all federal and state tax
returns which, to the knowledge of Paragon's officers, are required to be
filed by each Paragon Fund and has paid or will pay all federal and state
taxes shown to be due on said returns or on any assessments received by each
Paragon Fund. All tax liabilities of each Paragon Fund have been adequately
provided for on its books, and no tax deficiency or liability of any Paragon
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) As of both the Valuation Time and the Exchange Date and except for
shareholder approval as described in Section 8(a) and otherwise as described
in Section 1(1), Paragon on behalf of each Paragon Fund will have full
right, power and authority to sell, assign, transfer and deliver the
Investments and any other assets and liabilities of each Paragon Fund to be
transferred to the corresponding One Group Fund pursuant to this Agreement.
At the Exchange Date, subject only to the delivery of the Investments and
any such other assets and liabilities as contemplated by this Agreement, One
Group will, on behalf of each One Group Fund, acquire the Investments and
any such other assets subject to no encumbrances, liens or security
interests in favor of any third party creditor of Paragon or a Paragon Fund
and, except as described in Section 1(k), without any restrictions upon the
transfer thereof.
(k) No registration under the Securities Act of 1933, as amended (the
"1933 Act"), of any of the Investments would be required if they were, as of
the time of such transfer, the subject of a public distribution by either of
Paragon or One Group, except as previously disclosed to One Group by
Paragon.
(l) No consent, approval, authorization or order of any court or
governmental authority is required for the consummation by Paragon or any
Paragon Fund of the transactions contemplated by this Agreement, except such
as may be required under the 1933 Act, the Securities Exchange Act of 1934,
as amended (the "1934 Act"), the 1940 Act, state securities or blue sky laws
(which term as used herein shall include the laws of the District of
Columbia and of Puerto Rico) or the Hart-Scott-Rodino Antitrust Improvements
Act of 1976 (the "H-S-R Act").
(m) The registration statement (the "Registration Statement") filed with
the Commission by One Group on Form N-14 relating to the Shares issuable
hereunder, and the proxy statement of Paragon included therein (the "Proxy
Statement"), on the effective date of the Registration Statement and insofar
as they relate to Paragon and the Paragon Funds, (i) will comply in all
material respects with the provisions of the 1933 Act, the 1934 Act and the
1940 Act and the rules and regulations thereunder and (ii) will not contain
any untrue statement of a material fact or omit to state a material fact
required to be stated therein or necessary to make the statements therein
not misleading; and at the time of the shareholders' meeting referred to in
Section 8(a) below and on the Exchange Date, the prospectus contained in the
Registration Statement of which the Proxy Statement is a part (the
"Prospectus"), as amended or supplemented by any amendments or supplements
filed with the Commission by One Group, insofar as it relates to Paragon and
the Paragon Funds, will not contain any untrue statement of a material fact
or omit to state a material fact required to be stated therein or necessary
to make the statements therein not misleading; provided, however, that the
representations and warranties in this subsection shall apply only to
statements of fact relating to Paragon and any Paragon Fund contained in the
Registration Statement, the Prospectus or the Proxy Statement, or omissions
to state in any thereof a material fact relating to Paragon or any Paragon
Fund, as such Registration Statement, Prospectus and Proxy Statement shall
be furnished to Paragon in definitive form as soon as practicable following
effectiveness of the Registration Statement and before any public
distribution of the Prospectus or Proxy Statement.
A-3
<PAGE>
(n) All of the issued and outstanding shares of beneficial interest of
each Paragon Fund have been offered for sale and sold in conformity with all
applicable federal and state securities laws.
(o) Each of the Paragon Funds is qualified, and will at all times
through the Exchange Date qualify for taxation as a "regulated investment
company" under Sections 851 and 852 of the Code.
(p) At the Exchange Date, each of the Paragon Funds will have sold such
of its assets, if any, as necessary to assure that, after giving effect to
the acquisition of the assets pursuant to this Agreement, each of the One
Group Funds (othe than One Group Louisiana and One Group Gulf South) will
remain a "diversified company" within the meaning of Section 5(b) (l) of the
1940 Act and in compliance with such other mandatory investment restrictions
as are set forth in the One Group Prospectuses previously furnished to
Paragon.
2. REPRESENTATIONS AND WARRANTIES OF ONE GROUP. One Group and each One
Group Fund jointly and severally represent and warrant to and agree with Paragon
and each Paragon Fund that:
(a) One Group is a business trust duly established and validly existing
under the laws of The Commonwealth of Massachusetts and has power to carry
on its business as it is now being conducted and to carry out this
Agreement. One Group and each One Group Fund is not required to qualify as a
foreign association in any jurisdiction. One Group and each One Group Fund
has all necessary federal, state and local authorizations to own all of its
properties and assets and to carry on its business as now being conducted
and to fulfill the terms of this Agreement, except as set forth in Section
2(i).
(b) One Group 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. Each One Group Fund that has had active
operations prior to the Exchange Date, has elected to qualify and has
qualified as a regulated investment company under Part I of Subchapter M of
the Code, as of and since its first taxable year, and qualifies and intends
to continue to qualify as a regulated investment company for its taxable
year ending June 30, 1995. Each One Group Fund that has had actual
operations prior to the Exchange Date has been a regulated investment
company under such sections of the Code at all times since its inception.
(c) The statements of assets and liabilities, statements of operations,
statements of changes in net assets and schedules of investments (indicating
their market values) for each One Group Fund for the year ended June 30,
1995, such statements and schedules having been audited by Coopers &
Lybrand, independent accountants to One Group, have been furnished to
Paragon. Unaudited statements of assets and liabilities, statements of
operations, statements of changes in net assets and schedules of investments
(indicating their market values) for each One Group Fund as of December 31,
1995 have also been furnished to Paragon. Such statements of assets and
liabilities and schedules fairly present the financial position of the One
Group Funds as of their respective dates, and said statements of operations
and changes in net assets fairly reflect the results of its operations and
changes in financial position for the periods covered thereby in conformity
with generally accepted accounting principles.
(d) The prospectuses of each One Group Fund dated November 1, 1995,
other than those relating to the One Group Louisiana, One Group Growth and
One Group Gulf South, (collectively, the "One Group Prospectuses") and the
Statement of Additional Information for the One Group Funds, dated November
1, 1995, and on file with the Commission, which have been previously
furnished to Paragon, did not as of their dates and do not as of the date
hereof contain any untrue statement of a material fact or omit to state a
material fact required to be stated therein or necessary to make the
statements therein not misleading. The One Group Louisiana, One Group Growth
and One Group Gulf South Prospectuses and the Statements of Additional
Information, as amended, filed with the Commission on November 24, 1995,
which have been previously
A-4
<PAGE>
furnished to Paragon, did not as of their dates and do not as of the date
hereof contain any untrue statement of a material fact or omit to state a
material fact required to be stated therein or necessary to make the
statements therein not misleading.
(e) There are no material legal, administrative or other proceedings
pending or, to the knowledge of One Group or any One Group Fund, threatened
against One Group or any One Group Fund which assert liability on the part
of One Group or any One Group Fund.
(f) There are no material contracts outstanding to which One Group or
any One Group Fund is a party, other than as disclosed in the One Group
Prospectuses and the corresponding Statement of Additional Information or in
the Registration Statement.
(g) Neither One Group nor any One Group Fund has any known liabilities
of a material nature, contingent or otherwise, other than those shown on its
statement of assets and liabilities as of December 31, 1995 referred to
above and those incurred in the ordinary course of the business of One Group
as an investment company or any One Group Fund since such date. Prior to the
Exchange Date, One Group will advise Paragon of all known material
liabilities, contingent or otherwise, incurred by it and each One Group Fund
subsequent to December 31, 1995, whether or not incurred in the ordinary
course of business.
(h) Each One Group Fund has filed or will file all federal and state tax
returns which, to the knowledge of One Group's officers, are required to be
filed by each One Group Fund and has paid or will pay all federal and state
taxes shown to be due on said returns or on any assessments received by each
One Group Fund. All tax liabilities of each One Group Fund have been
adequately provided for on its books, and no tax deficiency or liability of
any One Group 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) No consent, approval, authorization or order of any governmental
authority is required for the consummation by One Group or any One Group
Fund of the transactions contemplated by this Agreement, except such as may
be required under the 1933 Act, the 1934 Act, the 1940 Act, state securities
or Blue Sky laws or the H-S-R Act.
(j) As of both the Valuation Time and the Exchange Date and otherwise
as described in Section 2 (i), One Group on behalf of each One Group Fund
will have full right, power and authority to purchase the Investments and
any other assets and assume the liabilities of each Paragon Fund to be
transferred to the corresponding One Group Fund pursuant to this Agreement.
(k) The Registration Statement, the Prospectus and the Proxy Statement,
on the effective date of the Registration Statement and insofar as they
relate to One Group and the One Group Funds: (i) will comply in all material
respects with the provisions of the 1933 Act, the 1934 Act and the 1940 Act
and the rules and regulations thereunder and (ii) will not contain any
untrue statement of a material fact or omit to state a material fact
required to be stated therein or necessary to make the statements therein
not misleading; and at the time of the shareholders' meeting referred to in
Section 8(a) and at the Exchange Date, the Prospectus, as amended or
supplemented by any amendments or supplements filed with the Commission by
One Group or any One Group Fund, will not contain any untrue statement of a
material fact or omit to state a material fact required to be stated therein
or necessary to make the statements therein not misleading; provided,
however, that none of the representations and warranties in this subsection
shall apply to statements in or omissions from the Registration Statement,
the Prospectus or the Proxy Statement made in reliance upon and in
conformity with information furnished by Paragon or any Paragon Fund for use
in the Registration Statement, the Prospectus or the Proxy Statement.
A-5
<PAGE>
(l) Shares to be issued to each Paragon Fund have been duly authorized
and, when issued and delivered pursuant to this Agreement and the
Prospectus, will be legally and validly issued and will be fully paid and
nonassessable by One Group and no shareholder of One Group will have any
preemptive right of subscription or purchase in respect thereof.
(m) The issuance of Shares pursuant to this Agreement will be in
compliance with all applicable federal and state securities laws.
(n) Each of One Group Money Market, One Group Bond, One Group Limited
Volatility, and One Group Equity is qualified and will at all times through
the Exchange Date qualify for taxation as a "regulated investment company"
under Sections 851 and 852 of the Code. Each of One Group Louisiana, One
Group Growth and One Group Gulf South, upon filing of its first income tax
return at the completion of its first taxable year, will elect to be a
regulated investment company and until such time will take all steps
necessary to ensure qualification as a regulated investment company.
3. REORGANIZATION. (a) Subject to the requisite shareholder approval as
described in Section 8(a) and to the other terms and conditions contained herein
(including each Paragon Fund's obligation to distribute to its respective
shareholders all of its investment company taxable income and net capital gain
as described in Section 9(k) hereof), Paragon and each Paragon Fund agree to
sell, assign, convey, transfer and deliver to the corresponding One Group Fund,
and One Group and each One Group Fund agree to acquire from the corresponding
Paragon Fund, on the Exchange Date all of the Investments and all of the cash
and other assets of each Paragon Fund in exchange for that number of Shares of
the corresponding One Group Fund provided for in Section 4 and the assumption by
the corresponding One Group Fund of all the liabilities of the Paragon Fund.
Pursuant to this Agreement, each Paragon Fund will, as soon as practicable after
the Exchange Date, distribute in liquidation all of the Shares received by it to
its shareholders in exchange for their shares of beneficial interest of such
Paragon Fund.
(b) Paragon, on behalf of each Paragon Fund, will pay or cause to be paid to
the corresponding One Group Fund any interest and cash dividends received by it
on or after the Exchange Date with respect to the Investments transferred to the
One Group Funds hereunder. Paragon, on behalf of each Paragon Fund, will
transfer to the corresponding One Group Fund any rights, stock dividends or
other securities received by Paragon or any Paragon Fund after the Exchange Date
as stock dividends or other distributions on or with respect to the Investments
transferred, which rights, stock dividends and other securities shall be deemed
included in the assets transferred to each One Group Fund at the Exchange Date
and shall not be separately valued, in which case any such distribution that
remains unpaid as of the Exchange Date shall be included in the determination of
the value of the assets of the Paragon Fund acquired by the corresponding One
Group Fund.
4. EXCHANGE DATE; VALUATION TIME. On the Exchange Date, One Group will
deliver to Paragon a number of Shares having an aggregate net asset value equal
to the value of the assets of the Corresponding Paragon Fund acquired by each
One Group Fund, less the value of the liabilities of such Paragon Fund assumed,
determined as hereafter provided in this Section 4.
(a) Subject to Section 4(d) hereof, the value of each Paragon Fund's net
assets will be computed as of the Valuation Time using the valuation procedures
for the corresponding One Group Fund as set forth in the One Group Prospectus
for the particular One Group Fund
(b) Subject to Section 4(d) hereof, the net asset value of a share of each
One Group Fund will be determined to the nearest full cent as of the Valuation
Time, using the valuation procedures set forth in the One Group Prospectus for
the particular One Group Fund.
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(c) Subject to Section 4(d), the Valuation Time shall be 4:00 p.m. Eastern
Standard time on March 22, 1996 or such earlier or later day as may be mutually
agreed upon in writing by the parties hereto (the "Valuation Time").
(d) No formula will be used to adjust the net asset value of any Paragon
Fund or One Group Fund to take into account differences in realized and
unrealized gains and losses.
(e) Each One Group Fund shall issue its Shares to the corresponding Paragon
Fund on one share deposit receipt registered in the name of the corresponding
Paragon Fund. Each Paragon Fund shall distribute in liquidation the Shares
received by it hereunder pro rata to its shareholders of each class of shares by
redelivering such share deposit receipt to One Group's transfer agent which will
as soon as practicable set up open accounts for each Paragon Fund shareholder in
accordance with written instructions furnished by Paragon.
(f) Each One Group Fund shall assume all liabilities of the corresponding
Paragon Fund, whether accrued or contingent, in connection with the acquisition
of assets and subsequent dissolution of the corresponding Paragon Fund or
otherwise, except that recourse for assumed liabilities relating to a particular
Paragon Fund will be limited to the corresponding One Group Fund.
5. EXPENSES, FEES, ETC. (a) Subject to subsections 5(b) through 5(e), all
fees and expenses, including accounting expenses, portfolio transfer taxes (if
any) or other similar expenses incurred in connection with the consummation by
One Group and Paragon of the transactions contemplated by this Agreement will be
paid by the party directly incurring such fees and expenses, except that the
costs of proxy materials and proxy solicitation, including legal expenses, will
be borne by the One Group; PROVIDED, HOWEVER, that such expenses will in any
event be paid by the party directly incurring such expenses if and to the extent
that the payment by the other party of such expenses would result in the
disqualification of any One Group Fund or any Paragon Fund, as the case may be,
as a "regulated investment company" within the meaning of Section 851 of the
Code.
(b) In the event the transactions contemplated by this Agreement are not
consummated by reason of Paragon being either unwilling or unable to go forward
(other than by reason of the nonfulfillment or failure of any condition to
Paragon's obligations referred to in Section 8(a) or Section 10) Paragon shall
pay directly all reasonable fees and expenses incurred by One Group in
connection with such transactions, including, without limitation, legal,
accounting and filing fees.
(c) In the event the transactions contemplated by this Agreement are not
consummated by reason of One Group being either unwilling or unable to go
forward (other than by reason of the nonfulfillment or failure of any condition
to One Group's obligations referred to in Section 8(a) or Section 9), One Group
shall pay directly all reasonable fees and expenses incurred by Paragon in
connection with such transactions, including without limitation legal,
accounting and filing fees.
(d) In the event the transactions contemplated by this Agreement are not
consummated for any reason other than (i) One Group or Paragon being either
unwilling or unable to go forward or (ii) the nonfulfillment or failure of any
condition to Paragon or One Group's obligations referred to in Section 8(a),
Section 9 or Section 10 of this Agreement, then each of Paragon and One Group
shall bear the expenses it has actually incurred in connection with such
transactions.
(e) Notwithstanding any other provisions of this Agreement, if for any
reason the transactions contemplated by this Agreement are not consummated, no
party shall be liable to the other party for any damages resulting therefrom,
including without limitation consequential damages, except as specifically set
forth above.
6. PERMITTED ASSETS. One Group agrees to advise Paragon promptly if at any
time prior to the Exchange Date the assets of any Paragon Fund include any
assets that the corresponding One Group Fund is not permitted, or reasonably
believes to be unsuitable for it, to acquire, including without limitation any
security that, prior to its acquisition by any Paragon Fund, One Group has
informed Paragon is unsuitable for the corresponding One Group Fund to acquire.
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7. EXCHANGE DATE. Delivery of the assets of the Paragon Funds to be
transferred, assumption of the liabilities of the Paragon Funds to be assumed,
and the delivery of Shares to be issued shall be made at the offices of Banc One
Investment Advisors Corporation at 9:00 am. on March 25, 1996, or at such other
time and date agreed to by Paragon and One Group, the date and time upon which
such delivery is to take place being referred to herein as the "Exchange Date."
8. SPECIAL MEETING OF SHAREHOLDERS; DISSOLUTION. (a) Paragon agrees to
call a special meeting of the shareholders of each Paragon Fund as soon as is
practicable after the effective date of the Registration Statement for the
purpose of considering the sale of all of the assets of each Paragon Fund to and
the assumption of all of the liabilities of each Paragon Fund by the
corresponding One Group Fund as herein provided, adopting this Agreement, and
authorizing the liquidation and dissolution of any Paragon Fund, and, except as
set forth in Section 13, it shall be a condition to the obligations of each of
the parties hereto that the holders of the shares of beneficial interest of each
Paragon Fund, and each class of shares of each Paragon Fund if such is required
under the 1940 Act, shall have approved this Agreement and the transactions
contemplated herein in the manner required by law and Paragon's Declaration of
Trust at such a meeting on or before the Valuation Time.
(b) Paragon and each Paragon Fund agree that the liquidation and dissolution
of each Paragon Fund will be effected in the manner provided in Paragon's
Declaration of Trust in accordance with applicable law, and that it will not
make any distributions of any Shares to the shareholders of a Paragon Fund
without first paying or adequately providing for the payment of all of such
Paragon Fund's known debts, obligations and liabilities.
(c) Each of One Group and Paragon will cooperate with the other, and each
will furnish to the other the information relating to itself required by the
1933 Act, the 1934 Act and the 1940 Act and the rules and regulations thereunder
to be set forth in the Registration Statement, including the Prospectus and the
Proxy Statement.
9. CONDITIONS TO ONE GROUP'S OBLIGATIONS. The obligations of One Group and
each One Group Fund hereunder shall be subject to the following conditions:
(a) That this Agreement shall have been adopted and the transactions
contemplated hereby, including the liquidation and dissolution of the
Paragon Funds, shall have been approved as set forth in Section 8(a).
(b) Paragon shall have furnished to One Group a statement of each
Paragon Fund's assets and liabilities, with values determined as provided in
Section 4 of this Agreement, together with a list of Investments with their
respective tax costs, all as of the Valuation Time, certified on Paragon's
behalf by its President (or any Vice President) and Treasurer, and a
certificate of both such officers, dated the Exchange Date, to the effect
that as of the Valuation Time and as of the Exchange Date there has been no
material adverse change in the financial position of any Paragon Fund since
November 30, 1995, other than changes in the Investments since that date or
changes in the market value of the Investments, or changes due to net
redemptions of shares of the Paragon Funds, dividends paid or losses from
operations.
(c) As of the Valuation Time and as of the Exchange Date, all
representations and warranties of Paragon and each Paragon Fund made in this
Agreement are true and correct in all material respects as if made at and as
of such dates, Paragon and each Paragon Fund has complied with all the
agreements and satisfied all the conditions on its part to be performed or
satisfied at or prior to each of such dates, and Paragon shall have
furnished to One Group a statement, dated the Exchange Date, signed by
Paragon's President (or any Vice President) and Treasurer certifying those
facts as of such dates.
(d) Paragon shall have delivered to One Group a letter from Price
Waterhouse LLP dated the Exchange Date stating that such firm reviewed the
federal and state income tax returns of each Paragon Fund for the year ended
November 30, 1995 and that, in the course of such review, nothing came to
their attention which caused them to believe that such returns did not
properly
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reflect, in all material respects, the federal and state income taxes of
each Paragon Fund for the periods covered thereby, or that each Paragon Fund
would not qualify as a regulated investment company for federal income tax
purposes.
(e) There shall not be any material litigation pending with respect to
the matters contemplated by this Agreement.
(f) One Group shall have received an opinion of Hale and Dorr, in form
reasonably satisfactory to One Group and dated the Exchange Date, to the
effect that (i) Paragon is a business trust duly established and validly
existing under the laws of the Commonwealth of Massachusetts, and neither
Paragon nor any Paragon Fund is, to the knowledge of such counsel, required
to qualify to do business as a foreign association in any jurisdiction, (ii)
this Agreement has been duly authorized, executed, and delivered by Paragon
and, assuming that the Registration Statement, the Prospectus and the Proxy
Statement comply with the 1933 Act, the 1934 Act and the 1940 Act and
assuming due authorization, execution and delivery of this Agreement by One
Group, is a valid and binding obligation of Paragon, (iii) Paragon and each
Paragon Fund has power to sell, assign, convey, transfer and deliver the
Investments and other assets contemplated hereby and, upon consummation of
the transactions contemplated hereby in accordance with the terms of this
Agreement, Paragon and each Paragon Fund will have duly sold, assigned,
conveyed, transferred and delivered such Investments and other assets to One
Group, (iv) the execution and delivery of this Agreement did not, and the
consummation of the transactions contemplated hereby will not, violate
Paragon's Declaration of Trust, or Bylaws, as amended, or any provision of
any agreement known to such counsel to which Paragon or any Paragon Fund is
a party or by which it is bound, it being understood that with respect to
investment restrictions as contained in Paragon's Declaration of Trust, or
Bylaws, or then-current prospectus or statement of additional information,
such counsel may rely upon a certificate of an officer of Paragon whose
responsibility it is to advise Paragon with respect to such matters and (v)
no consent, approval, authorization or order of any court or governmental
authority is required for the consummation by Paragon or any Paragon Fund of
the transactions contemplated hereby, 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 and the H-S-R Act, and it
being understood that such opinion shall not be deemed to apply to One
Group's compliance obligations under the 1933 Act, 1934 Act, 1940 Act, state
securities or blue sky laws and H-S-R Act. For purposes of analysis
regarding the 1940 Act, Hale & Dorr may assume as fact that the Paragon
Funds and the One Group Funds may be considered affiliated persons or
affiliated persons of an affiliated person solely by reason of having a
common investment adviser.
(g) One Group shall have received an opinion of Ropes & Gray, counsel to
One Group addressed to The One Group and each One Group Fund, in form
reasonably satisfactory to One Group and dated the Exchange Date, to the
effect that for Federal income tax purposes (i) no gain or loss will be
recognized by any Paragon Fund upon the transfer of the assets to the
corresponding One Group Fund in exchange for Shares and the assumption by
such One Group Fund of the liabilities of the Paragon Fund or upon the
distribution of Shares by the Paragon Fund to its shareholders in
liquidation; (ii) no gain or loss will be recognized by the shareholders of
any Paragon Fund upon the exchange of their shares for Shares; (iii) the
basis of the Shares a Paragon shareholder receives in connection with the
transaction will be the same as the basis of his or her Paragon Fund shares
exchanged therefor; (iv) a Paragon shareholder's holding period for his or
her Shares will be determined by including the period for which he or she
held the Paragon Fund shares exchanged therefor, provided that he or she
held such Paragon Fund shares as capital assets; (v) no gain or loss will be
recognized by any One Group Fund upon the receipt of the assets of the
corresponding Paragon Fund in exchange for Shares and the assumption by the
One Group Fund of the liabilities of the corresponding Paragon Fund; (vi)
the basis in the hands of the One Group Fund of the assets of the
corresponding Paragon Fund transferred to the One Group Fund in the
transaction will be the same as the basis of the assets in the hands of the
corresponding
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Paragon Fund immediately prior to the transfer; and (vii) the holding
periods of the assets of the corresponding Paragon Fund in the hands of the
One Group Fund will include the periods for which such assets were held by
the corresponding Paragon Fund.
(h) The assets of each Paragon Fund to be acquired by the corresponding
One Group Fund will include no assets which the corresponding One Group
Fund, by reason of limitations contained in its Declaration of Trust or of
investment restrictions disclosed in the One Group Prospectuses in effect on
the Exchange Date, may not properly acquire.
(i) The Registration Statement shall have become effective under the
1933 Act and applicable blue sky provisions, and no stop order suspending
such effectiveness shall have been instituted or, to the knowledge of One
Group contemplated by the Commission and or any state regulatory authority.
(j) All proceedings taken by Paragon in connection with the
transactions contemplated by this Agreement and all documents incidental
thereto reasonably shall be satisfactory in form and substance to One Group
and Ropes & Gray.
(k) Prior to the Exchange Date, each Paragon 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 November 30,
1995 and the short taxable year beginning on December 1, 1995 and ending on
the Exchange Date (computed without regard to any deduction for dividends
paid), and all of its net capital gain realized in its taxable year ended
November 30, 1995 and the short taxable year beginning on December 1, 1995
and ending on the Exchange Date (after reduction for any capital loss
carryover).
(l) Paragon shall have furnished to One Group a certificate, signed by
the President (or any Vice President) and the Treasurer of Paragon, as to
the tax cost to One Group of the securities delivered to One Group pursuant
to this Agreement, together with any such other evidence as to such tax cost
as One Group may reasonably request.
(m) Paragon's custodian shall have delivered to One Group a certificate
identifying all of the assets of each Paragon Fund held by such custodian as
of the Valuation Time.
(n) Paragon's transfer agent shall have provided to One Group (i) the
originals or true copies of all of the records of each Paragon Fund in the
possession of such transfer agent as of the Exchange Date, (ii) a
certificate setting forth the number of shares of each class of Paragon Fund
outstanding as of the Valuation Time and (iii) the name and address of each
holder of record of any such shares of each Paragon Fund and the number of
shares of each class held of record by each such shareholder.
(o) All of the issued and outstanding shares of beneficial interest of
each Paragon Fund shall have been offered for sale and sold in conformity
with all applicable federal or state securities or blue sky laws and, to the
extent that any audit of the records of Paragon or any Paragon Fund or its
transfer agent by One Group or its agents shall have revealed otherwise,
either (i) Paragon and each Paragon Fund shall have taken all actions that
in the reasonable opinion of One Group or Ropes & Gray are necessary to
remedy any prior failure on the part of Paragon to have offered for sale and
sold such shares in conformity with such laws or (ii) Paragon shall have
furnished (or caused to be furnished) surety, or deposited (or caused to be
deposited) assets in escrow, for the benefit of One Group in amounts
sufficient and upon terms satisfactory, in the opinion of One Group or its
counsel, to indemnify One Group against any expense, loss, claim, damage or
liability whatsoever that may be asserted or threatened by reason of such
failure on the part of Paragon to have offered and sold such shares in
conformity with such laws.
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(p) Paragon shall have duly executed and delivered to One Group bills of
sale, assignments, certificates and other instruments of transfer ("Transfer
Documents") as One Group may deem necessary or desirable to transfer all of
Paragon's and each Paragon Fund's entire right, title and interest in and to
the Investments and all other assets of each Paragon Fund.
10. CONDITIONS TO PARAGON'S OBLIGATIONS. The obligations of Paragon and
each Paragon Fund hereunder shall be subject to the following conditions:
(a) This Agreement shall have been adopted and the transactions
contemplated hereby, including the liquidation and dissolution of the
Paragon Funds, shall have been approved as described in Section 8(a).
(b) One Group shall have furnished to Paragon a Statement of each One
Group Fund's net assets, together with a list of portfolio holdings with
values determined as provided in Section 4, all as of the Valuation Time,
certified on One Group's behalf by its President (or any Vice President) and
Treasurer (or any Assistant Treasurer), and a certificate of both such
officers, dated the Exchange Date, to the effect that as of the Valuation
Time and as of the Exchange Date there has been no material adverse change
in the financial position of any One Group Fund since December 31, 1995,
other than changes in its portfolio securities since that date, changes in
the market value of its portfolio securities, changes due to net
redemptions, dividends paid or losses from operations.
(c) One Group shall have executed and delivered to Paragon an Assumption
of Liabilities dated as of the Exchange Date pursuant to which each One
Group Fund will assume all of the liabilities of the corresponding Paragon
Fund existing at the Valuation Time in connection with the transactions
contemplated by this Agreement.
(d) As of the Valuation Time and as of the Exchange Date, all
representations and warranties of One Group and each One Group Fund made in
this Agreement are true and correct in all material respects as if made at
and as of such dates, One Group and each One Group Fund has complied with
all of the agreements and satisfied all of the conditions on its part to be
performed or satisfied at or prior to each of such dates, and One Group
shall have furnished to Paragon a statement, dated the Exchange Date, signed
by One Group's President (or any Vice President) and Treasurer certifying
those facts as of such dates.
(e) There shall not be any material litigation pending with respect to
the matters contemplated by this Agreement.
(f) Paragon shall have received an opinion of Ropes & Gray, in form
reasonably satisfactory to Paragon and dated the Exchange Date, to the
effect that (i) One Group is a business trust and validly existing in
conformity with the laws of The Commonwealth of Massachusetts, and, (to the
knowledge of such counsel), neither One Group nor any One Group Fund is
required to qualify to do business as a foreign association in any
jurisdiction, (ii) the Shares to be delivered to Paragon as provided for by
this Agreement are duly authorized and upon such delivery will be validly
issued and will be fully paid and nonassessable by One Group and no
shareholder of One Group has any preemptive right to subscription or
purchase in respect thereof, (iii) this Agreement has been duly authorized,
executed and delivered by One Group and, assuming that the Prospectus, the
Registration Statement and the Proxy Statement comply with the 1933 Act, the
1934 Act and the 1940 Act and assuming due authorization, execution and
delivery of this Agreement by Paragon, is a valid and binding obligation of
One Group, (iv) the execution and delivery of this Agreement did not, and
the consummation of the transactions contemplated hereby will not, violate
One Group's Declaration of Trust, as amended, or Code of Regulations, or any
provision of any agreement known to such counsel to which One Group or any
One Group Fund is a party or by which it is bound, it being understood that
with respect to investment restrictions as contained in One Group's
Declaration of Trust, as amended, Code of Regulations or then-current
prospectus or statement of additional information of each One Group Fund,
such counsel may rely upon a
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certificate of an officer of One Group whose responsibility it is to advise
One Group with respect to such matters, (v) no consent, approval,
authorization or order of any court or governmental authority is required
for the consummation by One Group or any One Group Fund of the transactions
contemplated herein, 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 and the H-S-R Act and it being understood that
such opinion shall not be deemed to apply to Paragon's compliance
obligations under the 1933 Act, 1934 Act, 1940 Act, state securities or blue
sky laws and the H-S-R Act; and (vi) the Registration Statement has become
effective under the 1933 Act, and to the best of the knowledge of such
counsel, no stop order suspending the effectiveness of the Registration
Statement has been issued and no proceedings for that purpose have been
instituted or are pending or contemplated under the 1933 Act.
(g) Paragon shall have received an opinion of Ropes & Gray addressed to
Paragon, each Paragon Fund, and in a form reasonably satisfactory to Paragon
dated the Exchange Date, with
respect to the matters specified in Section 9(g) of this Agreement.
(h) All proceedings taken by One Group in connection with the
transactions contemplated by this Agreement and all documents incidental
thereto reasonably shall be satisfactory in form and substance to Paragon
and Hale and Dorr.
(i) The Registration Statement shall have become effective under the
1933 Act and applicable blue sky provisions, and no stop order suspending
such effectiveness shall have been instituted or, to the knowledge of
Paragon, contemplated by the Commission or any state regulatory authority.
11. INDEMNIFICATION. (a) The Paragon Funds will indemnify and hold
harmless One Group, its trustees and its officers (for purposes of this
subsection, 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 Paragon or any Paragon
Fund contained in the Registration Statement, the Prospectus or the Proxy
Statement 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 Paragon or any Paragon Fund required to be
stated therein or necessary to make the statements relating to Paragon or any
Paragon 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 Paragon. The
Indemnified Parties will notify Paragon 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 Section 11(a). Paragon shall be entitled to
participate at its own expense in the defense of any claim, action, suit or
proceeding covered by this Section 11(a), 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 Paragon 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 expense. The Paragon
Funds' obligation under this Section 11(a) to indemnify and hold harmless the
Indemnified Parties shall constitute a guarantee of payment so that the Paragon
Funds will pay in the first instance any expenses, losses, claims, damages and
liabilities required to be paid by it under this Section 11(a) without the
necessity of the Indemnified Parties first paying the same.
(b) The One Group Funds will indemnify and hold harmless Paragon, its
trustees and its officers (for purposes of this subparagraph, 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
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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 One Group or any One
Group Fund contained in the Registration Statement, the Prospectus or the Proxy
Statement, 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 One Group or any One Group Fund required
to be stated therein or necessary to make the statements relating to One Group
or any One Group 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 One
Group. The Indemnified Parties will notify One Group 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 any Indemnified
Party as to any matters covered by this Section 11(b). One Group shall be
entitled to participate at its own expense in the defense of any claim, action,
suit or proceeding covered by this Section 11(b), 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 One Group 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
One Group Funds' obligation under this Section 11(b) to indemnify and hold
harmless the Indemnified Parties shall constitute a guarantee of payment so that
the One Group Funds will pay in the first instance any expenses, losses, claims,
damages and liabilities required to be paid by it under this Section 11(b)
without the necessity of the Indemnified Parties first paying the same.
12. NO BROKER, ETC. Each of One Group and Paragon represents that there is
no person who has dealt with it 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. TERMINATION. One Group and Paragon may, by mutual consent of their
respective trustees, terminate this Agreement, and One Group or Paragon, after
consultation with counsel and by consent of their respective trustees or an
officer authorized by such trustees, may waive any condition to their respective
obligations hereunder. If the transactions contemplated by this Agreement have
not been substantially completed by June 30, 1996, this Agreement shall
automatically terminate on that date unless a later date is agreed to by One
Group and Paragon.
Notwithstanding any other provision in this Agreement, in the event
shareholder approval of this Agreement and the transactions contemplated by this
Agreement is obtained with respect to only one or more Paragon Funds but not all
of the Paragon Funds, One Group and Paragon agree to consummate those
transactions with respect to those Paragon Funds whose shareholders have
approved this Agreement and those transactions.
In the event that shareholder approval of this Agreement and the
transactions contemplated by this Agreement is required, but not obtained with
respect to only one class of shares of a Paragon Fund, the transaction with
respect to that Paragon Fund will not be consummated unless and until
shareholder approval is obtained with respect to both classes.
14. RULE 145. Pursuant to Rule 145 under the 1933 Act, One Group will, in
connection with the issuance of any Shares to any person who at the time of the
transaction contemplated hereby is deemed to be an affiliate of a party to the
transaction pursuant to Rule 145 (c), cause to be affixed upon the certificates
issued to such person (if any) a legend as follows:
"THESE SHARES HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933,
AS AMENDED, AND MAY NOT BE SOLD OR OTHERWISE TRANSFERRED EXCEPT TO THE
ONE GROUP OR ITS PRINCIPAL UNDERWRITER UNLESS (i) A REGISTRATION
STATEMENT WITH RESPECT THERETO IS EFFECTIVE UNDER THE
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SECURITIES ACT OF 1933, AS AMENDED, OR (ii) IN THE OPINION OF COUNSEL
REASONABLY SATISFACTORY TO THE ONE GROUP SUCH REGISTRATION IS NOT
REQUIRED."
and, further, One Group will issue stop transfer instructions to One Group's
transfer agent with respect to such shares. Paragon will provide One Group on
the Exchange Date with the name of any shareholder of the Paragon Funds who is
to the knowledge of Paragon an affiliate of Paragon on such date.
15. COVENANTS, ETC. DEEMED MATERIAL. All covenants, agreements,
representations and warranties made under this Agreement and any certificates
delivered pursuant to this Agreement shall be deemed to have been material and
relied upon by each of the parties, notwithstanding any investigation made by
them or on their behalf.
16. SOLE AGREEMENT; AMENDMENTS. This Agreement supersedes all previous
correspondence and oral communications between the parties regarding the subject
matter hereof, constitutes the only understanding with respect to such subject
matter, may not be changed except by a letter of agreement signed by each party
hereto, and shall be construed in accordance with and governed by the laws of
The Commonwealth of Massachusetts.
17. AGREEMENT AND DECLARATION OF TRUST. Paragon Portfolio is a business
trust organized under Massachusetts law and under a Declaration of Trust, to
which reference is hereby made and a copy of which is on file at the office of
the Secretary of The Commonwealth of Massachusetts and elsewhere as required by
law, and to any and all amendments thereto so filed or hereafter filed. The
obligations of "The Paragon Funds" entered into in the name or on behalf thereof
by any of the Trustees, officers, employees or agents are made not individually,
but in such capacities, and are not binding upon any of the Trustees, officers,
employees, agents or shareholders of Paragon personally, but bind only the
assets of Paragon, and all persons dealing with any of the series or funds of
Paragon, such as the Paragon Funds, must look solely to the assets of Paragon
belonging to such series or funds for the enforcement of any claims against
Paragon.
The names "The One Group" and "Trustees of The One Group" refer respectively
to One Group and the Trustees, as trustees but not individually or personally,
acting from time to time under a Declaration of Trust dated May 23, 1985 to
which reference is hereby made and a copy of which is on file at the office of
the Secretary of The Commonwealth of Massachusetts and elsewhere as required by
law, and to any and all amendments thereto so filed or hereafter filed. The
obligations of "The One Group" entered into in the name or on behalf thereof by
any of the Trustees, representatives or agents are made not individually, but in
such capacities, and are not binding upon any of the Trustees, Shareholders or
representatives of One Group personally, but bind only the assets of One Group
such as the One Group Funds, must look solely to the assets of One Group
belonging to such series for the enforcement of any claims against One Group.
This Agreement may be executed in any number of counter-parts, each of
which, when executed and delivered, shall be deemed to be an original.
PARAGON PORTFOLIO
By: ________Michael J. Richman________
THE ONE GROUP
By: __________Mark A. Dillon__________
A-14
<PAGE>
PARAGON TREASURY MONEY MARKET FUND
PROXY FOR A SPECIAL MEETING OF SHAREHOLDERS,
MARCH , 1996
THIS PROXY IS SOLICITED ON BEHALF OF THE TRUSTEES OF PARAGON PORTFOLIO.
The undersigned hereby appoints and each of them with full
power of substitution as proxies of the undersigned, to vote, as designated
below, at the Special Meeting of Shareholders of the Paragon Treasury Money
Market Fund ("Paragon Money Market") on March , 1996 at 9:00 am., Central
standard time, and at any adjournments thereof, all of the shares of beneficial
interest in Paragon Money Market which the undersigned would be entitled to vote
upon the following matter if personally present.
1. Approval of an Agreement and Plan of Reorganization pursuant to which
all of the assets and liabilities of Paragon Money Market will be transferred to
The One Group U.S. Treasury Securities Money Market Fund ("One Group Money
Market") in return for Class A and Fiduciary class shares of One Group Money
Market, followed by the dissolution and liquidation of Paragon Money Market, and
the distribution of shares of One Group Money Market to the shareholders of
Paragon Money Market.
FOR AGAINST ABSTAIN
/ / / / / /
THIS PROXY WHEN PROPERLY EXECUTED WILL BE VOTED IN THE MANNER DIRECTED
HEREIN BY THE UNDERSIGNED SHAREHOLDER. IF NO DIRECTION IS MADE, THIS PROXY WILL
BE VOTED FOR PROPOSAL (L). IN THEIR DISCRETION, THE PROXIES ARE AUTHORIZED TO
VOTE UPON SUCH OTHER MATTERS AS MAY PROPERLY COME BEFORE THE MEETING. THE
TRUSTEES RECOMMEND A VOTE FOR THE PROPOSAL ON THE REVERSE SIDE.
NOTE: Please sign exactly as the name appears on this card. EACH Joint owner
must sign the proxy. When signing as executor, administrator, attorney, trustee
or guardian, or as custodian for a minor, please give the FULL title of such. If
a corporation, please give the FULL corporate name and indicate the signer's
office. If a partner, please sign in the partnership name.
--------------------------------------
Signature of Shareholder(s)
--------------------------------------
Signature of Shareholder(s)
Dated: _______________________ , 1996.
PLEASE EXECUTE, SIGN, DATE, AND RETURN THIS PROXY
PROMPTLY USING THE ENCLOSED ENVELOPE
<PAGE>
PARAGON SHORT-TERM GOVERNMENT FUND
PROXY FOR A SPECIAL MEETING OF SHAREHOLDERS,
MARCH , 1996
THIS PROXY IS SOLICITED ON BEHALF OF THE TRUSTEES OF PARAGON PORTFOLIO.
The undersigned hereby appoints and each of them with full
power of substitution as proxies of the undersigned, to vote, as designated
below, at the Special Meeting of Shareholders of Paragon Short-Term Government
Fund ("Paragon Government") on March , 1996 at 9:00 am., Central standard
time, and at any adjournments thereof, all of the shares of beneficial interest
in Paragon Government which the undersigned would be entitled to vote upon the
following matter if personally present.
1. Approval of an Agreement and Plan of Reorganization pursuant to which
all of the assets and liabilities of Paragon Government will be transferred to
The One Group Limited Volatility Bond Fund ("One Group Limited Volatility") in
return for Class A, Class B and Fiduciary class shares of One Group Limited
Volatility, followed by the dissolution and liquidation of Paragon Government,
and the distribution of shares of One Group Limited Volatility to the
shareholders of Paragon Government.
FOR AGAINST ABSTAIN
/ / / / / /
THIS PROXY WHEN PROPERLY EXECUTED WILL BE VOTED IN THE MANNER DIRECTED
HEREIN BY THE UNDERSIGNED SHAREHOLDER. IF NO DIRECTION IS MADE, THIS PROXY WILL
BE VOTED FOR PROPOSAL (L). IN THEIR DISCRETION, THE PROXIES ARE AUTHORIZED TO
VOTE UPON SUCH OTHER MATTERS AS MAY PROPERLY COME BEFORE THE MEETING. THE
TRUSTEES RECOMMEND A VOTE FOR THE PROPOSAL ON THE REVERSE SIDE.
NOTE: Please sign exactly as the name appears on this card. EACH Joint owner
must sign the proxy. When signing as executor, administrator, attorney, trustee
or guardian, or as custodian for a minor, please give the FULL title of such. If
a corporation, please give the FULL corporate name and indicate the signer's
office. If a partner, please sign in the partnership name.
--------------------------------------
Signature of Shareholder(s)
--------------------------------------
Signature of Shareholder(s)
Dated: _______________________ , 1996.
PLEASE EXECUTE, SIGN, DATE, AND RETURN THIS PROXY
PROMPTLY USING THE ENCLOSED ENVELOPE
<PAGE>
PARAGON INTERMEDIATE-TERM BOND FUND
PROXY FOR A SPECIAL MEETING OF SHAREHOLDERS,
MARCH , 1996
THIS PROXY IS SOLICITED ON BEHALF OF THE TRUSTEES OF PARAGON PORTFOLIO.
The undersigned hereby appoints and each of them with full
power of substitution as proxies of the undersigned, to vote, as designated
below, at the Special Meeting of Shareholders of Paragon Intermediate Term Bond
Fund ("Paragon Bond") on March , 1996 at 9:00 am., Central standard time, and
at any adjournments thereof, all of the shares of beneficial interest in Paragon
Intermediate which the undersigned would be entitled to vote upon the following
matter if personally present.
1. Approval of an Agreement and Plan of Reorganization pursuant to which
all of the assets and liabilities of Paragon Bond will be transferred to The One
Group Government Bond Fund ("One Group Bond") in return for Class A, Class B and
Fiduciary class shares of One Group Bond, followed by the dissolution and
liquidation of Paragon Bond, and the distribution of shares of One Group Bond to
the shareholders of Paragon Bond.
FOR AGAINST ABSTAIN
/ / / / / /
THIS PROXY WHEN PROPERLY EXECUTED WILL BE VOTED IN THE MANNER DIRECTED
HEREIN BY THE UNDERSIGNED SHAREHOLDER. IF NO DIRECTION IS MADE, THIS PROXY WILL
BE VOTED FOR PROPOSAL (L). IN THEIR DISCRETION, THE PROXIES ARE AUTHORIZED TO
VOTE UPON SUCH OTHER MATTERS AS MAY PROPERLY COME BEFORE THE MEETING. THE
TRUSTEES RECOMMEND A VOTE FOR THE PROPOSAL ON THE REVERSE SIDE.
NOTE: Please sign exactly as the name appears on this card. EACH Joint owner
must sign the proxy. When signing as executor, administrator, attorney, trustee
or guardian, or as custodian for a minor, please give the FULL title of such. If
a corporation, please give the FULL corporate name and indicate the signer's
office. If a partner, please sign in the partnership name.
--------------------------------------
Signature of Shareholder(s)
--------------------------------------
Signature of Shareholder(s)
Dated: _______________________ , 1996.
PLEASE EXECUTE, SIGN, DATE, AND RETURN THIS PROXY
PROMPTLY USING THE ENCLOSED ENVELOPE
<PAGE>
PARAGON VALUE EQUITY INCOME FUND
PROXY FOR A SPECIAL MEETING OF SHAREHOLDERS,
MARCH , 1996
THIS PROXY IS SOLICITED ON BEHALF OF THE TRUSTEES OF PARAGON PORTFOLIO.
The undersigned hereby appoints and each of them with full
power of substitution as proxies of the undersigned, to vote, as designated
below, at the Special Meeting of Shareholders of Paragon Value Equity Income
Fund ("Paragon Equity") on March , 1996 at 9:00 am., Central standard time,
and at any adjournments thereof, all of the shares of beneficial interest in
Paragon Equity which the undersigned would be entitled to vote upon the
following matter if personally present.
1. Approval of an Agreement and Plan of Reorganization pursuant to which
all of the assets and liabilities of Paragon Equity will be transferred to The
One Group Income Equity Fund ("One Group Equity") in return for Class A, Class B
and Fiduciary class shares of One Group Equity, followed by the dissolution and
liquidation of Paragon Equity, and the distribution of shares of One Group
Equity to the shareholders of Paragon Equity.
FOR AGAINST ABSTAIN
/ / / / / /
THIS PROXY WHEN PROPERLY EXECUTED WILL BE VOTED IN THE MANNER DIRECTED
HEREIN BY THE UNDERSIGNED SHAREHOLDER. IF NO DIRECTION IS MADE, THIS PROXY WILL
BE VOTED FOR PROPOSAL (L). IN THEIR DISCRETION, THE PROXIES ARE AUTHORIZED TO
VOTE UPON SUCH OTHER MATTERS AS MAY PROPERLY COME BEFORE THE MEETING. THE
TRUSTEES RECOMMEND A VOTE FOR THE PROPOSAL ON THE REVERSE SIDE.
NOTE: Please sign exactly as the name appears on this card. EACH Joint owner
must sign the proxy. When signing as executor, administrator, attorney, trustee
or guardian, or as custodian for a minor, please give the FULL title of such. If
a corporation, please give the FULL corporate name and indicate the signer's
office. If a partner, please sign in the partnership name.
--------------------------------------
Signature of Shareholder(s)
--------------------------------------
Signature of Shareholder(s)
Dated: _______________________ , 1996.
PLEASE EXECUTE, SIGN, DATE, AND RETURN THIS PROXY
PROMPTLY USING THE ENCLOSED ENVELOPE
<PAGE>
PARAGON LOUISIANA TAX-FREE FUND
PROXY FOR A SPECIAL MEETING OF SHAREHOLDERS,
MARCH , 1996
THIS PROXY IS SOLICITED ON BEHALF OF THE TRUSTEES OF PARAGON PORTFOLIO.
The undersigned hereby appoints and each of them with full
power of substitution as proxies of the undersigned, to vote, as designated
below, at the Special Meeting of Shareholders of Paragon Louisiana Tax-Free Fund
("Paragon Louisiana") on March , 1996 at 9:00 am., Central standard time, and
at any adjournments thereof, all of the shares of beneficial interest in Paragon
Louisiana which the undersigned would be entitled to vote upon the following
matter if personally present.
1. Approval of an Agreement and Plan of Reorganization pursuant to which
all of the assets and liabilities of Paragon Louisiana will be transferred to
The One Group Louisiana Municipal Bond Fund ("One Group Louisiana") in return
for Class A, Class B and Fiduciary class shares of One Group Louisiana, followed
by the dissolution and liquidation of Paragon Louisiana, and the distribution of
shares of One Group Louisiana to the shareholders of Paragon Louisiana.
FOR AGAINST ABSTAIN
/ / / / / /
THIS PROXY WHEN PROPERLY EXECUTED WILL BE VOTED IN THE MANNER DIRECTED
HEREIN BY THE UNDERSIGNED SHAREHOLDER. IF NO DIRECTION IS MADE, THIS PROXY WILL
BE VOTED FOR PROPOSAL (L). IN THEIR DISCRETION, THE PROXIES ARE AUTHORIZED TO
VOTE UPON SUCH OTHER MATTERS AS MAY PROPERLY COME BEFORE THE MEETING. THE
TRUSTEES RECOMMEND A VOTE FOR THE PROPOSAL ON THE REVERSE SIDE.
NOTE: Please sign exactly as the name appears on this card. EACH Joint owner
must sign the proxy. When signing as executor, administrator, attorney, trustee
or guardian, or as custodian for a minor, please give the FULL title of such. If
a corporation, please give the FULL corporate name and indicate the signer's
office. If a partner, please sign in the partnership name.
--------------------------------------
Signature of Shareholder(s)
--------------------------------------
Signature of Shareholder(s)
Dated: _______________________ , 1996.
PLEASE EXECUTE, SIGN, DATE, AND RETURN THIS PROXY
PROMPTLY USING THE ENCLOSED ENVELOPE
<PAGE>
PARAGON VALUE GROWTH FUND
PROXY FOR A SPECIAL MEETING OF SHAREHOLDERS,
MARCH , 1996
THIS PROXY IS SOLICITED ON BEHALF OF THE TRUSTEES OF PARAGON PORTFOLIO.
The undersigned hereby appoints and each of them with full
power of substitution as proxies of the undersigned, to vote, as designated
below, at the Special Meeting of Shareholders of Paragon Value Growth Fund
("Paragon Growth") on March , 1996 at 9:00 am., Central standard time, and at
any adjournments thereof, all of the shares of beneficial interest in Paragon
Growth which the undersigned would be entitled to vote upon the following matter
if personally present.
1. Approval of an Agreement and Plan of Reorganization pursuant to which
all of the assets and liabilities of Paragon Growth will be transferred to The
One Group Value Growth Fund ("One Group Growth") in return for Class A, Class B
and Fiduciary class shares of One Group Growth, followed by the dissolution and
liquidation of Paragon Growth, and the distribution of shares of One Group
Growth to the shareholders of Paragon Growth.
FOR AGAINST ABSTAIN
/ / / / / /
THIS PROXY WHEN PROPERLY EXECUTED WILL BE VOTED IN THE MANNER DIRECTED
HEREIN BY THE UNDERSIGNED SHAREHOLDER. IF NO DIRECTION IS MADE, THIS PROXY WILL
BE VOTED FOR PROPOSAL (L). IN THEIR DISCRETION, THE PROXIES ARE AUTHORIZED TO
VOTE UPON SUCH OTHER MATTERS AS MAY PROPERLY COME BEFORE THE MEETING. THE
TRUSTEES RECOMMEND A VOTE FOR THE PROPOSAL ON THE REVERSE SIDE.
NOTE: Please sign exactly as the name appears on this card. EACH Joint owner
must sign the proxy. When signing as executor, administrator, attorney, trustee
or guardian, or as custodian for a minor, please give the FULL title of such. If
a corporation, please give the FULL corporate name and indicate the signer's
office. If a partner, please sign in the partnership name.
--------------------------------------
Signature of Shareholder(s)
--------------------------------------
Signature of Shareholder(s)
Dated: _______________________ , 1996.
PLEASE EXECUTE, SIGN, DATE, AND RETURN THIS PROXY
PROMPTLY USING THE ENCLOSED ENVELOPE
<PAGE>
PARAGON GULF SOUTH GROWTH FUND
PROXY FOR A SPECIAL MEETING OF SHAREHOLDERS,
MARCH , 1996
THIS PROXY IS SOLICITED ON BEHALF OF THE TRUSTEES OF PARAGON PORTFOLIO.
The undersigned hereby appoints and each of them with full
power of substitution as proxies of the undersigned, to vote, as designated
below, at the Special Meeting of Shareholders of Paragon Gulf South Growth Fund
("Paragon Gulf South") on March , 1996 at 9:00 am., Central standard time, and
at any adjournments thereof, all of the shares of beneficial interest in Paragon
Gulf South which the undersigned would be entitled to vote upon the following
matter if personally present.
1. Approval of an Agreement and Plan of Reorganization pursuant to which
all of the assets and liabilities of Paragon Gulf South will be transferred to
The One Group Gulf South Growth Fund ("One Group Gulf South") in return for
Class A, Class B and Fiduciary class shares of One Group Gulf South, followed by
the dissolution and liquidation of Paragon Gulf South, and the distribution of
shares of One Group Gulf South to the shareholders of Paragon Gulf South.
FOR AGAINST ABSTAIN
/ / / / / /
THIS PROXY WHEN PROPERLY EXECUTED WILL BE VOTED IN THE MANNER DIRECTED
HEREIN BY THE UNDERSIGNED SHAREHOLDER. IF NO DIRECTION IS MADE, THIS PROXY WILL
BE VOTED FOR PROPOSAL (L). IN THEIR DISCRETION, THE PROXIES ARE AUTHORIZED TO
VOTE UPON SUCH OTHER MATTERS AS MAY PROPERLY COME BEFORE THE MEETING. THE
TRUSTEES RECOMMEND A VOTE FOR THE PROPOSAL ON THE REVERSE SIDE.
NOTE: Please sign exactly as the name appears on this card. EACH Joint owner
must sign the proxy. When signing as executor, administrator, attorney, trustee
or guardian, or as custodian for a minor, please give the FULL title of such. If
a corporation, please give the FULL corporate name and indicate the signer's
office. If a partner, please sign in the partnership name.
--------------------------------------
Signature of Shareholder(s)
--------------------------------------
Signature of Shareholder(s)
Dated: _______________________ , 1996.
PLEASE EXECUTE, SIGN, DATE, AND RETURN THIS PROXY
PROMPTLY USING THE ENCLOSED ENVELOPE
<PAGE>
THE ONE GROUP
STATEMENT OF ADDITIONAL INFORMATION
This Statement of Additional Information contains information which may be
of interest to investors but which is not included in the Combined
Prospectus/Proxy Statement (the "Prospectus") of The One Group dated February
22, 1996 relating to the transfer of the assets and liabilities of Paragon
Treasury Money Market Fund, Paragon Short-Term Government Fund, Paragon
Intermediate-Term Bond Fund, Paragon Value Equity Income Fund, Paragon Louisiana
Fund Tax-Free Fund, Paragon Value Growth Fund, and Paragon Gulf South Fund to
One Group Money Market, One Group Limited Volatility, One Group Bond, One Group
Equity, One Group Louisiana, One Group Growth and One Group Gulf South,
respectively. This Statement of Additional Information is not a prospectus and
is authorized for distribution only when it accompanies or follows delivery of
the Prospectus. This Statement of Additional Information should be read in
conjunction with the Prospectus. A copy of the Prospectus may be obtained,
without charge, by writing The One Group Services Company, 3435 Stelzer Road,
Columbus, Oh 43219, or by calling 1-800-554-3862.
The Statement of Additional Information for The One Group dated November 1,
1995, as amended February 7, 1996, has been filed with the Securities and
Exchange Commission and is incorporated herein by reference. The Statement of
Additional Information for Paragon Portfolio dated March 30, 1995 has been filed
with the Securities and Exchange Commission and is incorporated herein by
reference.
Unaudited financial statements for Paragon Money Market, Paragon Government,
Paragon Bond, Paragon Equity, Paragon Louisiana, Paragon Growth and Paragon Gulf
South for the period ended May 31, 1995, are contained in the Paragon Portfolio
Semi-Annual Report, which was filed with the Securities and Exchange Commission
and is incorprated herein by reference.
THE DATE OF THIS STATEMENT OF ADDITIONAL INFORMATION IS FEBRUARY 22, 1996.
<PAGE>
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
-----
<S> <C>
Financial Statements of the Combined Funds on a pro-forma basis for the periods ended June 30, 1995 (One
Group Money Market, Paragon Money Market, One Group Limited Volatility, Paragon Government, One Group
Bond, Paragon Bond, One Group Equity and Paragon Equity) and May 31, 1995 (One Group Louisiana, Paragon
Louisiana, One Group Growth, Paragon Growth, One Group Gulf South and Paragon Gulf South).................
</TABLE>
<PAGE>
PARAGON PORTFOLIO
PARAGON TREASURY MONEY MARKET FUND
PARAGON SHORT-TERM GOVERNMENT FUND
PARAGON INTERMEDIATE-TERM BOND FUND
PARAGON VALUE EQUITY INCOME FUND
PARAGON LOUISIANA TAX-FREE FUND
PARAGON VALUE GROWTH FUND
PARAGON GULF SOUTH GROWTH FUND
THE ONE GROUP
ONE GROUP U.S. TREASURY SECURITIES MONEY MARKET FUND
ONE GROUP LIMITED VOLATILITY BOND FUND
ONE GROUP GOVERNMENT BOND FUND
ONE GROUP INCOME EQUITY FUND
ONE GROUP LOUISIANA MUNICIPAL BOND FUND
ONE GROUP VALUE GROWTH FUND
ONE GROUP GULF SOUTH GROWTH FUND
INTRODUCTION TO PROPOSED FUND MERGERS
The accompanying unaudited Pro Forma Combining Statements of Assets and
Liabilities, Statements of Operations, Financial Highlights, and Schedules of
Portfolio Investments reflect the accounts of Paragon Portfolios: Treasury Money
Market Fund, Short-Term Government Fund, Intermediate-Term Bond Fund and Value
Equity Income Fund and The One Group: U.S. Treasury Securities Money Market
Fund, Limited Volatility Bond Fund, Government Bond Fund and Income Equity Fund
as of and for the year ended June 30, 1995 and Paragon Portfolios: Louisiana
Tax-Free Fund, Value Growth Fund and Gulf South Growth Fund and The One Group:
Louisiana Municipal Bond Fund, Value Growth Fund and Gulf South Growth Fund as
of and for the year ended May 31, 1995. These statements have been derived from
the funds' books and records utilized in calculating daily net asset value at
June 30,1995 and at May 31, 1995, respectively.
- ----
70
<PAGE>
- --------------------------------------------------------------------------------
PARAGON TREASURY MONEY MARKET FUND
THE ONE GROUP U.S. TREASURY SECURITIES MONEY MARKET FUND
- --------------------------------------------------------------------------------
PRO FORMA COMBINING STATEMENT OF ASSETS AND LIABILITIES JUNE 30, 1995
(Unaudited)
<TABLE>
<CAPTION>
(Amounts in Thousands except per Share Amounts)
TREASURY
MONEY U.S. TREASURY PRO FORMA PRO FORMA
MARKET SECURITIES MONEY ADJUSTMENTS COMBINED
FUND MARKET FUND (NOTE 1) (NOTE 1)
-------- ---------------- ----------- ----------
<S> <C> <C> <C> <C>
ASSETS:
Investments, at value................................................. $63,376 $ 353,385 $ $ 416,761
Repurchase agreements................................................. 236,900 928,810 1,165,710
-------- ---------------- ----------- ----------
300,276 1,282,195 1,582,471
Cash.................................................................. 22 22
Interest receivable................................................... 369 219 588
Receivable for capital shares issued.................................. 170 170
Receivable from advisor............................................... 167 167
Prepaid expenses and other assets..................................... 21 36 57
-------- ---------------- ----------- ----------
TOTAL ASSETS.......................................................... 300,858 1,282,617 0 1,583,475
-------- ---------------- ----------- ----------
LIABILITIES:
Dividends payable..................................................... 1,458 5,248 6,706
Payable for capital shares redeemed................................... 11 11
Cash overdraft........................................................ 1 1
Accrued expenses and other payables:
Investment advisory fees.......................................... 50 357 407
Administration fees............................................... 38 171 209
12b-1 fees (Class A).............................................. 26 26
Transfer agent fees............................................... 15 15
Other............................................................. 36 36
-------- ---------------- ----------- ----------
TOTAL LIABILITIES..................................................... 1,608 5,803 0 7,411
-------- ---------------- ----------- ----------
NET ASSETS:
Capital............................................................... 299,187 1,276,812 1,575,999
Accumulated undistributed (distributions in excess of) net investment
income............................................................... 63 27 90
Accumulated undistributed net realized losses from investment
transactions......................................................... (25) (25 )
-------- ---------------- ----------- ----------
NET ASSETS............................................................ $299,250 $1,276,814 $ 0 $1,576,064
-------- ---------------- ----------- ----------
-------- ---------------- ----------- ----------
Net Assets
Fiduciary......................................................... $1,178,091 32,912 $1,211,003
Class A........................................................... 299,250 98,723 (32,912) 365,061
-------- ---------------- ----------
$299,250 $1,276,814 $1,576,064
-------- ---------------- ----------
-------- ---------------- ----------
Outstanding units of beneficial interest (shares)
Fiduciary......................................................... 1,178,070 32,912 1,210,982
Class A........................................................... 299,200 98,740 (32,912) 365,028
-------- ---------------- ----------- ----------
299,200 1,276,810 0 1,576,010
-------- ---------------- ----------- ----------
-------- ---------------- ----------- ----------
Net asset value--offering and redemption price per share.............. $ 1.00 $ 1.00 $ 1.00
-------- ---------------- ----------
-------- ---------------- ----------
Investments, at cost.................................................. $300,276 $1,282,195 $1,582,471
-------- ---------------- ----------
-------- ---------------- ----------
</TABLE>
SEE NOTES TO PRO FORMA FINANCIAL STATEMENTS.
----
71
<PAGE>
- --------------------------------------------------------------------------------
PARAGON SHORT-TERM GOVERNMENT FUND
THE ONE GROUP LIMITED VOLATILITY BOND FUND
- --------------------------------------------------------------------------------
PRO FORMA COMBINING STATEMENT OF ASSETS AND LIABILITIES JUNE 30, 1995
(Unaudited)
<TABLE>
<CAPTION>
(Amounts in Thousands except per Share Amounts)
SHORT-TERM LIMITED PRO FORMA PRO FORMA
GOVERNMENT VOLATILITY ADJUSTMENTS COMBINED
FUND BOND FUND (NOTE 1) (NOTE 1)
---------- ---------- ----------- -----------
<S> <C> <C> <C> <C>
ASSETS:
Investments, at value................... $122,737 $409,960 $ $532,697
Repurchase agreements................... 7,245 15,252 22,497
---------- ---------- ----------- -----------
129,982 425,212 555,194
Cash.................................... 4 4
Interest receivable..................... 1,260 5,461 6,721
Receivable for capital shares issued.... 225 1,469 1,694
Receivable from adviser................. 111 111
Deferred organization costs............. 3 3
Prepaid expenses and other assets....... 2 2 4
---------- ---------- ----------- -----------
TOTAL ASSETS............................ 131,473 432,258 0 563,731
---------- ---------- ----------- -----------
LIABILITIES:
Dividends payable....................... 534 1,318 1,852
Payable to brokers for investments
purchased............................. 3,346 3,346
Payable for capital shares redeemed..... 127 364 491
Cash overdraft.......................... 741 741
Accrued expenses and other payables:
Investment advisory fees............ 54 209 263
Administration fees................. 58 58
12b-1 fees (Class A)................ 3 3
12b-1 fees (Class B)................ 2 2
Transfer agent fees................. 23 23
Other............................... 72 49 121
---------- ---------- ----------- -----------
TOTAL LIABILITIES....................... 810 6,090 0 6,900
---------- ---------- ----------- -----------
NET ASSETS:
Capital................................. 132,933 427,533 560,466
Distributions in excess of net
investment income..................... (122) (122)
Accumulated undistributed net realized
losses from investment transactions... (1,174) (7,604) (8,778)
Net unrealized appreciation
(depreciation) from investments....... (1,096) 6,361 5,265
---------- ---------- ----------- -----------
NET ASSETS.............................. $130,663 $426,168 $ 0 $556,831
---------- ---------- ----------- -----------
---------- ---------- ----------- -----------
Net Assets
Fiduciary........................... $ $410,746 $ 44,305 $455,051
Class A............................. 130,355 12,516 (44,305) 98,566
Class B............................. 308 2,906 3,214
---------- ---------- ----------- -----------
$130,663 $426,168 $ 0 $556,831
---------- ---------- ----------- -----------
---------- ---------- ----------- -----------
Outstanding units of beneficial interest
(shares)
Fiduciary........................... 38,999 4,208 43,207
Class A............................. 12,902 1,189 (4,727) 9,364
Class B............................. 30 274 (1) 303
---------- ---------- ----------- -----------
12,932 40,462 (520) 52,874
---------- ---------- ----------- -----------
---------- ---------- ----------- -----------
Net asset value
Fiduciary--offering and redemption
price per share................... $10.53 $10.53
---------- -----------
---------- -----------
Class A--redemption price per
share............................. $10.10 $10.52 $10.52
---------- ---------- -----------
---------- ---------- -----------
Class B--offering price per share
(a)............................... $10.11 $10.60 $10.60
---------- ---------- -----------
---------- ---------- -----------
4.50% 4.50% 4.50%
Maximum Sales Charge....................
---------- ---------- -----------
---------- ---------- -----------
Maximum Offering Price
(100%/(100%--Maximum Sales Charge) of
net asset value adjusted to nearest
cent) per share (Class A)............. $10.58 $11.02 $11.02
---------- ---------- -----------
---------- ---------- -----------
Investments, at cost.................... $131,078 $418,851 $549,929
---------- ---------- -----------
---------- ---------- -----------
</TABLE>
- -------------
(a) Redemption price per Class B share varies based on length of time shares are
held.
SEE NOTES TO PRO FORMA FINANCIAL STATEMENTS.
- ----
72
<PAGE>
- --------------------------------------------------------------------------------
PARAGON INTERMEDIATE-TERM BOND FUND
THE ONE GROUP GOVERNMENT BOND FUND
-----------------------------------------------------------------------------
PRO FORMA COMBINING STATEMENT OF ASSETS AND LIABILITIES JUNE 30, 1995
(Unaudited)
<TABLE>
<CAPTION>
(Amounts in Thousands except per Share Amounts)
<S> <C> <C> <C> <C>
INTERMEDIATE- GOVERNMENT PRO FORMA PRO FORMA
TERM BOND BOND ADJUSTMENTS COMBINED
FUND FUND (NOTE 1) (NOTE 1)
------------ ------------ ------------ -----------
ASSETS:
Investments, at value..................................... $ 295,145 $ 371,122 $ $ 666,267
Repurchase agreements..................................... 18,205 16,852 35,057
------------ ------------ ------------ -----------
313,350 387,974 701,324
Cash...................................................... 2 2
Interest receivable....................................... 4,102 3,676 7,778
Receivable for capital shares issued...................... 16 1,484 1,500
Receivable from adviser................................... 6 6
Deferred organization costs............................... 9 9
Prepaid expenses and other assets......................... 11 35 46
------------ ------------ ------------ -----------
TOTAL ASSETS.............................................. 317,481 393,184 0 710,665
------------ ------------ ------------ -----------
LIABILITIES:
Dividends payable......................................... 1,689 1,191 2,880
Payable for capital shares redeemed....................... 3 898 901
Cash overdraft............................................ 425 425
Accrued expenses and other payables:
Investment advisory fees.............................. 125 143 268
Administration fees................................... 39 53 92
12b-1 fees (Class A).................................. 2 2
12b-1 fees (Class B).................................. 2 2
Transfer agent fees................................... 17 17
Other................................................. 69 1 70
------------ ------------ ------------ -----------
TOTAL LIABILITIES......................................... 1,942 2,715 0 4,657
------------ ------------ ------------ -----------
NET ASSETS:
Capital................................................... 315,270 396,664 711,934
Undistributed (distributions in excess of) net investment
income.................................................. 280 (302) (22)
Accumulated undistributed net realized losses from
investment transactions................................. (4,336) (13,541) (17,877)
Net unrealized appreciation from investments.............. 4,325 7,648 11,973
------------ ------------ ------------ -----------
NET ASSETS................................................ $ 315,539 $ 390,469 $ 0 $ 706,008
------------ ------------ ------------ -----------
------------ ------------ ------------ -----------
Net Assets
Fiduciary............................................. $ $ 379,826 $ 122,771 $ 502,597
Class A............................................... 314,751 8,130 (122,771) 200,110
Class B............................................... 788 2,513 3,301
------------ ------------ ------------ -----------
$ 315,539 $ 390,469 $ 0 $ 706,008
------------ ------------ ------------ -----------
------------ ------------ ------------ -----------
Outstanding units of beneficial interest (shares)
Fiduciary............................................. 38,720 12,515 51,235
Class A............................................... 30,682 828 (11,107) 20,403
Class B............................................... 77 256 4 337
------------ ------------ ------------ -----------
30,759 39,804 1,412 71,975
------------ ------------ ------------ -----------
------------ ------------ ------------ -----------
Net asset value
Fiduciary--offering and redemption price per share.... $ 9.81 $ 9.81
------------ -----------
------------ -----------
Class A--redemption price per share................... $10.26 $ 9.81 $ 9.81
------------ ------------ -----------
------------ ------------ -----------
Class B--offering price per share (a)................. $10.33 $ 9.81 $ 9.81
------------ ------------ -----------
------------ ------------ -----------
4.50% 4.50% 4.50%
Maximum Sales Charge......................................
------------ ------------ -----------
------------ ------------ -----------
Maximum Offering Price (100%/(100%--Maximum Sales Charge)
of net asset value adjusted to nearest cent) per share
(Class A)............................................... $10.74 $10.27 $10.27
------------ ------------ -----------
------------ ------------ -----------
Investments, at cost...................................... $ 309,025 $ 380,326 $ 689,351
------------ ------------ -----------
------------ ------------ -----------
</TABLE>
- ------------
(a) Redemption price per Class B share varies based on length of time shares are
held.
SEE NOTES TO PRO FORMA FINANCIAL STATEMENTS.
----
73
<PAGE>
- --------------------------------------------------------------------------------
PARAGON VALUE EQUITY INCOME FUND
THE ONE GROUP INCOME EQUITY FUND
- --------------------------------------------------------------------------------
PRO FORMA COMBINING STATEMENT OF ASSETS AND LIABILITIES JUNE 30, 1995
(Amounts in Thousands Except Per Share Amounts)
(Unaudited)
<TABLE>
<CAPTION>
VALUE
EQUITY INCOME PRO FORMA PRO FORMA
INCOME EQUITY ADJUSTMENTS COMBINED
FUND FUND (NOTE 1) (NOTE 1)
---------- ---------- ------------- -----------
<S> <C> <C> <C> <C>
ASSETS:
Investments, at value................................................... $ 118,417 $ 186,634 $ $ 305,051
Repurchase agreements................................................... 1,675 1,416 3,091
---------- ---------- ------------- -----------
120,092 188,050 308,142
Cash.................................................................... 2 2
Interest and dividends receivable....................................... 546 675 1,221
Receivable from brokers for investments sold............................ 162 162
Receivable for capital shares issued.................................... 254 404 658
Deferred organization costs............................................. 2 2
Prepaid expenses and other assets....................................... 7 66 73
---------- ---------- ------------- -----------
TOTAL ASSETS............................................................ 121,063 189,197 0 310,260
---------- ---------- ------------- -----------
LIABILITIES:
Dividends payable....................................................... 231 198 429
Payable for capital shares redeemed..................................... 643 643
Cash overdraft.......................................................... 30 30
Accrued expenses and other payables:
Investment advisory fees............................................ 60 115 175
Administration fees................................................. 18 26 44
12b-1 fees (Class A)................................................ 3 3
12b-1 fees (Class B)................................................ 2 2
Transfer agent fees................................................. 16 16
Other............................................................... 35 35
---------- ---------- ------------- -----------
TOTAL LIABILITIES....................................................... 360 1,017 0 1,377
---------- ---------- ------------- -----------
NET ASSETS:
Capital................................................................. 96,095 141,600 237,695
Undistributed (distributions in excess of) net investment income........ (1) 41 40
Accumulated undistributed net realized gains from investment
transactions.......................................................... 2,140 6,380 8,520
Net unrealized appreciation from investments............................ 22,469 40,159 62,628
---------- ---------- ------------- -----------
NET ASSETS.............................................................. $ 120,703 $ 188,180 $ 0 $ 308,883
---------- ---------- ------------- -----------
---------- ---------- ------------- -----------
Net Assets
Fiduciary........................................................... $ $ 170,919 $ 51,769 $ 222,688
Class A............................................................. 120,400 13,793 (51,769) 82,424
Class B............................................................. 303 3,468 3,771
---------- ---------- ------------- -----------
$ 120,703 $ 188,180 $ 0 $ 308,883
---------- ---------- ------------- -----------
---------- ---------- ------------- -----------
Outstanding units of beneficial interest (shares)
Fiduciary........................................................... 11,297 3,422 14,719
Class A............................................................. 8,998 913 (4,456) 5,455
Class B............................................................. 23 229 (3) 249
---------- ---------- ------------- -----------
9,021 12,439 (1,037) 20,423
---------- ---------- ------------- -----------
---------- ---------- ------------- -----------
Net asset value
Fiduciary--offering and redemption price per share.................. $15.13 $15.13
---------- ---------- -----------
---------- ---------- -----------
Class A--redemption price per share................................. $13.38 $15.11 $15.11
---------- ---------- -----------
---------- ---------- -----------
Class B--offering price per share................................... $13.40 $15.14 $15.14
---------- ---------- -----------
---------- ---------- -----------
Maximum Sales Charge.................................................... 4.50% 4.50% 4.50%
Maximum Offering Price (100%/(100%--Maximum Sales Charge) of net asset
value adjusted to nearest cent) per share (Class A)................... $14.01 $15.82 $15.82
---------- ---------- -----------
---------- ---------- -----------
Investments, at cost.................................................... $ 97,623 $ 147,891 $ 245,514
---------- ---------- -----------
---------- ---------- -----------
</TABLE>
- ------------
(a) Redemption price per Class B share varies based on length of time shares are
held.
SEE NOTES TO PRO FORMA FINANCIAL STATEMENTS.
- ----
74
<PAGE>
- --------------------------------------------------------------------------------
PARAGON LOUISIANA TAX-FREE FUND
THE ONE GROUP LOUISIANA MUNICIPAL BOND FUND
- --------------------------------------------------------------------------------
PRO FORMA COMBINING STATEMENT OF ASSETS AND LIABILITIES MAY 31, 1995
(Unaudited)
<TABLE>
<CAPTION>
LOUISIANA PRO FORMA PRO FORMA
LOUISIANA MUNICIPAL ADJUSTMENTS COMBINED
TAX-FREE FUND BOND FUND (NOTE 1) (NOTE 1)
------------- ------------ ---------------- -------------
<S> <C> <C> <C> <C>
ASSETS:
Investments, at value............................................. $192,231,927 $ 0 $ $192,231,927
Repurchase agreements.............................................
------------- ----- ----- -------------
192,231,927 192,231,927
Cash.............................................................. 563,395 563,395
Interest receivable............................................... 3,251,444 3,251,444
Receivable for capital shares issued.............................. 46,630 46,630
Prepaid expenses and other assets................................. 2,363 2,363
------------- ----- ----- -------------
TOTAL ASSETS...................................................... 196,095,759 0 0 196,095,759
------------- ----- ----- -------------
LIABILITIES:
Dividends payable................................................. 648,737 648,737
Payable to brokers for investments purchased...................... 1,867,217 1,867,217
Payable for capital shares redeemed............................... 58,164 58,164
Accrued expenses and other payables:
Investment advisory fees...................................... 67,295 67,295
Administration fees........................................... 16,821 16,821
12b-1 fees (Class A).......................................... 0
12b-1 fees (Class B).......................................... 0
Transfer agent fees........................................... 25,039 25,039
Other......................................................... 90,040 90,040
------------- ----- ----- -------------
TOTAL LIABILITIES................................................. 2,773,313 0 0 2,773,313
------------- ----- ----- -------------
NET ASSETS:
Capital........................................................... 190,800,935 190,800,935
Accumulated undistributed net realized losses from investment
transactions.................................................... (748,781) (748,781)
Net unrealized appreciation from investments...................... 3,270,292 3,270,292
------------- ----- ----- -------------
NET ASSETS........................................................ $193,322,446 $ 0 $ 0 $193,322,446
------------- ----- ----- -------------
------------- ----- ----- -------------
Net Assets
Class A....................................................... $192,392,293 $ 0 $192,392,293
Class B....................................................... 930,153 0 930,153
------------- ----- -------------
$193,322,446 $ 0 $193,322,446
------------- ----- -------------
------------- ----- -------------
Outstanding units of beneficial interest (shares)
Class A....................................................... 18,165,248 18,165,248
Class B....................................................... 87,823 87,823
------------- ----- -------------
18,253,071 0 18,253,071
------------- ----- -------------
------------- ----- -------------
Net asset value
Class A--redemption price per share........................... $10.59 $ $10.59
------------- ----- -------------
------------- ----- -------------
Class B--offering price per share (a)......................... $10.62 $ $10.62
------------- ----- -------------
------------- ----- -------------
Maximum Sales Charge.............................................. 4.50% 4.50% 4.50%
Maximum Offering Price (100%/(100%--Maximum Sales Charge) of net
asset value adjusted to nearest cent) per share (Class A)....... $11.09 $0.00 $11.09
------------- ----- -------------
------------- ----- -------------
Investments, at cost.............................................. $188,961,635 $ $188,961,635
------------- ----- -------------
------------- ----- -------------
</TABLE>
- ------------
(a) Redemption price per Class B share varies based on length of time shares are
held.
SEE NOTES TO PRO FORMA FINANCIAL STATEMENTS.
----
75
<PAGE>
- --------------------------------------------------------------------------------
PARAGON VALUE GROWTH FUND
THE ONE GROUP VALUE GROWTH FUND
- --------------------------------------------------------------------------------
PRO FORMA COMBINING STATEMENT OF ASSETS AND LIABILITIES MAY 31, 1995
(Unaudited)
<TABLE>
<CAPTION>
PRO FORMA PRO FORMA
VALUE VALUE ADJUSTMENTS COMBINED
GROWTH FUND GROWTH FUND (NOTE 1) (NOTE 1)
----------- ----------- ------------- -----------
<S> <C> <C> <C> <C>
ASSETS:
Investments, at value............................................. $195,905,211 $ 0 $ $195,905,211
Cash.............................................................. 1,330 1,330
Interest and dividends receivable................................. 516,024 516,024
Receivable for capital shares issued.............................. 37,801 37,801
Prepaid expenses and other assets................................. 3,106 3,106
----------- ----------- ------------- -----------
TOTAL ASSETS...................................................... 196,463,472 0 0 196,463,472
----------- ----------- ------------- -----------
LIABILITIES:
Dividends payable................................................. 31,787 31,787
Payable to brokers for investments purchased...................... 1,617,535 1,617,535
Payable for capital shares redeemed............................... 16,189 16,189
Accrued expenses and other payables:
Investment advisory fees...................................... 106,859 106,859
Administration fees........................................... 24,668 24,668
12b-1 fees (Class A).......................................... 0
12b-1 fees (Class B).......................................... 0
Transfer agent fees........................................... 42,605 42,605
Other......................................................... 36,650 36,650
----------- ----------- ------------- -----------
TOTAL LIABILITIES................................................. 1,876,293 0 0 1,876,293
----------- ----------- ------------- -----------
NET ASSETS:
Capital........................................................... 150,654,300 150,654,300
Distributions in excess of net investment income.................. (2,478) (2,478)
Accumulated undistributed net realized gains from investment
transactions..................................................... 8,456,766 8,456,766
Net unrealized appreciation from investments...................... 35,478,591 35,478,591
----------- ----------- ------------- -----------
NET ASSETS........................................................ $194,587,179 $ 0 $ 0 $194,587,179
----------- ----------- ------------- -----------
----------- ----------- ------------- -----------
Net Assets
Class A....................................................... $193,132,902 $ 0 $193,132,902
Class B....................................................... 1,454,277 0 1,454,277
----------- ----------- -----------
$194,587,179 $ 0 $194,587,179
----------- ----------- -----------
----------- ----------- -----------
Outstanding units of beneficial interest (shares)
Class A....................................................... 12,964,665 12,964,665
Class B....................................................... 97,623 97,623
----------- ----------- -----------
13,062,288 0 13,062,288
----------- ----------- -----------
----------- ----------- -----------
Net asset value
Class A--redemption price per share........................... $14.90 $ $14.90
----------- ----------- -----------
----------- ----------- -----------
Class B--offering price per share(a).......................... $14.88 $ $14.88
----------- ----------- -----------
----------- ----------- -----------
Maximum Sales Charge.............................................. 4.50% 4.50% 4.50%
Maximum Offering Price (100%/(100%--Maximum Sales Charge) of net
asset value adjusted to nearest cent) per share (Class A)........ $15.60 $15.60
----------- -----------
----------- -----------
$160,426,620 $ $160,426,620
Investments, at cost..............................................
----------- ----------- -----------
----------- ----------- -----------
</TABLE>
- ------------
(a) Redemption price per Class B share varies based on length of time shares are
held.
SEE NOTES TO PRO FORMA FINANCIAL STATEMENTS.
- ----
76
<PAGE>
- --------------------------------------------------------------------------------
PARAGON GULF SOUTH GROWTH FUND
THE ONE GROUP GULF SOUTH GROWTH FUND
- --------------------------------------------------------------------------------
PRO FORMA COMBINING STATEMENT OF ASSETS AND LIABILITIES MAY 31, 1995
(Unaudited)
<TABLE>
<CAPTION>
GULF
SOUTH PRO FORMA PRO FORMA
GULF SOUTH GROWTH ADJUSTMENTS COMBINED
GROWTH FUND FUND (NOTE 1) (NOTE 1)
------------ --------- ----------- ------------
<S> <C> <C> <C> <C>
ASSETS:
Investments, at value...................................................... $87,892,875 $ 0 $ $87,892,875
Cash....................................................................... 3,467 3,467
Interest and dividends receivable.......................................... 17,753 17,753
Receivable from brokers for investments sold............................... 803,403
Receivable for capital shares issued....................................... 35,313 35,313
Deferred organization costs................................................ 6,091 6,091
Prepaid expenses and other assets.......................................... 1,088 1,088
------------ --------- ----------- ------------
TOTAL ASSETS............................................................... 88,759,990 0 0 87,956,587
------------ --------- ----------- ------------
LIABILITIES:
Payable to brokers for investments purchased............................... 256,250 256,250
Payable for capital shares redeemed........................................ 9,716 9,716
Accrued expenses and other payables:
Investment advisory fees............................................... 48,273 48,273
Administration fees.................................................... 11,140 11,140
12b-1 fees (Class A)................................................... 0
12b-1 fees (Class B)................................................... 0
Transfer agent fees.................................................... 18,152 18,152
Other.................................................................. 26,284 26,284
------------ --------- ----------- ------------
TOTAL LIABILITIES.......................................................... 369,815 0 0 369,815
------------ --------- ----------- ------------
NET ASSETS:
Capital.................................................................... 67,102,635 67,102,635
Distributions in excess of net investment income........................... (104,878) (104,878)
Accumulated undistributed net realized gains from investment transactions.. 3,074,158 3,074,158
Net unrealized appreciation from investments............................... 18,318,260 18,318,260
------------ --------- ----------- ------------
NET ASSETS................................................................. $88,390,175 $ 0 $ 0 $87,586,772
------------ --------- ----------- ------------
------------ --------- ----------- ------------
Net Assets
$87,356,267 $ $87,356,267
Class A................................................................
1,033,908 0 1,033,908
Class B................................................................
------------ --------- ------------
$88,390,175 $ 0 $88,390,175
------------ --------- ------------
------------ --------- ------------
Outstanding units of beneficial interest (shares)
Class A................................................................ 5,431,525 5,431,525
Class B................................................................ 64,285 64,285
------------ --------- ------------
5,495,810 0 5,495,810
------------ --------- ------------
------------ --------- ------------
Net asset value
Class A--redemption price per share.................................... $16.08 $ $16.08
------------ --------- ------------
------------ --------- ------------
Class B--offering price per share (a).................................. $15.99 $ $15.99
------------ --------- ------------
------------ --------- ------------
Maximum Sales Charge....................................................... 4.50% 4.50% 4.50%
Maximum Offering Price (100%/(100%--Maximum Sales Charge) of net asset
value adjusted to nearest cent) per share (Class A)...................... $16.84 $ $16.84
------------ --------- ------------
------------ --------- ------------
Investments, at cost....................................................... $69,574,615 $ $69,574,615
------------ --------- ------------
------------ --------- ------------
</TABLE>
- ------------
(a) Redemption price per Class B share varies based on length of time shares are
held.
SEE NOTES TO PRO FORMA FINANCIAL STATEMENTS.
----
77
<PAGE>
- --------------------------------------------------------------------------------
PARAGON TREASURY MONEY MARKET FUND
THE ONE GROUP U.S. TREASURY SECURITIES MONEY MARKET FUND
- --------------------------------------------------------------------------------
PRO FORMA COMBINING STATEMENT OF OPERATIONS FOR THE YEAR ENDED JUNE 30, 1995
(Unaudited)
<TABLE>
<CAPTION>
(Amounts in Thousands)
<S> <C> <C> <C> <C>
U.S.
TREASURY TREASURY
MONEY SECURITIES PRO FORMA PRO FORMA
MARKET MONEY MARKET ADJUSTMENTS COMBINED
FUND FUND (NOTE 1) (NOTE 1)
---------- ------------ ------------- ----------
INVESTMENT INCOME:
Interest income.............................................. $ 16,019 $ 64,651 $ $ 80,670
---------- ------------ ----- ----------
TOTAL INCOME................................................. 16,019 64,651 0 80,670
---------- ------------ ----- ----------
EXPENSES:
Investment advisory fees..................................... 586 4,214 440 5,240
Administration fees.......................................... 439 2,030 53 2,522
12b-1 fees (Class A)......................................... 232 232
Custodian and accounting fees................................ 69 168 237
Legal and audit fees......................................... 30 205 235
Organization costs........................................... 9 9
Trustees' fees and expenses.................................. 6 13 19
Transfer agent fees.......................................... 56 49 105
Registration and filing fees................................. 2 279 281
Printing costs............................................... 30 30
Other........................................................ 38 70 108
---------- ------------ ----- ----------
Total expenses before waivers/reimbursements................. 1,235 7,290 493 9,018
Less waivers/reimbursements.................................. (2,145) (163) (2,308)
---------- ------------ ----- ----------
TOTAL EXPENSES............................................... 1,235 5,145 330 6,710
---------- ------------ ----- ----------
Net Investment Income........................................ 14,784 59,506 (330) 73,960
---------- ------------ ----- ----------
REALIZED/UNREALIZED GAINS FROM INVESTMENTS:
Net realized gains from investment transactions.............. 145 14 0 159
---------- ------------ ----- ----------
Change in net assets resulting from operations............... $ 14,929 $ 59,520 $ (330) $ 74,119
---------- ------------ ----- ----------
---------- ------------ ----- ----------
</TABLE>
SEE NOTES TO PRO FORMA FINANCIAL STATEMENTS.
- ----
78
<PAGE>
- --------------------------------------------------------------------------------
PARAGON SHORT-TERM GOVERNMENT FUND
THE ONE GROUP LIMITED VOLATILITY BOND FUND
- --------------------------------------------------------------------------------
PRO FORMA COMBINING STATEMENT OF OPERATIONS FOR THE YEAR ENDED JUNE 30, 1995
(Unaudited)
<TABLE>
<CAPTION>
(Amounts in Thousands)
<S> <C> <C> <C> <C>
LIMITED
SHORT-TERM VOLATILITY PRO FORMA PRO FORMA
GOVERNMENT BOND ADJUSTMENTS COMBINED
FUND FUND (NOTE 1) (NOTE 1)
------------ ---------- ------------- ----------
INVESTMENT INCOME:
Interest income............................................... $ 8,743 $ 26,927 $ $ 35,670
------ ---------- ----- ----------
TOTAL INCOME.................................................. 8,743 26,927 35,670
------ ---------- ----- ----------
EXPENSES:
Investment advisory fees...................................... 716 2,548 143 3,407
Administration fees........................................... 215 716 26 957
12b-1 fees (Class A).......................................... 47 47
12b-1 fees (Class B).......................................... 1 24 25
12b-1 fees (Service).......................................... 1 1
Custodian and accounting fees................................. 61 77 138
Legal and audit fees.......................................... 25 54 79
Organization costs............................................ 4 14 18
Trustees' fees and expenses................................... 4 8 12
Transfer agent fees........................................... 59 93 152
Registration and filing fees.................................. 10 44 54
Printing costs................................................ 31 31
Other......................................................... 15 36 51
------ ---------- ----- ----------
Total expenses before waivers/reimbursements.................. 1,110 3,693 169 4,972
Less waivers/reimbursements................................... (1,415) (72) (1,487)
------ ---------- ----- ----------
TOTAL EXPENSES................................................ 1,110 2,278 97 3,485
------ ---------- ----- ----------
Net Investment Income......................................... 7,633 24,649 (97) 32,185
------ ---------- ----- ----------
REALIZED/UNREALIZED GAINS (LOSSES) FROM INVESTMENTS:
Net realized losses from investment transactions.............. (390) (7,605) (7,995)
Net change in unrealized appreciation from investments........ 1,649 14,800 16,449
------ ---------- ----- ----------
Net realized/unrealized gains on investments.................. 1,259 7,195 0 8,454
------ ---------- ----- ----------
Change in net assets resulting from operations................ $ 8,892 $ 31,844 $ (97) $ 40,639
------ ---------- ----- ----------
------ ---------- ----- ----------
</TABLE>
SEE NOTES TO PRO FORMA FINANCIAL STATEMENTS.
----
79
<PAGE>
- --------------------------------------------------------------------------------
PARAGON INTERMEDIATE-TERM BOND FUND
THE ONE GROUP GOVERNMENT BOND FUND
- --------------------------------------------------------------------------------
PRO FORMA COMBINING STATEMENT OF OPERATIONS FOR THE YEAR ENDED JUNE 30, 1995
(Unaudited)
<TABLE>
<CAPTION>
(Amounts in Thousands)
<S> <C> <C> <C> <C>
INTERMEDIATE- GOVERNMENT PRO FORMA PRO FORMA
TERM BOND BOND ADJUSTMENTS COMBINED
FUND FUND (NOTE 1) (NOTE 1)
------------ ----------- ------------ ----------
INVESTMENT INCOME:
Interest income............................................. $ 23,383 $ 21,138 $ $ 44,521
------------ ----------- ------------ ----------
TOTAL INCOME................................................ 23,383 21,138 0 44,521
------------ ----------- ------------ ----------
EXPENSES:
Investment advisory fees.................................... 1,532 1,291 1,379 4,202
Administration fees......................................... 460 483 55 998
12b-1 fees (Class A)........................................ 14 14
12b-1 fees (Class B)........................................ 2 13 1 16
Custodian and accounting fees............................... 112 65 177
Legal and audit fees........................................ 49 42 91
Organization costs.......................................... 15 3 18
Trustees' fees and expenses................................. 9 6 15
Transfer agent fees......................................... 55 71 126
Registration and filing fees................................ 21 84 105
Printing costs.............................................. 36 36
Other....................................................... 87 22 89
------------ ----------- ------------ ----------
Total expenses before waivers/reimbursements................ 2,322 2,130 1,435 5,887
Less waivers/reimbursements................................. (59) (47) (106)
------------ ----------- ------------ ----------
TOTAL EXPENSES.............................................. 2,322 2,071 1,388 5,781
------------ ----------- ------------ ----------
Net Investment Income....................................... 21,061 19,067 (1,388) 38,740
------------ ----------- ------------ ----------
REALIZED/UNREALIZED GAINS (LOSSES) FROM INVESTMENTS:
Net realized losses from investment transactions............ (261) (7,094) (7,355)
Net change in unrealized appreciation from investments...... 12,188 16,133 28,321
------------ ----------- ------------ ----------
Net realized/unrealized gains on investments................ 11,927 9,039 0 20,966
------------ ----------- ------------ ----------
Change in net assets resulting from operations.............. $ 32,988 $ 28,106 $ (1,388) $ 59,706
------------ ----------- ------------ ----------
------------ ----------- ------------ ----------
</TABLE>
SEE NOTES TO PRO FORMA FINANCIAL STATEMENTS.
- ----
80
<PAGE>
- --------------------------------------------------------------------------------
PARAGON VALUE EQUITY INCOME FUND
THE ONE GROUP INCOME EQUITY FUND
- --------------------------------------------------------------------------------
PRO FORMA COMBINING STATEMENT OF OPERATIONS FOR THE YEAR ENDED JUNE 30, 1995
(Unaudited)
<TABLE>
<CAPTION>
(Amounts in Thousands)
<S> <C> <C> <C> <C>
VALUE
EQUITY INCOME PRO FORMA PRO FORMA
INCOME EQUITY ADJUSTMENTS COMBINED
FUND FUND (NOTE 1) (NOTE 1)
---------- ---------- ------------- ----------
INVESTMENT INCOME:
Interest income................................................. $ 760 $ 397 $ $ 1,157
Dividend income................................................. 3,069 7,297 10,366
Foreign taxes withheld.......................................... (36) (36)
---------- ---------- ----- ----------
TOTAL INCOME.................................................... 3,793 7,694 0 11,487
---------- ---------- ----- ----------
EXPENSES:
Investment advisory fees........................................ 759 1,474 105 2,338
Administration fees............................................. 162 336 54 552
12b-1 fees (Class A)............................................ 43 43
12b-1 fees (Class B)............................................ 1 23 24
Custodian and accounting fees................................... 40 24 64
Legal and audit fees............................................ 12 52 64
Organization costs.............................................. 4 5 9
Trustees' fees and expenses..................................... 2 4 6
Transfer agent fees............................................. 52 60 112
Registration and filing fees.................................... 4 37 41
Printing costs.................................................. 18 18
Other........................................................... 17 5 22
---------- ---------- ----- ----------
Total expenses before waivers/reimbursements.................... 1,053 2,081 159 3,293
Less waivers/reimbursements..................................... (19) (2) (21)
---------- ---------- ----- ----------
TOTAL EXPENSES.................................................. 1,053 2,062 157 3,272
---------- ---------- ----- ----------
Net Investment Income........................................... 2,740 5,632 (157) 8,215
---------- ---------- ----- ----------
REALIZED/UNREALIZED GAINS FROM INVESTMENTS:
Net realized gains from investment transactions................. 3,075 11,040 14,115
Net change in unrealized appreciation from investments.......... 15,565 20,447 36,012
---------- ---------- ----- ----------
Net realized/unrealized gains on investments.................... 18,640 31,487 0 50,127
---------- ---------- ----- ----------
Change in net assets resulting from operations.................. $ 21,380 $ 37,119 $ (157) $ 58,342
---------- ---------- ----- ----------
---------- ---------- ----- ----------
</TABLE>
SEE NOTES TO PRO FORMA FINANCIAL STATEMENTS.
----
81
<PAGE>
- --------------------------------------------------------------------------------
PARAGON LOUISIANA TAX-FREE FUND
THE ONE GROUP LOUISIANA MUNICIPAL BOND FUND
- --------------------------------------------------------------------------------
PRO FORMA COMBINING STATEMENT OF OPERATIONS FOR THE YEAR ENDED MAY 31, 1995
(Unaudited)
<TABLE>
<CAPTION>
LOUISIANA LOUISIANA PRO FORMA PRO FORMA
TAX-FREE MUNICIPAL ADJUSTMENTS COMBINED
FUND BOND FUND (NOTE 1) (NOTE 1)
----------- ----------- ----------- -----------
<S> <C> <C> <C> <C>
INVESTMENT INCOME:
Interest income................................... $11,452,213 $ $ $11,452,213
Other income...................................... 219 219
----------- ----------- ----------- -----------
TOTAL INCOME...................................... 11,452,432 0 0 11,452,432
----------- ----------- ----------- -----------
EXPENSES:
Investment advisory fees.......................... 995,714 995,714
Administration fees............................... 298,714 298,714
12b-1 fees (Class B).............................. 2,184 2,184
Custodian and accounting fees..................... 108,746 108,746
Legal and audit fees.............................. 30,103 30,103
Organization costs................................ 3,230 3,230
Trustees' fees and expenses....................... 5,012 5,012
Transfer agent fees............................... 94,105 94,105
Registration and filing fees...................... 20,214 20,214
Other............................................. 43,826 43,826
----------- ----------- ----------- -----------
Total expenses before waivers/reimbursements...... 1,601,848 0 0 1,601,848
Less waivers/reimbursements....................... (298,714) (298,714)
----------- ----------- ----------- -----------
TOTAL EXPENSES.................................... 1,303,134 0 0 1,303,134
----------- ----------- ----------- -----------
Net Investment Income............................. 10,149,298 0 0 10,149,298
----------- ----------- ----------- -----------
REALIZED/UNREALIZED GAINS (LOSSES) FROM
INVESTMENTS:
Net realized losses from investment
transactions..................................... (819,928) (819,928)
Net change in unrealized appreciation from
investments...................................... 2,840,774 2,840,774
----------- ----------- ----------- -----------
Net realized/unrealized gains on investments...... 2,020,846 0 0 2,020,846
----------- ----------- ----------- -----------
Change in net assets resulting from operations.... $12,170,144 $ 0 $ 0 $12,170,144
----------- ----------- ----------- -----------
----------- ----------- ----------- -----------
</TABLE>
SEE NOTES TO PRO FORMA FINANCIAL STATEMENTS.
- ----
82
<PAGE>
- --------------------------------------------------------------------------------
PARAGON VALUE GROWTH FUND
THE ONE GROUP VALUE GROWTH FUND
- --------------------------------------------------------------------------------
PRO FORMA COMBINING STATEMENT OF OPERATIONS FOR THE YEAR ENDED MAY 31, 1995
(Unaudited)
<TABLE>
<CAPTION>
VALUE VALUE PRO FORMA PRO FORMA
GROWTH GROWTH ADJUSTMENTS COMBINED
FUND FUND (NOTE 1) (NOTE 1)
----------- ----------- ----------- -----------
<S> <C> <C> <C> <C>
INVESTMENT INCOME:
Interest income................................... $ 709,812 $ $ $ 709,812
Dividend income................................... 3,752,808 3,752,808
Other income...................................... 209 209
----------- ----------- ----------- -----------
TOTAL INCOME...................................... 4,462,829 0 0 4,462,829
----------- ----------- ----------- -----------
EXPENSES:
Investment advisory fees.......................... 1,177,028 1,177,028
Administration fees............................... 271,623 271,623
12b-1 fees (Class B).............................. 3,707 3,707
Custodian and accounting fees..................... 62,792 62,792
Legal and audit fees.............................. 22,724 22,724
Organization costs................................ 3,031 3,031
Trustees' fees and expenses....................... 4,147 4,147
Transfer agent fees............................... 172,438 172,438
Registration and filing fees...................... 10,620 10,620
Other............................................. 15,799 15,799
----------- ----------- ----------- -----------
TOTAL EXPENSES.................................... 1,743,909 0 0 1,743,909
----------- ----------- ----------- -----------
Net Investment Income............................. 2,718,920 0 0 2,718,920
----------- ----------- ----------- -----------
REALIZED/UNREALIZED GAINS FROM INVESTMENTS:
Net realized gains from investment transactions... 4,085,545 4,085,545
Net change in unrealized appreciation from
investments...................................... 6,425,267 6,425,267
----------- ----------- ----------- -----------
Net realized/unrealized gains on investments...... 10,510,812 0 0 10,510,812
----------- ----------- ----------- -----------
Change in net assets resulting from operations.... $13,229,732 $ 0 $ 0 $13,229,732
----------- ----------- ----------- -----------
----------- ----------- ----------- -----------
</TABLE>
SEE NOTES TO PRO FORMA FINANCIAL STATEMENTS.
----
83
<PAGE>
- --------------------------------------------------------------------------------
PARAGON GULF SOUTH GROWTH FUND
THE ONE GROUP GULF SOUTH GROWTH FUND
- --------------------------------------------------------------------------------
PRO FORMA COMBINING STATEMENT OF OPERATIONS FOR THE YEAR ENDED MAY 31, 1995
(Unaudited)
<TABLE>
<CAPTION>
GULF SOUTH GULF SOUTH PRO FORMA PRO FORMA
GROWTH GROWTH ADJUSTMENTS COMBINED
FUND FUND (NOTE 1) (NOTE 1)
---------- ---------- ------------ ----------
<S> <C> <C> <C> <C>
INVESTMENT INCOME:
Interest income................................... $ 406,598 $ $ $ 406,598
Dividend income................................... 181,673 181,673
Other income...................................... 77 77
---------- ---------- ------------ ----------
TOTAL INCOME...................................... 588,348 0 0 588,348
---------- ---------- ------------ ----------
EXPENSES:
Investment advisory fees.......................... 534,714 534,714
Administration fees............................... 123,396 123,396
12b-1 fees (Class B).............................. 2,565 2,565
Custodian and accounting fees..................... 40,535 40,535
Legal and audit fees.............................. 10,977 10,977
Organization costs................................ 5,554 5,554
Trustees' fees and expenses....................... 1,965 1,965
Transfer agent fees............................... 108,884 108,884
Registration and filing fees...................... 5,790 5,790
Other............................................. 7,005 7,005
---------- ---------- ------------ ----------
TOTAL EXPENSES.................................... 841,385 0 0 841,385
---------- ---------- ------------ ----------
Net Investment Income (Loss)...................... (253,037) 0 0 (253,037)
---------- ---------- ------------ ----------
REALIZED/UNREALIZED GAINS (LOSSES) FROM
INVESTMENTS:
Net realized gains from investment transactions... 3,471,622 3,471,622
Net change in unrealized depreciation from
investments...................................... (718,024) (718,024)
---------- ---------- ------------ ----------
Net realized/unrealized gains on investments...... 2,753,598 0 0 2,753,598
---------- ---------- ------------ ----------
Change in net assets resulting from operations.... $2,500,561 $ 0 $ 0 $2,500,561
---------- ---------- ------------ ----------
---------- ---------- ------------ ----------
</TABLE>
SEE NOTES TO PRO FORMA FINANCIAL STATEMENTS.
- ----
84
<PAGE>
- --------------------------------------------------------------------------------
PARAGON TREASURY MONEY MARKET FUND
THE ONE GROUP U.S. TREASURY SECURITIES MONEY MARKET FUND
- --------------------------------------------------------------------------------
PRO FORMA SCHEDULE OF PORTFOLIO INVESTMENTS JUNE 30, 1995
(Amounts in Thousands) (Unaudited)
<TABLE>
<CAPTION>
PRINCIPAL AMOUNT AMORTIZED COST
- ------------------------------------- -------------------------------------
TREASURY U.S. TREASURY TREASURY U.S. TREASURY
MONEY SECURITIES PRO FORMA MONEY SECURITIES PRO FORMA
MARKET MONEY MARKET COMBINED MARKET MONEY MARKET COMBINED
FUND FUND (NOTE 1) SECURITY DESCRIPTION FUND FUND (NOTE 1)
- --------- ------------- ----------- ------------------------------------------------------ --------- ------------- -----------
<C> <C> <C> <S> <C> <C> <C>
U.S. TREASURY BILLS (26.4%):
40,000 40,000 6.06%, 7/6/95....................................... $ $ 39,966 $ 39,966
30,000 30,000 6.13%, 8/17/95...................................... 29,760 29,760
30,000 30,000 6.20%, 8/24/95...................................... 29,721 29,721
30,000 30,000 6.20%, 10/19/95..................................... 29,432 29,432
50,000 50,000 5.18%, 11/2/95...................................... 49,108 49,108
30,000 30,000 6.21%, 11/16/95..................................... 29,286 29,286
10,000 10,000 5.21%, 11/30/95..................................... 9,780 9,780
10,000 50,000 60,000 5.21%, 12/7/95...................................... 9,762 48,850 58,612
45,000 50,000 95,000 5.38%, 12/21/95..................................... 43,834 48,708 92,542
50,000 50,000 5.37%, 1/11/96...................................... 48,554 48,554
--------- ------------- -----------
Total U.S. Treasury Bills 63,376 353,385 416,761
--------- ------------- -----------
Total Investments, at value 63,376 353,385 416,761
--------- ------------- -----------
REPURCHASE AGREEMENTS (70.4%):
10,000 10,000 Banker's Trust, 6.02%, due 7/5/95, dated 6/21/95
(Collateralized by U.S. Treasury Notes, 6.50%,
5/17/97, market value--$10,000)..................... 10,000 10,000
13,000 13,000 Barclays Bank, 6.10%, due 7/3/95, dated 6/30/95
(Collateralized by U.S. Treasury Notes, 5.63%,
6/30/97, market value--$13,260)..................... 13,000 13,000
60,000 60,000 Barclays de Zoete Wedd, 6.00%, due 7/5/95, dated
6/30/95 (Collateralized by $53,038 various
government securities, 0.00%-12.38%,
8/15/95-5/15/16, market value--$61,201)............. 60,000 60,000
13,000 13,000 Deutsche Bank, 6.13%, due 7/3/95, dated 6/30/95
(Collateralized by U.S. Treasury Notes, 7.75%,
3/31/96, market value--$13,000)..................... 13,000 13,000
250,000 250,000 Deutsche Bank, 6.20%, due 7/3/95, dated 6/30/95*...... 250,000 250,000
60,000 60,000 Deutsche Bank, 6.05%, due 7/5/95, dated 6/30/95*...... 60,000 60,000
13,000 13,000 First Boston, 6.10%, due 7/5/95, dated 6/30/95
(Collateralized by U.S. Treasury Notes, 0.00%***,
12/14/95, market value--$13,326).................... 13,000 13,000
106,900 106,900 Goldman Sachs & Co., 6.13%, due 7/3/95, dated
6/30/95............................................. 106,900 106,900
60,000 60,000 Hong Kong Shanghai Banc Corp., 6.10%, due 7/5/95,
dated 6/30/95 (Collateralized by $57,932 U.S.
Treasury Notes, 6.00%-7.88%, 7/31/99-12/31/99,
market value--$61,203).............................. 60,000 60,000
10,000 10,000 Lehman Brothers Holdings, Inc., 6.03%, due 7/5/95,
dated 6/21/95 (Collateralized by U.S. Treasury
Notes, 6.50%, 5/15/97, market value-- $10,000)...... 10,000 10,000
</TABLE>
CONTINUED
----
85
<PAGE>
- --------------------------------------------------------------------------------
PARAGON TREASURY MONEY MARKET FUND
THE ONE GROUP U.S. TREASURY SECURITIES MONEY MARKET FUND
- --------------------------------------------------------------------------------
PRO FORMA SCHEDULE OF PORTFOLIO INVESTMENTS, CONTINUED JUNE 30, 1995
(Amounts in Thousands) (Unaudited)
<TABLE>
<CAPTION>
PRINCIPAL AMOUNT AMORTIZED COST
- ------------------------------------- -------------------------------------
TREASURY U.S. TREASURY TREASURY U.S. TREASURY
MONEY SECURITIES PRO FORMA MONEY SECURITIES PRO FORMA
MARKET MONEY MARKET COMBINED MARKET MONEY MARKET COMBINED
FUND FUND (NOTE 1) SECURITY DESCRIPTION FUND FUND (NOTE 1)
- --------- ------------- ----------- ------------------------------------------------------ --------- ------------- -----------
REPURCHASE AGREEMENTS, CONTINUED:
<C> <C> <C> <S> <C> <C> <C>
60,000 60,000 Lehman Brothers Holdings, Inc., 6.04%, due 7/5/95,
dated 6/30/95 (Collateralized by $159,579 various
government securities, 0.00%, 5/15/09-5/15/10,
market value--$61,200).............................. $ $ 60,000 $ 60,000
178,810 178,810 Lehman Brothers Holdings, Inc., 6.20%, due 7/3/95,
dated 6/30/95 (Collateralized by $395,648 various
government securities, 0.00%, 11/15/00-5/15/09,
market value--$182,382)............................. 178,810 178,810
15,000 15,000 Merrill Lynch, 5.95%, due 7/27/95, dated 5/12/95...... 15,000 15,000
10,000 10,000 Morgan Stanley, 5.95%, due 8/16/95, dated 5/17/95
(Collateralized by U.S. Treasury Notes, 4.75%,
8/31/98, market value--$10,000)..................... 10,000 10,000
60,000 60,000 Morgan Stanley, 6.06%, due 7/5/95, dated 6/30/95
(Collateralized by $62,105 U.S. Treasury Notes,
4.38%-7.75%, 3/31/96-11/15/96, market value--
$61,205)............................................ 60,000 60,000
13,000 13,000 Nikko, 6.10%, due 7/3/95, dated 6/30/95
(Collateralized by U.S. Treasury Bills, 7.50%,
7/3/96, market value--$13,000)...................... 13,000 13,000
60,000 60,000 Nomura Securities International, 6.05%, due 7/5/95,
dated 6/30/95** 60,000 60,000
140,000 140,000 Nomura Securities International, 6.18%, due 7/3/95,
dated 6/30/95** 140,000 140,000
10,000 10,000 Smith Barney, 6.02%, due 7/5/95, dated 6/23/95
(Collateralized by U.S. Treasury Notes, 7.00%,
9/30/96, market value--$9,885)...................... 10,000 10,000
10,000 10,000 Swiss Bank, 5.96%, due 8/3/95, dated 5/5/95
(Collateralized by U.S. Treasury Notes, 7.50%,
12/31/96, market value--$10,000).................... 10,000 10,000
13,000 13,000 UBS Securities, 6.05%, due 7/5/95, dated 6/30/95
(Collateralized by U.S. Treasury Notes, 6.50%,
4/30/99, market value--$13,000)..................... 13,000 13,000
--------- ------------- -----------
Total Repurchase Agreements 236,900 928,810 1,109,710
--------- ------------- -----------
Total (Cost--$244,276, $1,282,195 and $1,526,471
respectively) (a) $ 300,276 $ 1,282,195 $ 1,526,471
--------- ------------- -----------
--------- ------------- -----------
</TABLE>
- ----------
Percentages indicated are based on proforma combined net assets of $1,576.
(a) Cost and value for federal income tax and financial reporting purposes are
the same.
* These repurchase agreements are cross collateralized by $302,852 U.S.
Treasury Notes, 5.13%-8.88%, 8/31/95-2/23/00, market value--$316,200.
** These repurchase agreements are cross collateralized by $188,404 various
government securities, 0.00%-12.00%, 12/28/95-2/15/15, market
value--$204,000.
*** Variable Rate Securities.
SEE NOTES TO PRO FORMA FINANCIAL STATEMENTS.
- ----
86
<PAGE>
- --------------------------------------------------------------------------------
PARAGON SHORT-TERM GOVERNMENT FUND
THE ONE GROUP LIMITED VOLATILITY BOND FUND
- --------------------------------------------------------------------------------
PRO FORMA SCHEDULE OF PORTFOLIO INVESTMENTS JUNE 30, 1995
(Amounts in Thousands) (Unaudited)
<TABLE>
<CAPTION>
PRINCIPAL AMOUNT MARKET VALUE
- ---------------------------------- ----------------------------------
SHORT-TERM LIMITED PRO FORMA SHORT-TERM LIMITED PRO FORMA
GOVERNMENT VOLATILITY COMBINED GOVERNMENT VOLATILITY COMBINED
FUND BOND FUND (NOTE 1) SECURITY DESCRIPTION FUND BOND FUND (NOTE 1)
- ---------- ---------- ---------- -------------------------------------------------- ---------- ---------- ----------
<C> <C> <C> <S> <C> <C> <C>
ASSET BACKED SECURITIES (10.7%):
4,620 4,620 CIT Group Securitization Corp., Class A1 7.70%,
8/15/20......................................... $ $ 4,728 $ 4,728
5,000 5,000 Green Tree Home Improvement Loan Trust 6.20%,
7/15/20......................................... 4,987 4,987
2,665 2,665 Merrill Lynch Corp., Pool #1992-A A 5.50%,
5/15/98......................................... 2,654 2,654
5,000 5,000 National Premier Funding 7.00%, 6/1/99............ 5,026 5,026
700 700 Premier Auto Trust, Pool #1992-2A 6.38%,
9/15/97......................................... 702 702
959 959 Premier Auto Trust, Pool #1992-3A 5.90%,
11/15/97........................................ 955 955
533 533 Shawmut National Granto Trust, Pool #1992-A A,
5.55%, 11/15/97................................. 533 533
7,000 7,000 Standard Credit Card, Class A 8.63%, 1/7/02....... 7,303 7,303
10,000 10,000 Standard Credit Card Master Trust, Pool #1991-1A,
8.50%, 6/7/96................................... 10,226 10,226
5,712 5,712 UCFC, 1995-A, Tranche A-1 7.55%, 7/10/04.......... 5,770 5,770
7,000 7,000 UCFC Home Equity Loan 8.38%, 3/10/07.............. 7,210 7,210
5,466 5,466 Union Federal, 4.88%, 2/15/00..................... 5,331 5,331
785 785 Union Federal Savings Bank, Grantor Trust, Pool
#1992-A A, 6.70%, 11/15/97...................... 785 785
3,638 3,638 Union Federal Savings Bank, Grantor Trust, Pool
#1993-A, 4.53%, 5/15/99......................... 3,554 3,554
---------- ---------- ----------
Total Asset Backed Securities 59,764 59,764
---------- ---------- ----------
CORPORATE BONDS (12.9%):
Automotive (0.6%):
3,179 3,179 Chrysler Corp., 10.40%, 8/1/99.................... 3,394 3,394
---------- ---------- ----------
Finance (6.1%):
7,000 7,000 Ford Motor Credit, 1/15/00 7,481 7,481
5,000 5,000 GMAC Financial, 7.00%, 3/1/00..................... 5,050 5,050
5,200 5,200 International Lease Finance, 6.63%, 6/1/96........ 5,227 5,227
10,000 10,000 International Lease Finance, 5.54%, 5/5/97........ 9,888 9,888
6,000 6,000 Paccar Financial, 6.45%, 3/25/96.................. 6,018 6,018
---------- ---------- ----------
33,664 33,664
---------- ---------- ----------
Foreign (1.4%):
10,000 10,000 Westpac Banking Floater Perpetual Note A2/A-,
5.84%........................................... 8,100 8,100
---------- ---------- ----------
Pharmaceutical (0.9%):
5,000 5,000 American Home Products 7.70%, 2/15/00............. 5,225 5,225
---------- ---------- ----------
Retail (0.3%):
1,500 1,500 Dayton Hudson Corp., 6.06%, 12/15/96.............. 1,500 1,500
---------- ---------- ----------
</TABLE>
CONTINUED
----
87
<PAGE>
- --------------------------------------------------------------------------------
PARAGON SHORT-TERM GOVERNMENT FUND
THE ONE GROUP LIMITED VOLATILITY BOND FUND
- --------------------------------------------------------------------------------
PRO FORMA SCHEDULE OF PORTFOLIO INVESTMENTS, CONTINUED JUNE 30, 1995
(Amounts in Thousands) (Unaudited)
<TABLE>
<CAPTION>
PRINCIPAL AMOUNT MARKET VALUE
- ---------------------------------- ----------------------------------
SHORT-TERM LIMITED PRO FORMA SHORT-TERM LIMITED PRO FORMA
GOVERNMENT VOLATILITY COMBINED GOVERNMENT VOLATILITY COMBINED
FUND BOND FUND (NOTE 1) SECURITY DESCRIPTION FUND BOND FUND (NOTE 1)
- ---------- ---------- ---------- -------------------------------------------------- ---------- ---------- ----------
CORPORATE BONDS, CONTINUED:
<C> <C> <C> <S> <C> <C> <C>
Securities Broker (3.6%):
7,000 7,000 Lehman Brothers, 7.00%, 5/15/97................... $ $ 7,053 $ 7,053
3,000 3,000 Lehman Brothers, 10.00%, 5/15/99.................. 3,285 3,285
4,500 4,500 Lehman Brothers Holding, 8.88%, 11/1/98........... 4,748 4,748
5,000 5,000 Smith Barney, 6.00%, 3/15/97...................... 4,969 4,969
---------- ---------- ----------
20,055 20,055
---------- ---------- ----------
Total Corporate Bonds 71,938 71,938
---------- ---------- ----------
U.S. GOVERNMENT & AGENCY OBLIGATIONS (27.6%):
Federal Farm Credit Bank
1,735 1,735 5.31%, 5/26/98.................................. 1,697 1,697
Federal Home Loan Bank:
2,100 2,100 5.38%, 11/27/95................................. 2,099 2,099
7,500 7,500 6.55%, 4/17/96.................................. 7,515 7,515
2,000 2,000 6.85%, 2/25/97.................................. 2,023 2,023
4,000 4,000 6.60%, 4/13/99.................................. 4,031 4,031
5,000 5,000 7.35%, 5/24/00.................................. 5,009 5,009
10,000 10,000 7.78%, 10/19/01................................. 10,724 10,724
Federal Home Loan Mortgage Corp.:
636 636 9.00%, 1/1/05, Pool #E00012..................... 663 663
626 626 9.00%, 12/1/05, Pool #E00005.................... 653 653
1,155 1,155 8.00%, 10/1/06, Pool #E00052.................... 1,187 1,187
3,318 3,318 7.00%, 3/1/07, Pool #E34594, Gold............... 3,326 3,326
3,024 3,024 7.00%, 4/1/07, Pool #E00087, Gold............... 3,032 3,032
4,234 4,234 7.50%, 4/1/07, Pool #E00084..................... 4,304 4,304
5,087 5,087 7.50%, 11/1/07, Pool #E00165.................... 5,172 5,172
9,169 9,169 8.50%, 2/1/08, Pool #G10133, Gold............... 9,495 9,495
4,890 4,890 8.00%, 1/1/10, Pool #E00355..................... 5,026 5,026
12,735 12,735 8.00%, 2/1/10, Pool #G10382..................... 13,089 13,089
7,550 7,550 5.50%, 10/15/13, Class C, REMIC #1546-C......... 7,384 7,384
10,000 10,000 5.25%, 9/15/15, REMIC #1638 BC.................. 9,641 9,641
10,000 10,000 8.25%, 12/15/16, REMIC #1770 PD................. 10,459 10,459
10,000 10,000 7.25%, 4/15/18, REMIC #1254 F................... 10,036 10,036
Federal National Mortgage Assoc.:
3,000 3,000 5.35%, 10/10/97................................. 2,942 2,942
5,000 5,000 8.45%, 10/21/96................................. 5,151 5,151
3,000 3,000 8.20%, 3/10/98.................................. 3,151 3,151
2,000 2,000 5.30%, 3/11/98.................................. 1,949 1,949
4,000 4,000 5.35%, 4/1/98................................... 3,909 3,909
3,600 3,600 6.90%, 3/27/98.................................. 3,672 3,672
373 373 9.00%, 9/1/05, Pool #50340...................... 389 389
420 420 9.00%, 11/1/05, Pool #50361..................... 438 438
421 421 8.50%, 4/1/06, Pool #116875..................... 436 436
6,000 6,000 7.00%, 6/1/10, Pool #315928..................... 6,011 6,011
1,679 1,679 6.00%, 9/25/18, Pool # 1989-94E, REMIC.......... 1,666 1,666
</TABLE>
CONTINUED
- ----
88
<PAGE>
- --------------------------------------------------------------------------------
PARAGON SHORT-TERM GOVERNMENT FUND
THE ONE GROUP LIMITED VOLATILITY BOND FUND
- --------------------------------------------------------------------------------
PRO FORMA SCHEDULE OF PORTFOLIO INVESTMENTS, CONTINUED JUNE 30, 1995
(Amounts in Thousands) (Unaudited)
<TABLE>
<CAPTION>
PRINCIPAL AMOUNT MARKET VALUE
- ---------------------------------- ----------------------------------
SHORT-TERM LIMITED PRO FORMA SHORT-TERM LIMITED PRO FORMA
GOVERNMENT VOLATILITY COMBINED GOVERNMENT VOLATILITY COMBINED
FUND BOND FUND (NOTE 1) SECURITY DESCRIPTION FUND BOND FUND (NOTE 1)
- ---------- ---------- ---------- -------------------------------------------------- ---------- ---------- ----------
U.S. GOVERNMENT & AGENCY OBLIGATIONS, CONTINUED:
<C> <C> <C> <S> <C> <C> <C>
Government National Mortgage Assoc.:
6 6 8.00%, 2/15/02, Pool #192917.................... $ $ 2 $ 2
43 43 8.00%, 3/15/02, Pool #209172.................... 44 44
16 16 9.00%, 6/15/02, Pool #229311.................... 17 17
127 127 9.00%, 10/15/02, Pool #229569................... 133 133
29 29 8.00%, 6/15/05, Pool #288827.................... 30 30
17 17 9.00%, 9/15/05, Pool #292569.................... 18 18
129 129 9.00%, 10/15/05, Pool #292589................... 135 135
39 39 8.00%, 5/15/06, Pool #303851.................... 41 41
11 11 8.00%, 7/15/06, Pool #307231.................... 11 11
59 59 8.00%, 8/15/06, Pool #311166.................... 61 61
415 415 8.00%, 10/15/06, Pool #316915................... 429 429
76 76 8.00%, 11/15/06, Pool #311131................... 79 79
766 766 8.00%, 11/15/06, Pool #312210................... 791 791
440 440 8.00%, 11/15/06, Pool #313528................... 454 454
196 196 8.00%, 11/15/06, Pool #315078................... 202 202
204 204 8.00%, 11/15/06, Pool #316671................... 210 210
58 58 8.00%, 12/15/06, Pool #311301................... 60 60
382 382 8.00%, 12/15/06, Pool #311384................... 394 394
314 314 8.00%, 1/15/07, Pool #317663.................... 324 324
669 669 8.00%, 2/15/07, Pool #316086.................... 691 691
291 291 8.00%, 3/15/07, Pool #318825.................... 301 301
122 122 8.00%, 3/15/07, Pool #178684.................... 126 126
254 254 8.00%, 4/15/07, Pool #316441.................... 262 262
U.S. Government Backed Bonds:
552 552 Resolution Trust Corporation, Series 1992 5.90%,
7/25/23......................................... 550 550
2,018 2,018 U.S. Government Guaranteed Overseas Private
Investment Corp.: 5.55%, 1/13/97................ 2,005 2,005
---------- ---------- ----------
Total U.S. Government & Agency Obligations 27,473 126,176 153,649
---------- ---------- ----------
U.S. TREASURY NOTES (44.4%):
3,000 3,000 5.13%, 11/15/95................................. 6,986 6,986
5,000 5,000 7.50%, 1/31/96.................................. 5,050 5,050
10,000 10,000 6.25%, 8/31/96.................................. 10,047 10,047
15,000 15,000 7.25%, 8/31/96.................................. 15,238 15,238
15,000 15,000 6.88%, 10/31/96................................. 15,200 15,200
10,000 10,000 6.50%, 11/30/96................................. 10,091 10,091
5,500 5,500 6.25%, 1/31/97.................................. 5,533 5,533
6,000 6,000 6.88%, 4/30/97.................................. 6,103 6,103
20,000 20,000 6.50%, 5/15/97.................................. 20,225 20,225
4,000 4,000 6.75%, 5/31/97.................................. 4,063 4,063
3,000 3,000 6.38%, 6/30/97.................................. 3,032 3,032
</TABLE>
CONTINUED
----
89
<PAGE>
- --------------------------------------------------------------------------------
PARAGON SHORT-TERM GOVERNMENT FUND
THE ONE GROUP LIMITED VOLATILITY BOND FUND
- --------------------------------------------------------------------------------
PRO FORMA SCHEDULE OF PORTFOLIO INVESTMENTS, CONTINUED JUNE 30, 1995
(Amounts in Thousands) (Unaudited)
<TABLE>
<CAPTION>
PRINCIPAL AMOUNT MARKET VALUE
- ---------------------------------- ----------------------------------
SHORT-TERM LIMITED PRO FORMA SHORT-TERM LIMITED PRO FORMA
GOVERNMENT VOLATILITY COMBINED GOVERNMENT VOLATILITY COMBINED
FUND BOND FUND (NOTE 1) SECURITY DESCRIPTION FUND BOND FUND (NOTE 1)
- ---------- ---------- ---------- -------------------------------------------------- ---------- ---------- ----------
U.S. TREASURY NOTES, CONTINUED:
<C> <C> <C> <S> <C> <C> <C>
10,000 10,000 5.75%, 10/31/97................................. $ 9,973 $ $ 9,973
3,000 3,000 7.38%, 11/15/97................................. 3,098 3,098
9,000 9,000 6.00%, 11/30/97................................. 9,023 9,023
5,000 5,000 5.13%, 3/31/98.................................. 4,904 4,904
1,500 1,500 5.13%, 4/30/98.................................. 1,470 1,470
10,000 10,000 6.13%, 5/15/98.................................. 10,063 10,063
9,000 9,000 5.13%, 6/30/98.................................. 8,806 8,806
10,000 10,000 8.25%, 7/15/98.................................. 10,635 10,635
7,000 7,000 7.13%, 10/15/98................................. 7,245 7,245
5,000 5,000 6.38%, 1/15/99.................................. 5,067 5,067
10,000 10,000 6.33%, 7/15/99.................................. 10,133 10,133
10,000 10,000 6.38%, 7/15/99.................................. 10,133 10,133
5,000 5,000 7.75%, 11/30/99................................. 5,331 5,331
1,000 1,000 8.88%, 5/15/00.................................. 1,121 1,121
21,000 21,000 6.25%, 5/31/00.................................. 21,206 21,206
3,000 3,000 8.50%, 11/15/00................................. 3,336 3,336
6,000 6,000 7.50%, 11/15/01................................. 6,440 6,440
10,000 10,000 7.50%, 5/15/02.................................. 10,774 10,774
7,000 7,000 6.25%, 2/15/03.................................. 7,020 7,020
---------- ---------- ----------
Total U.S. Treasury Notes 95,264 152,082 247,346
---------- ---------- ----------
REPURCHASE AGREEMENTS (4.0%):
15,252 15,252 Lehman Brothers, 6.15%, dated 6/30/65, due 7/3/95
(Collateralized by 15,030 U.S. Treasury Notes,
6.75%, 2/28/97, market value--$15,570).......... 15,252 15,252
7,245 7,245 State Street Bank & Trust Co., 5.50%, dated
6/30/95, due 7/3/95............................. 7,245 7,245
---------- ---------- ----------
Total Repurchase Agreements 7,245 15,252 22,497
---------- ---------- ----------
Total (Cost $131,078, $418,850 and $549,928
respectively)(a) $ 129,982 $ 425,212 $ 555,194
---------- ---------- ----------
---------- ---------- ----------
</TABLE>
- ----------
Percentages indicated are based on proforma net assets of $556,831.
(a) Represents cost for federal income tax purposes and differs from value by
net unrealized appreciation of securities as follows:
<TABLE>
<S> <C>
Unrealized appreciation........................................... $ 7,758
Unrealized depreciation........................................... (2,493)
---------
Net unrealized appreciation....................................... $ 5,265
---------
---------
</TABLE>
* Variable rate securities having liquidity sources through bank letters of
credit and/or liquidity arrangements.
The interest rate, which will change periodically, is based upon bank prime
rates or an index of market interest rates.
The rate reflected on the Schedule of Portfolio Investments is the rate in
effect on June 30, 1995.
SEE NOTES TO PRO FORMA FINANCIAL STATEMENTS.
- ----
90
<PAGE>
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PARAGON INTERMEDIATE-TERM BOND FUND
THE ONE GROUP GOVERNMENT BOND FUND
- --------------------------------------------------------------------------------
PRO FORMA SCHEDULE OF PORTFOLIO INVESTMENTS JUNE 30, 1995
(Amounts in Thousands) (Unaudited)
<TABLE>
<CAPTION>
PRINCIPAL AMOUNT MARKET VALUE
- ------------------------------------ ------------------------------------
INTERMEDIATE PRO FORMA INTERMEDIATE PRO FORMA
TERM BOND GOVERNMENT COMBINED TERM BOND GOVERNMENT COMBINED
FUND BOND FUND (NOTE 1) SECURITY DESCRIPTION FUND BOND FUND (NOTE 1)
- ------------ ---------- ---------- -------------------------------------------------- ------------ ---------- ----------
<C> <C> <C> <S> <C> <C> <C>
CORPORATE BONDS (10.4%):
Basic Materials & Natural Resources (0.4%):
3,000 3,000 Monsanto Co., 6.00%, 7/1/00....................... $ 2,950 $ $ 2,950
------------ ---------- ----------
Beverages (0.3%):
2,000 2,000 Coca Cola Enterprises, Inc., 7.00%, 11/15/99...... 2,032 2,032
------------ ---------- ----------
Medical Supplies (0.3%):
2,000 2,000 Baxter International, Inc., 7.25%, 2/15/08........ 2,036 2,036
------------ ---------- ----------
Finance (5.4%):
1,900 1,900 Amsouth Bancorporation, 9.38%, 5/1/99............. 2,067 2,067
2,000 2,000 AON Corp., 6.70%, 6/15/03......................... 1,979 1,979
1,000 1,000 Banc One Corp., 8.74%, 9/15/03.................... 1,114 1,114
5,000 5,000 Boatmens Bancshares, Inc., 7.63%, 10/1/04 5,226 5,226
2,000 2,000 Capital Holding Corp., 8.90%, 10/20/99............ 2,162 2,162
1,000 1,000 Capital Holding Corp., 8.98%, 9/23/03............. 1,104 1,104
2,850 2,850 Capital Holding Corp., 7.82%, 6/23/04............. 2,956 2,956
2,990 2,990 Comerica, Inc., 7.25%, 10/15/02................... 3,101 3,101
2,000 2,000 Ford Motor Credit Corp., 9.38%, 12/15/97.......... 2,141 2,141
2,000 2,000 General Electric Capital Corp., 8.65%*, 5/1/18.... 2,042 2,042
1,000 1,000 Harris Bancorp, Inc., 9.38%, 6/1/01............... 1,139 1,139
3,000 3,000 International Lease Finance Corp., 6.50%,
8/15/99.......................................... 2,994 2,994
400 400 International Bank for Reconstruction and De-
velopment, Medium Term Note COLTS, 7.65%,
2/28/97.......................................... 409 409
3,000 3,000 NCNB Texas National Bank, 9.50%, 6/1/04........... 3,503 3,503
1,500 1,500 Sovran Financial Corp., 9.25%, 6/15/06............ 1,766 1,766
2,000 2,000 Suntrust Banks, Inc., 8.88%, 2/1/98............... 2,130 2,130
400 400 Transamerica Financial Corp., 7.88%, 2/15/97...... 412 412
2,000 2,000 Wachovia Corp., 6.38%, 4/15/03.................... 1,968 1,968
------------ ---------- ----------
37,392 821 38,213
------------ ---------- ----------
Pharmaceuticals (0.1%):
350 350 Becton Dickinson & Co., 8.38%, 6/1/96............. 357 357
------------ ---------- ----------
Retail Stores (1.1%):
1,250 1,250 Dayton Hudson Corp., 7.25%, 9/1/04................ 1,285 1,285
2,000 2,000 Dillard Department Stores, Inc., 8.75%, 6/15/98... 2,120 2,120
4,000 4,000 Wal Mart Stores, Inc., 7.50%, 5/15/04............. 4,223 4,223
------------ ---------- ----------
7,628 7,628
------------ ---------- ----------
Securities Brokers & Dealers (1.7%):
5,000 5,000 Bear Stearns Cos., Inc., 8.25%, 2/1/02............ 5,323 5,323
3,000 3,000 Merrill Lynch & Co., Inc., 8.00%, 2/1/02.......... 3,171 3,171
1,000 1,000 Merrill Lynch & Co., Inc., 8.23%*, 4/30/02........ 1,068 1,068
2,000 2,000 Morgan Stanley Group, Inc., 9.38%, 6/15/01........ 2,233
------------ ---------- ----------
11,795 11,795
------------ ---------- ----------
Technology (0.3%):
2,000 2,000 Motorola, Inc., 6.50%, 3/1/08..................... 1,933 1,933
------------ ---------- ----------
</TABLE>
CONTINUED
----
91
<PAGE>
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PARAGON INTERMEDIATE-TERM BOND FUND
THE ONE GROUP GOVERNMENT BOND FUND
- --------------------------------------------------------------------------------
PRO FORMA SCHEDULE OF PORTFOLIO INVESTMENTS, CONTINUED JUNE 30, 1995
(Amounts in Thousands) (Unaudited)
<TABLE>
<CAPTION>
PRINCIPAL AMOUNT MARKET VALUE
- ------------------------------------ ------------------------------------
INTERMEDIATE PRO FORMA INTERMEDIATE PRO FORMA
TERM BOND GOVERNMENT COMBINED TERM BOND GOVERNMENT COMBINED
FUND BOND FUND (NOTE 1) SECURITY DESCRIPTION FUND BOND FUND (NOTE 1)
- ------------ ---------- ---------- -------------------------------------------------- ------------ ---------- ----------
CORPORATE BONDS, CONTINUED:
<C> <C> <C> <S> <C> <C> <C>
Tobacco (0.4%):
1,000 1,000 Philip Morris Cos., Inc., 9.00%, 1/1/01........... $ 1,105 $ $ 1,105
2,000 2,000 Philip Morris Cos., Inc., 7.13%, 8/15/02.......... 2,032 2,032
------------ ---------- ----------
3,137 3,137
------------ ---------- ----------
Utilities (0.5%):
3,000 3,000 Alltell Corp., 7.25%, 4/1/04...................... 3,060 3,060
300 300 Southern Railway Co., 8.25%, 6/1/96............... 304 304
------------ ---------- ----------
3,060 304 3,364
------------ ---------- ----------
Total Corporate Bonds 71,963 1,482 73,445
------------ ---------- ----------
U.S. GOVERNMENT AGENCIES (58.8%):
Federal Farm Credit Bank:
5,000 5,000 6.88%, 5/1/00................................... 5,063 5,063
2,000 2,000 7.95%, 4/1/02................................... 2,095 2,095
Federal Home Loan Bank:
5,000 5,000 0.00%*, 3/18/96, Accrual Note................... 4,789 4,789
7,000 7,000 6.55% through 7/17/95, 7.05%, through 10/17/95,
7.65% through 1/17/96, 4/17/96.................. 7,014 7,014
550 550 8.25%, 6/25/96.................................. 560 560
3,923 3,923 6.05%, 6/24/97 IAN.............................. 3,923 3,923
2,000 2,000 9.25%, 11/25/98................................. 2,171 2,171
2,000 2,000 9.30%, 1/25/99.................................. 2,199 2,199
3,000 3,000 8.60%, 6/25/99.................................. 3,255 3,255
5,000 5,000 6.27%, 1/14/04.................................. 4,799 4,799
Federal Home Loan Mortgage Corp.:
5,000 5,000 7.35%, 3/9/98................................... 5,027 5,027
2,000 2,000 6.44%, 1/28/00.................................. 2,015 2,015
3,000 3,000 7.88%, 4/28/04.................................. 3,076 3,076
5,000 5,000 7.89%, 5/12/04.................................. 5,124 5,124
2,018 2,018 7.00%, 1/15/08.................................. 1,963 1,963
7,756 7,756 7.50%, 4/1/09................................... 7,885 7,885
7,729 7,729 8.50%, 12/1/09.................................. 8,004 8,004
492 492 9.00%, 10/1/17.................................. 514 514
370 370 9.00%, 4/1/18................................... 386 386
8,000 8,000 7.25%, 4/15/18, REMIC........................... 8,029 8,029
175 175 9.00%, 6/1/20................................... 182 182
67 67 9.00%, 8/1/20................................... 70 70
95 95 9.00%, 10/1/20.................................. 99 99
102 102 9.00%, 1/1/21................................... 107 107
10,000 10,000 7.00%, 3/15/21, REMIC, CMO...................... 9,708 9,708
93 93 9.00%, 4/1/21................................... 97 97
190 190 9.00%, 7/1/21................................... 198 198
268 268 9.00%, 9/1/21................................... 280 280
179 179 9.00%, 11/1/21.................................. 186 186
54 54 9.00%, 11/1/21.................................. 56 56
</TABLE>
CONTINUED
- ----
92
<PAGE>
- --------------------------------------------------------------------------------
PARAGON INTERMEDIATE-TERM BOND FUND
THE ONE GROUP GOVERNMENT BOND FUND
- --------------------------------------------------------------------------------
PRO FORMA SCHEDULE OF PORTFOLIO INVESTMENTS, CONTINUED JUNE 30, 1995
(Amounts in Thousands) (Unaudited)
<TABLE>
<CAPTION>
PRINCIPAL AMOUNT MARKET VALUE
- ------------------------------------ ------------------------------------
INTERMEDIATE PRO FORMA INTERMEDIATE PRO FORMA
TERM BOND GOVERNMENT COMBINED TERM BOND GOVERNMENT COMBINED
FUND BOND FUND (NOTE 1) SECURITY DESCRIPTION FUND BOND FUND (NOTE 1)
- ------------ ---------- ---------- -------------------------------------------------- ------------ ---------- ----------
U.S. GOVERNMENT AGENCIES, CONTINUED:
<C> <C> <C> <S> <C> <C> <C>
Federal Home Loan Mortgage Corp., continued:
167 167 9.00%, 11/1/21.................................. $ $ 175 $ 175
251 251 9.00%, 5/1/22................................... 262 262
319 319 9.00%, 5/1/22................................... 333 333
10,000 10,000 7.50%, 9/15/22, CMO............................. 10,186 10,186
8,012 8,012 10.00%, 10/15/23, REMIC......................... 8,973 8,973
7,089 7,089 8.50%, 5/1/24................................... 7,319 7,319
6,705 6,705 8.50%, 7/1/24................................... 6,923 6,923
9,833 9,833 7.50%, 9/1/24................................... 9,873 9,873
9,933 9,933 8.00%, 11/1/24.................................. 10,128 10,128
3,405 3,405 7.50%, 5/1/25................................... 3,419 3,419
6,595 6,595 7.50%, 6/1/25................................... 6,622 6,622
10,000 10,000 8.00%, 6/1/25................................... 10,197 10,197
Federal National Mortgage Assoc.:
1,000 1,000 9.35%, 2/12/96.................................. 1,021 1,021
4,500 4,500 6.45% through 5/10/95, 6.60% through 5/10/96,
6.90%, through 5/10/97, 5/10/99................. 4,484 4,484
2,000 2,000 9.20%, 6/10/97.................................. 2,111 2,111
2,000 2,000 8.80%, 7/25/97.................................. 2,105 2,105
5,000 5,000 4.85%, 6/23/98.................................. 4,931 4,931
4,000 4,000 8.70%, 6/10/99.................................. 4,337 4,337
3,000 3,000 8.90%, 6/12/00.................................. 3,336 3,336
3,000 3,000 8.70%, 6/11/01.................................. 3,069 3,069
2,000 2,000 7.90%, 4/10/02.................................. 2,046 2,046
3,000 3,000 6.20%, 11/12/03................................. 2,861 2,861
2,820 2,820 8.05%, 5/20/04.................................. 2,895 2,895
15,000 15,000 7.16%, 5/11/05.................................. 15,570 15,570
5,821 5,821 7.00%, 4/1/08................................... 5,832 5,832
7,875 7,875 REMIC Trust 1993-175, Class PG, 6.50%, 9/25/08,
CMO............................................. 7,550 7,550
8,000 8,000 6.00%, 6/25/09, REMIC........................... 7,347 7,347
4,900 4,900 7.00%, 6/1/10................................... 4,814 4,814
10,000 10,000 6.25%, 2/25/13, REMIC........................... 9,891 9,891
3,596 3,596 REMIC Trust 1993-225, Class VG, 6.35%, 8/25/13,
CMO............................................. 3,423 3,423
5,430 5,430 7.50%, 6/1/14................................... 5,452 5,452
4,244 4,244 7.50%, 7/1/14................................... 4,261 4,261
249 249 10.00%, 10/1/16................................. 270 270
771 771 10.00%, 10/1/19................................. 836 836
10,000 10,000 7.00%, 5/25/20, REMIC........................... 9,937 9,937
436 436 10.00%, 7/1/20.................................. 473 473
6,901 6,901 REMIC Trust 1993-56, Class PT, 6.60%, 2/25/21,
CMO............................................. 6,696 6,696
5,584 5,584 REMIC Trust 1992-205, Class K, 6.50%, 5/25/21,
CMO............................................. 5,363 5,363
3,597 3,597 REMIC Trust 19-87, Class H, 6.50%, 10/25/21,
CMO............................................. 3,465 3,465
</TABLE>
CONTINUED
----
93
<PAGE>
- --------------------------------------------------------------------------------
PARAGON INTERMEDIATE-TERM BOND FUND
THE ONE GROUP GOVERNMENT BOND FUND
- --------------------------------------------------------------------------------
PRO FORMA SCHEDULE OF PORTFOLIO INVESTMENTS, CONTINUED JUNE 30, 1995
(Amounts in Thousands) (Unaudited)
<TABLE>
<CAPTION>
PRINCIPAL AMOUNT MARKET VALUE
- ------------------------------------ ------------------------------------
INTERMEDIATE PRO FORMA INTERMEDIATE PRO FORMA
TERM BOND GOVERNMENT COMBINED TERM BOND GOVERNMENT COMBINED
FUND BOND FUND (NOTE 1) SECURITY DESCRIPTION FUND BOND FUND (NOTE 1)
- ------------ ---------- ---------- -------------------------------------------------- ------------ ---------- ----------
U.S. GOVERNMENT AGENCIES, CONTINUED:
<C> <C> <C> <S> <C> <C> <C>
Federal National Mortgage Assoc., continued:
1,043 1,043 10.00%, 11/1/21................................. $ $ 1,132 $ 1,132
852 852 10.00%, 11/1/21................................. 925 925
5,000 5,000 6.55%, 12/25/21................................. 4,874 4,874
5,000 5,000 REMIC Trust 1993-183, Class H, 6.50%, 3/25/22,
CMO............................................. 4,813 4,813
5,000 5,000 REMIC Trust 1993-110, Class H, 6.50%, 5/25/23,
CMO............................................. 4,816 4,816
9,094 9,094 6.35%, 12/25/23, REMIC.......................... 8,546 8,546
5,042 5,042 7.00%, 1/25/24, REMIC........................... 5,024 5,024
9,870 9,870 7.00%, 2/1/24................................... 9,713 9,713
6,343 6,343 7.84%*, 2/25/24, REMIC.......................... 5,455 5,455
4,931 4,931 7.50%, 5/1/25................................... 4,951 4,951
4,900 4,900 7.50%, 6/1/25................................... 4,920 4,920
4,900 4,900 7.50%, 6/1/25................................... 4,920 4,920
Government National Mortgage Assoc.:
17 17 10.50%, 4/15/98................................. 18 18
55 55 10.00%, 9/15/00................................. 58 58
13 13 10.00%, 12/15/00................................ 14 14
20 20 10.00%, 1/15/01................................. 21 21
135 135 8.50%, 6/15/01.................................. 141 141
10 10 8.50%, 7/15/01.................................. 11 11
135 135 9.00%, 9/15/01.................................. 141 141
14 14 9.00%, 9/15/01.................................. 14 14
111 111 9.50%, 9/15/01.................................. 116 116
116 116 8.50%, 11/15/01................................. 121 121
86 86 9.50%, 11/15/01................................. 91 91
159 159 9.00%, 12/15/01................................. 166 166
107 107 8.50%, 12/15/01................................. 112 112
142 142 8.00%, 3/15/02.................................. 147 147
302 302 9.00%, 5/15/03.................................. 316 316
257 257 9.00%, 6/15/05.................................. 269 269
97 97 9.00%, 8/15/05.................................. 101 101
102 102 9.00%, 9/15/05.................................. 107 107
53 53 9.00%, 9/15/05.................................. 56 56
99 99 8.00%, 7/15/06.................................. 102 102
47 47 7.50%, 7/15/07.................................. 48 48
125 125 8.00%, 8/15/07.................................. 128 128
116 116 8.00%, 8/15/07.................................. 119 119
489 489 7.50%, 12/15/07................................. 499 499
74 74 9.00%, 11/15/08................................. 78 78
127 127 9.00%, 4/15/09.................................. 133 133
32 32 9.00%, 5/15/09.................................. 34 34
16 16 9.50%, 7/15/09.................................. 17 17
199 199 9.50%, 9/15/09.................................. 211 211
</TABLE>
CONTINUED
- ----
94
<PAGE>
- --------------------------------------------------------------------------------
PARAGON INTERMEDIATE-TERM BOND FUND
THE ONE GROUP GOVERNMENT BOND FUND
- --------------------------------------------------------------------------------
PRO FORMA SCHEDULE OF PORTFOLIO INVESTMENTS, CONTINUED JUNE 30, 1995
(Amounts in Thousands) (Unaudited)
<TABLE>
<CAPTION>
PRINCIPAL AMOUNT MARKET VALUE
- ------------------------------------ ------------------------------------
INTERMEDIATE PRO FORMA INTERMEDIATE PRO FORMA
TERM BOND GOVERNMENT COMBINED TERM BOND GOVERNMENT COMBINED
FUND BOND FUND (NOTE 1) SECURITY DESCRIPTION FUND BOND FUND (NOTE 1)
- ------------ ---------- ---------- -------------------------------------------------- ------------ ---------- ----------
U.S. GOVERNMENT AGENCIES, CONTINUED:
<C> <C> <C> <S> <C> <C> <C>
Government National Mortgage Assoc., continued:
54 54 9.50%, 10/15/09................................. $ $ 57 $ 57
51 51 11.00%, 11/15/09................................ 57 57
24 24 12.00%, 8/15/13................................. 28 28
2 2 12.00%, 4/15/15................................. 2 2
13 13 11.00%, 6/15/15................................. 15 15
113 113 9.00%, 5/15/16.................................. 118 118
171 171 9.00%, 6/15/16.................................. 180 180
19 19 9.50%, 7/15/16.................................. 20 20
149 149 9.00%, 7/15/16.................................. 157 157
103 103 9.50%, 8/15/16.................................. 109 109
192 192 9.00%, 9/15/16.................................. 201 201
37 37 9.50%, 1/15/17.................................. 39 39
357 357 9.00%, 2/15/17.................................. 376 376
313 313 9.00%, 6/15/17.................................. 329 329
84 84 9.50%, 8/15/17.................................. 89 89
33 33 9.00%, 8/15/17.................................. 34 34
47 47 9.50%, 8/15/17.................................. 50 50
121 121 9.00%, 6/15/18.................................. 127 127
126 126 9.50%, 8/15/18.................................. 134 134
34 34 9.00%, 10/15/18................................. 36 36
242 242 9.50%, 12/15/18................................. 257 257
6 6 9.00%, 10/15/19................................. 6 6
76 76 9.00%, 11/15/19................................. 80 80
87 87 9.00%, 1/15/20.................................. 92 92
105 105 9.00%, 2/15/20.................................. 111 111
127 127 9.00%, 3/15/20.................................. 134 134
124 124 9.50%, 9/15/20.................................. 131 131
122 122 9.50%, 12/15/20................................. 130 130
416 416 9.00%, 6/15/21.................................. 437 437
45 45 7.50%, 2/15/22.................................. 45 45
752 752 8.00%, 7/15/22.................................. 770 770
838 838 7.50%, 8/15/22.................................. 844 844
47 47 7.00%, 10/15/22................................. 47 47
253 253 7.00%, 11/15/22................................. 249 249
48 48 7.00%, 12/15/22................................. 47 47
45 45 7.00%, 1/15/23.................................. 44 44
566 566 7.00%, 1/15/23.................................. 558 558
428 428 7.00%, 1/15/23.................................. 422 422
599 599 7.00%, 1/15/23.................................. 590 590
273 273 7.00%, 1/15/23.................................. 269 269
55 55 7.00%, 3/15/23.................................. 54 54
730 730 7.00%, 5/15/23.................................. 719 719
70 70 7.00%, 5/15/23.................................. 69 69
922 922 7.00%, 5/15/23.................................. 909 909
374 374 6.50%, 5/15/23.................................. 360 360
942 942 7.00%, 5/15/23.................................. 928 928
</TABLE>
CONTINUED
----
95
<PAGE>
- --------------------------------------------------------------------------------
PARAGON INTERMEDIATE-TERM BOND FUND
THE ONE GROUP GOVERNMENT BOND FUND
- --------------------------------------------------------------------------------
PRO FORMA SCHEDULE OF PORTFOLIO INVESTMENTS, CONTINUED JUNE 30, 1995
(Amounts in Thousands) (Unaudited)
<TABLE>
<CAPTION>
PRINCIPAL AMOUNT MARKET VALUE
- ------------------------------------ ------------------------------------
INTERMEDIATE PRO FORMA INTERMEDIATE PRO FORMA
TERM BOND GOVERNMENT COMBINED TERM BOND GOVERNMENT COMBINED
FUND BOND FUND (NOTE 1) SECURITY DESCRIPTION FUND BOND FUND (NOTE 1)
- ------------ ---------- ---------- -------------------------------------------------- ------------ ---------- ----------
U.S. GOVERNMENT AGENCIES, CONTINUED:
<C> <C> <C> <S> <C> <C> <C>
Government National Mortgage Assoc., continued:
857 857 7.00%, 5/15/23.................................. $ $ 844 $ 844
101 101 6.50%, 6/15/23.................................. 97 97
498 498 6.50%, 6/15/23.................................. 479 479
64 64 6.50%, 6/15/23.................................. 61 61
69 69 6.50%, 6/15/23.................................. 66 66
276 276 6.50%, 7/15/23.................................. 266 266
293 293 7.00%, 7/15/23.................................. 288 288
954 954 7.00%, 7/15/23.................................. 940 940
28 28 7.00%, 7/15/23.................................. 28 28
373 373 7.00%, 7/15/23.................................. 367 367
42 42 7.00%, 7/15/23.................................. 41 41
250 250 7.00%, 7/15/23.................................. 246 246
564 564 7.00%, 7/15/23.................................. 556 556
691 691 7.00%, 7/15/23.................................. 681 681
591 591 7.00%, 7/15/23.................................. 582 582
921 921 7.00%, 7/15/23.................................. 907 907
348 348 6.50%, 8/15/23.................................. 334 334
500 500 6.50%, 8/15/23.................................. 481 481
731 731 6.50%, 8/15/23.................................. 703 703
263 263 6.50%, 8/15/23.................................. 253 253
187 187 6.50%, 8/15/23.................................. 180 180
323 323 6.50%, 8/15/23.................................. 311 311
65 65 6.50%, 9/15/23.................................. 62 62
809 809 6.50%, 9/15/23.................................. 778 778
239 239 6.50%, 10/15/23................................. 230 230
452 452 6.00%, 10/15/23................................. 424 424
35 35 6.00%, 10/15/23................................. 33 33
472 472 6.00%, 10/15/23................................. 443 443
5,054 5,054 8.00%, 10/15/23................................. 5,178 5,178
739 739 6.50%, 11/15/23................................. 711 711
24 24 6.50%, 11/15/23................................. 23 23
158 158 6.50%, 12/15/23................................. 152 152
1,003 1,003 6.50%, 12/15/23................................. 965 965
162 162 6.50%, 12/15/23................................. 156 156
753 753 6.50%, 12/15/23................................. 724 724
39 39 6.50%, 12/15/23................................. 37 37
942 942 6.50%, 1/15/24.................................. 906 906
415 415 6.50%, 2/15/24.................................. 399 399
192 192 6.50%, 2/15/24.................................. 184 184
1,331 1,331 6.50%, 2/15/24.................................. 1,281 1,281
361 361 6.50%, 2/15/24.................................. 347 347
419 419 6.50%, 2/15/24.................................. 403 403
891 891 7.50%, 6/15/24.................................. 897 897
106 106 7.50%, 6/15/24.................................. 106 106
1,103 1,103 8.50%, 8/15/24.................................. 1,146 1,146
5,364 5,364 8.50%, 8/15/24.................................. 5,574 5,574
</TABLE>
CONTINUED
- ----
96
<PAGE>
- --------------------------------------------------------------------------------
PARAGON INTERMEDIATE-TERM BOND FUND
THE ONE GROUP GOVERNMENT BOND FUND
- --------------------------------------------------------------------------------
PRO FORMA SCHEDULE OF PORTFOLIO INVESTMENTS, CONTINUED JUNE 30, 1995
(Amounts in Thousands) (Unaudited)
<TABLE>
<CAPTION>
PRINCIPAL AMOUNT MARKET VALUE
- ------------------------------------ ------------------------------------
INTERMEDIATE PRO FORMA INTERMEDIATE PRO FORMA
TERM BOND GOVERNMENT COMBINED TERM BOND GOVERNMENT COMBINED
FUND BOND FUND (NOTE 1) SECURITY DESCRIPTION FUND BOND FUND (NOTE 1)
- ------------ ---------- ---------- -------------------------------------------------- ------------ ---------- ----------
U.S. GOVERNMENT AGENCIES, CONTINUED:
<C> <C> <C> <S> <C> <C> <C>
Government National Mortgage Assoc., continued:
1,186 1,186 8.50%, 8/15/24.................................. $ $ 1,233 $ 1,233
4,946 4,946 8.00%, 9/15/24.................................. 5,068 5,068
487 487 8.00%, 9/15/24.................................. 499 499
2,002 2,002 8.50%, 11/15/24................................. 2,080 2,080
10,000 10,000 8.50%, 4/15/25.................................. 10,391 10,391
Student Loan Marketing Assoc.:
2,000 2,000 8.27%, 12/15/99................................. 2,129 2,129
25,000 25,000 5.65%, 12/1/00.................................. 2,425 2,425
------------ ---------- ----------
Total U.S. Government Agencies 146,941 268,352 415,293
------------ ---------- ----------
U.S. TREASURY BONDS (15.4%):
500 500 9.25%, 1/15/96.................................. 509 509
4,000 4,000 8.88%, 2/15/96.................................. 4,074 4,074
5,000 5,000 6.00%, 12/31/97................................. 5,014 5,014
10,000 10,000 9.00%, 5/15/98.................................. 10,803 10,803
1,000 1,000 8.88%, 11/15/98................................. 1,088 1,088
3,400 3,400 8.88%, 2/15/99.................................. 3,719 3,719
4,000 4,000 9.13%, 5/15/99.................................. 4,427 4,427
2,600 2,600 6.38%, 7/15/99.................................. 2,635 2,635
3,000 3,000 5.50%, 4/15/00.................................. 2,940 2,940
6,000 6,000 8.38%, 8/15/00.................................. 6,016 6,016
15,000 15,000 6.25%, 2/15/03.................................. 15,043 15,043
8,000 8,000 8.25%, 5/15/05.................................. 8,684 8,684
10,000 10,000 8.38%, 8/15/08.................................. 11,288 11,288
5,000 5,000 7.25%, 5/15/16.................................. 5,309 5,309
1,500 1,500 8.88%, 8/15/17.................................. 1,868 1,868
15,000 15,000 8.13%, 8/15/19.................................. 17,468 17,468
700 700 7.88%, 2/15/21.................................. 796 796
7,500 7,500 6.25%, 8/15/23.................................. 7,088 7,088
------------ ---------- ----------
Total U.S. Treasury Bonds 76,240 32,529 108,769
------------ ---------- ----------
U.S. TREASURY NOTES (9.7%):
1,800 1,800 8.88%, 11/15/94................................. 1,958 1,958
7,000 7,000 6.00%, 11/30/97................................. 7,018 7,018
8,000 8,000 8.25%, 7/15/98.................................. 8,508 8,508
2,200 2,200 8.88%, 2/15/99.................................. 2,406 2,406
3,000 3,000 6.38%, 7/15/99.................................. 3,040 3,040
5,000 5,000 7.50%, 10/31/99................................. 5,279 5,279
2,000 2,000 7.88%, 11/15/99................................. 2,141 2,141
2,000 2,000 5.50%, 4/15/00.................................. 1,960 1,960
5,500 5,500 7.50%, 11/15/01................................. 5,903 5,903
14,500 14,500 7.50%, 5/15/02.................................. 15,623 15,623
1,000 1,000 6.38%, 8/15/02.................................. 1,012 1,012
</TABLE>
CONTINUED
----
97
<PAGE>
- --------------------------------------------------------------------------------
PARAGON INTERMEDIATE-TERM BOND FUND
THE ONE GROUP GOVERNMENT BOND FUND
- --------------------------------------------------------------------------------
PRO FORMA SCHEDULE OF PORTFOLIO INVESTMENTS, CONTINUED JUNE 30, 1995
(Amounts in Thousands) (Unaudited)
<TABLE>
<CAPTION>
PRINCIPAL AMOUNT MARKET VALUE
- ------------------------------------ ------------------------------------
INTERMEDIATE PRO FORMA INTERMEDIATE PRO FORMA
TERM BOND GOVERNMENT COMBINED TERM BOND GOVERNMENT COMBINED
FUND BOND FUND (NOTE 1) SECURITY DESCRIPTION FUND BOND FUND (NOTE 1)
- ------------ ---------- ---------- -------------------------------------------------- ------------ ---------- ----------
U.S. TREASURY NOTES, CONTINUED:
<C> <C> <C> <S> <C> <C> <C>
5,600 5,600 6.25%, 2/15/03.................................. $ $ 5,616 $ 5,616
8,500 8,500 5.88%, 2/15/04.................................. 8,295 8,295
------------ ---------- ----------
Total U.S. Treasury Notes 68,759 68,759
------------ ---------- ----------
Total Investments, at value 295,144 371,122 666,266
------------ ---------- ----------
REPURCHASE AGREEMENTS (5.0%):
16,852 16,852 Lehman Brothers, 6.15%, dated 6/30/95, due 7/3/95
(Collateralized by 16,720 U.S. Treasury Notes,
6.63%, 3/31/97 market value-- $17,201) 16,852 16,852
18,205 18,205 State Street Bank & Trust Co., 5.50%, dated
6/30/95, due 7/3/95.............................. 18,205 18,205
------------ ---------- ----------
Total Repurchase Agreements 18,205 16,852 35,057
------------ ---------- ----------
Total (Cost--$309,025, $380,326 and $689,351
respectively) (a) $ 313,349 $ 387,974 $ 701,323
------------ ---------- ----------
------------ ---------- ----------
</TABLE>
- ---------
Percentages indicated are based on pro forma combined net assets of $706,008.
(a) Represents cost for federal income tax purposes and differs from value by
net unrealized appreciation of securities as follows:
<TABLE>
<S> <C>
Unrealized appreciation.................................... $ 18,942
Unrealized depreciation.................................... (6,969)
---------
Net unrealized appreciation................................ $ 11,973
---------
---------
</TABLE>
* Variable rate securities having liquidity sources through bank letters of
credit and/or liquidity arrangements.
The interest rate, which will change periodically, is based upon bank prime
rates or an index of market interest rates.
The rate reflected on the Schedule of Portfolio Investments is the rate in
effect on June 30, 1995.
CMO--Collateralized Mortgage Obligation
COLTS--Continuously Offered Long-Term Securities
IAN--Indexed Amortization Note
REMIC--Real Estate Mortgage Investment Conduit
SEE NOTES TO PRO FORMA FINANCIAL STATEMENTS.
- ----
98
<PAGE>
- --------------------------------------------------------------------------------
PARAGON VALUE EQUITY INCOME FUND
THE ONE GROUP INCOME EQUITY FUND
- --------------------------------------------------------------------------------
PRO FORMA SCHEDULE OF PORTFOLIO INVESTMENTS JUNE 30, 1995
(Amounts in Thousands, except Shares or Principal Amounts) (Unaudited)
<TABLE>
<CAPTION>
PRINCIPAL AMOUNT MARKET VALUE
- ------------------------------- -----------------------------
VALUE VALUE
EQUITY INCOME PRO FORMA EQUITY INCOME PRO FORMA
INCOME EQUITY COMBINED INCOME EQUITY COMBINED
FUND FUND (NOTE 1) SECURITY DESCRIPTION FUND FUND (NOTE 1)
- --------- --------- --------------------------------------------------------------------- -------- -------- ---------
<C> <C> <C> <S> <C> <C> <C>
COMMON STOCKS (87.3%):
Aircraft (2.8%):
70,000 70,000 Boeing Co. ................................................. $ $ 4,384 $ 4,384
68,600 68,600 Lockheed Martin Corp. ...................................... 4,330 4,330
-------- -------- ---------
4,330 4,384 8,714
-------- -------- ---------
Banks (2.5%):
76,754 76,754 BankAmerica Corp. .......................................... 4,039 4,039
53,000 53,000 J.P. Morgan & Co., Inc. .................................... 3,717 3,717
-------- -------- ---------
7,756 7,756
-------- -------- ---------
Beverages (1.3%):
65,000 65,000 Coca Cola Co. .............................................. 4,144 4,144
-------- -------- ---------
Building & Construction (0.5%):
30,000 30,000 Corning Delaware............................................ 1,534 1,534
-------- -------- ---------
Business Equipment & Services (3.3%):
55,000 55,000 Browning Ferris Industries, Inc. ........................... 1,987 1,987
90,000 90,000 Dun & Bradstreet Corp. ..................................... 4,725 4,725
115,000 115,000 National Service Industries, Inc. .......................... 3,320 3,320
-------- -------- ---------
10,032 10,032
-------- -------- ---------
Chemicals--Petroleum & Inorganic (6.2%):
65,000 65,000 ARCO Chemical Co. .......................................... 2,949 2,949
50,000 68,000 118,000 Dow Chemical Co. ........................................... 3,594 4,887 8,481
53,000 53,000 DuPont (E.I.) de Nemours & Co. ............................. 3,644 3,644
65,000 65,000 Grace W. R. & Co. .......................................... 3,989 3,989
-------- -------- ---------
7,238 11,825 19,063
-------- -------- ---------
Chemicals--Specialty (1.5%):
125,000 125,000 Nalco Chemical Co. ......................................... 4,547 4,547
-------- -------- ---------
Computers--Main/Mini (3.5%):
30,000 30,000 International Business Machines............................. 2,880 2,880
25,000 25,000 Salomon, Inc. .............................................. 2,400 2,400
15,000 32,000 47,000 Xerox Corp. ................................................ 1,759 3,752 5,511
-------- -------- ---------
4,639 6,152 10,791
-------- -------- ---------
Computers--Micro (0.3%):
23,000 23,000 Compaq Computer Corp. (b)................................... 1,044 1,044
-------- -------- ---------
Cosmetics/Toiletry (1.3%):
80,000 80,000 International Flavors & Fragrances Inc. .................... 3,980 3,980
-------- -------- ---------
Defense (1.3%):
25,000 25,000 Loral Corp. ................................................ 1,294 1,294
33,600 33,600 Raytheon Co. ............................................... 2,608 2,608
-------- -------- ---------
3,902 3,902
-------- -------- ---------
</TABLE>
CONTINUED
----
99
<PAGE>
- --------------------------------------------------------------------------------
PARAGON VALUE EQUITY INCOME FUND
THE ONE GROUP INCOME EQUITY FUND
- --------------------------------------------------------------------------------
PRO FORMA SCHEDULE OF PORTFOLIO INVESTMENTS, CONTINUED JUNE 30, 1995
(Amounts in Thousands, except Shares or Principal Amounts) (Unaudited)
<TABLE>
<CAPTION>
PRINCIPAL AMOUNT MARKET VALUE
- ------------------------------- -----------------------------
VALUE VALUE
EQUITY INCOME PRO FORMA EQUITY INCOME PRO FORMA
INCOME EQUITY COMBINED INCOME EQUITY COMBINED
FUND FUND (NOTE 1) SECURITY DESCRIPTION FUND FUND (NOTE 1)
- --------- --------- --------------------------------------------------------------------- -------- -------- ---------
COMMON STOCKS, CONTINUED:
<C> <C> <C> <S> <C> <C> <C>
Electrical Equipment (0.4%):
21,000 21,000 Johnson Controls, Inc. ..................................... $ 1,186 $ $ 1,186
-------- -------- ---------
Electronic Components (2.1%):
50,000 50,000 Avnet, Inc. ................................................ 2,419 2,419
40,000 40,000 Intel Corp. ................................................ 2,532 2,532
11,700 11,700 Texas Instruments Corp. .................................... 1,566 1,566
-------- -------- ---------
6,517 6,517
-------- -------- ---------
Farm Machinery (0.6%):
20,000 20,000 Deere & Co. ................................................ 1,713 1,713
-------- -------- ---------
Finance (2.4%):
19,100 19,100 Federal National Mortgage Assoc. ........................... 1,803 1,803
60,000 60,000 First Tennessee National Corp. ............................. 2,782 2,782
71,000 71,000 Reliastar Financial Corp. .................................. 2,716 2,716
-------- -------- ---------
7,301 7,301
-------- -------- ---------
Food & Related (4.0%):
90,000 90,000 Campbell Soup Co. .......................................... 4,410 4,410
45,000 65,000 110,000 ConAgra, Inc. .............................................. 1,569 2,267 3,836
93,000 93,000 IBP, Inc. .................................................. 4,045 4,045
-------- -------- ---------
5,614 6,677 12,291
-------- -------- ---------
Forest/Paper Products (0.7%):
25,000 25,000 International Paper Co. .................................... 2,144 2,144
-------- -------- ---------
Furniture/Furnishings (0.4%):
50,000 50,000 Masco Corp. ................................................ 1,350 1,350
-------- -------- ---------
Health Care--Drugs (3.6%):
85,000 136,000 221,000 Baxter International, Inc. ................................. 3,092 4,947 8,039
72,000 72,000 Schering Plough Corp. ...................................... 3,177 3,177
-------- -------- ---------
6,269 4,947 11,216
-------- -------- ---------
Health Care--General (5.8%):
60,000 60,000 American Home Products...................................... 4,642 4,642
25,000 73,000 98,000 Bristol-Myers Squibb Co. ................................... 1,703 4,973 6,676
35,000 35,000 Columbia/HCA Healthcare..................................... 1,514 1,514
60,000 60,000 Warner - Lambert Co. ....................................... 5,183 5,183
-------- -------- ---------
3,217 14,798 18,015
-------- -------- ---------
Home Building/Mobil Homes (0.5%):
70,000 70,000 Fleetwood Enterprises, Inc. ................................ 1,383 1,383
-------- -------- ---------
</TABLE>
CONTINUED
- ----
100
<PAGE>
- --------------------------------------------------------------------------------
PARAGON VALUE EQUITY INCOME FUND
THE ONE GROUP INCOME EQUITY FUND
- --------------------------------------------------------------------------------
PRO FORMA SCHEDULE OF PORTFOLIO INVESTMENTS, CONTINUED JUNE 30, 1995
(Amounts in Thousands, except Shares or Principal Amounts) (Unaudited)
<TABLE>
<CAPTION>
PRINCIPAL AMOUNT MARKET VALUE
- ------------------------------- -----------------------------
VALUE VALUE
EQUITY INCOME PRO FORMA EQUITY INCOME PRO FORMA
INCOME EQUITY COMBINED INCOME EQUITY COMBINED
FUND FUND (NOTE 1) SECURITY DESCRIPTION FUND FUND (NOTE 1)
- --------- --------- --------------------------------------------------------------------- -------- -------- ---------
COMMON STOCKS, CONTINUED:
<C> <C> <C> <S> <C> <C> <C>
Household--General Products (2.0%):
125,000 125,000 Jostens..................................................... $ $ 2,656 $ 2,656
70,000 70,000 Premark International, Inc. ................................ 3,631 3,631
-------- -------- ---------
3,631 2,656 6,287
-------- -------- ---------
Household--Major Appliances (1.1%):
100,000 100,000 Briggs & Stratton Corp. .................................... 3,450 3,450
-------- -------- ---------
Industrial Equipment (0.3%):
20,000 20,000 PACCAR, Inc. ............................................... 935 935
-------- -------- ---------
Insurance--Life (1.5%):
80,000 80,000 Transamerica Corp. ......................................... 4,660 4,660
-------- -------- ---------
Insurance--Property/Casualty (1.7%):
120,000 120,000 Lincoln National Corp. ..................................... 5,250 5,250
-------- -------- ---------
Motor Vehicles (0.7%):
45,000 45,000 Chrysler Corp. ............................................. 2,154 2,154
-------- -------- ---------
Multiple Industry (1.7%):
80,000 80,000 Corning, Inc. .............................................. 2,620 2,620
22,000 22,000 ITT Corp. .................................................. 2,585 2,585
-------- -------- ---------
2,585 2,620 5,205
-------- -------- ---------
Petroleum--Domestic (2.9%):
70,000 70,000 Amoco Corp. ................................................ 4,664 4,664
40,000 40,000 Atlantic Richfield Co. ..................................... 4,390 4,390
-------- -------- ---------
9,054 9,054
-------- -------- ---------
Petroleum--International (7.0%):
24,000 24,000 Chevron Corp. .............................................. 1,119 1,119
15,000 70,000 85,000 Exxon Corp. ................................................ 1,059 4,944 6,003
44,000 45,000 89,000 Mobil Corp. ................................................ 4,224 4,320 8,544
15,000 35,000 50,000 Royal Dutch Petroleum....................................... 1,828 4,266 6,094
-------- -------- ---------
8,230 13,530 21,760
-------- -------- ---------
Petroleum Services (1.0%):
85,000 85,000 Halliburton Co. ............................................ 3,039 3,039
-------- -------- ---------
Photography Equipment (1.5%):
75,000 75,000 Eastman Kodak Co. .......................................... 4,547 4,547
-------- -------- ---------
Publishing (1.6%):
65,000 65,000 McGraw-Hill Cos., Inc. ..................................... 4,932 4,932
-------- -------- ---------
</TABLE>
CONTINUED
----
101
<PAGE>
- --------------------------------------------------------------------------------
PARAGON VALUE EQUITY INCOME FUND
THE ONE GROUP INCOME EQUITY FUND
- --------------------------------------------------------------------------------
PRO FORMA SCHEDULE OF PORTFOLIO INVESTMENTS, CONTINUED JUNE 30, 1995
(Amounts in Thousands, except Shares or Principal Amounts) (Unaudited)
<TABLE>
<CAPTION>
PRINCIPAL AMOUNT MARKET VALUE
- ------------------------------- -----------------------------
VALUE VALUE
EQUITY INCOME PRO FORMA EQUITY INCOME PRO FORMA
INCOME EQUITY COMBINED INCOME EQUITY COMBINED
FUND FUND (NOTE 1) SECURITY DESCRIPTION FUND FUND (NOTE 1)
- --------- --------- --------------------------------------------------------------------- -------- -------- ---------
COMMON STOCKS, CONTINUED:
<C> <C> <C> <S> <C> <C> <C>
Retail--General Merchandise (4.2%):
60,600 60,600 J.C. Penney, Inc. .......................................... $ 2,909 $ $ 2,909
46,000 46,000 Reebok International, Inc. ................................. 1,564 1,564
20,000 90,000 110,000 Sears Roebuck & Co. ........................................ 1,198 5,389 6,587
35,000 35,000 V.F. Corp. ................................................. 1,881 1,881
-------- -------- ---------
7,552 5,389 12,941
-------- -------- ---------
Securities & Commercial Broker (1.9%):
125,000 125,000 American Express Co. ....................................... 4,391 4,391
30,000 30,000 Merrill Lynch & Co., Inc. .................................. 1,575 1,575
-------- -------- ---------
1,575 4,391 5,966
-------- -------- ---------
Steel (0.4%):
60,000 60,000 Birmingham Steel Corp. ..................................... 1,110 1,110
-------- -------- ---------
Tobacco (3.0%):
50,000 73,000 123,000 Philip Morris Cos., Inc. ................................... 3,719 5,429 9,148
-------- -------- ---------
Transportation (0.8%):
25,000 25,000 British Airways ADR......................................... 1,681 1,681
40,000 40,000 Consolidated Freightways.................................... 885 885
-------- -------- ---------
2,566 2,566
-------- -------- ---------
Utilities--Electric (2.8%):
133,000 133,000 Central & South West Corp. ................................. 3,491 3,491
60,000 60,000 Duke Power Co. ............................................. 2,490 2,490
90,000 90,000 WPS Resources............................................... 2,632 2,632
-------- -------- ---------
8,613 8,613
-------- -------- ---------
Utilities--Telephone (6.2%):
90,000 90,000 AT&T........................................................ 4,781 4,781
37,000 37,000 Bellsouth Corp. ............................................ 2,349 2,349
45,000 45,000 Entergy Corp. .............................................. 1,086 1,086
70,000 70,000 GTE Corp. .................................................. 2,389 2,389
90,000 90,000 Peco Energy Co. ............................................ 2,486 2,486
100,000 100,000 SBC Communications, Inc. ................................... 4,763 4,763
42,000 42,000 Sprint Corp. ............................................... 1,412 1,412
-------- -------- ---------
9,722 9,544 19,266
-------- -------- ---------
Total Common Stocks 100,276 169,230 269,506
-------- -------- ---------
</TABLE>
CONTINUED
- ----
102
<PAGE>
- --------------------------------------------------------------------------------
PARAGON VALUE EQUITY INCOME FUND
THE ONE GROUP INCOME EQUITY FUND
- --------------------------------------------------------------------------------
PRO FORMA SCHEDULE OF PORTFOLIO INVESTMENTS, CONTINUED JUNE 30, 1995
(Amounts in Thousands, except Shares or Principal Amounts) (Unaudited)
<TABLE>
<CAPTION>
PRINCIPAL AMOUNT MARKET VALUE
- ------------------------------- -----------------------------
VALUE VALUE
EQUITY INCOME PRO FORMA EQUITY INCOME PRO FORMA
INCOME EQUITY COMBINED INCOME EQUITY COMBINED
FUND FUND (NOTE 1) SECURITY DESCRIPTION FUND FUND (NOTE 1)
- --------- --------- --------------------------------------------------------------------- -------- -------- ---------
CORPORATE BONDS (3.9%):
<C> <C> <C> <S> <C> <C> <C>
1,050,000 1,050,000 Avnet, Inc., 6.00%, 4/15/12................................. $ 1,214 $ $ 1,214
2,500,000 2,500,000 Browning Ferris Industries, Inc., 6.25%, 8/15/12............ 2,513 2,513
1,000,000 1,000,000 Healthsouth Rehabilitaion, 5.00%, 4/1/01.................... 1,095 1,095
2,500,000 2,500,000 Hechinger Co., 5.50%, 4/1/12................................ 1,587 1,587
2,500,000 2,500,000 Masco Corp., 5.25%, 2/15/12................................. 2,187 2,187
2,250,000 2,250,000 Pennzoil Co., 6.50%, 1/15/03................................ 2,678 2,678
980,000 980,000 Sports & Recreation, Inc., 4.25%, 11/1/00................... 745 745
-------- -------- ---------
Total Corporate Bonds 7,319 4,700 12,019
-------- -------- ---------
PREFERRED STOCK (CONVERTIBLE) (7.6%):
15,000 15,000 Burlington Northern, Inc. .................................. 1,012 1,012
26,000 26,000 Citicorp.................................................... 4,115 4,115
80,000 80,000 ConAgra, Inc., Class E...................................... 2,830 2,830
35,600 35,600 Ford Motor Co. ............................................. 3,458 3,458
35,500 70,000 105,500 General Motors Corp. ....................................... 2,236 4,410 6,646
80,000 80,000 Sonoco Products............................................. 4,440 4,440
70,000 70,000 Westinghouse Electric....................................... 1,024 1,024
-------- -------- ---------
Total Preferred Stock 10,821 12,704 23,525
-------- -------- ---------
Total Investments, at value 118,416 186,634 305,050
-------- -------- ---------
REPURCHASE AGREEMENTS (1.0%):
1,416,000 1,416,000 Lehman Brothers, 6.15%, dated 6/30/95, due 7/3/95
(Collateralized by 1,400,000 U.S. Treasury Notes, 6.75%,
2/28/97, market value-$1,450)............................. 1,416 1,416
1,675,000 1,675,000 State Street Bank & Trust Co., 5.50%, dated 6/30/95, due
7/3/95.................................................... 1,675 1,675
-------- -------- ---------
Total Repurchase Agreements 1,675 1,416 3,091
-------- -------- ---------
Total (Cost--$97,622, $147,891 and $245,513,
respectively)(a) $120,091 $188,050 $308,141
-------- -------- ---------
-------- -------- ---------
</TABLE>
- ----------
Percentages indicated are based on proforma combined net assets of $308,883.
(a) Represents cost for financial reporting purposes and differs from cost basis
for federal income tax purposes by the amount of losses reconized for
financial reporting in excess of federal income tax reporting of
approximately $7. Cost for federal income tax purposes differs from value by
net unrealized appreciation of securities as follows:
<TABLE>
<S> <C>
Unrealized appreciation........................................... $ 65,698
Unrealized depreciation........................................... (3,077)
---------
Net unrealized appreciation....................................... $ 62,621
---------
---------
</TABLE>
(b) Represents non-income producing security.
SEE NOTES TO PRO FORMA FINANCIAL STATEMENTS.
----
103
<PAGE>
- --------------------------------------------------------------------------------
PARAGON LOUISIANA TAX-FREE FUND
THE ONE GROUP LOUISIANA MUNICIPAL BOND FUND
- --------------------------------------------------------------------------------
PRO FORMA SCHEDULE OF PORTFOLIO INVESTMENTS MAY 31, 1995
(Unaudited)
<TABLE>
<CAPTION>
PRINCIPAL INTEREST MATURITY
AMOUNT RATE DATE VALUE
- ---------- ------- ---------------------------------------- ------------
<C> <C> <S> <C>
LOUISIANA MUNICIPAL BOND OBLIGATIONS (97.0%)
General Obligations (31.0%)
Caddo Parish (MBIA)
$200,000 7.10% 02/01/00................................ $ 214,456
550,000 7.20 02/01/01................................ 589,672
300,000 7.20 02/01/02................................ 321,123
1,415,000 5.25 02/01/06................................ 1,410,217
Caddo Parish School District (MBIA)
750,000 5.00 03/01/03................................ 745,215
Calcasieu Parish School District (BIG)
500,000 7.10 02/01/01................................ 532,705
De Soto Parish School District
120,000 8.00 08/01/05................................ 133,928
1,070,000 5.30 10/01/05................................ 1,040,404
1,245,000 5.60 10/01/06................................ 1,208,796
Jefferson Parish (FGIC)
500,000 7.10 09/01/97................................ 525,540
500,000 7.40 09/01/99................................ 528,145
250,000 7.70 09/01/02................................ 264,825
Jefferson Parish Construction Waterworks District #2
400,000 7.25 01/15/00................................ 401,032
LA State
6,160,000 7.00 08/01/02................................ 6,543,090
675,000 7.00 08/01/03................................ 714,555
LA State (FSA)
2,750,000 7.10 09/01/03................................ 3,064,545
LA State (MBIA)
6,290,000 6.00 05/15/99................................ 6,585,253
Lafayette Parish (FGIC)
1,000,000 7.80 03/01/01................................ 1,089,140
Lafourche Parish Water District #3
650,000 5.63 01/01/01................................ 668,369
Lincoln Parish School District (MBIA)
500,000 6.20 03/01/03................................ 525,490
1,465,000 6.40 03/01/05................................ 1,539,217
Monroe Parish School District (FGIC)
1,230,000 5.35 03/01/05................................ 1,230,517
1,320,000 5.35 03/01/06................................ 1,315,512
Monroe Parish School District (MBIA)
1,220,000 8.00 03/01/01................................ 1,393,374
1,300,000 7.00 03/01/02................................ 1,435,109
1,390,000 7.00 03/01/03................................ 1,547,765
Ouachita Parish West School District Refunding Series A (FSA)
2,000,000 6.50 03/01/03................................ 2,154,140
1,000,000 6.60 03/01/04................................ 1,079,380
2,695,000 6.65 03/01/05................................ 2,901,599
1,655,000 6.70 03/01/06................................ 1,777,387
Plaquemines Parish (AMBAC)
1,440,000 6.40 08/01/04................................ 1,546,445
Rapides Parish (MBIA)
500,000 7.25 04/01/00................................ 540,220
<CAPTION>
PRINCIPAL INTEREST MATURITY
AMOUNT RATE DATE VALUE
- ---------- ------- ---------------------------------------- ------------
<C> <C> <S> <C>
LOUISIANA MUNICIPAL BOND OBLIGATIONS, CONTINUED:
General Obligations, continued:
Rapides Parish School District #11 (FGIC)
$670,000 6.90% 02/01/01................................ $ 718,776
1,475,000 6.95 02/01/02................................ 1,582,247
Shreveport
880,000 4.25 12/01/03................................ 825,009
930,000 4.25 12/01/04................................ 862,017
480,000 5.90 02/01/07................................ 493,934
Shreveport (AMBAC)
480,000 6.20 03/01/02................................ 504,470
500,000 6.70 02/01/03................................ 531,240
St. Charles School District #1 (AMBAC)
1,000,000 6.25 03/01/04................................ 1,058,740
2,350,000 6.45 03/01/06................................ 2,473,493
St. John Baptist Parish School District
605,000 4.90 03/01/06................................ 566,649
500,000 5.10 03/01/08................................ 478,980
St. John Baptist Parish School District #1
870,000 6.25 03/01/05................................ 910,107
695,000 5.20 03/01/09................................ 649,081
St. Landry Parish School District #1 (MBIA)
1,000,000 8.00 05/01/98................................ 1,082,500
750,000 6.10 05/01/07................................ 770,108
St. Tammany Parish (FGIC)
300,000 7.40 03/01/98................................ 318,855
620,000 6.70 04/01/98................................ 660,548
------------
Total General Obligations 60,053,919
------------
Health Care Revenue (14.3%)
LA Public Facilities Authority Alton Ochsner Medical
Foundation 92-A (MBIA)
2,280,000 6.30 05/15/04................................ 2,460,439
LA Public Facilities Authority General Health (MBIA)
2,820,000 5.55 11/01/04................................ 2,905,897
LA Public Facilities Authority Health and Education
1,765,000 7.30(a) 12/01/15................................ 1,848,873
LA Public Facilities Authority Health and Education Series B
$3,825,000 7.30(a) 12/01/15................................ 3,941,050
LA Public Facilities Authority Lafayette Medical Center (FSA)
1,000,000 6.05 10/01/04................................ 1,068,420
LA Public Facilities Authority Mary Bird Perkins Cancer Center
(FSA)
1,135,000 5.50 01/01/04................................ 1,160,765
LA Public Facilities Authority Our Lady of Lake Hospital
(MBIA)
500,000 5.70 12/01/04................................ 521,570
LA Public Facilities Authority St. Francis Medical Center
(FSA)
1,385,000 4.80 07/01/04................................ 1,341,622
870,000 4.90 07/01/05................................ 845,301
</TABLE>
CONTINUED
- ----
104
<PAGE>
- --------------------------------------------------------------------------------
PARAGON LOUISIANA TAX-FREE FUND
THE ONE GROUP LOUISIANA MUNICIPAL BOND FUND
- --------------------------------------------------------------------------------
PRO FORMA SCHEDULE OF PORTFOLIO INVESTMENTS, CONTINUED MAY 31, 1995
(Unaudited)
<TABLE>
<CAPTION>
PRINCIPAL INTEREST MATURITY
AMOUNT RATE DATE VALUE
- ---------- ------- ---------------------------------------- ------------
<C> <C> <S> <C>
LOUISIANA MUNICIPAL BOND OBLIGATIONS, CONTINUED:
Health Care Revenue, continued:
LA Public Facilities Authority Woman's Hospital
$1,235,000 6.85% 10/01/05................................ $ 1,291,724
LA Public Facilities Authority Woman's Hospital (FGIC)
500,000 7.20 10/01/97................................ 531,035
730,000 5.40 10/01/05................................ 742,906
1,715,000 5.50 10/01/06................................ 1,747,482
Lafourche Parish Hospital District #3
525,000 5.50 10/01/04................................ 504,452
Ouachita Parish Glenwood Hospital
2,525,000 7.50 07/01/06................................ 2,809,239
St. Tammany Hospital District #1 (FGIC)
1,815,000 6.30 07/01/07................................ 1,890,903
Terrebonne Parish Hospital Service #1 (BIG)
1,285,000 7.40 04/01/03................................ 1,396,178
Vermillion Parish Hospital (MBIA)
555,000 6.35 05/01/00................................ 595,193
------------
Total Health Care Revenue 27,603,049
------------
Higher Education--5.3%
LA Public Facilities Authority Loyola University
500,000 9.00 10/01/95................................ 507,420
500,000 7.20 10/01/00................................ 552,925
1,960,000 6.60 04/01/05................................ 2,131,245
LA Public Facilities Authority Tulane University
300,000 7.50 05/15/00................................ 327,594
2,940,000 6.25 07/15/06................................ 3,112,549
1,000,000 6.40 11/15/07................................ 1,070,640
LA Public Facilities Authority Tulane University (FGIC)
450,000 5.80 02/15/04................................ 471,929
LA Public Facilities Authority Tulane University Series B
700,000 7.00 08/15/97................................ 735,581
200,000 7.20 08/15/98................................ 213,966
LA Public Facilities Authority Tulane University Series C
750,000 7.00 08/15/97................................ 788,123
300,000 7.20 08/15/98................................ 320,949
------------
Total Higher Education 10,232,921
------------
Sales Tax Revenue (37.6%)
Alexandria Public Improvements (MBIA)
300,000 7.35 08/01/97................................ 318,573
Baton Rouge Public Improvements (AMBAC)
700,000 6.85 08/01/00................................ 772,632
800,000 6.90 08/01/01................................ 879,696
Baton Rouge Public Improvements (FSA)
2,000,000 6.00 08/01/04................................ 2,109,000
1,000,000 6.00 06/01/06................................ 1,043,720
765,000 6.38 08/01/09................................ 796,136
Bossier City Public Improvements (AMBAC)
805,000 6.20 11/01/07................................ 856,472
<CAPTION>
PRINCIPAL INTEREST MATURITY
AMOUNT RATE DATE VALUE
- ---------- ------- ---------------------------------------- ------------
<C> <C> <S> <C>
LOUISIANA MUNICIPAL BOND OBLIGATIONS, CONTINUED:
Sales Tax Revenue, continued:
Bossier City Public Improvements (FGIC)
$400,000 6.88% 11/01/06................................ $ 433,100
400,000 6.88 11/01/07................................ 433,100
East Baton Rouge Parish (FGIC)
2,280,000 8.00 02/01/02................................ 2,682,420
2,490,000 4.65 02/01/04................................ 2,337,662
East Baton Rouge Parish (MBIA)
500,000 7.10 02/01/99................................ 540,995
500,000 7.10 02/01/00................................ 546,005
East Baton Rouge Parish Public Improvements
1,085,000 5.15 02/01/05................................ 1,028,330
1,145,000 5.15 02/01/06................................ 1,072,258
General Baton Parking Authority
1,390,000 6.38 07/01/03................................ 1,392,821
Utility Revenue (3.2%)
Bossier City Public Improvements (FGIC)
550,000 6.88 11/01/08................................ 591,222
Houma (FGIC)
1,560,000 6.13 01/01/07................................ 1,657,859
Shreveport Water & Sewer
500,000 6.25 12/01/03................................ 542,670
Shreveport Water & Sewer (FGIC)
930,000 7.75 12/01/02................................ 1,091,299
Terrebone Parish Waterworks (FGIC)
690,000 5.70 11/01/06................................ 710,693
Ville Platte Parish
1,555,000 5.50 05/01/09................................ 1,500,217
------------
Total Utility Revenue 6,094,160
------------
Miscellaneous Louisiana Municipal Bonds (5.6%)
Bastrop Pollution Control Industrial Development
(International Paper)
2,500,000 6.90 03/01/07................................ 2,688,925
Caddo Parish Industrial Development Revenue (Wal-Mart Stores,
Inc.)
470,000 5.95 11/01/07................................ 478,192
De Soto Parish Pollution Control
1,000,000 5.05 12/01/02................................ 989,480
East Baton Rouge Mortgage Finance Authority
770,000 4.90 10/01/05................................ 722,175
East Baton Rouge Mortgage Finance Authority (GNMA/FNMA
collateralized)
1,390,000 5.45 10/01/03................................ 1,411,503
Iberia Home Mortgage Loan Association
1,575,000 7.38 01/01/11................................ 1,689,723
LA Housing Finance Agency
1,100,000 5.70 06/01/15................................ 1,102,926
LA Public Facilities Authority Multi-Housing Linlake Village
610,000 5.25(a) 06/01/07................................ 615,813
</TABLE>
CONTINUED
----
105
<PAGE>
- --------------------------------------------------------------------------------
PARAGON LOUISIANA TAX-FREE FUND
THE ONE GROUP LOUISIANA MUNICIPAL BOND FUND
- --------------------------------------------------------------------------------
PRO FORMA SCHEDULE OF PORTFOLIO INVESTMENTS, CONTINUED MAY 31, 1995
(Unaudited)
<TABLE>
<CAPTION>
PRINCIPAL INTEREST MATURITY
AMOUNT RATE DATE VALUE
- ---------- ------- ---------------------------------------- ------------
<C> <C> <S> <C>
LOUISIANA MUNICIPAL BOND OBLIGATIONS, CONTINUED:
Miscellaneous Louisiana Municipal Bonds, continued:
LA Public Facilities Authority Shreveport Single Family
Mortgage
$1,018,790 8.45% 12/01/12................................ 1,091,410
------------
Total Miscellaneous Louisiana Municipal Bonds 10,790,147
------------
Total Louisiana Municipal Bond Obligations
(cost--$184,261,635) 187,531,927
------------
SHORT-TERM OBLIGATIONS (2.4%)
Burke County Georgia Pollution Control
1,500,000 4.02(a) 07/01/24................................ 1,500,000
LA State Recovery District Tax
2,000,000 4.55(a) 07/07/97................................ 2,000,000
400,000 2.93(a) 07/01/96................................ 400,000
North Alabama Environmental Pollution Center
800,000 4.33(a) 12/01/00................................ 800,000
------------
<CAPTION>
PRINCIPAL INTEREST MATURITY
AMOUNT RATE DATE VALUE
- ---------- ------- ---------------------------------------- ------------
<C> <C> <S> <C>
SHORT-TERM OBLIGATIONS, CONTINUED:
Total Short-Term Obligations
(cost--$4,700,000) $ 4,700,000
------------
------------
Total Investments
(cost--$188,961,635(b)) 192,231,927
------------
------------
Federal Income Tax Information:
Gross unrealized gain for investments in which value exceeds
cost...................................................... 4,648,835
Gross unrealized loss for investments in which cost exceeds
value..................................................... (1,378,543)
------------
Net unrealized gain $ 3,270,292
------------
------------
</TABLE>
- ------------
(a) Variable rate security. Coupon rate disclosed is that which is in effect at
May 31, 1995.
(b) The cost stated also represents aggregate cost for federal income tax
purposes.
<TABLE>
<S> <C> <C>
AMBAC -- Insured by American Municipal Bond Assurance Corporation.
BIG -- Insured by Bond Investors Guaranty Insurance Company.
FGIC -- Insured by Financial Guaranty Insurance Corporation.
FSA -- Insured by Financial Security Assurance, Inc.
MBIA -- Insured by Municipal Bond Investors Assurance Corporation.
</TABLE>
The percentage shown for each investment category reflects the value of
investments in that category as a percentage of total net assets.
SEE NOTES TO PRO FORMA FINANCIAL STATEMENTS.
- ----
106
<PAGE>
- --------------------------------------------------------------------------------
PARAGON VALUE GROWTH FUND
THE ONE GROUP VALUE GROWTH FUND
- --------------------------------------------------------------------------------
PRO FORMA SCHEDULE OF PORTFOLIO INVESTMENTS MAY 31, 1995
(Unaudited)
<TABLE>
<CAPTION>
SHARES DESCRIPTION VALUE
- ----------- -------------------------------------- -------------
<C> <S> <C>
COMMON STOCKS (84.5%)
Basic Materials & Natural Resources (8.0%)
90,000 Dow Chemical Co. ..................... $ 6,603,750
75,000 Du Pont (E.I.) De Nemours & Co. ...... 5,090,625
80,000 Nucor Corp. .......................... 3,820,000
-------------
15,514,375
-------------
Capital Equipment & Services (4.1%)
100,000 Allied Signal , Inc. ................. 4,037,500
70,000 Johnson Controls, Inc. ............... 4,007,500
-------------
8,045,000
-------------
Consumer Cyclical (16.0%)
200,000 Carnival Corp. ....................... 4,650,000
120,000 Chrysler Corp. (b).................... 5,235,000
200,000 Consolidated Stores Corp. (a)......... 3,750,000
150,000 Heillg Meyers Co. .................... 3,581,250
165,000 Home Depot, Inc. ..................... 6,888,125
150,000 Office Depot, Inc. (a)................ 3,600,000
140,000 Wal-Mart Stores, Inc. ................ 3,500,000
-------------
31,184,375
-------------
Consumer Noncyclical (13.7%)
125,000 Columbia/HCA Healthcare Corp. ........ 5,109,375
65,000 Darden Restaurants, Inc. (a).......... 715,000
100,000 Duracell International, Inc. ......... 4,325,000
135,000 Foundation Health Corp. (a)........... 3,796,875
65,000 General Mills, Inc. .................. 3,371,875
120,000 Healthcare Compare Corp. (a).......... 3,750,000
150,000 United Healthcare Corp. .............. 5,587,500
-------------
26,655,625
-------------
Energy (7.1%)
100,000 Amoco Corp. .......................... 6,837,500
100,000 Murphy Oil Corp. ..................... 4,375,000
80,000 Sun Co., Inc. ........................ 2,520,000
-------------
13,732,500
-------------
Finance (8.2%)
81,000 CCB Financial Corp. (b)............... 3,341,250
50,000 Federal National Mortgage
Association......................... 4,650,000
120,000 First American Corp. of Tennessee..... 4,162,500
175,000 Southtrust Corp. ..................... 3,740,625
-------------
15,894,375
-------------
Technology (15.6%)
130,000 Compaq Computer Corp. (a)............. 5,086,250
100,000 General Instrument Corp. ............. 3,087,500
85,000 Intel Corp. .......................... 9,541,250
65,000 Texas Instruments, Inc. .............. 7,515,625
<CAPTION>
SHARES DESCRIPTION VALUE
- ----------- -------------------------------------- -------------
</TABLE>
COMMON STOCKS, CONTINUED:
Technology, continued:
<TABLE>
<C> <S> <C>
$10,000 Vishay Intertechnology, Inc. (a)...... $ 653,460
40,000 Xerox Corp. .......................... 4,535,000
-------------
30,419,085
-------------
Transportation (1.2%)
100,000 Atlantic Southeast Airlines, Inc. .... 2,412,500
-------------
Utilities (10.6%)
120,000 AT&T Corp. ........................... 6,090,000
41,500 BellSouth Corp. ...................... 2,547,063
150,000 Enron Corp. .......................... 5,475,000
250,000 WorldCom, Inc. (a).................... 6,500,000
-------------
20,612,063
-------------
Total Common Stocks (cost--$128,330,615) 164,459,898
-------------
PREFERRED STOCKS (5.8%)
55,000 Ashland Oil Co., Covertible
Preferred, 3.13%.................... 3,245,000
75,000 Corning Delaware LP, Convertible
Preferred, 6.00%.................... 3,731,250
45,000 Ford Motor Co., Convertible
Preferred, 4.20%.................... 4,297,500
-------------
Total Preferred Stocks (cost--$11,095,795) 11,273,750
-------------
</TABLE>
<TABLE>
<CAPTION>
PRINCIPAL INTEREST MATURITY
AMOUNT RATE DATE VALUE
- ------------- ------------ --------------------- ---------------
<C> <C> <S> <C>
CORPORATE OBLIGATIONS (2.9%)
Avnet, Inc.
$2,800,000 6.00% 04/15/12 $ 3,097,500
Sports & Recreation, Inc.
3,250,000 4.25 11/01/00 2,474,063
---------------
Total Corporate Obligations
(cost--$6,410,210) 5,571,563
---------------
REPURCHASE AGREEMENTS (7.5%)
State Street Bank & Trust Co., dated 05/31/95,
repurchase price $14,592,229 (U.S. Treasury
Note: $14,540,000, 6.63%, 03/31/97)
14,590,000 5.50% 06/01/95 14,590,000
---------------
Total Repurchase Agreements
(cost--$14,590,000) 14,590,000
---------------
Total Investments (cost--$160,426,620 (c)) 195,905,211
---------------
---------------
Federal Income Tax Information:
Gross unrealized gain for investments in which
value exceeds cost ........................... 39,485,811
Gross unrealized loss for investments in which
cost exceeds value ........................... (4,007,220)
---------------
Net unrealized gain ............................ $ 35,478,591
---------------
---------------
</TABLE>
- ------------
(a) Non-income producing security.
(b) There are common stock rights attached to these securities.
(c) The cost stated also represents aggregate cost for federal income tax
purposes.
The percentage shown for each investment category reflects the value of
investments in that category as a percentage of total net assets.
SEE NOTES TO PRO FORMA FINANCIAL STATEMENTS.
----
107
<PAGE>
- --------------------------------------------------------------------------------
PARAGON GULF SOUTH GROWTH FUND
THE ONE GROUP GULF SOUTH GROWTH FUND
- --------------------------------------------------------------------------------
PRO FORMA SCHEDULE OF PORTFOLIO INVESTMENTS MAY 31, 1995
(Unaudited)
<TABLE>
<CAPTION>
SHARES DESCRIPTION VALUE
- --------- ------------------------------------------ ------------
<C> <S> <C>
COMMON STOCKS (89.8%)
Basic Materials & Natural Resources (7.9%):
100,000 Albemarle Corp............................ $ 1,537,500
60,000 Georgia Gulf Corp......................... 1,822,500
65,000 Image Industries, Inc.(a)................. 682,500
50,000 Nucor Corp................................ 2,387,500
65,000 Shaw Group Inc............................ 528,125
------------
6,958,125
------------
Capital Equipment & Services (1.9%)
110,000 Union Switch & Signal, Inc. (a)........... 1,711,875
------------
Consumer Cyclical (16.2%)
120,000 Autozone, Inc.(a)......................... 2,790,000
75,000 Cameron Ashley, Inc.(a)................... 843,750
40,000 Dollar General Corp....................... 1,135,000
100,000 Heilig Meyers Co.......................... 2,387,500
50,000 Michaels Stores, Inc.(a).................. 1,131,250
135,000 Office Depot, Inc.(a)..................... 3,240,000
114,000 River Oaks Furniture, Inc.(a)............. 1,425,000
120,000 Sports & Recreation, Inc.(a).............. 1,380,000
------------
14,332,500
------------
Consumer Noncyclical (13.1%)
100,000 Apple South, Inc.......................... 1,737,500
25,000 Coastal Physician Group, Inc.(a).......... 390,625
125,000 Coventry Corp.(a)......................... 2,578,125
75,000 Cracker Barrel Old Country Store.......... 1,828,125
50,000 HeathWise of America, Inc.(a)............. 1,462,500
87,000 Inphynet Medical Management, Inc.(a)...... 1,413,750
800,000 Isolyser Company, Inc.(a)................. 2,120,000
------------
11,530,625
------------
Energy (7.9%)
100,000 Benton Oil & Gas Co.(a)................... 1,312,500
100,000 Input/Output Inc.(a)...................... 3,400,000
95,000 Landmark Graphics Corp.(a)................ 2,244,375
------------
6,956,875
------------
Finance (21.9%)
75,000 American Federal Bank, FSB................ 1,050,000
45,000 Bankers First Corp........................ 1,215,000
55,000 First Financial Management Corp........... 3,905,000
20,000 Leader Financial Corp..................... 540,000
80,000 Medaphis Corp.(a)......................... 4,820,000
120,000 Regional Acceptance Corp.(a).............. 1,890,000
85,000 Stewart Enterprises, Inc.................. 2,550,000
77,000 United Companies Financial Corp........... 3,407,250
------------
19,377,250
------------
<CAPTION>
SHARES DESCRIPTION VALUE
- --------- ------------------------------------------ ------------
</TABLE>
COMMON STOCKS, CONTINUED:
<TABLE>
<C> <S> <C>
Technology (8.0%)
60,000 Acxiom Corp.(a)........................... $ 1,170,000
40,000 DSC Communications Corp.(a)(b)............ 1,480,000
55,000 Mobile Telecommunications Technology
Corp.(a)................................ 1,237,500
100,000 SCI Systems, Inc.(a)...................... 2,075,000
60,000 Scientific-Atlanta, Inc................... 1,117,500
------------
7,080,000
------------
Transportation (4.8%)
120,000 Atlantic Southeast Airlines, Inc.......... 2,895,000
75,000 Miller Industries, Inc.(a)................ 1,378,125
------------
4,273,125
------------
Utilities (8.1%)
100,000 Communications Central, Inc.(a)........... 825,000
100,000 EqualNet Holding Corp.(a)................. 1,637,500
180,000 WorldCom, Inc.(a)......................... 4,680,000
------------
7,142,500
------------
Total Common Stocks
(cost--$61,044,615) 79,362,875
------------
</TABLE>
<TABLE>
<CAPTION>
PRINCIPAL INTEREST
AMOUNT RATE MATURITY DATE
- ----------- ----------- -------------------------
<C> <C> <S> <C>
REPURCHASE AGREEMENTS (9.7%)
State Street Bank & Trust Company, dated 05/31/95,
repurchase price $8,531,303 (U.S. Treasury Note:
$8,505,000, 6.63%, 03/31/97)
8,530,000 5.50% 06/01/95 8,530,000
---------------
Total Repurchase Agreements
(cost--$8,530,000) 8,530,000
---------------
Total Investments
(cost--$69,574,615(c)) 87,892,875
---------------
---------------
Federal Income Tax Information:
Gross unrealized gain for investments in which
value exceeds cost............................. 23,435,921
Gross unrealized loss for investments in which
cost exceeds value............................. (5,117,661)
---------------
Net unrealized gain.............................. $ 18,318,260
---------------
---------------
</TABLE>
- ------------
(a) Non-income producing security.
(b) There are common stock rights attached to these securities.
(c) The cost stated also represents aggregate cost for federal income tax
purposes.
The percentage shown for each investment category reflects the value of
investments in that category as a percentage of total net assets.
SEE NOTES TO PRO FORMA FINANCIAL STATEMENTS.
- ----
108
<PAGE>
PARAGON PORTFOLIO
PARAGON TREASURY MONEY MARKET FUND
PARAGON SHORT-TERM GOVERNMENT FUND
PARAGON INTERMEDIATE-TERM BOND FUND
PARAGON VALUE EQUITY INCOME FUND
PARAGON LOUISIANA TAX-FREE FUND
PARAGON VALUE GROWTH FUND
PARAGON GULF SOUTH GROWTH FUND
THE ONE GROUP
THE ONE GROUP U.S. TREASURY SECURITIES MONEY MARKET FUND
THE ONE GROUP LIMITED VOLATILITY BOND FUND
THE ONE GROUP GOVERNMENT BOND FUND
THE ONE GROUP INCOME EQUITY FUND
THE ONE GROUP LOUISIANA MUNICIPAL BOND FUND
THE ONE GROUP VALUE GROWTH FUND
THE ONE GROUP GULF SOUTH GROWTH FUND
NOTES TO PRO FORMA FINANCIAL STATEMENTS
(Unaudited)
------------------------
1. BASIS OF COMBINATION:
The unaudited Pro Forma Combining Statements of Assets and Liabilities,
Statements of Operations, Financial Highlights and Schedules of Portfolio
Investments reflect the accounts of Paragon Portfolio: Paragon Treasury Money
Market Fund ("Paragon Money Market"), Paragon Short-Term Government Fund
("Paragon Government"), Paragon Intermediate-Term Bond Fund ("Paragon Bond"),
Paragon Value Equity Income Fund ("Paragon Equity"), Paragon Louisiana Tax-Free
Fund ("Paragon Louisiana"), Paragon Value Growth Fund ("Paragon Growth"), and
Paragon Gulf South Growth Fund ("Paragon Gulf South") (collectively, the
"Paragon Funds") and The One Group: The One Group U.S. Treasury Securities Money
Market Fund ("One Group Money Market"), The One Group Limited Volatility Bond
Fund ("One Group Limited Volatility"), The One Group Government Bond Fund ("One
Group Bond"), The One Group Income Equity Fund ("One Group Equity"), The One
Group Louisiana Municipal Bond Fund ("One Group Louisiana"), The One Group Value
Growth Fund ("One Group Growth") and The One Group Gulf South Growth Fund ("One
Group Gulf South") (collectively, the "One Group Funds") as if the proposed
reorganization occurred as of and for the year ended June 30, 1995 for One Group
Money Market, One Group Limited Volatility, One Group Bond and One Group Equity;
and as of and for the year ended May 31, 1995 for One Group Louisiana, One Group
Growth and One Group Gulf South. As of May 31, 1995, One Group Louisiana, One
Group Growth and One Group Gulf South had not yet commenced operations. These
statements have been derived from books and records utilized in calculating
daily net asset value at June 30, 1995 and May 31, 1995.
CONTINUED
----
109
<PAGE>
- --------------------------------------------------------------------------------
PARAGON PORTFOLIO
THE GROUP
- --------------------------------------------------------------------------------
NOTES TO PRO FORMA FINANCIAL STATEMENTS (Continued)
(Unaudited)
The pro forma statements give effect to the proposed transfers of the assets and
stated liabilities of each Paragon Fund in exchange for shares of the
corresponding One Group Fund as follows:
<TABLE>
<CAPTION>
SHAREHOLDERS OF WILL RECEIVE SHARES OF
- --------------------------- -----------------------------------------------------------------
<S> <C>
Paragon Money Market One Group Money Market
Paragon Government One Group Limited Volatility
Paragon Bond One Group Bond
Paragon Equity One Group Equity
Paragon Louisiana One Group Louisiana
Paragon Growth One Group Growth
Paragon Gulf South One Group Gulf South
</TABLE>
Following the proposed transfer of assets, shares of each One Group Fund will be
distributed to shareholders of each corresponding Paragon Fund. The Paragon
Funds will then be dissolved and liquidated. As a result of the transactions,
each shareholder of a Paragon Fund will receive on a tax-free basis, a number of
full and fractional shares of the corresponding One Group Fund equal at the date
of the exchange to the value of the net assets of each Paragon Fund attributable
to the shareholder. If the Paragon Fund shareholder of record is a financial
organization authorized to act in a fiduciary, advisory, custodial, agency or
similar capacity, that shareholder will receive One Group Fiduciary Class
Shares. All other Paragon Fund Class A shareholders will receive One Group Class
A Shares. Shareholders of record holding Paragon Fund Class B Shares, other than
Class B shareholders of Paragon Money Market, will receive One Group Class B
shares. Paragon Money Market Class B shareholders will receive One Group Money
Market Class A Shares.
For purposes of determining the Proforma adjusted shares as of June 30, 1995,
the percentages of Paragon Class A shareholders receiving One Group Fiduciary
Class Shares were 11%, 34%, 39%, and 43% for the Money Market, Government, Bond
and Equity Funds, respectively. Those percentages represent the actual
percentages as of December 31, 1995.
Under the purchase method of accounting for business combinations under
generally accepted accounting principles, the basis on the part of the One Group
Funds, of the assets of the Paragon Funds will be the fair market value of such
assets on the closing date of the transaction. For accounting purposes, the One
Group Funds are the survivors of this reorganization. The pro forma statements
reflect the combined results of operations of the Paragon Funds and the One
Group Funds. However, should such reorganization be effected, the statements of
operations of the One Group Funds will not be restated for precombination period
results of the corresponding Paragon Funds.
All fees and expenses, including accounting expenses, portfolio transfer taxes
(if any) or any other similar expenses incurred in connection with the
consummation by The One Group and Paragon Portfolio of the transactions
contemplated by the proposed Agreement and Plan of Reorganization will be paid
by the party directly incurring such fees and expenses, except that the costs of
proxy materials and proxy solicitation, including legal expenses, will be borne
by One Group; provided however, that such expenses will in any event be paid by
the party directly incurring such expenses if and to the extent that the payment
by the other party of such expenses would result in the disqualification of an
One Group or Paragon Fund, as the case may be, as a regulated investment company
within the meaning of Section 851 of the Internal Revenue Code.
The Pro Forma Combining Statements of Assets and Liabilities, Statements of
Operations, Financial Highlights 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 Paragon Funds are portfolios of Paragon Portfolio, an open-end management
investment company consisting of eleven funds. Likewise, the One Group Funds are
portfolios of The One Group, an open-end management investment company
consisting of thirty-two separate funds.
CONTINUED
- ----
110
<PAGE>
- --------------------------------------------------------------------------------
PARAGON PORTFOLIO
THE GROUP
- --------------------------------------------------------------------------------
NOTES TO PRO FORMA FINANCIAL STATEMENTS (Continued)
(Unaudited)
EXPENSES
PARAGON FUNDS:
Paragon Government, Paragon Bond, Paragon Equity, Paragon Louisiana, Paragon
Growth, and Paragon Gulf South have entered into Investment Advisory Agreements
with Premier Investment Advisors, L.L.C., ("Premier"), a subsidiary of Premier
Bank N.A. Paragon Money Market has entered into an Investment Advisory Agreement
with Goldman Sachs Asset Management ("GSAM"), a separate operating division of
Goldman, Sachs & Co. ("Goldman Sachs"), and into a Subadvisory Agreement with
Premier and GSAM. Pursuant to the terms of the Investment Advisory Agreements,
Premier and GSAM manage the investments and make investment decisions for each
of the respective funds. For these services, each of the Paragon Funds pays its
investment adviser a monthly fee at the following annual rate of the
corresponding Fund's average daily net assets:
<TABLE>
<S> <C>
Paragon Money Market................................................................ 0.20%
Paragon Government.................................................................. 0.50%
Paragon Bond........................................................................ 0.50%
Paragon Equity...................................................................... 0.65%
Paragon Louisiana................................................................... 0.50%
Paragon Growth...................................................................... 0.65%
Paragon Gulf South.................................................................. 0.65%
</TABLE>
With respect to Paragon Louisiana, Premier has advised Paragon Portfolio that it
has voluntarily agreed to reduce its advisory fee from 0.50% to 0.40% of the
Fund's average daily net assets. For the year ended May 31, 1995, Premier waived
$199,143 of its advisory fee for Paragon Louisiana.
GSAM serves as Paragon Portfolio's administrator pursuant to an Administration
Agreement. Under the Administration Agreement, GSAM administers the business
affairs of Paragon Portfolio. As compensation for services rendered under the
Administration Agreement, each Paragon Fund pays GSAM a fee, computed daily and
payable monthly, at the annual rate of 0.15% of the average daily net assets of
the corresponding Fund. With respect to Paragon Louisiana, GSAM has advised
Paragon Portfolio that, it has voluntarily agreed to reduce its administration
fee from 0.15% to 0.10% of the Fund's average daily net assets. For the year
ended May 31, 1995, GSAM waived $99,571 of its administration fee for Paragon
Louisiana.
Goldman Sachs serves as the Distributor of shares of the Paragon Funds pursuant
to a Distribution Agreement with Paragon Portfolio. Goldman Sachs may receive a
portion of the sales load imposed on the sale of Class A Shares of the variable
net asset portfolios. Paragon Portfolio has also adopted, on behalf of each
Paragon Fund, a Distribution Plan for Class B Shares (the "Class B Plan") in
accordance with Rule 12b-1 under the Investment Company Act of 1940 (the "1940
Act"). Under the Class B Plan, each Paragon Fund pays Goldman Sachs a quarterly
fee for distribution services with respect to the Class B Shares equal to, on an
annual basis, 0.75% of each Paragon Fund's average daily net assets attributable
to the Class B Shares of such Fund.
ONE GROUP FUNDS:
The One Group and Banc One Investment Advisors Corporation (the "Advisor") are
parties to an investment advisory agreement under which the Advisor is entitled
to receive an annual fee, computed daily and paid monthly, equal to the
following percentages of each One Group Fund's average daily net assets as
follows:
<TABLE>
<S> <C>
One Group Money Market.............................................................. 0.35%
One Group Limited Volatility........................................................ 0.60%
One Group Bond...................................................................... 0.45%
One Group Equity.................................................................... 0.74%
</TABLE>
CONTINUED
----
111
<PAGE>
- --------------------------------------------------------------------------------
PARAGON PORTFOLIO
THE GROUP
- --------------------------------------------------------------------------------
NOTES TO PRO FORMA FINANCIAL STATEMENTS (Continued)
(Unaudited)
The One Group and 440 Financial Group of Worcester ("440 Financial") are parties
to an administrative agreement under which 440 Financial (the "Administrator")
provides services for a fee that is computed daily and payable monthly, at an
annual rate of 0.20% on the first $1.5 billion of the combined average net
assets of the combined net assets of the Funds of The One Group; 0.18% on the
next $0.5 billion of the combined average net assets, and 0.16% on the combined
average net assets over $2 billion. Effective April 1, 1995, The Shareholder
Services Group, Inc.,
d/b/a 440 Financial became the Administrator to The One Group. Also effective
April 1, 1995, the Advisor became the Sub-Administrator to The One Group
pursuant to an agreement between the Administrator and the Advisor. The Advisor
assumed many of the administrative duties, for which it receives a fee paid by
the Administrator.
The One Group has adopted a distribution and shareholder services plan (the
"Plan") on behalf of the Class A, Class B and Service Class shares pursuant to
Rule 12b-1 under the 1940 Act. 440 Financial Distributors, Inc. (the
Distributor) acts as the distributor of The One Group's shares. The Distributor
receives an annual fee for its services of 0.35%, 1.00%, and 0.75% of the
average daily net assets of the Class A, Class B, and Service Class shares,
respectively. These fees are used by the Distributor to pay banks, including
affiliates of the Advisor, other institutions and broker/dealers, or to
reimburse the Distributor for expenses incurred for providing distribution or
shareholder assistance. The Distributor has voluntarily agreed to limit its fees
for the Class A shares to an annual rate of 0.25% of the average daily net
assets of the Class A Shares of each One Group Fund.
The Advisor, Administrator, and Distributor voluntarily agreed to waive a
portion of their fees and to reimburse the One Group Funds for certain expenses
so that total expenses of each Fund would not exceed certain annual expense
limitations. For the year ended June 30, 1995, fees in the following amounts
were waived or reimbursed to the One Group Funds (amounts in thousands):
<TABLE>
<CAPTION>
INVESTMENT
ADVISORY ADMINISTRATION 12B-1 FEES 12B-1 FEES
FEES FEES (CLASS A) (CLASS B)
----------- ----------------- --------------- ---------------
<S> <C> <C> <C> <C>
One Group Money Market.................................. $ 1,957 $ 122 $ 66 --
One Group Limited Volatility............................ $ 1,393 $ 2 $ 14 $ 6
One Group Bond.......................................... $ 39 $ 15 $ 4 $ 1
One Group Equity........................................ $ 7 -- $ 12 --
</TABLE>
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 Paragon Funds were included in the One Group
Funds for the year ended June 30, 1995. Investment advisory, administration and
12b-1 fees in the pro forma combined column are calculated at the rates in
effect for the One Group Funds based upon the combined net assets of the Paragon
Funds and the One Group Funds. All other pro forma combined expenses are based
on the combined net assets of the funds and are, therefore, equal to the sum of
the Paragon Funds' expenses and the One Group Funds' expenses.
CONTINUED
- ----
112
<PAGE>
- --------------------------------------------------------------------------------
PARAGON PORTFOLIO
THE GROUP
- --------------------------------------------------------------------------------
NOTES TO PRO FORMA FINANCIAL STATEMENTS (Continued)
(Unaudited)
For the year ended June 30, 1995, a portion of the investment advisory,
administration and 12b-1 fees on a pro forma combined basis for each of the One
Group Funds were waived as follows (ratio of expenses waived to average net
assets):
<TABLE>
<CAPTION>
RATIO OF RATIO OF
RATIO OF EXPENSES WAIVED EXPENSES WAIVED
EXPENSES WAIVED - - -
FIDUCIARY CLASS CLASS A CLASS B
------------------- ---------------- ----------------
<S> <C> <C> <C>
One Group Money Market............................................ 0.18% 0.28% --
One Group Limited Volatility...................................... 0.33% 0.43% 0.58%
One Group Bond.................................................... 0.02% 0.12% 0.12%
One Group Equity.................................................. 0.00% 0.10% 0.01%
</TABLE>
The pro forma schedules of portfolio investments give effect to the proposed
transfer of such assets as if the reorganization had occurred at June 30, 1995
for One Group Money Market, One Group Limited Volatility, One Group Bond and One
Group Equity and at May 31, 1995 for One Group Louisiana, One Group Growth and
One Group Gulf South.
2. PORTFOLIO VALUATION:
ONE GROUP FUNDS:
ONE GROUP MONEY MARKET: Investments of One Group Money Market are valued
utilizing the amortized cost method permitted in accordance with Rule 2a-7 under
the Investment Company Act of 1940. Under the amortized cost method, discount or
premium is amortized on a constant basis to the maturity of the security. In
addition, One Group Money Market may not (a) purchase any instrument with a
remaining maturity greater than thirteen months (except for investments subject
to a demand feature or certain securities with variable rates of interest), or
(b) maintain a dollar weighted average portfolio maturity which exceeds 90 days.
ONE GROUP LIMITED VOLATILITY, ONE GROUP BOND AND ONE GROUP EQUITY: Listed
securities are valued at the last sales price on the principal exchange where
such securities are traded. Unlisted securities or listed securities for which
last sales prices are not available are valued at the mean of the latest bid and
asked priced in the principal market where such securities are traded. Corporate
debt securities and debt securities of U.S. issuers (other than short-term
investments maturing in 60 days or less), including municipal securities, are
valued on the basis of valuations provided by dealers or by an independent
pricing service approved by the Board of Trustees. Short-term investments
maturing in 60 days or less are valued at amortized cost which, combined with
accrued interest, approximates market value. Investments for which there are no
such quotations or valuations are valued at fair value as determined in good
faith by the investment adviser under the direction of the Board of Trustees.
Futures contracts are valued at the settlement price established each day by the
board of trade or an exchange on which they are traded. Options traded on an
exchange are valued using the last sale price or, in the absence of a sale, the
last offering price. Options traded over-the-counter are valued using
dealer-supplied valuations.
PARAGON FUNDS:
PARAGON MONEY MARKET: Portfolio securities of Paragon Money Market are valued
at amortized cost which approximates market value. Under this method, all
investments purchased at a discount or premium are valued by amortizing the
difference between original purchase price and maturity value of the issue over
the period to maturity.
PARAGON GOVERNMENT, PARAGON BOND, PARAGON EQUITY, PARAGON LOUISIANA, PARAGON
GROWTH, AND PARAGON GULF SOUTH: Equity securities traded on a national
securities exchange or the National Association of Securities Dealers Automated
Quotation System ("NASDAQ") are valued at their last sale price on the principal
exchange on which
CONTINUED
----
113
<PAGE>
- --------------------------------------------------------------------------------
PARAGON PORTFOLIO
THE GROUP
- --------------------------------------------------------------------------------
NOTES TO PRO FORMA FINANCIAL STATEMENTS (Continued)
(Unaudited)
they are traded or NASDAQ (if NASDAQ is the principal market for such
securities) on the valuation day or, if no sale occurs, at the mean between the
closing bid and asked prices. Unlisted equity securities for which market
quotations are available are valued at the mean between the most recent bid and
asked prices. Fixed income securities are valued at prices supplied by an
independent pricing service which reflect broker/dealer-supplied valuations and
electronic data processing techniques. Short-term debt obligations maturing in
60 days or less are valued at amortized cost. Other assets and assets whose
market values, in the investment adviser's opinion, do not reflect fair value
are valued at fair value using methods determined in good faith by the Board of
Trustees of Paragon Portfolio.
3. CAPITAL SHARES:
The pro forma net asset values per share assume the issuance of shares of The
One Group Funds which would have occurred at June 30, 1995 and May 31, 1995 in
connection with the proposed reorganization. The pro forma number of shares
outstanding consists of the following:
<TABLE>
<CAPTION>
SHARES ADDITIONAL SHARES
OUTSTANDING AT ASSUMED IN THE
JUNE 30, 1995 REORGANIZATION PROFORMA SHARES AT
(000) (000) JUNE 30, 1995 (000)
-------------- ------------------ -------------------
<S> <C> <C> <C>
One Group Money Market................................. 1,276,810 299,200 1,576,010
One Group Limited Volatility........................... 40,462 12,412 52,874
One Group Bond......................................... 39,804 32,171 71,975
One Group Equity....................................... 12,439 7,984 20,423
SHARES ADDITIONAL SHARES
OUTSTANDING AT ASSUMED IN THE
MAY 31, 1995 REORGANIZATION PROFORMA SHARES AT
(000) (000) MAY 31, 1995 (000)
-------------- ------------------ -------------------
One Group Louisiana.................................... 0 18,253 18,253
One Group Growth....................................... 0 13,062 13,062
One Group Gulf South................................... 0 5,496 5,496
</TABLE>
CONTINUED
- ----
114
<PAGE>
- --------------------------------------------------------------------------------
PARAGON TREASURY MONEY MARKET FUND
THE ONE GROUP U.S. TREASURY SECURITIES MONEY MARKET FUND
- --------------------------------------------------------------------------------
PRO FORMA COMBINING FINANCIAL HIGHLIGHTS
(Unaudited)
<TABLE>
<CAPTION>
TREASURY MONEY MARKET FUND U.S. TREASURY
------------------------------------ SECURITIES MONEY
MARKET FUND
YEAR ---------------------
ENDED SIX MONTHS ONE MONTH
NOVEMBER ENDED MAY ENDED JUNE YEAR ENDED JUNE 30,
30, 1994 31, 1995 30, 1995 1995
-------- ---------- ------------ ---------------------
CLASS A CLASS A CLASS A FIDUCIARY CLASS A
-------- ---------- ------------ ---------- --------
<S> <C> <C> <C> <C> <C>
NET ASSET VALUE,
BEGINNING OF PERIOD........................ $ 1.000 $ 1.000 $ 1.000 $ 1.000 $ 1.000
-------- ---------- ------------ ---------- --------
Investment Activities
Net investment income...................... 0.040 0.030 0.050 0.047
-------- ---------- ------------ ---------- --------
Distributions
Net investment income...................... (0.040) (0.030) (0.050) (0.047)
-------- ---------- ------------ ---------- --------
NET ASSET VALUE,
END OF PERIOD.............................. $ 1.000 $ 1.000 $ 1.000 $ 1.000 $ 1.000
-------- ---------- ------------ ---------- --------
-------- ---------- ------------ ---------- --------
Total Return................................. 3.68% 5.73%(a) 0.96% 5.07% 4.81%
RATIOS/SUPPLEMENTARY DATA:
Net Assets at end of period (000).......... $296,365 $308,522 $299,250 $1,178,091 $98,723
Ratio of expenses to average net assets.... 0.43% 0.41%(a) 0.41%(a)(b) 0.41% 0.66%
Ratio of net investment income to average
net assets................................. 3.60% 5.54%(a) 5.54%(a)(b) 4.96% 4.71%
Ratio of expenses to average net assets*... 0.43% 0.41%(a) 0.41%(a)(b) 0.59% 0.94%
Ratio of net investment income to average
net assets*................................ 3.60% 5.54%(a) 5.54%(a)(b) 4.78% 4.43%
</TABLE>
- ------------
* During the period, certain fees were voluntarily reduced. If such voluntary
fee reductions had not occurred, the ratios would have been as indicated.
(a) Annualized.
(b) Ratios are from six months ended 5/31/95 representing most current available
information.
SEE NOTES TO PRO FORMA FINANCIAL STATEMENTS.
----
115
<PAGE>
- --------------------------------------------------------------------------------
PARAGON SHORT-TERM GOVERNMENT FUND
THE ONE GROUP LIMITED VOLATILITY BOND FUND
- --------------------------------------------------------------------------------
PRO FORMA COMBINING FINANCIAL HIGHLIGHTS
(Unaudited)
<TABLE>
<CAPTION>
SHORT-TERM GOVERNMENT FUND
--------------------------------------------------------------------------
YEAR
YEAR ENDED SIX
ENDED NOVEMBER SIX MONTHS MONTHS ONE MONTH ONE MONTH
NOVEMBER 30, ENDED ENDED ENDED ENDED
30, 1994 MAY 31, MAY 31, JUNE 30, JUNE 30,
1994 --------- 1995 1995 1995 1995
-------- CLASS B ---------- --------- ------------ -----------
CLASS A (b) CLASS A CLASS B CLASS A CLASS B
-------- --------- ---------- --------- ------------ -----------
<S> <C> <C> <C> <C> <C> <C>
NET ASSET VALUE,
BEGINNING OF PERIOD............................. $ 10.34 $ 9.95 $ 9.85 $ 9.85 $ 10.13 $10.13
-------- --------- ---------- --------- ------------ -----------
Investment Activities
Net investment income........................... 0.50 0.05 0.27 0.24 0.04 0.04
Net realized and unrealized gains
(losses) from investments..................... (0.49) (0.10) 0.28 0.28 (0.02) (0.02)
-------- --------- ---------- --------- ------------ -----------
Total from Investment Activities.................. 0.01 (0.05) 0.55 0.52 0.02 0.02
-------- --------- ---------- --------- ------------ -----------
Distributions
Net investment income........................... (0.50) (0.05) (0.27) (0.24) (0.05) (0.04)
In excess of net investment income..............
-------- --------- ---------- --------- ------------ -----------
Total Distributions............................... (0.50) (0.05) (0.27) (0.24) (0.05) (0.04)
-------- --------- ---------- --------- ------------ -----------
NET ASSET VALUE,
END OF PERIOD................................... $ 9.85 $ 9.85 $ 10.13 $10.13 $ 10.10 $10.11
-------- --------- ---------- --------- ------------ -----------
-------- --------- ---------- --------- ------------ -----------
Total Return (Excluding Sales Charge)............. 0.12% (0.39)% 5.62% 5.24% 5.62%(d) 5.24%(d)
RATIOS/SUPPLEMENTARY DATA:
Net Assets at end of period (000)............... $142,958 $ 41 $130,665 $ 164 $130,355 $ 308
Ratio of expenses to average net
assets........................................ 0.77% 1.53%(c) 0.78%(c) 1.53%(c) 0.78%(c)(d) 1.53%(c)(d)
Ratio of net investment income to average net
assets........................................ 4.89% 4.92%(c) 5.54%(c) 4.72%(c) 5.54%(c)(d) 4.72%(c)(d)
Ratio of expenses to average net assets *....... 0.77% 1.53%(c) 0.78%(c) 1.53%(c) 0.78%(c)(d) 1.53%(c)(d)
Ratio of net investment income to average net
assets *...................................... 4.89% 4.92%(c) 5.54%(c) 4.72%(c) 5.54%(c)(d) 4.72%(c)(d)
Portfolio Turnover.............................. 40.00% 40.00% 9.00% 9.00% 9.00%(d) 9.00%(d)
<CAPTION>
LIMITED VOLATILITY BOND FUND
----------------------------------------
YEAR ENDED JUNE 30, 1995
----------------------------------------
SERVICE
FIDUCIARY CLASS A CLASS B (a)
-------- ------- ------- ---------
<S> <C> <C> <C> <C>
NET ASSET VALUE,
BEGINNING OF PERIOD............................. $ 10.33 $ 10.32 $ 10.40 $10.38
-------- ------- ------- ---------
Investment Activities
Net investment income........................... 0.60 0.56 0.53 0.51
Net realized and unrealized gains
(losses) from investments..................... 0.19 0.21 0.19 0.19
-------- ------- ------- ---------
Total from Investment Activities.................. 0.79 0.77 0.72 0.70
-------- ------- ------- ---------
Distributions
Net investment income........................... (0.59) (0.56) (0.52) (0.49)
In excess of net investment income.............. (0.01)
-------- ------- ------- ---------
Total Distributions............................... (0.59) (0.57) (0.52) (0.49)
-------- ------- ------- ---------
NET ASSET VALUE,
END OF PERIOD................................... $ 10.53 $ 10.52 $ 10.60 $10.59
-------- ------- ------- ---------
-------- ------- ------- ---------
Total Return (Excluding Sales Charge)............. 7.96% 7.67% 7.18% (a)
RATIOS/SUPPLEMENTARY DATA:
Net Assets at end of period (000)............... $410,746 $12,516 $ 2,906
Ratio of expenses to average net
assets........................................ 0.52% 0.77% 1.28% 1.32%(c)
Ratio of net investment income to average net
assets........................................ 5.82% 5.57% 5.10% 5.55%(c)
Ratio of expenses to average net assets *....... 0.85% 1.20% 1.86% 1.68%(c)
Ratio of net investment income to average net
assets *...................................... 5.49% 5.14% 4.52% 5.20%(c)
Portfolio Turnover.............................. 76.43% 76.43% 76.43% 76.43%
</TABLE>
- -------------
* During the period the investment advisory, 12b-1 and administration fees
were voluntarily reduced. If such voluntary fee reductions had not occurred,
the ratios would have been as indicated.
(a) The Service Class Shares commenced offering on January 17, 1994, when they
were designated as "Retirement" Shares. On April 4, 1995, the name of the
Retirement Shares was changed to "Service" Shares. As of June 1, 1995,
Service Shares transferred to Class A Shares; and as of June 30, 1995, there
were no shareholders in the Service Class. The return for the period from
July 1, 1994 to June 1, 1995 for the Service Shares was 6.90%.
(b) Class B Share activity commenced October 19, 1994.
(c) Annualized.
(d) Information is from six months ended 5/31/95.
SEE NOTES TO PRO FORMA FINANCIAL STATEMENTS.
- ----
116
<PAGE>
- --------------------------------------------------------------------------------
PARAGON INTERMEDIATE-TERM BOND FUND
THE ONE GROUP GOVERNMENT BOND FUND
- --------------------------------------------------------------------------------
PRO FORMA COMBINING FINANCIAL HIGHLIGHTS
(Unaudited)
<TABLE>
<CAPTION>
INTERMEDIATE-TERM BOND FUND
-------------------------------------------------------------------------------------------
YEAR ENDED YEAR ENDED SIX MONTHS SIX MONTHS ONE MONTH ONE MONTH
NOVEMBER 30, NOVEMBER 30, ENDED MAY 31, ENDED MAY ENDED JUNE 30, ENDED JUNE
1994 1994 1995 31, 1995 1995 30, 1995
------------ ------------ ------------- ------------ -------------- -------------
CLASS A CLASS B (b) CLASS A CLASS B CLASS A CLASS B
------------ ------------ ------------- ------------ -------------- -------------
<S> <C> <C> <C> <C> <C> <C>
NET ASSET VALUE,
BEGINNING OF
PERIOD.......... $ 10.84 $ 9.74 $ 9.54 $ 9.56 $ 10.29 $10.32
------------ ------ ------------- ------------ -------------- ------
Investment
Activities
Net investment
income.......... 0.66 0.10 0.34 0.30 0.05 0.05
Net realized and
unrealized gains
from
investments..... (1.16) (0.18) 0.75 0.76 (0.02)
------------ ------ ------------- ------------ -------------- ------
Total from
Investment
Activities........ (0.50) (0.08) 1.09 1.06 0.03 0.05
------------ ------ ------------- ------------ -------------- ------
Distributions
Net investment
income.......... (0.66) (0.10) (0.34) (0.30) (0.06) (0.04)
In excess of net
investment
income.......... (0.14)
------------ ------ ------------- ------------ -------------- ------
Total
Distributions..... (0.80) (0.10) (0.34) (0.30) (0.06) (0.04)
------------ ------ ------------- ------------ -------------- ------
NET ASSET VALUE,
END OF PERIOD..... $ 9.54 $ 9.56 $ 10.29 $ 10.32 $ 10.26 $10.33
------------ ------ ------------- ------------ -------------- ------
------------ ------ ------------- ------------ -------------- ------
Total Return
(Excluding Sales
Charge)........... (4.77)% (0.76)% 11.60% 11.30% 11.60%(d) 11.30%(d)
RATIOS/SUPPLEMENTARY
DATA:
Net Assets at end
of period
(000)........... $297,123 $ 250 $314,924 $ 687 $314,746 $ 794
Ratio of expenses
to average net
assets.......... 0.76% 1.52%(c) 0.76%(c) 1.51%(c) 0.76%(c)(d) 1.51%(c)(d)
Ratio of net
investment
income to
average net
assets.......... 6.56% 6.38%(c) 6.91%(c) 6.13%(c) 6.91%(c)(d) 6.13%(c)(d)
Ratio of expenses
to average net
assets *........ 0.76% 1.52%(c) 0.76%(c) 1.51%(c) 0.76%(c)(d) 1.51%(c)(d)
Ratio of net
investment
income to
average net
assets *........ 6.56% 6.38%(c) 6.91%(c) 6.13%(c) 6.91%(c)(d) 6.13%(c)(d)
Portfolio
Turnover.......... 38.00% 38.00% 18.00% 18.00% 18.00%(d) 18.00%(d)
<CAPTION>
GOVERNMENT BOND FUND
-------------------------------------------------
FIDUCIARY CLASS A CLASS B SERVICE (a)
--------- --------- -------- --------------
<S> <C> <C> <C> <C>
NET ASSET VALUE,
BEGINNING OF
PERIOD.......... $ 9.35 $ 9.35 $ 9.35 $ 9.32
--------- --------- -------- ------
Investment
Activities
Net investment
income.......... 0.62 0.61 0.55 0.44
Net realized and
unrealized gains
from
investments..... 0.46 0.45 0.46 0.46
--------- --------- -------- ------
Total from
Investment
Activities........ 1.08 1.06 1.01 0.90
--------- --------- -------- ------
Distributions
Net investment
income.......... (0.61) (0.59) (0.55) (0.44)
In excess of net
investment
income.......... (0.01) (0.01)
--------- --------- -------- ------
Total
Distributions..... (0.62) (0.60) (0.55) (0.44)
--------- --------- -------- ------
NET ASSET VALUE,
END OF PERIOD..... $ 9.81 $ 9.81 $ 9.81 $ 9.78
--------- --------- -------- ------
--------- --------- -------- ------
Total Return
(Excluding Sales
Charge)........... 12.04% 11.84% 11.20% (a)
RATIOS/SUPPLEMENTARY
DATA:
Net Assets at end
of period
(000)........... $379,826 $ 8,130 $ 2,513
Ratio of expenses
to average net
assets.......... 0.71% 0.97% 1.62% 1.64%(c)
Ratio of net
investment
income to
average net
assets.......... 6.65% 6.46% 5.76% 6.65%(c)
Ratio of expenses
to average net
assets *........ 0.73% 1.09% 1.74% 1.66%(c)
Ratio of net
investment
income to
average net
assets *........ 6.63% 6.34% 5.64% 6.62%(c)
Portfolio
Turnover.......... 106.14% 106.14% 106.14% 106.14%
</TABLE>
- -------------
* During the period the investment advisory, 12b-1 and administration fees
were voluntarily reduced. If such voluntary fee reductions had not occurred,
the ratios would have been as indicated.
(a) The Service Class Shares commenced offering on July 15, 1994, when they were
designated as "Retirement" Shares. On April 4, 1995, the name of the
Retirement Shares was changed to "Service" Shares. As of June 1, 1995,
Service Shares transferred to Class A Shares; and as of June 30, 1995, there
were no shareholders in the Service Class. The return for the period from
July 15, 1994 to June 1, 1995 for the Service Shares was 9.59%.
(b) Class B Share activity commenced October 19, 1994.
(c) Annualized.
(d) Information is from six months ended 5/31/95.
SEE NOTES TO PRO FORMA FINANCIAL STATEMENTS.
----
117
<PAGE>
- --------------------------------------------------------------------------------
PARAGON VALUE EQUITY INCOME FUND
THE ONE GROUP INCOME EQUITY FUND
- --------------------------------------------------------------------------------
PRO FORMA COMBINING FINANCIAL HIGHLIGHTS FOR THE YEAR ENDED MAY 31, 1995
(Unaudited)
<TABLE>
<CAPTION>
VALUE EQUITY INCOME FUND
-----------------------------------------------------------------------------
YEAR
YEAR ENDED SIX
ENDED NOVEMBER SIX MONTHS MONTHS ONE MONTH
NOVEMBER 30, ENDED ENDED ENDED ONE MONTH
30, 1994 MAY 31, MAY 31, JUNE 30, ENDED
1994 --------- 1995 1995 1995 JUNE 30, 1995
-------- CLASS B ----------- --------- ------------ --------------
CLASS A (a) CLASS A CLASS B CLASS A CLASS B
-------- --------- ----------- --------- ------------ --------------
<S> <C> <C> <C> <C> <C> <C>
NET ASSET VALUE,
BEGINNING OF PERIOD.............. $ 12.74 $12.01 $ 11.55 $11.56 $12.93 $ 12.94
-------- --------- ----------- --------- ------------ ------
Investment Activities
Net investment income............ 0.30 0.04 0.16 0.11 0.03 0.02
Net realized and unrealized gains
from investments............... (0.54) (0.45) 1.75 1.76 0.45 0.46
-------- --------- ----------- --------- ------------ ------
Total from Investment Activities (0.24) (0.41) 1.91 1.87 0.48 0.48
-------- --------- ----------- --------- ------------ ------
Distributions
Net investment income............ (0.34) (0.04) (0.16) (0.12) (0.03) (0.02)
In excess of net investment
income.........................
Net realized gains............... (0.61) (0.37) (0.37)
-------- --------- ----------- --------- ------------ ------
(0.95) (0.04) (0.53) (0.49) (0.03) (0.02)
-------- --------- ----------- --------- ------------ ------
Total Distributions................ $ 11.55 $11.56 $ 12.93 $12.94 $13.38 $ 13.40
-------- --------- ----------- --------- ------------ ------
-------- --------- ----------- --------- ------------ ------
NET ASSET VALUE, END OF PERIOD..... (1.69 )% (3.40)% 17.16% 16.74% 17.16%(c) 16.74%(c)
-------- --------- ----------- --------- ------------ ------
Total Return (excluding sales
charge)..........................
RATIOS/SUPPLEMENTARY DATA:
Net Assets at end of period
(000).......................... $103,364 $ 31 $116,282 $ 243 $120,400 $ 303
Ratio of expenses to average net
assets......................... 0.93 % 1.67%(b) 0.90%(b) 1.65%(b) 0.90%(b)(c) 1.65%(b)(c)
Ratio of net investment income to
average net assets............. 2.50 % 1.71%(b) 2.62%(b) 1.81%(b) 2.62%(b)(c) 1.81%(b)(c)
Ratio of expenses to average net
assets *....................... 0.93 % 1.67%(b) 0.90%(b) 1.65%(b) 0.90%(b)(c) 1.65%(b)(c)
Ratio of net investment income to
average net assets *........... 2.50 % 1.71%(b) 2.62%(b) 1.81%(b) 2.62%(b)(c) 1.81%(b)(c)
Portfolio Turnover................. 49.00 % 49.00% 17.00% 17.00% 17.00%(c) 17.00%(c)
<CAPTION>
INCOME EQUITY FUND
---------------------------------
YEAR ENDED JUNE 30, 1995
---------------------------------
FIDUCIARY CLASS A CLASS B
--------- --------- ---------
<S> <C> <C> <C>
NET ASSET VALUE,
BEGINNING OF PERIOD.............. $ 13.22 $ 13.20 $ 13.23
--------- --------- ---------
Investment Activities
Net investment income............ 0.40 0.03 0.26
Net realized and unrealized gains
from investments............... 2.28 2.29 2.29
--------- --------- ---------
Total from Investment Activities 2.68 2.32 2.55
--------- --------- ---------
Distributions
Net investment income............ (0.40) (0.03) (0.25)
In excess of net investment
income......................... (0.01) (0.02)
Net realized gains............... (0.37) (0.37) (0.37)
--------- --------- ---------
(0.77) (0.41) (0.64)
--------- --------- ---------
Total Distributions................ $ 15.13 $ 15.11 $ 15.14
--------- --------- ---------
--------- --------- ---------
NET ASSET VALUE, END OF PERIOD..... 21.04% 20.79% 19.91%
--------- --------- ---------
Total Return (excluding sales
charge)..........................
RATIOS/SUPPLEMENTARY DATA:
Net Assets at end of period
(000).......................... $170,919 $ 13,793 $ 3,468
Ratio of expenses to average net
assets......................... 1.01% 1.26% 2.01%
Ratio of net investment income to
average net assets............. 2.85% 2.61% 1.88%
Ratio of expenses to average net
assets *....................... 1.01% 1.36% 2.02%
Ratio of net investment income to
average net assets *........... 2.85% 2.51% 1.87%
Portfolio Turnover................. 4.03% 4.03% 4.03%
</TABLE>
- -------------
* During the period, certain fees were voluntarily reduced. If such voluntary
fee reductions had not occurred, the ratios would have been as indicated.
(a) Class B Share activity commenced October 19, 1994.
(b) Annualized.
(c) Information is from six months ended 5/31/95.
SEE NOTES TO PRO FORMA FINANCIAL STATEMENTS.
- ----
118
<PAGE>
- --------------------------------------------------------------------------------
PARAGON LOUISIANA TAX-FREE FUND
THE ONE GROUP LOUISIANA MUNICIPAL BOND FUND
- --------------------------------------------------------------------------------
PRO FORMA COMBINING FINANCIAL HIGHLIGHTS FOR THE YEAR ENDED MAY 31, 1995
(Unaudited)
<TABLE>
<CAPTION>
LOUISIANA
TAX-FREE FUND
-------------
CLASS A
-------------
<S> <C>
NET ASSET VALUE,
BEGINNING OF PERIOD...................................................................................... $ 10.47
-------------
Investment Activities
Net investment income................................................................................... 0.53
Net realized and unrealized gains from investments...................................................... 0.12
-------------
Total from Investment Activities.......................................................................... 0.65
-------------
Distributions
Net investment income................................................................................... (0.53)
-------------
Total Distributions....................................................................................... (0.53)
-------------
NET ASSET VALUE, END OF PERIOD............................................................................ $ 10.59
-------------
-------------
Total Return (Excluding Sales Charge)..................................................................... 6.47%
RATIOS/SUPPLEMENTARY DATA:
Net Assets at end of period (000)....................................................................... $ 192,390
Ratio of expenses to average net assets (b)............................................................. 0.65%
Ratio of net investment income to average net assets (b)................................................ 5.15%
Ratio of expenses to average net assets* (b)............................................................ 0.80%
Ratio of net investment income to average net assets* (b)............................................... 5.00%
Portfolio Turnover...................................................................................... 21.00%
<CAPTION>
CLASS B (A)
-------------
<S> <C>
NET ASSET VALUE,
BEGINNING OF PERIOD...................................................................................... $ 10.41
-------------
Investment Activities
Net investment income................................................................................... 0.32
Net realized and unrealized gains from investments...................................................... 0.21
-------------
Total from Investment Activities.......................................................................... 0.53
-------------
Distributions
Net investment income................................................................................... (0.32 )
-------------
Total Distributions....................................................................................... (0.32 )
-------------
NET ASSET VALUE, END OF PERIOD............................................................................ $ 10.62
-------------
-------------
Total Return (Excluding Sales Charge)..................................................................... 5.20%
RATIOS/SUPPLEMENTARY DATA:
Net Assets at end of period (000)....................................................................... $ 932
Ratio of expenses to average net assets (b)............................................................. 1.40%
Ratio of net investment income to average net assets (b)................................................ 4.36%
Ratio of expenses to average net assets* (b)............................................................ 1.55%
Ratio of net investment income to average net assets* (b)............................................... 4.21%
Portfolio Turnover...................................................................................... 21.00%
</TABLE>
- ---------
* During the period, certain fees were voluntarily reduced. If such voluntary
fee reductions had not occurred, the ratios would have been as indicated.
(a) Class B Share activity commenced on September 16, 1994.
(b) Information is from six months ended 5/31/95.
SEE NOTES TO FINANCIAL STATEMENTS.
----
119
<PAGE>
- --------------------------------------------------------------------------------
PARAGON VALUE GROWTH FUND
THE ONE GROUP VALUE GROWTH FUND
- --------------------------------------------------------------------------------
PRO FORMA COMBINING FINANCIAL HIGHLIGHTS FOR THE YEAR ENDED MAY 31, 1995
(Unaudited)
<TABLE>
<CAPTION>
VALUE
GROWTH FUND
-----------
CLASS A
-----------
<S> <C>
NET ASSET VALUE,
BEGINNING OF PERIOD........................................................................................ $ 14.58
-----------
Investment Activities
Net investment income...................................................................................... 0.22
Net realized and unrealized gains from investments......................................................... 0.76
-----------
Total from Investment Activities............................................................................. 0.98
-----------
Distributions
Net investment income...................................................................................... (0.24)
-----------
Total Distributions.......................................................................................... (0.24)
-----------
NET ASSET VALUE, END OF PERIOD............................................................................... $ 14.90
-----------
-----------
Total Return (Excluding Sales Charge)........................................................................ 7.30%
RATIOS/SUPPLEMENTARY DATA:
Net Assets at end of period (000).......................................................................... $ 193,134
Ratio of expenses to average net assets (b)................................................................ 0.95%
Ratio of net investment income to average net assets (b)................................................... 1.61%
Portfolio Turnover......................................................................................... 51.00%
<CAPTION>
CLASS B (A)
------------
<S> <C>
NET ASSET VALUE,
BEGINNING OF PERIOD........................................................................................ $ 14.98
------
Investment Activities
Net investment income...................................................................................... 0.08
Net realized and unrealized gains from investments......................................................... 0.35
------
Total from Investment Activities............................................................................. 0.43
------
Distributions
Net investment income...................................................................................... (0.09)
------
Total Distributions.......................................................................................... (0.09)
------
NET ASSET VALUE, END OF PERIOD............................................................................... $ 14.88
------
------
Total Return (Excluding Sales Charge)........................................................................ 3.27%
RATIOS/SUPPLEMENTARY DATA:
Net Assets at end of period (000).......................................................................... $ 1,453
Ratio of expenses to average net assets (b)................................................................ 1.70%
Ratio of net investment income to average net assets (b)................................................... 0.88%
Portfolio Turnover......................................................................................... 51.00%
</TABLE>
- ---------
(a) Class B Share activity commenced on September 9, 1994.
(b) Information is from six months ended 5/31/95.
SEE NOTES TO FINANCIAL STATEMENTS.
- ----
120
<PAGE>
- --------------------------------------------------------------------------------
PARAGON GULF SOUTH GROWTH FUND
THE ONE GROUP GULF SOUTH GROWTH FUND
- --------------------------------------------------------------------------------
PRO FORMA COMBINING FINANCIAL HIGHLIGHTS FOR THE YEAR ENDED MAY 31, 1995
(Unaudited)
<TABLE>
<CAPTION>
GULF SOUTH
GROWTH FUND
-------------
CLASS A
-------------
<S> <C>
NET ASSET VALUE,
BEGINNING OF PERIOD...................................................................................... $ 15.93
-------------
Investment Activities
Net investment income................................................................................... (0.05)
Net realized and unrealized gains from investments...................................................... 0.47
-------------
TOTAL FROM INVESTMENT ACTIVITIES.......................................................................... 0.42
-------------
Distributions
Net investment income...................................................................................
Net realized gains...................................................................................... (0.27)
-------------
Total Distributions....................................................................................... (0.27)
-------------
NET ASSET VALUE,
END OF PERIOD............................................................................................ $ 16.08
-------------
-------------
Total Return (Excluding Sales Charge)..................................................................... 2.79%
RATIOS/SUPPLEMENTARY DATA:
Net Assets at end of period (000)....................................................................... $ 87,362
Ratio of expenses to average net assets(b).............................................................. 1.01%
Ratio of net investment income to average net assets(b)................................................. 0.25%
Portfolio Turnover...................................................................................... 53.00%
<CAPTION>
CLASS B (A)
-------------
<S> <C>
NET ASSET VALUE,
BEGINNING OF PERIOD...................................................................................... $ 16.10
-------------
Investment Activities
Net investment income................................................................................... (0.06 )
Net realized and unrealized gains from investments...................................................... 0.22
-------------
TOTAL FROM INVESTMENT ACTIVITIES.......................................................................... 0.16
-------------
Distributions
Net investment income...................................................................................
Net realized gains...................................................................................... (0.27 )
-------------
Total Distributions....................................................................................... (0.27 )
-------------
NET ASSET VALUE,
END OF PERIOD............................................................................................ $ 15.99
-------------
-------------
Total Return (Excluding Sales Charge)..................................................................... 0.96%
RATIOS/SUPPLEMENTARY DATA:
Net Assets at end of period (000)....................................................................... $ 1,028
Ratio of expenses to average net assets(b).............................................................. 1.76%
Ratio of net investment income to average net assets(b)................................................. (1.01%
Portfolio Turnover...................................................................................... 53.00%
</TABLE>
- ---------
(a) Class B Share activity commenced on September 12, 1994.
(b) Information is from six months ended 5/31/95.
SEE NOTES TO FINANCIAL STATEMENTS.
----
121
<PAGE>
REGISTRATION STATEMENT ON FORM N-14
PART C. OTHER INFORMATION
ITEM 15. INDEMNIFICATION
The information required by this item is incorporated by reference to the
Item 27 of Post-Effective Amendment No. 35 (filed August 31, 1995) to
Registrant's Registration Statement on Form N-lA (File No. 2-95973) under the
Securities Act of 1933 and the Investment Company Act of 1940 (File No.
811-4236).
ITEM 16. EXHIBITS
<TABLE>
<C> <S>
(1) Amended and Restated Declaration of Trust is incorporated by
reference to Exhibit (1) to Post Effective Amendment No. 26 filed
February 17, 1993) to Registrant's Registration Statement on Form
N-1A.
(2) Code of Regulations as amended and restated July 26, 1990 is
incorporated by reference to Exhibit (2) to Post-Effective Amendment
No. 17 (filed August 31, 1990) to Registrant's Registration Statement
on Form N-1A.
(3) Not applicable.
(4) Form of Agreement and Plan of Reorganization is filed herewith.
(5)(a) Article V, Article VIII and Article IX, Sections 4 and 5 of the
Amended and Restated Declaration of Trust are incorporated by
reference to Exhibi (1) to Post-Effective Amendment No. 26 (filed
February 17, 1993) to Registrant's Registration Statement on Form
N-1A.
(5)(b) Article I of the Code of Regulations as amended and restated July 26,
1990 is incorporated by reference to Exhibit (2) to Post-Effective
Amendment No. 17 (filed August 31, 1990) to Registrant's Registration
Statement on Form N-1A.
(6)(a) Investment Advisory Agreement dated January 11, 1993 between
Registrant and Banc One Investment Advisors Corporation is
incorporated by reference to Exhibit 5(a) to Post-Effective Amendment
No. 27 (filed March 17, 1993) to Registrant's Registration Statement
on Form N-1A.
(6)(b) Form of Revised Schedule A to the Investment Advisory Agreement
between Registrant and Banc One Investment Advisors Corporation
incorporated by reference to Exhibit 5(c) to Post-Effective Amendment
36 (filed November 24, 1995) to Registrant's Registration Statement
on Form N-1A.
(6)(c) Sub-Investment Advisory Agreement dated February 11, 1993 between
Banc One Investment Advisors Corporation and Boston International
Advisors, Inc. is incorporated by reference to Exhibit (5) (c) to
Post-Effective Amendment No. 28 (filed June 30, 1993) to Registrant's
Registration Statement on Form N-1A.
(6)(d) Sub-Investment Advisory Agreement dated January 2, 1996 between Banc
One Investment Advisors Corporation and Goldman Sachs Asset
Management Inc. is filed herewith.
(7)(a) Distribution Agreement dated November 1, 1995 between the Registrant
and The One Group Services Company is incorporated by reference to
Exhibit (6) (a) to Post-Effective Amendment No. 36 (filed November
24, 1995) to Registrant's Registration Statement on Form N-1A.
(7)(b) Forms of Revised Schedules A-D to the Distribution Agreement between
The One Group Services Company and the Registrant are incorporated by
reference to Post-Effective Amendment 36 (filed November 24, 1995) to
Registrant's Registration Statement on Form N-1A.
(7)(c) Re-Executed Distribution Agreement between Registrant and The One
Group Services Company is filed herewith.
</TABLE>
II-1
<PAGE>
<TABLE>
<C> <S>
(7)(d) Dealer's Agreement for The One Group Funds dated November 11, 1995
between The One Group Services Company and Banc One Securities
Corporation is filed herewith.
(8) Not applicable.
(9)(a) Custodian Contract between Registrant and State Street Bank and Trust
Company is incorporated by reference to Exhibit (8) to Post-Effective
Amendment No. 12 (filed September 9, 1988) to Registrant's
Registration Statement on Form N-1A.
(10)(a) Re-Executed Distribution and Shareholder Services Plan - Class A and
Service Class shares dated November 1, 1995 between the Registrant
and The One Group Services Company is incorporated by reference to
Exhibit (15) (a) to Post-Effective Amendment No. 36 (filed November
24, 1995) to Registrant's Registration Statement on Form N-1A.
(10)(b) Form of Revised Schedule A to the Re-Executed Distribution and
Shareholder Services Plan -Class A and Service Class Shares between
the Registrant and The One Group Services Company is incorporated by
reference to Post-Effective Amendment 36 (filed November 24, 1995) to
the Registrant's Registration Statement on Form N-1A.
(10)(c) Re-Executed Distribution and Shareholder Services Plan - CDSL Class
shares dated November 1, 1995 between the Registrant and The One
Group Services Company is incorporated by reference to Exhibit
(15)(c) Post-Effective Amendment No. 36 (filed November 24, 1995) to
Registrant's Registration Statement on Form N-1A.
(10)(d) Re-Executed Distribution and Shareholder Services Plan - CDSL Class
shares between the Registrant and The One Group Services Company is
filed herewith.
(10)(e) Multiple Class Plan for The One Group adopted by the Board of
Trustees on May 22, 1995 is incorporated by reference to Exhibit
10(c) to the Registrant's Registration Statement on Form N-14 (filed
June 15, 1995).
(11) Opinion of Ropes & Gray, including consent, is incorporated by
reference to Form 24f-2 Notice for the fiscal year ended June 30,
1995, (filed August 29, 1995).
(12) Opinion of Ropes & Gray, including consent, as to Tax Matters is
filed herewith.
(13)(a) Management and Administration Agreement dated December 1, 1995
between the Registrant and The One Group Services Company is filed
herewith.
(13)(b) Transfer Agency and Service Agreement between the Registrant and
State Street Bank and Trust Company is incorporated by reference to
Exhibit (9)(b) to Post-Effective Amendment No. 12 (filed September 9,
1988) to Registrant's Registration Statement on Form N-1A.
(13)(c) Fund Accounting Agreement dated December 1, 1995 between the
Registrant and The One Group Services Company is filed herewith.
(13)(d) Sub-Administration Agreement dated December 1, 1995 between The One
Group Services Company and Banc One Investment Advisors Corporation
is filed herewith.
(14)(a) Consent of Coopers & Lybrand L.L.P., is filed herewith.
(14)(b) Consent of Ropes & Gray is filed herewith.
(14)(c) Consent of Price Waterhouse LLP is filed herewith.
(14)(d) Consent of KPMG Peat Marwick, LLP is filed herewith.
(15) Not applicable.
(16) Executed Powers of Attorney are filed herewith.
(17)(a) Declaration pursuant to Rule 24f-2 under the Investment Company Act
of 1940 for the Registrant dated August 26, 1995 is filed herewith.
(17)(b) Prospectuses for The One Group Treasury Money Market Fund, The One
Group Limited Volatility Bond Fund, The One Group Government Bond
Fund, The One Group Income Equity Fund dated November 1, 1995, and
The One Group Louisiana Tax-Free Fund, The One Group Value Growth
Fund and The One Group Gulf South Fund dated February 7,
</TABLE>
II-2
<PAGE>
<TABLE>
<C> <S>
1996, and prospectuses for Paragon Treasury Money Market Fund,
Paragon Short-Term Government Fund, Paragon Intermediate-Term Fund,
Paragon Louisiana Tax-Free Fund, Paragon Value Growth Fund, Paragon
Value Equity Income Fund and Paragon Gulf South Growth Fund dated
March 30, 1995.
(17)(c) Statement of Additional Information of the One Group, dated November
1, 1995, as amended, February 7, 1996, and Statement of Additional
Information for Paragon Portfolio dated March 30, 1995.
(17)(d) Supplement to The One Group Prospectus dated January 12, 1996.
(17)(e) Paragon Portfolio Semi-Annual Report for the period ended May 31,
1995.
</TABLE>
ITEM 17. UNDERTAKINGS
(1) The registrant agrees that prior to any public reoffering of the
securities registered through the use of a prospectus which is a 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, the reoffering
prospectus will contain the information called for by the applicable
registration form for reoffering by persons who may be deemed underwriters, in
addition to the information called for by the other items of the applicable
form.
(2) The registrant agrees that every prospectus that is filed under
paragraph (1) above will be filed as a 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 1933 Act, 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.
II-3
<PAGE>
SIGNATURES
As required by the Securities Act of 1933, this Registration Statement has
been signed on behalf of the Registrant in the City of Washington, District of
Columbia, on the 22 day of January, 1996.
The One Group
Registrant
/s/ MARK A. DILLON
--------------------------------------
* Mark A. Dillon,
PRESIDENT
As required by the Securities Act of 1933, this registration statement has
been signed by the following persons in the capacities and on the dates
indicated.
SIGNATURE TITLE DATE
- ----------------------------------- ------------------------- ----------------
*/s/ MARK A. DILLON
- ----------------------------------- President January 22, 1996
Mark A. Dillon
*/s/ TERRANCE R. DOLAN
- ----------------------------------- Treasurer January 22, 1996
Terrance R. Dolan
*/s/ PETER C. MARSHALL
- ----------------------------------- Trustee January 22, 1996
Peter C. Marshall
*/s/ CHARLES I. POST
- ----------------------------------- Trustee January 22, 1996
Charles I. Post
*/s/ JOHN S. RANDALL
- ----------------------------------- Trustee January 22, 1996
John S. Randall
*/s/ FREDERICK W. RUEBECK
- ----------------------------------- Trustee January 22, 1996
Frederick W. Ruebeck
*BY: /s/ ALAN G.
PRIEST
January 22, 1996
- -----------------------------------
Alan G. Priest
ATTORNEY-IN-FACT
II-4
<PAGE>
EXHIBIT INDEX
<TABLE>
<CAPTION>
EXHIBIT NO. PAGE
- -------------- ---------
<C> <S> <C>
(4) Agreement and Plan of Reorganization
(6)(d) Sub-Investment Advisory Agreement dated January 2, 1996 between Banc One Investment Advisors
Corporation and Goldman Sachs Asset Management, Inc.
(7)(c) Re-Executed Distribution Agreement between Registrant and The One Group Services Company dated
December 13, 1995.
(7)(d) Dealer Agreement for The One Group Funds dated November 11, 1995 between The One Group
Services Company and Banc One Securities Corporation.
(10)(d) Re-Executed Distribution and Shareholder Services Plan - CDSL Class Shares between the
Registrant and The One Group Services Company.
(12) Opinion of Ropes & Gray, including consent, as to Tax Matters.
(13)(a) Management and Administration Agreement dated December 1, 1995 between the Registrant and The
One Group Services Company.
(13)(c) Fund Accounting Agreement dated December 1, 1995 between the Registrant and The One Group
Services Company.
(13)(d) Sub-Administration Agreement dated December 1, 1995 between The One Group Services Company.
(14)(a) Consent of Coopers & Lybrand
(14)(b) Consent of Ropes & Gray
(14)(c) Consent of Price Waterhouse, LLP
(14)(d) Consent of KPMG Peat Marwick, LLP
(16) Executed Powers of Attorney
(17)(a) Declaration pursuant to Rule 24f-2 under the Investment Company Act of 1940 for the Registrant
dated August 26, 1995.
(17)(b) Prospectuses for The One Group U.S. Treasury Securities Money Market Fund, The One Group
Limited Volatility Bond Fund, The One Group Government Bond Fund, The One Group Income Equity
Fund dated November 1, 1995, and The One Group Louisiana Tax-Free Fund, The One Group Value
Growth Fund and The One Group Gulf South Fund dated February 7, 1996, and prospectuses for
Paragon Treasury Money Market Fund, Paragon Short-Term Government Fund, Paragon
Intermediate-Term Fund, Paragon Louisiana Tax-Free Fund, Paragon Value Growth Fund, Paragon
Value Equity Income Fund and Paragon Gulf South Growth Fund dated March 30, 1995.
(17)(c) Statement of Additional Information of the One Group, dated November 1, 1995, as amended,
February 7, 1996, and Statement of Additional Information for Paragon Portfolio dated March
30, 1995.
(17)(d) Supplement to The One Group Prospectus dated January 12, 1996.
(17)(e) Paragon Portfolio Semi-Annual Report for the period ended May 31, 1995.
</TABLE>
<PAGE>
Exhibit (4)
<PAGE>
AGREEMENT AND PLAN OF REORGANIZATION
This Agreement and Plan of Reorganization (the "Agreement") is made as of
January 19, 1996 by and between The One Group -Registered Trademark-, a
Massachusetts business trust, ("One Group") and Paragon Portfolio, a
Massachusetts business trust ("Paragon"). The capitalized terms used herein
shall have the meaning ascribed to them in this Agreement.
1. PLAN OF REORGANIZATION
(a) Paragon will sell, assign, convey, transfer and deliver to One Group,
and One Group will acquire, on the Exchange Date all of the properties and
assets existing at the Valuation Time in Paragon Treasury Money Market Fund
("Paragon Money Market"), Paragon Short-Term Government Fund ("Paragon
Government"), Paragon Intermediate-Term Bond Fund ("Paragon Bond"), Paragon
Value Equity Income Fund ("Paragon Equity"), Paragon Louisiana Tax-Free Fund
("Paragon Louisiana"), Paragon Value Growth Fund ("Paragon Growth") and Paragon
Gulf South Growth Fund ("Paragon Gulf South") (Paragon Money Market, Paragon
Government, Paragon Bond, Paragon Equity, Paragon Louisiana, Paragon Growth and
Paragon Gulf South, each is a "Paragon Fund" and are collectively the "Paragon
Funds"), such acquisition to be made by The One Group Treasury Securities Money
Market Fund ("One Group Money Market"), The One Group Limited Volatility Bond
Fund ("One Group Limited Volatility"), The One Group Government Bond Fund ("One
Group Bond"), One Group Income Equity Fund ("One Group Equity"), The One Group
Louisiana Municipal Bond Fund ("One Group Louisiana"), The One Group Value
Growth Fund ("One Group Growth") and The One Group Gulf South Fund ("One Group
Gulf South") (One Group Money Market, One Group
<PAGE>
Limited Volatility, One Group Bond, One Group Income Equity, One Group
Louisiana, One Group Growth and One Group Gulf South, each is a "One Group
Fund" and are collectively the "One Group Funds"), respectively, of One Group.
For purposes of this Agreement the respective Paragon Funds correspond to the
One Group Funds as follows: Paragon Money Market corresponds to One Group Money
Market; Paragon Government corresponds to One Group Limited Volatility; Paragon
Bond corresponds to One Group Bond; Paragon Equity corresponds to One Group
Income Equity; Paragon Louisiana corresponds to One Group Louisiana; Paragon
Growth corresponds to One Group Growth; and One Group Gulf South corresponds to
Paragon Gulf South. In consideration therefor, each One Group Fund shall, on
the Exchange Date, assume all of the liabilities of the corresponding Paragon
Fund in exchange for a number of full and fractional One Group Class A,
Fiduciary Class or Class B shares of the corresponding One Group Fund
(collectively, "Shares") having an aggregate net asset value equal to the value
of all of the assets of each Paragon Fund transferred to the corresponding One
Group Fund on such date less the value of all of the liabilities of each Paragon
Fund assumed by the corresponding One Group Fund on that date. It is intended
that each reorganization described in this Agreement shall be a tax-free
reorganization under the Internal Revenue Code of 1986, as amended (the "Code").
(b) Upon consummation of the transactions described in paragraph (a)
of this Agreement, each Paragon Fund shall distribute in complete liquidation
to its respective shareholders of record as of the Exchange Date the Shares
received by it, each shareholder being entitled to receive that number of
Shares equal to the proportion which the number of shares of beneficial
interest of the applicable class of the Paragon Fund held by such shareholder
bears to the number of such shares of such Paragon Fund outstanding on such
date. If the Paragon shareholder of record is a financial
<PAGE>
organization authorized to act in a fiduciary, advisory, custodial or similar
capacity, that shareholder will receive One Group Fiduciary Class Shares. All
other Paragon Class A shareholders will receive One Group Class A Shares.
Shareholders of record holding Paragon Class B Shares, other than Class B
shareholders of Paragon Money Market, will receive One Group Class B shares.
Paragon Money Market Class B Shares will receive One Group Money Market Class A
shares.
II. AGREEMENT
One Group and Paragon represent, warrant and agree as follows:
1. REPRESENTATIONS AND WARRANTIES OF PARAGON. Paragon and each Paragon
Fund jointly and severally represent and warrant to and agree with One Group and
each One Group Fund that:
(a) Paragon is a business trust duly established and validly existing
under the laws of the Commonwealth of Massachusetts and has power to own all of
its properties and assets and to carry out its obligations under this Agreement.
Paragon and each Paragon Fund is not required to qualify as a foreign
association in any jurisdiction. Paragon and each Paragon Fund has all
necessary federal, state and local authorizations to carry on its business as
now being conducted and to fulfill the terms of this Agreement, except as set
forth in Section 1(l).
(b) Paragon is registered under the Investment Company Act of 1940, as
amended (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.
Each Paragon Fund has elected to qualify and has qualified as a regulated
investment company under Part I of Subchapter M of the Code, as of and since its
first taxable year, and qualifies and intends to continue to qualify
<PAGE>
as a regulated investment company for its taxable year ending upon its
liquidation. Each Paragon Fund has been a regulated investment company under
such sections of the Code at all times since its inception.
(c) The statements of assets and liabilities, statements of operations,
statements of changes in net assets and schedules of portfolio investments
(indicating their market values) for each Paragon Fund at and for the year ended
November 30, 1994, such statements and schedules having been audited by Price
Waterhouse LLP, independent accountants to Paragon, have been furnished to One
Group.
(d) The combined prospectus of the Paragon Funds dated March 30, 1995 (the
"Paragon Prospectus") and the Statement of Additional Information for the
Paragon Funds dated March 30, 1995 and on file with the Securities and Exchange
Commission (the "Commission"), which have been previously furnished to One
Group, did not as of their dates and do not as of the date hereof contain any
untrue statement of a material fact or omit to state a material fact required to
be stated therein or necessary to make the statements therein not misleading.
<PAGE>
(e) There are no material legal, administrative or other proceedings
pending or, to the knowledge of Paragon or any Paragon Fund, threatened against
Paragon or any Paragon Fund which assert liability on the part of Paragon or any
Paragon Fund.
(f) There are no material contracts outstanding to which Paragon or any
Paragon Fund is a party, other than as disclosed in the Paragon Prospectus and
the corresponding Statement of Additional Information, or in the Registration
Statement and the Proxy Statement as defined herein.
(g) Neither Paragon nor any Paragon Fund has any known liabilities of a
material nature, contingent or otherwise, other than those shown as belonging to
it on its statement of assets and liabilities as of November 30, 1995, and those
incurred in the ordinary course of Paragon's business as an investment company
since that date. Prior to the Exchange Date, Paragon will advise One Group of
all known material liabilities, contingent or otherwise, incurred by it and each
Paragon Fund subsequent to November 30, 1995, whether or not incurred in the
ordinary course of business.
(h) As used in this Agreement, the term "Investments" shall mean each
Paragon Fund's investments shown on the schedule of its portfolio investments as
of November 30, 1995 referred to in Section 1(c) hereof, as supplemented with
such changes as Paragon or each Paragon Fund shall make after November 30, 1995,
which changes have been disclosed to One Group, and changes made on and after
the date of this Agreement after advising One Group of such proposed changes,
and changes resulting from stock dividends, stock split-ups, mergers and similar
corporate actions.
(i) Each Paragon Fund has filed or will file all federal and state tax
returns which, to the knowledge of Paragon's officers, are required to be filed
by each Paragon Fund and has paid
<PAGE>
or will pay all federal and state taxes shown to be due on said returns or on
any assessments received by each Paragon Fund. All tax liabilities of each
Paragon Fund have been adequately provided for on its books, and no tax
deficiency or liability of any Paragon 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) As of both the Valuation Time and the Exchange Date and except for
shareholder approval as described in Section 8(a) and otherwise as described in
Section 1(1), Paragon on behalf of each Paragon Fund will have full right, power
and authority to sell, assign, transfer and deliver the Investments and any
other assets and liabilities of each Paragon Fund to be transferred to the
corresponding One Group Fund pursuant to this Agreement. At the Exchange Date,
subject only to the delivery of the Investments and any such other assets and
liabilities as contemplated by this Agreement, One Group will, on behalf of each
One Group Fund, acquire the Investments and any such other assets subject to no
encumbrances, liens or security interests in favor of any third party creditor
of Paragon or a Paragon Fund and, except as described in Section 1(k), without
any restrictions upon the transfer thereof.
(k) No registration under the Securities Act of 1933, as amended (the
"1933 Act"), of any of the Investments would be required if they were, as of the
time of such transfer, the subject of a public distribution by either of Paragon
or One Group, except as previously disclosed to One Group by Paragon.
(l) No consent, approval, authorization or order of any court or
governmental authority is required for the consummation by Paragon or any
Paragon Fund of the transactions contemplated by this Agreement, except such as
may be required under the 1933 Act, the Securities Exchange Act of 1934, as
amended (the "1934 Act"), the 1940 Act, state securities
<PAGE>
or blue sky laws (which term as used herein shall include the laws of the
District of Columbia and of Puerto Rico) or the Hart-Scott-Rodino Antitrust
Improvements Act of 1976 (the "H-S-R Act").
(m) The registration statement (the "Registration Statement") filed with
the Commission by One Group on Form N-14 relating to the Shares issuable
hereunder, and the proxy statement of Paragon included therein (the "Proxy
Statement"), on the effective date of the Registration Statement and insofar as
they relate to Paragon and the Paragon Funds, (i) will comply in all material
respects with the provisions of the 1933 Act, the 1934 Act and the 1940 Act and
the rules and regulations thereunder and (ii) will not contain any untrue
statement of a material fact or omit to state a material fact required to be
stated therein or necessary to make the statements therein not misleading; and
at the time of the shareholders' meeting referred to in Section 8(a) below and
on the Exchange Date, the prospectus contained in the Registration Statement of
which the Proxy Statement is a part (the "Prospectus"), as amended or
supplemented by any amendments or supplements filed with the Commission by One
Group, insofar as it relates to Paragon and the Paragon Funds, will not contain
any untrue statement of a material fact or omit to state a material fact
required to be stated therein or necessary to make the statements therein not
misleading; provided, however, that the representations and warranties in this
subsection shall apply only to statements of fact relating to Paragon and any
Paragon Fund contained in the Registration Statement, the Prospectus or the
Proxy Statement, or omissions to state in any thereof a material fact relating
to Paragon or any Paragon Fund, as such Registration Statement, Prospectus and
Proxy Statement shall be furnished to Paragon in definitive form as soon as
practicable following effectiveness of the Registration Statement and before
any public distribution of the Prospectus or Proxy Statement.
<PAGE>
(n) All of the issued and outstanding shares of beneficial interest of
each Paragon Fund have been offered for sale and sold in conformity with all
applicable federal and state securities laws.
(o) Each of the Paragon Funds is qualified, and will at all times through
the Exchange Date qualify for taxation as a "regulated investment company" under
Sections 851 and 852 of the Code.
(p) At the Exchange Date, each of the Paragon Funds will have sold such of
its assets, if any, as necessary to assure that, after giving effect to the
acquisition of the assets pursuant to this Agreement, each of the One Group
Funds will remain a "diversified company" within the meaning of Section 5(b) (l)
of the 1940 Act and in compliance with such other mandatory investment
restrictions as are set forth in the One Group Prospectuses previously furnished
to Paragon.
2. REPRESENTATIONS AND WARRANTIES OF ONE GROUP. One Group and each One
Group Fund jointly and severally represent and warrant to and agree with Paragon
and each Paragon Fund that:
(a) One Group is a business trust duly established and validly existing
under the laws of The Commonwealth of Massachusetts and has power to carry on
its business as it is now being conducted and to carry out this Agreement. One
Group and each One Group Fund is not required to qualify as a foreign
association in any jurisdiction. One Group and each One Group Fund has all
necessary federal, state and local authorizations to own all of its properties
and assets and to carry on its business as now being conducted and to fulfill
the terms of this Agreement, except as set forth in Section 2(i).
<PAGE>
(b) One Group 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. Each One Group Fund that has had active operations
prior to the Exchange Date, has elected to qualify and has qualified as a
regulated investment company under Part I of Subchapter M of the Code, as of and
since its first taxable year, and qualifies and intends to continue to qualify
as a regulated investment company for its taxable year ending June 30, 1995.
Each One Group Fund that has had actual operations prior to the Exchange Date
has been a regulated investment company under such sections of the Code at all
times since its inception.
(c) The statements of assets and liabilities, statements of operations,
statements of changes in net assets and schedules of investments (indicating
their market values) for each One Group Fund for the year ended June 30, 1995,
such statements and schedules having been audited by Coopers & Lybrand,
independent accountants to One Group, have been furnished to Paragon. Unaudited
statements of assets and liabilities, statements of operations, statements of
changes in net assets and schedules of investments (indicating their market
values) for each One Group Fund as of December 31, 1995 have also been furnished
to Paragon. Such statements of assets and liabilities and schedules fairly
present the financial position of the One Group Funds as of their respective
dates, and said statements of operations and changes in net assets fairly
reflect the results of its operations and changes in financial position for the
periods covered thereby in conformity with generally accepted accounting
principles.
(d) The prospectuses of each One Group Fund dated November 1, 1995
(collectively, the "One Group Prospectuses"), other than those relating to
the One Group Louisiana, One Group Growth and One Group Gulf South, and the
Statement of Additional Information
<PAGE>
for the One Group Funds, dated November 1, 1995, and on file with the
Commission, which have been previously furnished to Paragon, did not as of their
dates and do not as of the date hereof contain any untrue statement of a
material fact or omit to state a material fact required to be stated therein or
necessary to make the statements therein not misleading. The One Group
Louisiana, One Group Growth and One Group Gulf South Prospectuses and the
Statements of Additional Information, as amended, filed with the Commission on
November 24, 1995, which have been previously furnished to Paragon, did not as
of their dates and do not as of the date hereof contain any untrue statement of
a material fact or omit to state a material fact required to be stated therein
or necessary to make the statements therein not misleading.
(e) There are no material legal, administrative or other proceedings
pending or, to the knowledge of One Group or any One Group Fund, threatened
against One Group or any One Group Fund which assert liability on the part of
One Group or any One Group Fund.
(f) There are no material contracts outstanding to which One Group or any
One Group Fund is a party, other than as disclosed in the One Group Prospectuses
and the corresponding Statement of Additional Information or in the Registration
Statement.
(g) Neither One Group nor any One Group Fund has any known liabilities of
a material nature, contingent or otherwise, other than those shown on its
statement of assets and liabilities as of December 31, 1995 referred to above
and those incurred in the ordinary course of the business of One Group as an
investment company or any One Group Fund since such date. Prior to the Exchange
Date, One Group will advise Paragon of all known material liabilities,
contingent or otherwise, incurred by it and each One Group Fund subsequent to
December 31, 1995, whether or not incurred in the ordinary course of business.
<PAGE>
(h) Each One Group Fund has filed or will file all federal and state tax
returns which, to the knowledge of One Group's officers, are required to be
filed by each One Group Fund and has paid or will pay all federal and state
taxes shown to be due on said returns or on any assessments received by each One
Group Fund. All tax liabilities of each One Group Fund have been adequately
provided for on its books, and no tax deficiency or liability of any One Group
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) No consent, approval, authorization or order of any governmental
authority is required for the consummation by One Group or any One Group Fund of
the transactions contemplated by this Agreement, except such as may be required
under the 1933 Act, the 1934 Act, the 1940 Act, state securities or Blue Sky
laws or the H-S-R Act.
(j) As of both the Valuation Time and the Exchange Date and otherwise as
described in Section 2 (i), One Group on behalf of each One Group Fund will have
full right, power and authority to purchase the Investments and any other assets
and assume the liabilities of each Paragon Fund to be transferred to the
corresponding One Group Fund pursuant to this Agreement.
(k) The Registration Statement, the Prospectus and the Proxy Statement, on
the effective date of the Registration Statement and insofar as they relate to
One Group and the One Group Funds: (i) will comply in all material respects with
the provisions of the 1933 Act, the 1934 Act and the 1940 Act and the rules and
regulations thereunder and (ii) will not contain any untrue statement of a
material fact or omit to state a material fact required to be stated therein or
necessary to make the statements therein not misleading; and at the time of the
shareholders'
<PAGE>
meeting referred to in Section 8(a) and at the Exchange Date, the Prospectus, as
amended or supplemented by any amendments or supplements filed with the
Commission by One Group or any One Group Fund, will not contain any untrue
statement of a material fact or omit to state a material fact required to be
stated therein or necessary to make the statements therein not misleading;
provided, however, that none of the representations and warranties in this
subsection shall apply to statements in or omissions from the Registration
Statement, the Prospectus or the Proxy Statement made in reliance upon and in
conformity with information furnished by Paragon or any Paragon Fund for use in
the Registration Statement, the Prospectus or the Proxy Statement.
(l) Shares to be issued to each Paragon Fund have been duly authorized
and, when issued and delivered pursuant to this Agreement and the Prospectus,
will be legally and validly issued and will be fully paid and nonassessable by
One Group and no shareholder of One Group will have any preemptive right of
subscription or purchase in respect thereof.
(m) The issuance of Shares pursuant to this Agreement will be in
compliance with all applicable federal and state securities laws.
(n) Each of One Group Money Market, One Group Bond, One Group Limited
Volatility, and One Group Equity is qualified and will at all times through the
Exchange Date qualify for taxation as a "regulated investment company" under
Sections 851 and 852 of the Code. Each of One Group Louisiana, One Group
Growth and One Group Gulf South, upon filing of its first income tax return at
the completion of its first taxable year, will elect to be a regulated
investment company and until such time will take all steps necessary to ensure
qualification as a regulated investment company.
<PAGE>
3. REORGANIZATION. (a) Subject to the requisite shareholder approval as
described in Section 8(a) and to the other terms and conditions contained herein
(including each Paragon Fund's obligation to distribute to its respective
shareholders all of its investment company taxable income and net capital gain
as described in Section 9(k) hereof ), Paragon and each Paragon Fund agree to
sell, assign, convey, transfer and deliver to the corresponding One Group Fund,
and One Group and each One Group Fund agree to acquire from the corresponding
Paragon Fund, on the Exchange Date all of the Investments and all of the cash
and other assets of each Paragon Fund in exchange for that number of Shares of
the corresponding One Group Fund provided for in Section 4 and the assumption by
the corresponding One Group Fund of all the liabilities of the Paragon Fund.
Pursuant to this Agreement, each Paragon Fund will, as soon as practicable after
the Exchange Date, distribute in liquidation all of the Shares received by it to
its shareholders in exchange for their shares of beneficial interest of such
Paragon Fund.
(b) Paragon, on behalf of each Paragon Fund, will pay or cause to be paid
to the corresponding One Group Fund any interest and cash dividends received by
it on or after the Exchange Date with respect to the Investments transferred to
the One Group Funds hereunder. Paragon, on behalf of each Paragon Fund, will
transfer to the corresponding One Group Fund any rights, stock dividends or
other securities received by Paragon or any Paragon Fund after the Exchange Date
as stock dividends or other distributions on or with respect to the Investments
transferred, which rights, stock dividends and other securities shall be deemed
included in the assets transferred to each One Group Fund at the Exchange Date
and shall not be separately valued, in which case any such distribution that
remains unpaid as of the
<PAGE>
Exchange Date shall be included in the determination of the value of the assets
of the Paragon Fund acquired by the corresponding One Group Fund.
4. EXCHANGE DATE; VALUATION TIME. On the Exchange Date, One Group will
deliver to Paragon a number of Shares having an aggregate net asset value equal
to the value of the assets of the Corresponding Paragon Fund acquired by each
One Group Fund, less the value of the liabilities of such Paragon Fund assumed,
determined as hereafter provided in this Section 4.
(a) Subject to Section 4(d) hereof, the value of each Paragon Fund's net
assets will be computed as of the Valuation Time using the valuation procedures
for the corresponding One Group Fund as set forth in the One Group Prospectus
for the particular One Group Fund
(b) Subject to Section 4(d) hereof, the net asset value of a share of each
One Group Fund will be determined to the nearest full cent as of the Valuation
Time, using the valuation procedures set forth in the One Group Prospectus for
the particular One Group Fund.
(c) Subject to Section 4(d), the Valuation Time shall be 4:00 p.m. Eastern
Standard time on March 22, 1996 or such earlier or later day as may be
mutually agreed upon in writing by the parties hereto (the "Valuation Time").
(d) No formula will be used to adjust the net asset value of any Paragon
Fund or One Group Fund to take into account differences in realized and
unrealized gains and losses.
(e) Each One Group Fund shall issue its Shares to the corresponding
Paragon Fund on one share deposit receipt registered in the name of the
corresponding Paragon Fund. Each Paragon Fund shall distribute in liquidation
the Shares received by it hereunder pro rata to its shareholders of each class
of shares by redelivering such share deposit receipt to One Group's transfer
agent which will
<PAGE>
as soon as practicable set up open accounts for each Paragon Fund shareholder in
accordance with written instructions furnished by Paragon.
(f) Each One Group Fund shall assume all liabilities of the corresponding
Paragon Fund, whether accrued or contingent, in connection with the acquisition
of assets and subsequent dissolution of the corresponding Paragon Fund or
otherwise, except that recourse for assumed liabilities relating to a particular
Paragon Fund will be limited to the corresponding One Group Fund.
5. EXPENSES, FEES, ETC. (a) Subject to subsections 5(b) through 5 (e),
all fees and expenses, including accounting expenses, portfolio transfer taxes
(if any) or other similar expenses incurred in connection with the consummation
by One Group and Paragon of the transactions contemplated by this Agreement will
be paid by the party directly incurring such fees and expenses, except that the
costs of proxy materials and proxy solicitation, including legal expenses, will
be borne by the One Group; PROVIDED, HOWEVER, that such expenses will in any
event be paid by the party directly incurring such expenses if and to the extent
that the payment by the other party of such expenses would result in the
disqualification of any One Group Fund and any Paragon Fund, as the case may be,
as a "regulated investment company" within the meaning of Section 851 of the
Code.
(b) In the event the transactions contemplated by this Agreement are not
consummated by reason of Paragon being either unwilling or unable to go forward
(other than by reason of the nonfulfillment or failure of any condition to
Paragon's obligations referred to in Section 8(a) or Section 10) Paragon shall
pay directly all reasonable fees and expenses incurred by One Group in
connection with such transactions, including, without limitation, legal,
accounting and filing fees.
<PAGE>
(c) In the event the transactions contemplated by this Agreement are not
consummated by reason of One Group being either unwilling or unable to go
forward (other than by reason of the nonfulfillment or failure of any condition
to One Group's obligations referred to in Section 8(a) or Section 9), One Group
shall pay directly all reasonable fees and expenses incurred by Paragon in
connection with such transactions, including without limitation legal,
accounting and filing fees.
(d) In the event the transactions contemplated by this Agreement are not
consummated for any reason other than (i) One Group or Paragon being either
unwilling or unable to go forward or (ii) the nonfulfillment or failure of any
condition to Paragon or One Group's obligations referred to in Section 8(a),
Section 9 or Section 10 of this Agreement, then each of Paragon and One Group
shall bear the expenses it has actually incurred in connection with such
transactions.
(e) Notwithstanding any other provisions of this Agreement, if for any
reason the transactions contemplated by this Agreement are not consummated, no
party shall be liable to the other party for any damages resulting therefrom,
including without limitation consequential damages, except as specifically set
forth above.
6. PERMITTED ASSETS. One Group agrees to advise Paragon promptly if at
any time prior to the Exchange Date the assets of any Paragon Fund include any
assets that the corresponding One Group Fund is not permitted, or reasonably
believes to be unsuitable for it, to acquire, including without limitation any
security that, prior to its acquisition by any Paragon Fund, One Group has
informed Paragon is unsuitable for the corresponding One Group Fund to acquire.
<PAGE>
7. EXCHANGE DATE. Delivery of the assets of the Paragon Funds to be
transferred, assumption of the liabilities of the Paragon Funds to be assumed,
and the delivery of Shares to be issued shall be made at the offices of Banc One
Investment Advisors Corporation at 9:00 am. on March 25, 1996, or at such other
time and date agreed to by Paragon and One Group, the date and time upon which
such delivery is to take place being referred to herein as the "Exchange Date."
8. SPECIAL MEETING OF SHAREHOLDERS; DISSOLUTION. (a) Paragon agrees to
call a special meeting of the shareholders of each Paragon Fund as soon as is
practicable after the effective date of the Registration Statement for the
purpose of considering the sale of all of the assets of each Paragon Fund to and
the assumption of all of the liabilities of each Paragon Fund by the
corresponding One Group Fund as herein provided, adopting this Agreement, and
authorizing the liquidation and dissolution of any Paragon Fund, and, except as
set forth in Section 13, it shall be a condition to the obligations of each of
the parties hereto that the holders of the shares of beneficial interest of each
Paragon Fund, and each class of shares of each Paragon Fund if such is required
under the 1940 Act, shall have approved this Agreement and the transactions
contemplated herein in the manner required by law and Paragon's Declaration of
Trust at such a meeting on or before the Valuation Time.
(b) Paragon and each Paragon Fund agree that the liquidation and
dissolution of each Paragon Fund will be effected in the manner provided in
Paragon's Declaration of Trust in accordance with applicable law, and that it
will not make any distributions of any Shares to the shareholders of a Paragon
Fund without first paying or adequately providing for the payment of all of such
Paragon Fund's known debts, obligations and liabilities.
<PAGE>
(c) Each of One Group and Paragon will cooperate with the other, and each
will furnish to the other the information relating to itself required by the
1933 Act, the 1934 Act and the 1940 Act and the rules and regulations thereunder
to be set forth in the Registration Statement, including the Prospectus and the
Proxy Statement.
9. CONDITIONS TO ONE GROUP'S OBLIGATIONS. The obligations of One Group
and each One Group Fund hereunder shall be subject to the following conditions:
(a) That this Agreement shall have been adopted and the transactions
contemplated hereby, including the liquidation and dissolution of the Paragon
Funds, shall have been approved as set forth in Section 8(a).
(b) Paragon shall have furnished to One Group a statement of each Paragon
Fund's assets and liabilities, with values determined as provided in Section 4
of this Agreement, together with a list of Investments with their respective tax
costs, all as of the Valuation Time, certified on Paragon's behalf by its
President (or any Vice President) and Treasurer, and a certificate of both such
officers, dated the Exchange Date, to the effect that as of the Valuation Time
and as of the Exchange Date there has been no material adverse change in the
financial position of any Paragon Fund since November 30, 1995, other than
changes in the Investments since that date or changes in the market value of the
Investments, or changes due to net redemptions of shares of the Paragon Funds,
dividends paid or losses from operations.
(c) As of the Valuation Time and as of the Exchange Date, all
representations and warranties of Paragon and each Paragon Fund made in this
Agreement are true and correct in all material respects as if made at and as of
such dates, Paragon and each Paragon Fund has complied with all the agreements
and satisfied all the conditions on its part to be performed or satisfied at or
prior to each of such dates, and Paragon shall have furnished to One Group a
<PAGE>
statement, dated the Exchange Date, signed by Paragon's President (or any Vice
President) and Treasurer certifying those facts as of such dates.
(d) Paragon shall have delivered to One Group a letter from Price
Waterhouse LLP dated the Exchange Date stating that such firm reviewed the
federal and state income tax returns of each Paragon Fund for the year ended
November 30, 1995 and that, in the course of such review, nothing came to their
attention which caused them to believe that such returns did not properly
reflect, in all material respects, the federal and state income taxes of each
Paragon Fund for the periods covered thereby, or that each Paragon Fund would
not qualify as a regulated investment company for federal income tax purposes.
(e) There shall not be any material litigation pending with respect to the
matters contemplated by this Agreement.
(f) One Group shall have received an opinion of Hale and Dorr, in form
reasonably satisfactory to One Group and dated the Exchange Date, to the effect
that (i) Paragon is a business trust duly established and validly existing under
the laws of the Commonwealth of Massachusetts, and neither Paragon nor any
Paragon Fund is, to the knowledge of such counsel, required to qualify to do
business as a foreign association in any jurisdiction, (ii) this Agreement has
been duly authorized, executed, and delivered by Paragon and, assuming that the
Registration Statement, the Prospectus and the Proxy Statement comply with the
1933 Act, the 1934 Act and the 1940 Act and assuming due authorization,
execution and delivery of this Agreement by One Group, is a valid and binding
obligation of Paragon, (iii) Paragon and each Paragon Fund has power to sell,
assign, convey, transfer and deliver the Investments and other assets
contemplated hereby and, upon consummation of the transactions contemplated
hereby in accordance with the terms of this Agreement, Paragon and each Paragon
Fund will have duly
<PAGE>
sold, assigned, conveyed, transferred and delivered such Investments and other
assets to One Group, (iv) the execution and delivery of this Agreement did not,
and the consummation of the transactions contemplated hereby will not, violate
Paragon's Declaration of Trust, or Bylaws, as amended, or any provision of any
agreement known to such counsel to which Paragon or any Paragon Fund is a party
or by which it is bound, it being understood that with respect to investment
restrictions as contained in Paragon's Declaration of Trust, or Bylaws, or then-
current prospectus or statement of additional information, such counsel may rely
upon a certificate of an officer of Paragon whose responsibility it is to advise
Paragon with respect to such matters and (v) no consent, approval, authorization
or order of any court or governmental authority is required for the consummation
by Paragon or any Paragon Fund of the transactions contemplated hereby, 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 and the H-S-R
Act, and it being understood that such opinion shall not be deemed to apply to
One Group's compliance obligations under the 1933 Act, 1934 Act, 1940 Act, state
securities or blue sky laws and H-S-R Act. For purposes of analysis regarding
the 1940 Act, Hale & Dorr may assume as fact that the Paragon Funds and the One
Group Funds may be considered affiliated persons or affiliated persons of an
affiliated person solely by reason of having a common investment adviser.
(g) One Group shall have received an opinion of Ropes & Gray, counsel to
One Group addressed to The One Group and each One Group Fund, in form reasonably
satisfactory to One Group and dated the Exchange Date, to the effect that for
Federal income tax purposes (i) no gain or loss will be recognized by any
Paragon Fund upon the transfer of the assets to the corresponding One Group Fund
in exchange for Shares and the assumption, by such One Group Fund of
<PAGE>
the liabilities of the Paragon Fund or upon the distribution of Shares by the
Paragon Fund to its shareholders in liquidation; (ii) no gain or loss will be
recognized by the shareholders of any Paragon Fund upon the exchange of their
shares for Shares (iii) the basis of the Shares a Paragon shareholder receives
in connection with the transaction will be the same as the basis of his or her
Paragon Fund shares exchanged therefor; (iv) a Paragon shareholder's holding
period for his or her Shares will be determined by including the period for
which he or she held the Paragon Fund shares exchanged therefor, provided that
he or she held such Paragon Fund shares as capital assets; (v) no gain or loss
will be recognized by any One Group Fund upon the receipt of the assets of the
corresponding Paragon Fund in exchange for Shares and the assumption by the One
Group Fund of the liabilities of the corresponding Paragon Fund; and (vi) the
basis in the hands of the One Group Fund of the assets of the corresponding
Paragon Fund transferred to the One Group Fund will be the same as the basis of
the assets in the hands of the corresponding Paragon Fund immediately prior to
the transfer.
(h) The assets of each Paragon Fund to be acquired by the corresponding
One Group Fund will include no assets which the corresponding One Group Fund, by
reason of limitations contained in its Declaration of Trust or of investment
restrictions disclosed in the One Group Prospectuses in effect on the Exchange
Date, may not properly acquire.
(i) The Registration Statement shall have become effective under the 1933
Act and applicable blue sky provisions, and no stop order suspending such
effectiveness shall have been instituted or, to the knowledge of One Group
contemplated by the Commission and or any state regulatory authority.
<PAGE>
(j) All proceedings taken by Paragon in connection with the transactions
contemplated by this Agreement and all documents incidental thereto reasonably
shall be satisfactory in form and substance to One Group and Ropes & Gray.
(k) Prior to the Exchange Date, each Paragon 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 November 30, 1995 and the
short taxable year beginning on December 1, 1995 and ending on the Exchange Date
(computed without regard to any deduction for dividends paid), and all of its
net capital gain realized in its taxable year ended November 30, 1995 and the
short taxable year beginning on December 1, 1995 and ending on the Exchange Date
(after reduction for any capital loss carryover).
(l) Paragon shall have furnished to One Group a certificate, signed by the
President (or any Vice President) and the Treasurer of Paragon, as to the tax
cost to One Group of the securities delivered to One Group pursuant to this
Agreement, together with any such other evidence as to such tax cost as One
Group may reasonably request.
(m) Paragon's custodian shall have delivered to One Group a certificate
identifying all of the assets of each Paragon Fund held by such custodian as of
the Valuation Time.
(n) Paragon's transfer agent shall have provided to One Group (i) the
originals or true copies of all of the records of each Paragon Fund in the
possession of such transfer agent as of the Exchange Date, (ii) a certificate
setting forth the number of shares of each class of Paragon Fund outstanding as
of the Valuation Time and (iii) the name and address of each holder of record of
any such shares of each Paragon Fund and the number of shares of each class held
of record by each such shareholder.
<PAGE>
(o) All of the issued and outstanding shares of beneficial interest of
each Paragon Fund shall have been offered for sale and sold in conformity with
all applicable federal or state securities or blue sky laws and, to the extent
that any audit of the records of Paragon or any Paragon Fund or its transfer
agent by One Group or its agents shall have revealed otherwise, either (i)
Paragon and each Paragon Fund shall have taken all actions that in the
reasonable opinion of One Group or Ropes & Gray are necessary to remedy any
prior failure on the part of Paragon to have offered for sale and sold such
shares in conformity with such laws or (ii) Paragon shall have furnished (or
caused to be furnished) surety, or deposited (or caused to be deposited) assets
in escrow, for the benefit of One Group in amounts sufficient and upon terms
satisfactory, in the opinion of One Group or its counsel, to indemnify One Group
against any expense, loss, claim, damage or liability whatsoever that may be
asserted or threatened by reason of such failure on the part of Paragon to have
offered and sold such shares in conformity with such laws.
(p) Paragon shall have duly executed and delivered to One Group bills of
sale, assignments, certificates and other instruments of transfer ("Transfer
Documents") as One Group may deem necessary or desirable to transfer all of
Paragon's and each Paragon Fund's entire right, title and interest in and to the
Investments and all other assets of each Paragon Fund.
10. CONDITIONS TO PARAGON'S OBLIGATIONS. The obligations of Paragon and
each Paragon Fund hereunder shall be subject to the following conditions:
(a) This Agreement shall have been adopted and the transactions
contemplated hereby, including the liquidation and dissolution of the Paragon
Funds, shall have been approved as described in Section 8(a).
<PAGE>
(b) One Group shall have furnished to Paragon a Statement of each One
Group Fund's net assets, together with a list of portfolio holdings with values
determined as provided in Section 4, all as of the Valuation Time, certified on
One Group's behalf by its President (or any Vice President) and Treasurer (or
any Assistant Treasurer), and a certificate of both such officers, dated the
Exchange Date, to the effect that as of the Valuation Time and as of the
Exchange Date there has been no material adverse change in the financial
position of any One Group Fund since December 31, 1995, other than changes in
its portfolio securities since that date, changes in the market value of its
portfolio securities, changes due to net redemptions, dividends paid or losses
from operations.
(c) One Group shall have executed and delivered to Paragon an Assumption
of Liabilities dated as of the Exchange Date pursuant to which each One Group
Fund will assume all of the liabilities of the corresponding Paragon Fund
existing at the Valuation Time in connection with the transactions contemplated
by this Agreement.
(d) As of the Valuation Time and as of the Exchange Date, all
representations and warranties of One Group and each One Group Fund made in this
Agreement are true and correct in all material respects as if made at and as of
such dates, One Group and each One Group Fund has complied with all of the
agreements and satisfied all of the conditions on its part to be performed or
satisfied at or prior to each of such dates, and One Group shall have furnished
to Paragon a statement, dated the Exchange Date, signed by One Group's President
(or any Vice President) and Treasurer certifying those facts as of such dates.
(e) There shall not be any material litigation pending with respect to the
matters contemplated by this Agreement.
<PAGE>
(f) Paragon shall have received an opinion of Ropes & Gray, in form
reasonably satisfactory to Paragon and dated the Exchange Date, to the effect
that (i) One Group is a business trust and validly existing in conformity with
the laws of The Commonwealth of Massachusetts, and, (to the knowledge of such
counsel), neither One Group nor any One Group Fund is required to qualify to do
business as a foreign association in any jurisdiction, (ii) the Shares to be
delivered to Paragon as provided for by this Agreement are duly authorized and
upon such delivery will be validly issued and will be fully paid and
nonassessable by One Group and no shareholder of One Group has any preemptive
right to subscription or purchase in respect thereof, (iii) this Agreement has
been duly authorized, executed and delivered by One Group and, assuming that the
Prospectus, the Registration Statement and the Proxy Statement comply with the
1933 Act, the 1934 Act and the 1940 Act and assuming due authorization,
execution and delivery of this Agreement by Paragon, is a valid and binding
obligation of One Group, (iv) the execution and delivery of this Agreement did
not, and the consummation of the transactions contemplated hereby will not,
violate One Group's Declaration of Trust, as amended, or Code of Regulations, or
any provision of any agreement known to such counsel to which One Group or any
One Group Fund is a party or by which it is bound, it being understood that with
respect to investment restrictions as contained in One Group's Declaration of
Trust, as amended, Code of Regulations or then-current prospectus or statement
of additional information of each One Group Fund, such counsel may rely upon a
certificate of an officer of One Group whose responsibility it is to advise One
Group with respect to such matters, (v) no consent, approval, authorization or
order of any court or governmental authority is required for the consummation by
One Group or any One Group Fund of the transactions contemplated herein, except
such as have been obtained under the 1933 Act, the 1934 Act and the 1940 Act
<PAGE>
and such as may be required under state securities or blue sky laws and the H-S-
R Act and it being understood that such opinion shall not be deemed to apply to
Paragon's compliance obligations under the 1933 Act, 1934 Act, 1940 Act, state
securities or blue sky laws and the H-S-R Act; and (vi) the Registration
Statement has become effective under the 1933 Act, and to the best of the
knowledge of such counsel, no stop order suspending the effectiveness of the
Registration Statement has been issued and no proceedings for that purpose have
been instituted or are pending or contemplated under the 1933 Act.
(g) Paragon shall have received an opinion of Ropes & Gray addressed to
Paragon, each Paragon Fund, and in a form reasonably satisfactory to Paragon
dated the Exchange Date, with respect to the matters specified in Section 9(g)
of this Agreement.
(h) All proceedings taken by One Group in connection with the transactions
contemplated by this Agreement and all documents incidental thereto reasonably
shall be satisfactory in form and substance to Paragon and Hale and Dorr.
(i) The Registration Statement shall have become effective under the 1933
Act and applicable blue sky provisions, and no stop order suspending such
effectiveness shall have been instituted or, to the knowledge of Paragon,
contemplated by the Commission or any state regulatory authority.
11. INDEMNIFICATION. (a) The Paragon Funds will indemnify and hold
harmless One Group, its trustees and its officers (for purposes of this
subsection, 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
<PAGE>
Parties may be threatened by reason of any untrue statement or alleged untrue
statement of a material fact relating to Paragon or any Paragon Fund contained
in the Registration Statement, the Prospectus or the Proxy Statement 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 Paragon or any Paragon Fund required to be stated therein or
necessary to make the statements relating to Paragon or any Paragon 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 Paragon. The Indemnified Parties will
notify Paragon 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 Section 11(a). Paragon shall be entitled to participate at its own
expense in the defense of any claim, action, suit or proceeding covered by this
Section 11(a), 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 Paragon 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 expense. The Paragon Funds'
obligation under this Section 11(a) to indemnify and hold harmless the
Indemnified Parties shall constitute a guarantee of payment so that the Paragon
Funds will pay in the first instance any expenses, losses, claims, damages and
liabilities required to be paid by it under this Section 11(a) without the
necessity of the Indemnified Parties first paying the same.
<PAGE>
(b) The One Group Funds will indemnify and hold harmless Paragon, its
trustees and its officers (for purposes of this subparagraph, 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 One Group or any One Group Fund contained in the
Registration Statement, the Prospectus or the Proxy Statement, 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 One Group or any One Group Fund required to be stated therein or
necessary to make the statements relating to One Group or any One Group 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 One Group. The Indemnified
Parties will notify One Group 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 any Indemnified Party as to
any matters covered by this Section 11(b). One Group shall be entitled to
participate at its own expense in the defense of any claim, action, suit or
proceeding covered by this Section 11(b), 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 One Group elects to
assume such defense, the Indemnified Parties shall be entitled to participate
in the defense of any such claim, action, suit
<PAGE>
or proceeding at their own expense. The One Group Funds' obligation under
this Section 11(b) to indemnify and hold harmless the Indemnified Parties
shall constitute a guarantee of payment so that the One Group Funds will pay
in the first instance any expenses, losses, claims, damages and liabilities
required to be paid by it under this Section 11(b) without the necessity of
the Indemnified Parties first paying the same.
12. NO BROKER, ETC. Each of One Group and Paragon represents that there
is no person who has dealt with it 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. TERMINATION. One Group and Paragon may, by mutual consent of their
respective trustees, terminate this Agreement, and One Group or Paragon, after
consultation with counsel and by consent of their respective trustees or an
officer authorized by such trustees, may waive any condition to their respective
obligations hereunder. If the transactions contemplated by this Agreement have
not been substantially completed by June 30, 1996, this Agreement shall
automatically terminate on that date unless a later date is agreed to by One
Group and Paragon.
Notwithstanding any other provision in this Agreement, in the event
shareholder approval of this Agreement and the transactions contemplated by this
Agreement is obtained with respect to only one or more Paragon Funds but not all
of the Paragon Funds, One Group and Paragon agree to consummate those
transactions with respect to those Paragon Funds whose shareholders have
approved this Agreement and those transactions.
In the event that shareholder approval of this Agreement and the
transactions contemplated by this Agreement is required, but not obtained with
respect to only one class of shares of a Paragon Fund, the transaction with
respect to that Paragon
<PAGE>
Fund will not be consummated unless and until shareholder approval is obtained
with respect to both classes.
14. RULE 145. Pursuant to Rule 145 under the 1933 Act, One Group will, in
connection with the issuance of any Shares to any person who at the time of the
transaction contemplated hereby is deemed to be an affiliate of a party to the
transaction pursuant to Rule 145 (c), cause to be affixed upon the certificates
issued to such person (if any) a legend as follows:
"THESE SHARES HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF
1933, AS AMENDED, AND MAY NOT BE SOLD OR OTHERWISE TRANSFERRED EXCEPT
TO THE ONE GROUP OR ITS PRINCIPAL UNDERWRITER UNLESS (i) A
REGISTRATION STATEMENT WITH RESPECT THERETO IS EFFECTIVE UNDER THE
SECURITIES ACT OF 1933, AS AMENDED, OR (ii) IN THE OPINION OP COUNSEL
REASONABLY SATISFACTORY TO THE ONE GROUP SUCH REGISTRATION IS NOT
REQUIRED."
and, further, One Group will issue stop transfer instructions to One Group's
transfer agent with respect to such shares. Paragon will provide One Group on
the Exchange Date with the name of any shareholder of the Paragon Funds who is
to the knowledge of Paragon an affiliate of Paragon on such date.
15. COVENANTS, ETC. DEEMED MATERIAL. All covenants, agreements,
representations and warranties made under this Agreement and any certificates
delivered pursuant to this Agreement shall be deemed to have been material and
relied upon by each of the parties, notwithstanding any investigation made by
them or on their behalf.
<PAGE>
16. SOLE AGREEMENT; AMENDMENTS. This Agreement supersedes all previous
correspondence and oral communications between the parties regarding the subject
matter hereof, constitutes the only understanding with respect to such subject
matter, may not be changed except by a letter of agreement signed by each party
hereto, and shall be construed in accordance with and governed by the laws of
The Commonwealth of Massachusetts.
17. AGREEMENT AND DECLARATION OF TRUST. Paragon Portfolio is a business
trust organized under Massachusetts law and under a Declaration of Trust, to
which reference is hereby made and a copy of which is on file at the office of
the Secretary of The Commonwealth of Massachusetts and elsewhere as required by
law, and to any and all amendments thereto so filed or hereafter filed. The
obligations of "Paragon Funds" entered into in the name or on behalf thereof
by any of the Trustees, officers, employees or agents are made not individually,
but in such capacities, and are not binding upon any of the Trustees, officers,
employees, agents or shareholders of Paragon personally, but bind only the
assets of Paragon, and all persons dealing with any of the series or funds of
Paragon, such as Paragon Funds, must look solely to the assets of Paragon
belonging to such series or funds for the enforcement of any claims against
Paragon.
The names "The One Group" and "Trustees of The One Group" refer
respectively to One Group and the Trustees, as trustees but not individually or
personally, acting from time to time under a Declaration of Trust dated May 23,
1985 to which reference is hereby made and a copy of which is on file at the
office of the Secretary of The Commonwealth of Massachusetts and elsewhere as
required by law, and to any and all amendments thereto so filed or hereafter
filed. The obligations of "The One Group" entered into in the name or on behalf
thereof by any of the Trustees, representatives or agents are made not
individually, but in such capacities, and are
<PAGE>
not binding upon any of the Trustees, Shareholders or representatives of One
Group personally, but bind only the assets of One Group such as the One Group
Funds, must look solely to the assets of One Group belonging to such series for
the enforcement of any claims against One Group.
This Agreement may be executed in any number of counter-parts, each of
which, when executed and delivered, shall be deemed to be an original.
PARAGON PORTFOLIO
By: _______________________________
THE ONE GROUP
By: _______________________________
<PAGE>
Exhibit (6)(d)
<PAGE>
January 2, 1996
Goldman Sachs
Asset Management
One New York Plaza
New York, NY 10004
INVESTMENT ADVISORY AGREEMENT FOR SUBADVISER
--------------------------------------------
(Paragon Treasury Honey Market Fund)
Dear Sirs:
Banc One Investment Advisors Corporation, an Ohio corporation with its principal
office in Westerville, Ohio (the "Investment Adviser"), is investment adviser to
Paragon Portfolio (the "Trust") on behalf of Paragon Treasury Money Market Fund
(the "Fund"). The Trust has been organized under the laws of Massachusetts to
engage in the business of an investment company. The shares of beneficial
interest of the Trust ("Shares") are divided into multiple series, including the
Fund, as established pursuant to a written instrument executed by the Trustees
of the Trust. Pursuant to authority granted the Adviser by the Trust's Trustees
and pursuant to the provisions of the Investment Advisory Agreement dated
January 2, 1996 between the Adviser and the Trust, the Adviser has selected
you to act as an investment subadviser of the Fund and to provide certain
services, as more fully set forth below, and you are willing to act as such
investment subadviser and to perform such services under the terms and
conditions hereinafter set forth. Accordingly, the Adviser and the Trust on
behalf of the Fund agree with you as follows:
I. ADVISORY SERVICES
Subject to the supervision of the Investment Adviser and the Trust's Board
of Trustees, you will provide a continuous investment program for the Fund,
including investment research and management with respect to all
securities, investments and cash equivalents
<PAGE>
in the Fund's portfolio. You will determine from time to time what
securities and other investments will be purchased, retained or sold by the
Fund and will place orders for purchases and sales on behalf of the Fund.
You will provide services under this Agreement in accordance with the
Fund's investment objective, policies and restrictions as stated in the
Fund's Prospectus and in resolutions of the Trust's Board of Trustees.
In the performance of your duties hereunder, you are and shall be an
independent contractor and unless otherwise expressly provided herein or
otherwise authorized in writing, shall have no authority to act for or
represent the Trust in any way or otherwise be deemed to be an agent of the
Trust or of the Adviser. You will make your officers and employees
available to meet with the Trust's officers and Trustees at least quarterly
on due notice to review the investments and investment program of the Fund
in the light of current and prospective economic and market conditions.
In compliance with the requirements of Rule 31a-3 under the Investment
Company Act of 1940 (the "Act"), you agree that all records which you
maintain for the Fund are the property of the Fund. You further agree to
surrender promptly to the Fund any such records upon the Fund's request.
You agree to preserve for the periods prescribed by Rule 31c-2 under the
Act the records required to be maintained by Rule 31a-1 under the Act.
You will treat confidentially and as proprietary information of the Fund
all records and other information relative to the Fund and prior, present
or potential shareholders and will not use such records and information for
any purpose other than the performance of your
<PAGE>
responsibilities, except after prior notification and approval in writing
by the Fund. Such approval shall not be unreasonably withheld and may not
be withheld where you may be exposed to civil or criminal contempt
proceedings for failure to comply when requested to divulge such
information by duly constituted authorities or when requested by the Fund.
II. ALLOCATION OF CHARGES AND EXPENSES
You will bear your own costs of providing services hereunder. Except as
aforesaid, you will not be required to pay any expenses of the Fund.
III. COMPENSATION OF THE SUBADVISER
For all investment management services to be rendered hereunder, the
Adviser will pay you on the last day of each month a fee, at an annual rate
equal to .10% of the average daily net assets, as defined below, of the
Fund. The "average daily net assets" of the Fund are defined as the
average of the values placed on the net assets as of 4:00 pm. (New York
time), on each day on which the net asset value of the Fund's portfolio is
determined consistent with the provisions of Rule 22c-1 under the
Investment Company Act of 1940 or, if the Fund lawfully determines the
value of the net assets of its portfolio as of some other time on each
business day, as of such time. The value of net assets of the Fund shall
be determined pursuant to the applicable provisions of the Declaration of
Trust of the Trust. If, pursuant to such provisions, the determination of
net asset value is suspended for any particular business day, then for the
purposes of this paragraph III, the value of the net assets of the Fund as
last determined shall be deemed to be the value of the net assets as of the
close of regular trading on the New York Stock Exchange, or
<PAGE>
as of such other time as the value of the net assets of the Fund's
portfolio may lawfully be determined on that day. If the determination of
the net asset value of the Shares of the Fund has been suspended pursuant
to the Declaration of Trust of the Trust for a period including such month,
your compensation payable at the end of such month shall be computed on the
basis of the value of the net assets of the Fund as last determined
(whether during or prior to such month). If the Fund determines the value
of the net assets of its portfolio more than once on any day, the last such
determination thereof on that day shall be deemed to be the sole
determination thereof on that day for the purposes of this paragraph III.
IV. LIMITATION OF LIABILITY
You shall not be liable for any error of judgment or mistake of law or for
any loss suffered by the Fund in connection with the matters to which this
Agreement relates except a loss resulting from a breach of fiduciary duty
with respect to the receipt of compensation for services or except a loss
resulting from willful misfeasance, bad faith or gross negligence on your
part in the performance of your duties or from reckless disregard by you of
your obligations and duties under this Agreement. Any person, even though
also employed by you, who may be or become an employee of and paid by the
Fund shall be deemed, when acting within the scope of his employment by the
Fund, to be acting in such employment solely for the Fund and not as your
employee or agent. The Adviser shall indemnify you for any damages and
related expenses incurred by you as a result of the performance of your
duties hereunder, unless the same shall result from behavior found by a
final judicial determination to constitute willful misfeasance, bad faith,
gross negligence or a reckless disregard of your obligations, as specified
above.
<PAGE>
V. DURATION AND TERMINATION OF THIS AGREEMENT
This Agreement shall remain in force until May 31, 1996. This Agreement
may, on 45 days' written notice, be terminated at any time without the
payment of any penalty, by the Board of Trustees, by vote of a majority of
the outstanding voting securities of the Fund, by the Adviser, or by you.
This Agreement shall automatically terminate in the event of its
assignment. In interpreting the provisions of this Agreement, the
definitions contained in Section 2(a) of the Act (particularly the
definitions of "interested person," "assignment" and "majority of the
outstanding voting securities"), as from time to time amended, shall be
applied, subject, however, to such exemptions as may be granted by the
Securities and Exchange Commission by any rule, regulation or order.
VI. AMENDMENT OF THIS AGREEMENT
No provisions of this Agreement may be changed, waived, discharged or
terminated orally, but only by an instrument in writing signed by the party
against which enforcement of the change, waiver, discharge or termination
is sought. No amendment of this Agreement shall be effective until
approved by vote of the holders of a majority of the outstanding voting
securities of the Fund and by the Board of Trustees, including a majority
of the Trustees who are not interested persons of the Adviser, you or the
Trust, cast in person at a meeting called for the purpose of voting on such
approval.
It shall be your responsibility to furnish to the Trustees of the Trust
such information as may reasonably be necessary in order for such Trustees
to evaluate this Agreement or any proposed amendments thereto for the
purposes of casting a vote pursuant to paragraphs V or VI hereof.
<PAGE>
VII. GOVERNING LAW
This Agreement shall be governed by and construed in accordance with the
laws of the State of New York.
VIII. MISCELLANEOUS
The captions in this Agreement are included for convenience of reference
only and in no way define or delimit any of the provisions hereof or
otherwise affect their construction or effect. This Agreement may be
executed simultaneously in two or more counterparts, each of which shall be
deemed an original, but all of which together shall constitute one and the
same instrument.
The name "Paragon Portfolio" is the designation of the Trustees for the time
being under the Declaration of Trust dated October 2, 1989, as amended from to
time, and all persons dealing with the Trust or the Fund must look solely to the
property of the Trust or the Fund for the enforcement of any claims against the
Trust as neither the Trustees, officers, agents or shareholders assume any
personal liability for obligations entered into on behalf of the Trust. No
series of the Trust (including the Fund) shall be liable for any claims against
any other series of the Trust.
If you are in agreement with the foregoing, please sign the form of acceptance
on the accompanying counterpart of this letter and return one such counterpart
to the Trust and the other such counterpart to the Adviser, whereupon this
letter shall become a binding contract.
Yours very truly,
<PAGE>
PARAGON PORTFOLIO
(On behalf of Paragon Treasury
Money Market Fund)
Attest:
By: /s/ Michael J. Richman By: /s/ Angelique Barrow
------------------------------- ----------------------------------
Michael J. Richman Angelique Barrow
Title: Secretary of the Trust Legal Products Analyst
BANC ONE INVESTMENT ADVISORS CORPORATION
Attest:
By: /s/ Mark Beeson By: /s/ Michael V. Wible
----------------------------- ------------------------------------
Name Mark Beeson Name Michael V. Wible
Title Senior Vice-President Title Senior Attorney
GOLDMAN SACHS ASSET MANAGEMENT
a separate operating division of
Go1dman, Sachs & Co.
Attest:
By: /s/ Marcia Beck By: /s/ Angelique Barrow
----------------------------- ------------------------------------
Name Marcia Beck Name Angelique Barrow
Title Vice President Title Legal Products Analyst
<PAGE>
Exhibit (7)(c)
<PAGE>
DISTRIBUTION AGREEMENT
AGREEMENT dated November 1, 1995, as re-executed December 13, 1995, between
The One Group (the "Trust"), a Massachusetts business trust having its principal
place of business at 774 Park Meadow Drive, Westerville, Ohio 43218, and The One
Group Services Company ("Distributor") having its principal place of business at
3435 Stelzer Road, Columbus, Ohio 43219.
WHEREAS, the Trust is an open-end management investment company, organized
as a Massachusetts business trust and registered with the Securities and
Exchange Commission (the "Commission") under the Investment Company Act of 1940
(the "1940 Act"); and
WHEREAS, it is intended that Distributor act as the distributor of the
units of beneficial interest ("Shares") of each of the investment portfolios of
the Trust identified in Schedule A hereto as such Schedule may be amended from
time to time (such portfolios being referred to individually as a "Fund" and
collectively as the "Funds").
NOW, THEREFORE, in consideration of the mutual premises and covenants
herein set forth, the parties agree as follows:
1. SERVICES AS DISTRIBUTOR.
1.1 Distributor will act as agent for the distribution of the Shares
covered by the registration statement and prospectus of the Trust then in effect
under the Securities Act of 1933, as amended (the "Securities Act"). As used in
this Agreement, the term "registration statement" shall mean Parts A (the
prospectus), B (the Statement of Additional Information) and C of each
registration statement that is filed on Form N-1A, or any successor thereto,
with the Commission, together with any amendments thereto. The term
"prospectus" shall mean each form of prospectus and Statement of Additional
Information used by the Funds for delivery to shareholders and prospective
shareholders after the effective dates of the above referenced registration
statements, together with any amendments and supplements thereto.
1.2 Distributor agrees to use appropriate efforts to solicit orders for
the sale of the Shares and will undertake such advertising and promotion as it
believes reasonable in connection with such solicitation. The Trust understands
that Distributor is now and may in the future be the distributor of the shares
of several investment companies or series (together, "Companies") including
Companies having investment objectives similar to those of the Trust. The Trust
further understands that investors and potential investors in the Trust may
invest in shares of such other Companies. The Trust agrees that Distributor's
duties to such Companies shall not be deemed in conflict with its duties to the
Trust under this paragraph 1.2.
Distributor may finance appropriate activities which it deems reasonable
which are primarily intended to result in the sale of the Shares, including, but
not limited to, advertising, and the compensation of underwriters, dealers and
sales personnel.
<PAGE>
1.3 In its capacity as distributor of the Shares, all activities of
Distributor and its partners, agents, and employees shall comply with all
applicable laws, rules and regulations, including, without limitation, the 1940
Act, all rules and regulations promulgated by the Commission thereunder and all
rules and regulations adopted by any securities association registered under the
Securities Exchange Act of 1934.
1.4 Distributor will transmit any orders received by it for purchase or
redemption of the Shares to the transfer agent and custodian for the Funds.
1.5 Whenever in their judgment such action is warranted by unusual market,
economic or political conditions, or by abnormal circumstances of any kind, the
Trust's officers may decline to accept any orders for, or make any sales of, the
Shares until such time as those officers deem it advisable to accept such orders
and to make such sales.
1.6 Distributor will act only on its own behalf as principal if it chooses
to enter into selling agreements with selected dealers or others.
1.7 The Trust agrees at its own expense to execute any and all documents
and to furnish any and all information and otherwise to take all actions that
may be reasonably necessary in connection with the qualification of the Shares
for sale in such states as Distributor may designate.
1.8 The Trust shall furnish from time to time, for use in connection with
the sale of the Shares, such information with respect to the Funds and the
Shares as Distributor may reasonably request; and the Trust warrants that the
statements contained in any such information shall fairly show or represent what
they purport to show or represent. The Trust shall also furnish Distributor
upon request with: (a) unaudited semi-annual statements of the Funds' books and
accounts prepared by the Trust, (b) a monthly itemized list of the securities in
the Funds, (c) monthly balance sheets as soon as practicable after the end of
each month, and (d) from time to time such additional information regarding the
financial condition of the Funds as Distributor may reasonably request.
1.9 The Trust represents to Distributor that, with respect to the Shares,
all registration statements and prospectuses filed by the Trust with the
Commission under the Securities Act have been carefully prepared in conformity
with requirements of said Act and rules and regulations of the Commission
thereunder. The registration statement and prospectus contain all statements
required to be stated therein in conformity with said Act and the rules and
regulations of said Commission and all statements of fact contained in any such
registration statement and prospectus are true and correct. Furthermore,
neither any registration statement nor any prospectus includes an untrue
statement of a material fact or omits to state a material fact required to be
stated therein or necessary to make the statements therein not misleading to a
purchaser of the Shares. The Trust may, but shall not be obligated to, propose
from time to time such amendment or amendments to any registration statement and
such supplement or supplements to any prospectus as, in the light of future
developments, may, in the opinion of the Trust's counsel, be necessary or
advisable. If the Trust shall not propose such amendment
<PAGE>
or amendments and/or supplement or supplements within fifteen days after receipt
by the Trust of a written request from Distributor to do so, Distributor may, at
its option, terminate this Agreement. The Trust shall not file any amendment to
any registration statement or supplement to any prospectus without giving
Distributor reasonable notice thereof in advance; provided, however, that
nothing contained in this Agreement shall in any way limit the Trust's right to
file at any time such amendments to any registration statement and/or
supplements to any prospectus, of whatever character, as the Trust may deem
advisable, such right being in all respects absolute and unconditional.
1.10 The Trust authorizes Distributor and dealers to use any prospectus in
the form furnished from time to time in connection with the sale of the Shares.
The Trust agrees to indemnify, defend and hold Distributor, its several officers
and employees, and any person who controls Distributor within the meaning of
Section 15 of the Securities Act free and harmless from and against any and all
claims, demands, liabilities and expenses (including the cost of investigating
or defending such claims, demands or liabilities and any counsel fees incurred
in connection therewith) which Distributor, its partners and employees, or any
such controlling person, may incur under the Securities Act or under common law
or otherwise, arising out of or based upon any untrue statement, or alleged
untrue statement, of a material fact contained in any registration statement or
any prospectus or arising out of or based upon any omission, or alleged
omission, to state a material fact required to be stated in either any
registration statement or any prospectus or necessary to make the statements in
either thereof not misleading; provided, however, that the Trust's agreement to
indemnify Distributor, its partners or employees, and any such controlling
person shall not be deemed to cover any claims, demands, liabilities or expenses
arising out of any statements or representations as are contained in any
prospectus and in such financial and other statements as are furnished in
writing to the Trust by Distributor and used in the answers to the registration
statement or in the corresponding statements made in the prospectus, or arising
out of or based upon any omission or alleged omission to state a material fact
in connection with the giving of such information required to be stated in such
answers or necessary to make the answers not misleading; and further provided
that the Trust's agreement to indemnify Distributor and the Trust's
representations and warranties hereinbefore set forth in paragraph 1.9 shall not
be deemed to cover any liability to the Trust or its Shareholders to which
Distributor would otherwise be subject by reason of willful misfeasance, bad
faith or gross negligence in the performance of its duties, or by reason of
Distributor's reckless disregard of its obligations and duties under this
Agreement. The Trust's agreement to indemnify Distributor, its officers and
employees and any such controlling person, as aforesaid, is expressly
conditioned upon the Trust being notified of any action brought against
Distributor, its officers or employees, or any such controlling person, such
notification to be given by letter or by telegram addressed to the Trust at its
principal office in Columbus, Ohio and sent to the Trust by the person against
whom such action is brought, within 10 days after the summons or other first
legal process shall have been served. The failure to so notify the Trust of any
such action shall not relieve the Trust from any liability which the Trust may
have to the person against whom such action is brought by reason of any such
untrue, or allegedly untrue, statement or omission, or alleged omission,
otherwise than on account of the Trust's indemnity agreement contained in this
paragraph 1.10. The Trust will be entitled to assume the defense of any suit
brought to enforce any such claim,
<PAGE>
demand or liability, but, in such case, such defense shall be conducted by
counsel of good standing chosen by the Trust and approved by Distributor, which
approval shall not be unreasonably withheld. In the event the Trust elects to
assume the defense of any such suit and retain counsel of good standing approved
by Distributor, the defendant or defendants in such suit shall bear the fees and
expenses of any additional counsel retained by any of them; but in case the
Trust does not elect to assume the defense of any such suit, or in case
Distributor reasonably does not approve of counsel chosen by the Trust, the
Trust will reimburse Distributor, its officers and employees, or the controlling
person or persons named as defendant or defendants in such suit, for the fees
and expenses of any counsel retained by Distributor or them. The Trust's
indemnification agreement contained in this paragraph 1.10 and the Trust's
representations and warranties in this Agreement shall remain operative and in
full force and effect regardless of any investigation made by or on behalf of
Distributor, its partners and employees, or any controlling person, and shall
survive the delivery of any Shares.
This Agreement of indemnity will inure exclusively to Distributor's
benefit, to the benefit of its several officers and employees, and their
respective estates, and to the benefit of the controlling persons and their
successors. The Trust agrees promptly to notify Distributor of the commencement
of any litigation or proceedings against the Trust or any of its officers or
Trustees in connection with the issue and sale of any Shares.
1.11 Distributor agrees to indemnify, defend and hold the Trust, its
several officers and Trustees and any person who controls the Trust within the
meaning of Section 15 of the Securities Act free and harmless from and against
any and all claims, demands, liabilities and expenses (including the costs of
investigating or defending such claims, demands or liabilities and any counsel
fees incurred in connection therewith) which the Trust, its officers or Trustees
or any such controlling person, may incur under the Securities Act or under
common law or otherwise, but only to the extent that such liability or expense
incurred by the Trust, its officers or Trustees or such controlling person
resulting from such claims or demands, shall arise out of or be based upon any
untrue, or alleged untrue, statement of a material fact contained in information
furnished in writing by Distributor to the Trust and used in the answers to any
of the items of the registration statement or in the corresponding statements
made in the prospectus, or shall arise out of or be based upon any omission, or
alleged omission, to state a material fact in connection with such information
furnished in writing by Distributor to the Trust required to be stated in such
answers or necessary to make such information not misleading. Distributor's
agreement to indemnify the Trust, its officers and Trustees, and any such
controlling person, as aforesaid, is expressly conditioned upon Distributor
being notified of any action brought against the Trust, its officers or
Trustees, or any such controlling person, such notification to be given by
letter or telegram addressed to Distributor at its principal office in Columbus,
Ohio, and sent to Distributor by the person against whom such action is brought,
within 10 days after the summons or other first legal process shall have been
served. Distributor shall have the right of first control of the defense of
such action, with counsel of its own choosing, satisfactory to the Trust, if
such action is based solely upon such alleged misstatement or omission on
Distributor's part, and in any other event the Trust, its officers or Trustees
or such controlling person shall each have the right to participate in the
defense or preparation of the defense of any such action. The failure to so
notify Distributor of any such
<PAGE>
action shall not relieve Distributor from any liability which Distributor may
have to the Trust, its officers or Trustees, or to such controlling person by
reason of any such untrue or alleged untrue statement, or omission or alleged
omission, otherwise than on account of Distributor's indemnity agreement
contained in this paragraph 1.11.
1.12 No Shares shall be offered by either Distributor or the Trust under
any of the provisions of this Agreement and no orders for the purchase or sale
of Shares hereunder shall be accepted by the Trust if and so long as the
effectiveness of the registration statement then in effect or any necessary
amendments thereto shall be suspended under any of the provisions of the
Securities Act or if and so long as a current prospectus as required by Section
10(b)(2) of said Act is not on file with the Commission; provided, however, that
nothing contained in this paragraph 1.12 shall in any way restrict or have an
application to or bearing upon the Trust's obligation to repurchase Shares from
any Shareholder in accordance with the provisions of the Trust's prospectus,
Agreement and Declaration of Trust, or Bylaws.
1.13 The Trust agrees to advise Distributor as soon as reasonably
practical by a notice in writing delivered to Distributor or
its counsel:
(a) of any request by the Commission for amendments to the
registration statement or prospectus then in effect or for
additional information;
(b) in the event of the issuance by the Commission of any stop order
suspending the effectiveness of the registration statement or
prospectus then in effect or the initiation by service of process
on the Trust of any proceeding for that purpose;
(c) of the happening of any event that makes untrue any statement of
a material fact made in the registration statement or prospectus
then in effect or which requires the making of a change in such
registration statement or prospectus in order to make the
statements therein not misleading; and
(d) of all action of the Commission with respect to any amendment to
any registration statement or prospectus which may from time to
time be filed with the Commission.
For purposes of this section, informal requests by or acts of the Staff of
the Commission shall not be deemed actions of or requests by the Commission.
1.14 Distributor agrees on behalf of itself and its partners and employees
to treat confidentially and as proprietary information of the Trust all records
and other information relative to the Trust and its prior, present or potential
Shareholders, and not to use such records and information for any purpose other
than performance of its responsibilities and duties hereunder, except, after
prior notification to and approval in writing by the Trust, which approval shall
not be unreasonably withheld and may not be withheld where Distributor may be
exposed to civil or criminal contempt proceedings for failure to comply, when
requested to divulge such information by duly constituted authorities, or when
so requested by the Trust.
<PAGE>
1.15 This Agreement shall be governed by the laws of the Commonwealth of
Massachusetts.
2. TERM, DURATION AND TERMINATION.
This Agreement shall become effective November 1, 1995 and, unless
sooner terminated as provided herein, shall continue until October 31, 1996.
Thereafter, if not terminated, this Agreement shall continue automatically for
successive one-year terms, provided that such continuance is specifically
approved at least annually by (a) by the vote of a majority of those members of
the Trust's Board of Trustees who are not parties to this Agreement or
interested persons of any such party, cast in person at a meeting for the
purpose of voting on such approval and (b) by the vote of the Trust's Board of
Trustees or the vote of a majority of the outstanding voting securities of such
Fund. This Agreement is terminable without penalty, on not less than sixty-days
prior written notice, by the Trust's Board of Trustees, by vote of a majority of
the outstanding voting securities of the Trust or by the Distributor. This
Agreement will also terminate automatically in the event of its assignment. (As
used in this Agreement, the terms "majority of the outstanding voting
securities," "interested persons" and "assignment" shall have the same meanings
as ascribed to such terms in the 1940 Act.)
3. SALE OF SHARES SUBJECT TO A FRONT-END SALES LOAD
3.1 Under this Agreement, the following provisions shall apply with
respect to the sale of and payment of those Shares sold at an offering price
which includes a front-end sales load ("Class A Shares") as described in the
prospectuses of the Funds identified on Schedule B hereto (collectively, the
"Front-End Load Funds"; individually a "Front-End Load Fund"):
(a) The Distributor shall have the right to purchase Class A Shares
from the Front-End Load Funds at their net asset value and to sell such Shares
to the public against orders therefor at the applicable offering price, as
defined in Section 3.2 below. The Distributor shall also have the right to sell
Class A Shares to dealers against orders therefor at the public offering price
less a concession determined by the Distributor, which concession shall not
exceed the amount of the sales charge or underwriting discount, if any, referred
to in Section 3.2 below.
(b) Prior to the time of delivery of any Class A Shares by a Front-
End Load Fund to, or on the order of, the Distributor, the Distributor shall pay
or cause to be paid to the Front-End Load Fund or to its order an amount in
Boston or New York clearing house funds equal to the applicable net asset value
of such Shares. The Distributor may retain so much of any sales load or
underwriting discount as it not allowed by the Distributor as a concession to
dealers.
3.2 The public offering price of a Class A Share of a Front-End Load Fund
shall be the net asset value of the Share, plus any applicable sales charge, all
as set forth in the current prospectus of the Front-End Load Fund. The net
asset value of Class A Shares shall be
<PAGE>
determined in accordance with the provisions of the Declaration of Trust and
Code of Regulations of the Trust and the then current prospectus of the Front-
End Load Fund.
3.3 The Front-End Load Funds reserve the right to issue, transfer or sell
Class A Shares at net asset value (a) in connection with merger or consolidation
of the Trust or the Front-End Load Fund(s) with any other investment company or
the acquisition by the Trust or the Front-End Load Fund(s) of all or
substantially all of the assets or of the outstanding Shares of any other
investment company; (b) in connection with a pro rata distribution directly to
the holders of Shares in the nature of a stock dividend or split; (c) upon the
exercise of subscription rights granted to the holders of Shares on a pro rata
basis; (d) in connection with the issuance of Shares pursuant to any exchange
and reinvestment privileges described in any then current prospectus of the
Front-End Load Fund; and (e) otherwise in accordance with any then current
prospectus of the Front-End Load Fund.
4. SALE OF SHARES SUBJECT TO A TRADITIONAL RULE 12B-1 FEE
4.1 Under this Agreement, the following provisions shall apply with
respect to Shares of Classes of the Trust's Shares, other than those of a Class
featuring a contingent deferred sales charge, that are subject to a fee under a
Distribution and Shareholder Services Plan under Rule 12b-1 as described in the
prospectuses of the Funds and identified on Schedule C hereto (collectively, the
"Distribution Plan Classes;" individually a "Distribution Plan Class"):
(a) The Distributor shall receive from the Trust all distribution and
service fees, as applicable, at the rate and under the terms and conditions set
forth in each Distribution and Shareholder Services Plan adopted by each
Distribution Plan Class of each Fund, as such Plans may be amended from time to
time, and subject to any further limitations on such fees as the Board may
impose.
(b) The Distributor may reallow any or all of the distribution or
service fees which it is paid by the Trust with respect to each Distribution
Plan Class of each Fund to such brokers, dealers and other financial
institutions and intermediaries as the Distributor may from time to time
determine.
5. SALE OF SHARES SUBJECT TO A CONTINGENT DEFERRED SALES CHARGE
5.1 The Trust may offer Shares subject to a contingent deferred sales
charge (a "CDSC"). The Distributor may pay brokers, dealers and other financial
institutions and intermediaries commissions with regard to the sale of CDSC
Shares. Under this Agreement, the following provisions shall apply with respect
to Shares of a Class featuring a CDSC (a "CDSC Class") as described in the
prospectus(es) of the Funds and identified on Schedule D hereto.
(a) The Distributor shall be entitled to receive all CDSC payments on
Shares of a CDSC Class. The Distributor may assign or sell to a third party (a
"CDSC Financing Entity") all or a part of the CDSC payments on Shares of a CDSC
Class that the Distributor is entitled to receive under this Agreement. The
Distributor's right to payment on such Shares,
<PAGE>
if assigned or sold to a CDSC Financing Entity, shall continue after termination
of this Agreement.
(b) (i) The Distributor shall be entitled to receive all distribution
and service fees at the rate and under the terms and conditions set forth in the
Distribution and Shareholder Services Plan adopted by the CDSC Class (the
"Plan") on all Shares so long as the Plan is in effect. The Distributor may
assign or sell to a CDSC Financing Entity all or a part of the distribution fees
the Distributor is entitled to receive from the Trust under the Plan. The
Distributor's right to payment of distribution fees on such Shares, if assigned
or sold to a CDSC Financing Entity, shall continue after termination of this
Agreement, otherwise, the right to receive all distribution and service fee
payments in respect of periods subsequent to the termination of this Agreement
shall terminate upon termination of this Agreement.
(ii) The Distributor shall not be required to offer or sell
Shares of a CDSC Class unless and until it has received a binding commitment
from a CDSC Financing Entity (a "Commitment") satisfactory to the Distributor
which Commitment shall cover all expenses and fees related to the offer and sale
of such Shares of the CDSC Class including but not limited to dealer
reallowances, financing commitment fees, and legal fees. If at any time during
the term of this Agreement the then current CDSC financing is terminated through
no fault of the Distributor, the Distributor has the right to immediately
suspend CDSC Shares sales until substitute financing becomes effective.
(iii) The Distributor may enter into arrangements regarding the
financing of commissions pertaining to the sale of shares of a CDSC Class only
upon written approval of the Trust's Treasurer, or his or her designee, such
approval not to be unreasonably withheld.
(c) The Distributor and the Trust hereby agree that the terms and
conditions set forth herein regarding the offer and sale of Shares of a CDSC
Class may be amended upon approval of both parties in order to comply with the
terms and conditions of any agreement with a CDSC Financing Entity to finance
the costs for the offer and sale of Shares of a CDSC Class so long as such terms
and conditions are in compliance with the Plan.
6. LIMITATION OF LIABILITY OF THE TRUSTEES AND SHAREHOLDERS.
It is expressly agreed that the obligations of the Trust hereunder
shall not be binding upon any of the Trustees, shareholders, nominees, officers,
agents or employees of the Trust personally, but shall bind only the trust
property of the Trust. The execution and delivery of this Agreement have been
authorized by the Trustees, and this Agreement has been signed and delivered by
an authorized officer of the Trust, acting as such, and neither such
authorization by the Trustees nor such execution and delivery by such officer
shall be deemed to have been made by any of them individually or to impose any
liability on any of them personally, but shall bind only the trust property of
the Trust as provided in the Trust's Agreement and Declaration of Trust.
<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused this instrument to be
executed by their officers designated below as of the day and year first written
above.
THE ONE GROUP THE ONE GROUP SERVICES COMPANY
By: Mark Dillon By: Steve Mintos
- ------------------------------ -------------------------------
Title: President Title: Executive Vice President
- ------------------------------ -----------------------------
Date: December 13, 1995 Date: December 13, 1995
- ------------------------------ ------------------------------
<PAGE>
Schedule A
to the Distribution Agreement
between The One Group-Registered Trademark- and
The One Group Services Company
NAME OF FUND
- ------------
MONEY MARKET FUNDS
- ------------------
The U.S. Treasury Securities Money Market Fund
The Prime Money Market Fund
The Municipal Money Market Fund (formerly The Tax-Free Money Market Portfolio)
The Ohio Municipal Money Market Fund
The Institutional Prime Money Market Fund
The Treasury Money Market Fund
The Treasury Only Money Market Fund
The Government Money Market Fund
The Tax Exempt Money Market Fund
EQUITY FUNDS
- ------------
The Income Equity Fund
The Disciplined Value Fund
The Small Company Growth Fund (formerly The Growth Equity Portfolio)
The International Equity Index Fund
The Large Company Value Fund (formerly The Quantitative Equity Portfolio)
The Equity Index Fund
The Asset Allocation Fund (formerly The Flexible Balanced Portfolio)
The Large Company Growth Fund
FIXED INCOME FUNDS
- ------------------
The Income Bond Fund (formerly The Income Portfolio)
The Limited Volatility Bond Fund
The Intermediate Tax-Free Bond Fund
The Ohio Municipal Bond Fund
The Government Bond Fund
The Government ARM Fund
The Tax-Free Bond Fund
The Texas Tax-Free Bond Fund
The West Virginia Tax-Free Fund
The Kentucky Municipal Bond Fund
The Intermediate Bond Fund
The Arizona Tax-Free Bond Fund
THE ONE GROUP THE ONE GROUP SERVICES COMPANY
By: Mark Dillon By: Steve Mintos
- ------------------------------ --------------------------------
Title: President Title: Executive Vice President
- ------------------------------ --------------------------------
Date: December 13, 1995 Date: December 13, 1995
- ------------------------------ --------------------------------
A-1
<PAGE>
Schedule B
to the Distribution Agreement
between The One Group-Registered Trademark- and
The One Group Services Company
NAME OF FUND
- ------------
EQUITY FUNDS
- ------------
The Income Equity Fund
The Disciplined Value Fund
The Small Company Growth Fund (formerly The Growth Equity Portfolio)
The International Equity Index Fund
The Equity Index Fund
The Large Company Value Fund (formerly The Quantitative Equity Portfolio)
The Asset Allocation Fund (formerly The Flexible Balanced Portfolio)
The Large Company Growth Fund
FIXED INCOME FUNDS
- ------------------
The Income Bond Fund (formerly the Income Portfolio)
The Limited Volatility Bond Fund
The Intermediate Tax-Free Bond Fund
The Ohio Municipal Bond Fund
The Government Bond Fund
The Government ARM Fund
The Tax-Free Bond Fund
The Texas Tax-Free Bond Fund
The West Virginia Tax-Free Fund
The Kentucky Municipal Bond Fund
The Intermediate Bond Fund
The Arizona Tax-Free Bond Fund
THE ONE GROUP THE ONE GROUP SERVICES COMPANY
By: Mark Dillon By: Steve Mintos
- ------------------------------ --------------------------------
Title: President Title: Executive Vice President
- ------------------------------ --------------------------------
Date: December 13, 1995 Date: December 13, 1995
- ------------------------------ --------------------------------
B-1
<PAGE>
Schedule C
to the Distribution Agreement
between The One Group-Registered Trademark- and
The One Group Services Company
DISTRIBUTION PLAN SHARES
NAME OF FUND
- ------------
MONEY MARKET FUNDS
- ------------------
The U.S. Treasury Securities Money Market Fund - Service Class Shares
The U.S. Treasury Securities Money Market Fund -- Class A Shares
The Prime Money Market Fund -- Class A Shares
The Prime Money Market Fund -- Service Class Shares
The Municipal Money Market Fund (formerly The Tax-Free Money Market Portfolio) -
- - Class A Shares
The Ohio Municipal Money Market Fund -- Class A Shares
EQUITY FUNDS
- ------------
The Income Equity Fund -- Class A Shares
The Disciplined Value Fund -- Class A Shares
The Small Company Growth Fund (formerly The Growth Equity Portfolio) -- Class A
Shares
The International Equity Index Fund -- Class A Shares
The Large Company Value Fund (formerly The Quantitative Equity Portfolio) --
Class A Shares
The Equity Index Fund -- Class A Shares
The Asset Allocation Fund (formerly The Flexible Balanced Portfolio) -- Class A
Shares
The Large Company Growth Fund -- Class A Shares
FIXED INCOME FUNDS
- ------------------
The Income Bond Fund -- Class A Shares
The Limited Volatility Bond Fund -- Class A Shares
The Intermediate Tax-Free Bond Fund -- Class A Shares
The Ohio Municipal Bond Fund -- Class A Shares
The Government Bond Fund -- Class A Shares
The Government ARM Fund -- Class A Shares
The Tax-Free Bond Fund -- Class A Shares
The Texas Tax-Free Fund -- Class A Shares
The West Virginia Tax-Free Fund -- Class A Shares
The Kentucky Municipal Bond Fund -- Class A Shares
The Intermediate Bond Fund -- Class A Shares
The Arizona Tax-Free Bond Fund -- Class A Shares
THE ONE GROUP THE ONE GROUP SERVICES COMPANY
By: Mark Dillon By: Steve Mintos
- ------------------------------ --------------------------------
Title: President Title: Executive Vice President
- ------------------------------ --------------------------------
Date: December 13, 1995 Date: December 13, 1995
- ------------------------------ --------------------------------
C-1
<PAGE>
Schedule D
to the Distribution Agreement
between The One Group-Registered Trademark- and
The One Group Services Company
CDSC CLASSES
NAME OF FUND
- ------------
EQUITY FUNDS
- ------------
The Income Equity Fund -- Class B
The Disciplined Value Fund -- Class B
The Small Company Growth Fund -- Class B
The Equity Index Fund -- Class B
The Large Company Value Fund -- Class B
The Asset Allocation Fund -- Class B
The International Equity Index Fund -- Class B
The Large Company Growth Fund -- Class B
FIXED INCOME FUNDS
- ------------------
The Income Bond Fund -- Class B
The Limited Volatility Bond Fund -- Class B
The Government Bond Fund -- Class B
The Government ARM Fund -- Class B
The Intermediate Tax-Free Fund -- Class B
The Tax-Free Bond Fund -- Class B
The Ohio Municipal Bond Fund -- Class B
The Intermediate Bond Fund -- Class B
The Kentucky Municipal Bond Fund - Class B
THE ONE GROUP THE ONE GROUP SERVICES COMPANY
By: Mark Dillon By: Steve Mintos
- ------------------------------ --------------------------------
Title: President Title: Executive Vice President
- ------------------------------ --------------------------------
Date: December 13, 1995 Date: December 13, 1995
- ------------------------------ --------------------------------
D-1
<PAGE>
Exhibit (7)(d)
<PAGE>
THE ONE GROUP SERVICES COMPANY
DEALER'S AGREEMENT FOR THE ONE GROUP
FAMILY OF MUTUAL FUNDS
TO: The One Group Services Company
3435 Stelzer Road
Columbus, Ohio 43219
For the mutual promises contained herein and other good and valuable
consideration, we enter into this Agreement with you for the sale of the units
of beneficial interest (the "Shares") of any and all of the investment
portfolios (the "Funds") of The One Group-SM- (the "Trust"), a Massachusetts
business trust, of which you are the Distributor and whose Shares are offered at
the net asset value next determined after a purchase order is effective plus any
applicable sales charge (the "Current Offering Price"). Upon acceptance of this
Agreement by you, we understand that we may offer and sell Shares of the Funds
subject, however, to all of the terms and conditions hereof and to your right,
without notice, to suspend or terminate the sale of Shares of the Funds.
1. We understand that we will be compensated by you as set forth in the
applicable current Prospectus for each Fund for services that we provide
pursuant to this Agreement. The term "Prospectus" herein refers to the
prospectus on file with the Securities and Exchange Commission (the "SEC") which
is part of the registration statement of the Trust under the Securities Act of
1933, as amended (the "Securities Act"). We acknowledge that any compensation
paid to us is subject to the Rule 12b-1 Plan adopted by the Funds (the "Plan"),
Rule 12b-1 promulgated pursuant to the Investment Company Act of 1940, as
amended (the "Investment Company Act") and the National Association of
Securities Dealers, Inc. (The "NASD") Rules of Fair Practice.
2. We desire to make the Funds' Shares available to our customers and you
will confirm transactions in accordance with the terms and conditions set forth
herein.
a. The customers in question are for all purposes our
customers and not your customers. You shall
execute our transactions for each of our customers
only upon our authorization; it being understood
in all cases that (i) we are acting as the agent
for the customer; (ii) as between us and the
customer, the customer will have beneficial
ownership of the securities; (iii) each
transaction is initiated solely upon the order of
the customers, and (iv) each transaction is for
the account of the customer and not for our
account.
b. Orders for the Shares of the Funds received from
us will be accepted by you only at the price and
other terms applicable to each order as described
in the then current Prospectuses, for the applicable
Funds.
c. We will provide the following support services to
customers who may from time to time beneficially
own Shares of the Trust: (i) aggregating and
processing purchase and redemption requests for
Shares from customers and placing net purchase and
redemption orders with the Distributor; (ii)
providing customers with a service that invests
the assets of their accounts in Shares pursuant to
specific or pre-authorized instructions; (iii)
processing dividend payments from the Trust on
behalf of customers; (iv) providing information
periodically to customers showing their positions
in the Trust's Shares; (v) arranging for bank wire
transfer of funds to or from a customer's account;
(vi) responding to inquiries from customers
relating to the services performed under this
Agreement; (vii) forwarding to customers proxy
statements and proxies containing proposals
regarding this Agreement or a Fund's Plan; (viii)
rendering ongoing advice respecting the
suitability of particular investment opportunities
offered by the Trust in light of the customer's
needs; and (ix) providing such other similar
services as the Distributor may reasonably request
to the extent that we are permitted to do so under
applicable statutes, rules or regulations. We
will provide such office space and equipment,
telephone facilities and personnel (which may be
any part of the space, equipment and facilities
currently used in our business, or any personnel
employed by us) as may be reasonably necessary or
beneficial in order to provide such services to
customers.
In no transaction shall we have any authority to act as agent for the Funds
or for you. We understand and agree that, as Distributor for the Shares of the
Funds, you are acting as a disclosed agent of the Funds and are not liable to
the Funds for payment for purchases of Shares of the Funds.
3. We understand that the Shares of the Funds will be offered and sold at
the Current Offering Price in effect at the time the order for such Shares is
confirmed and accepted by you or your agent. The minimum dollar purchase of
Shares of the Funds shall be the applicable minimum amount described in the then
current applicable Prospectus and no order for less than such amount will be
accepted hereunder. All purchase requests and applications submitted by us are
subject to acceptance or rejection in your sole discretion, and, if accepted,
each purchase will be deemed to have been consummated at your office. The
procedures for handling orders shall be subject to the instructions which you
shall forward to us from time to time.
<PAGE>
4. We certify (a) that we are a member in good standing of the NASD and
agree to maintain membership in the NASD or (b) in the alternative, that we are
a foreign dealer not eligible for membership in the NASD. In either case, we
agree to abide by all the rules and regulations of the SEC and the NASD which
are binding upon underwriters and dealers in the distribution of securities of
open-end investment companies, including, without limitation, Section 26 of
Article III of the NASD Rules of Fair Practice, all of which are incorporated
herein as if set forth in full.
We further certify that we are licensed to offer and sell securities of
open-end investment companies in all jurisdictions in which we plan to offer and
sell such securities. We further agree to comply with all applicable state and
Federal laws and the rules and regulations of authorized regulatory agencies.
We agree that we will not sell or offer for sale Shares of the Funds in any
state or jurisdiction where they have not been qualified for sale. You will
make available to us a current list of the jurisdictions in which the Funds'
Shares are qualified for sale or are exempt from the registration requirements
of the respective securities laws of such jurisdictions. We acknowledge that
you assume no responsibility or obligation as to our right to sell Shares in any
jurisdiction.
5. We will offer and sell the Shares of the Funds only in accordance with
the terms and conditions of the applicable current Prospectus and Statement of
Additional Information ("SAI") and we will make no representations not included
in said Prospectus or SAI or in any authorized supplemental material supplied by
you. We shall have no authority to act as agent for the Funds or for you. You
will furnish us without charge reasonable quantities of offering Prospectuses
and SAIs, with any supplements currently in effect, and copies of current
shareholder reports of the Funds, and sales materials issued from time to time.
We agree to comply with the provisions contained in Federal and state securities
laws governing the distribution of prospectuses to persons to whom we offer
Shares. We further agree to deliver, upon your request, copies of any amended
Prospectus of the Fund to purchasers whose Shares we are holding as record owner
and to deliver to such persons copies of the annual and interim reports and
proxy solicitation materials of the Funds. We may not publish any advertisement
or distribute sales literature or other written material to the public which
makes reference to you or the Funds (except material which you have furnished to
us and authorized for distribution) without your prior written approval. We
agree to be responsible for the proper instruction and training of all sales
personnel employed or registered as a broker or sales representative with us, in
order that the Shares will be offered in accordance with the terms and
conditions of this Agreement, and all applicable laws, rules and regulations.
We agree to indemnify and hold you, your affiliates and the Funds (including all
officers, Trustees, directors, employees and agents thereof) harmless from and
against any and all claims, losses, demands, liabilities or expenses (including
attorneys' fees) arising out
<PAGE>
of any violation by us, or by any of our brokers or sales representatives, of
any law, rule or regulation, or any provision of this Agreement or out of any
negligent act or omission by us while engaged in any activities pursuant to this
Agreement. All expenses which we incur in connection with our activities under
this Agreement shall be borne by us. You agree to indemnify and hold us and our
affiliates (including all officers, directors, employees and agents thereof)
harmless from and against any and all claims, losses, demands, liabilities and
expenses (including attorneys' fees) arising out of any violation by you or by
any of your brokers or sales representatives, of any law, rule or regulation or
any provision of this Agreement or out of any negligent act or omission by you
while engaged in any activities pursuant to this Agreement; provided, however,
that your agreement to indemnify us, our affiliates and directors, officers or
employees, shall not be deemed to cover any claims, losses, demands, liabilities
or expenses arising out of any statements, financial or other information
furnished by us or our affiliates and, further provided, that your obligations
to indemnify us shall not be deemed to cover any liability to which we would
otherwise be subject by reason of bad faith or negligence in the performance of
our duties or by reason of our reckless disregard of our obligations and duties
under this Agreement.
6. We will maintain all records required by law to be kept by us relating
to transactions in Shares and, upon request by the Fund, promptly make such
records available to the Fund or you as the Fund or you may reasonable request.
7. We understand and agree that, if any Shares of the Funds sold under
this Agreement are redeemed or repurchased by the Funds or by you as disclosed
agent for the Funds or are tendered for redemption within seven business days
after the date of confirmation of initial purchase of such Shares, we shall
forfeit and repay to you any portion of a sales charge reallowed by you to us
with respect to such Shares.
8. Payment for purchase of Shares of the Funds made by wire order from us
shall be made directly to State Street Bank and Trust Company, the Funds'
transfer agent. If such payment is not received at the customary or required
time for settlement of the transaction, we understand that you reserve the
right, without notice, forthwith, to cancel the sale, in which case we may be
held responsible for any loss, including loss of profit, suffered by the Funds
or you resulting from our failure to make the aforesaid payment.
9. On the settlement date of each transaction, we on behalf of our
customers will remit the full purchase price and our customers will be credited
with an investment in Shares of the applicable Fund or Funds equal to such
purchase price.
10. Your obligations to us under this Agreement are subject to all
applicable provisions of any Distribution Agreement entered into between you and
the Trust. We understand and agree that in performing our services covered by
this Agreement we are acting as agent for the customer, and you are in no way
responsible for the manner of our performance or for any of our acts or
omissions in connection therewith.
11. We may terminate this Agreement by notice in writing to you, which
termination shall become effective on the date of receipt of such notice by you.
We agree that you have and reserve the right, in your sole discretion without
notice, to suspend the sale of Shares of the Funds, or to withdraw entirely the
offering of Shares of the Funds, or, in your sole discretion, to modify, amend
or terminate this Agreement upon written notice to us of such modification,
amendment or termination which shall be effective on the date stated in such
notice. This Agreement may be terminated with respect to a Fund or a class of
Shares thereof
<PAGE>
at any time, without payment of any penalty, by vote of a majority of the
Disinterested Trustees (as defined in the Plan), or by vote of a majority of the
class of Shares of such Fund for which services are provided hereunder, on not
more than 60 days' written notice. Without limiting the foregoing, you may
terminate this Agreement for cause on violation by us of any of the provisions
of this Agreement, said termination to become effective on the date of mailing
notice to us of such termination. Without limiting the foregoing, any provision
hereof to the contrary notwithstanding, our expulsion from the NASD will
automatically terminate this Agreement without notice, and our suspension from
the NASD or violation of applicable state or Federal laws or rules and
regulations of an authorized regulatory agency will terminate this Agreement
effective upon the date of your mailing notice to us of such termination.
Waiver of any breach of any provision of this Agreement will not be construed as
a waiver of the provision or of your right to enforce said provision thereafter.
Your failure to terminate for any cause shall not constitute a waiver of your
right to terminate at a later date for any such cause. All notices hereunder
shall be to the respective parties at the addresses listed hereon, unless
changed by notice given in accordance with this Agreement.
12. This Agreement shall become effective as of the date when it is
executed and dated by you below and shall be in substitution of any prior
agreement between you and us covering the Funds. This Agreement and all the
rights and obligations of the parties hereunder shall be governed by and
construed under the laws of the State of Ohio. This Agreement is not assignable
or transferable, and shall terminate automatically in the event of its
assignment except that your firm may assign or transfer this Agreement to any
successor firm or corporation which becomes the Distributor to the Funds.
Company: Banc One Securities Corporation
Address: 733 Green Crest Road
Westerville, OH 43081
By: Michael J. Norton
------------------------------
(Signature)
Michael J. Norton
- ------------------------------
(Print Name)
November 11, 1995
- ------------------------------
(Date)
Accepted:
THE ONE GROUP SERVICES COMPANY
By: Mark S. Redman
- -----------------------------------
Dated: 11th day of November, 1995
<PAGE>
Exhibit (10)(d)
<PAGE>
DISTRIBUTION AND SHAREHOLDER SERVICES PLAN
CLASS B SHARES
JANUARY 1, 1994
AS RE-EXECUTED ON DECEMBER 13, 1995
This constitutes a DISTRIBUTION AND SHAREHOLDER SERVICES PLAN (the "Plan")
of The One Group-Registered Trademark-, a Massachusetts business trust (the
"Trust"), adopted pursuant to Rule 12b-1 under the Investment Company Act of
1940, as amended (the "1940 Act"). The Plan is applicable to Class B Shares (or
such other designation as may be assigned to a class of shares sold subject to a
contingent deferred sales charge) of each of the Trust's investment portfolios
identified on Schedule A hereto, as such Schedule may be amended from time to
time (each a "Fund" and collectively the "Funds").
WHEREAS, it is desirable to enable the Trust to have flexibility in meeting
the investment and shareholder servicing needs of its future investors; and
WHEREAS, the Board of Trustees of the Trust (the "Board of Trustees"),
mindful of the requirements imposed by Rule 12b-1 under the 1940 Act, has
determined to effect the Plan for the provision of distribution and shareholder
assistance with respect to the Class B Shares of the Funds;
NOW, THEREFORE, the Trust and the Distributor hereby agree as follows:
1. A Fund shall pay to One Group-Registered Trademark- Services Company
("the Distributor"), out of the assets attributable to such Fund's Class B
Shares, distribution and shareholder servicing fees at an annual rate
aggregating 1.00% of the average daily net assets of a Fund's Class B Shares
(the "Distribution Fee"). The Distributor may apply the Distribution Fee toward
the following: (i) compensation for its services or expenses in connection with
distribution assistance with respect to a Fund's Class B Shares; (ii) payments
to financial institutions and intermediaries (such as banks, savings and loan
associations, insurance companies, and investment counselors) as brokerage
commissions in connection with the sale of a Fund's Class B Shares; and
(iii) payments to financial institutions and intermediaries (such as banks,
savings and loan associations, insurance companies, and investment counselors),
broker-dealers, and the Distributor's affiliates and subsidiaries as
compensation for services and/or reimbursement of expenses incurred in
connection with distribution or shareholder services with respect to a Fund's
Class B Shares. The maximum amount of the Distribution Fee that may be payable
by the Fund's Class B Shares for the aforementioned services and expenses other
than services and/or reimbursement of expenses incurred in connection with
shareholder services with respect to a Fund's Class B Shares is .75% of the
average daily net assets of a Fund's Class B Shares. The remaining portion of
the Distribution Fee is payable by the Fund's Class B Shares only as
compensation for services and/or reimbursement of expenses incurred in
connection with shareholder services with respect to a Fund's Class B Shares.
As provided in the Distribution Agreement, the Distributor may assign its right
to receive the Distribution Fee to any entity in connection with the sale of a
Fund's Class B Shares.
2. The Distribution Fee shall be accrued daily and payable monthly, and
shall be paid by a Fund to the Distributor irrespective of whether such fee
exceeds the amounts paid (or payable) by the Distributor pursuant to the
immediately preceding paragraph.
3. Any person authorized to direct the disposition of monies paid or
payable by a Fund pursuant to Part B of the Plan or any related agreement shall
provide to the Board of Trustees of the Trust, and the Board of Trustees shall
review, at least quarterly, a written report of the amounts so expended and the
purposes for which such expenditures were made.
4. All agreements with any person relating to implementation of the Plan
shall be in writing, and any agreement related to the Plan shall provide:
<PAGE>
A. That such agreement shall be subject to all conditions imposed by the
Securities and Exchange Commission with respect to such agreement as a
condition to granting exemptive relief from Sections 18(f)(1), 18(g),
and 18(i) of the 1940 Act and to enable the Trust to divide each of
its investment portfolios into multiple classes of Shares;
B. That such agreement may be terminated with respect to a Fund at any
time, without payment of any penalty, by vote of a majority of the
Disinterested Trustees (as such term is defined below), or by vote of
a majority of the CDSC Class Shares of such Fund subject to the
agreement, on not more than 60 days' written notice; and
C. That such agreement shall terminate automatically in the event of its
assignment.
GENERAL PROVISIONS
1. This Plan shall be effective with regard to Class B Shares of a Fund
following approval by a vote of the initial shareholder of such Fund.
2. The Plan will be effective with respect to Class B Shares of a Fund
only after approval by a vote of a majority of the Board of Trustees, including
a majority of trustees who are not "interested persons" of the Trust (as defined
in the 1940 Act) and who have no direct or indirect financial interest in the
operation of this Plan or in any agreements related to this Plan (the
"Disinterested Trustees"), cast in person at a meeting called for the purpose of
voting on this Plan.
3. The Plan shall continue in effect with respect to Class B Shares of a
Fund for a period of more than one year after it takes effect only so long as
such continuance is specifically approved at least annually in the manner
provided for approval in the immediately preceding paragraph.
4. The Plan may be terminated with respect to a Fund at any time by vote
of a majority of the Disinterested Trustees, or by vote of a majority of the
outstanding voting securities of such Fund with respect to such Fund's Class B
Shares.
5. The Plan may not be amended to increase materially the amount of the
Distribution Fee with respect to the Class B Shares of a Fund without approval
by a majority of the outstanding voting securities of such Fund with respect to
such Fund's Class B Shares, and by approval of the Board of Trustees in the
manner provided in Paragraph 2 of the general provisions. All material
amendments to the Plan shall be approved by the Board of Trustees in the manner
provided in Paragraph 2 of the general provisions.
6. Selection and nomination of trustees who are not interested persons of
the Trust shall be committed to the discretion of such disinterested trustees,
in accordance with Rule 12b-1(c) under the 1940 Act.
7. As used in the Plan, the terms "assignment," interested person," and
"majority of the outstanding voting securities" shall have the respective
meanings specified in the 1940 Act and the rules and regulations thereunder,
subject to such exemptions as may be granted by the Securities and Exchange
Commission.
8. The names "The One Group-Registered Trademark-" and "Board of
Trustees" refer respectively to the Trust created and the Trustees, as trustees
but not individually or personally, acting from time to time under a Declaration
of Trust dated May 23, 1985, to which reference is hereby made and a copy of
which is on file at the office of the Secretary of the Commonwealth of
Massachusetts and elsewhere as required by law, and to any and all amendments
thereto so filed or hereafter filed. The obligations of "The One Group-
Registered Trademark-" entered into in the name or on behalf thereof by any of
the Trustees, representatives or agents are made not individually, but in such
capacities, and are not binding upon any of the Trustees, Shareholders or
representatives of the Trust personally, but bind only the assets of the Trust,
and all persons dealing with any series and/or class of Shares of the Trust
<PAGE>
must look solely to the assets of the Trust belonging to such series and/or
class for the enforcement of any claims against the Trust.
THE ONE GROUP-Registered Trademark-
By: Mark Dillon
---------------------------
Title: President
---------------------------
Date: December 13, 1995
ONE GROUP-Registered Trademark- SERVICES COMPANY
By: Steve Mintos
---------------------------
Title: Executive Vice President
---------------------------
Date: December 13, 1995
<PAGE>
SCHEDULE A TO THE
DISTRIBUTION AND SHAREHOLDER SERVICES PLAN
CLASS B SHARES
BETWEEN THE ONE GROUP-Registered Trademark- AND
ONE GROUP SERVICES COMPANY
NAME OF FUND
- ------------
Income Equity Fund
Disciplined Value Fund
Small Company Growth Fund
Equity Index Fund
Large Company Value Fund
Asset Allocation Fund
International Equity Index Fund
Large Company Growth Fund
Income Bond Fund
Limited Volatility Bond Fund
Intermediate Bond Fund
Government Bond Fund
Government ARM Fund
Intermediate Tax-Free Bond Fund
Tax-Free Bond Fund
Ohio Municipal Bond Fund
Texas Tax-Free Bond Fund
West Virginia Tax-Free Bond Fund
Kentucky Municipal Bond Fund
Arizona Tax-Free Bond Fund
Louisiana Municipal Bond Fund
Value Growth Fund
Gulf South Growth Fund
THE ONE GROUP-Registered Trademark-
By: Mark Dillon
---------------------------
Title: President
---------------------------
Date: December 13, 1995
ONE GROUP-Registered Trademark- SERVICES COMPANY
By: Steve Mintos
---------------------------
Title: Executive Vice President
---------------------------
Date: December 13, 1995
<PAGE>
Exhibit (12)
<PAGE>
CONSENT OF COUNSEL
We hereby consent to the use of our opinion included in or made a part of
the Registration Statement of The One Group on Form N-14 under the Securities
Act of 1933, as amended.
Ropes & Gray
ROPES & GRAY
Washington, D.C.
January 19, 1996
<PAGE>
January 19, 1996
The One Group Gulf South
Growth Fund
c/o The One Group
3435 Stelzer Road
Columbus, OH 43219
Paragon Gulf South Growth Fund
c/o Paragon Portfolio
4900 Sears Tower
Chicago, IL 60606
Ladies and Gentlemen:
We have acted as counsel in connection with the Plan of Reorganization (the
"Agreement") as approved by the Board of Trustees of Paragon Portfolio on
October 31, 1995, as amended, between The One Group Gulf South Growth Fund
("Acquiring Fund"), a portfolio of The One Group, a Massachusetts business trust
and Paragon Gulf South Growth Fund ("Target Fund"), a portfolio of Paragon
Portfolio, a Massachusetts business trust. The Agreement describes a proposed
transaction (the "Transaction") to occur on a date to be agreed upon by
Acquiring Fund and Target Fund (the "Exchange Date"), pursuant to which
Acquiring Fund will acquire substantially all of the assets of Target Fund in
exchange for shares of beneficial interest in Acquiring Fund (the "Acquiring
Fund Shares") and the assumption by Acquiring Fund of all of the liabilities of
Target Fund following which the Acquiring Fund Shares received by Target Fund
will be distributed by Target Fund to its shareholders in liquidation and
termination of Target Fund. This opinion as to certain federal income tax
consequences of the Transaction is furnished to you pursuant to Sections 9(g)
and 10(g) of the Agreement. Capitalized terms not defined herein are defined in
the Agreement.
Target Fund is a series of Paragon Portfolio which is registered under
the Investment Company Act of 1940, as amended (the "1940 Act") as an
open-end management investment company. Shares of Target Fund are redeemable
at net asset value at each shareholder's option. Target Fund has elected to
be a regulated investment company for federal income tax purposes under
Section 851 of the Internal Revenue Code of 1986, as amended (the "Code").
<PAGE>
The One Group Gulf South Growth Fund -2- January 19, 1996
Paragon Gulf South Growth Fund
Acquiring Fund is a series of The One Group which is registered under
the 1940 Act as an open-end management investment company. Shares of
Acquiring Fund are redeemable at net asset value at each shareholder's
option.
For purposes of this opinion, we have considered the Agreement, the
Registration Statement filed with the Securities and Exchange Commission on
January 19, 1996 (including the items incorporated by reference therein), and
such other items as we have deemed necessary to render this opinion. In
addition, you have represented to us the following facts, occurrences and
information upon which you have indicated we may rely in rendering this opinion
(whether or not contained or reflected in the documents and items referred to
above):
1. Target Fund will transfer to Acquiring Fund all of its assets, and
Acquiring Fund will assume all of the liabilities of Target Fund as of the
Exchange Date.
2. The fair market value of the Acquiring Fund Shares received by each
Target Fund shareholder will be approximately equal to the fair market value of
the Target Fund shares surrendered in exchange therefor. The Target Fund
shareholders will receive no consideration other than Acquiring Fund Shares
(which may include fractional shares) in exchange for their shares of beneficial
interest in Target Fund (the "Target Fund Shares").
3. None of the compensation received by any shareholder-employees of
Target Fund, if any, will be separate consideration for, or allocable to, any of
their Target Fund Shares; none of the Acquiring Fund Shares received by any
Target Fund shareholder-employees will be separate consideration for, or
allocable to, any employment; and the compensation paid to any Acquiring Fund or
Target Fund shareholder-employees, if any, will be for services actually
rendered and will be commensurate with amounts paid to third parties bargaining
at arm's length for similar services.
4. There is no plan or intention by any Target Fund shareholder who owns
5% or more of the total outstanding Target Fund Shares, and to the best of the
knowledge of the management of Target Fund, there is no plan or intention on the
part of the remaining Target Fund shareholders to sell, exchange, or otherwise
dispose of a number of Acquiring Fund Shares received in the Transaction that
would reduce Target Fund shareholders' ownership of Acquiring Fund Shares to a
number of Acquiring Fund Shares having a value, as of the date of the
Transaction, of less than 50 percent of the value of all of the formerly
outstanding Target Fund Shares as of the same date. For purposes of this
representation, Acquiring Fund Shares or Target Fund Shares surrendered by
Target Fund shareholders in redemption or otherwise disposed of, where such
dispositions, if any, appear to be initiated by Target Fund
-2-
<PAGE>
The One Group Gulf South Growth Fund -3- January 19, 1996
Paragon Gulf South Growth Fund
shareholders in connection with or as a result of the Agreement or the
Transaction, will be treated as outstanding Target Fund shares on the date of
the Transaction.
5. Acquiring Fund has no plan or intention to reacquire any of the
Acquiring Fund Shares issued in the Transaction, except for Acquiring Fund
Shares reacquired in the ordinary course of its business as an open-end
investment company.
6. Acquiring Fund will acquire at least 90 percent of the fair market
value of the net assets and at least 70 percent of the fair market value of the
gross assets held by Target Fund immediately prior to the Transaction. For
purposes of this representation, (a) amounts paid by Target Fund, out of the
assets of Target Fund, to Target Fund shareholders in redemption of Target Fund
Shares, where such redemptions, if any, appear to be initiated by Target Fund
shareholders in connection with or as a result of the Agreement or the
Transaction, (b) amounts used by Target Fund to pay expenses of the Transaction,
and (c) amounts used to effect all redemptions and distributions (except for
regular, normal dividends declared and paid in order to ensure Target Fund's
continued qualification as a regulated investment company and to avoid fund-
level tax) made by Target Fund immediately preceding the transfer will be
included as assets of Target Fund held immediately prior to the Transaction.
Further, to the best of the knowledge of the managements of each of Acquiring
Fund and Target Fund, this representation will remain true even if the amounts,
if any, that Acquiring Fund pays after the Transaction to Acquiring Fund
shareholders who are former Target Fund shareholders in redemption of Acquiring
Fund Shares received in exchange for Target Fund Shares, where such redemptions,
if any, appear to be initiated by such shareholders in connection with or as a
result of the Agreement or the Transaction, are considered to be assets of
Target Fund that were not transferred to Acquiring Fund.
7. Immediately after the Transaction, the shareholders of Target Fund
will be in control of Acquiring Fund within the meaning of Section 304(c) of the
Code.
8. The fair market value of the assets transferred to Acquiring Fund by
Target Fund will equal or exceed the sum of the liabilities to be assumed by
Acquiring Fund.
9. The total adjusted basis of the assets of Target Fund transferred to
Acquiring Fund will equal or exceed the sum of the liabilities to be assumed by
Acquiring Fund.
10. Following the Transaction, Acquiring Fund will continue to use a
significant portion (in this case, at least 50%) of the historic business assets
of Target Fund. Specifically, Acquiring Fund will use such significant portion
of Target Fund's historic business assets in its business by continuing to hold
at least such portion of the total assets transferred to it by
-3-
<PAGE>
The One Group Gulf South Growth Fund -4- January 19, 1996
Paragon Gulf South Growth Fund
Target Fund. In making this determination, dispositions made in the ordinary
course of Acquiring Fund's business as an open-end investment company (i.e.,
dispositions resulting from investment decisions made after the Transaction on
the basis of investment considerations independent of the Transaction) shall not
be taken into account. In addition, following the Transaction, Acquiring Fund
will continue the historic business of Target Fund as an open-end investment
company that seeks long-term capital growth by investing primarily in a
portfolio of common stocks, preferred stocks and other equity securities of
small capitalization, emerging growth and medium capitalization growth
companies, which are either head-quartered in or whose primary market is in the
southeastern region of the United States.
11. At the time of the Transaction, Acquiring Fund will not have
outstanding any warrants, options, convertible securities, or any other type of
right pursuant to which any person could acquire stock in Acquiring Fund that,
if exercised or converted, would affect the Target Fund shareholders'
acquisition or retention of control of Acquiring Fund as defined in Section
304(c) of the Code.
12. Acquiring Fund has no plan or intention to sell or otherwise
dispose of any of the assets of Target Fund acquired in the Transaction
except for (i) dispositions made in the ordinary course of its business as a
series of an open-end investment company (i.e., dispositions resulting from
investment decisions made after the Transaction on the basis of investment
considerations independent of the Transaction) and (ii) dispositions made by
Acquiring Fund to realign its portfolio in order to reflect its investment
objective and conform to its investment restrictions and/or to maintain its
qualifications as a "regulated investment company" for federal income tax
purposes under Section 851 of the Code ("Realignment Dispositions"), which
Realignment Dispositions shall be limited to the extent required by the above
representation relating to the continual use by Acquiring Fund of the
historic business assets of Target Fund. For purposes of this
representation, Realignment Dispositions made by Target Fund, if any, will be
considered to have been made by Acquiring Fund.
13. The liabilities of Target Fund to be assumed by Acquiring Fund were
incurred by Target Fund in the ordinary course of its business and are
associated with the assets transferred to Acquiring Fund. For purposes of this
paragraph, expenses of the Transaction are not treated as liabilities.
14. All fees and expenses incurred by Target Fund and/or Acquiring Fund
in connection with the consummation of the Transaction will be paid by the party
directly incurring such fees and expenses, except that the costs of proxy
materials and proxy solicitations will be borne by The One Group; provided,
however, that such fees and expenses will in any event be paid by the party
directly incurring such expenses if and to the extent that payment by the other
party would result in the disqualification of Acquiring Fund or Target Fund, as
the case may be, as a "regulated investment company" within the meaning of
Section 851 of the Code. All such fees and expenses incurred and borne by
either of Acquiring Fund and Target Fund shall be solely and directly related to
the Transaction and shall be paid directly by Target Fund or Acquiring Fund, as
the case may be, to the relevant providers of services or other payees, in
accordance with the principles set forth in Rev. Rul. 73-54, 1973-1 C.B. 187.
-4-
<PAGE>
The One Group Gulf South Growth Fund -5- January 19, 1996
Paragon Gulf South Growth Fund
Target Fund shareholders will pay their respective expenses, if any,
incurred in connection with the Transaction.
15. For federal income tax purposes, Target Fund qualifies as a regulated
investment company, and the provisions of Sections 851 through 855 of the Code
apply to Target Fund for its current taxable year beginning December 1, 1995 and
will continue to apply to it through the Exchange Date.
In that regard, Target Fund will declare to Target Fund shareholders of
record on or prior to the Exchange Date a dividend or dividends which together
with all previous such dividends shall have the effect of distributing all of
Target Fund's investment company taxable income (see Code Section 852) (computed
without regard to any deduction for dividends paid) and all of Target Fund's net
realized capital gain (after reduction for any capital loss carryover) in each
case for both the taxable year ending November 30, 1995 and the short taxable
period beginning on December 1, 1995 and ending on the Exchange Date. Such
dividends will be made to ensure continued qualification of Target Fund as a
regulated investment company for tax purposes and to eliminate fund-level tax.
16. Acquiring Fund has not yet filed its first tax return and thus has
not yet elected to be a regulated investment company for federal tax purposes.
However, upon filing its first income tax return at the completion of its first
taxable year, Acquiring Fund will elect to be a regulated investment company and
until such time will take all steps necessary to ensure that it qualifies as a
regulated investment company, including at all times being a series of a trust
that is registered as an investment company under the Investment Company Act
of 1940.
17. There is no intercorporate indebtedness existing between Target Fund
and Acquiring Fund.
18. Target Fund will distribute the Acquiring Fund Shares it receives in
the Transaction to its shareholders as provided in the Agreement.
19. Target Fund is not under the jurisdiction of a court in a Title 11 or
similar case within the meaning of Section 368(a)(3)(A) of the Code.
Based on the foregoing representations and our review of the documents and
items referred to above, and provided that all facts represented to be true "to
the best of the knowledge of the management" of the relevant fund are, in fact,
true (whether or not known), we are of the opinion that for federal income tax
purposes:
-5-
<PAGE>
The One Group Gulf South Growth Fund -6- January 19, 1996
Paragon Gulf South Growth Fund
(i) No gain or loss will be recognized by Target Fund upon the transfer of
Target Fund's assets to Acquiring Fund in exchange for Acquiring Fund
Shares and the assumption by Acquiring Fund of the liabilities of
Target Fund, or upon the distribution of Acquiring Fund Shares by
Target Fund to its shareholders in liquidation;
(ii) No gain or loss will be recognized by the Target Fund shareholders
upon the exchange of their Target Fund Shares for Acquiring Fund
Shares;
(iii) The basis of Acquiring Fund Shares a Target Fund shareholder receives
in connection with the Transaction will be the same as the basis of
his or her Target Fund Shares exchanged therefor;
(iv) A Target Fund shareholder's holding period for his or her Acquiring
Fund Shares will be determined by including the period for which he or
she held the Target Fund Shares exchanged therefor, provided that he
or she held such Target Fund shares as capital assets;
(v) No gain or loss will be recognized by Acquiring Fund upon the receipt
of the assets of Target Fund in exchange for Acquiring Fund Shares and
the assumption by Acquiring Fund of the liabilities of Target Fund;
(vi) The basis in the hands of Acquiring Fund of the assets of Target Fund
transferred to Acquiring Fund in the Transaction will be the same as
the basis of such assets in the hands of Target Fund immediately prior
to the transfer; and
(vii) The holding periods of the assets of Target Fund in the hands of
Acquiring Fund will include the periods during which such assets were
held by Target Fund;
Very truly yours,
Ropes & Gray
4062771.01
-6-
<PAGE>
January 19, 1996
The One Group Value
Growth Fund
c/o The One Group
3435 Stelzer Road
Columbus, OH 43219
Paragon Value Growth Fund
c/o Paragon Portfolio
4900 Sears Tower
Chicago, IL 60606
Ladies and Gentlemen:
We have acted as counsel in connection with the Plan of Reorganization (the
"Agreement") as approved by the Board of Trustees of Paragon Portfolio on
October 31, 1995, as amended, between The One Group Value Growth Fund
("Acquiring Fund"), a portfolio of The One Group, a Massachusetts business trust
and Paragon Value Growth Fund ("Target Fund"), a portfolio of Paragon Portfolio,
a Massachusetts business trust. The Agreement describes a proposed transaction
(the "Transaction") to occur on a date to be agreed upon by Acquiring Fund and
Target Fund (the "Exchange Date"), pursuant to which Acquiring Fund will acquire
substantially all of the assets of Target Fund in exchange for shares of
beneficial interest in Acquiring Fund (the "Acquiring Fund Shares") and the
assumption by Acquiring Fund of all of the liabilities of Target Fund following
which the Acquiring Fund Shares received by Target Fund will be distributed by
Target Fund to its shareholders in liquidation and termination of Target Fund.
This opinion as to certain federal income tax consequences of the Transaction is
furnished to you pursuant to Sections 9(g) and 10(g) of the Agreement.
Capitalized terms not defined herein are defined in the Agreement.
Target Fund is a series of Paragon Portfolio which is registered under
the Investment Company Act of 1940, as amended (the "1940 Act") as an
open-end management investment company. Shares of Target Fund are redeemable
at net asset value at each shareholder's option. Target Fund has elected to
be a regulated investment company for federal income tax purposes under
Section 851 of the Internal Revenue Code of 1986, as amended (the "Code").
<PAGE>
The One Group Value Growth Fund -2- January 19,1996
Paragon Value Growth Fund
Acquiring Fund is a series of The One Group which is registered under the
1940 Act as an open-end management investment company. Shares of Acquiring Fund
are redeemable at net asset value at each shareholder's option.
For purposes of this opinion, we have considered the Agreement, the
Registration Statement filed with the Securities and Exchange Commission on
January 19, 1996 (including the items incorporated by reference therein), and
such other items as we have deemed necessary to render this opinion. In
addition, you have represented to us the following facts, occurrences and
information upon which you have indicated we may rely in rendering this opinion
(whether or not contained or reflected in the documents and items referred to
above):
1. Target Fund will transfer to Acquiring Fund all of its assets, and
Acquiring Fund will assume all of the liabilities of Target Fund as of the
Exchange Date.
2. The fair market value of the Acquiring Fund Shares received by each
Target Fund shareholder will be approximately equal to the fair market value of
the Target Fund shares surrendered in exchange therefor. The Target Fund
shareholders will receive no consideration other than Acquiring Fund Shares
(which may include fractional shares) in exchange for their shares of beneficial
interest in Target Fund (the "Target Fund Shares").
3. None of the compensation received by any shareholder-employees of
Target Fund, if any, will be separate consideration for, or allocable to, any of
their Target Fund Shares; none of the Acquiring Fund Shares received by any
Target Fund shareholder-employees will be separate consideration for, or
allocable to, any employment; and the compensation paid to any Acquiring Fund or
Target Fund shareholder-employees, if any, will be for services actually
rendered and will be commensurate with amounts paid to third parties bargaining
at arm's length for similar services.
4. There is no plan or intention by any Target Fund shareholder who owns
5% or more of the total outstanding Target Fund Shares, and to the best of the
knowledge of the management of Target Fund, there is no plan or intention on the
part of the remaining Target Fund shareholders to sell, exchange, or otherwise
dispose of a number of Acquiring Fund Shares received in the Transaction that
would reduce Target Fund shareholders' ownership of Acquiring Fund Shares to a
number of Acquiring Fund Shares having a value, as of the date of the
Transaction, of less than 50 percent of the value of all of the formerly
outstanding Target Fund Shares as of the same date. For purposes of this
representation, Acquiring Fund Shares or Target Fund Shares surrendered by
Target Fund shareholders in redemption or otherwise disposed of, where such
dispositions, if any, appear to be initiated by Target Fund
-2-
<PAGE>
The One Group Value Growth Fund -3- January 19,1996
Paragon Value Growth Fund
shareholders in connection with or as a result of the Agreement or the
Transaction, will be treated as outstanding Target Fund shares on the date of
the Transaction.
5. Acquiring Fund has no plan or intention to reacquire any of the
Acquiring Fund Shares issued in the Transaction, except for Acquiring Fund
Shares reacquired in the ordinary course of its business as an open-end
investment company.
6. Acquiring Fund will acquire at least 90 percent of the fair market
value of the net assets and at least 70 percent of the fair market value of the
gross assets held by Target Fund immediately prior to the Transaction. For
purposes of this representation, (a) amounts paid by Target Fund, out of the
assets of Target Fund, to Target Fund shareholders in redemption of Target Fund
Shares, where such redemptions, if any, appear to be initiated by Target Fund
shareholders in connection with or as a result of the Agreement or the
Transaction, (b) amounts used by Target Fund to pay expenses of the Transaction,
and (c) amounts used to effect all redemptions and distributions (except for
regular, normal dividends declared and paid in order to ensure Target Fund's
continued qualification as a regulated investment company and to avoid fund-
level tax) made by Target Fund immediately preceding the transfer will be
included as assets of Target Fund held immediately prior to the Transaction.
Further, to the best of the knowledge of the managements of each of Acquiring
Fund and Target Fund, this representation will remain true even if the amounts,
if any, that Acquiring Fund pays after the Transaction to Acquiring Fund
shareholders who are former Target Fund shareholders in redemption of Acquiring
Fund Shares received in exchange for Target Fund Shares, where such redemptions,
if any, appear to be initiated by such shareholders in connection with or as a
result of the Agreement or the Transaction, are considered to be assets of
Target Fund that were not transferred to Acquiring Fund.
7. Immediately after the Transaction, the shareholders of Target Fund
will be in control of Acquiring Fund within the meaning of Section 304(c) of the
Code.
8. The fair market value of the assets transferred to Acquiring Fund by
Target Fund will equal or exceed the sum of the liabilities to be assumed by
Acquiring Fund.
9. The total adjusted basis of the assets of Target Fund transferred to
Acquiring Fund will equal or exceed the sum of the liabilities to be assumed by
Acquiring Fund.
10. Following the Transaction, Acquiring Fund will continue to use a
significant portion (in this case, at least 50%) of the historic business assets
of Target Fund. Specifically, Acquiring Fund will use such significant portion
of Target Fund's historic business assets in its business by continuing to hold
at least such portion of the total assets transferred to it by
-3-
<PAGE>
The One Group Value Growth Fund -4- January 19,1996
Paragon Value Growth Fund
Target Fund. In making this determination, dispositions made in the ordinary
course of Acquiring Fund's business as an open-end investment company (i.e.,
dispositions resulting from investment decisions made after the Transaction on
the basis of investment considerations independent of the Transaction) shall not
be taken into account. In addition, following the Transaction, Acquiring Fund
will continue the historic business of Target Fund as an open-end investment
company that seeks long-term capital growth and growth of income while, as a
secondary objective, providing a moderate level of income by investing primarily
in common stocks, preferred stocks and other equity securities.
11. At the time of the Transaction, Acquiring Fund will not have
outstanding any warrants, options, convertible securities, or any other type of
right pursuant to which any person could acquire stock in Acquiring Fund that,
if exercised or converted, would affect the Target Fund shareholders'
acquisition or retention of control of Acquiring Fund as defined in Section
304(c) of the Code.
12. Acquiring Fund has no plan or intention to sell or otherwise dispose
of any of the assets of Target Fund acquired in the Transaction except for
(i) dispositions made in the ordinary course of its business as a series of
an open-end investment company (i.e., dispositions resulting from investment
decisions made after the Transaction on the basis of investment considerations
independent of the Transaction) and (ii) dispositions made by
Acquiring Fund to realign its portfolio in order to reflect its investment
objective and conform to its investment restrictions and/or to maintain its
qualifications as a "regulated investment company" for federal income tax
purposes under Section 851 of the Code ("Realignment Dispositions"), which
Realignment Dispositions shall be limited to the extent required by the above
representation relating to the continual use by Acquiring Fund of the
historic business assets of Target Fund. For purposes of this
representation, Realignment Dispositions made by Target Fund, if any, will be
considered to have been made by Acquiring Fund.
13. The liabilities of Target Fund to be assumed by Acquiring Fund were
incurred by Target Fund in the ordinary course of its business and are
associated with the assets transferred to Acquiring Fund. For purposes of this
paragraph, expenses of the Transaction are not treated as liabilities.
14. All fees and expenses incurred by Target Fund and/or Acquiring Fund in
connection with the consummation of the Transaction will be paid by the party
directly incurring such fees and expenses, except that the costs of proxy
materials and proxy solicitations will be borne by The One Group; provided,
however, that such fees and expenses will in any event be paid by the party
directly incurring such expenses if and to the extent that payment by the other
party would result in the disqualification of Acquiring Fund or Target Fund, as
the case may be, as a "regulated investment company" within the meaning of
Section 851 of the Code. All such fees and expenses incurred and borne by
either of Acquiring Fund and Target Fund shall be solely and directly related to
the Transaction and shall be paid directly by Target Fund or Acquiring Fund, as
the case may be, to the relevant providers of services or other payees, in
accordance with the principles set forth in Rev. Rul. 73-54, 1973-1 C.B. 187.
-4-
<PAGE>
The One Group Value Growth Fund -5- January 19,1996
Paragon Value Growth Fund
Target Fund shareholders will pay their respective expenses, if any,
incurred in connection with the Transaction.
15. For federal income tax purposes, Target Fund qualifies as a regulated
investment company, and the provisions of Sections 851 through 855 of the Code
apply to Target Fund for its current taxable year beginning December 1, 1995 and
will continue to apply to it through the Exchange Date.
In that regard, Target Fund will declare to Target Fund shareholders of
record on or prior to the Exchange Date a dividend or dividends which together
with all previous such dividends shall have the effect of distributing all of
Target Fund's investment company taxable income (see Code Section 852) (computed
without regard to any deduction for dividends paid) and all of Target Fund's net
realized capital gain (after reduction for any capital loss carryover) in each
case for both the taxable year ending November 30, 1995 and the short taxable
period beginning on December 1, 1995 and ending on the Exchange Date. Such
dividends will be made to ensure continued qualification of Target Fund as a
regulated investment company for tax purposes and to eliminate fund-level tax.
16. Acquiring Fund has not yet filed its first tax return and thus has
not yet elected to be a regulated investment company for federal tax
purposes. However, upon filing its first income tax return at the completion
of its first taxable year, Acquiring Fund will elect to be a regulated
investment company and until such time will take all steps necessary to
ensure that it qualifies as a regulated investment company, including at all
times being a series of a trust that is registered as an investment company
under the Investment Company Act of 1940.
17. There is no intercorporate indebtedness existing between Target Fund
and Acquiring Fund.
18. Target Fund will distribute the Acquiring Fund Shares it receives in
the Transaction to its shareholders as provided in the Agreement.
19. Target Fund is not under the jurisdiction of a court in a Title 11 or
similar case within the meaning of Section 368(a)(3)(A) of the Code.
Based on the foregoing representations and our review of the documents and
items referred to above, and provided that all facts represented to be true "to
the best of the knowledge of the management" of the relevant fund are, in fact,
true (whether or not known), we are of the opinion that for federal income tax
purposes:
-5-
<PAGE>
The One Group Value Growth Fund -6- January 19,1996
Paragon Value Growth Fund
(i) No gain or loss will be recognized by Target Fund upon the transfer of
Target Fund's assets to Acquiring Fund in exchange for Acquiring Fund
Shares and the assumption by Acquiring Fund of the liabilities of
Target Fund, or upon the distribution of Acquiring Fund Shares by
Target Fund to its shareholders in liquidation;
(ii) No gain or loss will be recognized by the Target Fund shareholders
upon the exchange of their Target Fund Shares for Acquiring Fund
Shares;
(iii) The basis of Acquiring Fund Shares a Target Fund shareholder receives
in connection with the Transaction will be the same as the basis of
his or her Target Fund Shares exchanged therefor;
(iv) A Target Fund shareholder's holding period for his or her Acquiring
Fund Shares will be determined by including the period for which he or
she held the Target Fund Shares exchanged therefor, provided that he
or she held such Target Fund shares as capital assets;
(v) No gain or loss will be recognized by Acquiring Fund upon the receipt
of the assets of Target Fund in exchange for Acquiring Fund Shares and
the assumption by Acquiring Fund of the liabilities of Target Fund;
(vi) The basis in the hands of Acquiring Fund of the assets of Target Fund
transferred to Acquiring Fund in the Transaction will be the same as
the basis of such assets in the hands of Target Fund immediately prior
to the transfer; and
(vii) The holding periods of the assets of Target Fund in the hands of
Acquiring Fund will include the periods during which such assets were
held by Target Fund;
Very truly yours,
Ropes & Gray
4062767.01
-6-
<PAGE>
January 19, 1996
The One Group Limited
Volatility Bond Fund
c/o The One Group
3435 Stelzer Road
Columbus, OH 43219
Paragon Short-Term Government Fund
c/o Paragon Portfolio
4900 Sears Tower
Chicago, IL 60606
Ladies and Gentlemen:
We have acted as counsel in connection with the Plan of Reorganization (the
"Agreement") as approved by the Board of Trustees of Paragon Portfolio on
October 31, 1995, as amended, between The One Group Limited Volatility Bond Fund
("Acquiring Fund"), a portfolio of The One Group, a Massachusetts business trust
and Paragon Short-Term Government Fund ("Target Fund"), a portfolio of Paragon
Portfolio, a Massachusetts business trust. The Agreement describes a proposed
transaction (the "Transaction") to occur on a date to be agreed upon by
Acquiring Fund and Target Fund (the "Exchange Date"), pursuant to which
Acquiring Fund will acquire substantially all of the assets of Target Fund in
exchange for shares of beneficial interest in Acquiring Fund (the "Acquiring
Fund Shares") and the assumption by Acquiring Fund of all of the liabilities of
Target Fund following which the Acquiring Fund Shares received by Target Fund
will be distributed by Target Fund to its shareholders in liquidation and
termination of Target Fund. This opinion as to certain federal income tax
consequences of the Transaction is furnished to you pursuant to Sections 9(g)
and 10(g) of the Agreement. Capitalized terms not defined herein are defined in
the Agreement.
Target Fund is a series of Paragon Portfolio which is registered under
the Investment Company Act of 1940, as amended (the "1940 Act") as an
open-end management investment company. Shares of Target Fund are redeemable
at net asset value at each shareholder's option. Target Fund has elected to
be a
<PAGE>
The One Group Limited Volatility Bond Fund -2- January 19, 1996
Paragon Short-Term Government
regulated investment company for federal income tax purposes under Section 851
of the Internal Revenue Code of 1986, as amended (the "Code").
Acquiring Fund is a series of The One Group which is registered under
the 1940 Act as an open-end management investment company. Shares of
Acquiring Fund are redeemable at net asset value at each shareholder's
option. Acquiring Fund has elected to be a regulated investment company for
federal income tax purposes under Section 851 of the Code.
For purposes of this opinion, we have considered the Agreement, the
Registration Statement filed with the Securities and Exchange Commission on
January 19, 1996 (including the items incorporated by reference therein), and
such other items as we have deemed necessary to render this opinion. In
addition, you have represented to us the following facts, occurrences and
information upon which you have indicated we may rely in rendering this opinion
(whether or not contained or reflected in the documents and items referred to
above):
1. Target Fund will transfer to Acquiring Fund all of its assets, and
Acquiring Fund will assume all of the liabilities of Target Fund as of the
Exchange Date.
2. The fair market value of the Acquiring Fund Shares received by each
Target Fund shareholder will be approximately equal to the fair market value of
the Target Fund shares surrendered in exchange therefor. The Target Fund
shareholders will receive no consideration other than Acquiring Fund Shares
(which may include fractional shares) in exchange for their shares of beneficial
interest in Target Fund (the "Target Fund Shares").
3. None of the compensation received by any shareholder-employees of
Target Fund, if any, will be separate consideration for, or allocable to, any of
their Target Fund Shares; none of the Acquiring Fund Shares received by any
Target Fund shareholder-employees will be separate consideration for, or
allocable to, any employment; and the compensation paid to any Acquiring Fund or
Target Fund shareholder-employees, if any, will be for services actually
rendered and will be commensurate with amounts paid to third parties bargaining
at arm's length for similar services.
4. There is no plan or intention by any Target Fund shareholder who owns
5% or more of the total outstanding Target Fund Shares, and to the best of the
knowledge of the management of Target Fund, there is no plan or intention on the
part of the remaining Target Fund shareholders to sell, exchange, or otherwise
dispose of a number of Acquiring Fund Shares received in the Transaction that
would reduce Target Fund shareholders' ownership of Acquiring Fund Shares to a
number of Acquiring Fund Shares having a value, as of the date of
-2-
<PAGE>
The One Group Limited Volatility Bond Fund -3- January 19, 1996
Paragon Short-Term Government
the Transaction, of less than 50 percent of the value of all of the formerly
outstanding Target Fund Shares as of the same date. For purposes of this
representation, Acquiring Fund Shares or Target Fund Shares surrendered by
Target Fund shareholders in redemption or otherwise disposed of, where such
dispositions, if any, appear to be initiated by Target Fund shareholders in
connection with or as a result of the Agreement or the Transaction, will be
treated as outstanding Target Fund shares on the date of the Transaction.
5. Acquiring Fund has no plan or intention to reacquire any of the
Acquiring Fund Shares issued in the Transaction, except for Acquiring Fund
Shares reacquired in the ordinary course of its business as an open-end
investment company.
6. Acquiring Fund will acquire at least 90 percent of the fair market
value of the net assets and at least 70 percent of the fair market value of the
gross assets held by Target Fund immediately prior to the Transaction. For
purposes of this representation, (a) amounts paid by Target Fund, out of the
assets of Target Fund, to Target Fund shareholders in redemption of Target Fund
Shares, where such redemptions, if any, appear to be initiated by Target Fund
shareholders in connection with or as a result of the Agreement or the
Transaction, (b) amounts used by Target Fund to pay expenses of the Transaction,
and (c) amounts used to effect all redemptions and distributions (except for
regular, normal dividends declared and paid in order to ensure Target Fund's
continued qualification as a regulated investment company and to avoid fund-
level tax) made by Target Fund immediately preceding the transfer will be
included as assets of Target Fund held immediately prior to the Transaction.
Further, to the best of the knowledge of the managements of each of Acquiring
Fund and Target Fund, this representation will remain true even if the amounts,
if any, that Acquiring Fund pays after the Transaction to Acquiring Fund
shareholders who are former Target Fund shareholders in redemption of Acquiring
Fund Shares received in exchange for Target Fund Shares, where such redemptions,
if any, appear to be initiated by such shareholders in connection with or as a
result of the Agreement or the Transaction, are considered to be assets of
Target Fund that were not transferred to Acquiring Fund.
7. The fair market value of the assets transferred to Acquiring Fund by
Target Fund will equal or exceed the sum of the liabilities to be assumed by
Acquiring Fund.
8. Following the Transaction, Acquiring Fund will continue to use a
significant portion (in this case, at least 50%) of the historic business assets
of Target Fund. Specifically, Acquiring Fund will use such significant portion
of Target Fund's historic business assets in its business by continuing to hold
at least such portion of the total assets transferred to it by Target Fund. In
making this determination, dispositions made in the ordinary course of
-3-
<PAGE>
The One Group Limited Volatility Bond Fund -4- January 19, 1996
Paragon Short-Term Government
Acquiring Fund's business as an open-end investment company (i.e., dispositions
resulting from investment decisions made after the Transaction on the basis of
investment considerations independent of the Transaction) shall not be taken
into account. In addition, following the Transaction, Acquiring Fund will
continue the historic business of Target Fund as an open-end investment company
that seeks to maximize current income to the extent consistent with preservation
of capital by investing primarily in securities of the U.S. Government, its
agencies and instrumentalities.
9. Acquiring Fund has no plan or intention to sell or otherwise
dispose of any of the assets of Target Fund acquired in the Transaction
except for (i) dispositions made in the ordinary course of its business as a
series of an open-end investment company (i.e., dispositions resulting from
investment decisions made after the Transaction on the basis of investment
considerations independent of the Transaction)and (ii) dispositions made by
Acquiring Fund to realign its portfolio in order to reflect its investment
objective and conform to its investment restrictions and/or to maintain its
qualifications as a "regulated investment company" for federal income tax
purposes under Section 851 of the Code ("Realignment Dispositions"), which
Realignment Dispositions shall be limited to the extent required by the above
representation relating to the continual use by Acquiring Fund of the
historic business assets of Target Fund. For purposes of this
representation, Realignment Dispositions made by Target Fund, if any, will be
considered to have been made by Acquiring Fund.
10. The liabilities of Target Fund to be assumed by Acquiring Fund were
incurred by Target Fund in the ordinary course of its business and are
associated with the assets transferred to Acquiring Fund. For purposes of this
paragraph, expenses of the Transaction are not treated as liabilities.
11. All fees and expenses incurred by Target Fund and/or Acquiring Fund
in connection with the consummation of the Transaction will be paid by the party
directly incurring such fees and expenses, except that the costs of proxy
materials and proxy solicitations will be borne by The One Group; provided,
however, that such fees and expenses will in any event be paid by the party
directly incurring such expenses if and to the extent that payment by the other
party would result in the disqualification of Acquiring Fund or Target Fund, as
the case may be, as a "regulated investment company" within the meaning of
Section 851 of the Code. All such fees and expenses incurred and borne by
either of Acquiring Fund and Target Fund shall be solely and directly related to
the Transaction and shall be paid directly by Target Fund or Acquiring Fund, as
the case may be, to the relevant providers of services or other payees, in
accordance with the principles set forth in Rev. Rul. 73-54, 1973-1 C.B. 187.
Target Fund shareholders will pay their respective expenses, if any,
incurred in connection with the Transaction.
12. For federal income tax purposes, Target Fund qualifies as a regulated
investment company, and the provisions of Sections 851 through 855 of the Code
apply to Target Fund for its current taxable year beginning December 1, 1995 and
will continue to apply to it
-4-
<PAGE>
The One Group Limited Volatility Bond Fund -5- January 19, 1996
Paragon Short-Term Government
through the Exchange Date.
In that regard, Target Fund will declare to Target Fund shareholders of
record on or prior to the Exchange Date a dividend or dividends which together
with all previous such dividends shall have the effect of distributing all of
Target Fund's investment company taxable income (see Code Section 852) for both
the taxable year ending November 30, 1995 and the short taxable year of Target
Fund beginning on December 1, 1995 and ending on the Exchange Date (computed in
each case without regard to any deduction for dividends paid) and all of the net
capital gain realized in Target Fund's taxable year ending November 30, 1995 and
in its short taxable year beginning on December 1, 1995 and ending on the
Exchange Date (after reduction for any capital loss carryover). Such dividends
will be made to ensure continued qualification of Target Fund as a regulated
investment company for tax purposes and to eliminate fund-level tax.
13. For federal income tax purposes, Acquiring Fund qualifies as a
regulated investment company, and the provisions of Sections 851 through 855 of
the Code apply to Acquiring Fund for its current taxable year beginning July 1,
1995 and will continue to apply to it through the Exchange Date.
14. Acquiring Fund does not own, directly or indirectly, nor has it owned
during the past five years, directly or indirectly, any Target Fund Shares.
15. There is no intercorporate indebtedness existing between Target Fund
and Acquiring Fund.
16. Target Fund will distribute the Acquiring Fund Shares it receives in
the Transaction to its shareholders as provided in the Agreement.
17. Target Fund is not under the jurisdiction of a court in a Title 11 or
similar case within the meaning of Section 368(a)(3)(A) of the Code.
Based on the foregoing representations and our review of the documents and
items referred to above, and provided that all facts represented to be true "to
the best of the knowledge of the management" of the relevant fund are, in fact,
true (whether or not known), we are of the opinion that for federal income tax
purposes:
(i) No gain or loss will be recognized by Target Fund upon the transfer of
Target Fund's assets to Acquiring Fund in exchange for Acquiring Fund
Shares and the
-5-
<PAGE>
The One Group Limited Volatility Bond Fund -6- January 19, 1996
Paragon Short-Term Government
assumption by Acquiring Fund of the liabilities of Target Fund, or
upon the distribution of Acquiring Fund Shares by Target Fund to its
shareholders in liquidation;
(ii) No gain or loss will be recognized by the Target Fund shareholders
upon the exchange of their Target Fund Shares for Acquiring Fund
Shares;
(iii) The basis of Acquiring Fund Shares a Target Fund shareholder receives
in connection with the Transaction will be the same as the basis of
his or her Target Fund Shares exchanged therefor;
(iv) A Target Fund shareholder's holding period for his or her Acquiring
Fund Shares will be determined by including the period for which he or
she held the Target Fund Shares exchanged therefor, provided that he
or she held such Target Fund shares as capital assets;
(v) No gain or loss will be recognized by Acquiring Fund upon the receipt
of the assets of Target Fund in exchange for Acquiring Fund Shares and
the assumption by Acquiring Fund of the liabilities of Target Fund;
(vi) The basis in the hands of Acquiring Fund of the assets of Target Fund
transferred to Acquiring Fund in the Transaction will be the same as
the basis of such assets in the hands of Target Fund immediately prior
to the transfer; and
(vii) The holding periods of the assets of Target Fund in the hands of
Acquiring Fund will include the periods during which such assets were
held by Target Fund;
Very truly yours,
Ropes & Gray
4062720.01
-6-
<PAGE>
January 19, 1996
The One Group Government Bond Fund
c/o The One Group
3435 Stelzer Road
Columbus, OH 43219
Paragon Intermediate-Term Bond Fund
c/o Paragon Portfolio
4900 Sears Tower
Chicago, IL 60606
Ladies and Gentlemen:
We have acted as counsel in connection with the Plan of Reorganization (the
"Agreement") as approved by the Board of Trustees of Paragon Portfolio on
October 31, 1995, as amended, between The One Group Government Bond Fund
("Acquiring Fund"), a portfolio of The One Group, a Massachusetts business trust
and Paragon Intermediate-Term Bond Fund ("Target Fund"), a portfolio of Paragon
Portfolio, a Massachusetts business trust. The Agreement describes a proposed
transaction (the "Transaction") to occur on a date to be agreed upon by
Acquiring Fund and Target Fund (the "Exchange Date"), pursuant to which
Acquiring Fund will acquire substantially all of the assets of Target Fund in
exchange for shares of beneficial interest in Acquiring Fund (the "Acquiring
Fund Shares") and the assumption by Acquiring Fund of all of the liabilities of
Target Fund following which the Acquiring Fund Shares received by Target Fund
will be distributed by Target Fund to its shareholders in liquidation and
termination of Target Fund. This opinion as to certain federal income tax
consequences of the Transaction is furnished to you pursuant to Sections 9(g)
and 10(g) of the Agreement. Capitalized terms not defined herein are defined in
the Agreement.
Target Fund is a series of Paragon Portfolio which is registered under the
Investment Company Act of 1940, as amended (the "1940 Act") as an open-end
management investment company. Shares of Target Fund are redeemable at net
asset value at each shareholder's option. Target Fund has elected to be a
regulated investment company for federal income tax purposes under Section 851
of the Internal Revenue Code of 1986, as amended (the "Code").
<PAGE>
The One Group Government Bond Fund - 2 - January 19, 1996
Paragon Intermediate-Term Bond Fund
Acquiring Fund is a series of The One Group which is registered under the
1940 Act as an open-end management investment company. Shares of Acquiring
Fund are redeemable at net asset value at each shareholder's option. Acquiring
Fund has elected to be a regulated investment company for federal income tax
purposes under Section 851 of the Code.
For purposes of this opinion, we have considered the Agreement, the
Registration Statement filed with the Securities and Exchange Commission on
January 19, 1996 (including the items incorporated by reference therein), and
such other items as we have deemed necessary to render this opinion. In
addition, you have represented to us the following facts, occurrences and
information upon which you have indicated we may rely in rendering this opinion
(whether or not contained or reflected in the documents and items referred to
above):
1. Target Fund will transfer to Acquiring Fund all of its assets, and
Acquiring Fund will assume all of the liabilities of Target Fund as of the
Exchange Date.
2. The fair market value of the Acquiring Fund Shares received by each
Target Fund shareholder will be approximately equal to the fair market value of
the Target Fund shares surrendered in exchange therefor. The Target Fund
shareholders will receive no consideration other than Acquiring Fund Shares
(which may include fractional shares) in exchange for their shares of beneficial
interest in Target Fund (the "Target Fund Shares").
3. None of the compensation received by any shareholder-employees of
Target Fund, if any, will be separate consideration for, or allocable to, any of
their Target Fund Shares; none of the Acquiring Fund Shares received by any
Target Fund shareholder-employees will be separate consideration for, or
allocable to, any employment; and the compensation paid to any Acquiring Fund or
Target Fund shareholder-employees, if any, will be for services actually
rendered and will be commensurate with amounts paid to third parties bargaining
at arm's length for similar services.
4. There is no plan or intention by any Target Fund shareholder who owns
5% or more of the total outstanding Target Fund Shares, and to the best of the
knowledge of the management of Target Fund, there is no plan or intention on the
part of the remaining Target Fund shareholders to sell, exchange, or otherwise
dispose of a number of Acquiring Fund Shares received in the Transaction that
would reduce Target Fund shareholders' ownership of Acquiring Fund Shares to a
number of Acquiring Fund Shares having a value, as of the date of the
Transaction, of less than 50 percent of the value of all of the formerly
outstanding Target Fund Shares as of the same date. For purposes of this
representation, Acquiring Fund Shares
- 2 -
<PAGE>
The One Group Government Bond Fund - 3 - January 19, 1996
Paragon Intermediate-Term Bond Fund
or Target Fund Shares surrendered by Target Fund shareholders in redemption or
otherwise disposed of, where such dispositions, if any, appear to be initiated
by Target Fund shareholders in connection with or as a result of the Agreement
or the Transaction, will be treated as outstanding Target Fund shares on the
date of the Transaction.
5. Acquiring Fund has no plan or intention to reacquire any of the
Acquiring Fund Shares issued in the Transaction, except for Acquiring Fund
Shares reacquired in the ordinary course of its business as an open-end
investment company.
6. Acquiring Fund will acquire at least 90 percent of the fair market
value of the net assets and at least 70 percent of the fair market value of the
gross assets held by Target Fund immediately prior to the Transaction. For
purposes of this representation, (a) amounts paid by Target Fund, out of the
assets of Target Fund, to Target Fund shareholders in redemption of Target Fund
Shares, where such redemptions, if any, appear to be initiated by Target Fund
shareholders in connection with or as a result of the Agreement or the
Transaction, (b) amounts used by Target Fund to pay expenses of the Transaction,
and (c) amounts used to effect all redemptions and distributions (except for
regular, normal dividends declared and paid in order to ensure Target Fund's
continued qualification as a regulated investment company and to avoid fund-
level tax) made by Target Fund immediately preceding the transfer will be
included as assets of Target Fund held immediately prior to the Transaction.
Further, to the best of the knowledge of the managements of each of Acquiring
Fund and Target Fund, this representation will remain true even if the amounts,
if any, that Acquiring Fund pays after the Transaction to Acquiring Fund
shareholders who are former Target Fund shareholders in redemption of Acquiring
Fund Shares received in exchange for Target Fund Shares, where such redemptions,
if any, appear to be initiated by such shareholders in connection with or as a
result of the Agreement or the Transaction, are considered to be assets of
Target Fund that were not transferred to Acquiring Fund.
7. The fair market value of the assets transferred to Acquiring Fund by
Target Fund will equal or exceed the sum of the liabilities to be assumed by
Acquiring Fund.
8. Following the Transaction, Acquiring Fund will continue to use a
significant portion (in this case, at least 50%) of the historic business assets
of Target Fund. Specifically, Acquiring Fund will use such significant portion
of Target Fund's historic business assets in its business by continuing to hold
at least such portion of the total assets transferred to it by Target Fund. In
making this determination, dispositions made in the ordinary course of Acquiring
Fund's business as an open-end investment company (i.e., dispositions resulting
from investment decisions made after the Transaction on the basis of investment
considerations
- 3 -
<PAGE>
The One Group Government Bond Fund - 4 - January 19, 1996
Paragon Intermediate-Term Bond Fund
independent of the Transaction) shall not be taken into account. In addition,
following the Transaction, Acquiring Fund will continue the historic business of
Target Fund as an open-end investment company that seeks to provide a high level
of current income consistent with safety of principal by investing primarily in
fixed-income government securities.
9. Acquiring Fund has no plan or intention to sell or otherwise dispose
of any of the assets of Target Fund acquired in the Transaction except for (i)
dispositions made in the ordinary course of its business as a series of an
open-end investment company (i.e., dispositions resulting from investment
decisions made after the Transaction on the basis of investment considerations
independent of the Transaction) and (ii) dispositions made by Acquiring Fund
to realign its portfolio in order to reflect its investment objective and
conform to its investment restrictions and/or to maintain its qualifications as
a "regulated investment company" for federal income tax purposes under Section
851 of the Code ("Realignment Dispositions"), which Realignment Dispositions
shall be limited to the extent required by the above representation relating to
the continual use by Acquiring Fund of the historic business assets of Target
Fund. For purposes of this representation, Realignment Dispositions made by
Target Fund, if any, will be considered to have been made by Acquiring Fund.
10. The liabilities of Target Fund to be assumed by Acquiring Fund were
incurred by Target Fund in the ordinary course of its business and are
associated with the assets transferred to Acquiring Fund. For purposes of this
paragraph, expenses of the Transaction are not treated as liabilities.
11. All fees and expenses incurred by Target Fund and/or Acquiring Fund in
connection with the consummation of the Transaction will be paid by the party
directly incurring such fees and expenses, except that the costs of proxy
materials and proxy solicitations will be borne by The One Group; provided,
however, that such fees and expenses will in any event be paid by the party
directly incurring such expenses if and to the extent that payment by the other
party would result in the disqualification of Acquiring Fund or Target Fund, as
the case may be, as a "regulated investment company" within the meaning of
Section 851 of the Code. All such fees and expenses incurred and borne by
either of Acquiring Fund and Target Fund shall be solely and directly related to
the Transaction and shall be paid directly by Target Fund or Acquiring Fund, as
the case may be, to the relevant providers of services or other payees, in
accordance with the principles set forth in Rev. Rul. 73-54, 1973-1 C.B. 187.
Target Fund shareholders will pay their respective expenses, if any,
incurred in connection with the Transaction.
12. For federal income tax purposes, Target Fund qualifies as a regulated
investment company, and the provisions of Sections 851 through 855 of the Code
apply to Target Fund for its current taxable year beginning December 1, 1995 and
will continue to apply to it through the Exchange Date.
- 4 -
<PAGE>
The One Group Government Bond Fund - 5 - January 19, 1996
Paragon Intermediate-Term Bond Fund
In that regard, Target Fund will declare to Target Fund shareholders of
record on or prior to the Exchange Date a dividend or dividends which together
with all previous such dividends shall have the effect of distributing all of
Target Fund's investment company taxable income (see Code Section 852) for both
the taxable year ending November 30, 1995 and the short taxable year of Target
Fund beginning on December 1, 1995 and ending on the Exchange Date (computed in
each case without regard to any deduction for dividends paid) and all of the net
capital gain realized in Target Fund's taxable year ending November 30, 1995 and
in its short taxable year beginning on December 1, 1995 and ending on the
Exchange Date (after reduction for any capital loss carryover). Such dividends
will be made to ensure continued qualification of Target Fund as a regulated
investment company for tax purposes and to eliminate fund-level tax.
13. For federal income tax purposes, Acquiring Fund qualifies as a
regulated investment company, and the provisions of Sections 851 through 855 of
the Code apply to Acquiring Fund for its current taxable year beginning July 1,
1995 and will continue to apply to it through the Exchange Date.
14. Acquiring Fund does not own, directly or indirectly, nor has it owned
during the past five years, directly or indirectly, any Target Fund Shares.
15. There is no intercorporate indebtedness existing between Target Fund
and Acquiring Fund.
16. Target Fund will distribute the Acquiring Fund Shares it receives in
the Transaction to its shareholders as provided in the Agreement.
17. Target Fund is not under the jurisdiction of a court in a Title 11 or
similar case within the meaning of Section 368(a)(3)(A) of the Code.
Based on the foregoing representations and our review of the documents and
items referred to above, and provided that all facts represented to be true "to
the best of the knowledge of the management" of the relevant fund are, in fact,
true (whether or not known), we are of the opinion that for federal income tax
purposes:
(i) No gain or loss will be recognized by Target Fund upon the transfer of
Target Fund's assets to Acquiring Fund in exchange for Acquiring Fund
Shares and the assumption by Acquiring Fund of the liabilities of
Target Fund, or upon the distribution of Acquiring Fund Shares by
Target Fund to its shareholders in
- 5 -
<PAGE>
The One Group Government Bond Fund - 6 - January 19, 1996
Paragon Intermediate-Term Bond Fund
liquidation;
(ii) No gain or loss will be recognized by the Target Fund shareholders
upon the exchange of their Target Fund Shares for Acquiring Fund
Shares;
(iii) The basis of Acquiring Fund Shares a Target Fund shareholder receives
in connection with the Transaction will be the same as the basis of
his or her Target Fund Shares exchanged therefor;
(iv) A Target Fund shareholder's holding period for his or her Acquiring
Fund Shares will be determined by including the period for which he or
she held the Target Fund Shares exchanged therefor, provided that he
or she held such Target Fund shares as capital assets;
(v) No gain or loss will be recognized by Acquiring Fund upon the receipt
of the assets of Target Fund in exchange for Acquiring Fund Shares and
the assumption by Acquiring Fund of the liabilities of Target Fund;
(vi) The basis in the hands of Acquiring Fund of the assets of Target Fund
transferred to Acquiring Fund in the Transaction will be the same as
the basis of such assets in the hands of Target Fund immediately prior
to the transfer; and
(vii) The holding periods of the assets of Target Fund in the hands of
Acquiring Fund will include the periods during which such assets were
held by Target Fund;
Very truly yours,
Ropes & Gray
4062714.01
<PAGE>
January 19, 1996
The One Group Income Equity Fund
c/o The One Group
3435 Stelzer Road
Columbus, OH 43219
Paragon Value Equity Income Fund
Paragon Portfolio
4900 Sears Tower
Chicago, IL 60606
Ladies and Gentlemen:
We have acted as counsel in connection with the Plan of Reorganization (the
"Agreement") as approved by the Board of Trustees of Paragon Portfolio on
October 31, 1995, as amended, between The One Group Income Equity Fund
("Acquiring Fund"), a portfolio of The One Group, a Massachusetts business trust
and Paragon Value Equity Income Fund ("Target Fund"), a portfolio of Paragon
Portfolio, a Massachusetts business trust. The Agreement describes a proposed
transaction (the "Transaction") to occur on a date to be agreed upon by
Acquiring Fund and Target Fund (the "Exchange Date"), pursuant to which
Acquiring Fund will acquire substantially all of the assets of Target Fund in
exchange for shares of beneficial interest in Acquiring Fund (the "Acquiring
Fund Shares") and the assumption by Acquiring Fund of all of the liabilities of
Target Fund following which the Acquiring Fund Shares received by Target Fund
will be distributed by Target Fund to its shareholders in liquidation and
termination of Target Fund. This opinion as to certain federal income tax
consequences of the Transaction is furnished to you pursuant to Sections 9(g)
and 10(g) of the Agreement. Capitalized terms not defined herein are defined in
the Agreement.
Target Fund is a series of Paragon Portfolio which is registered under the
Investment Company Act of 1940, as amended (the "1940 Act") as an open-end
management investment company. Shares of Target Fund are redeemable at net
asset value at each shareholder's option. Target Fund has elected to be a
regulated investment company for federal income tax purposes under Section 851
of the Internal Revenue Code of 1986, as amended (the "Code").
<PAGE>
The One Group Income Equity Fund - 2 - January 19, 1996
Paragon Value Equity Income Bond Fund
Acquiring Fund is a series of the One Group which is registered under the
1940 Act as an open-end management investment company. Shares of Acquiring
Fund are redeemable at net asset value at each shareholder's option. Acquiring
Fund has elected to be a regulated investment company for federal income tax
purposes under Section 851 of the Code.
For purposes of this opinion, we have considered the Agreement, the
Registration Statement filed with the Securities and Exchange Commission on
January 19, 1996 (including the items incorporated by reference therein), and
such other items as we have deemed necessary to render this opinion. In
addition, you have represented to us the following facts, occurrences and
information upon which you have indicated we may rely in rendering this opinion
(whether or not contained or reflected in the documents and items referred to
above):
1. Target Fund will transfer to Acquiring Fund all of its assets, and
Acquiring Fund will assume all of the liabilities of Target Fund as of the
Exchange Date.
2. The fair market value of the Acquiring Fund Shares received by each
Target Fund shareholder will be approximately equal to the fair market value of
the Target Fund shares surrendered in exchange therefor. The Target Fund
shareholders will receive no consideration other than Acquiring Fund Shares
(which may include fractional shares) in exchange for their shares of beneficial
interest in Target Fund (the "Target Fund Shares").
3. None of the compensation received by any shareholder-employees of
Target Fund, if any, will be separate consideration for, or allocable to, any of
their Target Fund Shares; none of the Acquiring Fund Shares received by any
Target Fund shareholder-employees will be separate consideration for, or
allocable to, any employment; and the compensation paid to any Acquiring Fund or
Target Fund shareholder-employees, if any, will be for services actually
rendered and will be commensurate with amounts paid to third parties bargaining
at arm's length for similar services.
4. There is no plan or intention by any Target Fund shareholder who owns
5% or more of the total outstanding Target Fund Shares, and to the best of the
knowledge of the management of Target Fund, there is no plan or intention on the
part of the remaining Target Fund shareholders to sell, exchange, or otherwise
dispose of a number of Acquiring Fund Shares received in the Transaction that
would reduce Target Fund shareholders' ownership of Acquiring Fund Shares to a
number of Acquiring Fund Shares having a value, as of the date of the
Transaction, of less than 50 percent of the value of all of the formerly
outstanding Target Fund Shares as of the same date. For purposes of this
representation, Acquiring Fund Shares
- 2 -
<PAGE>
The One Group Income Equity Fund - 3 - January 19, 1996
Paragon Value Equity Income Bond Fund
or Target Fund Shares surrendered by Target Fund shareholders in redemption or
otherwise disposed of, where such dispositions, if any, appear to be initiated
by Target Fund shareholders in connection with or as a result of the Agreement
or the Transaction, will be treated as outstanding Target Fund shares on the
date of the Transaction.
5. Acquiring Fund has no plan or intention to reacquire any of the
Acquiring Fund Shares issued in the Transaction, except for Acquiring Fund
Shares reacquired in the ordinary course of its business as an open-end
investment company.
6. Acquiring Fund will acquire at least 90 percent of the fair market
value of the net assets and at least 70 percent of the fair market value of the
gross assets held by Target Fund immediately prior to the Transaction. For
purposes of this representation, (a) amounts paid by Target Fund, out of the
assets of Target Fund, to Target Fund shareholders in redemption of Target Fund
Shares, where such redemptions, if any, appear to be initiated by Target Fund
shareholders in connection with or as a result of the Agreement or the
Transaction, (b) amounts used by Target Fund to pay expenses of the Transaction,
and (c) amounts used to effect all redemptions and distributions (except for
regular, normal dividends declared and paid in order to ensure Target Fund's
continued qualification as a regulated investment company and to avoid fund-
level tax) made by Target Fund immediately preceding the transfer will be
included as assets of Target Fund held immediately prior to the Transaction.
Further, to the best of the knowledge of the managements of each of Acquiring
Fund and Target Fund, this representation will remain true even if the amounts,
if any, that Acquiring Fund pays after the Transaction to Acquiring Fund
shareholders who are former Target Fund shareholders in redemption of Acquiring
Fund Shares received in exchange for Target Fund Shares, where such redemptions,
if any, appear to be initiated by such shareholders in connection with or as a
result of the Agreement or the Transaction, are considered to be assets of
Target Fund that were not transferred to Acquiring Fund.
7. The fair market value of the assets transferred to Acquiring Fund by
Target Fund will equal or exceed the sum of the liabilities to be assumed by
Acquiring Fund.
8. Following the Transaction, Acquiring Fund will continue to use a
substantial portion (in this case, at least 50%) of the historic business assets
of Target Fund. Specifically, Acquiring Fund will use such significant portion
of Target Fund's historic business assets in its business by continuing to hold
at least such portion of the total assets transferred to it by Target Fund. In
making this determination, dispositions made in the ordinary course of Acquiring
Fund's business as an open-end investment company (i.e., dispositions resulting
from investment decisions made after the Transaction on the basis of investment
considerations
- 3 -
<PAGE>
The One Group Income Equity Fund - 4 - January 19, 1996
Paragon Value Equity Income Bond Fund
independent of the Transaction) shall not be taken into account. In addition,
following the Transaction, Acquiring Fund will continue the historic business of
Target Fund as an open-end investment company that seeks current income and
capital growth by investing primarily in equity securities.
9. Acquiring Fund has no plan or intention to sell or otherwise dispose
of any of the assets of Target Fund acquired in the Transaction except for
(i) dispositions made in the ordinary course of its business as a series of an
open-end investment company (i.e., dispositions resulting from investment
decisions made after the Transaction on the basis of investment considerations
independent of the Transaction)and (ii) dispositions made by Acquiring Fund to
realign its portfolio in order to reflect its investment objective and conform
to its investment restrictions and/or to maintain its qualifications as a
"regulated investment company" for federal income tax purposes under Section
851 of the Code ("Realignment Dispositions"), which Realignment Dispositions
shall be limited to the extent required by the above representation relating
to the continual use by Acquiring Fund of the historic business assets of
Target Fund. For purposes of this representation, Realignment Dispositions
made by Target Fund, if any, will be considered to have been made by Acquiring
Fund.
10. The liabilities of Target Fund to be assumed by Acquiring Fund were
incurred by Target Fund in the ordinary course of its business and are
associated with the assets transferred to Acquiring Fund. For purposes of this
paragraph, expenses of the Transaction are not treated as liabilities.
11. All fees and expenses incurred by Target Fund and/or Acquiring Fund in
connection with the consummation of the Transaction will be paid by the party
directly incurring such fees and expenses, except that the costs of proxy
materials and proxy solicitations will be borne by The One Group; provided,
however, that such fees and expenses will in any event be paid by the party
directly incurring such expenses if and to the extent that payment by the other
party would result in the disqualification of Acquiring Fund or Target Fund, as
the case may be, as a "regulated investment company" within the meaning of
Section 851 of the Code. All such fees and expenses incurred and borne by
either of Acquiring Fund and Target Fund shall be solely and directly related to
the Transaction and shall be paid directly by Target Fund or Acquiring Fund, as
the case may be, to the relevant providers of services or other payees, in
accordance with the principles set forth in Rev. Rul. 73-54, 1973-1 C.B. 187.
Target Fund shareholders will pay their respective expenses, if any,
incurred in connection with the Transaction.
12. For federal income tax purposes, Target Fund qualifies as a regulated
investment company, and the provisions of Sections 851 through 855 of the Code
apply to Target Fund for its current taxable year beginning December 1, 1995 and
will continue to apply to it through the Exchange Date.
In that regard, Target Fund will declare to Target Fund shareholders of
record on or
- 4 -
<PAGE>
The One Group Income Equity Fund - 5 - January 19, 1996
Paragon Value Equity Income Bond Fund
prior to the Exchange Date a dividend or dividends which together with all
previous such dividends shall have the effect of distributing all of Target
Fund's investment company taxable income (see Code Section 852) for both the
taxable year ending November 30, 1995 and the short taxable year of Target Fund
beginning on December 1, 1995 and ending on the Exchange Date (computed in each
case without regard to any deduction for dividends paid) and all of the net
capital gain realized in Target Fund's taxable year ending November 30, 1995 and
in its short taxable year beginning on December 1, 1995 and ending on the
Exchange Date (after reduction for any capital loss carryover). Such dividends
will be made to ensure continued qualification of Target Fund as a regulated
investment company for tax purposes and to eliminate fund-level tax.
13. For federal income tax purposes, Acquiring Fund qualifies as a
regulated investment company, and the provisions of Sections 851 through 855 of
the Code apply to Acquiring Fund for its current taxable year beginning July 1,
1995 and will continue to apply to it through the Exchange Date.
14. Acquiring Fund does not own, directly or indirectly, nor has it owned
during the past five years, directly or indirectly, any Target Fund Shares.
15. There is no intercorporate indebtedness existing between Target Fund
and Acquiring Fund.
16. Target Fund will distribute the Acquiring Fund Shares it receives in
the Transaction to its shareholders as provided in the Agreement.
17. Target Fund is not under the jurisdiction of a court in a Title 11 or
similar case within the meaning of Section 368(a)(3)(A) of the Code.
Based on the foregoing representations and our review of the documents and
items referred to above, and provided that all facts represented to be true "to
the best of the knowledge of the management" of the relevant fund are, in fact,
true (whether or not known), we are of the opinion that for federal income tax
purposes:
(i) No gain or loss will be recognized by Target Fund upon the transfer of
Target Fund's assets to Acquiring Fund in exchange for Acquiring Fund
Shares and the assumption by Acquiring Fund of the liabilities of
Target Fund, or upon the distribution of Acquiring Fund Shares by
Target Fund to its shareholders in liquidation;
- 5 -
<PAGE>
The One Group Income Equity Fund - 6 - January 19, 1996
Paragon Value Equity Income Bond Fund
(ii) No gain or loss will be recognized by the Target Fund shareholders
upon the exchange of their Target Fund Shares for Acquiring Fund
Shares;
(iii) The basis of Acquiring Fund Shares a Target Fund shareholder receives
in connection with the Transaction will be the same as the basis of
his or her Target Fund Shares exchanged therefor;
(iv) A Target Fund shareholder's holding period for his or her Acquiring
Fund Shares will be determined by including the period for which he or
she held the Target Fund Shares exchanged therefor, provided that he
or she held such Target Fund shares as capital assets;
(v) No gain or loss will be recognized by Acquiring Fund upon the receipt
of the assets of Target Fund in exchange for Acquiring Fund Shares and
the assumption by Acquiring Fund of the liabilities of Target Fund;
(vi) The basis in the hands of Acquiring Fund of the assets of Target Fund
transferred to Acquiring Fund in the Transaction will be the same as
the basis of such assets in the hands of Target Fund immediately prior
to the transfer; and
(vii) The holding periods of the assets of Target Fund in the hands of
Acquiring Fund will include the periods during which such assets were
held by Target Fund;
Very truly yours,
Ropes & Gray
4062707.01
<PAGE>
January 19, 1996
The One Group Louisiana Municipal
Bond Fund
c/o The One Group
3435 Stelzer Road
Columbus, OH 43219
Paragon Louisiana Tax-Free Fund
c/o Paragon Portfolio
4900 Sears Tower
Chicago, IL 60606
Ladies and Gentlemen:
We have acted as counsel in connection with the Plan of Reorganization (the
"Agreement") as approved by the Board of Trustees of Paragon Portfolio on
October 31, 1995, as amended, between The One Group Louisiana Municipal Bond
Fund ("Acquiring Fund"), a portfolio of The One Group, a Massachusetts business
trust and Paragon Louisiana Tax-Free Fund ("Target Fund"), a portfolio of
Paragon Portfolio, a Massachusetts business trust. The Agreement describes a
proposed transaction (the "Transaction") to occur on a date to be agreed upon by
Acquiring Fund and Target Fund (the "Exchange Date"), pursuant to which
Acquiring Fund will acquire substantially all of the assets of Target Fund in
exchange for shares of beneficial interest in Acquiring Fund (the "Acquiring
Fund Shares") and the assumption by Acquiring Fund of all of the liabilities of
Target Fund following which the Acquiring Fund Shares received by Target Fund
will be distributed by Target Fund to its shareholders in liquidation and
termination of Target Fund. This opinion as to certain federal income tax
consequences of the Transaction is furnished to you pursuant to Sections 9(g)
and 10(g) of the Agreement. Capitalized terms not defined herein are defined in
the Agreement.
Target Fund is a series of Paragon Portfolio which is registered under the
Investment Company Act of 1940, as amended (the "1940 Act") as an open-end
management investment company. Shares of Target Fund are redeemable at net
asset value at each shareholder's option. Target Fund has elected to be a
regulated investment company for federal income tax purposes under Section 851
of the Internal Revenue Code of 1986, as amended (the "Code").
<PAGE>
The One Group Louisiana Municipal Bond Fund - 2 - January 19, 1996
Paragon Louisiana Tax-Free Fund
Acquiring Fund is a series of the One Group which is registered under the
1940 Act as an open-end management investment company. Shares of Acquiring
Fund are redeemable at net asset value at each shareholder's option.
For purposes of this opinion, we have considered the Agreement, the
Registration Statement filed with the Securities and Exchange Commission on
January 19, 1996 (including the items incorporated by reference therein), and
such other items as we have deemed necessary to render this opinion. In
addition, you have represented to us the following facts, occurrences and
information upon which you have indicated we may rely in rendering this opinion
(whether or not contained or reflected in the documents and items referred to
above):
1. Target Fund will transfer to Acquiring Fund all of its assets, and
Acquiring Fund will assume all of the liabilities of Target Fund as of the
Exchange Date.
2. The fair market value of the Acquiring Fund Shares received by each
Target Fund shareholder will be approximately equal to the fair market value of
the Target Fund shares surrendered in exchange therefor. The Target Fund
shareholders will receive no consideration other than Acquiring Fund Shares
(which may include fractional shares) in exchange for their shares of beneficial
interest in Target Fund (the "Target Fund Shares").
3. None of the compensation received by any shareholder-employees of
Target Fund, if any, will be separate consideration for, or allocable to, any of
their Target Fund Shares; none of the Acquiring Fund Shares received by any
Target Fund shareholder-employees will be separate consideration for, or
allocable to, any employment; and the compensation paid to any Acquiring Fund or
Target Fund shareholder-employees, if any, will be for services actually
rendered and will be commensurate with amounts paid to third parties bargaining
at arm's length for similar services.
4. There is no plan or intention by any Target Fund shareholder who owns
5% or more of the total outstanding Target Fund Shares, and to the best of the
knowledge of the management of Target Fund, there is no plan or intention on the
part of the remaining Target Fund shareholders to sell, exchange, or otherwise
dispose of a number of Acquiring Fund Shares received in the Transaction that
would reduce Target Fund shareholders' ownership of Acquiring Fund Shares to a
number of Acquiring Fund Shares having a value, as of the date of the
Transaction, of less than 50 percent of the value of all of the formerly
outstanding Target Fund Shares as of the same date. For purposes of this
representation, Acquiring Fund Shares or Target Fund Shares surrendered by
Target Fund shareholders in redemption or otherwise disposed of, where such
dispositions, if any, appear to be initiated by Target Fund
- 2 -
<PAGE>
The One Group Louisiana Municipal Bond Fund - 3 - January 19, 1996
Paragon Louisiana Tax-Free Fund
shareholders in connection with or as a result of the Agreement or the
Transaction, will be treated as outstanding Target Fund shares on the date of
the Transaction.
5. Acquiring Fund has no plan or intention to reacquire any of the
Acquiring Fund Shares issued in the Transaction, except for Acquiring Fund
Shares reacquired in the ordinary course of its business as an open-end
investment company.
6. Acquiring Fund will acquire at least 90 percent of the fair market
value of the net assets and at least 70 percent of the fair market value of the
gross assets held by Target Fund immediately prior to the Transaction. For
purposes of this representation, (a) amounts paid by Target Fund, out of the
assets of Target Fund, to Target Fund shareholders in redemption of Target Fund
Shares, where such redemptions, if any, appear to be initiated by Target Fund
shareholders in connection with or as a result of the Agreement or the
Transaction, (b) amounts used by Target Fund to pay expenses of the Transaction,
and (c) amounts used to effect all redemptions and distributions (except for
regular, normal dividends declared and paid in order to ensure Target Fund's
continued qualification as a regulated investment company and to avoid fund-
level tax) made by Target Fund immediately preceding the transfer will be
included as assets of Target Fund held immediately prior to the Transaction.
Further, to the best of the knowledge of the managements of each of Acquiring
Fund and Target Fund, this representation will remain true even if the amounts,
if any, that Acquiring Fund pays after the Transaction to Acquiring Fund
shareholders who are former Target Fund shareholders in redemption of Acquiring
Fund Shares received in exchange for Target Fund Shares, where such redemptions,
if any, appear to be initiated by such shareholders in connection with or as a
result of the Agreement or the Transaction, are considered to be assets of
Target Fund that were not transferred to Acquiring Fund.
7. Immediately after the Transaction, the shareholders of Target Fund
will be in control of Acquiring Fund within the meaning of Section 304(c) of the
Code.
8. The fair market value of the assets transferred to Acquiring Fund by
Target Fund will equal or exceed the sum of the liabilities to be assumed by
Acquiring Fund.
9. The total adjusted basis of the assets of Target Fund transferred to
Acquiring Fund will equal or exceed the sum of the liabilities to be assumed by
Acquiring Fund.
10. Following the Transaction, Acquiring Fund will continue to use a
significant portion (in this case, at least 50%) of the historic business
assets of Target Fund. Specifically, Acquiring Fund will use such significant
portion of Target Fund's historic business assets in its business by
continuing to hold at least such portion of the total assets transferred to
it by
- 3 -
<PAGE>
The One Group Louisiana Municipal Bond Fund - 4 - January 19, 1996
Paragon Louisiana Tax-Free Fund
Target Fund. In making this determination, dispositions made in the ordinary
course of Acquiring Fund's business as an open-end investment company (i.e.,
dispositions resulting from investment decisions made after the Transaction on
the basis of investment considerations independent of the Transaction) shall not
be taken into account. In addition, following the Transaction, Acquiring Fund
will continue the historic business of Target Fund as an open-end investment
company that seeks as high a level of current income exempt from Federal and
Louisiana income tax as is consistent with preservation of capital.
11. At the time of the Transaction, Acquiring Fund will not have
outstanding any warrants, options, convertible securities, or any other type of
right pursuant to which any person could acquire stock in Acquiring Fund that,
if exercised or converted, would affect the Target Fund shareholders'
acquisition or retention of control of Acquiring Fund as defined in Section
304(c) of the Code.
12. Acquiring Fund has no plan or intention to sell or otherwise dispose
of any of the assets of Target Fund acquired in the Transaction except for (i)
dispositions made in the ordinary course of its business as a series of an
open-end investment company (i.e., dispositions resulting from investment
decisions made after the Transaction on the basis of investment considerations
independent of the Transaction)and (ii) dispositions made by Acquiring Fund to
realign its portfolio in order to reflect its investment objective and conform
to its investment restrictions and/or to maintain its qualifications as a
"regulated investment company" for federal income tax purposes under Section
851 of the Code ("Realignment Dispositions"), which Realignment Dispositions
shall be limited to the extent required by the above representation relating to
the continual use by Acquiring Fund of the historic business assets of Target
Fund. For purposes of this representation, Realignment Dispositions made by
Target Fund, if any, will be considered to have been made by Acquiring Fund.
13. The liabilities of Target Fund to be assumed by Acquiring Fund were
incurred by Target Fund in the ordinary course of its business and are
associated with the assets transferred to Acquiring Fund. For purposes of this
paragraph, expenses of the Transaction are not treated as liabilities.
14. All fees and expenses incurred by Target Fund and/or Acquiring Fund in
connection with the consummation of the Transaction will be paid by the party
directly incurring such fees and expenses, except that the costs of proxy
materials and proxy solicitations will be borne by The One Group; provided,
however, that such fees and expenses will in any event be paid by the party
directly incurring such expenses if and to the extent that payment by the other
party would result in the disqualification of Acquiring Fund or Target Fund, as
the case may be, as a "regulated investment company" within the meaning of
Section 851 of the Code. All such fees and expenses incurred and borne by
either of Acquiring Fund and Target Fund shall be solely and directly related to
the Transaction and shall be paid directly by Target Fund or Acquiring Fund, as
the case may be, to the relevant providers of services or other payees, in
accordance with the principles set forth in Rev. Rul. 73-54, 1973-1 C.B. 187.
- 4 -
<PAGE>
The One Group Louisiana Municipal Bond Fund - 5 - January 19, 1996
Paragon Louisiana Tax-Free Fund
Target Fund shareholders will pay their respective expenses, if any,
incurred in connection with the Transaction.
15. For federal income tax purposes, Target Fund qualifies as a regulated
investment company, and the provisions of Sections 851 through 855 of the Code
apply to Target Fund for its current taxable year beginning December 1, 1995 and
will continue to apply to it through the Exchange Date.
In that regard, Target Fund will declare to Target Fund shareholders of
record on or prior to the Exchange Date a dividend or dividends which together
with all previous such dividends shall have the effect of distributing all of
the excess of (i) Target Fund's investment income excludable from gross income
under Section 103(a) of the Code over (ii) Target Fund's deductions disallowed
under Sections 265 and 171(a)(2) of the Code, all of Target Fund's investment
company taxable income (see Code Section 852) (computed in each case without
regard to any deduction for dividends paid) and all of Target Fund's net
realized capital gain (after reduction for any capital loss carryover) in each
case for both the taxable year ending November 30, 1995 and the short taxable
period beginning on December 1, 1995 and ending on the Exchange Date. Such
dividends will be made to ensure continued qualification of Target Fund as a
regulated investment company for tax purposes and to eliminate fund-level tax.
16. Acquiring Fund has not yet filed its first tax return and thus has not
yet elected to be a regulated investment company for federal tax purposes.
However, upon filing its first income tax return at the completion of its first
taxable year, Acquiring Fund will elect to be a regulated investment company and
until such time will take all steps necessary to ensure that it qualifies as a
regulated investment company, including at all times being a series of a
trust that is registered as an investment company under the Investment Company
Act of 1940.
17. There is no intercorporate indebtedness existing between Target Fund
and Acquiring Fund.
18. Target Fund will distribute the Acquiring Fund Shares it receives in
the Transaction to its shareholders as provided in the Agreement.
19. Target Fund is not under the jurisdiction of a court in a Title 11 or
similar case within the meaning of Section 368(a)(3)(A) of the Code.
Based on the foregoing representations and our review of the documents and
items referred to above, and provided that all facts represented to be true "to
the best of the
- 5 -
<PAGE>
The One Group Louisiana Municipal Bond Fund - 6 - January 19, 1996
Paragon Louisiana Tax-Free Fund
knowledge of the management" of the relevant fund are, in fact, true (whether or
not known), we are of the opinion that for federal income tax purposes:
(i) No gain or loss will be recognized by Target Fund upon the transfer of
Target Fund's assets to Acquiring Fund in exchange for Acquiring Fund
Shares and the assumption by Acquiring Fund of the liabilities of
Target Fund, or upon the distribution of Acquiring Fund Shares by
Target Fund to its shareholders in liquidation;
(ii) No gain or loss will be recognized by the Target Fund shareholders
upon the exchange of their Target Fund Shares for Acquiring Fund
Shares;
(iii) The basis of Acquiring Fund Shares a Target Fund shareholder receives
in connection with the Transaction will be the same as the basis of
his or her Target Fund Shares exchanged therefor;
(iv) A Target Fund shareholder's holding period for his or her Acquiring
Fund Shares will be determined by including the period for which he
or she held the Target Fund Shares exchanged therefor, provided
that he or she held such Target Fund shares as capital assets;
(v) No gain or loss will be recognized by Acquiring Fund upon the
receipt of the assets of Target Fund in exchange for Acquiring Fund
Shares and the assumption by Acquiring Fudn of the liabilities of
Target Fund;
(vi) The basis in the hands of Acquiring Fund of the assets of Target
Fund transferred to Acquiring Fund in the Transaction will be the
same as the basis of such assets in the hands of Target Fund
immediately prior to the transfer; and
(vii) The holding periods of the assets of Target Fund in the hands of
Acquiring Fund will include the periods during which such assets
were held by Target Fund;
Very truly yours,
Ropes & Gray
- 6 -
<PAGE>
January 19, 1996
The One Group U.S. Treasury
Securities Money Market Fund
c/o The One Group
3435 Stelzer Road
Columbus, OH 43219
Paragon Treasury Money Market Fund
c/o Paragon Portfolio
4900 Sears Tower
Chicago, IL 60606
Ladies and Gentlemen:
We have acted as counsel in connection with the Plan of Reorganization (the
"Agreement") as approved by the Board of Trustees of Paragon Portfolio on
October 31, 1995, as amended, between The One Group U.S. Treasury Securities
Money Market Fund ("Acquiring Fund"), a portfolio of The One Group, a
Massachusetts business trust and Paragon Treasury Money Market Fund ("Target
Fund"), a portfolio of Paragon Portfolio, a Massachusetts business trust. The
Agreement describes a proposed transaction (the "Transaction") to occur on a
date to be agreed upon by Acquiring Fund and Target Fund (the "Exchange Date"),
pursuant to which Acquiring Fund will acquire substantially all of the assets of
Target Fund in exchange for shares of beneficial interest in Acquiring Fund (the
"Acquiring Fund Shares") and the assumption by Acquiring Fund of all of the
liabilities of Target Fund following which the Acquiring Fund Shares received by
Target Fund will be distributed by Target Fund to its shareholders in
liquidation and termination of Target Fund. This opinion as to certain federal
income tax consequences of the Transaction is furnished to you pursuant to
Sections 9(g) and 10(g) of the Agreement. Capitalized terms not defined herein
are defined in the Agreement.
Target Fund is a series of Paragon Portfolio which is registered under the
Investment Company Act of 1940, as amended (the "1940 Act") as an open-end
management investment company. Shares of Target Fund are redeemable at net
asset value at each shareholder's option. Target Fund has elected to be a
<PAGE>
The One Group U.S. Treasury Securities Fund -2- January 19, 1996
Paragon Treasury Money Market Fund
regulated investment company for federal income tax purposes under Section
851 of the Internal Revenue Code of 1986, as amended (the "Code").
Acquiring Fund is a series of the One Group registered under the 1940
Act as an open-end management investment company. Shares of Acquiring Fund are
redeemable at net asset value at each shareholder's option. Acquiring Fund has
elected to be a regulated investment company for federal income tax purposes
under Section 851 of the Internal Revenue Code of 1986, as amended (the "Code").
Acquiring Fund is registered under the 1940 Act as an open-end management
investment company. Shares of Acquiring Fund are redeemable at net asset value
at each shareholder's option. Acquiring Fund has elected to be a regulated
investment company for federal income tax purposes under Section 851 of the
Code.
For purposes of this opinion, we have considered the Agreement, the
Registration Statement filed with the Securities and Exchange Commission on
January 19, 1996 (including the items incorporated by reference therein), and
such other items as we have deemed necessary to render this opinion. In
addition, you have represented to us the following facts, occurrences and
information upon which you have indicated we may rely in rendering this opinion
(whether or not contained or reflected in the documents and items referred to
above):
1. Target Fund will transfer to Acquiring Fund all of its assets, and
Acquiring Fund will assume all of the liabilities of Target Fund as of the
Exchange Date.
2. The fair market value of the Acquiring Fund Shares received by each
Target Fund shareholder will be approximately equal to the fair market value of
the Target Fund shares surrendered in exchange therefor. The Target Fund
shareholders will receive no consideration other than Acquiring Fund Shares
(which may include fractional shares) in exchange for their shares of beneficial
interest in Target Fund (the "Target Fund Shares").
3. None of the compensation received by any shareholder-employees of
Target Fund, if any, will be separate consideration for, or allocable to, any of
their Target Fund Shares; none of the Acquiring Fund Shares received by any
Target Fund shareholder-employees will be separate consideration for, or
allocable to, any employment; and the compensation paid to any Acquiring Fund or
Target Fund shareholder-employees, if any, will be for services actually
rendered and will be commensurate with amounts paid to third parties bargaining
at arm's length for similar services.
4. There is no plan or intention by any Target Fund shareholder who owns
5% or more of the total outstanding Target Fund Shares, and to the best of the
knowledge of the management of Target Fund, there is no plan or intention on the
part of the remaining Target Fund shareholders to sell, exchange, or otherwise
dispose of a number of Acquiring Fund Shares received in the Transaction that
would reduce Target Fund shareholders' ownership of Acquiring Fund Shares to a
number of Acquiring Fund Shares having a value, as of the date of
-2-
<PAGE>
The One Group U.S. Treasury Securities Fund -3- January 19, 1996
Paragon Treasury Money Market Fund
the Transaction, of less than 50 percent of the value of all of the formerly
outstanding Target Fund Shares as of the same date. For purposes of this
representation, Acquiring Fund Shares or Target Fund Shares surrendered by
Target Fund shareholders in redemption or otherwise disposed of, where such
dispositions, if any, appear to be initiated by Target Fund shareholders in
connection with or as a result of the Agreement or the Transaction, will be
treated as outstanding Target Fund shares on the date of the Transaction.
5. Acquiring Fund has no plan or intention to reacquire any of the
Acquiring Fund Shares issued in the Transaction, except for Acquiring Fund
Shares reacquired in the ordinary course of its business as an open-end
investment company.
6. Acquiring Fund will acquire at least 90 percent of the fair market
value of the net assets and at least 70 percent of the fair market value of the
gross assets held by Target Fund immediately prior to the Transaction. For
purposes of this representation, (a) amounts paid by Target Fund, out of the
assets of Target Fund, to Target Fund shareholders in redemption of Target Fund
Shares, where such redemptions, if any, appear to be initiated by Target Fund
shareholders in connection with or as a result of the Agreement or the
Transaction, (b) amounts used by Target Fund to pay expenses of the Transaction,
and (c) amounts used to effect all redemptions and distributions (except for
regular, normal dividends declared and paid in order to ensure Target Fund's
continued qualification as a regulated investment company and to avoid fund-
level tax) made by Target Fund immediately preceding the transfer will be
included as assets of Target Fund held immediately prior to the Transaction.
Further, to the best of the knowledge of the managements of each of Acquiring
Fund and Target Fund, this representation will remain true even if the amounts,
if any, that Acquiring Fund pays after the Transaction to Acquiring Fund
shareholders who are former Target Fund shareholders in redemption of Acquiring
Fund Shares received in exchange for Target Fund Shares, where such redemptions,
if any, appear to be initiated by such shareholders in connection with or as a
result of the Agreement or the Transaction, are considered to be assets of
Target Fund that were not transferred to Acquiring Fund.
7. The fair market value of the assets transferred to Acquiring Fund by
Target Fund will equal or exceed the sum of the liabilities to be assumed by
Acquiring Fund.
8. Following the Transaction, Acquiring Fund will continue to use a
substantial portion (in this case, at least 50%) of the historic business assets
of Target Fund. Specifically, Acquiring Fund will use such significant portion
of Target Fund's historic business assets in its business by continuing to hold
at least such portion of the total assets transferred to it by Target Fund. In
making this determination, dispositions made in the ordinary course of
-3-
<PAGE>
The One Group U.S. Treasury Securities Fund -4- January 19, 1996
Paragon Treasury Money Market Fund
Acquiring Fund's business as an open-end investment company (i.e., dispositions
resulting from investment decisions made after the Transaction on the basis of
investment considerations independent of the Transaction) shall not be taken
into account. In addition, following the Transaction, Acquiring Fund will
continue the historic business of Target Fund as an open-end investment company
which seeks to maximize current income to the extent consistent with
preservation of capital and maintenance of liquidity by investing in securities
issued or guaranteed by the U.S. Treasury and repurchase agreements relating to
such securities.
9. Acquiring Fund has no plan or intention to sell or otherwise dispose
of any of the assets of Target Fund acquired in the Transaction except for (i)
dispositions made in the ordinary course of its business as a series of an
open-end investment company (i.e., dispositions resulting from investment
decisions made after the Transaction on the basis of investment considerations
independent of the Transaction)and (ii) dispositions made by Acquiring Fund to
realign its portfolio in order to reflect its investment objective and conform
to its investment restrictions and/or to maintain its qualifications as a
"regulated investment company" for federal income tax purposes under Section
851 of the Code ("Realignment Dispositions"), which Realignment Dispositions
shall be limited to the extent required by the above representation relating
to the continual use by Acquiring Fund of the historic business assets of
Target Fund. For purposes of this representation, Realignment Dispositions
made by Target Fund, if any, will be considered to have been made by Acquiring
Fund.
10. The liabilities of Target Fund to be assumed by Acquiring Fund were
incurred by Target Fund in the ordinary course of its business and are
associated with the assets transferred to Acquiring Fund. For purposes of this
paragraph, expenses of the Transaction are not treated as liabilities.
11. All fees and expenses incurred by Target Fund and/or Acquiring Fund in
connection with the consummation of the Transaction will be paid by the party
directly incurring such fees and expenses, except that the costs of proxy
materials and proxy solicitations will be borne by The One Group; provided,
however, that such fees and expenses will in any event be paid by the party
directly incurring such expenses if and to the extent that payment by the other
party would result in the disqualification of Acquiring Fund or Target Fund, as
the case may be, as a "regulated investment company" within the meaning of
Section 851 of the Code. All such fees and expenses incurred and borne by
either of Acquiring Fund and Target Fund shall be solely and directly related to
the Transaction and shall be paid directly by Target Fund or Acquiring Fund, as
the case may be, to the relevant providers of services or other payees, in
accordance with the principles set forth in Rev. Rul. 73-54, 1973-1 C.B. 187.
Target Fund shareholders will pay their respective expenses, if any,
incurred in connection with the Transaction.
12. For federal income tax purposes, Target Fund qualifies as a regulated
investment company, and the provisions of Sections 851 through 855 of the Code
apply to Target Fund for its current taxable year beginning December 1, 1995 and
will continue to apply to it
-4-
<PAGE>
The One Group U.S. Treasury Securities Fund -4- January 19, 1996
Paragon Treasury Money Market Fund
through the Exchange Date.
In that regard, Target Fund will declare to Target Fund shareholders of
record on or prior to the Exchange Date a dividend or dividends which together
with all previous such dividends shall have the effect of distributing all of
Target Fund's investment company taxable income (see Code Section 852) for both
the taxable year ending November 30, 1995 and the short taxable year of Target
Fund beginning on December 1, 1995 and ending on the Exchange Date (computed in
each case without regard to any deduction for dividends paid) and all of the net
capital gain realized in Target Fund's taxable year ending November 30, 1995 and
in its short taxable year beginning on December 1, 1995 and ending on the
Exchange Date (after reduction for any capital loss carryover). Such dividends
will be made to ensure continued qualification of Target Fund as a regulated
investment company for tax purposes and to eliminate fund-level tax.
13. For federal income tax purposes, Acquiring Fund qualifies as a
regulated investment company, and the provisions of Sections 851 through 855 of
the Code apply to Acquiring Fund for its current taxable year beginning July 1,
1995 and will continue to apply to it through the Exchange Date.
14. Acquiring Fund does not own, directly or indirectly, nor has it owned
during the past five years, directly or indirectly, any Target Fund Shares.
15. There is no intercorporate indebtedness existing between Target Fund
and Acquiring Fund.
16. Target Fund will distribute the Acquiring Fund Shares it receives in
the Transaction to its shareholders as provided in the Agreement.
17. Target Fund is not under the jurisdiction of a court in a Title 11 or
similar case within the meaning of Section 368(a)(3)(A) of the Code.
Based on the foregoing representations and our review of the documents and
items referred to above, and provided that all facts represented to be true "to
the best of the knowledge of the management" of the relevant fund are, in fact,
true (whether or not known), we are of the opinion that for federal income tax
purposes:
(i) No gain or loss will be recognized by Target Fund upon the transfer of
Target Fund's assets to Acquiring Fund in exchange for Acquiring Fund
Shares and the
-5-
<PAGE>
The One Group U.S. Treasury Securities Fund -6- January 19, 1996
Paragon Treasury Money Market Fund
assumption by Acquiring Fund of the liabilities of Target Fund, or
upon the distribution of Acquiring Fund Shares by Target Fund to its
shareholders in liquidation;
(ii) No gain or loss will be recognized by the Target Fund shareholders
upon the exchange of their Target Fund Shares for Acquiring Fund
Shares;
(iii) The basis of Acquiring Fund Shares a Target Fund shareholder receives
in connection with the Transaction will be the same as the basis of
his or her Target Fund Shares exchanged therefor;
(iv) A Target Fund shareholder's holding period for his or her Acquiring
Fund Shares will be determined by including the period for which he or
she held the Target Fund Shares exchanged therefor, provided that he
or she held such Target Fund shares as capital assets;
(v) No gain or loss will be recognized by Acquiring Fund upon the receipt
of the assets of Target Fund in exchange for Acquiring Fund Shares and
the assumption by Acquiring Fund of the liabilities of Target Fund;
(vi) The basis in the hands of Acquiring Fund of the assets of Target Fund
transferred to Acquiring Fund in the Transaction will be the same as
the basis of such assets in the hands of Target Fund immediately prior
to the transfer; and
(vii) The holding periods of the assets of Target Fund in the hands of
Acquiring Fund will include the periods during which such assets were
held by Target Fund;
Very truly yours,
Ropes & Gray
4061232.02
-6-
<PAGE>
Exhibit (13)(a)
<PAGE>
MANAGEMENT AND ADMINISTRATION AGREEMENT
AGREEMENT made this 1st day of December, 1995, between The One Group (the
"Trust"), a Massachusetts business trust having its principal place of business
at 774 Park Meadow Drive, Westerville, Ohio 43081, and The One Group Services
Company ("Administrator"), a Delaware corporation having its principal place of
business at 3435 Stelzer Road, Columbus, Ohio 43219.
WHEREAS, the Trust is an open-end management investment company, organized
as a Massachusetts business trust and registered with the Securities and
Exchange Commission (the "Commission") under the Investment Company Act of 1940
(the "1940 Act"); and
WHEREAS, the Trust desires to retain Administrator to furnish management
and administration services to certain investment portfolios of the Trust and
may retain Administrator to serve in such capacity with respect to additional
investment portfolios of the Trust, all as now or hereafter may be identified in
Schedule A hereto as such Schedule may be amended from time to time
(individually referred to herein as a "Fund" and collectively referred to herein
as the "Funds").
NOW, THEREFORE, in consideration of the mutual premises and covenants
herein set forth, the parties agree as follows:
1. SERVICES AS MANAGER AND ADMINISTRATOR
Subject to the direction and control of the Board of Trustees of the Trust,
Administrator will assist in supervising all aspects of the operations of the
Funds except those performed by the investment adviser for the Funds under its
Investment Advisory Agreement, the custodian for the Funds under its Custodian
Agreement, the transfer agent for the Funds under its Transfer Agency Agreement
and the fund accountant for the Funds under its Fund Accounting Agreement.
Administrator will maintain office facilities (which may be in the offices
of Administrator or an affiliate but shall be in such location as the Trust
shall reasonably determine); furnish statistical and research data, clerical and
certain bookkeeping services and stationery and office supplies; prepare the
periodic reports to the Commission on Form N-SAR or any replacement forms
therefor; compile data for, assist the Trust or its designee in the preparation
of, and file, all the Funds' federal and state tax returns and required tax
filings other than those required to be made by the Funds' custodian and
transfer agent; prepare compliance filings pursuant to state securities laws
with the advice of the Trust's counsel; assist to the extent requested by the
Trust with the Trust's preparation of its Annual and Semi-Annual Reports to
Shareholders and its Registration Statements (on Form N-1A or any replacement
therefor); compile data for and prepare for filing Notices to the Commission
required pursuant to Rule 24f-2 under the 1940 Act; keep and maintain the
financial accounts and records of the Funds, including calculation of daily
expense accruals; in the case of money market funds, periodic review of the
amount of the deviation, if any, of the current net asset value per share
(calculated using available market quotations or an appropriate substitute that
reflects current market conditions) from each money market fund's amortized cost
price per share; and generally assist in all aspects of the operations
<PAGE>
of the Funds. In compliance with the requirements of Rule 31a-3 under the 1940
Act, Administrator hereby agrees that all records which it maintains for the
Trust are the property of the Trust and further agrees to surrender promptly to
the Trust any of such records upon the Trust's request. Administrator further
agrees to preserve for the periods prescribed by Rule 31a-2 under the 1940 Act
the records required to be maintained by Rule 31a-1 under the 1940 Act.
Administrator may delegate some or all of its responsibilities under this
Agreement.
2. FEES; EXPENSES; EXPENSE REIMBURSEMENT
In consideration of services rendered and expenses assumed pursuant to this
Agreement, each of the Funds will pay Administrator on the first business day of
each month, or at such time(s) as Administrator shall request and the parties
hereto shall agree, a fee computed daily and paid as specified below calculated
at the applicable annual rate set forth on Schedule A hereto. The fee for the
period from the day of the month this Agreement is entered into until the end of
that month shall be prorated according to the proportion which such period bears
to the full monthly period. Upon any termination of this Agreement before the
end of any month, the fee for such part of a month shall be prorated according
to the proportion which such period bears to the full monthly period and shall
be payable upon the date of termination of this Agreement.
For the purpose of determining fees payable to Administrator, the value of
the net assets of a particular Fund shall be computed in the manner described in
the Trust's Declaration of Trust or in the Prospectus or Statement of Additional
Information respecting that Fund as from time to time is in effect for the
computation of the value of such net assets in connection with the determination
of the liquidating value of the shares of such Fund.
Administrator will from time to time employ or associate with itself such
person or persons as Administrator may believe to be particularly fitted to
assist it in the performance of this Agreement. Such person or persons may be
partners, officers, or employees who are employed by both Administrator and the
Trust. The compensation of such person or persons shall be paid by
Administrator and no obligation may be incurred on behalf of the Funds in such
respect. Other expenses to be incurred in the operation of the Funds including
taxes, interest, brokerage fees and commissions, if any, fees of Trustees who
are not partners, officers, directors, shareholders or employees of
Administrator or the investment adviser or distributor for the Funds, Commission
fees and state Blue Sky qualification and renewal fees and expenses, investment
advisory fees, custodian fees, transfer and dividend disbursing agents' fees,
fund accounting fees including pricing of portfolio securities, service
organization fees, certain insurance premiums, outside and, to the extent
authorized by the Trust, inside auditing and legal fees and expenses, costs of
maintenance of corporate existence, typesetting and printing prospectuses for
regulatory purposes and for distribution to current shareholders of the Funds,
costs of shareholders' and Trustees' reports and meetings and any extraordinary
expenses will be borne by the Funds; provided, however, that the Funds will not
bear, directly or indirectly, the cost of any activity which is primarily
intended to result in the distribution of shares of the Funds.
If in any fiscal year the aggregate expenses of a particular Fund (as
defined under the securities regulations of any state having jurisdiction over
the Trust) exceed the expense limitations of any such state, Administrator will
reimburse such Fund for a portion of such excess expenses equal to such excess
times the ratio of the fees respecting such Fund otherwise payable
<PAGE>
to Administrator hereunder to the aggregate fees respecting such Fund otherwise
payable to Administrator hereunder and to Banc One Investment Advisors
Corporation under the Investment Advisory Agreements between Banc One Investment
Advisors Corporation and the Trust. The expense reimbursement obligation of
Administrator is limited to the amount of its fees hereunder for such fiscal
year, provided, however, that notwithstanding the foregoing, Administrator shall
reimburse a particular Fund for such proportion of such excess expenses
regardless of the amount of fees paid to it during such fiscal year to the
extent that the securities regulations of any state having jurisdiction over the
Trust so require. Such expense reimbursement, if any, will be estimated daily
and reconciled and paid on a monthly basis.
3. PROPRIETARY AND CONFIDENTIAL INFORMATION
Administrator agrees on behalf of itself and its partners and employees to
treat confidentially and as proprietary information of the Trust all records and
other information relative to the Trust and prior, present, or potential
shareholders, and not to use such records and information for any purpose other
than performance of its responsibilities and duties hereunder, except after
prior notification to and approval in writing by the Trust, which approval shall
not be unreasonably withheld and may not be withheld where Administrator may be
exposed to civil or criminal contempt proceedings for failure to comply, when
requested to divulge such information by duly constituted authorities, or when
so requested by the Trust.
4. LIMITATION OF LIABILITY; RELIANCE ON RECORDS AND INSTRUCTIONS;
INDEMNIFICATION
Administrator shall use its best efforts to ensure the accuracy of all
services performed under this Agreement but shall not be liable for any loss
suffered by the Funds in connection with the matters to which this Agreement
relates, except for a loss resulting from willful misfeasance, bad faith or
negligence on its part in the performance of its duties or from reckless
disregard by it of its obligations and duties under this Agreement. Any person,
even though also, an employee, or agent of Administrator, who may be or become
an officer, Trustee, employee or agent of the Trust or the Funds shall be
deemed, when rendering services to the Trust or the Funds, or acting on any
business of that party, to be rendering such services to or acting solely for
that party and not as a partner, employee, or agent or one under the control or
direction of Administrator even though paid by it.
The Trust agrees to indemnify and hold harmless Administrator, its
employees, agents, directors, officers and nominees from and against any and all
liabilities or expenses, including but not limited to attorney fees, in
connection with any claims or regulatory actions based upon reasonable reliance
on written information or records with respect to a Fund given to Administrator
by a duly authorized representative of the Sub-Administrator, Fund Accountant,
or Distributor; provided, that this indemnification shall not apply to actions
or omissions of Administrator in cases of its own bad faith, willful
misfeasance, negligence or from reckless disregard by it of its obligations and
duties, and further provided that prior to confessing any claims against it
which may be the subject of this indemnification, Administrator shall give the
Trust written notice of and reasonable opportunity to defend against said claim
in its own name or in the name of Administrator.
<PAGE>
5. TERM
This Agreement shall become effective as of the date first written above
(or, if a particular Fund is not in existence on the date, on the date an
amendment to Schedule A to this Agreement relating to that Fund is executed) and
shall continue until November 30, 1996, and unless sooner terminated as provided
herein, thereafter shall be renewed automatically for successive one-year terms,
unless written notice not to renew is given by the non-renewing party to the
other party at least 60 days prior to the expiration of the then-current term;
provided that such continuance is specifically reviewed and approved at least
annually (a) by the vote of a majority of the Trust's Board of Trustees or by
the vote of a majority of the outstanding voting securities of such Fund and (b)
by the majority of the Trust's Trustees who are not parties to the Agreement or
interested persons (as defined in the 1940 Act) of any party to this Agreement,
by vote cast in person at a meeting called for the purpose of voting on such
approval. The scope of such review shall be whether there is any "cause" (as
defined below) that would justify terminating the Agreement. This Agreement is
terminable with respect to a particular Fund through a failure to renew at the
end of a five-year term; upon mutual agreement of the parties hereto; or for
"cause" by the party alleging "cause," in any case on not less than 60 days
written notice by the Trust's Board of Trustees or by Administrator. Written
notice not to renew may be given for any reason, with or without "cause" (as
defined below).
For purposes of this Agreement, "cause" shall mean (a) willful misfeasance,
bad faith, gross negligence or reckless disregard on the part of the party to be
terminated with respect to its obligations and duties set forth herein; (b) a
final, unappealable judicial, regulatory or administrative ruling or order in
which the party to be terminated has been found guilty of criminal or unethical
behavior in the conduct of its business; (c) financial difficulties on the part
of the party to be terminated which is evidenced by the authorization or
commencement of, or involvement by way of pleading, answer, consent, or
acquiescence in, a voluntary or involuntary case under Title 11 of the United
States Code, as from time to time is in effect, or any applicable law, other
than said Title 11, of any jurisdiction relating to the liquidation or
reorganization of debtors or to the modification or alteration of the rights of
creditors; or (d) any circumstance which substantially impairs the performance
of the obligations and duties of the party to be terminated, or the ability to
perform those obligations and duties, as contemplated herein. Notwithstanding
the foregoing, the absence of either or both an annual review or ratification of
this Agreement by the Board of Trustees shall not, in and of itself, constitute
"cause" as used herein.
If, for any reason other than "cause" as defined above, Administrator is
replaced as fund manager and administrator, or if a third party is added to
perform all or a part of the services provided by Administrator under this
Agreement (excluding any sub-administrator appointed by Administrator as
provided in Section 1 hereof), then the Trust shall make a one-time cash
payment, as liquidated damages, to Administrator equal to the balance due
Administrator for the remainder of the term of this Agreement, assuming for
purposes of calculation of the payment that the asset level of the Trust on the
date Administrator is replaced, or a third party is added, will remain constant
for the balance of the contract term.
6. USE OF SUB-ADMINISTRATOR
<PAGE>
Administrator shall retain Banc One Investment Advisors Corporation
("BOIA") to provide sub-administration services pursuant to a sub-administration
agreement among Administrator, BOIA and the Trust dated as of the date first
written above. Such sub-administration agreement shall not be terminated during
the term of this Agreement without the specific written approval of the Trust.
Administrator shall not bear any responsibility or liability whatsoever to the
Trust for duties to be performed by BOIA under such sub-administration
agreement.
7. GOVERNING LAW AND MATTERS RELATING TO THE TRUST AS A MASSACHUSETTS
BUSINESS TRUST
This Agreement shall be governed by the law of the Commonwealth of
Massachusetts. It is expressly agreed that the obligations of the Trust
hereunder shall not be binding upon any of the Trustees, shareholders, nominees,
officers, agents or employees of the Trust personally, but shall bind only the
trust property of the Trust. The execution and delivery of this Agreement have
been authorized by the Trustees, and this Agreement has been signed and
delivered by an authorized officer of the Trust, acting as such, and neither
such authorization by the Trustees nor such execution and delivery by such
officer shall be deemed to have been made by any of them individually or to
impose any liability on any of them personally, but shall bind only the trust
property of the Trust as provided in the Trust's Agreement and Declaration of
Trust.
IN WITNESS WHEREOF, the parties hereto have caused this instrument to
be executed by their officers designated below as of the day and year first
written above.
THE ONE GROUP THE ONE GROUP SERVICES COMPANY
By: Mark Dillon By: Steve Mintos
----------------------- ----------------------------
Title: President Title: Executive Vice President
----------------------- ----------------------------
Date: December 13, 1995 Date: December 13, 1995
----------------------- ----------------------------
<PAGE>
SCHEDULE A
TO THE MANAGEMENT AND ADMINISTRATION AGREEMENT
BETWEEN
THE ONE GROUP-Registered Trademark-
AND
THE ONE GROUP SERVICES COMPANY
NAME OF THE MULTIPLE CLASS FUND
- -------------------------------
The U. S. Treasury Securities Money Market Fund
The Prime Money Market Fund
The Municipal Money Market Fund (formerly The Tax-Free Money Market Portfolio)
The Ohio Municipal Money Market Fund
The Income Equity Fund
The Disciplined Value Fund
The Small Company Growth Fund (formerly the Growth Equity Portfolio)
The International Equity Index Fund
The Large Company Value Fund (formerly The Quantitative Equity Portfolio)
The Equity Index Fund
The Income Bond Fund (formerly The Income Portfolio)
The Limited Volatility Bond Fund
The Intermediate Tax-Free Bond Fund
The Ohio Municipal Bond Fund
The Government Bond Fund
The Government ARM Fund
The Asset Allocation Fund (formerly The Flexible Balanced Portfolio)
The Tax-Free Bond Fund
The Texas Tax-Free Bond Fund
The West Virginia Tax-Free Fund
The Kentucky Municipal Bond Fund
The Intermediate Bond Fund
The Arizona Tax-Free Bond Fund
The Large Company Growth Fund
COMPENSATION REGARDING MULTIPLE CLASS FUNDS
Compensation for each of the above Funds (the "Multiple Class Funds") shall
be at annual rates of the Fund's average daily net assets as follows: twenty
one-hundredths of one percent (.20%) of amounts included in that portion of the
aggregate daily net assets of all Multiple Class Funds subject to this Agreement
equal to or less than $1,500,000,000; eighteen one-hundredths of one percent
(.18%) of amounts included in that portion of the aggregate daily net assets of
all Multiple Class Funds subject to this Agreement between $1,500,000,000 and
$2,000,000,000; and sixteen one-hundredths of one percent (.16%) of amounts
included in that portion of the aggregate daily net assets of all Multiple Class
Funds subject to this Agreement in excess of $2,000,000,000. The fees
pertaining to each Multiple Class Fund shall be computed daily in amounts
strictly proportionate to the amount of the Fund's average daily net assets as a
percentage of the aggregate daily net assets of all Multiple Class Funds subject
to this Agreement, and shall be paid periodically.A-1
A-1
<PAGE>
NAME OF SINGLE CLASS FUND
- -------------------------
The One Group Treasury Money Market Fund
The One Group Treasury Only Money Market Fund
The One Group Government Money Market Fund
The One Group Tax Exempt Money Market Fund
The One Group Institutional Prime Money Market Fund
COMPENSATION REGARDING SINGLE CLASS FUNDS
Compensation for each of the Funds listed immediately above (the "Single
Class Funds") shall be at the following annual rates: With respect to The One
Group Treasury Money Market, The One Group Treasury Only Money Market, The One
Group Government Money Market, and The One Group Tax Exempt Money Market Funds:
five one-hundredths of one percent (.05%) of the Fund's average daily net
assets; and with respect to The One Group Institutional Prime Money Market Fund:
four one-hundredths of one percent (.04%) of the Fund's average daily net
assets. The fees pertaining to each Single Class Fund shall be computed daily
and paid periodically.
COMPENSATION TO BE REDUCED BY FUND ACCOUNTING FEES
The compensation under this Agreement due to The One Group Services Company
with respect to each Multiple Class Fund and each Single Class Fund shall be
reduced in each month by the amount of compensation paid to The One Group
Service Company under its Fund Accounting Agreement with The One Group with
respect to such Fund.
THE ONE GROUP-Registered Trademark-
By: Mark Dillon
----------------------------
Title: President
----------------------------
Date: December 1, 1995
----------------------------
THE ONE GROUP SERVICES COMPANY
By: Steve Mintos
----------------------------
Title: Executive Vice President
----------------------------
Date: December 1, 1995
----------------------------
A-2
<PAGE>
Exhibit (13)(c)
<PAGE>
FUND ACCOUNTING AGREEMENT
AGREEMENT made this 1st day of December, 1995, between THE ONE GROUP (the
"Trust"), a Massachusetts business trust having its principal place of business
at 774 Park Meadow Drive, Westerville, Ohio 43081 and THE ONE GROUP SERVICES
COMPANY ("TOGSC"), a corporation organized under the laws of the State of
Delaware and having its principal place of business at 3435 Stelzer Road,
Columbus, Ohio 43219.
WHEREAS, the Trust desires that TOGSC perform certain fund accounting
services for each investment portfolio of the Trust identified on Schedule A
hereto, as such Schedule shall be amended from time to time (individually
referred to herein as the "Fund" and collectively as the "Funds"); and
WHEREAS, TOGSC is willing to perform such services on the terms and
conditions set forth in this Agreement.
NOW, THEREFORE, in consideration of the mutual premises and covenants
herein set forth, the parties agree as follows:
1. SERVICES AS FUND ACCOUNTANT.
(a) MAINTENANCE OF BOOKS AND RECORDS. TOGSC will keep and maintain
the following books and records of each Fund pursuant to Rule
31a-1 under the Investment Company Act of 1940 (the "Rule"):
(i) journals containing an itemized daily record in detail of
all purchases and sales of securities, all receipts and
disbursements of cash and all other debits and credits, as
required by subsection (b)(1) of the Rule;
(ii) general and auxiliary ledgers reflecting all asset,
liability, reserve, capital, income and expense accounts,
including interest accrued and interest received, as
required by subsection (b)(2)(i) of the Rule;
(iii)separate ledger accounts required by subsection
(b)(2)(ii) and (iii) of the Rule; and
(iv) a monthly trial balance of all ledger accounts (except
shareholder accounts) as required by subsection (b)(8) of
the Rule.
(b) PERFORMANCE OF DAILY ACCOUNTING SERVICES. In addition to the
maintenance of the books and records specified above, TOGSC shall
perform the following accounting services daily for each Fund:
<PAGE>
(i) calculate the net asset value per share utilizing prices
obtained from the sources described in subsection 1(b)(ii)
below;
(ii) obtain security prices from independent pricing services, or
if such quotes are unavailable, then obtain such prices from
each Fund's investment adviser or its designee, as approved
by the Trust's Board of Trustees;
(iii)verify and reconcile with the Funds' custodian all daily
trade activity;
(iv) compute, as appropriate, each Fund's net income and capital
gains, dividend payables, dividend factors, 7-day yields, 7-
day effective yields, 30-day yields, and weighted average
portfolio maturity;
(v) review daily the net asset value calculation and dividend
factor (if any) for each Fund prior to release to
shareholders, check and confirm the net asset values and
dividend factors for reasonableness and deviations, and
distribute net asset values and yields to NASDAQ;
(vi) report to the Trust the daily market pricing of securities
in any money market Funds, with the comparison to the
amortized cost basis;
(vii) determine unrealized appreciation and depreciation on
securities held in variable net asset value Funds;
(viii)amortize premiums and accrete discounts on securities
purchased at a price other than face value, if requested by
the Trust;
(ix) update fund accounting system to reflect rate changes, as
received from a Fund's investment adviser, on variable
interest rate instruments;
(x) post Fund transactions to appropriate categories;
(xi) accrue expenses of each Fund according to instructions
received from the Trust's Administrator;
(xii) determine the outstanding receivables and payables for all
(1) security trades, (2) Fund share transactions and (3)
income and expense accounts;
(xiii) provide accounting reports in connection with the Trust's
regular annual audit and other audits and examinations by
regulatory agencies; and
<PAGE>
(xiv) provide such periodic reports as the parties shall agree
upon, as set forth in a separate schedule.
(c) SPECIAL REPORTS AND SERVICES.
(i) TOGSC may provide additional special reports upon the
request of the Trust or a Fund's investment adviser, which
may result in an additional charge, the amount of which
shall be agreed upon between the parties.
(ii) TOGSC may provide such other similar services with respect
to a Fund as may be reasonably requested by the Trust, which
may result in an additional charge, the amount of which
shall be agreed upon between the parties.
(d) ADDITIONAL ACCOUNTING SERVICES. TOGSC shall also perform the
following additional accounting services for each Fund:
(i) Provide monthly a download (and hard copy thereof) of the
financial statements described below, upon request of the
Trust. The download will include the following items:
Statement of Assets and Liabilities,
Statement of Operations,
Statement of Changes in Net Assets, and
Condensed Financial Information;
(ii) Provide accounting information for the following:
(A) federal and state income tax returns and federal excise
tax returns;
(B) the Trust's semi-annual reports with the Securities and
Exchange Commission ("SEC") on Form N-SAR;
(C) the Trust's annual, semi-annual and quarterly (if any)
shareholder reports;
(D) registration statements on Form N-1A and other filings
relating to the registration of shares;
(E) the Administrator's monitoring of the Trust's status as
a regulated investment company under Subchapter M of
the Internal Revenue Code, as amended;
(F) annual audit by the Trust's auditors; and
(G) examinations performed by the SEC.
2. SUBCONTRACTING.
TOGSC may, at its expense, subcontract with any entity or person
concerning the provision of the services contemplated hereunder;
provided, however, that TOGSC shall not be relieved of any of its
obligations under this Agreement by
<PAGE>
the appointment of such subcontractor and provided further, that TOGSC
shall be responsible, to the extent provided in Section 7 hereof, for
all acts of such subcontractor as if such acts were its own.
3. COMPENSATION.
The Trust shall pay TOGSC for the services to be provided by TOGSC
under this Agreement in accordance with, and in the manner set forth
in, Schedule B hereto, as such Schedule may be amended from time to
time.
4. REIMBURSEMENT OF EXPENSES.
In addition to paying TOGSC the fees described in Section 3 hereof,
the Trust agrees to reimburse TOGSC for its out-of-pocket expense in
obtaining security market quotes pursuant to Section 1(b)(ii) above.
5. EFFECTIVE DATE.
This Agreement shall become effective with respect to a Fund as of the
date first written above (or, if a particular Fund is not in existence
on that date, on the date an amendment to Schedule A to this Agreement
relating to the Fund is executed) (the "Effective Date").
6. TERM.
This Agreement shall continue in effect with respect to a Fund, unless
earlier terminated by either party hereto as provided hereunder, until
November 30, 1996, and thereafter shall be renewed automatically for
successive one-year terms unless written notice not to renew is given
by the non-renewing party to the other party at least 60 days prior to
the expiration of the then-current term; provided, however, that after
such termination for so long as TOGSC, with the written consent of the
Trust, in fact continues to perform any one or more of the services
contemplated by this Agreement or any schedule or exhibit hereto, the
provisions of this Agreement, including without limitation the
provisions dealing with indemnification, shall continue in full force
and effect. Compensation due TOGSC and unpaid by the Trust upon such
termination shall be immediately due and payable upon and
notwithstanding such termination. TOGSC shall be entitled to collect
from the Trust, in addition to the compensation described under
Section 3 hereof, the amount of all of TOGSC's cash disbursements for
services in connection with TOGSC's activities in effecting such
termination, including without limitation, the delivery to the Trust
and/or its designees of the Trust's property, records, instruments and
documents, or any copies thereof. Subsequent to such termination, for
a reasonable fee, TOGSC will provide the Trust with reasonable access
to any Trust documents or records remaining in its possession.
Written notice not to renew may be given for any reason, with or
without "cause" (as defined below).
<PAGE>
This Agreement is terminable with respect to a particular Fund through
a failure to renew the Agreement at the end of the initial one-year
term; upon mutual agreement of the parties hereto; or for "cause" (as
defined below) by the party alleging "cause," in any case on not less
than 60 days' written notice by the Trust's Board of Trustees or by
TOGSC.
For purposes of this Agreement, "cause" shall mean (a) willful
misfeasance, bad faith, gross negligence or reckless disregard on the
part of the party to be terminated with respect to its obligations and
duties set forth herein; (b) a final, unappealable judicial,
regulatory or administrative ruling or order in which the party to be
terminated has been found guilty of criminal or unethical behavior in
the conduct of its business; (c) financial difficulties on the part of
the party to be terminated which is evidenced by the authorization or
commencement of, or involvement by way of pleading, answer, consent,
or acquiescence in, a voluntary or involuntary case under Title 11 of
the United States Code, as from time to time is in effect, or any
applicable law, other than said Title 11, of any jurisdiction relating
to the liquidation or reorganization of debtors or to the modification
or alteration of the rights of creditors; or (d) any circumstance
which substantially impairs the performance of the obligations and
duties of the party to be terminated, or the ability to perform those
obligations and duties as contemplated herein.
If, for any reason other than "cause" as defined above or by mutual
agreement, TOGSC is replaced as Fund Accountant, or if a third party
is added to perform all or a part of the services provided by TOGSC
under this Agreement (excluding any sub-accountant appointed by TOGSC
as provided in Section 2 hereof), then the Trust shall make a one-time
cash payment, as liquidated damages, to TOGSC equal to the balance due
TOGSC for the remainder of the term of this Agreement, assuming for
purposes of calculation of the payment that the asset level of the
Trust on the date TOGSC is replaced, or a third party is added, will
remain constant for the balance of the contract term.
7. STANDARD OF CARE; RELIANCE ON RECORDS AND INSTRUCTIONS;
INDEMNIFICATION.
TOGSC shall use its best efforts to ensure the accuracy of all
services performed under this Agreement. TOGSC agrees to indemnify
and hold harmless the Trust, its Trustees, officers, agents and
nominees from and against all claims, actions, demands, suits, whether
groundless or otherwise, from and against any and all judgments,
liabilities, losses, damages, costs, charges, counsel fees and other
expenses of every nature and character arising out of TOGSC's actions
or nonactions with respect to performance under this Agreement
provided that this indemnification shall not apply to actions or
omissions of TOGSC in cases of its bad faith, willful misfeasance,
negligence or from reckless disregard by it of its obligations and
duties. A Fund agrees to indemnify and hold harmless TOGSC, its
employees, agents, directors, officers and nominees from and against
any and all claims, demands, actions and suits, whether groundless or
otherwise, and from and against any and all judgments, liabilities,
losses, damages, costs, charges, counsel fees and other expenses of
every nature and character arising out of or
<PAGE>
in any way relating to TOGSC's actions taken or nonactions with
respect to the performance of services under this Agreement with
respect to such Fund or based, if applicable, upon reasonable reliance
on written information, records, instructions or requests with respect
to such Fund given or made to TOGSC by a duly authorized
representative of the Trust; provided that this indemnification shall
not apply to actions or omissions of TOGSC in cases of its own bad
faith, wilful misfeasance, negligence or from reckless disregard by it
of its obligations and duties, and further provided that prior to
confessing any claim against it which may be the subject of this
indemnification, TOGSC shall give the Trust written notice of and
reasonable opportunity to defend against said claim in its own name or
in the name of TOGSC.
8. RECORD RETENTION AND CONFIDENTIALITY.
TOGSC shall keep and maintain on behalf of the Trust such books and
records which the Trust and TOGSC is, or may be, required to keep and
maintain pursuant to any applicable statutes, rules and regulations,
including without limitation Rules 31a-1 and 31a-2 under the
Investment Company Act of 1940, as amended (the "1940 Act"), relating
to the maintenance of books and records in connection with the
services to be provided hereunder. TOGSC further agrees that all such
books and records shall be the property of the Trust and to make such
books and records available for inspection by the Trust or by the SEC
at reasonable times and otherwise to keep confidential all books and
records and other information relative to the Trust and its
shareholders; except when requested to divulge such information by
duly-constituted authorities or court process.
9. UNCONTROLLABLE EVENTS.
TOGSC assumes no responsibility hereunder, and shall not be liable,
for any damage, loss of data, delay or any other loss whatsoever
caused by events beyond its reasonable control.
10. REPORTS.
TOGSC will furnish to the Trust and to its properly authorized
auditors, investment advisers, examiners, distributors, dealers,
underwriters, salesmen, insurance companies and others designated by
the Trust in writing, such reports and at such times as are prescribed
pursuant to the terms and the conditions of this Agreement to be
provided or completed by TOGSC, or as subsequently agreed upon by the
parties pursuant to an amendment hereto. The Trust agrees to examine
each such report or copy promptly and will report or cause to be
reported any errors or discrepancies therein no later than ten
business days from the receipt thereof. In the event that errors or
discrepancies, except such errors and discrepancies as may not
reasonably be expected to be discovered by the recipient within ten
business days after conducting a diligent examination, are not so
reported within the aforesaid period of time, a report will for all
purposes be accepted by and binding upon the Trust and any other
recipient and, except
<PAGE>
as provided in Section 7 hereof, TOGSC shall have no liability for
errors or discrepancies therein and shall have no further
responsibility with respect to such report except to perform
reasonable corrections of such errors and discrepancies within a
reasonable time after requested to do so by the Trust.
11. RIGHTS OF OWNERSHIP.
All computer programs and procedures developed to perform services
required to be provided by TOGSC under this Agreement are the property
of TOGSC. All records and other data except such computer programs
and procedures are the exclusive property of the Trust and all such
other records and data will be furnished to the Trust in appropriate
form as soon as practicable after termination of this Agreement for
any reason.
12. RETURN OF RECORDS.
TOGSC may at its option at any time, and shall promptly upon the
Trust's demand, turn over to the Trust and cease to retain TOGSC's
files, records and documents created and maintained by TOGSC pursuant
to this Agreement which are no longer needed by TOGSC in the
performance of its services or for its legal protection. If not so
turned over to the Trust, such documents and records will be retained
by TOGSC for six years from the year of creation. At the end of such
six-year period, such records and documents will be turned over to the
Trust unless the Trust authorizes in writing the destruction of such
records and documents.
13. REPRESENTATIONS OF THE TRUST.
The Trust certifies to TOGSC that: (1) as of the close of business on
the Effective Date, each Fund that is in existence as of the Effective
Date has authorized unlimited shares, and (2) this Agreement has been
duly authorized by the Trust and, when executed and delivered by the
Trust, will constitute a legal, valid and binding obligation of the
Trust, enforceable against the Trust in accordance with its terms,
subject to bankruptcy, insolvency, reorganization, moratorium and
other laws of general application affecting the rights and remedies of
creditors and secured parties.
14. REPRESENTATIONS OF TOGSC.
TOGSC represents and warrants that: (a) the various procedures and
systems which TOGSC has implemented with regard to safeguarding from
loss or damage attributable to fire, theft, or any other cause of the
records, and other data of the Trust and TOGSC's records, data,
equipment, facilities and other property used in the performance of
its obligations hereunder are adequate and that it will make such
changes therein from time to time as are required for the secure
performance of its obligations hereunder, and (b) this Agreement has
been duly authorized by TOGSC and, when executed and delivered by
TOGSC, will constitute a legal, valid and binding obligation of TOGSC,
enforceable against
<PAGE>
TOGSC in accordance with its terms, subject to bankruptcy, insolvency,
reorganization, moratorium and other laws of general application
affecting the rights and remedies of creditors and secured parties.
15. INSURANCE.
TOGSC shall notify the Trust should any of its insurance coverage by
canceled or reduced. Such notification shall include the date of
change and the reasons therefor. TOGSC shall notify the Trust of any
material claims against it with respect to services performed under
this Agreement, whether or not they may be covered by insurance, and
shall notify the Trust from time to time as may be appropriate of the
total outstanding claims made by TOGSC under its insurance coverage.
16. INFORMATION TO BE FURNISHED BY THE TRUST AND FUNDS.
The Trust has furnished to TOGSC the following:
(a) copies of the Declaration of Trust of the Trust and of any
amendments thereto, certified by the proper official of the state
in which such Declaration has been filed;
(b) Copies of the following documents:
(i) the Trust's Bylaws and any amendments thereto; and
(ii) certified copies of resolutions of the Board of Trustees
covering the approval of this Agreement, authorization of a
specified officer of the Trust to execute and deliver this
Agreement and authorization for specified officers of the
Trust to instruct TOGSC thereunder;
(c) a list of all the officers of the Trust, together with specimen
signatures of those officers who are authorized to instruct TOGSC
in all matters; and
(d) two copies of the Prospectus and Statement of Additional
Information for each Fund.
17. INFORMATION FURNISHED BY TOGSC.
(a) TOGSC has furnished to the Trust the following:
(i) TOGSC's Articles of Incorporation; and
(ii) TOGSC's Bylaws and any amendments thereto.
(b) TOGSC shall, upon request, furnish certified copies of corporate
actions covering the following matters;
<PAGE>
(i) approval of this Agreement and authorization of a specified
officer of TOGSC to execute and deliver this Agreement; and
(ii) authorization of TOGSC to act as fund accountant for the
Trust and to provide accounting services for the Trust.
18. AMENDMENTS TO DOCUMENTS.
The Trust shall furnish TOGSC with written copies of any amendments
to, or changes in, any of the items referred to in Section 16 hereof
forthwith upon such amendments or changes becoming effective. In
addition, the Trust agrees that no amendments will be made to the
Prospectuses or Statements of Additional Information of the Trust
which might have the effect of changing the procedures employed by
TOGSC in providing the services agreed to hereunder or which amendment
might affect the duties of TOGSC hereunder unless the Trust first
obtains TOGSC's approval of such amendments or changes.
19. COMPLIANCE WITH LAW.
Except for the obligations of TOGSC set forth in Sections 1 and 8
hereof, the Trust assumes full responsibility for the preparation,
contents and distribution of each prospectus of the Trust as to
compliance with all applicable requirements of the Securities Act of
1933, as amended (the "Securities Act"), the 1940 Act and any other
laws, rules and regulations of governmental authorities having
jurisdiction. TOGSC shall have no obligation to take cognizance of
any laws relating to the sale of the Trust's shares. The Trust
represents and warrants that no shares of the Trust will be offered to
the public until the Trust's registration statement under the
Securities Act and the 1940 Act has been declared or becomes
effective.
20. NOTICES.
Notices of any kind to be given to the Trust hereunder by TOGSC shall
be in writing and shall be duly given if mailed or delivered to the
Trust at 774 Park Meadow Drive, Westerville, Ohio 43081; or at such
other address or to such individual as shall be so specified by the
Trust to TOGSC. Notices of any kind to be given to TOGSC hereunder by
the Trust shall be in writing and shall be duly given if mailed or
delivered to TOGSC at 3435 Stelzer Road, Columbus, Ohio 43219 or at
such other address or to such individual as shall be so specified by
TOGSC to the Trust.
21. HEADINGS.
Paragraph headings in this Agreement are included for convenience only
and are not to be used to construe or interpret this Agreement.
<PAGE>
22. ASSIGNMENT.
This Agreement and the rights and duties hereunder shall not be
assignable with respect to a Fund by either of the parties hereto
except by the specific written consent of the other party.
23. GOVERNING LAW.
This Agreement shall be governed by and its provisions shall be
construed in accordance with the laws of the Commonwealth of
Massachusetts.
24. LIMITATION OF LIABILITY OF THE TRUSTEES AND SHAREHOLDERS.
It is expressly agreed that the obligations of the Trust hereunder
shall not be binding upon any of the Trustees, shareholders, nominees,
officers, agents or employees of the Trust personally, but shall bind
only the trust property of the Trust. The execution and delivery of
this Agreement have been authorized by the Trustees, and this
Agreement has been signed and delivered by an authorized officer of
the Trust, acting as such, and neither such authorization by the
Trustees nor such execution and delivery by such officer shall be
deemed to have been by any of them individually or to impose any
liability on any of them personally, but shall bind only the trust
property of the Trust as provided in the Trust's Agreement and
Declaration of Trust.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
duly executed all as of the day and year first above written.
THE ONE GROUP-Registered Trademark-
By: Mark Dillon
---------------------------------
THE ONE GROUP SERVICES COMPANY
By: Steve Mintos
---------------------------------
<PAGE>
SCHEDULE A
TO THE FUND ACCOUNTING AGREEMENT
BETWEEN
THE ONE GROUP-Registered Trademark-
AND
THE ONE GROUP SERVICES COMPANY
NAME OF THE FUND
- ----------------
The U. S. Treasury Securities Money Market Fund
The Prime Money Market Fund
The Municipal Money Market Fund (formerly The Tax-Free Money Market Portfolio)
The Ohio Municipal Money Market Fund
The Income Equity Fund
The Disciplined Value Fund
The Small Company Growth Fund (formerly the Growth Equity Portfolio)
The International Equity Index Fund
The Large Company Value Fund (formerly The Quantitative Equity Portfolio)
The Equity Index Fund
The Income Bond Fund (formerly The Income Portfolio)
The Limited Volatility Bond Fund
The Intermediate Tax-Free Bond Fund
The Ohio Municipal Bond Fund
The Treasury Money Market Fund
The Treasury Only Money Market Fund
The Government Money Market Fund
The Tax Exempt Money Market Fund
The Institutional Prime Money Market Fund
The Government Bond Fund
The Government ARM Fund
The Asset Allocation Fund (formerly The Flexible Balanced Portfolio)
The Tax-Free Bond Fund
The Texas Tax-Free Fund
The Intermediate Bond Fund
The Arizona Tax-Free Bond Fund
The Large Company Growth Fund
The Kentucky Municipal Bond Fund
The West Virginia Tax-Free Fund
THE ONE GROUP-Registered Trademark-
By: Mark Dillon
---------------------------------
Date: December 1, 1995
-------------------------------
THE ONE GROUP SERVICES COMPANY
By: Steve Mintos
---------------------------------
Date: December 1, 1995
-------------------------------
<PAGE>
SCHEDULE B
TO THE FUND ACCOUNTING AGREEMENT
BETWEEN
THE ONE GROUP-Registered Trademark-
AND
THE ONE GROUP SERVICES COMPANY
FEES
Compensation due TOGSC under the terms of this Agreement will be paid by
The One Group Services Company from fees received by it under the terms of the
Management and Administration Agreement.
THE ONE GROUP-Registered Trademark-
By: Mark Dillon
---------------------------------
Date: December 1, 1995
-------------------------------
THE ONE GROUP SERVICES COMPANY
By: Steve Mintos
---------------------------------
Date: December 1, 1995
-------------------------------
B-1
<PAGE>
Exhibit (13)(d)
<PAGE>
SUB-ADMINISTRATION AGREEMENT
AGREEMENT made this 1st day of December, 1995 among The One Group-
Registered Trademark- Services Company (the "Administrator"), an Ohio
corporation having its principal place of business at 1900 E. Dublin-Granville
Road, Columbus, Ohio 43229; BANC ONE INVESTMENT ADVISORS CORPORATION (the "Sub-
Administrator"), an Ohio corporation having its principal place of business at
774 Park Meadow Road, Westerville, Ohio 43081; and The One Group (the "Trust"),
a Massachusetts business trust maintaining its principal place of business as
provided herein. Capitalized terms not otherwise defined herein have the
meaning given such terms in the Management and Administration Agreement dated
December 1, 1995, as amended, between the Administrator and the Trust (the
"Management and Administration Agreement").
WHEREAS, the Administrator has entered into a Management and Administration
Agreement with the Trust concerning the provision of management and
administrative services for the investment portfolios of the Trust identified on
Schedule A hereto, as such Schedule shall be amended from time to time
(individually referred to herein as a "Fund" and collectively as the "Funds");
and
WHEREAS, the Trust desires the Administrator to retain the Sub-
Administrator to perform administrative services with respect to each Fund and
the Sub-Administrator is willing to perform such services on the terms and
conditions set forth in this Agreement.
NOW, THEREFORE, in consideration of the mutual premises and covenants
herein set forth, the parties agree as follows:
l. SERVICES AS SUB-ADMINISTRATOR. As provided herein, the Sub-
Administrator will perform the following duties in accordance with all
applicable laws and regulations:
(i) assist the Trust in the supervision of all aspects of the
operations of the Funds except those performed by the investment
adviser for the Funds under its Investment Advisory Agreement,
the custodian for the Funds under its Custodian Agreement, and
the transfer agent for the Funds under its Transfer Agency
Agreement and the fund accountant under its Fund Accounting
Agreement between the Administrator and the Trust dated December
l, 1995, as amended (the "Fund Accounting Agreement");
(ii) maintain office facilities (which may be in the office of Sub-
Administrator or an affiliate but shall be in such location as
the Trust shall reasonably determine);
(iii) furnish statistical and research data clerical, accounting and
bookkeeping services, except for those services provided
pursuant to the terms of the Fund Accounting Agreement, and
stationery and office supplies;
(iv) prepare the periodic reports to the Securities and Exchange
Commission on Form N-SAR or any replacement forms thereto;
<PAGE>
(v) compile data for, prepare for execution by the Funds and file
(after review by the Trust's auditors) all the Funds' federal
and state tax returns and required tax filings other than those
required to be made by the Trust's Custodian and transfer agent;
(vi) prepare and file compliance filings pursuant to state securities
laws with the advice of the Trust's counsel and coordinate with
the transfer agent to monitor the sale of the Funds' shares;
(vii) assist the Trust to the extent requested by the Trust in the
preparation, mailing, and filing of the Trust's Annual and Semi-
Annual Reports to Shareholders and its Registration Statements;
(viii)prepare and file timely Notices to the Securities and Exchange
Commission required pursuant to Rule 24f-2 under the Investment
Company Act of 1940 (the "1940 Act")
(ix) prepare and file with the Securities and Exchange Commission all
Registration Statements on Form N-lA and all amendments thereto
with the advice of Trust's counsel;
(x) prepare and file with the Securities and Exchange Commission
Proxy Statements and related documents with the advice of
Trust's counsel and coordinate the distribution of such
documents;
(xi) provide Trustee Board meeting support, including the preparation
of documents related thereto; and
(xii) provide shareholder services to the Trust.
The Sub-Administrator will keep and maintain all books and records relating
to its services in accordance with Rule 31a-1 under the 1940 Act.
3. COMPENSATION.
on an annual basis to 3.4 one-hundredths of one percent (0.034%) of
the average daily net assets of each Multiple Class Fund and five one
hundredths of one percent (0.050%) of each Single Class Fund, in each
case computed daily and paid monthly on the business day following
receipt by the Administrator of its fee under the Administration
Agreement, unless a lower percentage is due under Schedule A of the
Management and Administration Agreement. The Administrator shall
receive all of the fees pursuant to the Management and Administration
Agreement during the Transition Period.
(i) REMAINDER OF TERM OF THE SUB-ADMINISTRATOR. The Administrator
shall receive all the fees pursuant to the Management and
Administration Agreement for each month. In each such month, the
total amount of the fee for said month under the Management and
Administration Agreement
<PAGE>
for the Multiple-Class Funds shall be expressed upon payment in
terms of an annual rate of one-hundredths of one percent of the
average daily net asset value of the Multiple-Class Funds (the
"Blended Management and Administration Rate"). The Administrator
shall pay the Sub-Administrator for the services provided under
this Agreement in each month following the Transition Period the
fees provided below, in each case computed daily and paid monthly
on the business day following receipt by the Administrator of its
fee under the Management and Administration Agreement, unless a
lower percentage is due under schedule A of the Management and
Administration Agreement.
(A) SINGLE CLASS FUNDS. FOR EACH MONTH, THE SUB-ADMINISTRATOR'S FEE WITH
RESPECT TO THE SINGLE CLASS FUNDS SHALL CONSIST OF an amount equal on
an annual basis to five one hundredths of one percent (0.05%) of the
average daily net assets of each Single Class Fund.
(B) MULTIPLE-CLASS FUNDS.
(a) Months During Which Assets Are Nine Billion Dollars or Less. For
each month during which average daily net assets are at or below
$9,000,000,000, the Sub-Administrator's fee with respect to
Multiple-Class Funds shall consist of an amount equal on an
annual basis to that calculated by reference to the Blended
Management and Administration Rate, as reduced by an amount equal
on an annual basis to eleven one hundredths of one percent
(.11%);
(b) MONTHS DURING WHICH ASSETS EXCEED NINE BILLION DOLLARS. For each
month, during which average daily net assets exceed
$9,000,000,000, the amount of such assets over $9,000,000,000
shall be known as the "Overage Amount." In such a month, the Sub-
Administrator's fee with respect to Multiple-Class Funds shall
consist of the following three components:
(I) an amount equal on an annual basis to 5.8 one hundredths of
one percent (.058%) of $9,000,000,000;
(II) an amount equal on an annual basis to 5.9 one hundredths of
one percent (.059%) of one half of the Overage Amount; and
(III) an amount equal on an annual basis to the product produced
by multiplying one half of the Overage Amount by the
Blended Management and Administration Rate as reduced by an
amount equal on an annual basis to eleven one hundredths of
one percent (.1l%).
4. EFFECTIVE DATE. This Agreement shall become effective with respect to
a Fund as of December 1, 1995 (or, if a particular Fund is not in existence on
that date, on the date
<PAGE>
specified in the amendment to Schedule A to this Agreement relating to such Fund
or, if no date is specified, the date on which such amendment is executed) (the
"Effective Date")
5. TERM. This Agreement shall continue in effect with respect to a Fund,
unless earlier terminated by either party hereto as provided hereunder, for the
period from the Effective Date through November 30, 1996 and shall be renewed
automatically for any additional period for which the Management and
Administration Agreement is renewed. This Agreement is terminable with respect
to a particular Fund only upon mutual agreement of all the parties hereto or for
"cause" (as defined below) by the party alleging "cause," in either case on not
less than sixty days' notice by the Trust's Board of Trustees or by the
Administrator.
For purposes of this Agreement, "cause," shall mean (i) willful
misfeasance, bad faith, gross negligence, abandonment, or reckless disregard on
the part of either party with respect to its obligations and duties set forth
herein; (ii) regulatory, administrative, or judicial action initiated against
either party with regard to the violation of any rule, regulation. order, or
law; (iii) the dissolution or liquidation of either party or other cessation of
business other than a reorganization or recapitalization of such party as an
ongoing business; (iv) financial difficulties on the part of either party which
is evidenced by the authorization or commencement of, or involvement by way of
pleading, answer, consent, or acquiescence in, a voluntary or involuntary case
under Title 11 of the United States Code, as from time to time in effect, or any
applicable law, other than said Title 11, of any jurisdiction relating to the
liquidation or reorganization of debtors or to the modification or alteration of
the rights of creditors; or (v) any circumstance which substantially impairs the
performance of either party's obligations and duties as contemplated herein.
6. (a) STANDARD OF CARE; RELIANCE ON RECORDS AND INSTRUCTIONS;
INDEMNIFICATION. The Administrator shall not be liable to the Trust or the Sub-
Administrator with respect to services to be provided by the Sub-Administrator
hereunder nor for any breach by the Sub-Administrator of any of the terms and
conditions hereunder. The Sub-Administrator shall use its best efforts to
insure the accuracy of all services performed under this Agreement, but shall
not be liable to the Trust for any action taken or omitted by the Sub-
Administrator in the absence of bad faith, willful misfeasance, negligence or
from a reckless disregard by it of its obligations and duties. The
Administrator agrees to indemnify and hold harmless the Sub-Administrator, its
employees, agents, directors, officers and nominees from and against any and all
liabilities or expenses, including but not limited to attorney fees, in
connection with any claims or regulatory actions based upon reasonable reliance
on written information or records with respect to a Fund given to the Sub-
Administrator by a duly authorized representative of the Administrator, Fund
Accountant, or Distributor; provided that this indemnification shall not apply
to actions or omissions of the Sub-Administrator in cases of its own bad faith,
willful misfeasance, negligence or from reckless disregard by it of its
obligations and duties, and further provided that prior to confessing any claim
against it which may be the subject of this indemnification, the Sub-
Administrator shall give the Administrator written notice of and reasonable
opportunity to defend against said claim in its own name or in the name of the
Sub-Administrator.
(b) The Sub-Administrator agrees to indemnify the Administrator, its
employees, agents, directors, officers, affiliates and nominees (collectively,
the "Administrator Indemnified Parties") from and against any and all
liabilities and expenses, including but not limited to attorney fees
(collectively, "Liabilities"), in connection with any claims or regulatory
<PAGE>
actions based on acts or failures to act in connection with or relating to this
Agreement or the Management and Administration Agreement except for claims or
actions due to the Administrator's negligence, bad faith, willful misfeasance or
reckless disregard of its obligations and duties under this Agreement or the
Administration Agreement.
8. RECORD RETENTION AND CONFIDENTIALITY. The Sub-Administrator shall keep
and maintain on behalf of the Trust all books and records which the Trust and
the Sub-Administrator are, or may be, required to keep and maintain in
connection with the services to be provided hereunder pursuant to any applicable
statutes, rules and regulations, including without limitation Rules 31 a-1 and
31a-2 under the 1940 Act. The Sub-Administrator agrees that all such books and
records shall be the property of the Trust and to make such books and records
available for inspection by the Trust, by the Administrator, or by duly
authorized regulatory agencies at reasonable times and otherwise to keep
confidential all books and records and other information relative to the Trust
and its shareholders; except when requested to divulge such information by duly-
constituted authorities or court process. The Sub-Administrator further agrees
to turn over such books and records upon demand by the Administrator and/or the
Trust. If not so turned over to the Trust, such document and records will be
retained by the Sub-Administrator as described above pursuant to applicable law.
At the end of any prescribed period, such records and documents will be turned
over to the Trust unless the Trust authorizes in writing the destruction of such
records and documents.
9. UNCONTROLLABLE EVENTS. The Sub-Administrator assumes no
responsibility hereunder, and shall not be liable, for any damage, loss of data,
delay or any other loss whatsoever caused by events beyond its reasonable
control.
10. RIGHTS OF OWNERSHIP. All computer programs and procedures developed to
perform the services to be provided by the Administrator under this Agreement
and the Management and Administration Agreement are the property of the
Administrator. All computer programs and procedures developed to perform the
services to be provided by the Sub-Administrator under this Agreement are the
property of the Sub-Administrator. All records and other data except such
computer programs and procedures are the exclusive property of the Trust and all
such other records and data will be furnished to the Administrator and/or the
Trust in appropriate form as soon as practicable after termination of this
Agreement for any reason.
11. REPRESENTATIONS OF THE ADMINISTRATOR. The Administrator represents
and warrants that this Agreement has been duly authorized by the Administrator
and, when executed and delivered by the Administrator, will constitute a legal,
valid and binding obligation of the Administrator, enforceable against the
Administrator in accordance with its terms, subject to bankruptcy, insolvency,
reorganization, moratorium and other laws of general application affecting
rights and remedies of creditors and secured parties.
12. REPRESENTATIONS OF THE SUB-ADMINISTRATOR. The Sub-Administrator
represents and warrants that this Agreement has been duly authorized by the Sub-
Administrator and, when executed and delivered by the Sub-Administrator, shall
constitute a legal, valid and binding obligation of the Sub-Administrator,
enforceable against the Sub-Administrator in accordance with its terms, subject
to bankruptcy, insolvency, reorganization, moratorium and other laws of general
application affecting the rights and remedies of creditors and secured parties.
The Sub-Administrator further represents and warrants that it is duly qualified
and has the capabilities to
<PAGE>
competently perform the duties and responsibilities it has agreed to perform
pursuant to this Agreement.
13. REPRESENTATIONS OF THE TRUST. The Trust represents and warrants that
this Agreement has been duly authorized by the Trust and, when executed and
delivered by the Trust, will constitute a legal, valid and binding obligation of
the Trust, enforceable against the Trust in accordance with its terms, subject
to bankruptcy, insolvency, reorganization, moratorium and other laws of general
application affecting the rights and remedies of creditors and secured parties.
14. NOTICES. Any notice provided hereunder shall be sufficiently given
when sent by registered or certified mail to the Administrator at the following
address: (TITLE), 1900 E. Dublin-Granville Road, Columbus, Ohio 43229; to the
Sub-Administrator at the following address: (TITLE), 774 Park Meadow Road,
Westerville, Ohio 43091; to the Trust at the following address: (TITLE), - 774
Park Meadow Road, Westerville, Ohio, 43081, or at such other address as any
party may from time to time specify in writing to the other parties pursuant to
this Section.
15. HEADINGS. Paragraph headings in this Agreement are included for
convenience only and are not to be used to construe or interpret this Agreement.
16. USE OF AGENTS. The Sub-Administrator may employ agents of its choice
to assist it in the performance of its duties under this Agreement including,
but not limited to, parties (including the Administrator or any affiliate, or
successor thereto) who currently provide services to the Trust. If the Sub-
Administrator employs any agents, the Sub-Administrator shall be solely
responsible for the acts or omissions of such agents and the Administrator shall
not be liable for any acts or omissions of such agents.
17. GOVERNING LAW. This Agreement shall be governed by and provisions
shall be construed in accordance with the laws of the State of Ohio. The name
"The One Group-Registered Trademark-" and "Trustees of The One Group-Registered
Trademark-" refer respectively to the Trust created and the Trustees, as
trustees but not individually or personally, acting from time to time under a
Declaration of Trust dated May 23, 1985 to which reference is hereby made and a
copy of which is on file at the office of the Secretary of the Commonwealth of
Massachusetts and elsewhere as required by law, and to any and all amendments
thereto so filed or hereafter filed. The obligations of "The One Group-
Registered Trademark-" entered into in the name or on behalf thereof by any of
the Trustees, representatives or agents are made not individually, but in such
capacities, and are not binding upon any of the Trustees, Shareholders or
representatives of the Trust personally, but bind only the assets of the Trust
and all persons dealing with any series and/or class of Shares of the Trust must
look solely to the assets of the Trust belonging to such series and/or class for
the enforcement of any claims against the Trust.
18. ASSIGNMENT. Each of the Management and Administration Agreement and
this Agreement shall be void in the case of its Assignment (as that term is used
in the Investment Company Act of 1940) absent the consent of the Trust to such
Assignment.
<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
duly executed all as of the day and year first above written.
[SEAL) THE ONE GROUP-Registered Trademark- SERVICES COMPANY
By: Steve Mintos
-----------------------------------------------
Title: Executive Vice President
--------------------------------------------
BANC ONE INVESTMENT ADVISORS CORPORATION
By: Mark Beeson
-----------------------------------------------
Title: Chief Financial Officer
--------------------------------------------
THE ONE GROUP-Registered Trademark-
By: Mark Dillon
-----------------------------------------------
Title: President
--------------------------------------------
Dated: December 1, 1995
<PAGE>
SCHEDULE A
TO THE SUB -ADMINISTRATION AGREEMENT AMONG
THE ONE GROUP-Registered Trademark- SERVICES COMPANY
BANC ONE INVESTMENT ADVISORS CORPORATION,
AND THE ONE GROUP-Registered Trademark-
NAME OF FUND
- ------------
U.S. Treasury Securities Money Market Fund
Prime Money Market Fund
Municipal Money Market Fund
Ohio Municipal Money Market Fund
Income Equity Fund
Disciplined Value Fund
Small Company Growth Fund
Blue Chip Equity Fund
International Equity Index Fund
Equity Index Fund
Large Company Value Fund
Large Company Growth Fund
Asset Allocation Fund
Income Bond Fund
Limited Volatility Bond Fund
Intermediate Bond Fund
Government Bond Fund
Government ARM Fund
Short-Term Global Bond Fund
Tax-Free Bond Fund
Intermediate Tax-Free Bond Fund
Ohio Municipal Bond Fund
Texas Tax-free Bond Fund
West Virginia Tax-Free Bond Fund
Kentucky Municipal Bond Fund
Arizona Tax-Free Bond Fund
Treasury Money Market Fund
Treasury Only Money Market Fund
Government Money Market Fund
Tax Exempt Money Market Fund
Institutional Prime Money Market Fund
THE ONE GROUP-Registered Trademark- BANC ONE INVESTMENT ADVISORS
SERVICES COMPANY CORPORATION
By: Steve Mintos By: Mark Beeson
----------------------------- --------------------------
Title: Executive Vice President Title: Chief Financial Officer
-----------------------
THE ONE GROUP-Registered Trademark-
By: Mark Dillon
-----------------------------
Title: President
---------------------------
<PAGE>
Exhibit (14)(a)
<PAGE>
CONSENT OF INDEPENDENT ACCOUNTANTS
We consent to the incorporation by reference in this Registration Statement on
Form N-14 (File No. 2-95973) of The One Group of our reports dated August
18,1995 on our audits of the financial statements and financial highlights of
the U.S. Treasury Securities Money Market Fund, the Prime Money Market Fund, the
Municipal Money Market Fund, the Ohio Municipal Money Market Fund, the Asset
Allocation Fund, the Income Equity Fund, the Equity Index Fund, the Large
Company Value Fund, the Blue Chip Equity Fund, the Large Company Growth Fund,
the Disciplined Value Fund, the Small Company Growth Fund, the International
Equity Index Fund, the Government ARM Fund, the Limited Volatility Bond Fund,
the Intermediate Bond Fund, the Government Bond Fund, the Income Bond Fund, the
Intermediate Tax-Free Bond Fund, the Tax-Free Bond Fund, the Kentucky Municipal
Bond Fund, the Ohio Municipal Bond Fund, the Treasury Only Money Market Fund,
and the Government Money Market Fund constituting The One Group as of June 30,
1995 and for the respective periods then ended. We also consent to the
reference to our Firm under the caption "Counsel and Independent Accountants" in
this Registration Statement on Form N-14 (File No. 2-95973).
COOPERS & LYBRAND L.L.P.
Boston, Massachusetts
January 19, 1996
<PAGE>
Exhibit 14(b)
<PAGE>
CONSENT OF COUNSEL
We hereby consent to the use of our name and the reference to our firm
included in or made a part of the Registration Statement of The One Group
on Form N-14 under the Securities Act of 1933, as amended.
Ropes & Gray
ROPES & GRAY
Washington, D.C.
January 19, 1996
<PAGE>
Exhibit (14)(c)
<PAGE>
CONSENT OF INDEPENDENT ACCOUNTANTS
We hereby consent to the incorporation by reference in the Combined
Prospectus/Proxy Statement constituting part of this registration statement on
Form N-14 (the "Registration Statement") of our report dated January 16, 1995,
relating to the November 30, 1994 financial statements and financial highlights
of Paragon Treasury Money Market Fund, Paragon Short-Term Government Fund,
Paragon Intermediate-Term Bond Fund, Paragon Louisiana Tax-Free Fund, Paragon
Value Growth Fund, Paragon Value Equity Income Fund and Paragon Gulf South
Growth Fund (constituting the Paragon Portfolio). We also consent to the
references to us under the headings "Counsel and Independent Accountants" and
"Financial Statements" in the Combined Prospectus/Proxy Statement, and to the
references to us under the heading "Financial Highlights" in the Paragon
Portfolio Prospectus dated March 30, 1995 and under the headings "Independent
Accountants" and "Financial Statements" in the Paragon Portfolio Statement of
Additional Information dated March 30, 1995, both of which have been
incorporated by reference into the Registration Statement.
PRICE WATERHOUSE LLP
1177 Avenue of the Americas
New York, NY 10036
January 16, 1996
<PAGE>
Exhibit (14)(d)
<PAGE>
AUDITORS' CONSENT
To the Board of Trustees of
The One Group:
We consent to the reference to our firm under the heading "Experts" in the
Statement of Additional Information, which is incorporated by reference in the
Form N-14 filed by The One Group.
KPMG Peat Marwick LLP
KPMG PEAT MARWICK LLP
Columbus, Ohio
January 16, 1996
<PAGE>
Exhibit (16)
<PAGE>
POWER OF ATTORNEY
John S. Randall, whose signature appears below, does hereby constitute and
appoint Martin E. Lybecker, Alan G. Priest, and Linda Dallas Rich, each
individually, his true and lawful attorneys and agents, with power of
substitution or substitution, to do any and all acts and things and to execute
any and all instruments which said attorneys and agents, each individually, may
deem necessary or advisable or which may be required to enable The One
- -Registered Trademark- Group (the "Trust"), to comply with the Investment
Company Act of 1940, as amended, and the Securities Act of 1933, as amended
("Acts"), and any rules, regulations or requirements of the Securities and
Exchange Commission in respect thereof, in connection with the filing and
effectiveness of any and all instruments and/or documents pertaining to the
federal registration of the shares of the Trust, including specifically, but
without limiting the generality of the foregoing, the power and authority to
sign in the name and on behalf of the undersigned as a director and/or officer
of the Trust any and all amendments to the Trust's Registration Statement as
filed with the Securities and Exchange Commission under said Acts, and the
undersigned does hereby ratify and confirm all that said attorneys and agents,
or either of them, shall do or cause to be done by virtue thereof.
Dated: September 22, 1993
----------------------
John S. Randall
-------------------------
JOHN S. RANDALL
<PAGE>
POWER OF ATTORNEY
Peter C. Marshall, whose signature appears below, does hereby constitute
and appoint Martin E. Lybecker, Alan G. Priest, and Linda Dallas Rich, each
individually, his true and lawful attorneys and agents, with power of
substitution or substitution, to do any and all acts and things and to execute
any and all instruments which said attorneys and agents, each individually, may
deem necessary or advisable or which may be required to enable The One
- -Registered Trademark- Group (the "Trust"), to comply with the Investment
Company Act of 1940, as amended, and the Securities Act of 1933, as amended
("Acts"), and any rules, regulations or requirements of the Securities and
Exchange Commission in respect thereof, in connection with the filing and
effectiveness of any and all instruments and/or documents pertaining to the
federal registration of the shares of the Trust, including specifically, but
without limiting the generality of the foregoing, the power and authority to
sign in the name and on behalf of the undersigned as a director and/or officer
of the Trust any and all amendments to the Trust's Registration Statement as
filed with the Securities and Exchange Commission under said Acts, and the
undersigned does hereby ratify and confirm all that said attorneys and agents,
or either of them, shall do or cause to be done by virtue thereof.
Dated: September 22, 1993
----------------------
Peter C. Marshall
-------------------------
PETER C. MARSHALL
<PAGE>
POWER OF ATTORNEY
Charles I. Post, whose signature appears below, does hereby constitute and
appoint Martin E. Lybecker, Alan G. Priest, and Linda Dallas Rich, each
individually, his true and lawful attorneys and agents, with power of
substitution or substitution, to do any and all acts and things and to execute
any and all instruments which said attorneys and agents, each individually, may
deem necessary or advisable or which may be required to enable The One
- -Registered Trademark- Group (the "Trust"), to comply with the Investment
Company Act of 1940, as amended, and the Securities Act of 1933, as amended
("Acts"), and any rules, regulations or requirements of the Securities and
Exchange Commission in respect thereof, in connection with the filing and
effectiveness of any and all instruments and/or documents pertaining to the
federal registration of the shares of the Trust, including specifically, but
without limiting the generality of the foregoing, the power and authority to
sign in the name and on behalf of the undersigned as a director and/or officer
of the Trust any and all amendments to the Trust's Registration Statement as
filed with the Securities and Exchange Commission under said Acts, and the
undersigned does hereby ratify and confirm all that said attorneys and agents,
or either of them, shall do or cause to be done by virtue thereof.
Dated: September 22, 1993
----------------------
Charles I. Post
-------------------------
CHARLES I. POST
<PAGE>
POWER OF ATTORNEY
Frederick W. Ruebeck, whose signature appears below, does hereby constitute
and appoint Martin E. Lybecker, Alan G. Priest, and Linda Dallas Rich, each
individually, his true and lawful attorneys and agents, with power of
substitution or substitution, to do any and all acts and things and to execute
any and all instruments which said attorneys and agents, each individually, may
deem necessary or advisable or which may be required to enable The One
- -Registered Trademark- Group (the "Trust"), to comply with the Investment
Company Act of 1940, as amended, and the Securities Act of 1933, as amended
("Acts"), and any rules, regulations or requirements of the Securities and
Exchange Commission in respect thereof, in connection with the filing and
effectiveness of any and all instruments and/or documents pertaining to the
federal registration of the shares of the Trust, including specifically, but
without limiting the generality of the foregoing, the power and authority to
sign in the name and on behalf of the undersigned as a director and/or officer
of the Trust any and all amendments to the Trust's Registration Statement as
filed with the Securities and Exchange Commission under said Acts, and the
undersigned does hereby ratify and confirm all that said attorneys and agents,
or either of them, shall do or cause to be done by virtue thereof.
Dated: September 22, 1993
----------------------
Frederick W. Ruebeck
-------------------------
FREDERICK W. RUEBECK
<PAGE>
POWER OF ATTORNEY
Mark A. Dillon, whose signature appears below, does hereby constitute and
appoint Martin E. Lybecker, Alan G. Priest, and Linda Dallas Rich, each
individually, his true and lawful attorneys and agents, with power of
substitution or substitution, to do any and all acts and things and to execute
any and all instruments which said attorneys and agents, each individually, may
deem necessary or advisable or which may be required to enable The One
- -Registered Trademark- Group (the "Trust"), to comply with the Investment
Company Act of 1940, as amended, and the Securities Act of 1933, as amended
("Acts"), and any rules, regulations or requirements of the Securities and
Exchange Commission in respect thereof, in connection with the filing and
effectiveness of any and all instruments and/or documents pertaining to the
federal registration of the shares of the Trust, including specifically, but
without limiting the generality of the foregoing, the power and authority to
sign in the name and on behalf of the undersigned as a director and/or officer
of the Trust any and all amendments to the Trust's Registration Statement as
filed with the Securities and Exchange Commission under said Acts, and the
undersigned does hereby ratify and confirm all that said attorneys and agents,
or either of them, shall do or cause to be done by virtue thereof.
Dated: September 22, 1993
----------------------
Mark A. Dillon
-------------------------
MARK A. DILLON
<PAGE>
POWER OF ATTORNEY
Terrance R. Dolan, whose signature appears below, does hereby constitute
and appoint Martin E. Lybecker, Alan G. Priest, and Linda Dallas Rich, each
individually, his true and lawful attorneys and agents, with power of
substitution or substitution, to do any and all acts and things and to execute
any and all instruments which said attorneys and agents, each individually, may
deem necessary or advisable or which may be required to enable The One
- -Registered Trademark- Group (the "Trust"), to comply with the Investment
Company Act of 1940, as amended, and the Securities Act of 1933, as amended
("Acts"), and any rules, regulations or requirements of the Securities and
Exchange Commission in respect thereof, in connection with the filing and
effectiveness of any and all instruments and/or documents pertaining to the
federal registration of the shares of the Trust, including specifically, but
without limiting the generality of the foregoing, the power and authority to
sign in the name and on behalf of the undersigned as a director and/or officer
of the Trust any and all amendments to the Trust's Registration Statement as
filed with the Securities and Exchange Commission under said Acts, and the
undersigned does hereby ratify and confirm all that said attorneys and agents,
or either of them, shall do or cause to be done by virtue thereof.
Dated: September 22, 1993
----------------------
Terrance R. Dolan
-------------------------
TERRANCE R. DOLAN
<PAGE>
Exhibit (17)(a)
<PAGE>
As filed with the Securities and Exchange Commission on NOVEMBER 24, 1995
Registration Nos. 2-95973 and 811-4236
SECURITIES AND EXCHANGE COMMISSION
Washington, DC 20549
FORM N-1A
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933 /X/
POST-EFFECTIVE AMENDMENT NO. 36 /X/
and
REGISTRATION STATEMENT UNDER THE INVESTMENT COMPANY /X/
ACT OF 1940
AMENDMENT NO. 37 /X/
THE ONE GROUP (R)
(Exact Name of Registrant as Specified in Charter)
774 PARK MEADOW DRIVE
WESTERVILLE, OHIO 43081
(Address of Principal Executive Offices)
(800) 480-4111
(Registrant's Telephone Number)
GEORGE MARTINEZ
3435 STELZER ROAD
COLUMBUS, OHIO 43219
(Name and Address of Agent for Service)
Copies To:
Alan G. Priest, Esquire Michael V. Wible, Esquire
Ropes & Gray Banc One Corporation
ONE FRANKLIN SQUARE 100 Est Broad Street
1301 I STREET, N.W., Suite 800E Columbus, Ohio 43271
Washington, D.C. 20005
It is proposed that this filing will become effective (check appropriate box)
Immediately upon filing pursuant to paragraph (b)
- ----
on (date) pursuant to paragraph (b)
- ----
60 days after filing pursuant to paragraph (a)(i)
- ----
on (date) pursuant to paragraph (a)(i)
- ----
x 75 days after filing pursuant to paragraph (a)(ii)
- ----
on (DATE) pursuant to paragraph (a)(ii)
- ----
of rule 485.
The Registrant has registered an indefinite number or amount of securities under
the Securities Act of 1933 pursuant to Section (a)(1) of Rule 24f-2. Rule 24f-2
Notice for the Registrant's fiscal year ending June 30, 1995 was filed on August
29, 1995.
<PAGE>
THE ONE GROUP-REGISTERED TRADEMARK-
U.S. TREASURY SECURITIES MONEY MARKET FUND
PRIME MONEY MARKET FUND PROSPECTUS
- --------------------------------------------------------------------------------
Investment Adviser: BANC ONE INVESTMENT ADVISORS CORPORATION
The One Group-Registered Trademark- (the "Trust") is a mutual fund seeking to
provide a convenient and economical means of investing in one or more
professionally managed portfolios of securities. This Prospectus relates to The
One Group-Registered Trademark- U.S. Treasury Securities Money Market Fund Class
A, Fiduciary Class and Service Class shares and The One Group-Registered
Trademark-Prime Money Market Fund Class A, Fiduciary Class and Service Class
shares (Service Class shares were previously designated as "Retirement Class
Shares").
THE ONE GROUP-REGISTERED TRADEMARK- U.S. TREASURY SECURITIES MONEY MARKET FUND
(THE "U.S. TREASURY MONEY MARKET FUND") AND THE ONE GROUP-REGISTERED TRADEMARK-
PRIME MONEY MARKET FUND (THE "PRIME MONEY MARKET FUND") EACH SEEKS CURRENT
INCOME WITH LIQUIDITY AND STABILITY OF PRINCIPAL.
CLASS A SHARES ARE OFFERED TO THE GENERAL PUBLIC.
FIDUCIARY CLASS SHARES ARE OFFERED TO INSTITUTIONAL INVESTORS, INCLUDING
AFFILIATES OF BANC ONE CORPORATION AND ANY BANK, DEPOSITORY INSTITUTION,
INSURANCE COMPANY, PENSION PLAN OR OTHER ORGANIZATION AUTHORIZED TO ENGAGE IN
FIDUCIARY, ADVISORY, AGENCY, CUSTODIAL OR SIMILAR CAPACITIES (EACH AN
"AUTHORIZED FINANCIAL ORGANIZATION").
SERVICE CLASS SHARES ARE OFFERED TO ENTITIES PURCHASING SUCH SHARES ON BEHALF OF
INVESTORS REQUIRING ADDITIONAL ADMINISTRATIVE AND/OR ACCOUNTING SERVICES, SUCH
AS SWEEP PROCESSING.
THE TRUST'S SHARES ARE NOT DEPOSITS OR OBLIGATIONS OF, OR ENDORSED OR GUARANTEED
BY BANC ONE CORPORATION OR ITS BANK OR NON-BANK AFFILIATES. THE TRUST'S SHARES
ARE NOT INSURED OR GUARANTEED BY THE FEDERAL DEPOSIT INSURANCE CORPORATION OR BY
ANY OTHER GOVERNMENTAL AGENCY OR GOVERNMENT SPONSORED AGENCY OF THE FEDERAL
GOVERNMENT OR ANY STATE. AN INVESTMENT IN MUTUAL FUND SHARES INVOLVES INVESTMENT
RISKS, INCLUDING THE POSSIBLE LOSS OF THE PRINCIPAL AMOUNT INVESTED. BANC ONE
INVESTMENT ADVISORS CORPORATION RECEIVES FEES FROM THE FUNDS FOR INVESTMENT
ADVISORY AND OTHER SERVICES.
THERE CAN BE NO ASSURANCE THAT EACH FUND WILL BE ABLE TO MAINTAIN A STABLE NET
ASSET VALUE OF $1.00 PER SHARE.
This Prospectus sets forth concisely the information about the Trust that a
prospective investor should know before investing. Investors are advised to read
this Prospectus and retain it for future reference. A Statement of Additional
Information dated November 1, 1995 has been filed with the Securities and
Exchange Commission and is available without charge through the Distributor, The
One Group-Registered Trademark- Services Company, 3435 Stelzer Road, Columbus,
OH 43219 or by calling 1-800-480-4111 during business hours. The Statement of
Additional Information is incorporated into this Prospectus by reference.
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED UPON THE
ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A
CRIMINAL OFFENSE.
November 1, 1995
<PAGE>
TABLE OF CONTENTS
<TABLE>
<S> <C>
SUMMARY.......................................................................................... 3
ABOUT THE FUNDS.................................................................................. 4
Expense Summary................................................................................ 4
Financial Highlights........................................................................... 8
The Funds...................................................................................... 10
Investment Objectives.......................................................................... 10
Investment Policies............................................................................ 10
HOW TO DO BUSINESS WITH THE ONE GROUP-REGISTERED TRADEMARK-...................................... 11
How to Invest in The One Group-Registered Trademark-........................................... 11
Exchanges...................................................................................... 12
Redemptions.................................................................................... 13
FUND MANAGEMENT.................................................................................. 14
The Adviser.................................................................................... 14
The Distributor................................................................................ 15
The Administrator.............................................................................. 15
The Transfer Agent and Custodian............................................................... 15
Counsel and Independent Accountants............................................................ 15
OTHER INFORMATION................................................................................ 16
The Trust...................................................................................... 16
Other Investment Policies...................................................................... 17
Description of Permitted Investments........................................................... 17
ADDITIONAL PERMITTED INVESTMENTS FOR THE ONE GROUP-REGISTERED TRADEMARK-......................... 18
Prime Money Market Fund........................................................................ 18
Description of Ratings......................................................................... 23
Miscellaneous.................................................................................. 24
Performance.................................................................................... 24
Taxes.......................................................................................... 24
</TABLE>
PROSPECTUS 2
<PAGE>
SUMMARY
The One Group-Registered Trademark- (the "Trust") is an open-end management
investment company that provides a convenient way to invest in professionally
managed portfolios of securities. The following provides basic information about
the Class A, Fiduciary Class and Service Class shares of The One
Group-Registered Trademark- U.S. Treasury Securities Money Market Fund (the
"U.S. Treasury Money Market Fund") and the Class A, Fiduciary Class and Service
Class shares of The One Group-Registered Trademark-Prime Money Market Fund (the
"Prime Money Market Fund").
WHAT ARE THE INVESTMENT OBJECTIVES? Each of the U.S. Treasury Money Market Fund
and Prime Money Market Fund seeks current income with liquidity and stability of
principal. See "Investment Objectives."
WHAT ARE THE PERMITTED INVESTMENTS? The U.S. Treasury Money Market Fund invests
exclusively in short-term U.S. Treasury bills, notes and other obligations
issued or guaranteed by the U.S. Treasury and repurchase agreements
collateralized by such obligations. The Prime Money Market Fund invests
exclusively in high quality money market instruments. See "Investment Policies."
WHO IS THE ADVISER? Banc One Investment Advisors Corporation, an indirect
subsidiary of BANC ONE CORPORATION, serves as the Adviser of the Trust. The
Adviser is entitled to a fee for advisory services provided to the Trust. The
Adviser may voluntarily agree to waive a part of its fees. See "The Adviser" and
"Expense Summary."
WHO IS THE ADMINISTRATOR? The One Group-Registered Trademark- Services Company
serves as the Administrator of the Trust. The Administrator is entitled to a fee
for services provided to the Trust. Banc One Investment Advisors Corporation
serves as the Sub-Administrator of the Trust, pursuant to an agreement with the
Administrator, for which Banc One Investment Advisors Corporation receives a fee
paid by the Administrator. See "The Administrator" and "Expense Summary."
WHO IS THE TRANSFER AGENT AND CUSTODIAN? State Street Bank and Trust Company
serves as Transfer Agent and Custodian for the Trust for which services it
receives a fee. Bank One Trust Company, N.A. serves as Sub-Custodian for the
Trust, for which services it receives a fee. See "The Transfer Agent and
Custodian."
WHO IS THE DISTRIBUTOR? The One Group-Registered Trademark- Services Company
acts as Distributor of the Trust's shares. The Distributor is entitled to fees
for distribution services for the Class A and Service Class shares of the Funds.
No compensation is paid to the Distributor for the distribution services for the
Fiduciary Class shares of the Funds. See "The Distributor."
HOW DO I PURCHASE AND REDEEM SHARES? Purchases and redemptions of shares of the
Funds may be made through the Distributor on any day that the Federal Reserve
Bank System is open for trading ("Business Days"). See "How to Invest in The One
Group-Registered Trademark-" and "Redemptions."
HOW ARE DIVIDENDS PAID? Substantially all of the net investment income
(exclusive of capital gains) of each Fund is determined and declared on each
Business Day as a dividend for Shareholders of record as of the close of
business on that day and is distributed in the form of periodic dividends to
such Shareholders of each Fund on the first Business Day of each month. Any
capital gains will be distributed at least annually. Distributions are paid in
additional shares of the same class unless the Shareholder elects to take the
payment in cash. See "Dividends."
3 PROSPECTUS
<PAGE>
ABOUT THE FUNDS
EXPENSE SUMMARY -- THE ONE GROUP-REGISTERED TRADEMARK- U.S. TREASURY SECURITIES
MONEY MARKET FUND
<TABLE>
<CAPTION>
FIDUCIARY SERVICE
CLASS A CLASS CLASS
- ----------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
SHAREHOLDER TRANSACTION EXPENSES(1)...................................... none none none
ANNUAL OPERATING EXPENSES(2)
(as a percentage of average daily net assets)
Investment Advisory Fees (after fee waivers)(3).......................... .27% .27% .27%
12b-1 Fees (after fee waiver)(4)......................................... .25% none .55%
Other Expenses........................................................... .22% .22% .22%
- ----------------------------------------------------------------------------------------------------------------
TOTAL OPERATING EXPENSES(5).............................................. .74% .49% 1.04%
- ----------------------------------------------------------------------------------------------------------------
</TABLE>
(1) A person who purchases shares through an account with a financial
institution may be charged separate fees by the financial institution. In
addition, a wire redemption charge, currently $7.00, is deducted from the
amount of a wire redemption payment made at the request of a Shareholder.
(2) The expense information in the table has been restated to reflect current
fees that would have been applicable had they been in effect during the
previous fiscal year.
(3) Investment Advisory Fees have been revised to reflect fee waivers effective
as of the date of this Prospectus. The Adviser may voluntarily agree to
waive a part of its fees. Absent this voluntary reduction, Investment
Advisory Fees would be .35% for all classes of shares.
(4) Absent the voluntary waiver of fees under the Trust's Distribution and
Shareholder Services Plans, 12b-1 fees (as a percentage of average daily net
assets) would be .35% for Class A shares and .75% for Service Class shares.
There are no 12b-1 fees charged to Fiduciary Class shares. The 12b-1 fees
may include a Shareholder servicing fee of .25% of the average daily net
assets of the Fund's Class A and Service Class shares. See "The
Distributor."
(5) Total Operating Expenses have been revised to reflect fee waivers effective
as of the date of this Prospectus. Other Expenses are based on the Fund's
expenses during the most recent fiscal year. Absent the voluntary reduction
of Investment Advisory and 12b-1 fees, Total Operating Expenses would be
.92% for Class A shares, .57% for Fiduciary Class shares and 1.32% for
Service Class shares.
PROSPECTUS 4
<PAGE>
EXAMPLE: An investor would pay the following expenses on a $1,000 investment in
Class A, Fiduciary Class and Service Class shares of the U.S. Treasury Money
Market Fund, assuming: (1) 5% annual return; and (2) redemption at the end of
each time period.
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------------
1 YEAR 3 YEARS 5 YEARS 10 YEARS
- -----------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Class A $ 8 $ 24 $ 41 $ 92
Fiduciary Class $ 5 $ 16 $ 27 $ 62
</TABLE>
Absent the voluntary reduction of fees, the dollar amounts in the above example
would be as follows:
<TABLE>
<CAPTION>
- ----------------------------------------------------------------------------------
10
1 YEAR 3 YEARS 5 YEARS YEARS
- ----------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Class A $ 9 $ 29 $ 51 $113
Fiduciary Class $ 6 $ 18 $ 32 $ 71
- ----------------------------------------------------------------------------------
- ----------------------------------------------------------------------------------
</TABLE>
Service Class shares are offered to investors requiring additional
administrative and/or accounting services, such as sweep processing. It is not
intended that a Shareholder would remain in the Service Class for more than a
very limited period of time. However, a shareholder investing on a continual
basis in the Service Class for a period of one (1) month would pay $1, three (3)
months would pay $3, one (1) year, would pay $11. Absent the voluntary fee
reduction a Shareholder would pay for a period of one (1) month $1, three (3)
months $3, one (1) year $13.
THESE EXAMPLES SHOULD NOT BE CONSIDERED A REPRESENTATION OF PAST OR FUTURE
EXPENSES AND ACTUAL EXPENSES MAY BE GREATER OR LESS THAN THOSE SHOWN. The
purpose of these tables is to assist the investor in understanding the various
costs and expenses that may be directly or indirectly borne by investors in the
Trust.
Investors in the Fund ("Shareholders") who are long-term Shareholders of Class A
shares and Service Class shares may pay more than the equivalent of the maximum
front-end sales charges otherwise permitted by the National Association of
Securities Dealers' Rules.
5 PROSPECTUS
<PAGE>
EXPENSE SUMMARY -- THE ONE GROUP-REGISTERED TRADEMARK- PRIME MONEY MARKET FUND
<TABLE>
<CAPTION>
FIDUCIARY SERVICE
CLASS A.... CLASS CLASS
- ----------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
SHAREHOLDER TRANSACTION EXPENSES(1)...................................... none none none
ANNUAL OPERATING EXPENSES(2)
(as a percentage of average daily net assets)
Investment Advisory Fees (after fee waivers)(3).......................... .27% .27% .27%
12b-1 Fees (after fee waiver)(4)......................................... .25% none .55%
Other Expenses........................................................... .20% .20% .20%
- ----------------------------------------------------------------------------------------------------------------
TOTAL OPERATING EXPENSES(5).............................................. .72% .47% 1.02%
- ----------------------------------------------------------------------------------------------------------------
</TABLE>
(1) A person who purchases shares through an account with a financial
institution may be charged separate fees by the financial institution. In
addition, a wire redemption charge, currently $7.00, is deducted from the
amount of a wire redemption payment made at the request of a Shareholder.
(2) The expense information in the table has been restated to reflect current
fees that would have been applicable had they been in effect during the
previous fiscal year.
(3) Investment Advisory Fees have been revised to reflect fee waivers effective
as of the date of this Prospectus. The Adviser has voluntarily agreed to
waive a part of its fees. Absent this voluntary reduction, Investment
Advisory Fees would be .35% for all classes of shares.
(4) Absent the voluntary waiver of fees under the Trust's Distribution and
Shareholder Services Plans, 12b-1 fees (as a percentage of average daily net
assets) would be .35% for Class A shares and .75% for Service Class shares.
There are no 12b-1 fees charged to Fiduciary Class shares. The 12b-1 fees
may include a Shareholder servicing fee of .25% of the average daily net
assets of the Fund's Class A and Service Class shares. See "The
Distributor."
(5) Total Operating Expenses have been revised to reflect fee waivers effective
as of the date of this Prospectus. Other Expenses are based on the Fund's
expenses during the most recent year. Absent the voluntary reduction of
Investment Advisory and 12b-1 fees, Total Operating Expenses would be .90%
for Class A Shares, .55% for Fiduciary Class Shares and 1.30% for Service
Class Shares.
PROSPECTUS 6
<PAGE>
EXAMPLE: An investor would pay the following expenses on a $1,000 investment in
Class A, Fiduciary Class and Service Class shares of the Prime Money Market
Fund, assuming: (1) 5% annual return; and (2) redemption at the end of each time
period.
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------------
1 YEAR 3 YEARS 5 YEARS 10 YEARS
- -----------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Class A $ 7 $ 23 $ 40 $ 90
Fiduciary Class $ 5 $ 15 $ 26 $ 60
</TABLE>
Absent the voluntary reduction of fees, the dollar amounts in the above example
would be as follows:
<TABLE>
<CAPTION>
- ----------------------------------------------------------------------------------
1
YEAR 3 YEARS 5 YEARS 10 YEARS
- ----------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Class A $ 9 $ 29 $ 50 $111
Fiduciary Class $ 6 $ 18 $ 31 $ 69
- ----------------------------------------------------------------------------------
- ----------------------------------------------------------------------------------
</TABLE>
Service Class shares are offered to investors requiring additional
administrative and/or accounting services, such as sweep processing. It is not
intended that a Shareholder would remain in the Service Class for more than a
very limited period of time. However, a shareholder investing on a continual
basis in the Service Class for a period of one (1) month would pay $1, three (3)
months would pay $3, one (1) year, would pay $10. Absent the voluntary fee
reduction a Shareholder would pay for a period of one (1) month $1, three (3)
months $3, one (1) year $13.
THESE EXAMPLES SHOULD NOT BE CONSIDERED A REPRESENTATION OF PAST OR FUTURE
EXPENSES AND ACTUAL EXPENSES MAY BE GREATER OR LESS THAN THOSE SHOWN. The
purpose of these tables is to assist the investor in understanding the various
costs and expenses that may be directly or indirectly borne by investors in the
Trust.
Long-term Shareholders of Class A shares and Service Class shares may pay more
than the equivalent of the maximum front-end sales charges otherwise permitted
by the National Association of Securities Dealers' Rules.
7 PROSPECTUS
<PAGE>
FINANCIAL HIGHLIGHTS
The Trust was organized as a Massachusetts Business Trust on May 23, 1985. The
Trust currently consists of 29 separate investment portfolios (the "funds").
Currently, shares in The One Group-Registered Trademark- U.S. Treasury
Securities Money Market Fund and The One Group-Registered Trademark-Prime Money
Market Fund are offered in three separate classes: Class A shares, Fiduciary
Class shares and Service Class shares.
The following tables set forth certain financial information with respect to the
Financial Highlights for Class A, Fiduciary Class and Service Class shares of
each Fund for the period from commencement of operations of each such class of
each Fund to June 30, 1995. Service Class shares were formerly designated as
Retirement Class shares. Such information is a part of the financial statements
audited by Coopers & Lybrand L.L.P., independent accountants for the Trust,
whose report on the Trust's financial statements for the year ended June 30,
1995 appears in the Statement of Additional Information. Further information
about each Fund's performance is contained in the Annual Report to Shareholders
for such Fund, which may be obtained without charge from the Distributor by
calling 1-800-480-4111 during business hours.
THE ONE GROUP-REGISTERED TRADEMARK- U.S. TREASURY SECURITIES MONEY MARKET FUND
FINANCIAL HIGHLIGHTS
For a share of each class outstanding throughout each period.
<TABLE>
<CAPTION>
U.S. Treasury Money Market Fund
--------------------------------------------------------------------------
Year ended June 30,
--------------------------------------------------------------------------
1995 1994 1993
------------------------ ---------------------- ----------------------
FIDUCIARY CLASS A FIDUCIARY CLASS A FIDUCIARY CLASS A
------------ --------- ---------- --------- ---------- ---------
<S> <C> <C> <C> <C> <C> <C>
Net Asset Value, Beginning of Period.... $ 1.000 $ 1.000 $ 1.000 $ 1.000 $ 1.000 $ 1.000
------------ --------- ---------- --------- ---------- ---------
Investment Activities
Net Investment Income................. 0.050 0.047 0.030 0.027 0.029 0.026
------------ --------- ---------- --------- ---------- ---------
Less Distribution
Net Investment Income................. (0.050) (0.047) (0.030) (0.027) (0.029) (0.026)
------------ --------- ---------- --------- ---------- ---------
Net Asset Values, End of Period......... $ 1.000 $ 1.000 $ 1.000 $ 1.000 $ 1.000 $ 1.000
------------ --------- ---------- --------- ---------- ---------
------------ --------- ---------- --------- ---------- ---------
Total Return............................ 5.07% 4.81% 3.01% 2.76% 2.89% 2.63%
Ratios/Supplementary Data:
Net Assets at end of period (000)..... $ 1,178,091 $98,723 $969,326 $53,423 $492,862 $30,759
Ratio of expenses to average net
assets.............................. 0.41% 0.66% 0.40% 0.63% 0.45% 0.65%
Ratio of net investment income to
average net assets.................. 4.96% 4.71% 3.02% 2.81% 2.85% 2.52%
Ratio of expenses to average net
assets*............................. 0.59% 0.94% 0.58% 0.87% 0.67% 1.02%
Ratio of net investment income to
average net assets*................. 4.78% 4.43% 2.84% 2.57% 2.63% 2.15%
<CAPTION>
1992 1991
------------------------ ----------
FIDUCIARY CLASS A (a) Fiduciary
---------- ----------- ----------
<S> <C> <C> <C>
Net Asset Value, Beginning of Period.... $ 1.000 $ 1.000 $ 1.000
---------- ----------- ----------
Investment Activities
Net Investment Income................. 0.043 0.012 0.062
---------- ----------- ----------
Less Distribution
Net Investment Income................. (0.043) (0.012) (0.062)
---------- ----------- ----------
Net Asset Values, End of Period......... $ 1.000 $ 1.000 $ 1.000
---------- ----------- ----------
---------- ----------- ----------
Total Return............................ 4.40% 3.38%(b) 6.63%
Ratios/Supplementary Data:
Net Assets at end of period (000)..... $410,146 $ 6 $339,987
Ratio of expenses to average net
assets.............................. 0.55% 0.59%(b) 0.60%
Ratio of net investment income to
average net assets.................. 4.25% 2.51%(b) 6.20%
Ratio of expenses to average net
assets*............................. 0.77% 0.71%(b) 0.80%
Ratio of net investment income to
average net assets*................. 4.04% 2.39%(b) 6.00%
</TABLE>
- -----------------
* During the period certain fees were voluntarily reduced. If such voluntary
fee reductions had not occurred, the ratios would have been as indicated.
(a) Class A Shares commenced offering on February 18, 1992.
(b) Annualized.
PROSPECTUS 8
<PAGE>
THE ONE GROUP-REGISTERED TRADEMARK- PRIME MONEY MARKET FUND
FINANCIAL HIGHLIGHTS
For a share of each class outstanding throughout each period.
<TABLE>
<CAPTION>
Prime Money Market Fund
----------------------------------------------------------
Year ended June 30,
----------------------------------------------------------
1995
---------------------------------- 1994
SERVICE ---------------------
FIDUCIARY CLASS A (a) Fiduciary Class A
------------ -------- --------- ---------- ---------
<S> <C> <C> <C> <C> <C>
Net Asset Value, Beginning of Period.............. $ 1.000 $ 1.000 $ 1.000 $ 1.000 $ 1.000
------------ -------- --------- ---------- ---------
Investment Activities
Net investment income........................... 0.052 0.050 0.041 0.031 0.027
------------ -------- --------- ---------- ---------
Less Distributions
Net investment income........................... (0.052) (0.050 ) (0.041) (0.031 ) (0.027)
------------ -------- --------- ---------- ---------
Net Asset Value, End of Period.................... $ 1.000 $ 1.000 $ 1.000 $ 1.000 $ 1.000
------------ -------- --------- ---------- ---------
------------ -------- --------- ---------- ---------
Total Return...................................... 5.34% 5.08% (a) 3.19% 2.93%
Ratios/Supplementary Data:
Net Assets at end of period (000)................ $1,965,416 $201,968 $1,600,876 $74,759
Ratio of expenses to average net assets........... 0.41% 0.67% 1.42%(c) 0.40% 0.65%
Ratio of net investment income to average net
assets........................................... 5.27% 5.02% 4.52%(c) 3.18% 2.92%
Ratio of expenses to average net assets*.......... 0.57% 0.92% 1.60%(c) 0.59% 0.90%
Ratio of net investment income to average net
assets*.......................................... 5.12% 4.77% 5.23%(c) 2.99% 2.67%
<CAPTION>
1993 1992
-------------------------- --------------------------
Retirement Fiduciary Class A Fiduciary Class A (b)
----------- ------------ ----------- ------------ -----------
<S> <C>
Net Asset Value, Beginning of Period.............. $ 1.000 $ 1.000 $ 1.000 $ 1.000 $ 1.000
----------- ------------ ----------- ------------ -----------
Investment Activities
Net investment income........................... 0.008 0.030 0.030 0.045 0.013
----------- ------------ ----------- ------------ -----------
Less Distributions
Net investment income........................... (0.008) (0.030) (0.030) (0.045) (0.013)
----------- ------------ ----------- ------------ -----------
Net Asset Value, End of Period.................... $ 1.000 $ 1.000 $ 1.000 $ 1.000 $ 1.000
----------- ------------ ----------- ------------ -----------
----------- ------------ ----------- ------------ -----------
Total Return...................................... 0.79%(d) 3.09% 2.83% 4.64% 3.51%(c)
Ratios/Supplementary Data:
Net Assets at end of period (000)................ $ 40 $979,275 $61,106 $946,504 $ 511
Ratio of expenses to average net assets........... 1.18%(c) 0.44% 0.65% 0.59% 0.79%(c)
Ratio of net investment income to average net
assets........................................... 3.03%(c) 3.05% 2.67% 4.49% 3.40%(c)
Ratio of expenses to average net assets*.......... 1.36%(c) 0.62% 0.99% 0.76% 0.94%(c)
Ratio of net investment income to average net
assets*.......................................... 2.85%(c) 2.87% 2.33% 4.32% 3.25%(c)
<CAPTION>
1991
------------
Fiduciary
------------
Net Asset Value, Beginning of Period.............. $ 1.000
------------
Investment Activities
Net investment income........................... 0.069
------------
Less Distributions
Net investment income........................... (0.069)
------------
Net Asset Value, End of Period.................... $ 1.000
------------
------------
Total Return...................................... 7.12%
Ratios/Supplementary Data:
Net Assets at end of period (000)................ $760,726
Ratio of expenses to average net assets........... 0.68%
Ratio of net investment income to average net
assets........................................... 6.86%
Ratio of expenses to average net assets*.......... 0.83%
Ratio of net investment income to average net
assets*.......................................... 6.71%
</TABLE>
- ---------------
* During the period certain fees were voluntarily reduced. If such voluntary
fee reductions had not occurred, the ratios would have been as indicated.
(a) The Service Shares commenced offering on January 17, 1994 when they were
designated as "Retirement" Shares. On April 4, 1995, the name of the
Retirement Shares was changed to "Service" Shares. As of June 1, 1995,
Service Shares transferred to Class A Shares. As of June 30, 1995, there
were no shareholders in the Service Class. The return for the period from
July 1, 1994 to June 1, 1995 for the Service Shares was 4.11%.
(b) Class A Shares commenced offering on February 18, 1992.
(c) Annualized.
(d) Not annualized.
9 PROSPECTUS
<PAGE>
THE FUNDS
The One Group-Registered Trademark- U.S. Treasury Securities Money Market Fund
(formerly, the U.S. Treasury Money Market Fund) and The One Group-Registered
Trademark- Prime Money Market Fund (each a "Fund" and, collectively, the
"Funds") are part of The One Group-Registered Trademark- (the "Trust"), which is
an open-end management investment company that offers units of beneficial
interest ("shares") in 29 separate funds and different classes of certain of the
funds. This Prospectus relates to Class A, Fiduciary Class and Service Class
shares of The One Group-Registered Trademark- U.S. Treasury Securities Money
Market Fund and The One Group-Registered Trademark- Prime Money Market Fund,
which provide for variations in distribution costs, voting rights, dividends and
shareholder services, pursuant to a multiple class plan (the "Multiple Class
Plan") adopted by the Board of Trustees of the Trust. Except for these
differences among classes, each share of each Fund represents an undivided,
proportionate interest in that Fund. Each Fund is a diversified mutual fund.
Information regarding the Trust's other funds and their classes is contained in
separate prospectuses which may be obtained from the Trust's Distributor, The
One Group-Registered Trademark- Services Company, 3435 Stelzer Road, Columbus,
OH 43219 or by calling 1-800-480-4111.
INVESTMENT OBJECTIVES
The investment objective of The One Group-Registered Trademark- U.S. Treasury
Securities Money Market Fund and The One Group-Registered Trademark- Prime Money
Market Fund is to seek current income with liquidity and stability of principal.
The investment objective of each Fund is fundamental and may not be changed
without a vote of the holders of a majority of such Fund's outstanding shares
(as defined in the Statement of Additional Information).
There can be no assurance that either Fund will meet its investment objective or
be able to maintain a net asset value of $1.00 per share on a continuous basis.
IN GENERAL
Each Fund intends to comply with regulations of the Securities and Exchange
Commission (the "SEC") applicable to money market funds using the amortized cost
method for calculating net asset value. These regulations impose certain
quality, maturity and diversification restraints on investments by the Funds.
Under these regulations, the Funds will invest only in U.S. dollar-denominated
securities, will maintain an average maturity on a dollar-weighted basis of 90
days or less, and will acquire only "eligible securities" that present minimal
credit risks and have a maturity of 397 days or less. For a further discussion
of these rules, see "Description of Permitted Investments."
INVESTMENT POLICIES
The investment policies of each Fund may be changed without an affirmative vote
of the holders of a majority of such Fund's outstanding shares unless a policy
is expressly deemed to be fundamental or is expressly deemed to be changeable
only by such a majority vote.
PERMISSIBLE INVESTMENTS
The One Group-Registered Trademark- U.S. Treasury Securities Money Market Fund
will invest exclusively in short-term U.S. Treasury bills, notes, and bonds
issued by the U.S. Treasury and Separately Traded Interest and Principal
component parts of such obligations that are transferable through the Federal
Book Entry System ("STRIPS") and Coupon Under Book Entry Safekeeping ("CUBES")
(collectively "U.S. Treasury Obligations"), repurchase agreements collateralized
by such obligations, reverse repurchase agreements and when-issued securities.
The Fund also engages in securities lending.
The One Group-Registered Trademark- Prime Money Market Fund will invest in
eligible securities consisting of U.S. dollar-denominated U.S. Treasury
Obligations, including STRIPS and CUBES, obligations issued or guaranteed as to
principal and interest by the agencies or instrumentalities of the U.S.
government, mortgage-backed securities, commercial paper of U.S. issuers rated
in the highest or second highest short-term rating category at the time of
investment by at least two nationally recognized statistical rating
organizations ("NRSRO") (one if it is the only organization rating such
obligation), in accordance with SEC regulations, or, if unrated, determined by
the Adviser to be of comparable quality, obligations (certificates of deposit,
time deposits and bankers' acceptances) of U.S. commercial banks, U.S. savings
and loan institutions, and U.S. and London branches of foreign banks that have
total assets of $1 billion or more as shown on their last published financial
statements at the time of investment and that are insured by the Federal Deposit
Insurance Corporation and that are of comparable quality to securities meeting
the above ratings or, if unrated, determined by the Adviser to be of comparable
quality, short-term corporate obligations of U.S. issuers of commercial paper of
comparable quality to securities meeting the above ratings or, if unrated,
determined by the Adviser to be of comparable quality, short-term funding
agreements of comparable quality, asset-backed securities of comparable quality,
repurchase agreements, reverse repurchase agreements, shares of other investment
companies, receipts, which may include Treasury Receipts ("TRS"), Treasury
Investment Growth Receipts ("TIGRS") and Certificate of Accrual on Treasury
Securities ("CATS"), variable and floating rate instruments, bank deposit notes,
when-issued securities, puts, commercial paper issued by foreign issuers,
municipal securities, municipal leases, and participation interests in municipal
securities. The Fund also engages in securities lending.
Each of the aforementioned securities will be purchased by the Funds only if
deemed to present minimal credit risk to the Fund.
Except as otherwise provided in the ratings requirements described above, where
applicable, all investments of each Fund must possess one of the ratings
described below in "Description
PROSPECTUS 10
<PAGE>
of Permitted Investments" and "Description of Ratings" at the time of investment
or, if unrated, determined by the Adviser to be of comparable quality.
For a further description of each Fund's permitted investments and the above
ratings, see "Description of Permitted Investments," "Description of Ratings"
and the Statement of Additional Information.
RISK FACTORS
The investment characteristics of mortgage-related securities, which may be
purchased by the Prime Money Market Fund, differ from traditional debt
securities. These differences can result in significantly greater price and
yield volatility than is the case with traditional fixed income securities. The
major differences typically include more frequent interest and principal
payments, usually monthly, the adjustability of interest rates and the
possibility that prepayments of principal may be made at any time. Prepayment
rates are influenced by changes in current interest rates and a variety of
economic, geographic, social and other factors. During periods of declining
interest rates, prepayment rates can be expected to accelerate. Under certain
interest rate and prepayment scenarios, the Fund may fail to recoup fully its
investment in mortgage-related securities notwithstanding a direct or indirect
governmental or agency guarantee. In general, changes in the rate of prepayments
on a mortgage-related security will change that security's market value and its
yield to maturity. When interest rates fall, high prepayments could force the
Fund to reinvest principal at a time when investment opportunities are not
attractive. Thus, mortgage-related securities may not be an effective means for
the Fund to lock in long-term interest rates. Conversely, during periods when
interest rates rise, slow prepayments could cause the average life of the
security to lengthen and the value to decline more than anticipated.
Foreign investments made by the Prime Money Market Fund involve risks that are
different from investments in securities of U.S. banks. These risks may include
future unfavorable political and economic developments, possible withholdings of
taxes, seizure of foreign deposits, currency controls, interest limitations or
other governmental restrictions which might affect payment of principal or
interest. Additionally, there may be less public information available about
foreign banks and their branches. Foreign branches of foreign banks are not
regulated by U.S. banking authorities and generally are not bound by accounting,
auditing and financial reporting standards comparable to U.S. banks. Although
these factors will be considered carefully, the Prime Money Market Fund does not
limit the amount of its assets which can be invested in any one type of
instrument or in any foreign country, except as required under regulations
applicable to money market funds and the Fund's investment objective, policies
and restrictions.
For additional information on each of the Fund's permitted investments and
associated risks, see "Description of Permitted Investments."
HOW TO DO BUSINESS WITH
THE ONE GROUP-REGISTERED TRADEMARK-
HOW TO INVEST IN THE ONE GROUP-REGISTERED TRADEMARK-
Shares of each Fund are sold on a continuous basis and may be purchased directly
from the Trust's Distributor, The One Group-Registered Trademark- Services
Company, by mail, by telephone, or by wire. Shares may also be purchased through
a financial institution, such as a bank, savings and loan association or
insurance company (each a "Shareholder Servicing Agent"), that has established a
Shareholder servicing agreement with the Distributor, or through a broker-dealer
that has established a dealer agreement with the Distributor.
Purchases and redemptions of shares of either Fund may be made on any day that
the Federal Reserve Bank System is open for trading ("Business Days"). The
minimum initial and subsequent investments in each Fund are $1,000 and $100,
respectively ($100 and $25, respectively, for employees of BANC ONE CORPORATION
and its affiliates). Initial and subsequent investment minimums may be waived at
the Distributor's discretion.
Class A shares are offered to the general public. Service Class shares are
offered to entities purchasing such shares on behalf of investors requiring
additional administrative and/or accounting services, such as sweep processing.
Fiduciary Class shares are offered to institutional investors, including
affiliates of BANC ONE CORPORATION and any bank, depository institution,
insurance company, pension plan or other organization authorized to act in
fiduciary, advisory, agency, custodial or similar capacities (each an
"Authorized Financial Organization"). For additional details regarding
eligibility, call the Distributor at 1-800-480-4111.
BY MAIL
Investors may purchase Class A shares of a Fund by completing and signing an
Account Application Form and mailing it, along with a check (or other negotiable
bank instrument or money order) payable to "The One Group-Registered
Trademark-," to State Street Bank and Trust Company (the Trust's Transfer Agent
and Custodian), P.O. Box 8500, Boston, MA 02266-8500. Subsequent purchases of
shares may be made at any time by mailing a check to the Transfer Agent. Account
Application Forms are available through the Distributor by calling
1-800-480-4111.
Purchases of Fiduciary Class shares, Service Class shares and Class A shares
that are being offered to investors in certain retirement plans such as 401(k)
and similar plans, other than Individual Retirement Accounts, are made by an
institutional investor and/or other intermediary on behalf of an investor (each
also a "Shareholder Servicing Agent"). The Shareholder Servicing Agent may
require an investor to complete forms in addition to the Account Application
Form and to follow procedures established by the Shareholder Servicing Agent.
11 PROSPECTUS
<PAGE>
Such Shareholders should contact their Shareholder Servicing Agents regarding
purchases, exchanges and redemptions of shares. See "Additional Information
Regarding Purchases."
BY TELEPHONE OR BY WIRE
Once an Account Application Form has been received, Shareholders are eligible to
make purchases by telephone or wire (if that option has been selected by a
Shareholder) by calling the Transfer Agent at 1-800-480-4111 or the Shareholder
Servicing Agents, if applicable.
Shareholders may revoke their automatic eligibility to make purchases and/or
redemptions by telephone or by wire, by sending a letter so stating to the
Transfer Agent, State Street Bank and Trust Company, P.O. Box 8500, Boston, MA
02266-8500.
SYSTEMATIC INVESTMENT PLAN
Class A investors may make automatic monthly investments in either Fund from
their bank, savings and loan or other depository institution accounts. The
minimum initial and subsequent investments must be $25 under the Systematic
Investment Plan, which minimum may be waived at the discretion of the
Distributor. The Trust pays the costs associated with these transfers, but
reserves the right, upon thirty days' written notice, to impose reasonable
charges for this service. A depository institution may impose a charge for
debiting an investor's account which would reduce the investor's return from an
investment in a Fund.
FUND-DIRECT IRA
The Trust offers a tax-advantaged retirement plan for which the shares of the
Funds may be an appropriate investment. The Trust's retirement plan allows
participants to defer taxes while helping them build their retirement savings.
The One Group-Registered Trademark- Fund-Direct IRA is a retirement plan with a
wide choice of investments offering people with earned income the opportunity to
compound earnings on a tax-deferred basis. An IRA Adoption Agreement may be
obtained by calling the Distributor at 1-800-480-4111.
ADDITIONAL INFORMATION REGARDING PURCHASES
A purchase order will be effective as of the day received by the Distributor and
the Shareholder will be eligible to receive dividends declared the same day, if
the Distributor receives the order before 2:00 p.m., eastern time, and the
Custodian receives Federal funds before the close of business on such day.
Otherwise, the purchase order will be effective the next Business Day on which
Federal funds are received by the Custodian before the cut-off time. Federal
funds are monies credited to a bank's account with a Federal Reserve Bank. The
purchase price of shares of each Fund is the net asset value next determined
after a purchase order is effected. The net asset value per share of each Fund
is determined by dividing the total market value of such Fund's investments and
other assets allocable to a class, less any liabilities allocable to that class,
by the total number of outstanding shares of such class. Net asset value per
share is determined daily as of 2:00 p.m. and 4:00 p.m., eastern time, on each
Business Day. For a further discussion of the calculation of net asset value,
see the Statement of Additional Information. Shares may also be issued in
transactions involving the acquisition by a Fund of securities held by
collective investment funds sponsored and administered by affiliates of the
Adviser. Purchases will be made in full and fractional shares of a Fund
calculated to three decimal places. The purchase price is expected to remain
constant at $1.00 per share.
The Trust reserves the right to reject a purchase order when the Distributor
determines that it is not in the best interest of the Trust and/or its
Shareholders to accept such order. Except as provided below, neither the Trust's
Transfer Agent nor the Trust will be responsible for any loss, liability, cost
or expense for acting upon telephone or wire instructions, and the investor will
bear all risk of loss. The Trust will employ reasonable procedures to confirm
that instructions communicated by telephone are genuine, including requiring a
form of personal identification prior to acting upon instructions received by
telephone and recording telephone instructions. If such procedures are not
employed, the Trust may be liable for any losses due to unauthorized or
fraudulent instructions.
Fiduciary Class shares offered to institutional investors and to investors in
certain retirement plans, Class A shares that are being offered to investors in
certain retirement plans such as 401(k) and similar plans, other than Individual
Retirement Accounts, and Service Class shares offered through institutional
investors will normally be held in the name of the Shareholder Servicing Agent
effecting the purchase on the Shareholder's behalf, and it is the Shareholder
Servicing Agent's responsibility to transmit purchase orders to the Distributor.
A Shareholder Servicing Agent may impose an earlier cut-off time for receipt of
purchase orders directed through it to allow for processing and transmittal of
these orders to the Distributor for effectiveness the same day. The Shareholder
should contact his or her Shareholder Servicing Agent for information as to the
Shareholder Servicing Agent's procedures for transmitting purchase, exchange or
redemption orders to the Trust. A Shareholder who desires to transfer the
registration of shares beneficially owned by him or her, but held of record by a
Shareholder Servicing Agent, should contact the Shareholder Servicing Agent to
accomplish such change. Other Shareholders who desire to transfer the
registration of their shares should contact the Transfer Agent.
No certificates representing shares of either Fund will be issued. In
communications to Shareholders, the Fund will not duplicate mailings of Fund
material to Shareholders who reside at the same address.
EXCHANGES
Fiduciary Class Shareholders of either Fund may exchange their shares for Class
A shares of the same Fund or for Class A shares or Fiduciary Class shares of
another fund of the Trust.
PROSPECTUS 12
<PAGE>
Effective January 1, 1996, Service Class shareholders may not exchange their
Service Class shares for shares of any other class, nor may shares of any other
class be exchanged for Service Class shares.
Class A Shareholders of either Fund may exchange their shares for Fiduciary
Class shares of the same Fund or for Fiduciary Class or Class A shares of
another fund of the Trust if the Shareholder is eligible to purchase such
shares.
The exchange privilege may be exercised only in those states where the shares of
a Fund or such other fund of the Trust may be legally sold. All exchanges
discussed herein are made at the net asset value of the exchanged shares, except
as provided below. The Trust does not impose a charge for processing exchanges
of shares. If a Shareholder seeks to exchange shares of either Fund for Class A
shares of a fund of the Trust that imposes a sales charge, the Shareholder will
be required to pay the sales charge applicable to the fund of the Trust into
which the shares are being exchanged, unless the sales charge is otherwise
waived, as provided in the Statement of Additional Information.
ADDITIONAL INFORMATION REGARDING EXCHANGES
In the case of shares held of record by a Shareholder Servicing Agent but
beneficially owned by a Shareholder, to exchange such shares the Shareholder
should contact the Shareholder Servicing Agent, who will contact the Transfer
Agent and effect the exchange on behalf of the Shareholder. If an exchange
request in good order is received by the Transfer Agent by 2:00 p.m., eastern
time, on any Business Day, the exchange usually will occur on that day. Any
Shareholder who wishes to make an exchange must receive a current prospectus of
the fund of the Trust in which he or she wishes to invest before the exchange
will be effected.
The Trust reserves the right to change the terms or conditions of the exchange
privilege discussed herein upon sixty days' written notice. An exchange between
classes of shares of the same fund is not considered a taxable event; however,
an exchange between funds of the Trust is considered a sale of shares and
usually results in a capital gain or loss for Federal income tax purposes.
Shareholders should consult their tax advisers for a more complete explanation
of the Federal income tax consequences of an exchange of shares of the Funds.
A more detailed description of the above is set forth in the Statement of
Additional Information.
REDEMPTIONS
Shareholders may redeem their shares without charge on any Business Day; shares
may ordinarily be redeemed by mail, by telephone or by wire. All redemption
orders are effected at the net asset value per share next determined after
receipt of a valid request for redemption. Payment to Shareholders for shares
redeemed will be made within seven days after receipt by the Transfer Agent of
the request for redemption. However, the Funds will attempt to honor requests
for next day payment on redemptions if the redemption request is received prior
to 2:00 p.m., eastern time, and requests for payment in two Business Days if the
redemption request is received after such time, unless it would be
disadvantageous to the Trust or the Shareholders of a particular Fund to sell or
liquidate portfolio securities in an amount sufficient to satisfy requests for
payment in this manner.
BY MAIL
A written request for redemption must be received by the Transfer Agent in order
to constitute a valid request for redemption. All written redemption requests
should be sent to The One Group-Registered Trademark-, c/o State Street Bank and
Trust Company, P.O. Box 8500, Boston, MA 02266-8500, or the Shareholder
Servicing Agent, if applicable. The Transfer Agent may require that the
signature on the written request be guaranteed by a commercial bank, by a member
firm of a domestic stock exchange or by a member of the Securities Transfer
Association Medallion Program or the Stock Exchange Medallion Program.
The signature guarantee requirement will be waived if all of the following
conditions apply: (i) the redemption is for $5,000 worth of shares or less; (ii)
the redemption check is payable to the Shareholder(s) of record; and (iii) the
redemption check is mailed to the Shareholder(s) at the address of record. The
Shareholder also may have the proceeds mailed to a commercial bank account
previously designated on the Account Application Form or by written instruction
to the Transfer Agent or the Shareholder Servicing Agent, if applicable. There
is no charge for having redemption requests mailed to a designated bank account.
BY TELEPHONE OR BY WIRE
Shareholders may have the payment of redemption requests wired or mailed to a
domestic commercial bank account previously designated on the Account
Application Form. Wire redemption requests may be made by the Shareholder by
telephone to the Transfer Agent at 1-800-480-4111, provided that the Shareholder
has elected the telephone redemption privilege in writing to the Distributor, or
to the Shareholder Servicing Agent, if applicable. The Transfer Agent may reduce
the amount of a wire redemption payment by its then current wire redemption
charge, which, as of the date of this Prospectus, is $7.00.
Neither the Trust nor the Transfer Agent will be responsible for the
authenticity of the redemption instructions received by telephone if it
reasonably believes those instructions to be genuine. The Trust and the Transfer
Agent will each employ reasonable procedures to confirm that telephone
instructions are genuine, and may be liable for losses resulting from
unauthorized or fraudulent telephone transactions if it does not employ those
procedures. Such procedures may include requesting personal identification
information or recording telephone conversations.
CHECKWRITING
Class A Shareholders may write checks for $250 or more. Once a Shareholder has
signed and returned a signature card, he or
13 PROSPECTUS
<PAGE>
she will receive a supply of checks drawn on State Street Bank and Trust
Company, the Trust's Custodian. The check may be payable to any person, and the
Shareholder's account will continue to earn dividends until the check clears.
Because of the difficulty of determining in advance the exact value of an
account, a Shareholder should not use a check to close the account. Checks are
free. However, an account will be charged for stop payments requested by the
Shareholder or if the check cannot be honored due to insufficient funds or other
valid reasons.
SYSTEMATIC WITHDRAWAL PLAN
Shareholders whose accounts have a value of at least $10,000 may elect to
receive, or may designate another person to receive, monthly, quarterly or
annual payments in a specified amount of not less than $100 each. There is no
charge for this service. Under the Systematic Withdrawal Plan, all dividends and
distributions must be reinvested in shares of such Fund. Shareholders who have
attained the age of 70 1/2 may elect to receive distributions, to the extent
that the redemption represents a minimum required distribution from an
Individual Retirement Account or other qualifying retirement plan. If the amount
of the systematic withdrawal exceeds the income accrued since the previous
withdrawal under the Systematic Withdrawal Plan, the principal balance invested
will be reduced and shares will be redeemed.
OTHER INFORMATION REGARDING REDEMPTIONS
At various times, the Funds may be requested to redeem shares for which they
have not yet received good payment. In such circumstances, the forwarding of
proceeds may be delayed for 15 or more days until payment has been collected for
the purchase of such shares. The Funds intend to pay cash for all shares
redeemed.
Due to the relatively high costs of handling small investments, each Fund
reserves the right to redeem, at net asset value, the shares of any Shareholder
if, because of redemptions of shares by or on behalf of the Shareholder, the
account of such Shareholder in such Fund has a value of less than $1,000, the
minimum initial purchase amount. Accordingly, an investor purchasing shares of a
Fund in only the minimum investment amount may be subject to such involuntary
redemption if he or she thereafter redeems any of these shares. Before a Fund
exercises its right to redeem such shares and to send the proceeds to the
Shareholder, the Shareholder will be given notice that the value of the shares
in his or her account is less than the minimum amount and will be allowed 60
days to make an additional investment in such Fund in an amount which will
increase the value of the account to at least $1,000.
See the Statement of Additional Information for examples of when the Trust may
suspend the right of redemption or redeem shares involuntarily if it appears
appropriate to do so in light of the Trust's responsibilities under the
Investment Company Act of 1940.
The redemption price of shares of the Funds is expected to remain constant at
$1.00 per share, although there is no assurance that this will always be the
case.
FUND MANAGEMENT
THE ADVISER
The Trust and Banc One Investment Advisors Corporation (the "Adviser") have
entered into an investment advisory agreement (the "Advisory Agreement"). Under
the Advisory Agreement, the Adviser makes the investment decisions for the
assets of each Fund and continuously reviews, supervises and administers each
Fund's investment program. The Adviser discharges its responsibilities subject
to the supervision of, and policies established by, the Trustees of the Trust.
The Trust's shares are not deposits or obligations of, or endorsed or guaranteed
by BANC ONE CORPORATION or its bank or non-bank affiliates. The Trust's shares
are not insured or guaranteed by the Federal Deposit Insurance Corporation
("FDIC") or by any other governmental agency or government sponsored agency of
the Federal government or any state.
The Adviser is an indirect, wholly-owned subsidiary of BANC ONE CORPORATION, a
bank holding company incorporated in the state of Ohio. BANC ONE CORPORATION
currently has affiliate banking organizations in Arizona, Colorado, Illinois,
Indiana, Kentucky, Ohio, Oklahoma, Texas, Utah, West Virginia and Wisconsin. In
addition, BANC ONE CORPORATION has several affiliates that engage in data
processing, venture capital, investment and merchant banking, and other
diversified services including trust management, investment management,
brokerage, equipment leasing, mortgage banking, consumer finance and insurance.
On a consolidated basis, BANC ONE CORPORATION had assets of over $86 billion as
of June 30, 1995.
The Adviser represents a consolidation of the investment advisory staffs of a
number of bank affiliates of BANC ONE CORPORATION, which have considerable
experience in the management of open-end management investment company
portfolios, including The One Group-Registered Trademark- since 1985 (then known
as "The Helmsman Fund"). Prior to January 1993, Bank One, Indianapolis, NA
served as investment adviser to each Fund. Bank One, Indianapolis, NA is an
indirect, wholly-owned subsidiary of BANC ONE CORPORATION.
The Adviser is entitled to a fee, which is calculated daily and paid monthly, at
an annual rate of .35% of the average daily net assets of each Fund. The Adviser
may voluntarily agree to waive a part of its fees. (See "About the Funds --
Expense Summary.") These fee waivers are voluntary and may be terminated at any
time. Shareholders will be notified in advance if and when these waivers are
terminated. During the fiscal year ended June 30, 1995, the Funds paid
investment advisory fees to the Adviser of .19% of the average daily net assets
of the U.S. Treasury Money Market Fund and .20% of the average daily net assets
of the Prime Money Market Fund.
PROSPECTUS 14
<PAGE>
THE DISTRIBUTOR
The One Group-Registered Trademark- Services Company (the "Distributor"), a
wholly owned subsidiary of the BISYS Group, Inc., and the Trust are parties to a
distribution agreement (the "Distribution Agreement") under which shares of the
Funds are sold on a continuous basis.
Class A shares and Service Class shares are subject to a distribution and
Shareholder services plan (the "Plan"). As provided in the Plan, the Trust will
pay the Distributor a fee of .35% of the average daily net assets of Class A
shares of each of the Funds and .75% of the average daily net assets of the
Service Class shares of each of the Funds. Currently, the Distributor has
voluntarily agreed to limit payments under the Plan to .25% of average daily net
assets of the Class A shares of each of the Funds and .55% of average daily net
assets of the Service Class shares of each of the Funds. Up to .25% of the fees
payable under the Plan may be used as compensation for Shareholder services by
the Distributor and/or financial institutions and intermediaries. All such fees
that may be paid under the Plan will be paid pursuant to Rule 12b-1 of the
Investment Company Act of 1940. The Distributor may apply these fees toward: (i)
compensation for its services in connection with distribution assistance or
provision of Shareholder services; or (ii) payments to financial institutions
and intermediaries such as banks (including affiliates of the Adviser), savings
and loan associations, insurance companies, investment counselors,
broker-dealers, and the Distributor's affiliates and subsidiaries, as
compensation for services or reimbursement of expenses incurred in connection
with distribution assistance or provision of Shareholder services.
The Plan is characterized as a compensation plan since the distribution fees
will be paid to the Distributor without regard to the distribution or
Shareholder service expenses incurred by the Distributor or the amount of
payments made to financial institutions and intermediaries. Each Fund also may
execute brokerage or other agency transactions through an affiliate of the
Adviser or through the Distributor for which the affiliate or the Distributor
receives compensation. Pursuant to guidelines adopted by the Board of Trustees
of the Trust, any such compensation will be reasonable and fair compared to
compensation received by other brokers in connection with comparable
transactions.
During the fiscal year ended June 30, 1995, 440 Financial Distributors, Inc.,
the previous distributor to the Trust, received fees aggregating .25% of the
average daily net assets of Class A shares of each Fund. In addition, 440
Financial Distributors, Inc. received annualized fees of .74% of the average
daily net assets of the Service Class shares of each Fund. Service Class shares
were formerly designated as Retirement Class shares.
Fiduciary Class shares of each Fund are offered without distribution fees to
institutional investors, including Authorized Financial Organizations. It is
possible that an institution may offer different classes of shares to its
customers and thus receive different compensation with respect to different
classes of shares. In addition, a financial institution that is the record owner
of shares for the account of its customers may impose separate fees for account
services to its customers.
THE ADMINISTRATOR
The One Group-Registered Trademark- Services Company (the "Administrator"), a
wholly-owned subsidiary of the BISYS Group, Inc., and the Trust are parties to
an administration agreement relating to the Funds (the "Administration
Agreement"). Under the terms of the Administration Agreement, the Administrator
is responsible for providing the Trust with administrative services (other than
investment advisory services), including regulatory reporting and all necessary
office space, equipment, personnel and facilities.
The Adviser also serves as Sub-Administrator to each fund of the Trust, pursuant
to an agreement between the Administrator and the Adviser. Pursuant to this
agreement, the Adviser performs many of the Administrator's duties, for which
the Adviser receives a fee paid by the Administrator.
The Administrator is entitled to a fee for administrative services, which is
calculated daily and paid monthly, at an annual rate of .20% of each fund's
average daily net assets on the first $1.5 billion in Trust assets (excluding
the Treasury Only Money Market Fund and the Government Money Market Fund), .18%
of each fund's average daily net assets to $2 billion in Trust assets (excluding
the Treasury Only Money Market Fund and the Government Money Market Fund), and
.16% of each fund's average daily net assets when Trust assets exceed $2 billion
(excluding the Treasury Only Money Market Fund and the Government Money Market
Fund). During the fiscal year ended June 30, 1995, 440 Financial, the previous
administrator to the Trust, received annualized fees of .16% of the U.S.
Treasury Money Market Fund's average daily net assets and .16% of the Prime
Money Market Fund's average daily net assets.
THE TRANSFER AGENT AND CUSTODIAN
State Street Bank and Trust Company, P.O. Box 8500, Boston, MA 02266-8500 acts
as Transfer Agent and Custodian for the Trust for which services it receives a
fee. The Custodian holds cash, securities and other assets of the Trust as
required by the Investment Company Act of 1940. Bank One Trust Company, N.A.
serves as Sub-Custodian in connection with the Trust's securities lending
activities, pursuant to an agreement between State Street Bank and Trust Company
and Bank One Trust Company. Bank One Trust Company receives a fee paid by the
Trust.
COUNSEL AND INDEPENDENT ACCOUNTANTS
Ropes & Gray serves as counsel to the Trust. Coopers & Lybrand L.L.P. serves as
the independent accountants of the Trust.
15 PROSPECTUS
<PAGE>
OTHER INFORMATION
THE TRUST
The Trust was organized as a Massachusetts Business Trust under a Declaration of
Trust filed on May 23, 1985. The Declaration of Trust permits the Trust to offer
separate funds and different classes of each fund. All consideration received by
the Trust for shares of any fund and all assets of such fund belong to that fund
and would be subject to liabilities related thereto.
The Trust pays its expenses, including fees of its service providers, audit and
legal expenses, expenses of preparing prospectuses, proxy solicitation material
and reports to Shareholders, costs of custodial services and registering the
shares under Federal and state securities laws, pricing, insurance expenses,
litigation and other extraordinary expenses, brokerage costs, interest charges,
taxes and organizational expenses. During the fiscal year of the Trust ended
June 30, 1995, the total operating expenses of the U.S. Treasury Money Market
Fund were .66% of the average daily net assets of the Class A shares of the Fund
and .41% of the average daily net assets of the Fiduciary Class shares of the
Fund. These expenses would have been .94% and .59%, respectively, of the average
daily net assets of such classes but for the voluntary reduction of fees. During
the fiscal year of the Trust ended June 30, 1995, the total operating expenses
of the Prime Money Market Fund were .67% of its average daily net assets of the
Class A shares of the Fund, .41% of the average daily net assets of the
Fiduciary Class shares of the Fund and 1.42% (annualized) of the average daily
net assets of the Service Class shares (formerly designated as Retirement Class
shares) of the Fund. These expenses would have been .92%, .57%, and 1.60%,
respectively, of the average daily net assets of such classes but for the
voluntary reduction of fees.
The Adviser and the Administrator each bears all expenses incurred in connection
with the performance of their services as investment adviser and administrator,
respectively, other than the cost of securities (including brokerage
commissions, if any) purchased for each Fund.
As a general matter, as set forth in the Multiple Class Plan, expenses are
allocated to each class of shares of each Fund on the basis of the net asset
value of that class in relation to the net asset value of the Fund. At present,
the only expenses that are allocated to Class A and Service Class shares, other
than in accordance with the relative net asset value of the class, are the
different distribution and Shareholder services costs. See "Expense Summary." At
present, no expenses are allocated to Fiduciary Class shares as a class that are
not also borne by the other classes of shares of each Fund in proportion to the
relative net asset values of the shares of such classes.
TRUSTEES OF THE TRUST
The management and affairs of the Trust are supervised by the Trustees under the
laws governing business trusts in the Commonwealth of Massachusetts. The
Trustees have approved contracts under which, as described above, certain
companies provide essential management services to the Trust.
VOTING RIGHTS
As set forth in the Multiple Class Plan, each share held entitles the
Shareholder of record to one vote. Each fund of the Trust will vote separately
on matters relating solely to that fund. In addition, each class of a fund shall
have exclusive voting rights on any matter submitted to Shareholders that
relates solely to the class, and shall have separate voting rights on any matter
submitted to Shareholders in which the interests of one class differ from the
interests of any other class. However, all fund Shareholders will have equal
voting rights on matters that affect all fund Shareholders equally.
As a Massachusetts Business Trust, the Trust is not required to hold annual
meetings of Shareholders but approval will be sought for certain changes in the
operation of the Trust and for the election of Trustees under certain
circumstances. In addition, a Trustee may be elected or removed by the remaining
Trustees or by Shareholders at a special meeting called upon written request of
Shareholders owning at least 10% of the outstanding shares of the Trust. In the
event that such a meeting is requested, the Trust will provide appropriate
assistance and information to the Shareholders requesting the meeting.
DIVIDENDS
Substantially all of the net investment income (exclusive of capital gains) of
each Fund is determined and declared on each Business Day as a dividend for
Shareholders of record as of the close of business on that day and is
distributed in the form of periodic dividends to such Shareholders of each Fund
on the first Business Day of each month. Any capital gains will be distributed
at least annually.
Shareholders automatically receive all income dividends and capital gain
distributions in additional Class A, Service Class or Fiduciary Class shares, as
applicable, at the net asset value next determined following the record date,
unless the Shareholder has elected to take such payment in cash. Such election,
or any revocation thereof, must be made in writing, at least 15 days prior to
distribution, to the Transfer Agent at P.O. Box 8500, Boston, MA 02266-8500, and
will become effective with respect to dividends and distributions having record
dates after its receipt by the Transfer Agent. Reinvested dividends and
distributions receive the same tax treatment as dividends and distributions paid
in cash.
The amount of dividends payable on Fiduciary Class shares will be more than the
dividends payable on Class A and Service Class shares because of the
distribution expenses charged to Class A and Service Class shares.
SHAREHOLDER INQUIRIES
Shareholder inquiries should be directed to the Administrator, The One
Group-Registered Trademark- Services Company, 3435 Stelzer Road, Columbus, OH
43219.
PROSPECTUS 16
<PAGE>
REPORTING
The Trust issues unaudited financial information semiannually and audited
financial statements annually. The Trust furnishes proxy statements and other
reports to Shareholders of record.
OTHER INVESTMENT POLICIES
INVESTMENT LIMITATIONS
The investment objective and the following investment limitations are
fundamental policies of each Fund. It is also a fundamental policy of each Fund
to use its best efforts to maintain a constant net asset value of $1.00 per
share, although there can be no assurance that a Fund will be able to do so. It
is a fundamental policy of the U.S. Treasury Securities Money Market Fund to
invest only in U.S. Treasury obligations and repurchase agreements
collateralized by such obligations. Fundamental policies cannot be changed with
respect to a Fund without the consent of the holders of a majority of the Fund's
outstanding shares. The term "majority of the outstanding shares" means the vote
of (i) 67% or more of the Fund's shares present at a meeting, if more than 50%
of the outstanding shares of the Fund are present or represented by proxy, or
(ii) more than 50% of the Fund's outstanding shares, whichever is less.
The Funds may not:
1. Purchase securities of any issuer (except securities issued or guaranteed by
the United States, its agencies or instrumentalities and, if consistent with
such Fund's investment objective and policies, repurchase agreements involving
such securities) if as a result more than 5% of the total assets of the Fund
would be invested in the securities of such issuer or the Fund would own more
than 10% of the outstanding voting securities of such issuer; provided, however,
that a Fund may invest up to 25% of its total assets without regard to this
restriction as permitted by applicable law. For purposes of these limitations, a
security is considered to be issued by the government entity whose assets and
revenues guarantee or back the security. With respect to private activity bonds
or industrial development bonds backed only by the assets and revenues of a
non-governmental user, such user would be considered the issuer.
2. Purchase any securities that would cause more than 25% of the total assets of
the Fund to be invested in the securities of one or more issuers conducting
their principal business activities in the same industry. With respect to the
Prime Money Market Fund, (i) this limitation does not apply to investments in
obligations issued or guaranteed by the U.S. government or its agencies and
instrumentalities, domestic bank certificates of deposit or bankers'
acceptances, and repurchase agreements involving such securities; (ii)
wholly-owned finance companies will be considered to be in the industries of
their parents if their activities are primarily related to financing the
activities of their parents; and (iii) utilities will be divided according to
their services (for example, gas, gas transmission, electric and telephone will
each be considered a separate industry). With respect to the Prime Money Market
Fund, this limitation shall not apply to municipal securities, or governmental
guarantees of municipal securities; and provided, further, that for purposes of
this limitation only, private activity bonds that are backed only by the assets
and revenues of a nongovernmental user shall not be deemed to be municipal
securities.
3. Make loans, except that a Fund may (i) purchase or hold debt instruments in
accordance with its investment objective and policies; (ii) enter into
repurchase agreements, and (iii) engage in securities lending as described in
this Prospectus and in the Statement of Additional Information.
The foregoing percentages will apply at the time of the purchase of a security.
Additional investment limitations are set forth in the Statement of Additional
Information.
DESCRIPTION OF PERMITTED INVESTMENTS
The following is a description of certain of the permitted investments for both
of the Funds.
U.S. TREASURY OBLIGATIONS -- Each Fund may invest in bills, notes and bonds
issued by the U.S. Treasury and separately traded interest and principal
component parts of such obligations that are transferable through the Federal
book-entry system known as Separately Traded Registered Interest and Principal
Securities ("STRIPS") and Coupon Under Book Entry Safekeeping ("CUBES"). Each
Fund may invest up to 25% of its total assets in STRIPS and CUBES when
consistent with such Fund's investment objective and policies.
REPURCHASE AGREEMENTS -- Repurchase Agreements are agreements by which a person
obtains a security and simultaneously commits to return the security to the
seller at an agreed upon price (including principal and interest) on an agreed
upon date within a number of days from the date of purchase. The custodian or
its agent will hold the security as collateral for the repurchase agreement.
Collateral must be maintained at a value at least equal to 100% of the
repurchase price. A Fund bears a risk of loss in the event the other party
defaults on its obligations and the Fund is delayed or prevented from its right
to dispose of the collateral securities or if the Fund realizes a loss on the
sale of the collateral securities. The Adviser will enter into repurchase
agreements on behalf of a Fund only with financial institutions deemed to
present minimal risk of bankruptcy during the term of the agreement based on
guidelines established and periodically reviewed by the Trustees. Repurchase
agreements are considered by the SEC to be loans under the Investment Company
Act of 1940.
REVERSE REPURCHASE AGREEMENTS -- Each Fund may borrow funds for temporary
purposes by entering into reverse repurchase agreements. Pursuant to such
agreements, the Funds would sell portfolio securities to financial institutions
such as banks and broker-dealers and agree to repurchase them at a mutually
agreed-upon date and price. A Fund will enter into reverse repurchase agreements
only to avoid otherwise selling securities during unfavorable market conditions
to meet redemptions. At the time a Fund enters into a reverse repurchase
agreement, it would place in a segregated custodial account
17 PROSPECTUS
<PAGE>
assets, such as liquid high grade debt securities, consistent with the Fund's
investment restrictions and having a value equal to the repurchase price
(including accrued interest) and would subsequently monitor the account to
ensure that such equivalent value was maintained. Reverse repurchase agreements
involve the risk that the market value of securities sold by a Fund may decline
below the price at which that Fund is obligated to repurchase the securities.
Reverse repurchase agreements are considered by the SEC to be borrowings by a
Fund under the Investment Company Act of 1940.
SECURITIES PURCHASED ON A WHEN-ISSUED BASIS AND FORWARD COMMITMENTS -- Each Fund
may purchase securities on a when-issued basis when deemed by the Adviser to
present attractive investment opportunities. When-issued securities are
purchased for delivery beyond the normal settlement date at a stated price and
yield, thereby involving the risk that the yield obtained will be less than that
available in the market at delivery. Although the purchase of securities on a
when-issued basis is not considered leveraging, it has the effect of leveraging.
When the Adviser purchases a when-issued security, the Custodian will set aside
cash or liquid securities to satisfy the purchase commitment. The Fund generally
will not pay for such securities or earn interest on them until received.
Commitments to purchase when-issued securities will not, under normal market
conditions, exceed 25% of the Fund's total assets, and a commitment will not
exceed 90 days. The Fund will only purchase when-issued securities for the
purpose of acquiring portfolio securities and not for speculative purposes.
In a forward commitment transaction, the Fund contracts to purchase securities
for a fixed price at a future date beyond customary settlement time. The Fund is
required to hold and maintain in a segregated account until the settlement date,
cash, U.S. government securities or liquid high-grade debt obligations in an
amount sufficient to meet the purchase price. The purchase of securities on a
when-issued or forward commitment basis involves a risk of loss if the value of
the security to be purchased declines prior to the settlement date. Although the
Fund would generally purchase securities on a when-issued or forward commitment
basis with the intention of actually acquiring securities for its portfolio, the
Fund may dispose of a when-issued security or forward commitment prior to
settlement if the Adviser deems it appropriate to do so.
SECURITIES LENDING -- In order to generate additional income, each Fund may lend
up to 33% of the securities in which it is invested pursuant to agreements
requiring that the loan be continuously secured by cash, securities of the U.S.
government or its agencies, shares of an investment trust or mutual fund or any
combination of cash and such securities as collateral equal at all times to at
least 100% of the market value plus accrued interest on the securities lent. The
Fund will continue to receive interest on the securities lent while
simultaneously seeking to earn interest on the investment of cash collateral in
U.S. government securities, shares of an investment trust or mutual fund, or
other short-term, highly liquid investments. Collateral is marked to market
daily to provide a level of collateral at least equal to the market value of the
securities lent. There may be risks of delay in recovery of the securities or
even loss of rights in the collateral should the borrower of the securities fail
financially. However, loans will only be made to borrowers deemed by the Adviser
to be of good standing under guidelines established by the Trust's Board of
Trustees and when, in the judgment of the Adviser, the consideration that can be
earned currently from such securities loans justifies the attendant risk. The
Fund will enter into loan arrangements only with counterparties which the
Adviser has deemed to be creditworthy under guidelines established by the Board
of Trustees. Loans are subject to termination by a Fund or the borrower at any
time and are, therefore, not considered to be illiquid investments.
ADDITIONAL PERMITTED INVESTMENTS FOR THE ONE GROUP-REGISTERED TRADEMARK-
PRIME MONEY MARKET FUND
MORTGAGE-BACKED SECURITIES -- Mortgage-backed securities are debt obligations
secured by real estate loans and pools of loans on single family homes,
multi-family homes, mobile homes, and in some cases, commercial properties. A
Fund may acquire securities representing an interest in a pool of mortgage loans
that are issued or guaranteed by a U.S. government agency. The primary issuers
or guarantors of these mortgage-backed securities are the Government National
Mortgage Association ("Ginnie Mae"), Federal National Mortgage Association
("Fannie Mae") and Federal Home Loan Mortgage Corporation ("Freddie Mac").
Mortgage-backed securities also may be issued by non-governmental entities and
may or may not have private insurer guarantees of timely payments. Such
non-governmental mortgage securities cannot be treated as U.S. government
securities for purposes of investment policies. The Fund also may invest in
mortgage-backed securities issued by non-government entities, which consist of
Collateralized Mortgage Obligations ("CMOs") and Real Estate Mortgage Investment
Conduits ("REMICs") that are rated in the highest or second highest rating
category at the time of investment by at least two nationally recognized
statistical rating organizations ("NRSRO") (one if it is the only organization
rating such obligation) or, if unrated, determined by the Adviser to be of
comparable quality. The mortgages backing these securities include conventional
thirty-year fixed rate mortgages, graduated payment mortgages, and adjustable
rate mortgages. Mortgage-backed securities are in most cases "pass-through"
instruments, through which the holder receives a share of all interest and
principal payments from the mortgages underlying the certificate. Because the
prepayment characteristics of the underlying mortgages vary, it is not possible
to predict accurately the average life or realized yield of a particular issue
of pass-through certificates. During periods of declining interest rates,
prepayment of mortgages underlying mortgage-backed securities can be expected to
accelerate. When the mortgage obligations are prepaid, the Fund reinvests the
prepaid amounts in securities, the yield of which reflects interest rates
prevailing at the time. Moreover, prepayment of mortgages which underlie
securities purchased at a premium could result in capital losses.
PROSPECTUS 18
<PAGE>
The Fund also may invest in multiple class securities issued by U.S. government
agencies and instrumentalities such as Fannie Mae, Freddie Mac or Ginnie Mae, or
private issuers including guaranteed CMOs and REMIC pass-through or
participation certificates, when consistent with the Fund's investment
objective, policies and limitations. A REMIC is a CMO that qualifies for special
tax treatment under the Internal Revenue Code of 1986, as amended (the "Code"),
and invests in certain mortgages principally secured by interests in real
property and other permitted investments.
CMOs and guaranteed REMIC pass-through certificates ("REMIC Certificates")
issued by Fannie Mae, Freddie Mac and Ginnie Mae are types of multiple class
pass-through securities. Investors may purchase beneficial interests in REMICs,
which are known as "regular" interests or "residual" interests. The Fund does
not currently intend to purchase residual interests in REMICs. The REMIC
Certificates represent beneficial ownership interests in a REMIC trust,
generally consisting of mortgage loans or Fannie Mae, Freddie Mac or Ginnie Mae
guaranteed mortgage pass-through certificates (the "Mortgage Assets"). The
obligations of Fannie Mae, Freddie Mac or Ginnie Mae under their respective
guarantee of the REMIC Certificates are obligations solely of Fannie Mae,
Freddie Mac or Ginnie Mae, respectively.
Fannie Mae REMIC Certificates are issued and guaranteed as to timely
distribution of principal and interest by Fannie Mae. In addition, Fannie Mae
will be obligated to distribute the principal balance of each class of REMIC
Certificates in full, whether or not sufficient funds are otherwise available.
Ginnie Mae REMIC Certificates guarantee the full and timely payment of interest
and principal on each class of securities (in accordance with the terms of the
classes as specified in the related offering circular supplement). The Ginnie
Mae guarantee is backed by the full faith and credit of the United States of
America.
For Freddie Mac REMIC Certificates, Freddie Mac guarantees the timely payment of
interest, and also guarantees the payment of principal as payments are required
to be made on the underlying mortgage participation certificates ("PCs"). PCs
represent undivided interests in specified residential mortgages or
participation therein purchased by Freddie Mac and placed in a PC pool. With
respect to principal payments on PCs, Freddie Mac generally guarantees ultimate
collection of all principal of the related mortgage loans without offset or
deduction. Freddie Mac also guarantees timely payment of principal on certain
PCs referred to as "Gold PCs."
REMIC Certificates issued by Fannie Mae, Freddie Mac and Ginnie Mae are treated
as U.S. government securities for purposes of investment policies. CMOs and
REMIC Certificates are issued in multiple classes. Each class of CMOs or REMIC
Certificates, often referred to as a "tranche," is issued at a specific
adjustable or fixed interest rate and must be fully retired no later than its
final distribution date. Principal prepayments on the mortgage loans or the
Mortgage Assets underlying the CMOs or REMIC Certificates may cause some or all
of the classes of CMOs or REMIC Certificates to be retired substantially earlier
than their final distribution dates. Generally, interest is paid or accrues on
all classes of CMOs or REMIC Certificates on a monthly basis.
The principal of and interest on the Mortgage Assets may be allocated among the
several classes of CMOs or REMIC Certificates in various ways. In certain
structures (known as "sequential pay" CMOs or REMIC Certificates), payments of
principal, including any principal prepayments, on the Mortgage Assets generally
are applied to the classes of CMOs or REMIC Certificates in the order of their
respective final distribution dates. Thus no payment of principal will be made
on any class of sequential pay CMOs or REMIC Certificates until all other
classes having an earlier final distribution date have been paid in full.
Additional structures of CMOs and REMIC Certificates include, among others,
"parallel pay" CMOs and REMIC Certificates. Parallel pay CMOs or REMIC
Certificates are those that are structured to apply principal payments and
prepayments of the Mortgage Assets to two or more classes concurrently on a
proportionate or disproportionate basis. These simultaneous payments are taken
into account in calculating the final distribution date of each class.
A wide variety of REMIC Certificates may be issued in the parallel pay or
sequential pay structures. These securities include accrual certificates (also
known as "Z-Bonds"), which only accrue interest at a specified rate until all
other certificates having an earlier final distribution date have been retired
and are converted thereafter to an interest-paying security, and planned
amortization class ("PAC") certificates, which are parallel pay REMIC
Certificates which generally require that specified amounts of principal be
applied on each payment date to one or more classes of REMIC Certificates (the
"PAC Certificates"), even though all other principal payments and prepayments of
the Mortgage Assets are then required to be applied to one or more other classes
of the certificates. The scheduled principal payments for the PAC Certificates
generally have the highest priority on each payment date after interest due has
been paid to all classes entitled to receive interest currently. Shortfalls, if
any, are added to the amount of principal payable on the next payment date. The
PAC Certificate payment schedule is taken into account in calculating the final
distribution date of each class of PAC. In order to create PAC tranches, one or
more tranches generally must be created that absorb most of the volatility in
the underlying Mortgage Assets. These tranches tend to have market prices and
yields that are much more volatile than the PAC classes.
Although the Fund invests only in securities issued or guaranteed by the U.S.
government, its agencies or instrumentalities, the Z-Bonds in which the Fund may
invest may bear the same non-credit-related risks as do other types of Z-Bonds.
Z-Bonds in which the Fund may invest will not include residual interest.
19 PROSPECTUS
<PAGE>
There can be no assurance that the United States government would provide
financial support to Fannie Mae, Freddie Mac or Ginnie Mae if necessary in the
future.
REGULATION OF MORTGAGE LOANS -- Mortgage loans are subject to a variety of state
and Federal regulations designed to protect borrowers which may impair the
ability of the mortgage lender to enforce its rights under the mortgage
documents. These regulations include legal restraints on foreclosures, homeowner
rights of redemption after foreclosure, Federal and state bankruptcy and debtor
relief laws, restrictions on enforcement of mortgage loan "due on sale" clauses
and state usury laws. Even though the Fund will invest in mortgage-backed
securities issued or guaranteed by the U.S. government, its agencies or
instrumentalities, these regulations may adversely affect the Fund's investments
by delaying the Fund's receipt of payments derived from principal or interest on
mortgage loans affected by such regulations.
INVESTMENT COMPANY SECURITIES -- The Fund may invest up to 5% of its total
assets in the securities of any one investment company, but may not own more
than 3% of the securities of any one investment company or invest more than 10%
of its assets in the securities of other investment companies. Such companies
may include companies of which the Adviser or a sub-adviser to a fund of the
Trust, or an affiliate of such Adviser or sub-adviser, serves as investment
adviser, administrator or distributor but only to the extent permitted by
applicable law. Because other investment companies employ an investment adviser,
such investment by the Fund may cause Shareholders to bear duplicate fees. Such
other investment company securities may include securities of a money market
fund of the Trust, in accordance with an exemptive order issued to the Trust by
the SEC. The Adviser will waive its fee attributable to the assets of the
investing fund invested in a money market fund of the Trust; and, to the extent
required by the laws of any state in which shares of the Trust are sold, the
Adviser will waive its fees attributable to the assets of the Fund invested in
any investment company.
U.S. GOVERNMENT AGENCIES -- Certain Federal agencies have been established as
instrumentalities of the U.S. government to supervise and finance specific types
of activities. Select agencies, such as Ginnie Mae and the Export-Import Bank,
are supported by the full faith and credit of the U.S. Treasury; others, such as
Fannie Mae, are supported by the credit of the instrumentality and have the
right to borrow from the U.S. Treasury; others are supported by the authority of
the U.S. government to purchase the agency's obligations; while still others,
such as the Federal Farm Credit Banks and Freddie Mac, are supported solely by
the credit of the instrumentality itself. No assurance can be given that the
U.S. government would provide financial support to U.S. government sponsored
agencies or instrumentalities if it is not obligated to do so by law.
Obligations of U.S. government agencies include debt issues and mortgage-backed
securities issued or guaranteed by select agencies.
RECEIPTS -- The Fund may purchase interests in separately traded interest and
principal component parts of U.S. Treasury obligations that are issued by banks
or brokerage firms and are created by depositing U.S. Treasury notes and U.S.
Treasury bonds into a special account at a custodian bank. The custodian holds
the interest and principal payments for the benefit of the registered owners of
the certificates or receipts. The custodian arranges for the issuance of the
certificates or receipts evidencing ownership and maintains the register.
Receipts include Treasury Receipts ("TRS"), Treasury Investment Growth Receipts
("TIGRS"), and Certificates of Accrual on Treasury Securities ("CATS").
The Prime Money Market Fund may invest up to 20% of its total assets in STRIPS,
CUBES, TRS, TIGRS and CATS. See also "Taxes."
VARIABLE AND FLOATING RATE INSTRUMENTS -- Certain of the obligations purchased
by the Fund may carry variable or floating rates of interest, may involve a
conditional or unconditional demand feature and may include variable amount
master demand notes. Such instruments bear interest at rates which are not
fixed, but which vary with changes in specified market rates or indices, such as
a Federal Reserve composite index. A demand instrument with a demand notice
period exceeding seven days may be considered illiquid if there is no secondary
market for such security; therefore, the Fund will not invest more than 10% of
its total assets in such instruments and other illiquid securities. The interest
rates on these securities may be reset daily, weekly, quarterly or some other
reset period.
There is no limit on the extent to which the Fund may purchase variable and
floating rate instruments that are not illiquid. The Fund will purchase variable
and floating rate instruments to facilitate portfolio liquidity or to permit the
investment of the Fund's assets at a favorable rate of return.
BANKERS' ACCEPTANCES -- Bankers' acceptances are bills of exchange or time
drafts drawn on and accepted by (i.e. made an obligation of) a commercial bank.
They are used by corporations to finance the shipment and storage of goods and
to furnish dollar exchange. Maturities are generally six months or less.
CERTIFICATES OF DEPOSIT -- Certificates of deposit are negotiable interest
bearing instruments with a specific maturity. Certificates of deposit ("CDs")
are issued by banks and savings and loan institutions in exchange for the
deposit of funds and normally can be traded in the secondary market prior to
maturity. The Fund may invest in CDs of domestic and foreign branches of U.S.
commercial banks and domestic branches of savings and loan associations that are
FDIC insured and that have total assets in excess of $1 billion. The Fund also
may invest in U.S. dollar-denominated CDs issued by foreign banks having total
assets in excess of $1 billion. Such instruments include Eurodollar CDs, which
are issued by branches of foreign and domestic banks located outside the U.S.,
and Yankee CDs, which are issued by a U.S. branch of a foreign bank and held in
the U.S.
PROSPECTUS 20
<PAGE>
TIME DEPOSITS -- Time deposits are non-negotiable receipts issued by a bank in
exchange for the deposit of funds. Like a certificate of deposit, a time deposit
("TD") earns a specified rate of interest over a definite period of time;
however, it cannot be traded in the secondary market. Time deposits with a
withdrawal penalty are considered to be illiquid securities; therefore, the Fund
will not invest more than 10% of its total assets in such time deposits and
other illiquid securities, unless they mature in seven days or less. The Fund
may make time deposits in commercial banks, savings banks, savings and loans,
and in foreign banks if the institution has total assets in excess of $1
billion. Such instruments include Eurodollar TDs, which are U.S. dollar
denominated deposits in a foreign branch of a U.S. or foreign bank and Canadian
TDs, which are issued by major branches of Canadian banks.
The Fund may also make interest-bearing savings deposits in commercial and
savings banks and in savings and loan associations in amounts not in excess of
5% of the Fund's total assets.
COMMERCIAL PAPER -- Commercial Paper is the term used to designate unsecured
short-term promissory notes issued by corporations and other entities.
Maturities on these issues vary from a few days to nine months. The Prime Money
Market Fund also may purchase Canadian commercial paper that is issued by a
Canadian corporation or a Canadian counterpart of a U.S. corporation, and
Europaper that is U.S. dollar-denominated commercial paper of a foreign issuer.
The Fund also may buy bonds with remaining maturities of under thirteen months.
MUNICIPAL SECURITIES -- The Fund may invest in municipal securities. Municipal
securities consist of (i) debt obligations issued by or on behalf of public
authorities to obtain funds to be used for various public facilities, for
refunding outstanding obligations, for general operating expenses, and for
lending such funds to other public institutions and facilities; and (ii) certain
private activity and industrial development bonds issued by or on behalf of
public authorities to obtain funds to provide for the construction, equipment,
repair, or improvement of privately operated facilities. Municipal notes include
general obligation notes, tax anticipation notes, revenue anticipation notes,
bond anticipation notes, certificates of indebtedness, demand notes and
construction loan notes and participation interests in municipal notes.
Municipal bonds include general obligation bonds, revenue or special obligation
bonds, private activity and industrial development bonds, and participation
interests in municipal bonds. General obligation bonds are backed by the taxing
power of the issuing municipality. Revenue bonds are backed by the revenues of a
project or facility, tolls from a toll bridge for example. The payment of
principal and interest on private activity and industrial development bonds
generally is dependent solely on the ability of the facility's user to meet its
financial obligations and the pledge, if any, of real and personal property so
financed as security for such payment.
Municipal securities may include obligations of municipal housing authorities
and single-family mortgage revenue bonds. Weaknesses in Federal housing subsidy
programs and their administration may result in a decrease of subsidies
available for payment of principal and interest on housing authority bonds.
Economic developments, including fluctuations in interest rates and increasing
construction and operating costs, may also adversely impact revenues of housing
authorities. In the case of some housing authorities, inability to obtain
additional financing could also reduce revenues available to pay existing
obligations. Single-family mortgage revenue bonds are subject to extraordinary
mandatory redemption at par in whole or in part from the proceeds derived from
prepayments of underlying mortgage loans and also from the unused proceeds of
the issue within a stated period which may be within a year from the date of
issue.
Municipal leases are obligations issued by state and local governments or
authorities to finance the acquisition of equipment and facilities and may be
considered to be illiquid. They may take the form of a lease, an installment
purchase contract, a conditional sales contract, or a participation interest in
any of the above. The Fund will limit its investment in municipal leases to no
more than 5% of its total assets. The Board of Trustees is responsible for
determining the credit quality of unrated municipal leases, on an ongoing basis,
including an assessment of the likelihood that the lease will not be cancelled.
The exclusion from gross income for Federal income tax purposes for certain
housing authority bonds depends on qualification under relevant provisions of
the Code and on other provisions of Federal law. These provisions of Federal law
contain certain ongoing requirements relating to the cost and location of the
residences financed with the proceeds of the single-family mortgage bonds and
the income levels of tenants of the rental projects financed with the proceeds
of the multi-family housing bonds. While the issuers of the bonds, and other
parties, including the originators and servicers of the single-family mortgages
and the owners of the rental projects financed with the multi-family housing
bonds, covenant to meet these ongoing requirements and generally agree to
institute procedures designed to insure that these requirements are met, there
can be no assurance that these ongoing requirements will be consistently met.
The failure to meet these requirements could cause the interest on the bonds to
become taxable, possibly retroactively from the date of issuance, thereby
reducing the value of the bonds, subjecting Shareholders to unanticipated tax
liabilities. Furthermore, any failure to meet these ongoing requirements might
not constitute an event of default under the applicable mortgage or permit the
holder to accelerate payment of the bond or require the issuer to redeem the
bond. In any event, where the mortgage is insured by the Federal Housing
Administration ("FHA"), the consent of the FHA may be required before insurance
proceeds would become payable to redeem the mortgage subsidy bonds.
PARTICIPATION INTERESTS -- The Fund may purchase interests in municipal
securities, including municipal leases, from financial institutions such as
commercial and investment banks, savings and loan associations and insurance
companies. These interests may take the form of participations, beneficial
interests in a trust, partnership interests, or any other form of indirect
ownership that allows the Fund to treat the income from the
21 PROSPECTUS
<PAGE>
investment as exempt from Federal income tax. The Fund invests in these
participation interests in order to obtain credit enhancement or demand features
that would not be available through direct ownership of the underlying municipal
securities.
DEMAND FEATURES -- The Fund may acquire securities that are subject to puts and
standby commitments ("demand features") to purchase the securities at their
principal amount (usually with accrued interest) within a fixed period (usually
seven days) following a demand by the Fund. The demand feature may be issued by
the issuer of the underlying securities, a dealer in the securities or by
another third party, and may not be transferred separately from the underlying
security. The underlying municipal securities subject to a put may be sold at
any time at the market rates. However, unless the put was an integral part of
the security as originally issued, it may not be marketable or assignable;
therefore, the put would only have value to the Fund. The Fund expects that it
will generally acquire puts only where the puts are available without the
payment of any direct or indirect consideration. However, if advisable or
necessary, in certain cases a premium may be paid for put features. A premium
paid will have the effect of reducing the yield otherwise payable on the
underlying security. The purpose of engaging in transactions involving puts is
to maintain flexibility and liquidity to permit the Fund to meet redemption
requests and remain as fully invested as possible in municipal securities. The
Fund will limit its put transactions to institutions that the Adviser believes
present minimal credit risk.
There is no limit to the percentage of portfolio securities that may be
purchased subject to a put. However, the Fund will not acquire a put which was
not an integral part of the security as originally issued if such acquisition
would cause the aggregate value of all such puts held in the portfolio to exceed
1/2 of 1% of the value of the Fund's total assets.
ASSET-BACKED SECURITIES -- Asset-backed securities consist of securities secured
by company receivables, home equity loans, truck and auto loans, leases, credit
card receivables and other securities backed by other types of receivables or
other assets. Credit support for asset-backed securities may be based on the
underlying assets and/or provided through credit enhancements by a third party.
Credit enhancement techniques include letters of credit, insurance bonds,
limited guarantees (which are generally provided by the issuer),
senior-subordinated structures and over collateralization. Unlike the collateral
in connection with mortgage-backed securities, the collateral backing
asset-backed securities cannot be foreclosed upon. These issues are normally
traded over-the-counter and typically have a short-intermediate maturity
structure depending on the paydown characteristics of the underlying financial
assets which are passed through to the security holder. Asset-backed securities
purchased by the Fund must be rated at the time of investment in the highest or
second highest rating category by at least two NRSROs (one if it is the only
organization rating such obligation) or, if unrated, determined by the Adviser
to be of comparable quality. There is no limit on the extent to which the Fund
may invest in asset-backed securities. Asset-backed securities may be purchased
for the purpose of enhancing yield. Under certain interest rate and prepayment
rate scenarios, the Fund may fail to recoup fully its investment in asset-backed
securities.
SHORT-TERM FUNDING AGREEMENTS -- The Fund may, in order to enhance yield, make
limited investments in short-term funding agreements (sometimes referred to as
Guaranteed Investment Contracts ("GICs")), issued by highly rated U.S. insurance
companies. Pursuant to such agreements, the Fund makes cash contributions to a
deposit fund of the insurance company's general account. The insurance company
then credits to the Fund on a monthly basis guaranteed interest at either a
fixed, variable or floating rate. A short-term funding agreement such as GIC
allows purchasers the option of buying an annuity with the monies accumulated
under the contract; however, the Fund will not purchase such annuities but will
instead elect cash payments in connection with the amounts payable to it under
the contracts.
A short-term funding agreement is a general obligation of the issuing insurance
company and not a separate account. The purchase price paid for a short-term
funding agreement becomes part of the general assets of the issuer, and the
contract is paid at maturity from the general assets of the issuer. The Fund
will only purchase short-term funding agreements from issuers which, at the time
of purchase, are rated "A" or better by A.M. Best Company, have assets of $1
billion or more, and meet quality and credit standards established by the
Adviser under the supervision of the Trust's Board of Trustees.
Generally, short-term funding agreements are not assignable or transferable
without the permission of the issuing insurance company. For this reason, an
active secondary market in short-term funding agreements does not currently
exist. Therefore, short-term funding agreements are considered by the Fund to be
illiquid investments, and will be acquired by the Fund only if, at the time of
purchase, no more than 10% of the Fund's total assets will be invested in
short-term funding agreements and other illiquid securities.
The Fund will purchase only short-term funding agreements that have a remaining
maturity of 397 days or less at the time of purchase and that the Adviser
determines to be of comparable quality to commercial paper rated in the highest
rating category by two or more NRSROs. The Trust's Board of Trustees must
approve or ratify the purchase of unrated short-term funding agreements by the
Fund. In determining the Fund's average weighted maturity, the maturity of a
short-term funding agreement with a rate of interest that readjusts upon stated
intervals shall be equal to the longer of the period of time until the
readjustment or the period of time remaining until the principal amount can be
recovered from the issuer through demand. The maturity of a short-term funding
agreement with a demand feature and a rate of interest that readjusts
automatically with changes in market interest rates shall be equal to the period
of time remaining until the principal amount can be recovered from the issuer
through demand.
PROSPECTUS 22
<PAGE>
SECURITIES OF FOREIGN ISSUERS -- The Fund may invest in securities of foreign
issuers to achieve income or capital appreciation. Foreign investments involve
risks that are different from investments in securities of U.S. issuers. These
risks may include future unfavorable political and economic developments,
possible withholding taxes, seizure of foreign deposits, currency controls,
interest limitations or other governmental restrictions which might affect
payment of principal or interest. Additionally, there may be less public
information available about foreign issuers. Foreign branches of foreign banks
are not regulated by U.S. banking authorities and generally are not bound by
accounting, auditing and financial reporting standards comparable to U.S. banks.
The Fund may invest in commercial paper of foreign issuers and obligations of
foreign branches of U.S. banks, U.S. and London branches of foreign banks, and
supranational entities which are established through the joint participation of
several governments (e.g., the Asian Development Bank and the Inter-American
Development Bank).
IN GENERAL:
SEC REGULATIONS REGARDING RESTRAINTS ON INVESTMENTS BY MONEY MARKET
FUNDS -- Investments by the Funds are subject to limitations imposed under
regulations adopted by the SEC. Under these regulations, money market funds may
acquire only obligations that present minimal credit risks and that are
"eligible securities" which means they are (i) rated, at the time of investment,
by at least two nationally recognized statistical rating organizations (one if
it is the only organization rating such obligation) in the highest short-term
rating category or, if unrated, determined by the Adviser to be of comparable
quality (a "first tier security"), or (ii) rated according to the foregoing
criteria in the second highest short-term rating category or, if unrated,
determined by the Adviser to be of comparable quality ("second tier security").
A security is not considered to be unrated if its issuer has outstanding
obligations of comparable priority and security that have a short-term rating.
The Adviser will determine that an obligation presents minimal credit risks or
that unrated instruments are of comparable quality in accordance with guidelines
established by the Trustees. In addition, investments in second tier securities
by the Prime Money Market Fund are subject to the further constraints that (i)
no more than 5% of the Fund's assets may be invested in such securities in the
aggregate; and (ii) any investment in such securities of one issuer is limited
to the greater of 1% of the Fund's total assets or $1 million. In addition, the
Fund may invest up to 25% of its assets in the first tier securities of a single
issuer for three business days.
The SEC has proposed amendments to certain of their regulations. In the event
these proposed amendments are adopted by the SEC, each Fund intends to comply
with such amended regulations.
DESCRIPTION OF RATINGS
The following descriptions are summaries of published ratings.
DESCRIPTION OF COMMERCIAL PAPER RATINGS
The following descriptions of commercial paper ratings have been published by
Standard & Poor's Corporation ("S&P"), Moody's Investors Service ("Moody's"),
Fitch's Investors Service ("Fitch"), Duff and Phelps ("Duff"), and IBCA Limited
("IBCA"), respectively.
Commercial paper rated A by S&P is regarded by S&P as having the greatest
capacity for timely payment. Issues rated A are further refined by use of the
numbers 1+, 1, and 2 to indicate the relative degree of safety. Issues rated
A-1+ are those with an "overwhelming degree" of credit protection. Those rated
A-1 reflect a "very strong" degree of safety regarding timely payment. Those
rated A-2 reflect a high degree of safety regarding timely payment but not as
high as A-1.
Commercial paper issues rated Prime-1 and Prime-2 by Moody's are judged by
Moody's to be of the "highest" quality and "higher" quality, respectively, on
the basis of relative repayment capacity.
The rating Fitch-1 (Highest Grade) is the highest commercial rating assigned by
Fitch. Paper rated Fitch-1 is regarded as having the strongest degree of
assurance for timely payment. The rating Fitch-2 (Very Good Grade) is the second
highest commercial paper rating assigned by Fitch which reflects an assurance of
timely payment only slightly less in degree than the strongest issues.
The rating Duff-1 is the highest commercial paper rating assigned by Duff. Paper
rated Duff-1 is regarded as having very high certainty of timely payment with
excellent liquidity factors that are supported by ample asset protection. Risk
factors are minor. Paper rated Duff-2 is regarded as having good certainty of
timely payment, good access to capital markets and sound liquidity factors and
company fundamentals. Risk factors are small.
The designation A1 by IBCA indicates that the obligation is supported by a very
strong capacity for timely repayment. Those obligations rated A1+ are supported
by the highest capacity for timely repayment. Obligations rated A2 are supported
by a strong capacity for timely repayment, although such capacity may be
susceptible to adverse changes in business, economic or financial conditions.
DESCRIPTION OF MUNICIPAL NOTE RATINGS
Moody's highest rating for state, municipal and other short-term notes is MIG-1
and VMIG-1. Short-term municipal securities rated MIG-1 or VMIG-1 are of the
best quality. They have strong protection from established cash flows of funds
for their servicing or from established and broad-based access to the market for
refinancing or both. Short-term municipal securities rated MIG-2 and VMIG-2 are
of high quality. Margins of protection are ample although not so large as in the
preceding group.
An S&P note rating reflects the liquidity concerns and market access risks
unique to notes. Notes due in three years or less
23 PROSPECTUS
<PAGE>
will likely receive a note rating. Notes maturing beyond three years will most
likely receive a long-term debt rating. The following criteria will be used in
making that assessment:
- - Amortization schedule (the larger the final maturity relative to other
maturities the more likely it will be treated as a note).
- - Source of Payment (the more dependent the issue is on the market for its
refinancing, the more likely it will be treated as a note).
Note rating symbols are as follows:
SP-1 Very strong or strong capacity to pay principal and interest. Those issues
determined to possess overwhelming safety characteristics will be given a plus
(+) designation.
SP-2 Satisfactory capacity to pay principal and interest.
MISCELLANEOUS
The Trust believes that as of August 4, 1995, BANC ONE CORPORATION (100 East
Broad Street, Columbus, OH 43271), through its affiliates, owned of record
substantially all the Fiduciary Class shares of both Funds. The Trust believes
that as of the same date, BANC ONE CORPORATION, through its affiliates,
possessed on behalf of its underlying accounts, voting or investment power with
respect to 96.14% of the Fiduciary Class shares of the U.S. Treasury Money
Market Fund and 91.52% of the Fiduciary Class shares of the Prime Money Market
Fund. As a consequence, BANC ONE CORPORATION may be deemed to be a controlling
person of the Fiduciary Class shares of the U.S. Treasury Securities Money
Market Fund and the Prime Money Market Fund under the Investment Company Act of
1940.
PERFORMANCE
From time to time, each Fund may advertise its "current yield" and "effective
yield." Both yield figures are based on historical earnings and are not intended
to indicate future performance. The "current yield" of a class of a Fund refers
to the income generated by an investment in a class of a Fund over a seven-day,
thirty-day or three-month period (which period will be stated in the
advertisement). This income is then "annualized." That is, the yield is
calculated by assuming that the income generated by the investment during that
period is generated over a one-year period and is shown as a percentage of the
investment. The "effective yield" of a class of a Fund refers to the income
generated by an investment in a class of a Fund over a seven-day, thirty-day,
one-year or three-year period (which period will be stated in the
advertisement). The "effective yield" is calculated the same way as current
yield but, when annualized, the income earned by an investment in a class of a
Fund is assumed to be reinvested. The "effective yield" will be slightly higher
than the "current yield" because of the compounding effect of the assumed
reinvestments. See the Statement of Additional Information.
The Trust will include information on all classes of a Fund in any advertisement
or information including performance data for such Fund. The performance for
Fiduciary Class shares may normally be higher than for Class A and Service Class
shares because Fiduciary Class shares are not subject to the distribution
expenses charged to Class A and Service Class shares.
The performance of each class of each Fund may from time to time be compared to
that of other mutual funds tracked by mutual fund rating services, to that of
broad groups of comparable mutual funds or to that of unmanaged indices that may
assume investment of dividends but do not reflect deductions for administrative
and management costs.
Further information about the performance of each class of each Fund is
contained in the Trust's Annual Report to Shareholders for both The One
Group-Registered Trademark-, U.S. Treasury Securities Money Market Fund and The
One Group-Registered Trademark-, and Prime Money Market Fund which may be
obtained without charge by calling 1-800-480-4111.
TAXES
The following summary of Federal income tax consequences is based on current tax
laws and regulations, which may be changed by legislative, judicial, or
administrative action. No attempt has been made to present a complete
explanation of the Federal, state, local or foreign income tax treatment of each
Fund or its Shareholders. Accordingly, Shareholders are urged to consult their
tax advisers regarding specific questions as to the tax consequences of
investing in a Fund.
TAX STATUS OF THE FUNDS
Each Fund is treated as a separate entity for Federal income tax purposes and is
not combined with the Trust's other funds. Each Fund intends to qualify as a
"regulated investment company" for Federal income tax purposes and to meet all
other requirements that are necessary for it to be relieved of Federal taxes on
that part of its net investment income and net capital gains (the excess of net
long-term capital gain over net short-term capital loss) that is distributed to
Shareholders.
TAX STATUS OF DISTRIBUTIONS
Each Fund will distribute substantially all of its net investment income
(including, for this purpose, net short-term capital gains) to Shareholders of
each class of shares of each Fund on at least an annual basis. Generally,
dividends from net investment income will be taxable to Shareholders as ordinary
income whether received in cash or in additional shares, and any net capital
gains will be distributed at least annually and will be taxed to Shareholders as
long-term capital gains, regardless of how long the Shareholder has held shares.
Distributions by a Fund to retirement plans that qualify for tax-exempt
treatment under the Code ("qualified retirement plans") will not be taxable. The
Federal tax treatment of qualified retirement plans, as well as distributions
from such plans, is governed by specific provisions of the Code. If shares are
held
PROSPECTUS 24
<PAGE>
by a retirement plan that ceases to qualify for tax-exempt treatment under the
Code or by an individual who has received such shares as a distribution from a
retirement plan, the Funds' distributions will be taxable to such plan or
individual as described in the preceding paragraph. Persons considering
directing the investment of their qualified retirement plan account in the Funds
and qualified retirement plan trusts considering purchasing such shares, should
consult their tax advisers for a more complete explanation of the Federal tax
consequences and for an explanation of the state, local and (if applicable)
foreign tax consequences of making such an investment.
The Funds will make annual reports to Shareholders of the Federal income tax
status of all distributions.
Certain securities purchased by the Funds (such as STRIPS, CUBES, TRS, TIGRS and
CATS), as defined in the "Description of Permitted Investments," are sold at
original issue discount and thus do not make periodic cash interest payments.
Each Fund will be required to include as part of its current income the imputed
interest on such obligations even though that Fund has not received any interest
payments on such obligations during that period. Because a Fund distributes
substantially all of its net investment income to its Shareholders (including
such imputed interest), a Fund may have to sell portfolio securities in order to
generate the cash necessary for the required distributions. Such sales may occur
at a time when the Adviser would not have chosen to sell such securities and may
result in a taxable gain or loss.
Dividends declared by a Fund in October, November or December of any year and
payable to Shareholders of record on a date in such a month will be deemed to
have been paid by a Fund and received by Shareholders on December 31 of that
year, if paid by a Fund at any time during the following January.
Each Fund intends to make sufficient distributions prior to the end of each
calendar year to avoid liability for Federal excise tax.
Dividends received by a Shareholder that are derived from the Fund's investments
in U.S. government obligations may not be entitled to the exemptions from state
and local income taxes that would be available if the Shareholder had purchased
U.S. government obligations directly. The Funds will inform Shareholders
annually of the percentage of income and distributions derived from U.S.
government obligations. Shareholders should consult their tax advisers regarding
the state and local tax treatment of the dividends received from a Fund.
A Fund may be subject to foreign withholding taxes on income derived from
obligations of foreign issuers. The Prime Money Market Fund will not be able to
elect to treat Shareholders as having paid their proportionate share of such
foreign taxes.
Sale, exchange, or redemption of Fund shares by a Shareholder will generally be
a taxable event to such Shareholder.
25 PROSPECTUS
<PAGE>
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PROSPECTUS 26
<PAGE>
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27 PROSPECTUS
<PAGE>
Investment Adviser and Sub-Administrator
Banc One Investment Advisors Corporation
774 Park Meadow Road
Columbus, OH 43271-0211
Distributor
The One Group-Registered Trademark- Services Company
3435 Stelzer Road
Columbus, OH 43219
Administrator
The One Group-Registered Trademark- Services Company
3435 Stelzer Road
Columbus, OH 43219
Transfer Agent and Custodian
State Street Bank and Trust Company
P.O. Box 8500
Boston, MA 02266-8500
Legal Counsel
Ropes & Gray
Suite 1200 South
1001 Pennsylvania Avenue, N.W.
Washington, D.C. 20004
Independent Accountants
Coopers & Lybrand L.L.P.
One Post Office Square
Boston, MA 02109
TOG-F-116
<PAGE>
THE ONE GROUP-REGISTERED TRADEMARK- LIMITED VOLATILITY BOND FUND PROSPECTUS
- --------------------------------------------------------------------------------
Investment Adviser: BANC ONE INVESTMENT ADVISORS CORPORATION
The One Group-Registered Trademark- (the "Trust") is a mutual fund seeking to
provide a convenient and economical means of investing in one or more
professionally managed portfolios of securities. This Prospectus relates to The
One Group-Registered Trademark- Limited Volatility Bond Fund Class A, Class B
and Fiduciary Class shares.
THE ONE GROUP-REGISTERED TRADEMARK- LIMITED VOLATILITY BOND FUND (THE "FUND")
SEEKS CURRENT INCOME CONSISTENT WITH PRESERVATION OF CAPITAL THROUGH INVESTMENTS
IN HIGH AND MEDIUM-GRADE FIXED-INCOME SECURITIES.
CLASS A AND CLASS B SHARES ARE OFFERED TO THE GENERAL PUBLIC.
FIDUCIARY CLASS SHARES ARE OFFERED TO INSTITUTIONAL INVESTORS, INCLUDING
AFFILIATES OF BANC ONE CORPORATION AND ANY BANK, DEPOSITORY INSTITUTION,
INSURANCE COMPANY, PENSION PLAN OR OTHER ORGANIZATION AUTHORIZED TO ACT IN
FIDUCIARY, ADVISORY, AGENCY, CUSTODIAL OR SIMILAR CAPACITIES (EACH AN
"AUTHORIZED FINANCIAL ORGANIZATION").
THE TRUST'S SHARES ARE NOT DEPOSITS OR OBLIGATIONS OF, OR ENDORSED OR GUARANTEED
BY BANC ONE CORPORATION OR ITS BANK OR NON-BANK AFFILIATES. THE TRUST'S SHARES
ARE NOT INSURED OR GUARANTEED BY THE FEDERAL DEPOSIT INSURANCE CORPORATION OR BY
ANY OTHER GOVERNMENTAL AGENCY OR GOVERNMENT SPONSORED AGENCY OF THE FEDERAL
GOVERNMENT OR ANY STATE. AN INVESTMENT IN MUTUAL FUND SHARES INVOLVES INVESTMENT
RISKS, INCLUDING THE POSSIBLE LOSS OF THE PRINCIPAL AMOUNT INVESTED. BANC ONE
INVESTMENT ADVISORS CORPORATION RECEIVES FEES FROM THE FUND FOR INVESTMENT
ADVISORY AND OTHER SERVICES.
This Prospectus sets forth concisely the information about the Trust that a
prospective investor should know before investing. Investors are advised to read
this Prospectus and retain it for future reference. A Statement of Additional
Information dated November 1, 1995 has been filed with the Securities and
Exchange Commission and is available without charge through the Distributor, The
One Group-Registered Trademark- Services Company, 3435 Stelzer Road, Columbus,
Ohio 43219 or by calling 1-800-480-4111 during business hours. The Statement of
Additional Information is incorporated into this Prospectus by reference.
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED UPON THE
ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A
CRIMINAL OFFENSE.
November 1, 1995
<PAGE>
TABLE OF CONTENTS
<TABLE>
<S> <C>
SUMMARY.......................................................................................... 3
ABOUT THE FUND................................................................................... 4
Expense Summary................................................................................ 4
Financial Highlights........................................................................... 5
The Fund....................................................................................... 7
Investment Objective........................................................................... 7
Investment Policies............................................................................ 7
HOW TO DO BUSINESS WITH THE ONE GROUP-REGISTERED TRADEMARK-...................................... 8
How to Invest in The One Group-Registered Trademark-........................................... 8
Alternative Sales Arrangements................................................................. 11
Exchanges...................................................................................... 12
Redemptions.................................................................................... 13
FUND MANAGEMENT.................................................................................. 14
The Adviser.................................................................................... 14
The Distributor................................................................................ 15
The Administrator.............................................................................. 15
The Transfer Agent and Custodian............................................................... 16
Counsel and Independent Accountants............................................................ 16
OTHER INFORMATION................................................................................ 16
The Trust...................................................................................... 16
Other Investment Policies...................................................................... 17
Description of Permitted Investments........................................................... 18
Description of Ratings......................................................................... 24
Miscellaneous.................................................................................. 25
Performance.................................................................................... 25
Taxes.......................................................................................... 26
</TABLE>
PROSPECTUS 2
<PAGE>
SUMMARY
The One Group-Registered Trademark- (the "Trust") is an open-end management
investment company that provides a convenient way to invest in professionally
managed portfolios of securities. The following provides basic information about
the Class A, Class B and Fiduciary Class shares of The One Group-Registered
Trademark- Limited Volatility Bond Fund.
WHAT IS THE INVESTMENT OBJECTIVE? The Fund seeks current income consistent with
preservation of capital through investments in high and medium-grade
fixed-income securities. See "Investment Objective."
WHAT ARE THE PERMITTED INVESTMENTS? The Fund will normally invest at least 80%
of total assets in debt securities of all types with short to intermediate
maturities. The Fund's investments are subject to market and interest rate
fluctuations, which may affect the value of the Fund's shares. The Fund may
invest only in a few select derivatives, generally those with lower risk; their
characteristics and limitations on their use are more fully described in the
"Description of Permitted Investments." There are many different types of
derivative securities with varying degrees of potential risk and return. See
"Investment Policies."
WHO IS THE ADVISER? Banc One Investment Advisors Corporation, an indirect
subsidiary of BANC ONE CORPORATION, serves as the Adviser of the Trust. The
Adviser is entitled to a fee for advisory services provided to the Trust. The
Adviser may voluntarily agree to waive a part of its fees. See "The Adviser" and
"Expense Summary."
WHO IS THE ADMINISTRATOR? The One Group-Registered Trademark- Services Company
serves as the Administrator of the Trust. The Administrator is entitled to a fee
for services provided to the Trust. Banc One Investment Advisors Corporation
serves as the Sub-Administrator of the Trust, pursuant to an agreement with the
Administrator for which Banc One Investment Advisors Corporation receives a fee
paid by the Administrator. See "The Administrator" and "Expense Summary."
WHO IS THE TRANSFER AGENT AND CUSTODIAN? State Street Bank and Trust Company
serves as Transfer Agent and Custodian for the Trust, for which services it
receives a fee. Bank One Trust Company, N.A. serves as Sub-Custodian for the
Trust, for which services it receives a fee. See "The Transfer Agent and
Custodian."
WHO IS THE DISTRIBUTOR? The One Group-Registered Trademark- Services Company
acts as Distributor of the Trust's shares. The Distributor is entitled to fees
for distribution services for the Class A and Class B shares. No compensation is
paid to the Distributor for the distribution services for the Fiduciary Class
shares of the Fund. See "The Distributor."
HOW DO I PURCHASE AND REDEEM SHARES? Purchases and redemptions may be made
through the Distributor on any day that the New York Stock Exchange is open for
trading ("Business Days"). See "How to Invest in The One Group-Registered
Trademark-" and "Redemptions."
HOW ARE DIVIDENDS PAID? Substantially all of the net investment income
(exclusive of capital gains) of the Fund is determined and declared daily, and
is distributed in the form of periodic dividends to Shareholders of the Fund on
the first Business Day of each month. Any capital gains are distributed at least
annually. Distributions are paid in additional shares of the same class unless
the Shareholder elects to take the payment in cash. See "Dividends."
3 PROSPECTUS
<PAGE>
ABOUT THE FUND
EXPENSE SUMMARY -- THE ONE GROUP-REGISTERED TRADEMARK- LIMITED VOLATILITY BOND
FUND
<TABLE>
<CAPTION>
FIDUCIARY
CLASS A CLASS B CLASS
- ---------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
SHAREHOLDER TRANSACTION EXPENSES(1)
Maximum Sales Charge Imposed on Purchases (as a percentage of offering
price)................................................................ 3.00% none none
Maximum Contingent Deferred Sales Charge (as a percentage of original
purchase price or redemption proceeds, as applicable)................. none 3.00% none
Redemption Fees......................................................... none none none
Exchange Fees........................................................... none none none
Annual Operating Expenses(2) (as a percentage of average daily net
assets)
Investment Advisory Fees (after fee waivers)(3)......................... .30% .30% .30%
12b-1 Fees (after fee waivers)(4)....................................... .25% .75% none
Other Expenses.......................................................... .25% .25% .25%
- ---------------------------------------------------------------------------------------------------------------
TOTAL OPERATING EXPENSES(5)............................................. .80% 1.30% .55%
- ---------------------------------------------------------------------------------------------------------------
</TABLE>
(1) A person who purchases shares through an account with a financial
institution or broker/dealer may be charged separate transaction fees by the
financial institution or broker/dealer. In addition, a wire redemption
charge, currently $7.00, is deducted from the amount of a wire redemption
payment made at the request of a Shareholder.
(2) The expense information in the table has been restated to reflect current
fees that would have been applicable had they been in effect during the
previous fiscal year.
(3) Investment Advisory Fees have been revised to reflect fee waivers effective
as of the date of this Prospectus. The Adviser may voluntarily agree to
waive a part of its fees. Absent this voluntary reduction, Investment
Advisory Fees would be .60% for all classes of shares.
(4) Absent the voluntary waiver of fees under the Trust's Distribution and
Shareholder Services Plans, 12b-1 fees (as a percentage of average daily net
assets) would be .35% for Class A shares and 1.00% for Class B shares. There
are no 12b-1 fees charged to Fiduciary Class shares. The 12b-1 fees include
a Shareholder servicing fee of .25% of the average daily net assets of the
Fund's Class B shares and may include a Shareholder servicing fee of .25% of
the average daily net assets of the Fund's Class A shares. See "The
Distributor."
(5) Total Operating Expenses have been revised to reflect fee waivers effective
as of the date of this Prospectus. Other Expenses are based on the Fund's
expenses during the most recent fiscal year. Absent the voluntary reduction
of Investment Advisory and 12b-1 fees, Total Operating Expenses would be
1.20% for Class A shares, 1.84% for Class B shares, and .85% for Fiduciary
Class shares.
EXAMPLE: An investor would pay the following expenses on a $1,000 investment in
Class A and Fiduciary Class shares of the Fund, assuming: (1) imposition of the
maximum sales charge for Class A shares; (2) 5% annual return; and (3)
redemption at the end of each time period.
<TABLE>
<CAPTION>
- ---------------------------------------------------------------------------------------------------------------------
1 YEAR 3 YEARS 5 YEARS 10 YEARS
- ---------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Class A $ 38 $ 55 $ 73 $ 126
Fiduciary Class.................................................. $ 6 $ 18 $ 31 $ 69
</TABLE>
Absent the voluntary reduction of fees, the dollar amounts in the above example
would be as follows:
<TABLE>
<CAPTION>
- ---------------------------------------------------------------------------------------------------------------------
1 YEAR 3 YEARS 5 YEARS 10 YEARS
- ---------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Class A.......................................................... $ 42 $ 67 $ 94 $ 171
Fiduciary Class.................................................. $ 9 $ 27 $ 47 $ 105
- ---------------------------------------------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------------------------------------------
</TABLE>
PROSPECTUS 4
<PAGE>
EXAMPLE: An investor would pay the following expenses on a $1,000 investment in
Class B shares, assuming: (1) deduction of the applicable maximum Contingent
Deferred Sales Charge; and (2) 5% annual return.
<TABLE>
<CAPTION>
- ---------------------------------------------------------------------------------------------------------------------
1 YEAR 3 YEARS 5 YEARS 10 YEARS
- ---------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Assuming a complete redemption at end of period.................. $ 43 $ 61 $ 71 $ 130
Assuming no redemption........................................... $ 13 $ 41 $ 71 $ 130
</TABLE>
Absent the voluntary reduction of fees, the dollar amounts in the above example
would be as follows:
<TABLE>
<CAPTION>
- ---------------------------------------------------------------------------------------------------------------------
1 YEAR 3 YEARS 5 YEARS 10 YEARS
- ---------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Assuming a complete redemption at end of period.................. $ 49 $ 78 $ 100 $ 184
Assuming no redemption........................................... $ 19 $ 58 $ 100 $ 184
</TABLE>
Class B shares automatically convert to Class A shares after six (6) years.
Therefore, the "10 Years" examples above reflect the effect of such conversion.
THESE EXAMPLES SHOULD NOT BE CONSIDERED A REPRESENTATION OF PAST OR FUTURE
EXPENSES AND ACTUAL EXPENSES MAY BE GREATER OR LESS THAN THOSE SHOWN. The
purpose of these tables is to assist the investor in understanding the various
costs and expenses that may be directly or indirectly borne by investors in the
Trust.
The rules of the Securities and Exchange Commission (the "SEC") require that the
maximum sales charge be reflected in the above table. However, investors of the
Fund ("Shareholders") may, under certain circumstances, qualify for reduced
sales charges. See "How to Invest in The One Group-Registered Trademark-."
Long-term Shareholders of Class A shares and Class B shares may pay more than
the equivalent of the maximum front-end sales charges otherwise permitted by the
National Association of Securities Dealers' Rules.
FINANCIAL HIGHLIGHTS
The Trust was organized as a Massachusetts Business Trust on May 23, 1985. The
Trust currently consists of 29 separate investment portfolios (the "funds").
Currently, shares in The One Group-Registered Trademark- Limited Volatility Bond
Fund are offered in three separate classes: Class A shares, Class B shares and
Fiduciary Class shares.
The following tables set forth financial information with respect to the
Financial Highlights for Class A, Class B and Fiduciary Class shares of the Fund
for the period from commencement of operations to June 30, 1995. Such
information is a part of the financial statements audited by Coopers & Lybrand
L.L.P., independent accountants for the Trust, whose report on the Trust's
financial statements for the year ended June 30, 1995 appears in the Statement
of Additional Information. Further information about the Fund's performance is
contained in the Annual Report to Shareholders, which may be obtained without
charge from the Distributor by calling 1-800-480-4111 during business hours.
5 PROSPECTUS
<PAGE>
THE ONE GROUP-REGISTERED TRADEMARK- LIMITED VOLATILITY BOND FUND
FINANCIAL HIGHLIGHTS
For a share of each class outstanding throughout each period
<TABLE>
<CAPTION>
LIMITED VOLATILITY BOND FUND
---------------------------------------------------------------------------------------------------------
YEAR ENDED JUNE 30,
---------------------------------------------------------------------------------------------------------
1995 1994
------------------------------------------------ ------------------------------------------------------
FIDUCIARY CLASS A CLASS B SERVICES (b) FIDUCIARY CLASS A CLASS B (a) RETIREMENT
---------- --------- -------- ------------ ---------- ----------- ------------- -----------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Net Asset Value,
Beginning of Period..... $ 10.33 $ 10.32 $10.40 $10.38 $ 10.87 $ 10.87 $10.78 $10.78
Investment Activities:
Net Investment
Income............... 0.60 0.56 0.53 0.51 0.54 0.52 0.17 0.10
Net Realized and
Unrealized Gain
(Losses) from
Investments.......... 0.19 0.21 0.19 0.19 (0.45) (0.46) (0.37) (0.38)
---------- --------- -------- ------ ---------- ----------- ------ -----------
Total from Investment
Activities.............. 0.79 0.77 0.72 0.70 0.09 0.06 (0.20) (0.28)
---------- --------- -------- ------ ---------- ----------- ------ -----------
Distributions
Net Investment
Income............... (0.59) (0.56) (0.52) (0.49) (0.55) (0.51) (0.15) (0.08)
In Excess of Net
Investment Income.... (0.01) (0.02) (0.04) (0.04)
Net Realized Gains..... (0.06) (0.06)
In Excess of Net
Realized Gains....... (0.03)
---------- --------- -------- ------ ---------- ----------- ------ -----------
Total Distributions...... (0.59) (0.57) (0.52) (0.49) (0.63) (0.61) (0.18) (0.12)
---------- --------- -------- ------ ---------- ----------- ------ -----------
Net Asset Value, end of
period.................. $ 10.53 $ 10.52 $10.60 $10.59 $ 10.33 $ 10.32 $10.40 $10.38
---------- --------- -------- ------ ---------- ----------- ------ -----------
---------- --------- -------- ------ ---------- ----------- ------ -----------
Total Return (Excludes
Sales Charge)........... 7.96% 7.67% 7.18% (b) 0.79% 0.49% (1.81)%(f) (2.59)%(f)
Ratios/Supplemental Data:
Net Assets, End of
Period (000)......... $410,746 $12,516 $2,906 $447,394 $15,216 $1,974 $ 16
Ratio of expenses to
average net assets... 0.52% 0.77% 1.28% 1.32%(c) 0.50% 0.75% 1.26%(e) 1.26%(e)
Ratio of net investment
income to average net
assets............... 5.82% 5.57% 5.10% 5.55%(e) 5.10% 4.92% 4.39%(e) 4.37%(e)
Ratio of expenses to
average net
assets*.............. 0.85% 1.20% 1.86% 1.68%(e) 0.85% 1.20% 1.86%(e) 1.60%(e)
Ratio of net investment
income to average net
assets*.............. 5.49% 5.14% 4.52% 5.20%(e) 4.75% 4.47% 3.79%(e) 4.03%(e)
Portfolio Turnover..... 76.43% 76.43% 76.43% 76.43% 30.61% 30.61% 30.61% 30.61%
</TABLE>
<TABLE>
<CAPTION>
LIMITED VOLATILITY BOND FUND
----------------------------------------------------------------
YEAR ENDED JUNE 30,
----------------------------------------------------------------
1993 1992 1991
--------------------- ------------------------ -------------
FIDUCIARY CLASS A FIDUCIARY CLASS A (c) FIDUCIARY (d)
---------- -------- ---------- ----------- -------------
<S> <C> <C> <C> <C> <C>
Net Asset Value,
Beginning of Period..... $ 10.72 $ 10.72 $ 10.26 $10.61 $ 10.00
---------- -------- ---------- ----------- -------------
Investment Activities:
Net Investment
Income............... 0.61 0.59 0.70 0.24 0.58
Net Realized and
Unrealized Gains
(Losses) from
Investments.......... 0.25 0.24 0.47 0.13 0.25
---------- -------- ---------- ----------- -------------
Total from Investment
Activities.............. 0.86 0.83 1.17 0.37 0.83
---------- -------- ---------- ----------- -------------
Distributions
Net Investment
Income............... (0.62) (0.59) (0.70) (0.26) (0.57)
In Excess of Net
Investment Income....
Net Realized Gains..... (0.09) (0.09) (0.01)
In Excess of Net
Realized Gains.......
---------- -------- ---------- ----------- -------------
Total Distributions...... (0.71) (0.68) (0.71) (0.26) (0.57)
---------- -------- ---------- ----------- -------------
Net Asset Value, end of
period.................. $ 10.87 $ 10.87 $ 10.72 $10.72 $ 10.26
---------- -------- ---------- ----------- -------------
---------- -------- ---------- ----------- -------------
Total Return (Excludes
Sales Charge)........... 8.27% 8.04% 11.75% 9.84%(e) 9.76%(e)
Ratios and Supplemental
Data:
Net Assets, end of
period (000)......... $397,820 $15,719 $301,907 $ 161 $154,991
Ratio of expenses to
average net assets... 0.56% 0.76% 0.52% 0.99%(e) 0.32%(e)
Ratio of net investment
income to average net
assets............... 5.70% 5.35% 6.63% 5.95%(e) 7.49%(e)
Ratio of expenses to
average net
assets*.............. 0.90% 1.27% 1.04% 1.29%(e) 0.92%(e)
Ratio of net investment
income to average net
assets*.............. 5.36% 4.84% 6.11% 5.65%(e) 6.89%(e)
Portfolio Turnover..... 40.28% 40.28% 43.87% 43.87% 24.69%
</TABLE>
- -----------------
* During the period the investment advisory, 12b-1, and administration fees
were voluntarily reduced. If such voluntary fee reductions had not occurred,
the ratios would have been as indicated.
(a) Class B Shares commenced offering on January 14, 1994.
(b) The Service Class Shares commenced offering on January 17, 1994 when they
were designated as "Retirement" Shares. On April 4, 1995 the name of the
Retirement Shares was changed in "Service" Shares. As of June 1, 1995,
Service Shares transferred to Class A Shares; and as of June 30, 1995, there
were no shareholders in the Service Class. The returns for the period from
July 1, 1995 for the Service Shares was 6.90%.
(c) Class A Shares commenced offering on February 18, 1992.
(d) The Fund commenced operations on September 4, 1990.
(e) Annualized
(f) Not Annualized
PROSPECTUS 6
<PAGE>
THE FUND
The One Group-Registered Trademark- Limited Volatility Bond Fund (the "Fund") is
part of The One Group-Registered Trademark- (the "Trust"), which is an open-end
management investment company that offers units of beneficial interest
("shares") in 29 separate funds and different classes of certain of the funds.
This Prospectus relates to Class A, Class B and Fiduciary Class shares of The
One Group-Registered Trademark- Limited Volatility Bond Fund, which provide for
variations in distribution costs, voting rights, dividends and per share net
asset value, pursuant to a multiple class plan (the "Multiple Class Plan")
adopted by the Board of Trustees of the Trust. Except for these differences
among classes, each share of the Fund represents an undivided, proportionate
interest in the Fund. The Fund is a diversified mutual fund. Information
regarding the Trust's other funds and their classes is contained in separate
prospectuses which may be obtained from the Trust's Distributor, The One
Group-Registered Trademark-Services Company, 3435 Stelzer Road, Columbus, Ohio
43219, or by calling 1-800-480-4111.
INVESTMENT OBJECTIVE
The Fund seeks current income consistent with preservation of capital through
investment in high and medium-grade fixed-income securities.
The investment objective of the Fund is fundamental and may not be changed
without a vote of the holders of a majority of the Fund's outstanding shares (as
defined in the Statement of Additional Information).
There is no assurance that the Fund will meet its investment objective.
INVESTMENT POLICIES
The investment policies of the Fund may be changed without an affirmative vote
of the holders of a majority of the Fund's outstanding shares unless a policy is
expressly deemed to be fundamental or is expressly deemed to be changeable only
by such a majority vote.
PERMISSIBLE INVESTMENTS
The Fund will normally invest at least 80% of total assets in debt securities of
all types with short to intermediate maturities. Under normal market conditions,
it is anticipated that the Fund's average weighted maturity will range between
one and five years. Up to 20% of the Fund's total assets may be invested in
preferred stocks. At least 65% of the Fund's total assets will consist of bonds
and at least 65% of total assets will consist of obligations issued by the U.S.
government or its agencies or instrumentalities, some of which may be subject to
repurchase agreements. For purposes of this policy "bonds" include debt
instruments issued by the U.S. Treasury, U.S. government agencies, corporations,
municipalities and foreign entities, mortgage-related securities, asset backed
securities and zero coupon obligations. The Fund may also purchase taxable or
tax-exempt municipal securities. The Fund may shorten its average weighted
maturity to as little as 90 days if deemed appropriate for temporary defensive
purposes.
Debt securities and municipal securities, if bonds, must be rated in one of the
three highest rating categories by at least one nationally recognized
statistical rating organization ("NRSRO") at the time of investment (for
example, A or better by Standard & Poor's Corporation ("S&P") or Moody's
Investors Service ("Moody's")) or, if unrated, determined by the Adviser to be
of comparable quality. Preferred stock also must be rated in one of the three
highest rating categories by at least one NRSRO at the time of investment (for
example, A or better by S&P or Moody's) or, if unrated, determined by the
Adviser to be of comparable quality.
Other municipal securities, such as tax-exempt commercial paper, notes and
variable rate demand obligations, must be rated in the highest rating category
at the time of investment by at least one NRSRO (such as A-1 by S&P or P-1 by
Moody's, with respect to tax-exempt commercial paper; SP-1 by S&P or MIG-1 by
Moody's with respect to notes; and A-1 by S&P or VMIG-1 by Moody's, with respect
to variable rate demand obligations), or, if unrated, determined by the Adviser
to be of comparable quality.
In addition to the permissible investments described above, the Fund also may
invest in securities purchased on a when-issued basis and forward commitments,
variable and floating rate notes, commercial paper, time deposits, certificates
of deposit, receipts, which may include Treasury Receipts ("TRS"), Treasury
Investment Growth Receipts ("TIGRS") and Certificates of Accrual on Treasury
Securities ("CATS"), U.S. Treasury obligations, which may include Separately
Traded Registered Interest and Principal Securities ("STRIPS") and Coupon Under
Book Entry Safekeeping ("CUBES"), bankers' acceptances, repurchase agreements,
reverse repurchase agreements, securities of other investment companies, and
mortgage dollar rolls. The Fund may also invest in: securities subject to demand
features, mortgage-backed securities, including collateralized mortgage
obligations ("CMOs") and real estate mortgage investment conduits ("REMICs"),
adjustable rate mortgage loans ("ARMs"), fixed rate mortgage loans, asset-backed
securities, guaranteed investment contracts, corporate securities, restricted
securities, foreign securities, including sponsored and unsponsored American
Depository Receipts ("ADRs"), municipal leases, and the Fund may also engage in
securities lending transactions.
This list of permissible investments includes select securities that may be
commonly considered to be derivatives, including: mortgage dollar rolls,
multiple class pass-through securities and collateralized mortgage obligations
(CMOs and REMICs) and asset-backed securities. These securities and limitations
on their use are more fully described in the "Description of Permitted
Investments."
For a description of the Fund's permitted investments and ratings, see
"Description of Permitted Investments" and "Description of Ratings" and the
Statement of Additional Information. For a description of permitted investments
for temporary defensive purposes, see "Temporary Defensive Position." In the
7 PROSPECTUS
<PAGE>
event a security owned by the Fund is downgraded below these rating categories,
the Adviser will review and take appropriate action with regard to the security.
RISK FACTORS
The market value of the Fund's fixed-income investments will change in response
to interest rate changes and other factors. During periods of falling interest
rates, the values of outstanding fixed-income securities generally rise.
Conversely, during periods of rising interest rates, the values of such
securities generally decline. Moreover, while securities with longer maturities
tend to produce higher yields, the prices of longer maturity securities are also
subject to greater market fluctuations as a result of changes in interest rates.
Changes by recognized agencies in the rating of any fixed income security and in
the ability of an issuer to make payments of interest and principal also affect
the value of these investments. Except under condition of default, changes in
the value of fixed-income securities will not affect cash income derived from
these securities but will affect the Fund's net asset value.
The investment characteristics of mortgage-related securities differ from
traditional debt securities. These differences can result in significantly
greater price and yield volatility than is the case with traditional fixed
income securities. The major differences typically include more frequent
interest and principal payments, usually monthly, the adjustability of interest
rates, and the possibility that prepayments of principal may be made at any
time. Prepayment rates are influenced by changes in current interest rates and a
variety of economic, geographic, social, and other factors. During periods of
declining interest rates, prepayment rates can be expected to accelerate. Under
certain interest rate and prepayment rate scenarios, the Fund may fail to recoup
fully its investment in mortgage-related securities notwithstanding a direct or
indirect governmental or agency guarantee. The Fund intends to use hedging
techniques to control this risk. In general, changes in the rate of prepayments
on a mortgage-related security will change that security's market value and its
yield to maturity. When interest rates fall, high prepayments could force the
Fund to reinvest principal at a time when investment opportunities are not
attractive. Thus, mortgage-related securities may not be an effective means for
the Fund to lock in long-term interest rates. Conversely, during periods when
interest rates rise, slow prepayments could cause the average life of the
securities to lengthen and the value to decline more than anticipated.
Certain investment management techniques that the Fund may use may expose the
Fund to special risks. These include, but are not limited to, making forward
commitments, lending portfolio securities and entering into mortgage dollar
rolls. These practices could expose the Fund to potentially greater risk of loss
than more traditional fixed-income investments.
Investments in securities of foreign issuers may involve greater risks than are
present in U.S. investments. In general, issuers in many foreign countries are
not subject to accounting, auditing and financial reporting standards, practices
and requirements comparable to those applicable to U.S. companies. There is
generally less information publicly available about, and less regulation of,
foreign issuers than U.S. companies. Transaction costs are generally higher for
investments in foreign issuers. Securities of some foreign companies are less
liquid, and their prices more volatile, than securities of comparable U.S.
companies. Settlement of transactions in some foreign markets may be delayed or
may be less frequent than in the United States, which could adversely affect the
liquidity of the Fund. In addition, with respect to some foreign countries,
there is the possibility of expropriation or confiscatory taxation, the
imposition of additional taxes or tax withholding, limitations on the removal of
securities, property or other assets of the Fund, political or social
instability, or diplomatic developments, which could affect the value of
investments in those countries.
For additional information on each of the Fund's permitted investments and
associated risks, see "Description of Permitted Investments."
HOW TO DO BUSINESS WITH
THE ONE GROUP-REGISTERED TRADEMARK-
HOW TO INVEST IN THE ONE GROUP-REGISTERED TRADEMARK-
Shares of the Fund are sold on a continuous basis and may be purchased directly
from the Trust's Distributor, The One Group-Registered Trademark- Services
Company, by mail, by telephone, or by wire. Shares may also be purchased through
a financial institution, such as a bank, savings and loan association or
insurance company (each a "Shareholder Servicing Agent"), that has established a
Shareholder servicing agreement with the Distributor, or through a broker-dealer
that has established a dealer agreement with the Distributor.
Purchases and redemptions of shares of the Fund may be made on any day that the
New York Stock Exchange is open for trading ("Business Days"). The minimum
initial and subsequent investments in the Fund are $1,000 and $100, respectively
($100 and $25, respectively, for employees of BANC ONE CORPORATION and its
affiliates). Initial and subsequent investment minimums may be waived at the
Distributor's discretion. Investors may purchase up to a maximum of $250,000 of
Class B shares per individual purchase order.
Class A and Class B shares are offered to the general public. Fiduciary Class
shares are offered to institutional investors, including affiliates of BANC ONE
CORPORATION and any bank, depository institution, insurance company, pension
plan or other organization authorized to act in fiduciary, advisory, agency,
custodial or similar capacities (each an "Authorized Financial Organization").
For additional details regarding eligibility, call the Distributor at
1-800-480-4111.
BY MAIL
Investors may purchase Class A and Class B shares of the Fund by completing and
signing an Account Application Form and
PROSPECTUS 8
<PAGE>
mailing it, along with a check (or other negotiable bank instrument or money
order) payable to "The One Group-Registered Trademark-," to State Street Bank
and Trust Company (the Trust's Transfer Agent and Custodian), P.O. Box 8500,
Boston, MA 02266-8500. Subsequent purchases of shares may be made at any time by
mailing a check to the Transfer Agent. Account Application Forms are available
through the Distributor by calling 1-800-480-4111.
Purchases of Fiduciary Class shares and Class A shares that are being offered to
investors in certain retirement plans such as 401(k) and similar plans, other
than Individual Retirement Accounts, are made by an institutional investor
and/or other intermediary on behalf of an investor (each also a "Shareholder
Servicing Agent"). The Shareholder Servicing Agent may require an investor to
complete forms in addition to the Account Application Form and to follow
procedures established by the Shareholder Servicing Agent. Such Shareholders
should contact their Shareholder Servicing Agents regarding purchases, exchanges
and redemptions of shares. See "Additional Information Regarding Purchases."
BY TELEPHONE OR BY WIRE
Once an Account Application Form has been received, Shareholders are eligible to
make purchases by telephone or wire (if that option has been selected by a
Shareholder) by calling the Transfer Agent at 1-800-480-4111 or the Shareholder
Servicing Agents, if applicable.
Shareholders may revoke their automatic eligibility to make purchases and/or
redemptions by telephone or by wire, by sending a letter so stating to the
Transfer Agent, State Street Bank and Trust Company, P.O. Box 8500, Boston, MA
02266-8500.
SYSTEMATIC INVESTMENT PLAN
Class A and Class B investors may make automatic monthly investments in the Fund
from their bank, savings and loan or other depository institution accounts. The
minimum initial and subsequent investments must be $25 under the Systematic
Investment Plan, which minimum may be waived at the discretion of the
Distributor. The Trust pays the costs associated with these transfers, but
reserves the right, upon thirty days' written notice, to impose reasonable
charges for this service. A depository institution may impose a charge for
debiting an investor's account which would reduce the investor's return from an
investment in the Fund.
FUND-DIRECT IRA
The Trust offers a tax-advantaged retirement plan for which the shares of the
Fund may be an appropriate investment. The Trust's retirement plan allows
participants to defer taxes while helping them build their retirement savings.
The One Group-Registered Trademark-'s Fund-Direct IRA is a retirement plan with
a wide choice of investments, offering people with earned income the opportunity
to compound earnings on a tax-deferred basis. An IRA Adoption Agreement may be
obtained by calling the Distributor at 1-800-480-4111.
ADDITIONAL INFORMATION REGARDING PURCHASES
A purchase order will be effective as of the day received by the Distributor if
the Distributor receives the order before 4:00 p.m., eastern time. However, an
order may be cancelled if the Transfer Agent does not receive Federal funds
before close of business on the next Business Day for Fiduciary Class shares,
and before the close of business on the third Business Day for Class A and Class
B shares, and the investor could be liable for any fees or expenses incurred by
the Trust. Federal funds are monies credited to a bank's account with a Federal
Reserve Bank. The purchase price of shares of the Fund is the net asset value
next determined after a purchase order is effected plus any applicable sales
charge (the "offering price"). The net asset value per share of the Fund is
determined by dividing the total market value of the Fund's investments and
other assets allocable to a class, less any liabilities allocable to that class,
by the total number of outstanding shares of such class. Net asset value per
share is determined daily as of 4:00 p.m., eastern time, on each Business Day.
For a further discussion of the calculation of net asset value, see the
Statement of Additional Information. Shares may also be issued in transactions
involving the acquisition by the Fund of securities held by collective
investment funds sponsored and administered by affiliates of the Adviser.
Purchases will be made in full and fractional shares of the Fund calculated to
three decimal places. Although the methodology and procedures are identical, the
net asset value per share of classes within the Fund may differ because the
distribution expenses charged to Class A shares and Class B shares are not
charged to Fiduciary Class shares.
The Trust reserves the right to reject a purchase order when the Distributor
determines that it is not in the best interest of the Trust and/or its
Shareholders to accept such order. Except as provided below, neither the Trust's
Transfer Agent nor the Trust will be responsible for any loss, liability, cost
or expense for acting upon telephone or wire instructions, and the investor will
bear all risk of loss. The Trust will employ reasonable procedures to confirm
that instructions communicated by telephone are genuine, including requiring a
form of personal identification prior to acting upon instructions received by
telephone and recording telephone instructions. If such procedures are not
employed, the Trust may be liable for any losses due to unauthorized or
fraudulent instructions.
Fiduciary Class shares offered to institutional investors and to investors in
certain retirement plans, and Class A shares that are offered to investors in
certain retirement plans such as 401(k) and similar plans, other than Individual
Retirement Accounts, will normally be held in the name of the Shareholder
Servicing Agent effecting the purchase on the Shareholder's behalf, and it is
the Shareholder Servicing Agent's responsibility to transmit purchase orders to
the Distributor. A Shareholder Servicing Agent may impose an earlier cut-off
time for receipt of purchase orders directed through it to allow for processing
and transmittal of these orders to the Distributor for effectiveness the same
day. The Shareholder should contact his or her Shareholder Servicing Agent for
information as to the Shareholder Servicing Agent's procedures for transmitting
purchase, exchange or redemption orders to the Trust. A Shareholder who
9 PROSPECTUS
<PAGE>
desires to transfer the registration of shares beneficially owned by him or her,
but held of record by a Shareholder Servicing Agent, should contact the
Shareholder Servicing Agent to accomplish such change. Other Shareholders who
desire to transfer the registration of their shares should contact the Transfer
Agent.
No certificates representing shares of the Fund will be issued. In
communications to Shareholders, the Fund will not duplicate mailings of Fund
material to Shareholders who reside at the same address.
SALES CHARGE
The following table shows the initial sales charge on Class A shares to a
"single purchaser" (defined below) together with the sales charge reallowed to
financial institutions and intermediaries (the "commission"):
<TABLE>
<CAPTION>
SALES CHARGE
SALES CHARGE AS APPROPRIATE COMMISSION
AS A PERCENTAGE OF AS A
PERCENTAGE OF NET AMOUNT PERCENTAGE OF
AMOUNT OF PURCHASE OFFERING PRICE INVESTED OFFERING PRICE
- --------------------------- ------------------ ------------------- ------------------
<S> <C> <C> <C>
less than $50,000.......... 3.00% 3.09% 2.70%
$50,000 but less than
$100,000................. 2.50% 2.56% 2.25%
$100,000 but less than
$250,000................. 2.00% 2.04% 1.80%
$250,000 but less than
$500,000................. 1.50% 1.52% 1.35%
$500,000 but less than
$1,000,000............... 1.00% 1.01% 0.90%
$1,000,000 or more......... 0.00% 0.00% 0.00%
</TABLE>
The commissions shown in the table apply to sales through financial institutions
and intermediaries. Under certain circumstances, the Distributor will use its
own funds to compensate financial institutions and intermediaries in amounts
that are additional to the commissions shown above. The maximum cash
compensation payable by the Distributor as a sales charge is 3.00% of the
offering price (including the commission shown above and additional cash
compensation described below). In addition, the Distributor will, from time to
time and at its own expense, provide promotional incentives to financial
institutions and intermediaries, whose registered representatives have sold or
are expected to sell significant amounts of the shares of the Fund, in the form
of payment for travel expenses, including lodging, incurred in connection with
trips taken by qualifying registered representatives to places within or outside
the United States, and additional compensation in an amount up to .25% of the
offering price of Class A shares of the Fund for sales of $1 million or more.
However, the Distributor will be reimbursed by the person receiving such
additional compensation for sales of the Fund of $1 million or more, if a
Shareholder redeems any or all of the shares for which such additional
compensation was paid by the Distributor prior to the first year anniversary of
purchase. Under certain circumstances, commissions up to the amount of the
entire sales charge will be reallowed to financial institutions and
intermediaries, which might then be deemed to be "underwriters" under the
Securities Act of 1933.
RIGHT OF ACCUMULATION
In calculating the sales charge rates applicable to current purchases of Class A
shares, a "single purchaser" is entitled to cumulate current purchases with the
current value at the offering price of previously purchased Class A and Class B
shares of the Fund and other eligible funds of the Trust, other than the Trust's
money market funds, that are sold subject to a comparable sales charge.
The term "single purchaser" refers to (i) an individual, (ii) an individual and
spouse purchasing shares of the Fund for their own account or for trust or
custodial accounts for their minor children, or (iii) a fiduciary purchasing for
any one trust, estate or fiduciary account, including employee benefit plans
created under Sections 401 or 457 of the Internal Revenue Code of 1986, as
amended (the "Code"), and including related plans of the same employer. To be
entitled to a reduced sales charge based upon shares already owned, the investor
must ask the Distributor for such reduction at the time of purchase and provide
the account number(s) of the investor, the investor and spouse, and their minor
children, and give the age of such children. The Fund may amend or terminate
this right of accumulation at any time as to subsequent purchases.
LETTER OF INTENT
By initially investing at least $2,000 in Class A shares of one or more funds
that impose a comparable sales charge over the next 13 months, the sales charge
may be reduced by completing the Letter of Intent section of the Account
Application Form. The Letter of Intent includes a provision for a sales charge
adjustment depending on the amount actually purchased within the 13-month
period. In addition, pursuant to a Letter of Intent, the Custodian will hold in
escrow the difference between the sales charge applicable to the amount
initially purchased and the sales charge paid at the time of investment, which
is based on the amount covered by the Letter of Intent.
For example, assume an investor signs a Letter of Intent to purchase $250,000 in
Class A shares of one (or more) of the funds of the Trust that impose a
comparable sales charge and, at the time of signing the Letter of Intent,
purchases $100,000 of Class A shares of one of these funds. The investor would
pay an initial sales charge of 1.50% (the sales charge applicable to purchases
of $250,000) and .50% of the investment (representing the difference between the
2.00% sales charge applicable to purchases of $100,000 and the 1.50% sales
charge already paid) would be held in escrow until the investor has purchased
the remaining $150,000 or more in Class A shares under the investor's Letter of
Intent.
The amount held in escrow will be applied to the investor's account at the end
of the 13-month period unless the amount specified in the Letter of Intent is
not purchased. In order to qualify for a Letter of Intent, the investor will be
required to make a minimum purchase of at least $2,000.
The Letter of Intent will not obligate the investor to purchase Class A shares,
but if he or she does, each purchase during the
PROSPECTUS 10
<PAGE>
period will be at the sales charge applicable to the total amount intended to be
purchased. The Letter of Intent may be dated as of a prior date to include any
purchases made within the past 90 days.
OTHER CIRCUMSTANCES
No sales charge is imposed on Class A shares of the Fund: (i) issued through
reinvestment of dividends and capital gains distributions; (ii) acquired through
the exercise of exchange privileges where a comparable sales charge has been
paid for exchanged shares; (iii) purchased by officers, directors or trustees,
retirees and employees (and their spouses and immediate family members) of the
Trust, of BANC ONE CORPORATION and its subsidiaries and affiliates, of the
Distributor and its subsidiaries and affiliates, or of an investment sub-adviser
of a fund of the Trust and such sub-adviser's subsidiaries and affiliates; (iv)
sold to affiliates of BANC ONE CORPORATION and certain accounts (other than
Individual Retirement Accounts) for which Authorized Financial Organizations act
in fiduciary, advisory, agency, custodial or similar capacities, or purchased by
investment advisers, financial planners or other intermediaries who have a
dealer arrangement with the Distributor, who place trades for their own accounts
or for the accounts of their clients and who charge a management, consulting or
other fee for their services, as well as clients of such investment advisers,
financial planners or other intermediaries who place trades for their own
accounts if the accounts are linked to the master account of such investment
adviser, financial planner or other intermediary; (v) purchased with proceeds
from the recent redemption of Fiduciary Class shares of a fund of the Trust or
acquired in an exchange of Fiduciary Class shares of a fund for Class A shares
of the same fund; (vi) purchased with proceeds from the recent redemption of
shares of a mutual fund (other than a fund of the Trust) for which a sales
charge was paid; (vii) purchased in an Individual Retirement Account with the
proceeds of a distribution from an employee benefit plan, provided that, at the
time of distribution, the employee benefit plan had plan assets invested in a
fund of the Trust; (viii) purchased with Trust assets; (ix) purchased in
accounts as to which a bank or broker-dealer charges an asset allocation fee,
provided the bank or broker-dealer has an agreement with the Distributor; or (x)
directly purchased with the proceeds of a dividend distribution on a bond for
which a Banc One Corporation affiliate bank or trust company is the Trustee or
Paying Agent.
An investor relying upon any of the categories of waivers of the sales charge
must qualify for such waiver in advance of the purchase with the Distributor or
the financial institution or intermediary through which shares are purchased by
the investor.
The waiver of the sales charge under circumstances (v), (vi) and (vii) above
applies only if the purchase is made within 60 days of the redemption or
distribution and if conditions imposed by the Distributor are met. The waiver
policy with respect to the purchase of shares through the use of proceeds from a
recent redemption or distribution as described in clauses (v), (vi) and (vii)
above will not be continued indefinitely and may be discontinued at any time
without notice. Investors should call the Distributor at 1-800-480-4111 to
determine whether they are eligible to purchase shares without paying a sales
charge through the use of proceeds from a recent redemption or distribution as
described above, and to confirm continued availability of these waiver policies
prior to initiating the procedures described in clauses (v), (vi) and (vii).
ALTERNATIVE SALES ARRANGEMENTS
CLASS B SHARES
Class B shares are not subject to a sales charge when they are purchased, but
are subject to a sales charge (the "Contingent Deferred Sales Charge") if a
Shareholder redeems them prior to the fourth anniversary of purchase. When a
Shareholder purchases Class B shares, the full purchase amount is invested
directly in the Fund. Class B shares of the Fund are subject to an ongoing
distribution and Shareholder service fee at an annual rate of 1.00% of the
Fund's average daily net assets as provided in the Class B Plan (described below
under "The Distributor"). The Distributor has voluntarily agreed to reduce the
amount of this fee to .75% of the Fund's average daily net assets attributable
to the Class B shares, for the indefinite future. This ongoing fee will cause
Class B shares to have a higher expense ratio and to pay lower dividends than
Class A shares. Class B shares convert automatically to Class A shares after six
years, commencing from the end of the calendar month in which the purchase order
was accepted under the circumstances and subject to the qualifications described
in this Prospectus.
Proceeds from the Contingent Deferred Sales Charge and the distribution and
Shareholder service fees under the Class B Plan are payable to the Distributor
and financial intermediaries to defray the expenses of advance brokerage
commissions and expenses related to providing distribution-related and
Shareholder services to the Fund in connection with the sale of the Class B
shares, such as the payment of compensation to dealers and agents for selling
Class B shares. A dealer reallowance of 2.75% of the original purchase price of
the Class B shares will be paid to financial institutions and intermediaries.
CONTINGENT DEFERRED SALES CHARGE
If the Shareholder redeems Class B shares prior to the fourth anniversary of
purchase, the Shareholder will pay a Contingent Deferred Sales Charge at the
rates set forth below. The Contingent Deferred Sales Charge is assessed on an
amount equal to the lesser of the then-current market value or the cost of the
shares being redeemed. Accordingly, no sales charge is imposed on increases in
net asset value above the initial purchase price. In addition, no charge is
assessed on shares derived from reinvestment of dividends or capital gain
distributions.
The amount of the Contingent Deferred Sales Charge, if any, varies depending on
the number of years from the time of payment for the purchase of Class B shares
until the time of redemption of such shares. Solely for purposes of determining
11 PROSPECTUS
<PAGE>
the number of years from the time of any payment for the purchase of shares, all
payments during a month are aggregated and deemed to have been made on the first
day of the month.
<TABLE>
<CAPTION>
CONTINGENT DEFERRED
SALES CHARGE AS A
YEAR(S) PERCENTAGE OF DOLLAR
SINCE AMOUNT SUBJECT TO
PURCHASE CHARGE
- ----------------------------------------- --------------------
<S> <C>
0-1...................................... 3.00%
1-2...................................... 3.00%
2-3...................................... 2.00%
3-4...................................... 1.00%
4-5...................................... None
5-6...................................... None
</TABLE>
In determining whether a particular redemption is subject to a Contingent
Deferred Sales Charge, it is assumed that the redemption is first of any Class A
shares in the Shareholder's Fund account (unless the Shareholder elects to have
Class B shares redeemed first) or shares representing capital appreciation, next
of shares acquired pursuant to reinvestment of dividends and capital gain
distributions, and finally of other shares held by the Shareholder for the
longest period of time. This method should result in the lowest possible sales
charge.
To provide an example, assume you purchased 100 shares at $10 per share (a total
cost of $1,000) and prior to the second anniversary after purchase, the net
asset value per share is $12 and during such time you have acquired 10
additional shares through dividends paid in shares. If you then make your first
redemption of 50 shares (proceeds of $600), 10 shares will not be subject to
charge because you received them as dividends. With respect to the remaining 40
shares, the charge is applied only to the original cost of $10 per share and not
to the increase in net asset value of $2 per share. Therefore, $400 of the $600
redemption proceeds is subject to a Contingent Deferred Sales Charge at a rate
of 3.00% (the applicable rate prior to the second anniversary after purchase).
The Contingent Deferred Sales Charge is waived on redemption of shares: (i) for
distributions that are made under a Systematic Withdrawal Plan of the Trust and
that are limited to no more than 10% of the account value annually, determined
in the first year, as of the date the redemption request is received by the
Transfer Agent, and in subsequent years, as of the most recent anniversary of
that date; (ii) following the death or disability (as defined in the Code) of a
Shareholder or a participant or beneficiary of a qualifying retirement plan if
redemption is made within one year of such death or disability; or (iii) to the
extent that the redemption represents a minimum required distribution from an
Individual Retirement Account or other qualifying retirement plan to a
Shareholder who has attained the age of 70. A Shareholder or his or her
representative should contact the Transfer Agent to determine whether a
retirement plan qualifies for a waiver and must notify the Transfer Agent prior
to the time of redemption if such circumstances exist and the Shareholder is
eligible for this waiver. In addition, the following circumstances are not
deemed to result in a "redemption" of Class B shares for purposes of the
assessment of a Contingent Deferred Sales Charge, which is therefore waived: (i)
plans of reorganization of the Fund, such as mergers, asset acquisitions and
exchange offers to which the Fund is a party; or (ii) exchanges for Class B
shares of other funds of the Trust as described under "Exchanges."
CONVERSION FEATURE
Class B shares include all shares purchased pursuant to the Contingent Deferred
Sales Charge which have been outstanding for less than the period ending six
years after the end of the month in which the shares were purchased. At the end
of this period, Class B shares will automatically convert to Class A shares and
will be subject to the lower distribution and Shareholder service fees charged
to Class A shares. Such conversion will be on the basis of the relative net
asset values of the two classes, without the imposition of any sales charge, fee
or other charge. The conversion is not a taxable event to a Shareholder.
For purposes of conversion to Class A shares, shares received as dividends and
other distributions paid on Class B shares in a Shareholder's Fund account will
be considered to be held in a separate sub-account. Each time any Class B shares
in a Shareholder's Fund account (other than those in the sub-account) convert to
Class A shares, a pro-rata portion of the Class B shares in the sub-account will
also convert to Class A shares.
If a Shareholder effects one or more exchanges among Class B shares of the funds
of the Trust during the six-year period, the Trust will aggregate the holding
periods for the shares of each fund of the Trust for purposes of calculating
that six-year period. Because the per share net asset value of the Class A
shares may be higher than that of the Class B shares at the time of conversion,
a Shareholder may receive fewer Class A shares than the number of Class B shares
converted, although the dollar value will be the same.
EXCHANGES
CLASS A AND FIDUCIARY CLASS
Fiduciary Class Shareholders of the Fund may exchange their shares for Class A
shares of the Fund or for Class A shares or Fiduciary Class shares of another
fund of the Trust.
Class A Shareholders may exchange their shares for Fiduciary Class shares of the
Fund or for Fiduciary Class shares or Class A shares of another fund of the
Trust, if the Shareholder is eligible to purchase such shares.
The exchange privilege may be exercised only in those states where the shares of
the Fund or such other fund of the Trust may be legally sold. All exchanges
discussed herein are made at the net asset value of the exchanged shares, except
as provided below. The Trust does not impose a charge for processing exchanges
of shares. If a Shareholder seeks to exchange Class A shares of a fund that does
not impose a sales charge for Class A shares of a fund that does or the fund
being exchanged into has a higher sales charge, the Shareholder will be required
to pay a sales charge in the amount equal to the difference between the sales
charge applicable to the fund into which the shares are
PROSPECTUS 12
<PAGE>
being exchanged and any sales charges previously paid for the exchanged shares,
including any sales charges incurred on any earlier exchanges of the shares
(unless such sales charge is otherwise waived, as provided in "Other
Circumstances"). The exchange of Fiduciary Class shares for Class A shares also
will require payment of the sales charge unless the sales charge is waived, as
provided in "Other Circumstances."
CLASS B
Class B Shareholders of the Fund may exchange their shares for Class B shares of
any other fund of the Trust on the basis of the net asset value of the exchanged
Class B shares, without the payment of any Contingent Deferred Sales Charge that
might otherwise be due upon redemption of the outstanding Class B shares. The
newly acquired Class B shares will be subject to the higher Contingent Deferred
Sales Charge of either the fund from which the shares were exchanged or the fund
into which the shares were exchanged. With respect to outstanding Class B shares
as to which previous exchanges have taken place, "higher Contingent Deferred
Sales Charge" shall mean the higher of the Contingent Deferred Sales Charge
applicable to either the fund the shares are exchanging into or any other fund
from which the shares previously have been exchanged. For purposes of computing
the Contingent Deferred Sales Charge that may be payable upon a disposition of
the newly acquired Class B shares, the holding period for outstanding Class B
shares of the fund from which the exchange was made is "tacked" to the holding
period of the newly acquired Class B shares. For purposes of calculating the
holding period applicable to the newly acquired Class B shares, the newly
acquired Class B shares shall be deemed to have been issued on the date of
receipt of the Shareholder's order to purchase the outstanding Class B shares of
the fund from which the initial exchange was made.
ADDITIONAL INFORMATION REGARDING EXCHANGES
In the case of shares held of record by a Shareholder Servicing Agent but
beneficially owned by a Shareholder, to exchange such shares the Shareholder
should contact the Shareholder Servicing Agent, who will contact the Transfer
Agent and effect the exchange on behalf of the Shareholder. If an exchange
request in good order is received by the Transfer Agent by 4:00 p.m., eastern
time, on any Business Day, the exchange usually will occur on that day. Any
Shareholder who wishes to make an exchange must receive a current prospectus of
the fund of the Trust in which he or she wishes to invest before the exchange
will be effected.
The Trust reserves the right to change the terms or conditions of the exchange
privilege discussed herein upon sixty days' written notice. An exchange between
classes of shares of the same fund is not considered a taxable event; however,
an exchange between funds of the Trust is considered a sale of shares and
usually results in a capital gain or loss for Federal income tax purposes.
Shareholders should consult their tax advisers for a more complete explanation
of the Federal income tax consequences of an exchange of shares of the Fund.
A more detailed description of the above is set forth in the Statement of
Additional Information.
REDEMPTIONS
Shareholders may redeem their shares without charge (except Class B shares, as
provided above) on any Business Day; shares may ordinarily be redeemed by mail,
by telephone or by wire. All redemption orders are effected at the net asset
value per share next determined for Class A and Fiduciary Class shares, and at
net asset value per share next determined reduced by any applicable Contingent
Deferred Sales Charge for Class B shares, after receipt of a valid request for
redemption. Payment to Shareholders for shares redeemed will be made within
seven days after receipt by the Transfer Agent of the request for redemption.
BY MAIL
A written request for redemption must be received by the Transfer Agent in order
to constitute a valid request for redemption. All written redemption requests
should be sent to The One Group-Registered Trademark-, c/o State Street Bank and
Trust Company, P.O. Box 8500, Boston, MA 02266-8500, or the Shareholder
Servicing Agent, if applicable. The Transfer Agent may require that the
signature on the written request be guaranteed by a commercial bank, a member
firm of a domestic stock exchange, or by a member of the Securities Transfer
Association Medallion Program or the Stock Exchange Medallion Program.
The signature guarantee requirement will be waived if all of the following
conditions apply: (i) the redemption is for $5,000 worth of shares or less; (ii)
the redemption check is payable to the Shareholder(s) of record; and (iii) the
redemption check is mailed to the Shareholder(s) at the address of record. The
Shareholder may also have the proceeds mailed to a commercial bank account
previously designated on the Account Application Form or by written instruction
to the Transfer Agent or the Shareholder Servicing Agent, if applicable. There
is no charge for having redemption requests mailed to a designated bank account.
BY TELEPHONE OR BY WIRE
Shareholders may have the payment of redemption requests wired or mailed to a
domestic commercial bank account previously designated on the Account
Application Form. Wire redemption requests may be made by the Shareholder by
telephone to the Transfer Agent at 1-800-480-4111, provided that the Shareholder
has elected the telephone redemption privilege in writing to the Distributor, or
to the Shareholder Servicing Agent, if applicable. The Transfer Agent may reduce
the amount of a wire redemption payment by its then-current wire redemption
charge, which, as of the date of this Prospectus, is $7.00.
Neither the Trust nor the Transfer Agent will be responsible for the
authenticity of the redemption instructions received by telephone if it
reasonably believes those instructions to be genuine. The Trust and the Transfer
Agent will each employ reasonable procedures to confirm that telephone
instructions are genuine,
13 PROSPECTUS
<PAGE>
and may be liable for losses resulting from unauthorized or fraudulent telephone
transactions if it does not employ those procedures. Such procedures may include
requesting personal identification information or recording telephone
conversations.
SYSTEMATIC WITHDRAWAL PLAN
Shareholders whose accounts have a value of at least $10,000 may elect to
receive, or may designate another person to receive, monthly, quarterly or
annual payments in a specified amount of not less than $100 each. There is no
charge for this service. Under the Systematic Withdrawal Plan, all dividends and
distributions must be reinvested in shares of the Fund. Purchases of additional
Class A shares while the Systematic Withdrawal Plan is in effect are generally
undesirable because a sales charge is incurred whenever purchases are made.
Pursuant to the Systematic Withdrawal Plan, Class B Shareholders may elect to
receive, or may designate another person to receive, distributions provided the
distributions are limited to no more than 10% of their account value annually,
determined in the first year as of the date the redemption request is received
by the Transfer Agent, and in subsequent years, as of the most recent
anniversary of that date. In addition, Shareholders who have attained the age of
70 may elect to receive distributions, to the extent that the redemption
represents a minimum required distribution from an Individual Retirement Account
or other qualifying retirement plan.
If the amount of the systematic withdrawal exceeds the income accrued since the
previous withdrawal under the Systematic Withdrawal Plan, the principal balance
invested will be reduced and shares will be redeemed.
OTHER INFORMATION REGARDING REDEMPTIONS
At various times, the Fund may be requested to redeem shares for which it has
not yet received good payment. In such circumstances, the forwarding of proceeds
may be delayed for 15 or more days until payment has been collected for the
purchase of such shares. The Fund intends to pay cash for all shares redeemed.
Due to the relatively high costs of handling small investments, the Fund
reserves the right to redeem, at net asset value, the shares of any Shareholder
if, because of redemptions of shares by or on behalf of the Shareholder, the
account of such Shareholder in the Fund has a value of less than $1,000, the
minimum initial purchase amount. Accordingly, an investor purchasing shares of
the Fund in only the minimum investment amount may be subject to such
involuntary redemption if he or she thereafter redeems any of these shares.
Before the Fund exercises its right to redeem such shares and to send the
proceeds to the Shareholder, the Shareholder will be given notice that the value
of the shares in his or her account is less than the minimum amount and will be
allowed 60 days to make an additional investment in the Fund in an amount which
will increase the value of the account to at least $1,000.
See "Redemption of Shares" in the Statement of Additional Information for
examples of when the Trust may suspend the right of redemption or redeem shares
involuntarily if it appears appropriate to do so in light of the Trust's
responsibilities under the Investment Company Act of 1940.
FUND MANAGEMENT
THE ADVISER
The Trust and Banc One Investment Advisors Corporation (the "Adviser") have
entered into an investment advisory agreement (the "Advisory Agreement"). Under
the Advisory Agreement, the Adviser makes the investment decisions for the
assets of the Fund and continuously reviews, supervises and administers the
Fund's investment program. The Adviser discharges its responsibilities subject
to the supervision of, and policies established by, the Trustees of the Trust.
The Trust's shares are not deposits or obligations of, or endorsed or guaranteed
by BANC ONE CORPORATION or its bank or non-bank affiliates. The Trust's shares
are not insured or guaranteed by the Federal Deposit Insurance Corporation
("FDIC") or by any other governmental agency or government sponsored agency of
the Federal government or any state.
The Adviser is an indirect, wholly-owned subsidiary of BANC ONE CORPORATION, a
bank holding company incorporated in the state of Ohio. BANC ONE CORPORATION
currently has affiliate banking organizations in Arizona, Colorado, Illinois,
Indiana, Kentucky, Ohio, Oklahoma, Texas, Utah, West Virginia and Wisconsin. In
addition, BANC ONE CORPORATION has several affiliates that engage in data
processing, venture capital, investment and merchant banking, and other
diversified services including trust management, investment management,
brokerage, equipment leasing, mortgage banking, consumer finance and insurance.
On a consolidated basis, BANC ONE CORPORATION had assets of over $86 billion as
of June 30, 1995.
The Adviser represents a consolidation of the investment advisory staffs of a
number of bank affiliates of BANC ONE CORPORATION, which have considerable
experience in the management of open-end management investment company
portfolios, including The One Group-Registered Trademark- since 1985 (then known
as "The Helmsman Fund"). Prior to January 1993, Bank One, Indianapolis, NA
served as investment adviser to the Fund. Bank One, Indianapolis, NA is an
indirect, wholly-owned subsidiary of BANC ONE CORPORATION.
Gary J. Madich, CFA, is Senior Managing Director of Fixed Income Securities. Mr.
Madich joined the Adviser in February 1995. Prior to joining the Adviser, Mr.
Madich was a Senior Vice President and Portfolio Manager with Federated
Investors. Mr. Madich has seventeen years of investment management experience.
PROSPECTUS 14
<PAGE>
James A. Sexton, CFA, has been Manager of the Fund since March 1995. In
addition, Mr. Sexton has managed the Intermediate Bond Fund of the Trust since
its inception in January 1994. Mr. Sexton has been employed by the Adviser and
its affiliates since 1980.
The Adviser is entitled to a fee, which is calculated daily and paid monthly, at
an annual rate of .60% of the average daily net assets of the Fund. The Adviser
may voluntarily agree to waive a part of its fees. (See "About the Fund --
Expense Summary.") These fee waivers are voluntary and may be terminated at any
time. Shareholders will be notified in advance if and when these waivers are
terminated. During the fiscal year ended June 30, 1995, the Fund paid investment
advisory fees to the Adviser of .27% of the Fund's average daily net assets.
THE DISTRIBUTOR
The One Group-Registered Trademark- Services Company (the "Distributor"), a
wholly-owned subsidiary of the BISYS Group, Inc., and the Trust are parties to a
distribution agreement (the "Distribution Agreement") under which shares of the
Fund are sold on a continuous basis.
Class A shares are subject to a distribution and Shareholder services plan (the
"Plan"). As provided in the Plan, the Trust will pay the Distributor a fee of
.35% of the average daily net assets of Class A shares of the Fund. Currently,
the Distributor has voluntarily agreed to limit payments under the Plan to .25%
of the average daily net assets of Class A shares of the Fund. Up to .25% of the
fees payable under the Plan may be used as compensation for Shareholder services
by the Distributor and/ or financial institutions and intermediaries. All such
fees that may be paid under the Plan will be paid pursuant to Rule 12b-1 of the
Investment Company Act of 1940. The Distributor may apply these fees toward: (i)
compensation for its services in connection with distribution assistance or
provision of Shareholder services; or (ii) payments to financial institutions
and intermediaries such as banks (including affiliates of the Adviser), savings
and loan associations, Class B shares are subject to a Contingent Deferred Sales
Charge if such shares are redeemed prior to the fourth anniversary of purchase.
insurance companies, investment counselors, broker-dealers, and the
Distributor's affiliates and subsidiaries, as compensation for services or
reimbursement of expenses incurred in connection with distribution assistance or
provision of Shareholder services.
Class B shares of the Fund are subject to an ongoing distribution and
Shareholder service fee as provided in the Class B distribution and Shareholder
services plan (the "Class B Plan") at an annual rate of 1.00% of the Fund's
average daily net assets, which includes Shareholder servicing fees of .25% of
the Fund's average daily net assets. Currently, the Distributor has voluntarily
agreed to limit payments under the Class B Plan to .75% of the average daily net
assets of the Class B shares of the Fund.
Proceeds from the Contingent Deferred Sales Charge and the distribution and the
Shareholder service fees under the Class B Plan are payable to the Distributor
and financial intermediaries to defray the expenses of advance brokerage
commissions and expenses related to providing distribution-related and
Shareholder services to the Fund in connection with the sale of Class B shares,
such as the payment of compensation to dealers and agents for selling Class B
shares. The combination of the Contingent Deferred Sales Charge and the
distribution and Shareholder service fees facilitate the ability of the Fund to
sell the Class B shares without a sales charge being deducted at the time of
purchase.
The Plan and the Class B Plan are characterized as compensation plans since the
distribution fees will be paid to the Distributor without regard to the
distribution or Shareholder service expenses incurred by the Distributor or the
amount of payments made to financial institutions and intermediaries. The Fund
also may execute brokerage or other agency transactions through an affiliate of
the Adviser or through the Distributor for which the affiliate or the
Distributor receives compensation. Pursuant to guidelines adopted by the Board
of Trustees of the Trust, any such compensation will be reasonable and fair
compared to compensation received by other brokers in connection with comparable
transactions.
During the fiscal year ended June 30, 1995, 440 Financial Distributors, Inc.,
the previous distributor to the Trust, received fees aggregating .25% of the
average daily net assets of Class A shares of the Fund. In addition, 440
Financial Distributors, Inc. received annualized fees of .75% of the average
daily net assets of the Class B shares of the Fund.
Fiduciary Class shares of the Fund are offered without distribution fees to
institutional investors, including Authorized Financial Organizations. It is
possible that an institution may offer different classes of shares to its
customers and thus receive different compensation with respect to different
classes of shares. In addition, a financial institution that is the record owner
of shares for the account of its customers may impose separate fees for account
services to its customers.
THE ADMINISTRATOR
The One Group-Registered Trademark- Services Company (the "Administrator"), a
wholly-owned subsidiary of the BISYS Group, Inc., and the Trust are parties to
an administration agreement relating to the Fund (the "Administration
Agreement"). Under the terms of the Administration Agreement, the Administrator
is responsible for providing the Trust with administrative services (other than
investment advisory services), including regulatory reporting and all necessary
office space, equipment, personnel and facilities.
The Adviser also serves as Sub-Administrator to each fund of the Trust, pursuant
to an agreement between the Administrator and the Adviser. Pursuant to this
agreement, the Adviser performs many of the Administrator's duties, for which
the Adviser receives a fee paid by the Administrator.
The Administrator is entitled to a fee for administrative services, which is
calculated daily and paid monthly, at an annual rate of .20% of each fund's
average daily net assets on the first
15 PROSPECTUS
<PAGE>
$1.5 billion in Trust assets (excluding the Treasury Only Money Market Fund and
the Government Money Market Fund), .18% of each fund's average daily net assets
to $2 billion in Trust assets (excluding the Treasury Only Money Market Fund and
the Government Money Market Fund), and .16% of each fund's average daily net
assets when Trust assets exceed $2 billion (excluding the Treasury Only Money
Market Fund and the Government Money Market Fund). During the fiscal year ended
June 30, 1995, 440 Financial, the previous administrator to the Trust, received
annualized fees of .17% of the Fund's average daily net assets.
THE TRANSFER AGENT AND CUSTODIAN
State Street Bank and Trust Company, P.O. Box 8500, Boston, MA 02266-8500 acts
as Transfer Agent and Custodian for the Trust, for which services it receives a
fee. The Custodian holds cash, securities and other assets of the Trust as
required by the Investment Company Act of 1940. Bank One Trust Company, N.A.
serves as Sub-Custodian in connection with the Trust's securities lending
activities, pursuant to an agreement between State Street Bank and Trust Company
and Bank One Trust Company. Bank One Trust Company receives a fee paid by the
Trust.
COUNSEL AND INDEPENDENT ACCOUNTANTS
Ropes & Gray serves as counsel to the Trust. Coopers & Lybrand L.L.P. serves as
the independent accountants of the Trust.
OTHER INFORMATION
THE TRUST
The Trust was organized as a Massachusetts Business Trust under a Declaration of
Trust filed on May 23, 1985. The Declaration of Trust permits the Trust to offer
separate funds and different classes of each fund. All consideration received by
the Trust for shares of any fund and all assets of such fund belong to that fund
and would be subject to liabilities related thereto.
The Trust pays its expenses, including fees of its service providers, audit and
legal expenses, expenses of preparing prospectuses, proxy solicitation material
and reports to Shareholders, costs of custodial services and registering the
shares under Federal and state securities laws, pricing, insurance expenses,
litigation and other extraordinary expenses, brokerage costs, interest charges,
taxes and organizational expenses. During the fiscal year of the Trust ended
June 30, 1995, the expenses of the Fund were .77% of the average daily net
assets of the Class A shares of the Fund, 1.28% of the average daily net assets
of the Class B shares of the Fund on an annual basis, and .52% of the average
daily net assets of the Fiduciary Class shares of the Fund. These expenses would
have been 1.20%, 1.86% and .85%, respectively, of the average daily net assets
of such classes, but for the voluntary reduction of fees.
The Adviser and the Administrator of the Fund each bears all expenses incurred
in connection with the performance of their services as investment adviser and
administrator, respectively, other than the cost of securities (including
brokerage commissions, if any) purchased for the Fund.
As a general matter, as set forth in the Multiple Class Plan, expenses are
allocated to each class of shares of the Fund on the basis of the net asset
value of that class in relation to the net asset value of the Fund. At present,
the only expenses that are allocated to Class A and Class B shares, other than
in accordance with the relative net asset value of the class, are the different
distribution and Shareholder services costs. See "Expense Summary." At present,
no expenses are allocated to Fiduciary Class shares as a class that are not also
borne by the other classes of shares of the Fund in proportion to the relative
net asset values of the shares of such classes.
The organizational expenses of the Fund have been capitalized and are being
amortized in the first five years of the Fund's operations. Such amortization
will reduce the amount of income available for payment as dividends.
TRUSTEES OF THE TRUST
The management and affairs of the Trust are supervised by the Trustees under the
laws governing business trusts in the Commonwealth of Massachusetts. The
Trustees have approved contracts under which, as described above, certain
companies provide essential management services to the Trust.
VOTING RIGHTS
As set forth in the Multiple Class Plan, each share held entitles the
Shareholder of record to one vote. Each fund of the Trust will vote separately
on matters relating solely to that fund. In addition, each class of a fund shall
have exclusive voting rights on any matter submitted to Shareholders that
relates solely to that class, and shall have separate voting rights on any
matter submitted to Shareholders in which the interests of one class differ from
the interests of any other class. However, all fund Shareholders will have equal
voting rights on matters that affect all fund Shareholders equally. As a
Massachusetts Business Trust, the Trust is not required to hold annual meetings
of Shareholders but approval will be sought for certain changes in the operation
of the Trust and for the election of Trustees under certain circumstances. In
addition, a Trustee may be elected or removed by the remaining Trustees or by
Shareholders at a special meeting called upon written request of Shareholders
owning at least 10% of the outstanding shares of the Trust. In the event that
such a meeting is requested, the Trust will provide appropriate assistance and
information to the Shareholders requesting the meeting.
DIVIDENDS
Net investment income (exclusive of capital gains) is determined and declared
daily, and is distributed in the form of monthly dividends to Shareholders of
Record of the Fund on the first Business Day of each month. Capital gains of the
Fund, if any, will be distributed at least annually.
PROSPECTUS 16
<PAGE>
To maintain a relatively even rate of distributions from the Fund rather than
having substantial fluctuations from period to period, the monthly distributions
level from the Fund may be fixed from time to time at rates consistent with the
Adviser's long-term earnings expectations.
Shareholders automatically receive all income dividends and capital gain
distributions in additional Class A, Class B, or Fiduciary Class shares, as
applicable, at the net asset value next determined following the record date,
unless the Shareholder has elected to take such payment in cash. Such election,
or any revocation thereof, must be made in writing, at least 15 days prior to
distribution, to the Transfer Agent at P.O. Box 8500, Boston, MA 02266-8500, and
will become effective with respect to dividends and distributions having record
dates after its receipt by the Transfer Agent. Reinvested dividends and
distributions receive the same tax treatment as dividends and distributions paid
in cash.
Class B shares received as dividends and capital gains distributions at the net
asset value next determined following the record date shall be held in a
separate Class B sub-account. Each time any Class B shares (other than those in
the sub-account) convert to Class A shares, a pro-rata portion of the Class B
shares in the sub-account will also convert to Class A shares. (See "Conversion
Feature.")
Dividends and distributions of the Fund are paid on a per-share basis. The value
of each share will be reduced by the amount of the payment. If shares are
purchased shortly before the record date for a dividend or the distribution of
capital gains, a Shareholder will pay the full price for the shares and receive
some portion of the price back as a taxable dividend or distribution even though
such distribution would, in effect, represent a return of the Shareholder's
investment.
The amount of dividends payable on Fiduciary Class shares will be more than the
dividends payable on Class A and Class B shares because of the distribution
expenses charged to Class A and Class B shares.
SHAREHOLDER INQUIRIES
Shareholder inquiries should be directed to the Administrator, The One
Group-Registered Trademark- Services Company, 3435 Stelzer Road, Columbus, Ohio
43219.
REPORTING
The Trust issues unaudited financial information semiannually and audited
financial statements annually. The Trust furnishes proxy statements and other
reports to Shareholders of record.
OTHER INVESTMENT POLICIES
TEMPORARY DEFENSIVE POSITION
For temporary defensive purposes during periods when the Adviser determines that
market conditions warrant such action, the Fund may invest up to 100% of its
assets in money market instruments, and may hold a portion of its assets in cash
for liquidity purposes.
To the extent the Fund is engaged in a temporary defensive position, it will not
be pursuing its investment objective.
PORTFOLIO TURNOVER
For the fiscal year ended June 30, 1995, the portfolio turnover rate for the
Fund was 76.43%. This rate of portfolio turnover may vary greatly from year to
year, as well as within a particular year.
INVESTMENT LIMITATIONS
The investment objective and the following investment limitations are
fundamental policies of the Fund. Fundamental policies cannot be changed without
the consent of the holders of a majority of the Fund's outstanding shares. The
term "majority of the outstanding shares" means the vote of (i) 67% or more of
the Fund's shares present at a meeting, if more than 50% of the outstanding
shares of the Fund are present or represented by proxy, or (ii) more than 50% of
the Fund's outstanding shares, whichever is less.
The Fund may not:
1. Purchase securities of any issuer (except securities issued or guaranteed by
the United States, its agencies or instrumentalities, and if consistent with the
Fund's investment objective and policies, repurchase agreements involving such
securities) if as a result more than 5% of the total assets of the Fund would be
invested in the securities of such issuer or the Fund would own more than 10% of
the outstanding voting securities of such issuer. This restriction applies to
75% of the Fund's assets. For purposes of these limitations, a security is
considered to be issued by the government entity whose assets and revenues
guarantee or back the security. With respect to private activity bonds or
industrial development bonds backed only by the assets and revenues of a
non-governmental user, such user would be considered the issuer.
2. Purchase any securities that would cause more than 25% of the total assets of
the Fund to be invested in the securities of one or more issuers conducting
their principal business activities in the same industry, provided that this
limitation does not apply to investments in obligations issued or guaranteed by
the U.S. government or its agencies and instrumentalities and repurchase
agreements involving such securities. For purposes of this limitation (i)
utilities will be divided according to their services (for example, gas, gas
transmission, electric and telephone will each be considered a separate
industry); and (ii) wholly-owned finance companies will be considered to be in
the industries of their parents if their activities are primarily related to
financing the activities of their parents.
3. Make loans, except that the Fund may (i) purchase or hold debt instruments in
accordance with its investment objective
17 PROSPECTUS
<PAGE>
and policies; (ii) enter into repurchase agreements; and (iii) engage in
securities lending as described in this Prospectus and in the Statement of
Additional Information.
The foregoing percentages will apply at the time of the purchase of a security.
Additional investment limitations are set forth in the Statement of Additional
Information.
DESCRIPTION OF PERMITTED INVESTMENTS
The following is a description of certain of the permitted investments for the
Fund.
U.S. TREASURY OBLIGATIONS -- The Fund may invest in bills, notes and bonds
issued by the U.S. Treasury and separately traded interest and principal
component parts of such obligations that are transferable through the Federal
book-entry system known as Separately Traded Registered Interest and Principal
Securities ("STRIPS") and Coupon Under Book Entry Safekeeping ("CUBES").
RECEIPTS -- The Fund may purchase interests in separately traded interest and
principal component parts of U.S. Treasury obligations that are issued by banks
or brokerage firms and are created by depositing U.S. Treasury notes and U.S.
Treasury bonds into a special account at a custodian bank. The custodian holds
the interest and principal payments for the benefit of the registered owners of
the certificates or receipts. The custodian arranges for the issuance of the
certificates or receipts evidencing ownership and maintains the register.
Receipts include Treasury Receipts ("TRS"), Treasury Investment Growth Receipts
("TIGRS"), and Certificates of Accrual on Treasury Securities ("CATS").
STRIPS, CUBES, TRS, TIGRS and CATS are sold as zero coupon securities, which
means that they are sold at a substantial discount and redeemed at face value at
their maturity date without interim cash payments of interest or principal. This
discount is amortized over the life of the security, and such amortization will
constitute the income earned on the security for both accounting and tax
purposes. Because of these features, these securities may be subject to greater
interest rate volatility than interest-paying U.S. Treasury obligations. The
Fund may invest up to 20% of its total assets in STRIPS, CUBES, TRS, TIGRS and
CATS. See also "Taxes."
CERTIFICATES OF DEPOSIT -- Certificates of deposit are negotiable interest
bearing instruments with a specific maturity. Certificates of deposit ("CDs")
are issued by banks and savings and loan institutions in exchange for the
deposit of funds and normally can be traded in the secondary market prior to
maturity.
TIME DEPOSITS -- Time deposits are non-negotiable receipts issued by a bank in
exchange for the deposit of funds. Like a certificate of deposit, a time deposit
("TD") earns a specified rate of interest over a definite period of time;
however, it cannot be traded in the secondary market. Time deposits with a
withdrawal penalty are considered to be illiquid securities; therefore, the Fund
will not invest more than 15% of its total assets in such time deposits and
other illiquid securities.
BANKERS' ACCEPTANCES -- Bankers' acceptances are bills of exchange or time
drafts drawn on and accepted by (i.e., made an obligation of) a commercial bank.
They are used by corporations to finance the shipment and storage of goods and
to furnish dollar exchange. Maturities are generally six months or less.
COMMERCIAL PAPER -- Commercial paper is the term used to designate unsecured
short-term promissory notes issued by corporations and other entities.
Maturities on these issues vary from a few days to nine months.
U.S. GOVERNMENT AGENCIES -- Certain Federal agencies have been established as
instrumentalities of the U.S. government to supervise and finance specific types
of activities. Select agencies, such as the Government National Mortgage
Association ("Ginnie Mae") and the Export-Import Bank, are supported by the full
faith and credit of the U.S. Treasury; others, such as the Federal National
Mortgage Association ("Fannie Mae"), are supported by the credit of the
instrumentality and have the right to borrow from the U.S. Treasury; others are
supported by the authority of the U.S. government to purchase the agency's
obligations; while still others, such as the Federal Farm Credit Banks and the
Federal Home Loan Mortgage Corporation ("Freddie Mac"), are supported solely by
the credit of the instrumentality itself. No assurance can be given that the
U.S. government would provide financial support to U.S. government sponsored
agencies or instrumentalities if it is not obligated to do so by law.
Obligations of U.S. government agencies include debt issues and mortgage-backed
securities issued or guaranteed by select agencies.
INVESTMENT COMPANY SECURITIES -- The Fund may invest up to 5% of its total
assets in the securities of any one investment company, but may not own more
than 3% of the securities of any one investment company or invest more than 10%
of its assets in the securities of other investment companies. In accordance
with an exemptive order issued to the Trust by the SEC, such other investment
company securities may include securities of a money market fund of the Trust,
and such companies may include companies of which the Adviser or a sub-adviser
to a fund of the Trust, or an affiliate of such Adviser or sub-adviser, serves
as investment adviser, administrator or distributor. Because other investment
companies employ an investment adviser, such investment by the Fund may cause
Shareholders to bear duplicate fees. The Adviser will waive its fee attributable
to the assets of the investing fund invested in a money market fund of the
Trust; and, to the extent required by the laws of any state in which shares of
the Trust are sold, the Adviser will waive its fees attributable to the assets
of the Fund invested in any investment company.
REPURCHASE AGREEMENTS -- Repurchase agreements are agreements by which a person
obtains a security and simultaneously commits to return the security to the
seller at an agreed upon price (including principal and interest) on an agreed
upon date within a number of days from the date of purchase. The custodian or
its agent will hold the security as collateral for the repurchase agreement.
Collateral must be maintained at a value at least equal to 100% of the
repurchase price. The Fund bears a
PROSPECTUS 18
<PAGE>
risk of loss in the event the other party defaults on its obligations and the
Fund is delayed or prevented from its right to dispose of the collateral
securities or if the Fund realizes a loss on the sale of the collateral
securities. The Adviser will enter into repurchase agreements on behalf of the
Fund only with financial institutions deemed to present minimal risk of
bankruptcy during the term of the agreement based on guidelines established and
periodically reviewed by the Trustees. Repurchase agreements are considered by
the SEC to be loans under the Investment Company Act of 1940.
REVERSE REPURCHASE AGREEMENTS -- The Fund may borrow funds for temporary
purposes by entering into reverse repurchase agreements. Pursuant to such
agreements, the Fund would sell portfolio securities to financial institutions
such as banks and broker-dealers and agree to repurchase them at a mutually
agreed-upon date and price. The Fund will enter into reverse repurchase
agreements only to avoid otherwise selling securities during unfavorable market
conditions to meet redemptions. At the time the Fund enters into a reverse
repurchase agreement, it would place in a segregated custodial account assets,
such as liquid high grade debt securities, consistent with the Fund's investment
restrictions and having a value equal to the repurchase price (including accrued
interest), and would subsequently monitor the account to ensure that such
equivalent value was maintained. Reverse repurchase agreements involve the risk
that the market value of securities sold by the Fund may decline below the price
at which the Fund is obligated to repurchase the securities. Reverse repurchase
agreements are considered by the SEC to be borrowing by the Fund under the
Investment Company Act of 1940.
SECURITIES LENDING -- In order to generate additional income, the Fund may lend
up to 33% of the securities in which it is invested pursuant to agreements
requiring that the loan be continuously secured by cash, securities of the U.S.
government or its agencies, shares of an investment trust or mutual fund or any
combination of cash and such securities as collateral equal at all times to at
least 100% of the market value plus accrued interest on the securities lent. The
Fund will continue to receive interest on the securities lent while
simultaneously seeking to earn interest on the investment of cash collateral in
U.S. government securities, shares of an investment trust or mutual fund, or
other short-term, highly liquid investments. Collateral is marked to market
daily to provide a level of collateral at least equal to the market value of the
securities lent. There may be risks of delay in recovery of the securities or
even loss of rights in the collateral should the borrower of the securities fail
financially. However, loans will only be made to borrowers deemed by the Adviser
to be of good standing under guidelines established by the Trust's Board of
Trustees and when, in the judgment of the Adviser, the consideration which can
be earned currently from such securities loans justifies the attendant risk. The
Fund will enter into loan arrangements only with counterparties which the
Adviser has deemed to be creditworthy under guidelines established by the Board
of Trustees. Loans are subject to termination by the Fund or the borrower at any
time, and are therefore, not considered to be illiquid investments.
RESTRICTED SECURITIES -- The Fund may invest in commercial paper issued in
reliance on the exemption from registration afforded by Section 4(2) of the
Securities Act of 1933. Section 4(2) commercial paper is restricted as to
disposition under Federal securities law and is generally sold to institutional
investors, such as the Fund, who agree that they are purchasing the paper for
investment purposes and not with a view to public distribution. Any resale by
the purchaser must be in an exempt transaction. Section 4(2) commercial paper is
normally resold to other institutional investors like the Fund through or with
the assistance of the issuer or investment dealers who make a market in Section
4(2) commercial paper, thus providing liquidity. The Fund believes that Section
4(2) commercial paper and possibly certain other restricted securities that meet
the criteria for liquidity established by the Trustees are quite liquid. The
Fund intends, therefore, to treat the restricted securities that meet the
criteria for liquidity established by the Trustees, including Section 4(2)
commercial paper, as determined by the Adviser, as liquid and not subject to the
investment limitation applicable to illiquid securities. In addition, because
Section 4(2) commercial paper is liquid, the Fund will not subject such paper to
the limitation applicable to restricted securities.
The ability of the Trustees to determine the liquidity of certain restricted
securities is permitted under an SEC staff position set forth in the adopting
release for Rule 144A under the Securities Act of 1933 (the "Rule"). The Rule is
a nonexclusive safe-harbor for certain secondary market transactions involving
securities subject to restrictions on resale under Federal securities laws. The
Rule provides an exemption from registration for resales of otherwise restricted
securities to qualified institutional buyers. The Rule is expected to further
enhance the liquidity of the secondary market for securities eligible for resale
under Rule 144A. The Fund believes that the staff of the SEC has left the
question of determining the liquidity of all restricted securities to the
Trustees. The Trustees have directed the Adviser to consider the following
criteria in determining the liquidity of certain restricted securities:
- - the frequency of trades and quotes for the security;
- - the number of dealers willing to purchase or sell the security
and the number of other potential buyers;
- - dealer undertakings to make a market in the security; and
- - the nature of the security and the nature of the marketplace
trades.
VARIABLE AND FLOATING RATE INSTRUMENTS -- Certain of the obligations purchased
by the Fund may carry variable or floating rates of interest, may involve a
conditional or unconditional demand feature and may include variable amount
master demand notes. A demand instrument with a demand notice period exceeding
seven days may be considered illiquid if there is no secondary market for such
security; therefore, the Fund will not invest more than 15% of its total assets
in such instruments and other illiquid securities. The interest rates on these
securities may be reset daily, weekly, quarterly or some other reset period,
19 PROSPECTUS
<PAGE>
and may have a floor or ceiling on interest rate charges. There is a risk that
the current interest rate on such obligations may not accurately reflect
existing market interest rates.
There is no limit on the extent to which the Fund may purchase variable and
floating rate instruments that are not illiquid. The Fund will purchase variable
and floating rate instruments to facilitate portfolio liquidity or to permit the
investment of the Fund's assets at a favorable rate of return.
SECURITIES PURCHASED ON A WHEN-ISSUED BASIS AND FORWARD COMMITMENTS -- The Fund
may purchase securities on a when-issued basis when deemed by the Adviser to
present attractive investment opportunities. When-issued securities are
purchased for delivery beyond the normal settlement date at a stated price and
yield, thereby involving the risk that the yield obtained will be less than that
available in the market at delivery. Although the purchase of securities on a
when-issued basis is not considered leveraging, it has the effect of leveraging.
When the Adviser purchases a when-issued security, the Custodian will set aside
cash or liquid securities to satisfy the purchase commitment. The Fund generally
will not pay for such securities or earn interest on them until received.
Commitments to purchase when-issued securities will not, under normal market
conditions, exceed 40% of the Fund's total assets, and a commitment will not
exceed 180 days. The Fund will only purchase when-issued securities for the
purpose of acquiring portfolio securities and not for speculative purposes.
In a forward commitment transaction, the Fund contracts to purchase securities
for a fixed price at a future date beyond customary settlement time. The Fund is
required to hold and maintain in a segregated account until the settlement date,
cash, U.S. government securities or liquid high-grade debt obligations in an
amount sufficient to meet the purchase price. Alternatively, the Fund may enter
into offsetting contracts for the forward sale of other securities that it owns.
The purchase of securities on a when-issued or forward commitment basis involves
a risk of loss if the value of the security to be purchased declines prior to
the settlement date. Although the Fund would generally purchase securities on a
when-issued or forward commitment basis with the intention of actually acquiring
securities for its portfolio, the Fund may dispose of a when-issued security or
forward commitment prior to settlement if the Adviser deems it appropriate to do
so.
MUNICIPAL SECURITIES -- The Fund may invest in municipal securities. Municipal
securities consist of (i) debt obligations issued by or on behalf of public
authorities to obtain funds to be used for various public facilities, for
refunding outstanding obligations, for general operating expenses, and for
lending such funds to other public institutions and facilities; and (ii) certain
private activity and industrial development bonds issued by or on behalf of
public authorities to obtain funds to provide for the construction, equipment,
repair, or improvement of privately operated facilities. Municipal notes include
general obligation notes, tax anticipation notes, revenue anticipation notes,
bond anticipation notes, certificates of indebtedness, demand notes and
construction loan notes and participation interests in municipal notes.
Municipal bonds include general obligation bonds, revenue or special obligation
bonds, private activity and industrial development bonds, and participation
interests in municipal bonds. General obligation bonds are backed by the taxing
power of the issuing municipality. Revenue bonds are backed by the revenues of a
project or facility, tolls from a toll bridge for example. The payment of
principal and interest on private activity and industrial development bonds
generally is dependent solely on the ability of the facility's user to meet its
financial obligations and the pledge, if any, of real and personal property so
financed as security for such payment.
Municipal securities may include obligations of municipal housing authorities
and single-family mortgage revenue bonds. Weaknesses in Federal housing subsidy
programs and their administration may result in a decrease of subsidies
available for payment of principal and interest on housing authority bonds.
Economic developments, including fluctuations in interest rates and increasing
construction and operating costs, may also adversely impact revenues of housing
authorities. In the case of some housing authorities, inability to obtain
additional financing could also reduce revenues available to pay existing
obligations. Single-family mortgage revenue bonds are subject to extraordinary
mandatory redemption at par in whole or in part from the proceeds derived from
prepayments of underlying mortgage loans and also from the unused proceeds of
the issue within a stated period which may be within a year from the date of
issue.
Municipal leases are obligations issued by state and local governments or
authorities to finance the acquisition of equipment and facilities and may be
considered to be illiquid. They may take the form of a lease, an installment
purchase contract, a conditional sales contract, or a participation interest in
any of the above. The Fund will limit its investment in municipal leases to no
more than 5% of total assets. The Board of Trustees is responsible for
determining the credit quality of unrated municipal leases, on an ongoing basis,
including an assessment of the likelihood that the lease will not be cancelled.
The exclusion from gross income for Federal income tax purposes for certain
housing authority bonds depends on qualification under relevant provisions of
the Code and on other provisions of Federal law. These provisions of Federal law
contain certain ongoing requirements relating to the cost and location of the
residences financed with the proceeds of the single-family mortgage bonds and
the income levels of tenants of the rental projects financed with the proceeds
of the multi-family housing bonds. While the issuers of the bonds, and other
parties, including the originators and servicers of the single-family mortgages
and the owners of the rental projects financed with the multi-family housing
bonds, covenant to meet these ongoing requirements and generally agree to
institute procedures designed to insure that these requirements are met, there
can be no assurance that these ongoing requirements will be consistently met.
The failure to meet these requirements could cause the interest on the bonds to
become taxable, possibly retroactively from the date of issuance, thereby
reducing the value of
PROSPECTUS 20
<PAGE>
the bonds and subjecting Shareholders to unanticipated tax liabilities.
Furthermore, any failure to meet these ongoing requirements might constitute an
event of default under the applicable mortgage or permit the holder to
accelerate payment of the bond or require the issuer to redeem the bond. In any
event, where the mortgage is insured by the Federal Housing Administration
("FHA"), the consent of the FHA may be required before insurance proceeds would
become payable to redeem the mortgage subsidy bonds.
DEMAND FEATURES -- The Fund may acquire securities that are subject to puts and
standby commitments ("demand features") to purchase the securities at their
principal amount (usually with accrued interest) within a fixed period (usually
seven days) following a demand by the Fund. The demand feature may be issued by
the issuer of the underlying securities, a dealer in the securities or by
another third party, and may not be transferred separately from the underlying
security.
The underlying municipal securities subject to a put may be sold at any time at
the market rates. However, unless the put was an integral part of the security
as originally issued, it may not be marketable or assignable; therefore, the put
would only have value to the Fund. The Fund expects that it will generally
acquire puts only where the puts are available without the payment of any direct
or indirect consideration. However, if advisable or necessary, in certain cases
a premium may be paid for put features. A premium paid will have the effect of
reducing the yield otherwise payable on the underlying security. The purpose of
engaging in transactions involving puts is to maintain flexibility and liquidity
to permit the Fund to meet redemption requests and remain as fully invested as
possible in municipal securities. The Fund will limit its put transactions to
institutions that the Adviser believes present minimal credit risk.
There is no limit to the percentage of portfolio securities that may be
purchased subject to a put. However, the Fund will not acquire a put which was
not an integral part of the security as originally issued if such acquisition
would cause the aggregate value of all such puts held in the portfolio to exceed
1/2 of 1% of the value of the Fund's total assets.
Under a "stand-by commitment," a dealer would agree to purchase, at the Fund's
option, specified municipal securities at a specified price. When entering into
stand-by commitments, the Fund will set aside sufficient assets invested in cash
equivalent securities to pay for all stand-by commitments on their scheduled
delivery dates. The Fund will acquire these commitments solely to facilitate
portfolio liquidity and does not intend to exercise its rights thereunder for
trading purposes. Stand-by commitments may also be referred to as put options.
The Fund will generally limit its investments in stand-by commitments to 25% of
its total assets.
ASSET-BACKED SECURITIES -- Asset-backed securities consist of securities secured
by company receivables, home equity loans, truck and auto loans, leases, and
credit card receivables. The collateral backing asset-backed securities cannot
be foreclosed upon. These issues are normally traded over-the-counter and
typically have a short-intermediate maturity structure depending on the paydown
characteristics of the underlying financial assets which are passed through to
the security holder. Asset-backed securities purchased by the Fund must be rated
in one of the three highest rating categories by at least one NRSRO at the time
of investment or, if unrated, determined by the Adviser to be of comparable
quality. The Fund will generally limit its investments in asset-backed
securities to 35% of its total assets. Asset-backed securities may be purchased
for the purpose of enhancing yield. Under certain interest rate and prepayment
rate scenarios, the Fund may fail to recoup fully its investment in asset-backed
securities.
MORTGAGE-BACKED SECURITIES -- Mortgage-backed securities are debt obligations
secured by real estate loans and pools of loans on single family homes,
multi-family homes, mobile homes, and in some cases, commercial properties. The
Fund may acquire securities representing an interest in a pool of mortgage loans
that are issued or guaranteed by a U.S. government agency. The primary issuers
or guarantors of these mortgage-backed securities are Ginnie Mae, Fannie Mae and
Freddie Mac. Mortgage-backed securities also may be issued by non-governmental
entities and may or may not have private insurer guarantees of timely payments.
Such non-governmental mortgage securities cannot be treated as U.S. government
securities for purposes of investment policies. The Fund also may invest in
mortgage-backed securities issued by non-government entities, which consist of
Collateralized Mortgage Obligations ("CMOs") and Real Estate Mortgage Investment
Conduits ("REMICs") that are rated the highest or second highest rating category
by at least one NRSRO at the time of investment or, if unrated, determined by
the Adviser to be of comparable quality. The mortgages backing these securities
include conventional thirty-year fixed rate mortgages, graduated payment
mortgages, and adjustable rate mortgages. The Fund will only purchase CMOs and
REMICs that are backed solely by Ginnie Mae certificates or other mortgage
pass-through instruments issued or guaranteed by the U.S. government or its
agencies and instrumentalities. However, the guarantees do not extend to the
mortgage-backed securities' value, which is likely to vary inversely with
fluctuations in interest rates. Mortgage-backed securities are in most cases
"pass-through" instruments, through which the holder receives a share of all
interest and principal payments from the mortgages underlying the certificate.
Because the prepayment characteristics of the underlying mortgages vary, it is
not possible to predict accurately the average life or realized yield of a
particular issue of pass-through certificates. During periods of declining
interest rates, prepayment of mortgages underlying mortgage-backed securities
can be expected to accelerate. When the mortgage obligations are prepaid, the
Fund reinvests the prepaid amounts in securities, the yield of which reflects
interest rates prevailing at the time. Moreover, prepayment of mortgages which
underlie securities purchased at a premium could result in capital losses.
The Fund also may invest in multiple class securities issued by U.S. government
agencies and instrumentalities such as Fannie Mae, Freddie Mac and Ginnie Mae,
or private issuers including guaranteed CMOs and REMIC pass-through or
participation
21 PROSPECTUS
<PAGE>
certificates, when consistent with the Fund's investment objective, policies and
limitations. A REMIC is a CMO that qualifies for special tax treatment under the
Code and invests in certain mortgages principally secured by interests in real
property and other permitted investments.
CMOs and guaranteed REMIC pass-through certificates ("REMIC Certificates")
issued by Fannie Mae, Freddie Mac and Ginnie Mae are types of multiple class
pass-through securities. Investors may purchase beneficial interests in REMICs,
which are known as "regular" interests or "residual" interests. The Fund does
not currently intend to purchase residual interests in REMICs. The REMIC
Certificates represent beneficial ownership interests in a REMIC trust,
generally consisting of mortgage loans or Fannie Mae, Freddie Mac or Ginnie Mae
guaranteed mortgage pass-through certificates (the "Mortgage Assets"). The
obligations of Fannie Mae, Freddie Mac, or Ginnie Mae under their respective
guaranty of the REMIC Certificates are obligations solely of Fannie Mae, Freddie
Mac or Ginnie Mae, respectively.
Fannie Mae REMIC Certificates are issued and guaranteed as to timely
distribution of principal and interest by Fannie Mae. In addition, Fannie Mae
will be obligated to distribute the principal balance of each class of REMIC
Certificates in full, whether or not sufficient funds are otherwise available.
For Freddie Mac REMIC Certificates, Freddie Mac guarantees the timely payment of
interest, and also guarantees the payment of principal as payments are required
to be made on the underlying mortgage participation certificates ("PCS"). PCS
represent undivided interests in specified residential mortgages or
participation therein purchased by Freddie Mac and placed in a PC pool. With
respect to principal payments on PCS, Freddie Mac generally guarantees ultimate
collection of all principal of the related mortgage loans without offset or
deduction. Freddie Mac also guarantees timely payment of principal on certain
PCS referred to as "Gold PCS."
Ginnie Mae REMIC certificates guarantee the full and timely payment of interest
and principal on each class of securities (in accordance with the terms of those
classes, as specified in the related offering circular supplement). This Ginnie
Mae guarantee is backed by the full faith and credit of the United States of
America.
REMIC Certificates issued by Fannie Mae, Freddie Mac and Ginnie Mae are treated
as U.S. government securities for purposes of investment policies. CMOs and
REMIC Certificates are issued in multiple classes. Each class of CMOs or REMIC
Certificates, often referred to as a "tranche," is issued at a specific
adjustable or fixed interest rate and must be fully retired no later than its
final distribution date. Principal prepayments on the mortgage loans or the
Mortgage Assets underlying the CMOs or REMIC Certificates may cause some or all
of the classes of CMOs or REMIC Certificates to be retired substantially earlier
than their final distribution dates. Generally, interest is paid or accrues on
all classes of CMOs or REMIC Certificates on a monthly basis.
The principal of and interest on the Mortgage Assets may be allocated among the
several classes of CMOs or REMIC Certificates in various ways. In certain
structures (known as "sequential pay" CMOs or REMIC Certificates), payments of
principal, including any principal prepayments, on the Mortgage Assets generally
are applied to the classes of CMOs or REMIC Certificates in the order of their
respective final distribution dates. Thus no payment of principal will be made
on any class of sequential pay CMOs or REMIC Certificates until all other
classes having an earlier final distribution date have been paid in full.
Additional structures of CMOs and REMIC Certificates include, among others,
"parallel pay" CMOs and REMIC Certificates. Parallel pay CMOs or REMIC
Certificates are those which are structured to apply principal payments and
prepayments of the Mortgage Assets to two or more classes concurrently on a
proportionate or disproportionate basis. These simultaneous payments are taken
into account in calculating the final distribution date of each class.
A wide variety of REMIC Certificates may be issued in the parallel pay or
sequential pay structures. These securities include accrual certificates (also
known as "Z-Bonds"), which only accrue interest at a specified rate until all
other certificates having an earlier final distribution date have been retired
and are converted thereafter to an interest-paying security, and planned
amortization class ("PAC") certificates, which are parallel pay REMIC
Certificates which generally require that specified amounts of principal be
applied on each payment date to one or more classes of REMIC Certificates (the
"PAC Certificates"), even though all other principal payments and prepayments of
the Mortgage Assets are then required to be applied to one or more other classes
of the certificates. The scheduled principal payments for the PAC Certificates
generally have the highest priority on each payment date after interest due has
been paid to all classes entitled to receive interest currently. Shortfalls, if
any, are added to the amount of principal payable on the next payment date. The
PAC Certificate payment schedule is taken into account in calculating the final
distribution date of each class of PAC. In order to create PAC tranches, one or
more tranches generally must be created that absorb most of the volatility in
the underlying Mortgage Assets. These tranches tend to have market prices and
yields that are much more volatile than the PAC classes. The Fund's use of CMOs
and REMICs will be limited to PAC Class Certificates.
There can be no assurance that the United States government would provide
financial support to Fannie Mae, Freddie Mac, or Ginnie Mae if necessary in the
future.
The Fund will not purchase mortgage-backed securities with an effective duration
exceeding five years. The Fund will generally limit its investments in
mortgage-backed securities to 50% of its total assets.
REGULATION OF MORTGAGE LOANS -- Mortgage loans are subject to a variety of state
and Federal regulations designed to protect borrowers which may impair the
ability of the mortgage
PROSPECTUS 22
<PAGE>
lender to enforce its rights under the mortgage documents. These regulations
include legal restraints on foreclosures, homeowner rights of redemption after
foreclosure, Federal and state bankruptcy and debtor relief laws, restrictions
on enforcement of mortgage loan "due on sale" clauses and state usury laws. Even
though the Fund will invest in mortgage-backed securities issued or guaranteed
by the U.S. government, its agencies or instrumentalities, these regulations may
adversely affect the Fund's investments by delaying the Fund's receipt of
payments derived from principal or interest on mortgage loans affected by such
regulations.
ADJUSTABLE RATE MORTGAGE LOANS ("ARMS") -- ARMs eligible for inclusion in a
mortgage pool will generally provide for a fixed initial mortgage interest rate
for a specified period of time. Thereafter, the interest rates (the "Mortgage
Interest Rates") may be subject to periodic adjustment based on changes in the
applicable index rate (the "Index Rate"). The adjusted rate would be equal to
the Index Rate plus a gross margin, which is a fixed percentage spread over the
Index Rate established for each ARM at the time of its origination.
Adjustable interest rates can cause payment increases that some borrowers may
find difficult to make. However, certain ARMs may provide that the Mortgage
Interest Rate may not be adjusted to a rate above an applicable lifetime maximum
rate or below an applicable lifetime minimum rate for such ARM. Certain ARMs may
also be subject to limitations on the maximum amount by which the Mortgage
Interest Rate may adjust for any single adjustment period (the "Maximum
Adjustment"). Other ARMs ("Negatively Amortizing ARMs") may provide instead or
as well for limitations on changes in the monthly payment on such ARMs.
Limitations on monthly payments can result in monthly payments which are greater
or less than the amount necessary to amortize a Negatively Amortizing ARM by its
maturity at the Mortgage Interest Rate in effect in any particular month. In the
event that a monthly payment is not sufficient to pay the interest accruing on a
Negatively Amortizing ARM, any such excess interest is added to the principal
balance of the loan, causing negative amortization and will be repaid through
future monthly payments. It may take borrowers under Negatively Amortizing ARMs
longer periods of time to achieve equity and may increase the likelihood of
default by such borrowers. In the event that a monthly payment exceeds the sum
of the interest accrued at the applicable Mortgage Interest Rate and the
principal payment which would have been necessary to amortize the outstanding
principal balance over the remaining term of the loan, the excess (or
"accelerated amortization") further reduces the principal balance of the ARM.
Negatively Amortizing ARMs do not provide for the extension of their original
maturity to accommodate changes in their Mortgage Interest Rate. As a result,
unless there is a periodic recalculation of the payment amount (which there
generally is), the final payment may be substantially larger than the other
payments. These limitations on periodic increases in interest rates and on
changes in monthly payments protect borrowers from unlimited interest rate and
payment increases.
There are two main categories of indices which provide the basis for rate
adjustments on ARMs: those based on U.S. Treasury securities and those derived
from a calculated measure such as a cost of funds index or a moving average of
mortgage rates. Commonly utilized indices include the one-year, three-year and
five-year constant maturity Treasury bill rates, the three-month Treasury bill
rate, the 180-day Treasury bill rate, rates on longer-term Treasury securities,
the 11th District Federal Home Loan Bank Cost of Funds, the National Median Cost
of Funds, the one-month, three-month, six-month or one-year London Interbank
Offered Rate ("LIBOR"), the prime rate of a specific bank, or commercial paper
rates. Some indices, such as the one-year constant maturity Treasury rate,
closely mirror changes in market interest rate levels. Others, such as the 11th
District Federal Home Loan Bank Cost of Funds index, tend to lag behind changes
in market rate levels and tend to be somewhat less volatile. The degree of
volatility in the market value of the Fund's portfolio and therefore in the net
asset value of the Fund's shares will be a function of the length of the
interest rate reset periods and the degree of volatility in the applicable
indices.
MORTGAGE DOLLAR ROLLS -- The Fund may enter into mortgage "dollar rolls" in
which the Fund sells securities for delivery in the current month and
simultaneously contracts with the same counterparty to repurchase similar (same
type, coupon and maturity) but not identical securities on a specified future
date. The Fund gives up the right to receive principal and interest paid on the
securities sold. However, the Fund would benefit to the extent of any difference
between the price received for the securities sold and the lower forward price
for the future purchase (often referred to as the "drop") or fee income plus the
interest earned on the cash proceeds of the securities sold until the settlement
date of the forward purchase. Unless such benefits exceed the income, capital
appreciation and gain or loss due to mortgage prepayments that would have been
realized on the securities sold as part of the mortgage dollar roll, the use of
this technique will diminish the investment performance of the Fund compared
with what such performance would have been without the use of mortgage dollar
rolls. The Fund will hold and maintain in a segregated account until the
settlement date, cash or liquid, high grade debt securities in an amount equal
to the forward purchase price. The benefits derived from the use of mortgage
dollar rolls may depend upon the Adviser's ability to predict correctly mortgage
prepayments and interest rates. There is no assurance that mortgage dollar rolls
can be successfully employed.
For financial reporting and tax purposes, the Fund proposes to treat mortgage
dollar rolls as two separate transactions: one involving the purchase of a
security and a separate transaction involving a sale. The Fund does not
currently intend to enter into mortgage dollar rolls that are accounted for as a
financing. For purposes of diversification and investment limitations, mortgage
dollar rolls are considered to be mortgage-backed securities.
SECURITIES OF FOREIGN ISSUERS -- The Fund may invest in securities of foreign
issuers, including obligations of foreign
23 PROSPECTUS
<PAGE>
governments and corporations, in order to achieve income or capital
appreciation. Foreign investments involve risks that are different from
investments in securities of U.S. issuers. These risks may include future
unfavorable political and economic developments, possible withholding taxes,
seizure of foreign deposits, currency controls, interest limitations or other
governmental restrictions which might affect payment of principal or interest.
Additionally, there may be less public information available about foreign
issuers. Foreign branches of foreign banks are not regulated by U.S. banking
authorities and generally are not bound by accounting, auditing and financial
reporting standards comparable to U.S. banks. The Fund may invest in commercial
paper of foreign issuers and obligations of foreign branches of U.S. banks, U.S.
and London branches of foreign banks, and supranational entities which are
established through the joint participation of several governments (e.g., the
Asian Development Bank and the Inter-American Development Bank). Securities of
foreign issuers may include sponsored and unsponsored ADRs, which are securities
typically issued by a U.S. financial institution that evidence ownership
interests in a pool of securities issued by a foreign issuer. There may be less
information available on the foreign issuers of unsponsored ADRs than on the
issuers of sponsored ADRs. ADRs include American Depository Shares and New York
Shares. The Fund will not invest more than 25% of its total assets in securities
of foreign issuers.
CORPORATE SECURITIES -- Corporate securities include corporate bonds,
convertible and non-convertible debt securities, and preferred stocks, as well
as commercial paper (short-term promissory notes issued by corporations).
Issuers of corporate bonds and notes are divided into many different categories
by bond market sector, such as electric utilities, gas utilities, telephone
utilities, consumer finance companies, wholesale finance companies and
industrial companies. Within each major category of issuer, there are many
subcategories.
FIXED RATE MORTGAGE LOANS -- Generally, fixed rate mortgage loans eligible for
inclusion in a mortgage pool will bear simple interest at fixed annual rates and
have original terms to maturity ranging from 5 to 40 years. The Fund may invest
in fixed rate mortgage loans that are privately issued and are not issued or
guaranteed by the U.S. government. Fixed rate mortgage loans generally provide
for monthly payments of principal and interest in substantially equal
installments for the contractual term of the mortgage note in sufficient amounts
to fully amortize principal by maturity although certain fixed rate mortgage
loans provide for a large final balloon payment upon maturity. The Fund may
invest in fixed rate mortgage loans or mortgage loan pools to enhance yield.
GICS -- The Fund may, in order to enhance yield, make limited investments in
Guaranteed Investment Contracts ("GICs") issued by highly rated U.S. insurance
companies. Pursuant to such contracts, the Fund makes cash contributions to a
deposit fund of the insurance company's general account. The insurance company
then credits to the Fund on a monthly basis guaranteed interest at either a
fixed, variable or floating rate. A GIC provides that this guaranteed interest
will not be less than a certain minimum rate. Generally, a GIC allows purchasers
the option of buying an annuity with the monies accumulated under the contract;
however, the Fund will not purchase any such annuities but will instead elect
cash payments in connection with the amounts payable to it under the contracts.
A GIC is a general obligation of the issuing insurance company and not a
separate account. The purchase price paid for a GIC becomes part of the general
assets of the issuer, and the contract is paid at maturity from the general
assets of the issuer. The Fund will only purchase GICs from issuers which, at
the time of purchase, are rated "A" or better by A.M. Best Company, have assets
of $1 billion or more, and meet quality and credit standards established by the
Adviser under the supervision of the Board of Trustees.
Generally, GICs are not assignable or transferable without the permission of the
issuing insurance company. For this reason, an active secondary market in GICs
does not currently exist. Therefore, GICs are considered by the Fund to be
illiquid investments, and will be acquired by the Fund only if, at the time of
purchase, no more than 15% of the Fund's total assets will be invested in GICs
and other illiquid securities.
DESCRIPTION OF RATINGS
The following descriptions are summaries of published ratings.
DESCRIPTION OF COMMERCIAL PAPER RATINGS
The following descriptions of commercial paper ratings have been published by
Standard & Poor's Corporation ("S&P"), Moody's Investors Service ("Moody's"),
Fitch's Investors Service ("Fitch"), Duff and Phelps ("Duff"), and IBCA Limited
("IBCA"), respectively.
Commercial paper rated A by S&P is regarded by S&P as having the greatest
capacity for timely payment. Issues rated A are further refined by use of the
numbers 1+, 1, and 2 to indicate the relative degree of safety. Issues rated
A-1+ are those with an "overwhelming degree" of credit protection. Those rated
A-1 reflect a "very strong" degree of safety regarding timely payment. Those
rated A-2 reflect a high degree of safety regarding timely payment but not as
high as A-1.
Commercial paper issues rated Prime-1 and Prime-2 by Moody's are judged by
Moody's to be of the "highest" quality and "higher" quality respectively on the
basis of relative repayment capacity.
The rating Fitch-1 (Highest Grade) is the highest commercial rating assigned by
Fitch. Paper rated Fitch-1 is regarded as having the strongest degree of
assurance for timely payment. The rating Fitch-2 (Very Good Grade) is the second
highest commercial paper rating assigned by Fitch which reflects an assurance of
timely payment only slightly less in degree than the strongest issues.
PROSPECTUS 24
<PAGE>
The rating Duff-1 is the highest commercial paper rating assigned by Duff. Paper
rated Duff-1 is regarded as having very high certainty of timely payment with
excellent liquidity factors which are supported by ample asset protection. Risk
factors are minor. Paper rated Duff-2 is regarded as having good certainty of
timely payment, good access to capital markets and sound liquidity factors and
company fundamentals. Risk factors are small.
The designation A1 by IBCA indicates that the obligation is supported by a very
strong capacity for timely repayment. Those obligations rated A1+ are supported
by the highest capacity for timely repayment. Obligations rated A2 are supported
by a strong capacity for timely repayment, although such capacity may be
susceptible to adverse changes in business, economic or financial conditions.
DESCRIPTION OF CORPORATE/MUNICIPAL BOND RATINGS
The following descriptions of S&P's and Moody's corporate and municipal bond
ratings have been published by S&P and Moody's, respectively.
Bonds rated AAA have the highest rating S&P assigns to a debt obligation. Such a
rating indicates an extremely strong capacity to pay principal and interest.
Bonds rated AA also qualify as high-quality debt obligations. Capacity to pay
principal and interest is very strong, and in the majority of instances they
differ from AAA issues only in a small degree. Debt rated A has a strong
capacity to pay interest and repay principal although it is somewhat more
susceptible to the adverse effects of changes in circumstances and economic
conditions than debt in higher rated categories.
Bonds that are rated Aaa by Moody's are judged to be of the best quality. They
carry the smallest degree of investment risk and are generally referred to as
"gilt edge." Interest payments are protected by a large, or an exceptionally
stable, margin and principal is secure. While the various protective elements
are likely to change, such changes as can be visualized are most unlikely to
impair the fundamentally strong position of such issues.
Bonds rated Aa by Moody's are judged by Moody's to be of high quality by all
standards. Together with bonds rated Aaa, they comprise what are generally known
as high-grade bonds. They are rated lower than the best bonds because margins of
protection may not be as large as in Aaa securities or fluctuation of protective
elements may be of greater amplitude or there may be other elements present that
make the long-term risks appear somewhat larger than in Aaa securities.
Bonds that are rated A possess many favorable investment attributes and are to
be considered as upper-medium grade obligations. Factors giving security to
principal and interest are considered adequate, but elements may be present
which suggest a susceptibility to impairment sometime in the future.
DESCRIPTION OF MUNICIPAL NOTE RATINGS
Moody's highest rating for state, municipal and other short-term notes is MIG-1
and VMIG-1. Short-term municipal securities rated MIG-1 or VMIG-1 are of the
best quality. They have strong protection from established cash flows of funds
for their servicing or from established and broad-based access to the market for
refinancing or both. Short-term municipal securities rated MIG-2 and VMIG-2 are
of high quality. Margins of protection are ample although not so large as in the
preceding group.
An S&P note rating reflects the liquidity concerns and market access risks
unique to notes. Notes due in three years or less will likely receive a note
rating. Notes maturing beyond three years will most likely receive a long-term
debt rating. The following criteria will be used in making that assessment:
- - Amortization schedule (the larger the final maturity relative
to other maturities the more likely it will be treated as a note).
- - Source of Payment (the more dependent the issue is on the
market for its refinancing, the more likely it will be treated as a note).
Note rating symbols are as follows:
SP-1 Very strong or strong capacity to pay principal and interest. Those issues
determined to possess overwhelming safety characteristics will be given a plus
(+) designation.
SP-2 Satisfactory capacity to pay principal and interest.
MISCELLANEOUS
The Trust believes that as of August 4, 1995, BANC ONE CORPORATION (100 East
Broad Street, Columbus, OH 43271), through its affiliates, owned of record
substantially all the Fiduciary Class shares of the Fund. The Trust believes
that as of the same date, BANC ONE CORPORATION, through its affiliates,
possessed on behalf of its underlying accounts, voting or investment power with
respect to 91.97% of the Fiduciary Class shares of the Fund. As a consequence,
BANC ONE CORPORATION may be deemed to be a controlling person of the Fiduciary
Class shares of the Fund under the Investment Company Act of 1940.
PERFORMANCE
From time to time, the Fund may advertise yield, total return and/or
distribution rate. These figures will be based on historical earnings and are
not intended to indicate future performance. The yield of the Fund refers to the
annualized income generated by an investment in the Fund over a specified 30-day
period. The yield is calculated by assuming that the income generated by the
investment during that period is generated over a one-year period and is shown
as a percentage of the investment.
Total return is the change in value of an investment in the Fund over a given
period, assuming reinvestment of any dividends and capital gains. A cumulative
total return reflects an actual
25 PROSPECTUS
<PAGE>
rate of return over a stated period of time. An average annual total return is a
hypothetical rate of return that, if achieved annually, would have produced the
same cumulative total return if performance had been constant over the entire
period. Average annual total returns smooth out variations in performance; they
are not the same as actual year-by-year results.
The distribution rate is computed by dividing the total amount of the dividends
per share paid out during the past period by the maximum offering price or
month-end net asset value depending on the class of the Fund. This figure is
then "annualized" (multiplied by 365 days and divided by the applicable number
of days in the period). Funds with a front-end sales charge would incorporate
the offering price into the distribution yield in place of month-end net asset
value.
Distribution rate is a measure of the level of income paid out in cash to
Shareholders over a specified period. It differs from yield and total return and
is not intended to be a complete measure of performance. Furthermore, the
distribution rate may include return of principal and/or capital gains. Total
return is the change in value of a hypothetical investment over a given period
assuming reinvestment of dividends and capital gain distributions. The yield
refers to the cumulative 30-day rolling net investment income, divided by
maximum offering price and multiplied by average shares outstanding during this
period. See the Statement of Additional Information.
The Trust will include information on all classes of shares of the Fund in any
advertisement or information including performance data for the Fund. The
performance for Fiduciary Class shares may be higher than for Class A shares and
Class B shares because Fiduciary Class shares are not subject to sales charges
and distribution expenses.
The performance of each class of the Fund may from time to time be compared to
that of other mutual funds tracked by mutual fund rating services, to that of
broad groups of comparable mutual funds or to that of unmanaged indices that may
assume investment of dividends but do not reflect deductions for administrative
and management costs. In addition, the performance of each class of the Fund may
be compared to other funds or to relevant indices that may calculate total
return without reflecting sales charges; in which case, the Fund may advertise
its total return in the same manner. If reflected, sales charges would reduce
these total return calculations.
Further information about the performance of each class of the Fund is contained
in the Trust's Annual Report to Shareholders for The One Group-Registered
Trademark- Limited Volatility Bond Fund, which may be obtained without charge by
calling 1-800-480-4111.
TAXES
The following summary of Federal income tax consequences is based on current tax
laws and regulations, which may be changed by legislative, judicial, or
administrative action. No attempt has been made to present a complete
explanation of the Federal, state, local or foreign income tax treatment of the
Fund or its Shareholders. Accordingly, Shareholders are urged to consult their
tax advisers regarding specific questions as to the tax consequences of
investing in the Fund.
TAX STATUS OF THE FUND
The Fund is treated as a separate entity for Federal income tax purposes and is
not combined with the Trust's other funds. The Fund intends to qualify as a
"regulated investment company" for Federal income tax purposes and to meet all
other requirements that are necessary for it to be relieved of Federal taxes on
that part of its net investment income and net capital gains (the excess of net
long-term capital gain over net short-term capital loss) that is distributed to
Shareholders.
TAX STATUS OF DISTRIBUTIONS
The Fund will distribute substantially all of its net investment income
(including, for this purpose, net short-term capital gain) to Shareholders of
each class of shares of the Fund on at least an annual basis. Generally,
dividends from net investment income will be taxable to Shareholders as ordinary
income whether received in cash or in additional shares, and any net capital
gains will be distributed at least annually and will be taxed to Shareholders as
long-term capital gains, regardless of how long the Shareholder has held shares.
Distributions by the Fund to retirement plans that qualify for tax-exempt
treatment under the Code ("qualified retirement plans"), will not be taxable.
The Federal tax treatment of qualified retirement plans, as well as
distributions from such plans, is governed by specific provisions of the Code.
If shares are held by a retirement plan that ceases to qualify for tax-exempt
treatment under the Code or by an individual who has received such shares as a
distribution from a retirement plan, the Fund's distributions will be taxable to
such plan or individual as described in the preceding paragraph. Persons
considering directing the investment of their qualified retirement plan account
in the Fund and qualified retirement plan trusts considering purchasing such
shares, should consult their tax advisers for a more complete explanation of the
Federal tax consequences, and for an explanation of the state, local and (if
applicable) foreign tax consequences of making such an investment.
The Fund will make annual reports to Shareholders of the Federal income tax
status of all distributions.
Certain securities purchased by the Fund (such as STRIPS, CUBES, TRS, TIGRS and
CATS), as defined in the "Description of Permitted Investments," are sold at
original issue discount and thus do not make periodic cash interest payments.
The Fund will be required to include as part of its current income the imputed
interest on such obligations even though the Fund has not received any interest
payments on such obligations during that period. Because the Fund distributes
substantially all of its net investment income to its Shareholders (including
such imputed interest), the Fund may have to sell portfolio securities in
PROSPECTUS 26
<PAGE>
order to generate the cash necessary for the required distributions. Such sales
may occur at a time when the Adviser would not have chosen to sell such
securities and may result in a taxable gain or loss.
Dividends declared by the Fund in October, November or December of any year and
payable to Shareholders of record on a date in such a month will be deemed to
have been paid by the Fund and received by Shareholders on December 31 of that
year, if paid by the Fund at any time during the following January.
The Fund intends to make sufficient distributions prior to the end of each
calendar year to avoid liability for Federal excise tax.
Dividends received by a Shareholder that are derived from the Fund's investments
in U.S. government obligations may not be entitled to the exemptions from state
and local income taxes that would be available if the Shareholder had purchased
U.S. government obligations directly. The Fund will inform Shareholders annually
of the percentage of income and distributions derived from U.S. government
obligations. Shareholders should consult their tax advisers regarding the state
and local tax treatment of the income dividends received from the Fund.
The Fund may be subject to foreign withholding taxes on income derived from
obligations of foreign issuers. The Fund will not be able to elect to treat
Shareholders as having paid their proportionate share of such foreign taxes.
Sale, exchange, or redemption of Fund shares by a Shareholder will generally be
a taxable event to such Shareholder.
27 PROSPECTUS
<PAGE>
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<PAGE>
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<PAGE>
Investment Adviser and Sub-Administrator
Banc One Investment Advisors Corporation
774 Park Meadow Road
Columbus, OH 43271-0211
Distributor
The One Group-Registered Trademark- Services Company
3435 Stelzer Road
Columbus, OH 43219
Administrator
The One Group-Registered Trademark- Services Company
3435 Stelzer Road
Columbus, OH 43219
Transfer Agent and Custodian
State Street Bank and Trust Company
P.O. Box 8500
Boston, MA 02266-8500
Legal Counsel
Ropes & Gray
Suite 1200 South
1001 Pennsylvania Avenue, N.W.
Washington, D.C. 20004
Independent Accountants
Coopers & Lybrand L.L.P.
One Post Office Square
Boston, MA 02109
TOG-F-112
<PAGE>
THE ONE GROUP-REGISTERED TRADEMARK- GOVERNMENT BOND FUND PROSPECTUS
- --------------------------------------------------------------------------------
Investment Adviser: BANC ONE INVESTMENT ADVISORS CORPORATION
The One Group-Registered Trademark- (the "Trust") is a mutual fund seeking to
provide a convenient and economical means of investing in one or more
professionally managed portfolios of securities. This Prospectus relates to The
One Group-Registered Trademark-Government Bond Fund Class A, Class B and
Fiduciary Class shares.
THE ONE GROUP-REGISTERED TRADEMARK- GOVERNMENT BOND FUND (THE "FUND") SEEKS A
HIGH LEVEL OF CURRENT INCOME WITH LIQUIDITY AND SAFETY OF PRINCIPAL.
CLASS A AND CLASS B SHARES ARE OFFERED TO THE GENERAL PUBLIC.
FIDUCIARY CLASS SHARES ARE OFFERED TO INSTITUTIONAL INVESTORS, INCLUDING
AFFILIATES OF BANC ONE CORPORATION AND ANY BANK, DEPOSITORY INSTITUTION,
INSURANCE COMPANY, PENSION PLAN OR OTHER ORGANIZATION AUTHORIZED TO ACT IN
FIDUCIARY, ADVISORY, AGENCY, CUSTODIAL OR SIMILAR CAPACITIES. (EACH AN
"AUTHORIZED FINANCIAL ORGANIZATION").
THE TRUST'S SHARES ARE NOT DEPOSITS OR OBLIGATIONS OF, OR ENDORSED OR GUARANTEED
BY BANC ONE CORPORATION OR ITS BANK OR NON-BANK AFFILIATES. THE TRUST'S SHARES
ARE NOT INSURED OR GUARANTEED BY THE FEDERAL DEPOSIT INSURANCE CORPORATION OR BY
ANY OTHER GOVERNMENTAL AGENCY OR GOVERNMENT SPONSORED AGENCY OF THE FEDERAL
GOVERNMENT OR ANY STATE. AN INVESTMENT IN MUTUAL FUND SHARES INVOLVES INVESTMENT
RISKS, INCLUDING THE POSSIBLE LOSS OF THE PRINCIPAL AMOUNT INVESTED. BANC ONE
INVESTMENT ADVISORS CORPORATION RECEIVES FEES FROM THE FUND FOR INVESTMENT
ADVISORY AND OTHER SERVICES.
This Prospectus sets forth concisely the information about the Trust that a
prospective investor should know before investing. Investors are advised to read
this Prospectus and retain it for future reference. A Statement of Additional
Information dated November 1, 1995 has been filed with the Securities and
Exchange Commission and is available without charge through the Distributor, The
One Group-Registered Trademark- Services Company, 3435 Stelzer Road, Columbus,
OH 43219 or by calling 1-800-480-4111 during business hours. The Statement of
Additional Information is incorporated into this Prospectus by reference.
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED UPON THE
ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A
CRIMINAL OFFENSE.
November 1, 1995
<PAGE>
TABLE OF CONTENTS
<TABLE>
<S> <C>
SUMMARY.......................................................................................... 3
ABOUT THE FUND................................................................................... 4
Expense Summary................................................................................ 4
Financial Highlights........................................................................... 5
The Fund....................................................................................... 7
Investment Objective........................................................................... 7
Investment Policies............................................................................ 7
HOW TO DO BUSINESS WITH THE ONE GROUP-REGISTERED TRADEMARK-...................................... 9
How to Invest in The One Group-Registered Trademark-........................................... 9
Alternative Sales Arrangements................................................................. 11
Exchanges...................................................................................... 13
Redemptions.................................................................................... 13
FUND MANAGEMENT.................................................................................. 14
The Adviser.................................................................................... 14
The Distributor................................................................................ 15
The Administrator.............................................................................. 16
The Transfer Agent and Custodian............................................................... 16
Counsel and Independent Accountants............................................................ 16
OTHER INFORMATION................................................................................ 16
The Trust...................................................................................... 16
Other Investment Policies...................................................................... 17
Description of Permitted Investments........................................................... 18
Description of Ratings......................................................................... 28
Miscellaneous.................................................................................. 29
Performance.................................................................................... 29
Taxes.......................................................................................... 30
</TABLE>
<PAGE>
SUMMARY
The One Group-Registered Trademark- (the "Trust") is an open-end management
investment company that provides a convenient way to invest in professionally
managed portfolios of securities. The following provides basic information about
the Class A, Class B and Fiduciary Class shares of The One Group-Registered
Trademark- Government Bond Fund.
WHAT IS THE INVESTMENT OBJECTIVE? The Fund seeks a high level of current income
with liquidity and safety of principal. See "Investment Objective."
WHAT ARE THE PERMITTED INVESTMENTS? The Fund will normally invest at least 65%
of total assets in obligations issued or guaranteed by the U.S. government or
its agencies and instrumentalities. The Fund's investments are subject to market
and interest rate fluctuations which may affect the value of the Fund's shares.
The Fund may only invest in select derivatives; their characteristics and
limitations on their use are more fully described in "Description of Permitted
Investments." There are many types of derivative securities with varying degrees
of potential risk and return. See "Investment Policies."
WHO IS THE ADVISER? Banc One Investment Advisors Corporation, an indirect
subsidiary of BANC ONE CORPORATION, serves as the Adviser of the Trust. The
Adviser is entitled to a fee for advisory services provided to the Trust. The
Adviser may voluntarily agree to waive a part of its fees. See "The Adviser" and
"Expense Summary."
WHO IS THE ADMINISTRATOR? The One Group-Registered Trademark- Services Company
serves as the Administrator of the Trust. The Administrator is entitled to a fee
for services provided to the Trust. Banc One Investment Advisors Corporation
serves as the Sub-Administrator of the Trust, pursuant to an agreement with the
Administrator for which Banc One Investment Advisors Corporation receives a fee
paid by the Administrator. See "The Administrator" and "Expense Summary."
WHO IS THE TRANSFER AGENT AND CUSTODIAN? State Street Bank and Trust Company
serves as Transfer Agent and Custodian for the Trust for which services it
receives a fee. Bank One Trust Company, N.A. serves as Sub-Custodian for the
Trust, for which services it receives a fee. See "The Transfer Agent and
Custodian."
WHO IS THE DISTRIBUTOR? The One Group-Registered Trademark- Services Company
acts as Distributor of the Trust's shares. The Distributor is entitled to fees
for distribution services for the Class A and Class B shares. No compensation is
paid to the Distributor for the distribution services for the Fiduciary Class
shares of the Fund. See "The Distributor."
HOW DO I PURCHASE AND REDEEM SHARES? Purchases and redemptions may be made
through the Distributor on any day that the New York Stock Exchange is open for
trading ("Business Days"). See "How to Invest in The One Group-Registered
Trademark-" and "Redemptions."
HOW ARE DIVIDENDS PAID? Substantially all of the net investment income
(exclusive of capital gains) of the Fund is determined and declared daily, and
is distributed in the form of periodic dividends to Shareholders of the Fund on
the first Business Day of each month. Any capital gains are distributed at least
annually. Distributions are paid in additional shares of the same class unless
the Shareholder elects to take the payment in cash. See "Dividends."
3 PROSPECTUS
<PAGE>
ABOUT THE FUND
EXPENSE SUMMARY -- THE ONE GROUP-REGISTERED TRADEMARK- GOVERNMENT BOND FUND
<TABLE>
<CAPTION>
FIDUCIARY
CLASS A CLASS B CLASS
- ----------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
SHAREHOLDER TRANSACTION EXPENSES(1)
Maximum Sales Charge Imposed on Purchases
(as a percentage of offering price).................................... 4.50% none none
Maximum Contingent Deferred Sales Charge
(as a percentage of original purchase price or
redemption proceeds, as applicable).................................... none 5.00% none
Redemption Fees.......................................................... none none none
Exchange Fees............................................................ none none none
ANNUAL OPERATING EXPENSES(2)
(as a percentage of average daily net assets)
Investment Advisory Fees(4).............................................. .45% .45% .45%
12b-1 Fees (after fee waivers)(3)........................................ .25% .90% none
Other Expenses........................................................... .26% .26% .26%
- ----------------------------------------------------------------------------------------------------------------
TOTAL OPERATING EXPENSES(4).............................................. .96% 1.61% .71%
- ----------------------------------------------------------------------------------------------------------------
</TABLE>
(1) A person who purchases shares through an account with a financial
institution or broker/dealer may be charged separate transaction fees by the
financial institution or broker/dealer. In addition, a wire redemption
charge, currently $7.00, is deducted from the amount of a wire redemption
payment made at the request of a Shareholder.
(2) The expense information in the table has been restated to reflect current
fees that would have been applicable had they been in effect during the
previous fiscal year.
(3) Absent the voluntary waiver of fees under the Trust's Distribution and
Shareholder Services Plans, 12b-1 fees (as a percentage of average daily net
assets) would be .35% for Class A shares and 1.00% for Class B shares. There
are no 12b-1 fees charged to Fiduciary Class shares. The 12b-1 fees include
a Shareholder servicing fee of .25% of average daily net assets of the
Fund's Class B shares and may include a Shareholder servicing fee of .25% of
the average daily net assets of the Fund's Class A shares. See "The
Distributor."
(4) Total Operating Expenses have been revised to reflect fee waivers effective
as of the date of this Prospectus. The Adviser may voluntarily agree to
waive a part of its fees. Absent the voluntary 12b-1 waiver, Total Operating
Expenses would be 1.06% for Class A shares and 1.71% for Class B shares.
EXAMPLE: An investor would pay the following expense on a $1,000 investment in
Class A and Fiduciary Class shares of the Fund, assuming: (1) imposition of the
maximum sales charge for Class A shares; (2) 5% annual return; and (3)
redemption at the end of each time period.
<TABLE>
<CAPTION>
- ---------------------------------------------------------------------------------
3 5
1 YEAR YEARS YEARS 10 YEARS
- ---------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Class A $ 54 $ 74 $ 96 $158
Fiduciary Class $ 7 $ 23 $ 40 $ 88
</TABLE>
Absent the voluntary reduction of 12b-1 fees, the dollar amounts in the above
example would be as follows:
<TABLE>
<CAPTION>
- ----------------------------------------------------------------------------------
3
1 YEAR YEARS 5 YEARS 10 YEARS
- ----------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Class A $ 55 $ 77 $101 $169
</TABLE>
PROSPECTUS 4
<PAGE>
EXAMPLE: An investor would pay the following expenses on a $1,000 investment in
Class B shares, assuming: (1) deduction of the applicable maximum Contingent
Deferred Sales Charge; and (2) 5% annual return.
<TABLE>
<CAPTION>
- ---------------------------------------------------------------------------------
3 5
1 YEAR YEARS YEARS 10 YEARS
- ---------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Assuming a complete redemption at end of
period $ 66 $ 81 $108 $174
Assuming no redemption $ 16 $ 51 $88 $174
</TABLE>
Absent the voluntary reduction of 12b-1 fees, the dollar amounts in the above
example would be as follows:
<TABLE>
<CAPTION>
- ---------------------------------------------------------------------------------
3 5
1 YEAR YEARS YEARS 10 YEARS
- ---------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Assuming a complete redemption at end of
period $ 67 $ 84 $113 $185
Assuming no redemption $ 17 $ 54 $ 93 $185
</TABLE>
Class B shares automatically convert to Class A shares after eight (8) years.
Therefore, the "10 Years" examples above reflect the effect of such conversion.
THESE EXAMPLES SHOULD NOT BE CONSIDERED A REPRESENTATION OF PAST OR FUTURE
EXPENSES AND ACTUAL EXPENSES MAY BE GREATER OR LESS THAN THOSE SHOWN. The
purpose of these tables is to assist the investor in understanding the various
costs and expenses that may be directly or indirectly borne by investors in the
Trust.
The rules of the Securities and Exchange Commission (the "SEC") require that the
maximum sales charge be reflected in the above table. However, investors of the
Fund ("Shareholders") may, under certain circumstances, qualify for reduced
sales charges. See "How to Invest in The One Group-Registered Trademark-."
Long-term Shareholders of Class A shares and Class B shares may pay more than
the equivalent of the maximum front-end sales charges otherwise permitted by the
National Association of Securities Dealers' Rules.
FINANCIAL HIGHLIGHTS
The Trust was organized as a Massachusetts Business Trust on May 23, 1985. The
Trust currently consists of 29 separate investment portfolios (the "funds").
Currently, shares in The One Group-Registered Trademark- Government Bond Fund
are offered in three separate classes: Class A shares, Class B shares and
Fiduciary Class shares.
The following tables set forth financial information with respect to the
Financial Highlights for Class A, Class B and Fiduciary Class shares of the Fund
for the period from commencement of operations to June 30, 1995. Such
information is a part of the financial statements audited by Coopers & Lybrand
L.L.P., independent accountants for the Trust, whose report on the Trust's
financial statements for the year ended June 30, 1995 appears in the Statement
of Additional Information. Further information about the Fund's performance is
contained in the Annual Report to Shareholders, which may be obtained without
charge from the Distributor by calling 1-800-480-4111 during business hours.
5 PROSPECTUS
<PAGE>
THE ONE GROUP-REGISTERED TRADEMARK- GOVERNMENT BOND FUND
FINANCIAL HIGHLIGHTS
For a share of each class outstanding throughout each period.
<TABLE>
<CAPTION>
GOVERNMENT BOND FUND
----------------------------------------------------------------------------------
YEAR ENDED JUNE 30,
----------------------------------------------------------------------------------
1995 1994
--------------------------------------------- ----------------------------------
FIDUCIARY CLASS A CLASS B SERVICE (f) FIDUCIARY CLASS A CLASS B (a)
--------- -------- -------- ----------- --------- -------- -----------
<S> <C> <C> <C> <C> <C> <C> <C>
Net Asset Value, Beginning of
Period....................... $ 9.35 $ 9.35 $ 9.35 $ 9.32 $ 10.15 $ 10.17 $ 10.04
--------- -------- -------- ----------- --------- -------- -----------
Investment Activities
Net Investment Income....... 0.62 0.61 0.55 0.44 0.51 0.48 0.18
Net Realized and Unrealized
Gains (Losses) from
Investments............... 0.46 0.45 0.46 0.46 (0.77) (0.79) (0.69)
--------- -------- -------- ----------- --------- -------- -----------
Total from Investment
Activities................... 1.08 1.06 1.01 0.90 (0.26) (0.31) (0.51)
--------- -------- -------- ----------- --------- -------- -----------
Distribution
Net Investment Income....... (0.61) (0.59) (0.55) (0.44) (0.50) (0.47) (0.16)
In Excess of Net Investment
Income.................... (0.01) (0.01) (0.02) (0.02) (0.02)
In Excess of Net Realized
Gains..................... (0.02) (0.02)
--------- -------- -------- ----------- --------- -------- -----------
Total Distributions........... (0.62) (0.60) (0.55) (0.44) (0.54) (0.51) (0.18)
--------- -------- -------- ----------- --------- -------- -----------
Net Asset Value, End of
Period....................... $ 9.81 $ 9.81 $ 9.81 $ 9.78 $ 9.35 $ 9.35 $ 9.35
--------- -------- -------- ----------- --------- -------- -----------
--------- -------- -------- ----------- --------- -------- -----------
Total Return (Excludes Sales
Charge)...................... 12.04% 11.84% 11.20% (f) (2.73)% (3.16)% (4.99)%(e)
Ratios/Supplementary Data:
Net Assets at end of period
(000)..................... $379,826 $ 8,130 $ 2,513 $ 209,692 $ 1,690 $ 656
Ratio of expenses to average
net assets................ 0.71% 0.97% 1.62% 1.64%(d) 0.68% 0.92% 1.52%(d)
Ratio of net investment
income to average net
assets.................... 6.65% 6.46% 5.76% 6.65%(d) 5.13% 4.84% 4.60%(d)
Ratio of expenses to average
net assets*.................. 0.73% 1.09% 1.74% 1.66%(d) 0.71% 1.05% 1.63%(d)
Ratio of net investment income
to average net assets*....... 6.63% 6.34% 5.64% 6.62%(d) 5.10% 4.71% 4.49%(d)
Portfolio turnover............ 106.14% 106.14% 106.14% 106.14% 377.78% 377.78% 377.78%
<CAPTION>
1993
---------------------------
FIDUCIARY (b) CLASS A (c)
------------- -----------
<S> <C> <C>
Net Asset Value, Beginning of
Period....................... $ 10.00 $ 10.22
------------- -----------
Investment Activities
Net Investment Income....... 0.20 0.17
Net Realized and Unrealized
Gains (Losses) from
Investments............... 0.15 (0.05)
------------- -----------
Total from Investment
Activities................... 0.35 0.12
------------- -----------
Distribution
Net Investment Income....... (0.20) (0.17)
In Excess of Net Investment
Income....................
In Excess of Net Realized
Gains.....................
------------- -----------
Total Distributions........... (0.20) (0.17)
------------- -----------
Net Asset Value, End of
Period....................... $ 10.15 $ 10.17
------------- -----------
------------- -----------
Total Return (Excludes Sales
Charge)...................... 9.03%(d) 5.35%(d)
Ratios/Supplementary Data:
Net Assets at end of period
(000)..................... $52,152 $ 840
Ratio of expenses to average
net assets................ 0.69%(d) 0.95%(d)
Ratio of net investment
income to average net
assets.................... 5.43%(d) 5.56%(d)
Ratio of expenses to average
net assets*.................. 1.05%(d) 1.44%(d)
Ratio of net investment income
to average net assets*....... 5.07%(d) 5.07%(d)
Portfolio turnover............ 139.24% 139.24%
</TABLE>
- -----------------
* During the period the investment advisory, 12b-1, and administration fees
were voluntarily reduced. If such voluntary fee reductions had not occurred,
the ratios would have been as indicated.
(a) Class B Shares commenced offering on January 14, 1994.
(b) The Fund commenced operations on February 8, 1993.
(c) Class A Shares commenced offering on March 5, 1993.
(d) Annualized.
(e) Not Annualized.
(f) The Service Shares commenced offering on July 15, 1994 when they were
designated as "Retirement" shares. On April 4, 1995, the name of the
Retirement shares was changed to "Service" shares. As of June 1, 1995,
Service Shares transferred to Class A shares, and as of June 30, 1995, there
were no shareholders in the Service Class. The return for the period from
July 15, 1994 to June 1, 1995 for the Service Shares was 9.59%.
PROSPECTUS 6
<PAGE>
THE FUND
The One Group-Registered Trademark- Government Bond Fund (the "Fund") is part of
The One Group-Registered Trademark- (the "Trust"), which is an open-end
management investment company that offers units of beneficial interest
("shares") in 29 separate funds and different classes of certain of the funds.
This Prospectus relates to Class A, Class B and Fiduciary Class shares of The
One Group-Registered Trademark- Government Bond Fund, which provide for
variations in distribution costs, voting rights, dividends and per share net
asset value pursuant to a multiple class plan (the "Multiple Class Plan")
adopted by the Board of Trustees of the Trust. Except for these differences
among classes, each share of the Fund represents an undivided, proportionate
interest in the Fund. The Fund is a diversified mutual fund. Information
regarding the Trust's other funds and their classes is contained in separate
prospectuses which may be obtained from the Trust's Distributor, The One
Group-Registered Trademark-Services Company, 3435 Stelzer Road, Columbus, OH
43219 or by calling 1-800-480-4111.
INVESTMENT OBJECTIVE
The Fund seeks a high level of current income with liquidity and safety of
principal.
The investment objective of the Fund is fundamental and may not be changed
without a vote of the holders of a majority of the Fund's outstanding shares (as
defined in the Statement of Additional Information).
There is no assurance that the Fund will meet its investment objective.
INVESTMENT POLICIES
The investment policies of the Fund may be changed without an affirmative vote
of the holders of a majority of the Fund's outstanding shares unless a policy is
expressly deemed to be fundamental or is expressly deemed to be changeable only
by such a majority vote.
PERMISSIBLE INVESTMENTS
The Fund intends to seek to achieve its investment objective principally through
investment in securities issued by the U.S. government and its agencies and
instrumentalities. Accordingly, at least 65% of the total assets of the Fund
will be invested in obligations guaranteed as to principal and interest by the
U.S. government or its agencies and instrumentalities, some of which may be
subject to repurchase agreements, and other securities representing an interest
in or collateralized by mortgages that are issued or guaranteed by the U.S.
government, its agencies or instrumentalities. The primary issuers or guarantors
of such securities currently include the Government National Mortgage
Association ("Ginnie Mae"), the Federal National Mortgage Association ("Fannie
Mae"), and the Federal Home Loan Mortgage Corporation ("Freddie Mac"), although
the Fund may invest in securities issued or guaranteed by other agencies or
instrumentalities in the future. The Fund's ability to achieve higher income is
not as great as that of funds that may invest in lower-quality instruments.
The average weighted remaining maturity of the Fund is expected to be between
three and fifteen years. However, the Fund's average weighted remaining maturity
may be outside this range if warranted by market conditions.
The balance of the Fund's assets may be invested in debt securities and
municipal securities. Debt securities generally will be rated in one of the
three highest rating categories by at least one nationally recognized
statistical rating organization ("NRSRO") at the time of investment (for
example, A or better by Standard & Poor's Corporation ("S&P") or Moody's
Investors Service ("Moody's")) or, if unrated, determined by the Adviser to be
of comparable quality. However, the Adviser reserves the right to invest in debt
securities which present attractive opportunities and are rated in the fourth
highest rating category by at least one NRSRO at the time of investment (for
example, BBB by S&P or Baa by Moody's). Preferred stock must be rated in one of
the four highest rating categories by at least one NRSRO at the time of
investment (for example, BBB or better by S&P or Baa or better by Moody's) or,
if unrated, determined by the Adviser to be of comparable quality. Securities
that are rated in the fourth highest rating category by an NRSRO are deemed by
these ratings services to have some speculative characteristics.
The Fund may also purchase taxable or tax-exempt municipal securities
("Municipal Securities"). Municipal Securities, if bonds, must be rated in one
of the four highest rating categories by at least one NRSRO at the time of
investment (for example, BBB or better by S&P or Baa or better by Moody's) or,
if unrated, determined by the Adviser to be of comparable quality. Other
Municipal Securities, such as tax-exempt commercial paper, notes or variable
rate demand obligations must be rated in one of the three highest rating
categories by at least one NRSRO at the time of investment (such as A-2 by S&P
or P-2 by Moody's, with respect to tax-exempt commercial paper; SP-2 by S&P or
MIG-2 by Moody's, with respect to notes; and A-2 by S&P or VMIG-2 by Moody's,
with respect to variable rate demand obligations) or, if unrated, determined by
the Adviser to be of comparable quality.
The Fund will normally invest in U.S. Treasury obligations, obligations issued
or guaranteed by the U.S. government or its agencies and instrumentalities and
repurchase agreements collateralized by such obligations.
In addition to the permissible investments described above, the Fund may also
invest in mortgage-backed securities, securities purchased on a when-issued
basis and forward commitments, variable and floating rate notes, restricted
securities, time deposits, certificates of deposit, receipts, which may include
Treasury Receipts ("TRS"), Treasury Investment Growth Receipts ("TIGRS") and
Certificates of Accrual on Treasury Securities ("CATS"), U.S. Treasury
obligations, which may include Separately Traded Registered Interest and
Principal Securities ("STRIPS") and Coupon Under Book Entry Safekeeping
("CUBES"), securities of other investment companies, bankers' acceptances,
commercial paper, repurchase agreements, reverse repurchase agreements, and
mortgage dollar rolls. The Fund may also invest in: options, futures contracts,
options on
7 PROSPECTUS
<PAGE>
futures contracts, municipal securities, securities subject to demand features,
multiple class pass-through securities and collateralized mortgage obligations
("CMOs"), real estate mortgage investment conduits ("REMICs"), adjustable rate
mortgage loans ("ARMS"), stripped mortgage-backed securities, fixed rate
mortgage loans, inverse floating rate instruments, asset-backed securities,
corporate securities, swap transactions, structured instruments, municipal
leases, and the Fund may also engage in securities lending transactions.
In addition the Fund may invest in new options, futures contracts and other
financial products that may be developed, to the extent that these products are
consistent with the Fund's investment objective and policies.
This list of permissible investments includes select securities that may be
commonly considered to be derivatives, including: mortgage dollar rolls,
options, futures contracts, options on futures contracts, multiple class
pass-through securities and collateralized mortgage obligations (CMOs and
REMICs), stripped mortgage-backed securities (IOs and POs), inverse floating
rate instruments, asset-backed securities, swap, cap and floor transactions, new
financial products and structured instruments. These securities and limitations
on their use are more fully described in the "Description of Permitted
Investments."
For a description of the Fund's permitted investments and ratings, see
"Description of Permitted Investments" and "Description of Ratings" and the
Statement of Additional Information. For a description of permitted investments
for temporary defensive purposes, see "Temporary Defensive Position." In the
event a security owned by the Fund is downgraded below these rating categories,
the Adviser will review and take appropriate action with regard to the security.
RISK FACTORS
The Fund's investments in mortgage pass-through securities and other securities
representing an interest in or collateralized by adjustable rate and fixed rate
mortgage loans ("Mortgage-Backed Securities") entail certain risks. These risks
include the failure of an issuer or guarantor to meet its obligations, adverse
interest rate changes, adverse economic, real estate or unemployment trends,
failures in connection with processing of transactions and the effects of
prepayments on mortgage cash flows. The Fund's policy of investing primarily in
securities issued or guaranteed by the U.S. government, its agencies or
instrumentalities, however, is designed to minimize credit and performance
related risks otherwise associated with Mortgage-Backed Securities.
The investment characteristics of Mortgage-Backed Securities differ from
traditional debt securities. These differences can result in significantly
greater price and yield volatility than is the case with traditional fixed
income securities. The major differences typically include more frequent
interest and principal payments, usually monthly, the adjustability of interest
rates, and the possibility that prepayments of principal may be made at any
time. Prepayment rates are influenced by changes in current interest rates and a
variety of economic, geographic, social, and other factors. During periods of
declining interest rates, prepayment rates can be expected to accelerate. Under
certain interest rate and prepayment rate scenarios, the Fund may fail to recoup
fully its investment in Mortgage-Backed Securities notwithstanding a direct or
indirect governmental or agency guarantee. In general, changes in the rate of
prepayments on a Mortgage-Backed Security will change that security's market
value and its yield to maturity. When interest rates fall, high prepayments
could force the Fund to reinvest principal at a time when investment
opportunities are not attractive. Thus, Mortgage-Backed Securities may not be an
effective means for the Fund to lock in long-term interest rates. Conversely,
during periods when interest rates rise, slow prepayments could cause the
average life of the security to lengthen and the value to decline more than
anticipated.
The market value of the Fund's fixed income investments will change in response
to interest rate changes and other factors. During periods of falling interest
rates, the values of outstanding fixed income securities generally rise.
Conversely, during periods of rising interest rates, the values of such
securities generally decline. Moreover, while securities with longer maturities
tend to produce higher yields, the prices of longer maturity securities are also
subject to greater market fluctuations as a result of changes in interest rates.
Changes by recognized agencies in the rating of any fixed income security and in
the ability of an issuer to make payments of interest and principal also affect
the value of these investments. Except under condition of default, changes in
the value of portfolio securities will not affect cash income derived from these
securities but will affect the Fund's net asset value.
Certain investment management techniques that the Fund may use may expose the
Fund to special risks. These include, but are not limited to, engaging in
hedging transactions (including mortgage and interest rate swaps and interest
rate floors and caps), purchasing and selling futures and options, making
forward commitments, purchasing structured instruments, lending portfolio
securities and entering into mortgage dollar rolls. These practices could expose
the Fund to potentially greater risk of loss than more traditional fixed income
investments.
Municipal securities rated in the fourth highest rating category by an NRSRO are
generally considered to be investment grade, although S&P indicates that such
municipal securities have speculative characteristics. Changes in economic
conditions or other circumstances are more likely to lead to a weakened capacity
of the issuers of such securities to make principal and interest payments than
is the case with higher grade securities.
For additional information on each of the Fund's permitted investments and
associated risks, see "Description of Permitted Investments."
PROSPECTUS 8
<PAGE>
HOW TO DO BUSINESS WITH
THE ONE GROUP-REGISTERED TRADEMARK-
HOW TO INVEST IN THE ONE GROUP-REGISTERED TRADEMARK-
Shares of the Fund are sold on a continuous basis and may be purchased directly
from the Trust's Distributor, The One Group-Registered Trademark- Services
Company, by mail, by telephone, or by wire. Shares may also be purchased through
a financial institution, such as a bank, savings and loan association or
insurance company (each a "Shareholder Servicing Agent"), that has established a
Shareholder servicing agreement with the Distributor, or through a broker-dealer
that has established a dealer agreement with the Distributor.
Purchases and redemptions of shares of the Fund may be made on any day that the
New York Stock Exchange is open for trading ("Business Days"). The minimum
initial and subsequent investments in the Fund are $1,000 and $100, respectively
($100 and $25, respectively, for employees of BANC ONE CORPORATION and its
affiliates). Initial and subsequent investment minimums may be waived at the
Distributor's discretion. Investors may purchase up to a maximum of $250,000 of
Class B shares per individual purchase order.
Class A and Class B shares are offered to the general public. Fiduciary Class
shares are offered to institutional investors, including affiliates of BANC ONE
CORPORATION and any bank, depository institution, insurance company, pension
plan or other organization authorized to act in fiduciary, advisory, agency,
custodial or similar capacities (each an "Authorized Financial Organization").
For additional details regarding eligibility, call the Distributor at
1-800-480-4111.
BY MAIL
Investors may purchase Class A and Class B shares of the Fund by completing and
signing an Account Application Form and mailing it, along with a check (or other
negotiable bank instrument or money order) payable to "The One Group-Registered
Trademark-," to State Street Bank and Trust Company (the Trust's Transfer Agent
and Custodian), P.O. Box 8500, Boston, MA 02266-8500. Subsequent purchases of
shares may be made at any time by mailing a check to the Transfer Agent. Account
Application Forms are available through the Distributor by calling
1-800-480-4111.
Purchases of Fiduciary Class shares and Class A shares that are being offered to
investors in certain retirement plans such as 401(k) and similar plans, other
than Individual Retirement Accounts, are made by an institutional investor
and/or other intermediary on behalf of an investor (each also a "Shareholder
Servicing Agent"). The Shareholder Servicing Agent may require an investor to
complete forms in addition to the Account Application Form and to follow
procedures established by the Shareholder Servicing Agent. Such Shareholders
should contact their Shareholder Servicing Agents regarding purchases, exchanges
and redemptions of shares. See "Additional Information Regarding Purchases."
BY TELEPHONE OR BY WIRE
Once an Account Application Form has been received, Shareholders are eligible to
make purchases by telephone or wire (if that option has been selected by a
Shareholder) by calling the Transfer Agent at 1-800-480-4111 or the Shareholder
Servicing Agents, if applicable.
Shareholders may revoke their automatic eligibility to make purchases and/or
redemptions by telephone or by wire, by sending a letter so stating to the
Transfer Agent, State Street Bank and Trust Company, P.O. Box 8500, Boston, MA
02266-8500.
SYSTEMATIC INVESTMENT PLAN
Class A and Class B investors may make automatic monthly investments in the Fund
from their bank, savings and loan or other depository institution accounts. The
minimum initial and subsequent investments must be $25 under the Systematic
Investment Plan, which minimum may be waived at the discretion of the
Distributor. The Trust pays the costs associated with these transfers, but
reserves the right, upon thirty days' written notice, to impose reasonable
charges for this service. A depository institution may impose a charge for
debiting an investor's account which would reduce the investor's return from an
investment in the Fund.
FUND-DIRECT IRA
The Trust offers a tax-advantaged retirement plan for which the shares of the
Fund may be an appropriate investment. The Trust's retirement plan allows
participants to defer taxes while helping them build their retirement savings.
The One Group-Registered Trademark-'s Fund-Direct IRA is a retirement plan with
a wide choice of investments offering people with earned income the opportunity
to compound earnings on a tax-deferred basis. An IRA Adoption Agreement may be
obtained by calling the Distributor at 1-800-480-4111.
ADDITIONAL INFORMATION REGARDING PURCHASES
A purchase order will be effective as of the day received by the Distributor if
the Distributor receives the order before 4:00 p.m., eastern time. However, an
order may be cancelled if the Transfer Agent does not receive Federal funds
before close of business on the next Business Day for Fiduciary Class shares,
and before the close of business on the third Business Day for Class A and Class
B shares, and the investor could be liable for any fees or expenses incurred by
the Trust. Federal funds are monies credited to a bank's account with a Federal
Reserve Bank. The purchase price of shares of the Fund is the net asset value
next determined after a purchase order is effected plus any applicable sales
charge (the "offering price"). The net asset value per share of the Fund is
determined by dividing the total market value of the Fund's investments and
other assets allocable to a class, less any liabilities allocable to that class,
by the total number of outstanding shares of such class. Net asset value per
share is determined daily as of 4:00 p.m., eastern time, on each Business Day.
For a further discussion of the calculation of net asset value, see the
Statement of Additional Information.
9 PROSPECTUS
<PAGE>
Shares may also be issued in transactions involving the acquisition by the Fund
of securities held by collective investment funds sponsored and administered by
affiliates of the Adviser. Purchases will be made in full and fractional shares
of the Fund calculated to three decimal places. Although the methodology and
procedures are identical, the net asset value per share of classes within the
Fund may differ because the distribution expenses charged to Class A shares and
Class B shares are not charged to Fiduciary Class shares.
The Trust reserves the right to reject a purchase order when the Distributor
determines that it is not in the best interest of the Trust and/or its
Shareholders to accept such order. Except as provided below, neither the Trust's
Transfer Agent nor the Trust will be responsible for any loss, liability, cost
or expense for acting upon telephone or wire instructions, and the investor will
bear all risk of loss. The Trust will employ reasonable procedures to confirm
that instructions communicated by telephone are genuine, including requiring a
form of personal identification prior to acting upon instructions received by
telephone and recording telephone instructions. If such procedures are not
employed, the Trust may be liable for any losses due to unauthorized or
fraudulent instructions.
Fiduciary Class shares offered to institutional investors and to investors in
certain retirement plans, and Class A shares that are offered to investors in
certain retirement plans such as 401(k) and similar plans, other than Individual
Retirement Accounts, will normally be held in the name of the Shareholder
Servicing Agent effecting the purchase on the Shareholder's behalf, and it is
the Shareholder Servicing Agent's responsibility to transmit purchase orders to
the Distributor. A Shareholder Servicing Agent may impose an earlier cut-off
time for receipt of purchase orders directed through it to allow for processing
and transmittal of these orders to the Distributor for effectiveness the same
day. The Shareholder should contact his or her Shareholder Servicing Agent for
information as to the Shareholder Servicing Agent's procedures for transmitting
purchase, exchange or redemption orders to the Trust. A Shareholder who desires
to transfer the registration of shares beneficially owned by him or her, but
held of record by a Shareholder Servicing Agent, should contact the Shareholder
Servicing Agent to accomplish such change. Other Shareholders who desire to
transfer the registration of their shares should contact the Transfer Agent.
No certificates representing shares of the Fund will be issued. In
communications to Shareholders, the Fund will not duplicate mailings of Fund
material to Shareholders who reside at the same address.
SALES CHARGE
The following table shows the initial sales charge on Class A shares to a
"single purchaser" (defined below) together with the sales charge reallowed to
financial institutions and intermediaries (the "commission"):
<TABLE>
<CAPTION>
SALES CHARGE AS
SALES CHARGE AS A APPROPRIATE COMMISSION AS A
PERCENTAGE OF PERCENTAGE OF NET PERCENTAGE OF
AMOUNT OF PURCHASE OFFERING PRICE AMOUNT INVESTED OFFERING PRICE
- --------------------------- ------------------ ------------------- ------------------
<S> <C> <C> <C>
less than $50,000.......... 4.50% 4.71% 4.05%
$50,000 but less than
$100,000.................. 3.50% 3.63% 3.15%
$100,000 but less than
$250,000.................. 2.50% 2.56% 2.25%
$250,000 but less than
$500,000.................. 1.50% 1.52% 1.35%
$500,000 but less than
$1,000,000................ 1.00% 1.01% 0.90%
$1,000,000 or more......... 0.00% 0.00% 0.00%
</TABLE>
The commissions shown in the table apply to sales through financial institutions
and intermediaries. Under certain circumstances, the Distributor will use its
own funds to compensate financial institutions and intermediaries in amounts
that are additional to the commissions shown above. The maximum cash
compensation payable by the Distributor as a sales charge is 4.50% of the
offering price (including the commission shown above and additional cash
compensation described below). In addition, the Distributor will, from time to
time and at its own expense, provide promotional incentives to financial
institutions and intermediaries, whose registered representatives have sold or
are expected to sell significant amounts of the shares of the Fund, in the form
of payment for travel expenses, including lodging, incurred in connection with
trips taken by qualifying registered representatives to places within or outside
the United States, and additional compensation in an amount up to .25% of the
offering price of Class A shares of the Fund for sales of $1 million or more.
However, the Distributor will be reimbursed by the person receiving such
additional compensation for sales of the Fund of $1 million or more, if a
Shareholder redeems any or all of the shares for which such additional
compensation was paid by the Distributor prior to the first year anniversary of
purchase. Under certain circumstances, commissions up to the amount of the
entire sales charge will be reallowed to financial institutions and
intermediaries, which might then be deemed to be "underwriters" under the
Securities Act of 1933.
RIGHT OF ACCUMULATION
In calculating the sales charge rates applicable to current purchases of Class A
shares, a "single purchaser" is entitled to cumulate current purchases with the
current value at the offering price of previously purchased Class A and Class B
shares of the Fund and other eligible funds of the Trust, but not shares of
money market funds, that are sold subject to a comparable sales charge.
The term "single purchaser" refers to (i) an individual, (ii) an individual and
spouse purchasing shares of the Fund for their own account or for trust or
custodial accounts for their minor children, or (iii) a fiduciary purchasing for
any one trust, estate or fiduciary account, including employee benefit plans
created
PROSPECTUS 10
<PAGE>
under Sections 401 or 457 of the Internal Revenue Code of 1986, as amended (the
"Code"), and including related plans of the same employer. To be entitled to a
reduced sales charge based upon shares already owned, the investor must ask the
Distributor for such reduction at the time of purchase and provide the account
number(s) of the investor, the investor and spouse, and their minor children,
and give the age of such children. The Fund may amend or terminate this right of
accumulation at any time as to subsequent purchases.
LETTER OF INTENT
By initially investing at least $2,000 of Class A shares in one or more funds
that impose a comparable sales charge over the next 13 months, the sales charge
may be reduced by completing the Letter of Intent section of the Account
Application Form. The Letter of Intent includes a provision for a sales charge
adjustment depending on the amount actually purchased within the 13-month
period. In addition, pursuant to a Letter of Intent, the Custodian will hold in
escrow the difference between the sales charge applicable to the amount
initially purchased and the sales charge paid at the time of investment, which
is based on the amount covered by the Letter of Intent.
For example, assume an investor signs a Letter of Intent to purchase $250,000 in
Class A shares of one (or more) of the funds of the Trust that impose a
comparable sales charge and, at the time of signing the Letter of Intent,
purchases $100,000 of Class A shares of one of these funds. The investor would
pay an initial sales charge of 1.50% (the sales charge applicable to purchases
of $250,000) and 1.00% of the investment (representing the difference between
the 2.50% sales charge applicable to purchases of $100,000 and the 1.50% sales
charge already paid) would be held in escrow until the investor has purchased
the remaining $150,000 or more in Class A shares under the investor's Letter of
Intent.
The amount held in escrow will be applied to the investor's account at the end
of the 13-month period unless the amount specified in the Letter of Intent is
not purchased. In order to qualify for a Letter of Intent, the investor will be
required to make a minimum purchase of at least $2,000.
The Letter of Intent will not obligate the investor to purchase Class A shares,
but if he or she does, each purchase during the period will be at the sales
charge applicable to the total amount intended to be purchased. The Letter of
Intent may be dated as of a prior date to include any purchases made within the
past 90 days.
OTHER CIRCUMSTANCES
No sales charge is imposed on Class A shares of the Fund: (i) issued through
reinvestment of dividends and capital gains distributions; (ii) acquired through
the exercise of exchange privileges where a comparable sales charge has been
paid for exchanged shares; (iii) purchased by officers, directors or trustees,
retirees and employees (and their spouses and immediate family members) of the
Trust, of BANC ONE CORPORATION and its subsidiaries and affiliates, of the
Distributor and its subsidiaries and affiliates, or of an investment sub-adviser
of a fund of the Trust and such sub-adviser's subsidiaries and affiliates, or
purchased by investment advisers, financial planners or other intermediaries who
have a dealer arrangement with the Distributor, who place trades for their own
accounts or for the accounts of their clients and who charge a management,
consulting or other fee for their services, as well as clients of such
investment advisers, financial planners or other intermediaries who place trades
for their own accounts if the accounts are linked to the master account of such
investment adviser, financial planner or other intermediary; (iv) sold to
affiliates of BANC ONE CORPORATION and certain accounts (other than Individual
Retirement Accounts) for which Authorized Financial Organizations act in
fiduciary, advisory, agency, custodial or similar capacities; (v) purchased with
proceeds from the recent redemption of Fiduciary Class shares of a fund of the
Trust or acquired in an exchange of Fiduciary Class shares of a fund for Class A
shares of the same fund; (vi) purchased with proceeds from the recent redemption
of shares of a mutual fund (other than a fund of the Trust) for which a sales
charge was paid; (vii) purchased in an Individual Retirement Account with the
proceeds of a distribution from an employee benefit plan, provided that, at the
time of distribution, the employee benefit plan had plan assets invested in a
fund of the Trust; (viii) purchased with Trust assets; (ix) purchased in
accounts as to which a bank or broker-dealer charges an asset allocation fee,
provided the bank or broker-dealer has an agreement with the Distributor; or (x)
directly purchased with the proceeds of a dividend distribution on a bond for
which a Banc One Corporation affiliate bank or trust company is the Trustee or
Paying Agent.
An investor relying upon any of the categories of waivers of the sales charge
must qualify for such waiver in advance of the purchase with the Distributor or
the financial institution or intermediary through which shares are purchased by
the investor.
The waiver of the sales charge under circumstances (v), (vi) and (vii) above
applies only if the purchase is made within 60 days of the redemption or
distribution and if conditions imposed by the Distributor are met. The waiver
policy with respect to the purchase of shares through the use of proceeds from a
recent redemption or distribution as described in clauses (v), (vi) and (vii)
above will not be continued indefinitely and may be discontinued at any time
without notice. Investors should call the Distributor at 1-800-480-4111 to
determine whether they are eligible to purchase shares without paying a sales
charge through the use of proceeds from a recent redemption or distribution as
described above, and to confirm continued availability of these waiver policies
prior to initiating the procedures described in clauses (v), (vi) and (vii).
ALTERNATIVE SALES ARRANGEMENTS
CLASS B SHARES
Class B shares are not subject to a sales charge when they are purchased, but
are subject to a sales charge (the "Contingent Deferred Sales Charge") if a
Shareholder redeems them prior to
11 PROSPECTUS
<PAGE>
the sixth anniversary of purchase. When a Shareholder purchases Class B shares,
the full purchase amount is invested directly in the Fund. Class B shares of the
Fund are subject to an ongoing distribution and Shareholder service fee at an
annual rate of 1.00% of the Fund's average daily net assets as provided in the
Class B Plan (described below under "The Distributor"). The Distributor has
voluntarily agreed to reduce the amount of this fee to .90% of the Fund's
average daily net assets attributable to the Class B shares, for the indefinite
future. This ongoing fee will cause Class B shares to have a higher expense
ratio and to pay lower dividends than Class A shares. Class B shares convert
automatically to Class A shares after eight years, commencing from the end of
the calendar month in which the purchase order was accepted under the
circumstances and subject to the qualifications described in this Prospectus.
Proceeds from the Contingent Deferred Sales Charge and the distribution and
Shareholder service fees under the Class B Plan are payable to the Distributor
and financial intermediaries to defray the expenses of advance brokerage
commissions and expenses related to providing distribution-related and
Shareholder services to the Fund in connection with the sale of the Class B
shares, such as the payment of compensation to dealers and agents for selling
Class B shares. A dealer reallowance of 4.00% of the original purchase price of
the Class B shares will be paid to financial institutions and intermediaries.
CONTINGENT DEFERRED SALES CHARGE
If the Shareholder redeems Class B shares prior to the sixth anniversary of
purchase, the Shareholder will pay a Contingent Deferred Sales Charge at the
rates set forth below. The Contingent Deferred Sales Charge is assessed on an
amount equal to the lesser of the then-current market value or the cost of the
shares being redeemed. Accordingly, no sales charge is imposed on increases in
net asset value above the initial purchase price. In addition, no charge is
assessed on shares derived from reinvestment of dividends or capital gain
distributions.
The amount of the Contingent Deferred Sales Charge, if any, varies depending on
the number of years from the time of payment for the purchase of Class B shares
until the time of redemption of such shares. Solely for purposes of determining
the number of years from the time of any payment for the purchase of shares, all
payments during a month are aggregated and deemed to have been made on the first
day of the month.
<TABLE>
<CAPTION>
CONTINGENT DEFERRED
SALES CHARGE AS A
YEAR(S) PERCENTAGE OF
SINCE DOLLAR AMOUNT
PURCHASE SUBJECT TO CHARGE
- -------------------------------------------------- -----------------------
<S> <C>
0-1............................................... 5.00%
1-2............................................... 4.00%
2-3............................................... 3.00%
3-4............................................... 3.00%
4-5............................................... 2.00%
5-6............................................... 1.00%
6-7............................................... None
7-8............................................... None
</TABLE>
In determining whether a particular redemption is subject to a Contingent
Deferred Sales Charge, it is assumed that the redemption is first of any Class A
shares in the Shareholder's Fund account (unless the Shareholder elects to have
Class B shares redeemed first) or shares representing capital appreciation, next
of shares acquired pursuant to reinvestment of dividends and capital gain
distributions, and finally of other shares held by the Shareholder for the
longest period of time. This method should result in the lowest possible sales
charge.
To provide an example, assume you purchased 100 shares at $10 per share (a total
cost of $1,000) and prior to the second anniversary after purchase, the net
asset value per share is $12 and during such time you have acquired 10
additional shares through dividends paid in shares. If you then make your first
redemption of 50 shares (proceeds of $600), 10 shares will not be subject to
charge because you received them as dividends. With respect to the remaining 40
shares, the charge is applied only to the original cost of $10 per share and not
to the increase in net asset value of $2 per share. Therefore, $400 of the $600
redemption proceeds is subject to a Contingent Deferred Sales Charge at a rate
of 4.00% (the applicable rate prior to the second anniversary after purchase).
The Contingent Deferred Sales Charge is waived on redemption of shares: (i) for
distributions that are made under a Systematic Withdrawal Plan of the Trust and
that are limited to no more than 10% of the account value annually, determined
in the first year as of the date the redemption request is received by the
Transfer Agent, and in subsequent years, as of the most recent anniversary of
that date; (ii) following the death or disability (as defined in the Code) of a
Shareholder or a participant or beneficiary of a qualifying retirement plan if
redemption is made within one year of such death or disability; or (iii) to the
extent that the redemption represents a minimum required distribution from an
Individual Retirement Account or other qualifying retirement plan to a
Shareholder who has attained the age of 70 1/2. A Shareholder or his or her
representative should contact the Transfer Agent to determine whether a
retirement plan qualifies for a waiver and must notify the Transfer Agent prior
to the time of redemption if such circumstances exist and the Shareholder is
eligible for this waiver. In addition, the following circumstances are not
deemed to result in a "redemption" of Class B shares for purposes of the
assessment of a Contingent Deferred Sales Charge, which is therefore waived: (i)
plans of reorganization of the Fund, such as mergers, asset acquisitions and
exchange offers to which the Fund is a party; or (ii) exchanges for Class B
shares of other funds of the Trust as described under "Exchanges."
CONVERSION FEATURE
Class B shares include all shares purchased pursuant to the Contingent Deferred
Sales Charge which have been outstanding for less than the period ending eight
years after the end of the month in which the shares were purchased. At the end
of this period, Class B shares will automatically convert to Class A shares and
will be subject to the lower distribution and Shareholder service fees charged
to Class A shares. Such conversion
PROSPECTUS 12
<PAGE>
will be on the basis of the relative net asset values of the two classes,
without the imposition of any sales charge, fee or other charge. The conversion
is not a taxable event to a Shareholder.
For purposes of conversion to Class A shares, shares received as dividends and
other distributions paid on Class B shares in a Shareholder's Fund account will
be considered to be held in a separate sub-account. Each time any Class B shares
in a Shareholder's Fund account (other than those in the sub-account) convert to
Class A shares, a pro-rata portion of the Class B shares in the sub-account will
also convert to Class A shares.
If a Shareholder effects one or more exchanges among Class B shares of the funds
of the Trust during the eight-year period, the Trust will aggregate the holding
periods for the shares of each fund of the Trust for purposes of calculating
that eight-year period. Because the per share net asset value of the Class A
shares may be higher than that of the Class B shares at the time of conversion,
a Shareholder may receive fewer Class A shares than the number of Class B shares
converted, although the dollar value will be the same.
EXCHANGES
CLASS A AND FIDUCIARY CLASS
Fiduciary Class Shareholders of the Fund may exchange their shares for Class A
shares of the Fund or for Class A shares or Fiduciary Class shares of another
fund of the Trust.
Class A Shareholders may exchange their shares for Fiduciary Class shares of the
Fund or for Fiduciary Class shares or Class A shares of another fund of the
Trust, if the Shareholder is eligible to purchase such shares.
The exchange privilege may be exercised only in those states where the shares of
the Fund or such other fund of the Trust may be legally sold. All exchanges
discussed herein are made at the net asset value of the exchanged shares, except
as provided below. The Trust does not impose a charge for processing exchanges
of shares. If a Shareholder seeks to exchange Class A shares of a fund that does
not impose a sales charge for Class A shares of a fund that does or the fund
being exchanged into has a higher sales charge, the Shareholder will be required
to pay a sales charge in the amount equal to the difference between the sales
charge applicable to the fund into which the shares are being exchanged and any
sales charges previously paid for the exchanged shares, including any sales
charges incurred on any earlier exchanges of the shares (unless such sales
charge is otherwise waived, as provided in "Other Circumstances"). The exchange
of Fiduciary Class shares for Class A shares also will require payment of the
sales charge unless the sales charge is waived, as provided in "Other
Circumstances."
CLASS B
Class B Shareholders of the Fund may exchange their shares for Class B shares of
any other fund of the Trust on the basis of the net asset value of the exchanged
Class B shares, without the payment of any Contingent Deferred Sales Charge that
might otherwise be due upon redemption of the outstanding Class B shares. The
newly acquired Class B shares will be subject to the higher Contingent Deferred
Sales Charge of either the fund from which the shares were exchanged or the fund
into which the shares were exchanged. With respect to outstanding Class B shares
as to which previous exchanges have taken place, "higher Contingent Deferred
Sales Charge" shall mean the higher of the Contingent Deferred Sales Charge
applicable to either the fund the shares are exchanging into or any other fund
from which the shares previously have been exchanged. For purposes of computing
the Contingent Deferred Sales Charge that may be payable upon a disposition of
the newly acquired Class B shares, the holding period for outstanding Class B
shares of the fund from which the exchange was made is "tacked" to the holding
period of the newly acquired Class B shares. For purposes of calculating the
holding period applicable to the newly acquired Class B shares, the newly
acquired Class B shares shall be deemed to have been issued on the date of
receipt of the Shareholder's order to purchase the outstanding Class B shares of
the fund from which the initial exchange was made.
ADDITIONAL INFORMATION REGARDING EXCHANGES
In the case of shares held of record by a Shareholder Servicing Agent but
beneficially owned by a Shareholder, to exchange such shares the Shareholder
should contact the Shareholder Servicing Agent, who will contact the Transfer
Agent and effect the exchange on behalf of the Shareholder. If an exchange
request in good order is received by the Transfer Agent by 4:00 p.m., eastern
time, on any Business Day, the exchange usually will occur on that day. Any
Shareholder who wishes to make an exchange must receive a current prospectus of
the fund of the Trust in which he or she wishes to invest before the exchange
will be effected.
The Trust reserves the right to change the terms or conditions of the exchange
privilege discussed herein upon sixty days' written notice. An exchange between
classes of shares of the same fund is not considered a taxable event; however,
an exchange between funds of the Trust is considered a sale of shares and
usually results in a capital gain or loss for Federal income tax purposes.
Shareholders should consult their tax advisers for a more complete explanation
of the Federal income tax consequences of an exchange of shares of the Fund.
A more detailed description of the above is set forth in the Statement of
Additional Information.
REDEMPTIONS
Shareholders may redeem their shares without charge (except Class B shares, as
provided above) on any Business Day; shares may ordinarily be redeemed by mail,
by telephone or by wire. All redemption orders are effected at the net asset
value per share next determined for Class A and Fiduciary Class shares and at
net asset value per share next determined reduced by any applicable Contingent
Deferred Sales Charge for Class B shares, after receipt of a valid request for
redemption. Payment to
13 PROSPECTUS
<PAGE>
Shareholders for shares redeemed will be made within seven days after receipt by
the Transfer Agent of the request for redemption.
BY MAIL
A written request for redemption must be received by the Transfer Agent in order
to constitute a valid request for redemption. All written redemption requests
should be sent to The One Group-Registered Trademark-, c/o State Street Bank and
Trust Company, P.O. Box 8500, Boston, MA 02266-8500, or the Shareholder
Servicing Agent, if applicable. The Transfer Agent may require that the
signature on the written request be guaranteed by a commercial bank, a member
firm of a domestic stock exchange, or by a member of the Securities Transfer
Association Medallion Program or the Stock Exchange Medallion Program.
The signature guarantee requirement will be waived if all of the following
conditions apply: (i) the redemption is for $5,000 worth of shares or less; (ii)
the redemption check is payable to the Shareholder(s) of record; and (iii) the
redemption check is mailed to the Shareholder(s) at the address of record. The
Shareholder may also have the proceeds mailed to a commercial bank account
previously designated on the Account Application Form or by written instruction
to the Transfer Agent or the Shareholder Servicing Agent, if applicable. There
is no charge for having redemption requests mailed to a designated bank account.
BY TELEPHONE OR BY WIRE
Shareholders may have the payment of redemption requests wired or mailed to a
domestic commercial bank account previously designated on the Account
Application Form. Wire redemption requests may be made by the Shareholder by
telephone to the Transfer Agent at 1-800-480-4111, provided that the Shareholder
has elected the telephone redemption privilege in writing to the Distributor, or
to the Shareholder Servicing Agent, if applicable. The Transfer Agent may reduce
the amount of a wire redemption payment by its then-current wire redemption
charge, which, as of the date of this Prospectus, is $7.00.
Neither the Trust nor the Transfer Agent will be responsible for the
authenticity of the redemption instructions received by telephone if it
reasonably believes those instructions to be genuine. The Trust and the Transfer
Agent will each employ reasonable procedures to confirm that telephone
instructions are genuine, and may be liable for losses resulting from
unauthorized or fraudulent telephone transactions if it does not employ those
procedures. Such procedures may include requesting personal identification
information or recording telephone conversations.
SYSTEMATIC WITHDRAWAL PLAN
Shareholders whose accounts have a value of at least $10,000 may elect to
receive, or may designate another person to receive, monthly, quarterly or
annual payments in a specified amount of not less than $100 each. There is no
charge for this service. Under the Systematic Withdrawal Plan, all dividends and
distributions must be reinvested in shares of the Fund. Purchases of additional
Class A shares while the Systematic Withdrawal Plan is in effect are generally
undesirable because a sales charge is incurred whenever purchases are made.
Pursuant to the Systematic Withdrawal Plan, Class B Shareholders may elect to
receive, or may designate another person to receive, distributions provided the
distributions are limited to no more than 10% of their account value annually,
determined in the first year as of the date the redemption request is received
by the Transfer Agent, and in subsequent years, as of the most recent
anniversary of that date. In addition, Shareholders who have attained the age of
70 1/2 may elect to receive distributions, to the extent that the redemption
represents a minimum required distribution from an Individual Retirement Account
or other qualifying retirement plan.
If the amount of the systematic withdrawal exceeds the income accrued since the
previous withdrawal under the Systematic Withdrawal Plan, the principal balance
invested will be reduced and shares will be redeemed.
OTHER INFORMATION REGARDING REDEMPTIONS
At various times, the Fund may be requested to redeem shares for which it has
not yet received good payment. In such circumstances, the forwarding of proceeds
may be delayed for 15 or more days until payment has been collected for the
purchase of such shares. The Fund intends to pay cash for all shares redeemed.
Due to the relatively high costs of handling small investments, the Fund
reserves the right to redeem, at net asset value, the shares of any Shareholder
if, because of redemptions of shares by or on behalf of the Shareholder, the
account of such Shareholder in the Fund has a value of less than $1,000, the
minimum initial purchase amount. Accordingly, an investor purchasing shares of
the Fund in only the minimum investment amount may be subject to such
involuntary redemption if he or she thereafter redeems any of these shares.
Before the Fund exercises its right to redeem such shares and to send the
proceeds to the Shareholder, the Shareholder will be given notice that the value
of the shares in his or her account is less than the minimum amount and will be
allowed 60 days to make an additional investment in the Fund in an amount which
will increase the value of the account to at least $1,000.
See the Statement of Additional Information for examples of when the Trust may
suspend the right of redemption or redeem shares involuntarily if it appears
appropriate to do so in light of the Trust's responsibilities under the
Investment Company Act of 1940.
FUND MANAGEMENT
THE ADVISER
The Trust and Banc One Investment Advisors Corporation (the "Adviser") have
entered into an investment advisory agreement (the "Advisory Agreement"). Under
the Advisory Agreement, the Adviser makes the investment decisions for the
assets of
PROSPECTUS 14
<PAGE>
the Fund and continuously reviews, supervises and administers the Fund's
investment program. The Adviser discharges its responsibilities subject to the
supervision of, and policies established by, the Trustees of the Trust. The
Trust's shares are not deposits or obligations of, or endorsed or guaranteed by
BANC ONE CORPORATION or its bank or non-bank affiliates. The Trust's shares are
not insured or guaranteed by the Federal Deposit Insurance Corporation ("FDIC")
or by any other governmental agency or government sponsored agency of the
Federal government or any state.
The Adviser is an indirect, wholly-owned subsidiary of BANC ONE CORPORATION, a
bank holding company incorporated in the state of Ohio. BANC ONE CORPORATION
currently has affiliate banking organizations in Arizona, Colorado, Illinois,
Indiana, Kentucky, Ohio, Oklahoma, Texas, Utah, West Virginia and Wisconsin. In
addition, BANC ONE CORPORATION has several affiliates that engage in data
processing, venture capital, investment and merchant banking, and other
diversified services including trust management, investment management,
brokerage, equipment leasing, mortgage banking, consumer finance and insurance.
On a consolidated basis, BANC ONE CORPORATION had assets of over $86 billion as
of June 30, 1995.
The Adviser represents a consolidation of the investment advisory staffs of a
number of bank affiliates of BANC ONE CORPORATION, which have considerable
experience in the management of open-end management investment company
portfolios, including The One Group-Registered Trademark- since 1985 (then known
as "The Helmsman Fund").
Gary J. Madich, CFA, is the Senior Managing Director of Fixed Income Securities.
Mr. Madich joined the Adviser in February, 1995. Prior to joining the Adviser,
Mr. Madich was a Senior Vice President and Portfolio Manager with Federated
Investors. Mr. Madich has seventeen years of investment management experience.
Thomas E. Donne, CFA, has been Manager of the Fund since January 1995. For the
past seven years, Mr. Donne has held various investment management positions
with the Adviser or its affiliates.
The Adviser is entitled to a fee, which is calculated daily and paid monthly, at
an annual rate of .45% of the average daily net assets of the Fund. The Adviser
may voluntarily agree to waive a part of its fees. (See "About the Fund --
Expense Summary.") These fee waivers are voluntary and may be terminated at any
time. Shareholders will be notified in advance if and when these waivers are
terminated. During the fiscal year ended June 30, 1995, the Fund paid investment
advisory fees to the Adviser of .44% of the Fund's average daily net assets.
THE DISTRIBUTOR
The One Group-Registered Trademark- Services Company (the "Distributor"), a
wholly-owned subsidiary of the BISYS Group, Inc., and the Trust are parties to a
distribution agreement (the "Distribution Agreement") under which shares of the
Fund are sold on a continuous basis.
Class A shares are subject to a distribution and Shareholder services plan (the
"Plan"). As provided in the Plan, the Trust will pay the Distributor a fee of
.35% of the average daily net assets of Class A shares of the Fund. Currently,
the Distributor has voluntarily agreed to limit payments under the Plan to .25%
of the average daily net assets of Class A shares of the Fund. Up to .25% of the
fees payable under the Plan may be used as compensation for Shareholder services
by the Distributor and/ or financial institutions and intermediaries. All such
fees that may be paid under the Plan will be paid pursuant to Rule 12b-1 of the
Investment Company Act of 1940. The Distributor may apply these fees toward: (i)
compensation for its services in connection with distribution assistance or
provision of Shareholder services; or (ii) payments to financial institutions
and intermediaries such as banks (including affiliates of the Adviser), savings
and loan associations, insurance companies, investment counselors,
broker-dealers, and the Distributor's affiliates and subsidiaries, as
compensation for services or reimbursement of expenses incurred in connection
with distribution assistance or provision of Shareholder services.
Class B shares are subject to a Contingent Deferred Sales Charge if such shares
are redeemed prior to the sixth anniversary of purchase. Class B shares of the
Fund are subject to an ongoing distribution and Shareholder service fee as
provided in the Class B distribution and Shareholder services plan (the "Class B
Plan") at an annual rate of 1.00% of the Fund's average daily net assets, which
includes Shareholder servicing fees of .25% of the Fund's average daily net
assets. Currently, the Distributor has voluntarily agreed to limit payments
under the Class B Plan to .90% of the average daily net assets of the Class B
shares of the Fund.
Proceeds from the Contingent Deferred Sales Charge and the distribution and the
Shareholder service fees under the Class B Plan are payable to the Distributor
and financial intermediaries to defray the expenses of advance brokerage
commissions and expenses related to providing distribution-related and
Shareholder services to the Fund in connection with the sale of Class B shares,
such as the payment of compensation to dealers and agents for selling Class B
shares. The combination of the Contingent Deferred Sales Charge and the
distribution and Shareholder service fees facilitate the ability of the Fund to
sell the Class B shares without a sales charge being deducted at the time of
purchase.
The Plan and the Class B Plan are characterized as compensation plans since the
distribution fees will be paid to the Distributor without regard to the
distribution or Shareholder service expenses incurred by the Distributor or the
amount of payments made to financial institutions and intermediaries. The Fund
also may execute brokerage or other agency transactions through an affiliate of
the Adviser, or through the Distributor for which the affiliate or the
Distributor receives compensation. Pursuant to guidelines adopted by the Board
of Trustees of the Trust, any
15 PROSPECTUS
<PAGE>
such compensation will be reasonable and fair compared to compensation received
by other brokers in connection with comparable transactions.
During the fiscal year ended June 30, 1995, 440 Financial Distributors, Inc.,
the previous distributor to the Trust, received fees aggregating .25% of the
average daily net assets of the Class A shares of the Fund. In addition, 440
Financial Distributors, Inc. received annualized fees of .90% of the average
daily net assets of the Class B shares of the Fund.
Fiduciary Class shares of the Fund are offered without distribution fees to
institutional investors, including Authorized Financial Organizations. It is
possible that an institution may offer different classes of shares to its
customers and thus receive different compensation with respect to different
classes of shares. In addition, a financial institution that is the record owner
of shares for the account of its customers may impose separate fees for account
services to its customers.
THE ADMINISTRATOR
The One Group-Registered Trademark- Services Company (the "Administrator"), a
wholly-owned subsidiary of the BISYS Group, Inc., and the Trust are parties to
an administration agreement relating to the Fund (the "Administration
Agreement"). Under the terms of the Administration Agreement, the Administrator
is responsible for providing the Trust with administrative services (other than
investment advisory services), including regulatory reporting and all necessary
office space, equipment, personnel and facilities.
The Adviser also serves as Sub-Administrator to each fund of the Trust, pursuant
to an agreement between the Administrator and the Adviser. Pursuant to this
agreement, the Adviser performs many of the Administrator's duties, for which
the Adviser receives a fee paid by the Administrator.
The Administrator is entitled to a fee for administrative services, which is
calculated daily and paid monthly, at an annual rate of .20% of each fund's
average daily net assets on the first $1.5 billion in Trust assets (excluding
the Treasury Only Money Market Fund and the Government Money Market Fund), .18%
of each fund's average daily net assets to $2 billion in Trust assets (excluding
the Treasury Only Money Market Fund and the Government Money Market Fund), and
.16% of each fund's average daily net assets when Trust assets exceed $2 billion
(excluding the Treasury Only Money Market Fund and the Government Money Market
Fund). During the fiscal year ended June 30, 1995, 440 Financial, the previous
administrator to the Trust, received annualized fees of .16% of the Fund's
average daily net assets.
THE TRANSFER AGENT AND CUSTODIAN
State Street Bank and Trust Company, P.O. Box 8500, Boston, MA 02266-8500 acts
as Transfer Agent and Custodian for the Trust for which services it receives a
fee. The Custodian holds cash, securities and other assets of the Trust as
required by the Investment Company Act of 1940. Banc One Trust Company, N.A.
serves as Sub-Custodian in connection with the Trust's securities lending
activities, pursuant to an agreement between State Street Bank and Trust Company
and Bank One Trust Company. Bank One Trust Company receives a fee paid by the
Trust.
COUNSEL AND INDEPENDENT ACCOUNTANTS
Ropes & Gray serves as counsel to the Trust. Coopers & Lybrand L.L.P. serves as
the independent accountants of the Trust.
OTHER INFORMATION
THE TRUST
The Trust was organized as a Massachusetts Business Trust under a Declaration of
Trust filed on May 23, 1985. The Declaration of Trust permits the Trust to offer
separate funds and different classes of each fund. All consideration received by
the Trust for shares of any fund and all assets of such fund belong to that fund
and would be subject to liabilities related thereto.
The Trust pays its expenses, including fees of its service providers, audit and
legal expenses, expenses of preparing prospectuses, proxy solicitation material
and reports to Shareholders, costs of custodial services and registering the
shares under Federal and state securities laws, pricing, insurance expenses,
litigation and other extraordinary expenses, brokerage costs, interest charges,
taxes and organizational expenses. During the fiscal year of the Trust ended
June 30, 1995, the expenses of the Fund were .97% of the average daily net
assets of the Class A shares of the Fund, 1.62% of the average daily net assets
of the Class B shares of the Fund on an annual basis and .71% of the average
daily net assets of the Fiduciary Class shares of the Fund. These expenses would
have been 1.09%, 1.74% and .73% of the average daily net assets of such classes,
but for the voluntary reduction of the 12b-1 fees.
The Adviser and the Administrator of the Fund each bears all expenses incurred
in connection with the performance of their services as investment adviser and
administrator, respectively, other than the cost of securities (including
brokerage commissions, if any) purchased for the Fund.
As a general matter, as set forth in the Multiple Class Plan, expenses are
allocated to each class of shares of the Fund on the basis of the net asset
value of that class in relation to the net asset value of the Fund. At present,
the only expenses that are allocated to Class A and Class B shares, other than
in accordance with the relative net asset value of the class, are the different
distribution and Shareholder services costs. See "Expense Summary." At present,
no expenses are allocated to Fiduciary Class shares as a class that are not also
borne by the other classes of shares of the Fund in proportion to the relative
net asset value of the shares of such classes.
PROSPECTUS 16
<PAGE>
The organizational expenses of the Fund have been capitalized and are being
amortized in the first five years of the Fund's operations. Such amortization
will reduce the amount of income available for payment as dividends.
TRUSTEES OF THE TRUST
The management and affairs of the Trust are supervised by the Trustees under the
laws governing business trusts in the Commonwealth of Massachusetts. The
Trustees have approved contracts under which, as described above, certain
companies provide essential management services to the Trust.
VOTING RIGHTS
As set forth in the Multiple Class Plan, each share held entitles the
Shareholder of record to one vote. Each fund of the Trust will vote separately
on matters relating solely to that fund. In addition, each class of a fund shall
have exclusive voting rights on any matter submitted to Shareholders that
relates solely to that class, and shall have separate voting rights on any
matter submitted to Shareholders in which the interests of one class differ from
the interests of any other class. However, all fund Shareholders will have equal
voting rights on matters that affect all fund Shareholders equally. As a
Massachusetts Business Trust, the Trust is not required to hold annual meetings
of Shareholders but approval will be sought for certain changes in the operation
of the Trust and for the election of Trustees under certain circumstances. In
addition, a Trustee may be elected or removed by the remaining Trustees or by
Shareholders at a special meeting called upon written request of Shareholders
owning at least 10% of the outstanding shares of the Trust. In the event that
such a meeting is requested, the Trust will provide appropriate assistance and
information to the Shareholders requesting the meeting.
DIVIDENDS
Net investment income (exclusive of capital gains) is determined and declared
daily, and is distributed in the form of periodic dividends to Shareholders of
the Fund on the first Business Day of each month. Capital gains of the Fund, if
any, will be distributed at least annually.
To maintain a relatively even rate of distributions from the Fund rather than
having substantial fluctuations from period to period, the monthly distributions
level from the Fund may be fixed from time to time at rates consistent with the
Adviser's long-term earnings expectations.
Shareholders automatically receive all income dividends and capital gain
distributions in additional Class A, Class B, or Fiduciary Class shares, as
applicable, at the net asset value next determined following the record date,
unless the Shareholder has elected to take such payment in cash. Such election,
or any revocation thereof, must be made in writing, at least 15 days prior to
distribution, to the Transfer Agent at P.O. Box 8500, Boston, MA 02266-8500, and
will become effective with respect to dividends and distributions having record
dates after its receipt by the Transfer Agent. Reinvested dividends and
distributions receive the same tax treatment as dividends and distributions paid
in cash.
Class B shares received as dividends and capital gains distributions at the net
asset value next determined following the record date shall be held in a
separate Class B sub-account. Each time any Class B shares (other than those in
the sub-account) convert to Class A shares, a pro-rata portion of the Class B
shares in the sub-account will also convert to Class A shares. (See "Conversion
Feature.")
Dividends and distributions of the Fund are paid on a per-share basis. The value
of each share will be reduced by the amount of the payment. If shares are
purchased shortly before the record date for a dividend or the distribution of
capital gains, a Shareholder will pay the full price for the shares and receive
some portion of the price back as a taxable dividend or distribution even though
such distribution would, in effect, represent a return of the Shareholder's
investment.
The amount of dividends payable on Fiduciary Class shares will be more than the
dividends payable on Class A and Class B shares because of the distribution
expenses charged to Class A and Class B shares.
SHAREHOLDER INQUIRIES
Shareholder inquiries should be directed to the Administrator, The One
Group-Registered Trademark- Services Company, 3435 Stelzer Road, Columbus, OH
43219.
REPORTING
The Trust issues unaudited financial information semiannually and audited
financial statements annually. The Trust furnishes proxy statements and other
reports to Shareholders of record.
OTHER INVESTMENT POLICIES
TEMPORARY DEFENSIVE POSITION
For temporary defensive purposes during periods when the Adviser determines that
market conditions warrant such action, the Fund may invest up to 100% of its
assets in money market instruments, and may hold a portion of its assets in cash
for liquidity purposes.
To the extent the Fund is engaged in a temporary defensive position, it will not
be pursuing its investment objective.
PORTFOLIO TURNOVER
For the fiscal year ended June 30, 1995, the portfolio turnover rate for the
Fund was 106.14%.
The 106.14% turnover rate for the Fund during the fiscal year ended June 30,
1995 was down from the prior year. The turnover rate was impacted by market
volatility and growth in the net
17 PROSPECTUS
<PAGE>
assets of the Fund; both of which prompted shifts of assets between market
sectors, such as U.S. Treasury securities and U.S. Agency Mortgage obligations.
The portfolio turnover rate for the Fund may vary greatly from year to year, as
well as within a particular year. Higher portfolio turnover rates will likely
result in higher transaction costs to the Fund and may result in additional tax
consequences to the Fund's Shareholders.
INVESTMENT LIMITATIONS
The investment objective and the following investment limitations are
fundamental policies of the Fund. Fundamental policies cannot be changed without
the consent of the holders of a majority of the Fund's outstanding shares. The
term "majority of the outstanding shares" means the vote of (i) 67% or more of
the Fund's shares present at a meeting, if more than 50% of the outstanding
shares of the Fund are present or represented by proxy, or (ii) more than 50% of
the Fund's outstanding shares, whichever is less.
The Fund may not:
1. Purchase securities of any issuer (except securities issued or guaranteed by
the United States, its agencies or instrumentalities and, if consistent with the
Fund's investment objective and policies, repurchase agreements involving such
securities) if as a result more than 5% of the total assets of the Fund would be
invested in the securities of such issuer or the Fund would own more than 10% of
the outstanding voting securities of such issuer. This restriction applies to
75% of the Fund's assets. For purposes of these limitations, a security is
considered to be issued by the government entity whose assets and revenues
guarantee or back the security. With respect to private activity bonds or
industrial development bonds backed only by the assets and revenues of a
non-governmental user, such user would be considered the issuer.
2. Purchase any securities that would cause more than 25% of the total assets of
the Fund to be invested in the securities of one or more issuers conducting
their principal business activities in the same industry, provided that this
limitation does not apply to investments in obligations issued or guaranteed by
the U.S. government or its agencies and instrumentalities and repurchase
agreements involving such securities. For purposes of this limitation (i)
utilities will be divided according to their services (for example, gas, gas
transmission, electric and telephone will each be considered a separate
industry); and (ii) wholly-owned finance companies will be considered to be in
the industries of their parents if their activities are primarily related to
financing the activities of their parents.
3. Make loans, except that the Fund may (i) purchase or hold debt instruments in
accordance with its investment objective and policies; (ii) enter into
repurchase agreements; and (iii) engage in securities lending as described in
this Prospectus and in the Statement of Additional Information.
The foregoing percentages will apply at the time of the purchase of a security.
Additional investment limitations are set forth in the Statement of Additional
Information.
DESCRIPTION OF PERMITTED INVESTMENTS
The following is a description of certain of the permitted investments for the
Fund.
U.S. TREASURY OBLIGATIONS -- The Fund may invest in bills, notes and bonds
issued by the U.S. Treasury and separately traded interest and principal
component parts of such obligations that are transferable through the Federal
book-entry system known as Separately Traded Registered Interest and Principal
Securities ("STRIPS") and Coupon Under Book Entry Safekeeping ("CUBES").
RECEIPTS -- The Fund may purchase interests in separately traded interest and
principal component parts of U.S. Treasury obligations that are issued by banks
or brokerage firms and are created by depositing U.S. Treasury notes and
Treasury bonds into a special account at a custodian bank. The custodian holds
the interest and principal payments for the benefit of the registered owners of
the certificates or receipts. The custodian arranges for the issuance of the
certificates or receipts evidencing ownership and maintains the register.
Receipts include Treasury Receipts ("TRS"), Treasury Investment Growth Receipts
("TIGRS"), and Certificates of Accrual on Treasury Securities ("CATS").
STRIPS, CUBES, TRS, TIGRS and CATS are sold as zero coupon securities, which
means that they are sold at a substantial discount and redeemed at face value at
their maturity date without interim cash payments of interest or principal. This
discount is amortized over the life of the security, and such amortization will
constitute the income earned on the security for both accounting and tax
purposes. Because of these features, these securities may be subject to greater
interest rate volatility than interest-paying U.S. Treasury obligations. The
Fund may invest up to 20% of its total assets in STRIPS, CUBES, TRS, TIGRS and
CATS. See also "Taxes."
CERTIFICATES OF DEPOSIT -- Certificates of deposit are negotiable interest
bearing instruments with a specific maturity. Certificates of deposit ("CDs")
are issued by banks and savings and loan institutions in exchange for the
deposit of funds and normally can be traded in the secondary market prior to
maturity.
TIME DEPOSITS -- Time deposits are non-negotiable receipts issued by a bank in
exchange for the deposit of funds. Like a certificate of deposit, a time deposit
("TD") earns a specified rate of interest over a definite period of time;
however, it cannot be traded in the secondary market. Time deposits with a
withdrawal penalty are considered to be illiquid securities; therefore, the Fund
will not invest more than 15% of its total assets in such time deposits and
other illiquid securities.
BANKERS' ACCEPTANCES -- Bankers' acceptances are bills of exchange or time
drafts drawn on and accepted by (i.e., made an
PROSPECTUS 18
<PAGE>
obligation of) a commercial bank. They are used by corporations to finance the
shipment and storage of goods and to furnish dollar exchange. Maturities are
generally six months or less.
COMMERCIAL PAPER -- Commercial paper is the term used to designate unsecured
short-term promissory notes issued by corporations and other entities.
Maturities on these issues vary from a few days to nine months.
U.S. GOVERNMENT AGENCIES -- Certain Federal agencies have been established as
instrumentalities of the U.S. government to supervise and finance specific types
of activities. Select agencies, such as the Government National Mortgage
Association ("Ginnie Mae") and the Export-Import Bank, are supported by the full
faith and credit of the U.S. Treasury; others, such as the Federal National
Mortgage Association ("Fannie Mae"), are supported by the credit of the
instrumentality and have the right to borrow from the U.S. Treasury; others are
supported by the authority of the U.S. government to purchase the agency's
obligations; while still others, such as the Federal Farm Credit Banks and the
Federal Home Loan Mortgage Corporation ("Freddie Mac"), are supported solely by
the credit of the instrumentality itself. No assurance can be given that the
U.S. government would provide financial support to U.S. government sponsored
agencies or instrumentalities if it is not obligated to do so by law.
Obligations of U.S. government agencies include debt issues and mortgage-backed
securities issued or guaranteed by select agencies.
INVESTMENT COMPANY SECURITIES -- The Fund may invest up to 5% of its total
assets in the securities of any one investment company, but may not own more
than 3% of the securities of any one investment company or invest more than 10%
of its assets in the securities of other investment companies. In accordance
with an exemptive order issued to the Trust by the SEC, such other investment
company securities may include securities of a money market fund of the Trust,
and such companies may include companies of which the Adviser or a sub-adviser
to a fund of the Trust, or an affiliate of such Adviser or sub-adviser, serves
as investment adviser, administrator or distributor. Because other investment
companies employ an investment adviser, such investment by the Fund may cause
Shareholders to bear duplicate fees. The Adviser will waive its fee attributable
to the assets of the investing fund invested in a money market fund of the
Trust; and, to the extent required by the laws of any state in which shares of
the Trust are sold, the Adviser will waive its fees attributable to the assets
of the Fund invested in any investment company.
REPURCHASE AGREEMENTS -- Repurchase agreements are agreements by which a person
obtains a security and simultaneously commits to return the security to the
seller at an agreed upon price (including principal and interest) on an agreed
upon date within a number of days from the date of purchase. The custodian or
its agent will hold the security as collateral for the repurchase agreement.
Collateral must be maintained at a value at least equal to 100% of the
repurchase price. The Fund bears a risk of loss in the event the other party
defaults on its obligations and the Fund is delayed or prevented from its right
to dispose of the collateral securities or if the Fund realizes a loss on the
sale of the collateral securities. The Adviser will enter into repurchase
agreements on behalf of the Fund only with financial institutions deemed to
present minimal risk of bankruptcy during the term of the agreement based on
guidelines established and periodically reviewed by the Trustees. Repurchase
agreements are considered by the SEC to be loans under the Investment Company
Act of 1940.
REVERSE REPURCHASE AGREEMENTS -- The Fund may borrow funds for temporary
purposes by entering into reverse repurchase agreements. Pursuant to such
agreements, the Fund would sell portfolio securities to financial institutions
such as banks and broker-dealers and agree to repurchase them at a mutually
agreed-upon date and price. The Fund will enter into reverse repurchase
agreements only to avoid otherwise selling securities during unfavorable market
conditions to meet redemptions. At the time the Fund enters into a reverse
repurchase agreement, it would place in a segregated custodial account assets,
such as liquid high grade debt securities consistent with the Fund's investment
restrictions and having a value equal to the repurchase price (including accrued
interest), and would subsequently monitor the account to ensure that such
equivalent value was maintained. Reverse repurchase agreements involve the risk
that the market value of securities sold by the Fund may decline below the price
at which the Fund is obligated to repurchase the securities. Reverse repurchase
agreements are considered by the SEC to be borrowings by the Fund under the
Investment Company Act of 1940.
SECURITIES LENDING -- In order to generate additional income, the Fund may lend
up to 33% of the securities in which it is invested pursuant to agreements
requiring that the loan be continuously secured by cash, securities of the U.S.
government or its agencies, shares of an investment trust or mutual fund or any
combination of cash and such securities as collateral equal at all times to at
least 100% of the market value plus accrued interest on the securities lent. The
Fund will continue to receive interest on the securities lent while
simultaneously seeking to earn interest on the investment of cash collateral in
U.S. government securities, shares of an investment trust or mutual fund, or
other short-term, highly liquid investments. Collateral is marked to market
daily to provide a level of collateral at least equal to the market value of the
securities lent. There may be risks of delay in recovery of the securities or
even loss of rights in the collateral should the borrower of the securities fail
financially. However, loans will only be made to borrowers deemed by the Adviser
to be of good standing under guidelines established by the Trust's Board of
Trustees and when, in the judgment of the Adviser, the consideration which can
be earned currently from such securities loans justifies the attendant risk. The
Fund will enter into loan arrangements only with counterparties which the
Adviser has deemed to be creditworthy under guidelines established by the Board
of Trustees. Loans are subject to termination by the Fund or the borrower at any
time, and are therefore, not considered to be illiquid investments.
RESTRICTED SECURITIES -- The Fund may invest in commercial paper issued in
reliance on the exemption from registration
19 PROSPECTUS
<PAGE>
afforded by Section 4(2) of the Securities Act of 1933. Section 4(2) commercial
paper is restricted as to disposition under Federal securities law and is
generally sold to institutional investors, such as the Fund, who agree that they
are purchasing the paper for investment purposes and not with a view to public
distribution. Any resale by the purchaser must be in an exempt transaction.
Section 4(2) commercial paper is normally resold to other institutional
investors like the Fund through or with the assistance of the issuer or
investment dealers who make a market in Section 4(2) commercial paper, thus
providing liquidity. The Fund believes that Section 4(2) commercial paper and
possibly certain other restricted securities that meet the criteria for
liquidity established by the Trustees are quite liquid. The Fund intends,
therefore, to treat the restricted securities that meet the criteria for
liquidity established by the Trustees, including Section 4(2) commercial paper,
as determined by the Adviser, as liquid and not subject to the investment
limitation applicable to illiquid securities. In addition, because Section 4(2)
commercial paper is liquid, the Fund will not subject such paper to the
limitation applicable to restricted securities.
The ability of the Trustees to determine the liquidity of certain restricted
securities is permitted under an SEC staff position set forth in the adopting
release for Rule 144A under the Securities Act of 1933 (the "Rule"). The Rule is
a nonexclusive safe-harbor for certain secondary market transactions involving
securities subject to restrictions on resale under Federal securities laws. The
Rule provides an exemption from registration for resales of otherwise restricted
securities to qualified institutional buyers. The Rule is expected to further
enhance the liquidity of the secondary market for securities eligible for resale
under Rule 144A. The Fund believes that the staff of the SEC has left the
question of determining the liquidity of all restricted securities to the
Trustees. The Trustees have directed the Adviser to consider the following
criteria in determining the liquidity of certain restricted securities:
- - the frequency of trades and quotes for the security;
- - the number of dealers willing to purchase or sell the security and the number
of other potential buyers;
- - dealer undertakings to make a market in the security; and
- - the nature of the security and the nature of the marketplace trades.
VARIABLE AND FLOATING RATE INSTRUMENTS -- Certain of the obligations purchased
by the Fund may carry variable or floating rates of interest, may involve a
conditional or unconditional demand feature and may include variable amount
master demand notes. A demand instrument with a demand notice period exceeding
seven days may be considered illiquid if there is no secondary market for such
security; therefore, the Fund will not invest more than 15% of its total assets
in such instruments and other illiquid securities. The interest rates on these
securities may be reset daily, weekly, quarterly or some other reset period, and
may have a floor or ceiling on interest rate charges. There is a risk that the
current interest rate on such obligations may not accurately reflect existing
market interest rates.
There is no limit on the extent to which the Fund may purchase variable and
floating rate instruments that are not illiquid. The Fund will purchase variable
and floating rate instruments to facilitate Fund liquidity or to permit the
investment of the Fund's assets at a favorable rate of return.
SECURITIES PURCHASED ON A WHEN-ISSUED BASIS AND FORWARD COMMITMENTS -- The Fund
may purchase securities on a when-issued basis when deemed by the Adviser to
present attractive investment opportunities. When-issued securities are
purchased for delivery beyond the normal settlement date at a stated price and
yield, thereby involving the risk that the yield obtained will be less than that
available in the market at delivery. Although the purchase of securities on a
when-issued basis is not considered leveraging, it has the effect of leveraging.
When the Adviser purchases a when-issued security, the Custodian will set aside
cash or liquid securities to satisfy the purchase commitment. The Fund generally
will not pay for such securities or earn interest on them until received.
Commitments to purchase when-issued securities will not, under normal market
conditions, exceed 40% of the Fund's total assets, and a commitment will not
exceed 180 days. The Fund will only purchase when-issued securities for the
purpose of acquiring portfolio securities and not for speculative purposes.
In a forward commitment transaction, the Fund contracts to purchase securities
for a fixed price at a future date beyond customary settlement time. The Fund is
required to hold and maintain in a segregated account until the settlement date,
cash, U.S. government securities or liquid high-grade debt obligations in an
amount sufficient to meet the purchase price. Alternatively, the Fund may enter
into offsetting contracts for the forward sale of other securities that it owns.
The purchase of securities on a when-issued or forward commitment basis involves
a risk of loss if the value of the security to be purchased declines prior to
the settlement date. Although the Fund would generally purchase securities on a
when-issued or forward commitment basis with the intention of actually acquiring
securities for its portfolio, the Fund may dispose of a when-issued security or
forward commitment prior to settlement if the Adviser deems it appropriate to do
so.
OPTIONS -- The Fund may purchase and write (i.e., sell) call options and put
options on securities and indices, which options are traded on national
securities exchanges. A call option gives the purchaser the right to buy, and
obligates the writer of the option to sell, the underlying security at the
agreed upon exercise (or "strike") price during the option period. A put option
gives the purchaser the right to sell, and obligates the writer to buy, the
underlying security at the strike price during the option period. Purchasers of
options pay an amount, known as a premium, to the option writer in exchange for
the right under the option contract. Option contracts may be written with terms
that would permit the holder of the option to purchase or sell the underlying
security only upon the expiration date of the option. The initial purchase
(sale) of an option contract is an "opening transaction." In order to close out
an option position, the Fund may enter into a "closing transaction," the sale
(purchase) of an
PROSPECTUS 20
<PAGE>
option contract on the same security with the same exercise price and expiration
date as the option contract originally opened.
The Fund may purchase put and call options in hedging transactions to protect
against a decline in the market value of the securities in the Fund (e.g., by
the purchase of a put option) and to protect against an increase in the cost of
fixed-income securities that the Fund may seek to purchase in the future (e.g.,
by the purchase of a call option). In the event that paying premiums for put and
call options, together with price movements in the underlying securities, are
such that exercise of the options would not be profitable for the Fund, losses
of the premiums paid may be offset by an increase in the value of the Fund's
securities (in the case of a purchase of put options) or by a decrease in the
cost of acquisition of securities by the Fund (in the case of a purchase of call
options).
The Fund also may write secured put and covered call options as a means of
increasing the yield on the Fund and as a means of providing limited protection
against decreases in market value of the Fund.
There are risks associated with options transactions, including the following:
(i) the success of a hedging strategy may depend on the ability of the Adviser
to predict movements in the prices of the individual securities, fluctuations in
markets and movements in interest rates; (ii) there may be an imperfect or no
correlation between the changes in market value of the securities held by the
Fund and the prices of options; (iii) there may not be a liquid secondary market
for options; and (iv) while the Fund will receive a premium when it writes
covered call options, it may not participate fully in a rise in the market value
of the underlying security. It is expected that the Fund will only engage in
option transactions with respect to permitted investments and related indices.
Generally, the policy of the Fund, in order to avoid the exercise of an option
sold by it, will be to cancel its obligation under the option by entering into a
closing purchase transaction, if available, unless selling (in the case of a
call option) or purchasing (in the case of a put option) the underlying
securities is determined to be in the Fund's interest. A closing purchase
transaction consists of a Fund purchasing an option having the same terms as the
option sold by the Fund, and has the effect of cancelling the Fund's position as
a seller. The premium which a Fund will pay in executing a closing purchase
transaction may be higher (or lower) than the premium received when the option
was sold, depending in large part upon the relative price of the underlying
security at the time of each transaction. To the extent options sold by a Fund
are exercised and the Fund either delivers securities to the holder of a call
option or liquidates securities as a source of funds to purchase securities put
to the Fund, the Fund's turnover rate will increase, which would cause the Fund
to incur additional brokerage expenses.
During the option period, the Fund, as a covered call writer, gives up the
potential appreciation above the exercise price should the underlying security
rise in value, and the Fund, as a covered put writer, retains the risk of loss
should the underlying security decline in value. For the covered call writer,
substantial appreciation in the value of the underlying security would result in
the security being "called away" at the strike price of the option which may be
substantially below the fair market value of such security. For the covered put
writer, substantial depreciation in the value of the underlying security would
result in the security being "put to" the writer at the strike price of the
option which may be substantially in excess of the fair market value of such
security. If a covered call option or a covered put option expires unexercised,
the writer realizes a gain, and the buyer a loss, in the amount of the premium.
The SEC requires that obligations of investment companies such as the Fund, in
connection with option sale positions, must comply with certain segregation or
coverage requirements, which are more fully described in the Statement of
Additional Information.
The Fund will only write covered call options on its securities and will limit
such activities to provide that the aggregate market value of such options and
the Fund's obligations under such written puts does not exceed 25% of the Fund's
total assets as of the time such options are entered into by the Fund.
FUTURES CONTRACTS AND RELATED OPTIONS -- The Fund may enter into futures
contracts, options on futures contracts, index futures and options thereon that
are traded on an exchange regulated by the Commodities Futures Trading
Commission ("CFTC") if, to the extent that such futures and options are not for
"bona fide hedging purposes" (as defined by the CFTC), the aggregate initial
margin and premiums on such positions (excluding the amount by which options are
in the money) do not exceed 5% of the Fund's total assets at current value. The
Fund, however, may invest more than such amount for bona fide hedging purposes,
and also may invest more than such amount if it obtains authority to do so from
the appropriate regulatory agencies without rendering the Fund a commodity pool
operator or adversely affecting its status as an investment company for Federal
securities law or income tax purposes.
The Fund may buy and sell futures contracts and related options to manage its
exposure to changing interest rates and security prices. Some futures
strategies, including selling futures, buying puts and writing calls, may reduce
the Fund's exposure to price fluctuations. Other strategies, including buying
futures, writing puts and buying calls, tend to increase market exposure.
Futures and options may be combined with each other in order to adjust the risk
and return characteristics of the overall portfolio. The Fund expects to enter
into these transactions to "lock in" a return or spread on a particular
investment or portion of its assets, to protect against any increase in the
price of securities the Fund anticipates purchasing at a later date, or for
other risk management strategies.
Options and futures can be volatile instruments, and involve certain risks. If
the Adviser applies a hedge at an inappropriate time or judges interest rates
incorrectly, options and futures strategies may lower the Fund's return. The
Fund could also
21 PROSPECTUS
<PAGE>
experience losses if the prices of its options and futures positions were poorly
correlated with its other instruments, or if it could not close out its
positions because of an illiquid secondary market.
Typically, investment in these contracts requires the Fund to deposit with the
applicable exchange or other specified financial intermediary as a good faith
deposit for its obligations, known as "initial margin," an amount of cash or
specified debt securities that initially is 1%-15% of the face amount of the
contract and that thereafter fluctuates on a periodic basis as the value of the
contract fluctuates. Thereafter, the Fund must make additional deposits equal to
any net losses due to unfavorable price movements of the contract and will be
credited with an amount equal to any net gains due to favorable price movements.
These additional deposits or credits are calculated and required daily and are
known as "variation margin."
The SEC requires that when an investment company such as the Fund effects
transactions of the foregoing nature, it must either segregate cash or high
quality, readily marketable portfolio securities with its custodian in the
amount of its obligations under the foregoing transactions or must cover such
obligations by maintaining positions in portfolio securities, futures contracts
or options that would serve to satisfy or offset the risk of such obligations.
When effecting transactions of the foregoing nature, the Fund will comply with
such segregation or cover requirements. No limitation exists on the amount of
the Fund's assets that may be used to comply with such segregation or cover
requirements.
The Fund also may engage in straddles and spreads with respect to 15% of its
assets. In a straddle transaction, the Fund either buys a call and a put or
sells a call and a put on the same security. In a spread, the Fund purchases and
sells a call or a put. The Fund will sell a straddle when the Adviser believes
the price of a security will be stable. The Fund will receive a premium on the
sale of the put and the call. A spread permits the Fund to make a hedged
investment that the price of a security will increase or decline.
STRUCTURED INSTRUMENTS -- The Fund may invest, from time to time, in one or more
structured instruments. Structured instruments are debt securities issued by
agencies of the U.S. government (such as the Student Loan Marketing Association
("Sallie Mae"), Ginnie Mae, Fannie Mae, and Freddie Mac), banks, corporations,
and other business entities whose interest and/or principal payments are indexed
to certain specific foreign currency exchange rates, interest rates, or one or
more other reference indexes. Structured instruments frequently are assembled in
the form of medium-term notes, but a variety of forms are available and may be
used in particular circumstances.
The terms of such structured instruments provide that their principal and/or
interest payments are adjusted upwards or downwards to reflect changes in the
reference index while the structured instruments are outstanding. In addition,
the reference index may be used in determining when the principal is redeemed.
As a result, the interest and/or principal payments that may be made on a
structured product may vary widely, depending on a variety of factors, including
the volatility of the reference index and the effect of changes in the reference
index on principal and/or interest payments.
While structured instruments may offer the potential for a favorable rate of
return, from time to time, they also entail certain risks. Structured
instruments may be less liquid than other debt securities, and the price of
structured instruments may be more volatile. If the value of the reference index
changes in a manner other than that expected by the Adviser, principal and/or
interest payments on the structured instrument may be substantially less than
expected. The Fund will only invest in structured securities that are consistent
with the Fund's investment objective, policies and restrictions and the
Adviser's outlook on market conditions. In some cases, depending on the terms of
the reference index, a structured instrument may provide that the principal
and/or interest payments may be adjusted below zero; however, the Fund will not
invest in structured instruments if the terms of the structured instrument
provide that the Fund may be obligated to pay more than its initial investment
in the structured instrument, or to repay any interest or principal that has
already been collected or paid back. In addition, many structured instruments
may not be registered under the Federal securities laws. In that event, the
Fund's ability to resell such a structured instrument may be more limited than
its ability to resell other portfolio securities. The Fund will treat such
instruments as illiquid, and will limit its investments in such instruments to
no more than 15% of its total assets, when combined with all other illiquid
investments of the Fund. Structured instruments that are registered under
Federal securities laws may be treated as liquid. In addition, although
structured instruments may be sold in the form of a corporate debt obligation,
they may not have some of the protection against counterparty default that may
be available with respect to publicly traded debt securities (i.e., the
existence of a trust indenture). In that respect, the risks of default
associated with structured instruments may be similar to those associated with
swap contracts. See "Swaps, Caps and Floors."
SWAPS, CAPS AND FLOORS -- In order to protect the value of the Fund from
interest rate fluctuations and to hedge against fluctuations in the floating
rate market in which the Fund's investments are traded, the Fund may enter into
swaps, caps, and floors on various securities (such as U.S. government
securities), securities indexes, interest rates, prepayment rates, foreign
currencies or other financial instruments or indexes, for both hedging and
non-hedging purposes. While swaps, caps, and floors (sometimes hereinafter
collectively referred to as "swap contracts") are different from futures
contracts (and options on futures contracts) in that swap contracts are
individually negotiated with specific counterparties, the Fund will use swap
contracts for purposes similar to the purposes for which it uses options,
futures, and options on futures. Those uses of swap contracts (i.e., risk
management and hedging) present the Fund with risks and opportunities similar to
those associated with options contracts, futures contracts, and options on
futures. See "Futures Contracts and Related Options," and "Options."
PROSPECTUS 22
<PAGE>
The Fund may enter into these transactions to manage its exposure to changing
interest rates and other market factors. Some transactions may reduce the Fund's
exposure to market fluctuations while others may tend to increase market
exposure.
Swap contracts typically involve an exchange of obligations by two sophisticated
parties. For example, in an interest rate swap, the Fund may exchange with
another party their respective rights to receive interest, such as an exchange
of fixed rate payments for floating rate payments. Currency swaps involve the
exchange of respective rights to make or receive payments in specified
currencies. Mortgage swaps are similar to interest rate swaps in that they
represent commitments to pay and receive interest. The notional principal
amount, however, is tied to a reference pool or pools of mortgages.
Caps and floors are variations on swaps. The purchase of a cap entitles the
purchaser to receive a principal amount from the party selling the cap to the
extent that a specified index exceeds a predetermined interest rate or amount.
The purchase of an interest rate floor entitles the purchaser to receive
payments on a notional principal amount from the party selling the floor to the
extent that a specified index falls below a predetermined interest rate or
amount. Caps and floors are similar in many respects to over-the-counter options
transactions, and may involve investment risks that are similar to those
associated with options transactions and options on futures contracts.
Because swap contracts are individually negotiated, they remain the obligation
of the respective counterparties, and there is a risk that a counterparty will
be unable to meet its obligations under a particular swap contract. If a
counterparty defaults on a swap contract with the Fund, the Fund may suffer a
loss. To address this risk, the Fund will usually enter into interest rate swaps
on a net basis, which means that the two payment streams (one from the Fund to
the counterparty, one to the Fund from the counterparty) are netted out, with
the Fund receiving or paying, as the case may be, only the net amount of the two
payments. Interest rate swaps do not involve the delivery of securities, other
underlying assets, or principal, except for purposes of collateralization, as
discussed below. Accordingly, the risk of loss with respect to interest rate
swaps entered into on a net basis would be limited to the net amount of the
interest payments that the Fund is contractually obligated to make. If the other
party to an interest rate swap defaults, the Fund's risk of loss consists of the
net amount of interest payments that the Fund is contractually entitled to
receive. To protect against losses related to counterparty default, the Fund may
enter into swap contracts that require transfers of collateral for changes in
market value. In contrast, currency swaps and other types of swap contracts may
involve the delivery of the entire principal value of one designated currency or
financial instrument in exchange for the other designated currency or financial
instrument. Therefore, the entire principal value of such swaps may be subject
to the risk that the other party will default on its contractual delivery
obligations.
In addition, because swap contracts are individually negotiated and ordinarily
non-transferable, there also may be circumstances in which it would be
impossible for the Fund to close out its obligations under the swap contract.
Under such circumstances, the Fund might be able to negotiate another swap
contract with a different counterparty to offset the risk associated with the
first swap contract. Unless the Fund is able to negotiate such an offsetting
swap contract, however, the Fund could be subject to continued adverse
developments, even after the Adviser has determined that it would be prudent to
close out or offset the first swap contract.
The Fund will not enter into any mortgage swap, interest rate swap, cap or floor
transaction unless the unsecured commercial paper, senior debt, or the claims
paying ability of the other party thereto is rated in the highest or second
highest rating category by at least one NRSRO at the time of investment, or, if
unrated, determined by the Adviser to be of comparable quality.
The use of swaps involves investment techniques and risks different from and
potentially greater than those associated with ordinary portfolio securities
transactions. If the Adviser is incorrect in its expectations of market values,
interest rates, or currency exchange rates, the investment performance of the
Fund would be less favorable than it would have been if this investment
technique were not used.
The staff of the SEC is presently considering its position with respect to
swaps, caps and floors as senior securities. Pending a determination by the
staff, the Fund will either treat swaps, caps and floors as being subject to its
senior securities restrictions or will refrain from engaging in swaps, caps and
floors. Once the staff has expressed a position with respect to swaps, caps and
floors, the Fund intends to engage in swaps, caps and floors, if at all, in a
manner consistent with such position. To the extent the net amount of an
interest rate or mortgage swap is held in a segregated account, consisting of
cash or liquid, high grade debt securities, the Adviser believes that swaps do
not constitute senior securities under the Investment Company Act of 1940 and,
accordingly, will not treat them as being subject to the Fund's borrowing
restrictions. The net amount of the excess, if any, of the Fund's obligations
over its entitlements with respect to each interest rate swap will be accrued on
a daily basis and an amount of cash or liquid securities having an aggregate net
asset value at least equal to the accrued excess will be maintained in a
segregated account by the Fund's Custodian.
The Fund will generally limit its investments in swaps, caps and floors to 25%
of its total assets.
NEW FINANCIAL PRODUCTS -- New options and futures contracts and other financial
products, and various combinations thereof, continue to be developed and the
Fund may invest in any such options, contracts and products as may be developed
to the extent consistent with its investment objective, policies and
restrictions and the regulatory requirements applicable to investment companies.
23 PROSPECTUS
<PAGE>
These various products may be used to adjust the risk and return characteristics
of the Fund's portfolio of investments. These various products may increase or
decrease exposure to security prices, interest rates, commodity prices, or other
factors that affect security values, regardless of the issuer's credit risk. If
market conditions do not perform consistent with expectations, the performance
of the Fund would be less favorable than it would have been if these products
were not used. In addition, losses may occur if counterparties involved in
transactions do not perform as promised. These products may expose the Fund to
potentially greater return as well as potentially greater risk of loss than more
traditional fixed income investments.
The Fund will generally limit its investments in new financial products to 25%
of its total assets.
MUNICIPAL SECURITIES -- The Fund may invest in municipal securities. Municipal
securities consist of (i) debt obligations issued by or on behalf of public
authorities to obtain funds to be used for various public facilities, for
refunding outstanding obligations, for general operating expenses, and for
lending such funds to other public institutions and facilities; and (ii) certain
private activity and industrial development bonds issued by or on behalf of
public authorities to obtain funds to provide for the construction, equipment,
repair, or improvement of privately operated facilities. Municipal notes include
general obligation notes, tax anticipation notes, revenue anticipation notes,
bond anticipation notes, certificates of indebtedness, demand notes and
construction loan notes and participation interests in municipal notes.
Municipal bonds include general obligation bonds, revenue or special obligation
bonds, private activity and industrial development bonds, and participation
interests in municipal bonds. General obligation bonds are backed by the taxing
power of the issuing municipality. Revenue bonds are backed by the revenues of a
project or facility, tolls from a toll bridge for example. The payment of
principal and interest on private activity and industrial development bonds
generally is dependent solely on the ability of the facility's user to meet its
financial obligations and the pledge, if any, of real and personal property so
financed as security for such payment.
Municipal securities may include obligations of municipal housing authorities
and single-family mortgage revenue bonds. Weaknesses in Federal housing subsidy
programs and their administration may result in a decrease of subsidies
available for payment of principal and interest on housing authority bonds.
Economic developments, including fluctuations in interest rates and increasing
construction and operating costs, may also adversely impact revenues of housing
authorities. In the case of some housing authorities, inability to obtain
additional financing could also reduce revenues available to pay existing
obligations. Single-family mortgage revenue bonds are subject to extraordinary
mandatory redemption at par in whole or in part from the proceeds derived from
prepayments of underlying mortgage loans and also from the unused proceeds of
the issue within a stated period which may be within a year from the date of
issue.
Municipal leases are obligations issued by state and local governments or
authorities to finance the acquisition of equipment and facilities and may be
considered to be illiquid. They may take the form of a lease, an installment
purchase contract, a conditional sales contract, or a participation interest in
any of the above. The Fund will limit its investment in municipal leases to no
more than 5% of total assets. The Board of Trustees is responsible for
determining the credit quality of unrated municipal leases, on an ongoing basis,
including an assessment of the likelihood that the lease will not be cancelled.
The exclusion from gross income for Federal income tax purposes for certain
housing authority bonds depends on qualification under relevant provisions of
the Code and on other provisions of Federal law. These provisions of Federal law
contain certain ongoing requirements relating to the cost and location of the
residences financed with the proceeds of the single-family mortgage bonds and
the income levels of tenants of the rental projects financed with the proceeds
of the multi-family housing bonds. While the issuers of the bonds, and other
parties, including the originators and servicers of the single-family mortgages
and the owners of the rental projects financed with the multi-family housing
bonds, covenant to meet these ongoing requirements and generally agree to
institute procedures designed to insure that these requirements are met, there
can be no assurance that these ongoing requirements will be consistently met.
The failure to meet these requirements could cause the interest on the bonds to
become taxable, possibly retroactively from the date of issuance, thereby
reducing the value of the bonds, subjecting Shareholders to unanticipated tax
liabilities. Furthermore, any failure to meet these ongoing requirements might
constitute an event of default under the applicable mortgage or permit the
holder to accelerate payment of the bond or require the issuer to redeem the
bond. In any event, where the mortgage is insured by the Federal Housing
Administration ("FHA"), the consent of the FHA may be required before insurance
proceeds would become payable to redeem the mortgage subsidy bonds.
DEMAND FEATURES -- The Fund may acquire securities that are subject to puts and
standby commitments ("demand features") to purchase the securities at their
principal amount (usually with accrued interest) within a fixed period (usually
seven days) following a demand by the Fund. The demand feature may be issued by
the issuer of the underlying securities, a dealer in the securities or by
another third party, and may not be transferred separately from the underlying
security.
The underlying municipal securities subject to a put may be sold at any time at
the market rates. However, unless the put was an integral part of the security
as originally issued, it may not be marketable or assignable; therefore, the put
would only have value to the Fund. The Fund expects that it will generally
acquire puts only where the puts are available without the payment of any direct
or indirect consideration. However, if advisable or necessary, in certain cases
a premium may be paid for put features. A premium paid will have the effect of
reducing the yield otherwise payable on the underlying security. The purpose of
engaging in transactions involving puts is to maintain
PROSPECTUS 24
<PAGE>
flexibility and liquidity to permit the Fund to meet redemption requests and
remain as fully invested as possible in municipal securities. The Fund will
limit its put transactions to institutions that the Adviser believes present
minimal credit risk.
There is no limit to the percentage of portfolio securities that may be
purchased subject to a put. However, the Fund will not acquire a put which was
not an integral part of the security as originally issued if such acquisition
would cause the aggregate value of all such puts held in the portfolio to exceed
of 1% of the value of the Fund's total assets.
Under a "stand-by commitment," a dealer would agree to purchase, at the Fund's
option, specified municipal securities at a specified price. When entering into
stand-by commitments, the Fund will set aside sufficient assets invested in cash
equivalent securities to pay for all stand-by commitments on their scheduled
delivery dates. The Fund will acquire these commitments solely to facilitate
portfolio liquidity and does not intend to exercise its rights thereunder for
trading purposes. Stand-by commitments may also be referred to as put options.
The Fund will generally limit its investments in stand-by commitments to 25% of
its total assets.
ASSET-BACKED SECURITIES -- Asset-backed securities consist of securities secured
by company receivables, home equity loans, truck and auto loans, leases, and
credit card receivables. The collateral backing asset-backed securities cannot
be foreclosed upon. These issues are normally traded over-the-counter and
typically have a short-intermediate maturity structure depending on the paydown
characteristics of the underlying financial assets which are passed through to
the security holder. Asset-backed securities purchased by the Fund must be rated
in one of the three highest rating categories by at least one NRSRO at the time
of investment, or, if unrated, determined by the Adviser to be of comparable
quality. Asset-backed securities may be purchased for the purpose of enhancing
yield. Under certain interest rate and prepayment rate scenarios, the Fund may
fail to recoup fully its investment in asset-backed securities.
The Fund will generally limit its investments in asset-backed securities to 25%
of its total assets.
MORTGAGE-BACKED SECURITIES -- Mortgage-Backed Securities are debt obligations
secured by real estate loans and pools of loans on single family homes,
multi-family homes, mobile homes, and in some cases, commercial properties. The
Fund may acquire securities representing an interest in a pool of mortgage loans
that are issued or guaranteed by a U.S. government agency. The primary issuers
or guarantors of these Mortgage-Backed Securities are Ginnie Mae, Fannie Mae and
Freddie Mac. Mortgage-backed securities may also be issued by non-governmental
entities and may or may not have private insurer guarantees of timely payments.
Such non-governmental mortgage securities cannot be treated as U.S. government
securities for purposes of investment policies. The Fund also may invest in
Mortgage-Backed Securities issued by non-government entities. The mortgages
backing both government and private issuers include thirty- and fifteen-year
fixed rate mortgages, five- and seven-year balloon mortgages, graduated payment
mortgages, and adjustable payment mortgages. New mortgage structures continue to
be developed and the Fund may invest in such securities to the extent they are
consistent with its investment objective, policies and restrictions. The Fund
will only purchase Mortgage-Backed Securities issued or guaranteed by the U.S.
government or its agencies or instrumentalities or that are rated in the highest
or second highest rating categories by at least one NRSRO at the time of
investment. Whether backed by a U.S. government entity or a private insurer, the
guarantees do not extend to the Mortgage-Backed Securities' value, which is
likely to vary inversely with fluctuations in interest rates. Mortgage-Backed
Securities are in most cases "pass-through" instruments, through which the
holder receives a share of all interest and principal payments from the
mortgages underlying the certificate. Because the prepayment characteristics of
the underlying mortgages vary, it is not possible to predict accurately the
average life or realized yield of a particular issue of pass-through
certificates. During periods of declining interest rates, prepayment of
mortgages underlying Mortgage-Backed Securities can be expected to accelerate.
When the mortgage obligations are prepaid, the Fund reinvests the prepaid
amounts in securities, the yield of which reflects interest rates prevailing at
the time. Moreover, prepayment of mortgages which underlie securities purchased
at a premium could result in capital losses.
The Fund also may invest in multiple class securities issued by U.S. government
agencies and instrumentalities such as Fannie Mae, Freddie Mac and Ginnie Mae,
or private issuers, including guaranteed Collateralized Mortgage Obligations
("CMOs") and Real Estate Mortgage Investment Conduit ("REMIC") pass-through or
participation certificates, when consistent with the Fund's investment
objective, policies and limitations. A REMIC is a CMO that qualifies for special
tax treatment under the Code and invests in certain mortgages principally
secured by interests in real property and other permitted investments.
CMOs and guaranteed REMIC pass-through certificates ("REMIC Certificates")
issued by Fannie Mae, Freddie Mac and Ginnie Mae are types of multiple class
pass-through securities. Investors may purchase beneficial interests in REMICs,
which are known as "regular" interests or "residual" interests. The Fund does
not currently intend to purchase residual interests in REMICs. The REMIC
Certificates represent beneficial ownership interests in a REMIC trust,
generally consisting of mortgage loans or Fannie Mae, Freddie Mac or Ginnie Mae
guaranteed mortgage pass-through certificates (the "Mortgage Assets"). The
obligations of Fannie Mae, Freddie Mac and Ginnie Mae under their respective
guaranty of the REMIC Certificates are obligations solely of Fannie Mae, Freddie
Mac or Ginnie Mae, respectively.
Fannie Mae REMIC Certificates are issued and guaranteed as to timely
distribution of principal and interest by Fannie Mae. In addition, Fannie Mae
will be obligated to distribute the principal balance of each class of REMIC
Certificates in full, whether or not sufficient funds are otherwise available.
25 PROSPECTUS
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For Freddie Mac REMIC Certificates, Freddie Mac guarantees the timely payment of
interest, and also guarantees the payment of principal as payments are required
to be made on the underlying mortgage participation certificates ("PCs"). PCs
represent undivided interests in specified residential mortgages or
participation therein purchased by Freddie Mac and placed in a PC pool. With
respect to principal payments on PCs, Freddie Mac generally guarantees ultimate
collection of all principal of the related mortgage loans without offset or
deduction. Freddie Mac also guarantees timely payment of principal on certain
PCs referred to as "Gold PCs."
Ginnie Mae REMIC Certificates guarantee the full and timely payment of interest
and principal on each class of securities (in accordance with the terms of those
classes, as specified in the related offering circular). The Ginnie Mae
guarantee is backed by the full faith and credit of the United States of
America.
REMIC Certificates issued by Fannie Mae, Freddie Mac and Ginnie Mae are treated
as U.S. government securities for purposes of investment policies. CMOs and
REMIC Certificates are issued in multiple classes. Each class of CMOs or REMIC
Certificates, often referred to as a "tranche," is issued at a specific
adjustable or fixed interest rate and must be fully retired no later than its
final distribution date. Principal prepayments on the mortgage loans or the
Mortgage Assets underlying the CMOs or REMIC Certificates may cause some or all
of the classes of CMOs or REMIC Certificates to be retired substantially earlier
than their final distribution dates. Generally, interest is paid or accrues on
all classes of CMOs or REMIC Certificates on a monthly basis.
The principal of and interest on the Mortgage Assets may be allocated among the
several classes of CMOs or REMIC Certificates in various ways. In certain
structures (known as "sequential pay" CMOs or REMIC Certificates), payments of
principal, including any principal prepayments, on the Mortgage Assets generally
are applied to the classes of CMOs or REMIC Certificates in the order of their
respective final distribution dates. Thus no payment of principal will be made
on any class of sequential pay CMOs or REMIC Certificates until all other
classes having an earlier final distribution date have been paid in full.
Additional structures of CMOs and REMIC Certificates include, among others,
"parallel pay" CMOs and REMIC Certificates. Parallel pay CMOs or REMIC
Certificates are those which are structured to apply principal payments and
prepayments of the Mortgage Assets to two or more classes concurrently on a
proportionate or disproportionate basis. These simultaneous payments are taken
into account in calculating the final distribution date of each class.
A wide variety of REMIC Certificates may be issued in the parallel pay or
sequential pay structures. These securities include accrual certificates (also
known as "Z-Bonds"), which only accrue interest at a specified rate until all
other certificates having an earlier final distribution date have been retired
and are converted thereafter to an interest-paying security, and planned
amortization class ("PAC") certificates, which are parallel pay REMIC
Certificates which generally require that specified amounts of principal be
applied on each payment date to one or more classes of REMIC Certificates (the
"PAC Certificates"), even though all other principal payments and prepayments of
the Mortgage Assets are then required to be applied to one or more other classes
of the certificates. The scheduled principal payments for the PAC Certificates
generally have the highest priority on each payment date after interest due has
been paid to all classes entitled to receive interest currently. Shortfalls, if
any, are added to the amount of principal payable on the next payment date. The
PAC Certificate payment schedule is taken into account in calculating the final
distribution date of each class of PAC. In order to create PAC tranches, one or
more tranches generally must be created that absorb most of the volatility in
the underlying Mortgage Assets. These tranches tend to have market prices and
yields that are much more volatile than the PAC classes.
Although the Fund invests only in securities issued or guaranteed by the U.S.
Government, its agencies or instrumentalities, the Z-Bonds in which the Fund may
invest may bear the same non-credit-related risks as do other types of Z-Bonds.
Z-Bonds in which the Fund may invest will not include residual interest.
There can be no assurance that the United States government would provide
financial support to Fannie Mae, Freddie Mac or Ginnie Mae if necessary in the
future.
The Fund will generally not limit its investments in mortgage-backed securities.
REGULATION OF MORTGAGE LOANS -- Mortgage loans are subject to a variety of state
and Federal regulations designed to protect borrowers which may impair the
ability of the mortgage lender to enforce its rights under the mortgage
documents. These regulations include legal restraints on foreclosures, homeowner
rights of redemption after foreclosure, Federal and state bankruptcy and debtor
relief laws, restrictions on enforcement of mortgage loan "due on sale" clauses
and state usury laws. Even though the Fund will invest in Mortgage-Backed
Securities issued or guaranteed by the U.S. government, its agencies or
instrumentalities, these regulations may adversely affect the Fund's investments
by delaying the Fund's receipt of payments derived from principal or interest on
mortgage loans affected by such regulations.
STRIPPED MORTGAGE-BACKED SECURITIES -- The Fund may, to enhance revenues or
hedge against interest rate risk, invest in stripped mortgage-backed securities
("SMBS"), which are derivative multiclass mortgage securities. The Fund may only
invest in SMBS issued or guaranteed by the U.S. government, its agencies or
instrumentalities.
SMBS are usually structured with two classes that receive different proportions
of the interest and principal distributions from a pool of mortgage assets. A
common type of SMBS will have one class receiving all of the interest from the
mortgage assets ("IOs"), while the other class will receive all of the
PROSPECTUS 26
<PAGE>
principal ("POs"). However, in some instances, one class will receive some of
the interest and most of the principal while the other class will receive most
of the interest and the remainder of the principal. If the underlying mortgage
assets experience greater than anticipated prepayments of principal, the Fund
may fail to fully recoup its initial investment in these securities. Although
the market for such securities is increasingly liquid, certain SMBS may not be
readily marketable and will be considered illiquid for purposes of the Fund's
limitation on investments in illiquid securities. Any determination that a SMBS
is liquid will be made pursuant to guidelines and standards established by the
Trust's Board of Trustees. The market value of the class consisting entirely of
principal payments generally is unusually volatile in response to changes in
interest rates. The yields on a class of SMBS that receives all or most of the
interest from mortgage assets are generally higher than prevailing market yields
on other Mortgage-Backed Securities because their cash flow patterns are more
volatile and there is a greater risk that the initial investment will not be
fully recouped. The Adviser will seek to manage these risks (and potential
benefits) by investing in a variety of such securities and by using certain
hedging techniques.
The Fund will generally limit its investments in SMBS to 15% of its total
assets.
ADJUSTABLE RATE MORTGAGE LOANS ("ARMS") -- ARMs eligible for inclusion in a
mortgage pool will generally provide for a fixed initial mortgage interest rate
for a specified period of time. Thereafter, the interest rates (the "Mortgage
Interest Rates") may be subject to periodic adjustment based on changes in the
applicable index rate (the "Index Rate"). The adjusted rate would be equal to
the Index Rate plus a gross margin, which is a fixed percentage spread over the
Index Rate established for each ARM at the time of its origination.
Adjustable interest rates can cause payment increases that some borrowers may
find difficult to make. However, certain ARMs may provide that the Mortgage
Interest Rate may not be adjusted to a rate above an applicable lifetime maximum
rate or below an applicable lifetime minimum rate for such ARM. Certain ARMs may
also be subject to limitations on the maximum amount by which the Mortgage
Interest Rate may adjust for any single adjustment period (the "Maximum
Adjustment"). Other ARMs ("Negatively Amortizing ARMs") may provide instead or
as well for limitations on changes in the monthly payment on such ARMs.
Limitations on monthly payments can result in monthly payments which are greater
or less than the amount necessary to amortize a Negatively Amortizing ARM by its
maturity at the Mortgage Interest Rate in effect in any particular month. In the
event that a monthly payment is not sufficient to pay the interest accruing on a
Negatively Amortizing ARM, any such excess interest is added to the principal
balance of the loan, causing negative amortization and will be repaid through
future monthly payments. It may take borrowers under Negatively Amortizing ARMs
longer periods of time to achieve equity and may increase the likelihood of
default by such borrowers. In the event that a monthly payment exceeds the sum
of the interest accrued at the applicable Mortgage Interest Rate and the
principal payment which would have been necessary to amortize the outstanding
principal balance over the remaining term of the loan, the excess (or
"accelerated amortization") further reduces the principal balance of the ARM.
Negatively Amortizing ARMs do not provide for the extension of their original
maturity to accommodate changes in their Mortgage Interest Rate. As a result,
unless there is a periodic recalculation of the payment amount (which there
generally is), the final payment may be substantially larger than the other
payments. These limitations on periodic increases in interest rates and on
changes in monthly payments protect borrowers from unlimited interest rate and
payment increases.
There are two main categories of indices which provide the basis for rate
adjustments on ARMs: those based on U.S. Treasury securities and those derived
from a calculated measure such as a cost of funds index or a moving average of
mortgage rates. Commonly utilized indices include the one-year, three-year and
five-year constant maturity Treasury bill rates, the three-month Treasury bill
rate, the 180-day Treasury bill rate, rates on longer-term Treasury securities,
the 11th District Federal Home Loan Bank Cost of Funds, the National Median Cost
of Funds, the one-month, three-month, six-month or one-year London Interbank
Offered Rate ("LIBOR"), the prime rate of a specific bank, or commercial paper
rates. Some indices, such as the one-year constant maturity Treasury rate,
closely mirror changes in market interest rate levels. Others, such as the 11th
District Federal Home Loan Bank Cost of Funds index, tend to lag behind changes
in market rate levels and tend to be somewhat less volatile. The degree of
volatility in the market value of the Fund's portfolio and therefore in the net
asset value of the Fund's shares will be a function of the length of the
interest rate reset periods and the degree of volatility in the applicable
indices.
MORTGAGE DOLLAR ROLLS -- The Fund may enter into mortgage "dollar rolls" in
which the Fund sells securities for delivery in the current month and
simultaneously contracts with the same counterparty to repurchase similar (same
type, coupon and maturity) but not identical securities on a specified future
date. The Fund gives up the right to receive principal and interest paid on the
securities sold. However, the Fund would benefit to the extent of any difference
between the price received for the securities sold and the lower forward price
for the future purchase (often referred to as the "drop") or fee income plus the
interest earned on the cash proceeds of the securities sold until the settlement
date of the forward purchase. Unless such benefits exceed the income, capital
appreciation and gain or loss due to mortgage prepayments that would have been
realized on the securities sold as part of the mortgage dollar roll, the use of
this technique will diminish the investment performance of the Fund compared
with what such performance would have been without the use of mortgage dollar
rolls. The Fund will hold and maintain in a segregated account until the
settlement date, cash or liquid, high grade debt securities in an amount equal
to the forward purchase price. The benefits derived from the use of mortgage
dollar rolls may depend upon the Adviser's ability to predict
27 PROSPECTUS
<PAGE>
correctly mortgage prepayments and interest rates. There is no assurance that
mortgage dollar rolls can be successfully employed.
For financial reporting and tax purposes, the Fund proposes to treat mortgage
dollar rolls as two separate transactions: one involving the purchase of a
security and a separate transaction involving a sale. The Fund does not
currently intend to enter into mortgage dollar rolls that are accounted for as a
financing. For purposes of diversification and investment limitations, mortgage
dollar rolls are considered to be mortgage-backed securities.
CORPORATE SECURITIES -- Corporate securities include corporate bonds,
convertible and non-convertible debt securities, and preferred stocks, as well
as commercial paper (short-term promissory notes issued by corporations).
Issuers of corporate bonds and notes are divided into many different categories
by bond market sector, such as electric utilities, gas utilities, telephone
utilities, consumer finance companies, wholesale finance companies and
industrial companies. Within each major category of issuer, there are many
subcategories.
INVERSE FLOATING RATE INSTRUMENTS -- The Fund may seek to increase yield by
investing in leveraged inverse floating rate debt instruments ("inverse
floaters"). The interest rate on an inverse floater resets in the opposite
direction from the market rate of interest to which the inverse floater is
indexed. An inverse floater may be considered to be leveraged to the extent that
its interest rate varies by a magnitude that exceeds the magnitude of the change
in the index rate of interest. The higher degree of leverage inherent in inverse
floaters is associated with greater volatility in their market values.
Accordingly, the duration of an inverse floater may exceed its stated final
maturity. The Fund will generally limit its investments in inverse floating rate
instruments to 15% of its total assets.
FIXED RATE MORTGAGE LOANS -- Generally, fixed rate mortgage loans eligible for
inclusion in a mortgage pool will bear simple interest at fixed annual rates and
have original terms to maturity ranging from 5 to 40 years. The Fund may invest
in fixed rate mortgage loans that are privately issued and are not issued or
guaranteed by the U.S. government. Fixed rate mortgage loans generally provide
for monthly payments of principal and interest in substantially equal
installments for the contractual term of the mortgage note in sufficient amounts
to fully amortize principal by maturity although certain fixed rate mortgage
loans provide for a large final balloon payment upon maturity. The Fund may
invest in fixed rate mortgage loans or mortgage loan pools to enhance yield.
DESCRIPTION OF RATINGS
The following descriptions are summaries of published ratings.
DESCRIPTION OF COMMERCIAL PAPER RATINGS
The following descriptions of commercial paper ratings have been published by
Standard & Poor's Corporation ("S&P"), Moody's Investors Service ("Moody's"),
Fitch's Investors Service ("Fitch"), Duff and Phelps ("Duff"), and IBCA Limited
("IBCA"), respectively.
Commercial paper rated A by S&P is regarded by S&P as having the greatest
capacity for timely payment. Issues rated A are further refined by use of the
numbers 1+, 1 and 2 to indicate the relative degree of safety. Issues rated A-1+
are those with an "overwhelming degree" of credit protection. Those rated A-1
reflect a "very strong" degree of safety regarding timely payment. Those rated
A-2 reflect a high degree of safety regarding timely payment but not as high as
A-1.
Commercial paper issues rated Prime-1 and Prime-2 by Moody's are judged by
Moody's to be of the "highest" quality and "higher" quality, respectively, on
the basis of relative repayment capacity.
The rating Fitch-1 (Highest Grade) is the highest commercial rating assigned by
Fitch. Paper rated Fitch-1 is regarded as having the strongest degree of
assurance for timely payment. The rating Fitch-2 (Very Good Grade) is the second
highest commercial paper rating assigned by Fitch which reflects an assurance of
timely payment only slightly less in degree than the strongest issues.
The rating Duff-1 is the highest commercial paper rating assigned by Duff. Paper
rated Duff-1 is regarded as having very high certainty of timely payment with
excellent liquidity factors which are supported by ample asset protection. Risk
factors are minor. Paper rated Duff-2 is regarded as having good certainty of
timely payment, good access to capital markets and sound liquidity factors and
company fundamentals. Risk factors are small.
The designation A1 by IBCA indicates that the obligation is supported by a very
strong capacity for timely repayment. Those obligations rated A1+ are supported
by the highest capacity for timely repayment. Obligations rated A2 are supported
by a strong capacity for timely repayment, although such capacity may be
susceptible to adverse changes in business, economic or financial conditions.
DESCRIPTION OF CORPORATE/MUNICIPAL BOND RATINGS
The following descriptions of S&P's and Moody's corporate and municipal bond
ratings have been published by S&P and Moody's, respectively.
Bonds rated AAA have the highest rating S&P assigns to a debt obligation. Such a
rating indicates an extremely strong capacity to pay principal and interest.
Bonds rated AA also qualify as high-quality debt obligations. Capacity to pay
principal and interest is very strong, and in the majority of instances they
differ from AAA issues only in a small degree. Debt rated A has a strong
capacity to pay interest and repay principal although it is somewhat more
susceptible to the adverse effects of changes in circumstances and economic
conditions than debt in higher rated categories.
PROSPECTUS 28
<PAGE>
Bonds that are rated Aaa by Moody's are judged to be of the best quality. They
carry the smallest degree of investment risk and are generally referred to as
"gilt edge." Interest payments are protected by a large, or an exceptionally
stable, margin and principal is secure. While the various protective elements
are likely to change, such changes as can be visualized are most unlikely to
impair the fundamentally strong position of such issues.
Bonds rated Aa by Moody's are judged by Moody's to be of high quality by all
standards. Together with bonds rated Aaa, they comprise what are generally known
as high-grade bonds. They are rated lower than the best bonds because margins of
protection may not be as large as in Aaa securities or fluctuation of protective
elements may be of greater amplitude or there may be other elements present that
make the long-term risks appear somewhat larger than in Aaa securities.
Bonds that are rated A possess many favorable investment attributes and are to
be considered as upper-medium grade obligations. Factors giving security to
principal and interest are considered adequate, but elements may be present
which suggest a susceptibility to impairment sometime in the future.
Debt rated BBB by S&P is regarded as having an adequate capacity to pay interest
and repay principal. Whereas it normally exhibits adequate protection
parameters, adverse economic conditions or changing circumstances are more
likely to lead to a weakened capacity to pay interest and repay principal for
debt in this category than in higher rated categories.
Bonds that are rated Baa by Moody's are considered as medium-grade obligations
(i.e., they are neither highly protected nor poorly secured). Interest payments
and principal security appear adequate for the present but certain protective
elements may be lacking or may be characteristically unreliable over any great
length of time. Such bonds lack outstanding investment characteristics and in
fact have speculative characteristics as well.
Changes in economic conditions or other circumstances are more likely to lead to
a weakened capacity of the issuers of securities rated BBB or Baa to make
principal and interest payments than is the case with higher grade securities.
DESCRIPTION OF MUNICIPAL NOTE RATINGS
Moody's highest rating for state, municipal and other short-term notes is MIG-1
and VMIG-1. Short-term municipal securities rated MIG-1 or VMIG-1 are of the
best quality. They have strong protection from established cash flows of funds
for their servicing or from established and broad-based access to the market for
refinancing or both. Short-term municipal securities rated MIG-2 and VMIG-2 are
of high quality. Margins of protection are ample although not so large as in the
preceding group.
An S&P note rating reflects the liquidity concerns and market access risks
unique to notes. Notes due in three years or less will likely receive a note
rating. Notes maturing beyond three years will most likely receive a long-term
debt rating. The following criteria will be used in making that assessment:
- - Amortization schedule (the larger the final maturity relative to other
maturities the more likely it will be treated as a note).
- - Source of Payment (the more dependent the issue is on the market for its
refinancing, the more likely it will be treated as a note).
Note rating symbols are as follows:
SP-1 Very strong or strong capacity to pay principal and interest. Those issues
determined to possess overwhelming safety characteristics will be given a plus
(+) designation.
SP-2 Satisfactory capacity to pay principal and interest.
MISCELLANEOUS
The Trust believes that as of August 4, 1995, BANC ONE CORPORATION (100 East
Broad Street, Columbus, OH 43271), through its affiliates, owned of record
substantially all the Fiduciary Class shares of the Fund. The Trust believes
that as of the same date, BANC ONE CORPORATION, through its affiliates,
possessed on behalf of its underlying accounts, voting or investment power with
respect to 83.45% of the Fiduciary Class shares of the Fund. As a consequence,
BANC ONE CORPORATION may be deemed to be a controlling person of the Fiduciary
Class shares of the Fund under the Investment Company Act of 1940.
PERFORMANCE
From time to time, the Fund may advertise yield, total return and/or
distribution rate. These figures will be based on historical earnings and are
not intended to indicate future performance. The yield of the Fund refers to the
annualized income generated by an investment in the Fund over a specified 30-day
period. The yield is calculated by assuming that the income generated by the
investment during that period is generated over a one-year period and is shown
as a percentage of the investment.
Total return is the change in value of an investment in the Fund over a given
period, assuming reinvestment of any dividends and capital gains. A cumulative
total return reflects an actual rate of return over a stated period of time. An
average annual total return is a hypothetical rate of return that, if achieved
annually, would have produced the same cumulative total return if performance
had been constant over the entire period. Average annual total returns smooth
out variations in performance; they are not the same as actual year-by-year
results.
The distribution rate is computed by dividing the total amount of the dividends
per share paid out during the past period by the maximum offering price or
month-end net asset value depending on the class of the Fund. This figure is
then "annualized" (multiplied by 365 days and divided by the applicable number
of
29 PROSPECTUS
<PAGE>
days in the period). Funds with a front-end sales charge would incorporate the
offering price into the distribution yield in place of month-end net asset
value.
Distribution rate is a measure of the level of income paid out in cash to
Shareholders over a specified period. It differs from yield and total return and
is not intended to be a complete measure of performance. Furthermore, the
distribution rate may include return of principal and/or capital gains. Total
return is the change in value of a hypothetical investment over a given period
assuming reinvestment of dividends and capital gain distributions. The yield
refers to the cumulative 30-day rolling net investment income, divided by
maximum offering price and multiplied by average shares outstanding during this
period. See the Statement of Additional Information.
The Trust will include information on all classes of shares of the Fund in any
advertisement or information including performance data for the Fund. The
performance for Fiduciary Class shares may be higher than for Class A shares and
Class B shares because Fiduciary Class shares are not subject to sales charges
and distribution expenses.
The performance of each class of the Fund may from time to time be compared to
that of other mutual funds tracked by mutual fund rating services, to that of
broad groups of comparable mutual funds or to that of unmanaged indices that may
assume investment of dividends but do not reflect deductions for administrative
and management costs. In addition, the performance of each class of the Fund may
be compared to other funds or to relevant indices that may calculate total
return without reflecting sales charges; in which case, the Fund may advertise
its total return in the same manner. If reflected, sales charges would reduce
these total return calculations.
Further information about the performance of each class of the Fund is contained
in the Trust's Annual Report to Shareholders for The One Group-Registered
Trademark- Government Bond Fund, which may be obtained without charge by calling
1-800-480-4111.
TAXES
The following summary of Federal income tax consequences is based on current tax
laws and regulations, which may be changed by legislative, judicial, or
administrative action. No attempt has been made to present a complete
explanation of the Federal, state, local or foreign tax treatment of the Fund or
its Shareholders. Accordingly, Shareholders are urged to consult their tax
advisers regarding specific questions as to the tax consequences of investing in
the Fund.
TAX STATUS OF THE FUND
The Fund is treated as a separate entity for Federal income tax purposes and is
not combined with the Trust's other funds. The Fund intends to qualify as a
"regulated investment company" for Federal income tax purposes and to meet all
other requirements that are necessary for it to be relieved of Federal taxes on
that part of its net investment income and net capital gains (the excess of net
long-term capital gain over net short-term capital loss) that is distributed to
Shareholders.
TAX STATUS OF DISTRIBUTIONS
The Fund will distribute substantially all of its net investment income
(including, for this purpose, net short-term capital gain) to Shareholders of
each class of shares of the Fund on at least an annual basis. Generally,
dividends from net investment income will be taxable to Shareholders as ordinary
income whether received in cash or in additional shares, and any net capital
gains will be distributed at least annually and will be taxed to Shareholders as
long-term capital gains, regardless of how long the Shareholder has held shares.
Distributions by the Fund to retirement plans that qualify for tax-exempt
treatment under the Code ("qualified retirement plans") will not be taxable. The
Federal tax treatment of qualified retirement plans, as well as distributions
from such plans, is governed by specific provisions of the Code. If shares are
held by a retirement plan that ceases to qualify for tax-exempt treatment under
the Code or by an individual who has received such shares as a distribution from
a retirement plan, the Fund's distributions will be taxable to such plan or
individual as described in the preceding paragraph. Persons considering
directing the investment of their qualified retirement plan account in the Fund
and qualified retirement plan trusts considering purchasing such shares, should
consult their tax advisers for a more complete explanation of the Federal tax
consequences, and for an explanation of the state, local and (if applicable)
foreign tax consequences of making such an investment.
The Fund will make annual reports to Shareholders of the Federal income tax
status of all distributions.
Certain securities purchased by the Fund (such as STRIPS, CUBES, TRS, TIGRS and
CATS), as defined in the "Description of Permitted Investments," are sold at
original issue discount and thus do not make periodic cash interest payments.
The Fund will be required to include as part of its current income the imputed
interest on such obligations even though the Fund has not received any interest
payments on such obligations during that period. Because the Fund distributes
substantially all of its net investment income to its Shareholders (including
such imputed interest), the Fund may have to sell portfolio securities in order
to generate the cash necessary for the required distributions. Such sales may
occur at a time when the Adviser would not have chosen to sell such securities
and may result in a taxable gain or loss.
Dividends declared by the Fund in October, November or December of any year and
payable to Shareholders of record on a date in such a month will be deemed to
have been paid by the Fund and received by Shareholders on December 31 of that
year, if paid by the Fund at any time during the following January.
The Fund intends to make sufficient distributions prior to the end of each
calendar year to avoid liability for Federal excise tax.
PROSPECTUS 30
<PAGE>
Dividends received by a Shareholder that are derived from the Fund's investments
in U.S. government obligations may not be entitled to the exemptions from state
and local income taxes that would be available if the Shareholder had purchased
U.S. government obligations directly. The Fund will inform Shareholders annually
of the percentage of income and distributions derived from U.S. government
obligations. Shareholders should consult their tax advisers regarding the state
and local tax treatment of the dividends received from the Fund.
Sale, exchange, or redemption of Fund shares by a Shareholder will generally be
a taxable event to such Shareholder.
31 PROSPECTUS
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Investment Adviser and Sub-Administrator
Banc One Investment Advisors Corporation
774 Park Meadow Road
Columbus, OH 43271-0211
Distributor
The One Group-Registered Trademark- Services Company
3435 Stelzer Road
Columbus, OH 43219
Administrator
The One Group-Registered Trademark- Services Company
3435 Stelzer Road
Columbus, OH 43219
Transfer Agent and Custodian
State Street Bank and Trust Company
P.O. Box 8500
Boston, MA 02266-8500
Legal Counsel
Ropes & Gray
Suite 1200 South
1001 Pennsylvania Avenue, N.W.
Washington, D.C. 20004
Independent Accountants
Coopers & Lybrand L.L.P.
One Post Office Square
Boston, MA 02109
TOG-F-118
<PAGE>
THE ONE GROUP-REGISTERED TRADEMARK- INCOME EQUITY FUND PROSPECTUS
- --------------------------------------------------------------------------------
Investment Adviser: BANC ONE INVESTMENT ADVISORS CORPORATION
The One Group-Registered Trademark- (the "Trust") is a mutual fund seeking to
provide a convenient and economical means of investing in one or more
professionally managed portfolios of securities. This Prospectus relates to The
One Group-Registered Trademark- Income Equity Fund Class A, Class B and
Fiduciary Class shares.
THE ONE GROUP-REGISTERED TRADEMARK- INCOME EQUITY FUND (THE "FUND") SEEKS
CURRENT INCOME THROUGH REGULAR PAYMENT OF DIVIDENDS WITH THE SECONDARY GOAL OF
ACHIEVING CAPITAL APPRECIATION BY INVESTING PRIMARILY IN EQUITY SECURITIES.
CLASS A AND CLASS B SHARES ARE OFFERED TO THE GENERAL PUBLIC.
FIDUCIARY CLASS SHARES ARE OFFERED TO INSTITUTIONAL INVESTORS, INCLUDING
AFFILIATES OF BANC ONE CORPORATION AND ANY BANK, DEPOSITORY INSTITUTION,
INSURANCE COMPANY, PENSION PLAN, OR OTHER ORGANIZATION AUTHORIZED TO ACT IN
FIDUCIARY, ADVISORY, AGENCY, CUSTODIAL OR SIMILAR CAPACITIES (EACH AN
"AUTHORIZED FINANCIAL ORGANIZATION").
THE TRUST'S SHARES ARE NOT DEPOSITS OR OBLIGATIONS OF, OR ENDORSED OR GUARANTEED
BY BANC ONE CORPORATION OR ITS BANK OR NON-BANK AFFILIATES. THE TRUST'S SHARES
ARE NOT INSURED OR GUARANTEED BY THE FEDERAL DEPOSIT INSURANCE CORPORATION OR BY
ANY OTHER GOVERNMENTAL AGENCY OR GOVERNMENT SPONSORED AGENCY OF THE FEDERAL
GOVERNMENT OR ANY STATE. AN INVESTMENT IN MUTUAL FUND SHARES INVOLVES INVESTMENT
RISKS, INCLUDING THE POSSIBLE LOSS OF THE PRINCIPAL AMOUNT INVESTED. BANC ONE
INVESTMENT ADVISORS CORPORATION RECEIVES FEES FROM THE FUND FOR INVESTMENT
ADVISORY AND OTHER SERVICES.
This Prospectus sets forth concisely the information about the Trust that a
prospective investor should know before investing. Investors are advised to read
this Prospectus and retain it for future reference. A Statement of Additional
Information dated November 1, 1995 has been filed with the Securities and
Exchange Commission and is available without charge through the Distributor, The
One Group-Registered Trademark- Services Company, 3435 Stelzer Road, Columbus,
Ohio 43219, or by calling 1-800-480-4111 during business hours. The Statement of
Additional Information is incorporated into this Prospectus by reference.
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED UPON THE
ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A
CRIMINAL OFFENSE.
November 1, 1995
<PAGE>
TABLE OF CONTENTS
<TABLE>
<S> <C>
SUMMARY.......................................................................................... 3
ABOUT THE FUND................................................................................... 4
Expense Summary................................................................................ 4
Financial Highlights........................................................................... 5
The Fund....................................................................................... 7
Investment Objective........................................................................... 7
Investment Policies............................................................................ 7
HOW TO DO BUSINESS WITH THE ONE GROUP-REGISTERED TRADEMARK-...................................... 8
How to Invest in The One Group-Registered Trademark-........................................... 8
Alternative Sales Arrangements................................................................. 11
Exchanges...................................................................................... 12
Redemptions.................................................................................... 13
FUND MANAGEMENT.................................................................................. 14
The Adviser.................................................................................... 14
The Distributor................................................................................ 14
The Administrator.............................................................................. 15
The Transfer Agent and Custodian............................................................... 15
Counsel and Independent Accountants............................................................ 15
OTHER INFORMATION................................................................................ 15
The Trust...................................................................................... 15
Other Investment Policies...................................................................... 17
Description of Permitted Investments........................................................... 17
Description of Ratings......................................................................... 22
Miscellaneous.................................................................................. 22
Performance.................................................................................... 23
Taxes.......................................................................................... 23
</TABLE>
PROSPECTUS 2
<PAGE>
SUMMARY
The One Group-Registered Trademark- (the "Trust") is an open-end management
investment company that provides a convenient way to invest in professionally
managed portfolios of securities. The following provides basic information about
the Class A, Class B and Fiduciary Class shares of The One Group-Registered
Trademark- Income Equity Fund.
WHAT IS THE INVESTMENT OBJECTIVE? The Fund seeks current income through regular
payment of dividends with the secondary goal of achieving capital appreciation
by investing primarily in equity securities. See "Investment Objective."
WHAT ARE THE PERMITTED INVESTMENTS? The Fund will invest primarily in common
stocks, but may also invest in debt securities and preferred stock that are
convertible into common stock. Equity securities such as those in which the Fund
may invest are more volatile and carry more risk than some other forms of
investment. Accordingly, the net asset value per share of the Fund may decrease
over time. The Fund may only invest in a select few derivatives; their
characteristics and limitations on their use are more fully described in
"Description of Permitted Investments." There are many different types of
derivative securities with varying degrees of potential risk and return. See
"Investment Policies."
WHO IS THE ADVISER? Banc One Investment Advisors Corporation, an indirect
subsidiary of BANC ONE CORPORATION, serves as the Adviser of the Trust. The
Adviser is entitled to a fee for advisory services provided to the Trust. The
Adviser may voluntarily agree to waive a part of its fees. See "The Adviser" and
"Expense Summary."
WHO IS THE ADMINISTRATOR? The One Group-Registered Trademark- Services Company
serves as the Administrator of the Trust. The Administrator is entitled to a fee
for services provided to the Trust. Banc One Investment Advisors Corporation
serves as the Sub-Administrator of the Trust, pursuant to an agreement with the
Administrator for which Banc One Investment Advisors Corporation receives a fee
paid by the Administrator. See "The Administrator" and "Expense Summary."
WHO IS THE TRANSFER AGENT AND CUSTODIAN? State Street Bank and Trust Company
serves as Transfer Agent and Custodian for the Trust for which services it
receives a fee. Bank One Trust Company, N.A. serves as Sub-Custodian for the
Trust, for which services it receives a fee. See "The Transfer Agent and
Custodian."
WHO IS THE DISTRIBUTOR? The One Group-Registered Trademark- Services Company
acts as Distributor of the Trust's shares. The Distributor is entitled to fees
for distribution services for the Class A and Class B shares of the Fund. No
compensation is paid to the Distributor for distribution services for the
Fiduciary Class shares of the Fund. See "The Distributor."
HOW DO I PURCHASE AND REDEEM SHARES? Purchases and redemptions of shares of the
Fund may be made through the Distributor on any day that the New York Stock
Exchange is open for trading ("Business Days"). See "How to Invest in The One
Group-Registered Trademark-" and "Redemptions."
HOW ARE DIVIDENDS PAID? Substantially all of the net investment income
(exclusive of capital gains) of the Fund is declared on the last Business Day of
each month as a dividend for Shareholders of record as of the close of business
on that day and is distributed in the form of periodic dividends to such
Shareholders of the Fund on the first Business Day of each month. Any capital
gains are distributed at least annually. Distributions are paid in additional
shares of the same class unless the Shareholder elects to take the payment in
cash. See "Dividends."
3 PROSPECTUS
<PAGE>
ABOUT THE FUND
EXPENSE SUMMARY -- THE ONE GROUP-REGISTERED TRADEMARK- INCOME EQUITY FUND
<TABLE>
<CAPTION>
FIDUCIARY
CLASS A CLASS B CLASS
- ---------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
SHAREHOLDER TRANSACTION EXPENSES(1)
Maximum Sales Charge Imposed on Purchases
(as a percentage of offering price)................................... 4.50% none none
Maximum Contingent Deferred Sales Charge
(as a percentage of original purchase price or redemption proceeds, as
applicable)........................................................... none 5.00% none
Redemption Fees......................................................... none none none
Exchange Fees........................................................... none none none
ANNUAL OPERATING EXPENSES(2)
(as a percentage of average daily net assets)
Investment Advisory Fees................................................ .74% .74% .74%
12b-1 Fees (after fee waiver)(3)........................................ .25% 1.00% none
Other Expenses.......................................................... .31% .31% .31%
- ---------------------------------------------------------------------------------------------------------------
TOTAL OPERATING EXPENSES(4)............................................. 1.30% 2.05% 1.05%
- ---------------------------------------------------------------------------------------------------------------
</TABLE>
(1) A person who purchases shares through an account with a financial
institution or broker/dealer may be charged separate transaction fees by the
financial institution or broker/dealer. In addition, a wire redemption
charge, currently $7.00, is deducted from the amount of a wire redemption
payment made at the request of a Shareholder.
(2) The expense information in the table has been restated to reflect current
fees that would have been applicable had they been in effect during the
previous fiscal year.
(3) Absent the voluntary waiver of fees under the Trust's Distribution and
Shareholder Services Plans, 12b-1 fees (as a percentage of average daily net
assets) would be .35% for Class A shares. There are no 12b-1 fees charged to
Fiduciary Class shares. The 12b-1 fees include a Shareholder servicing fee
of .25% of the average daily net assets of the Fund's Class B shares and may
include a Shareholder servicing fee of .25% of the average daily net assets
of the Fund's Class A shares. See "The Distributor."
(4) Total Operating Expenses have been revised to reflect fee waivers effective
as of the date of this Prospectus. The Adviser may voluntarily agree to
waive a part of its fees. Absent the voluntary 12b-1 fee waiver, Total
Operating Expenses would be 1.40% for Class A shares.
PROSPECTUS 4
<PAGE>
EXAMPLE: An investor would pay the following expenses on a $1,000 investment in
Class A and Fiduciary Class shares of the Fund, assuming: (1) imposition of the
maximum sales charge for Class A shares; (2) 5% annual return; and (3)
redemption at the end of each time period.
<TABLE>
<CAPTION>
- ----------------------------------------------------------------------------------
1 YEAR 3 YEARS 5 YEARS 10 YEARS
- ----------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Class A $58 $84 $113 $195
Fiduciary Class $11 $33 $ 58 $128
</TABLE>
Absent the voluntary reduction of 12b-1 fees, the dollar amounts in the above
example would be as follows:
<TABLE>
<CAPTION>
- ----------------------------------------------------------------------------------
1 YEAR 3 YEARS 5 YEARS 10 YEARS
- ----------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Class A $59 $87 $118 $205
- ----------------------------------------------------------------------------------
- ----------------------------------------------------------------------------------
</TABLE>
EXAMPLE: An investor would pay the following expenses on a $1,000 investment in
Class B shares, assuming: (1) deduction of the applicable maximum Contingent
Deferred Sales Charge; and (2) 5% annual return.
<TABLE>
<CAPTION>
- ----------------------------------------------------------------------------------
1 YEAR 3 YEARS 5 YEARS 10 YEARS
- ----------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Assuming a complete redemption at end of
period $71 $94 $130 $219
Assuming no redemption $21 $64 $110 $219
</TABLE>
Class B shareholders do not receive a voluntary reduction in 12b-1 fees.
However, after eight (8) years, Class B shares automatically convert to Class A
shares, which do receive a voluntary reduction in fees. Therefore, a purchaser
of Class B shares remaining in the Fund for ten (10) years would pay $219 with
the voluntary reduction applicable to Class A shareholders, and $221 absent the
voluntary reduction.
THESE EXAMPLES SHOULD NOT BE CONSIDERED A REPRESENTATION OF PAST OR FUTURE
EXPENSES AND ACTUAL EXPENSES MAY BE GREATER OR LESS THAN THOSE SHOWN. The
purpose of these tables is to assist the investor in understanding the various
costs and expenses that may be directly or indirectly borne by investors in the
Trust.
The rules of the Securities and Exchange Commission (the "SEC") require that the
maximum sales charge be reflected in the above table. However, investors in the
Fund ("Shareholders") may, under certain circumstances, qualify for reduced
sales charges. See "How to Invest in The One Group-Registered Trademark-."
Long-term Shareholders of Class A shares and Class B shares may pay more than
the equivalent of the maximum front-end sales charges otherwise permitted by the
National Association of Securities Dealers' Rules.
FINANCIAL HIGHLIGHTS
The Trust was organized as a Massachusetts Business Trust on May 23, 1985. The
Trust currently consists of 29 separate investment portfolios (the "funds").
Currently, shares in The One Group-Registered Trademark- Income Equity Fund are
offered in three separate classes: Class A shares, Class B shares and Fiduciary
Class shares.
The following tables set forth financial information with respect to the
Financial Highlights for Class A, Class B and Fiduciary Class shares of the Fund
for the period from commencement of operations of each such class of the Fund to
June 30, 1995. Such information is a part of the financial statements audited by
Coopers & Lybrand L.L.P., independent accountants for the Trust, whose report on
the Trust's financial statements for the year ended June 30, 1995 appears in the
Statement of Additional Information. Further information about the Fund's
performance is contained in the Annual Report to Shareholders, which may be
obtained without charge from the Distributor by calling 1-800-480-4111 during
business hours.
5 PROSPECTUS
<PAGE>
THE ONE GROUP-REGISTERED TRADEMARK- INCOME EQUITY FUND
FINANCIAL HIGHLIGHTS
For a share of each class outstanding throughout each period
<TABLE>
<CAPTION>
INCOME EQUITY FUND
-------------------------------------------------------------------------
YEAR ENDED JUNE 30,
-------------------------------------------------------------------------
1995 1994
--------------------------------- ------------------------------------
FIDUCIARY CLASS A CLASS B FIDUCIARY CLASS A CLASS B (c)
---------- --------- -------- ---------- -------- ------------
<S> <C> <C> <C> <C> <C> <C>
Net Asset Value,
Beginning of Period............... $ 13.22 $ 13.20 $13.23 $ 13.21 $13.20 $13.83
---------- --------- -------- ---------- -------- ------
Investment Activities
Net Investment Income............ 0.40 0.03 0.26 0.39 0.36 0.11
Net Realized and Unrealized Gain
(Losses) from Investments...... 2.28 2.29 2.29 0.01 (0.60)
---------- --------- -------- ---------- -------- ------
Total from Investment Activities... 2.68 2.32 2.55 0.40 0.36 (0.49)
---------- --------- -------- ---------- -------- ------
Distributions
Net Investment Income............ (0.40) (0.03) (0.25) (0.39) (0.34) (0.11)
In Excess of Net Investment
Income......................... (0.01) (0.02) (0.02)
Net Realized Gains............... (0.37) (0.37) (0.37)
---------- --------- -------- ---------- -------- ------
Total Distributions................ (0.77) (0.41) (0.64) (0.39) (0.36) (0.11)
---------- --------- -------- ---------- -------- ------
Net Asset Value, End of Period..... $ 15.13 $ 15.11 $15.14 $ 13.22 $13.20 $13.23
---------- --------- -------- ---------- -------- ------
---------- --------- -------- ---------- -------- ------
Total Return (Excludes Sales
Charge)........................... 21.04% 20.79% 19.91% 3.27% 2.95% (3.37)%(d)
Ratios/Supplementary Data:
Net Assets at end of period
(000).......................... $170,919 $13,793 $3,468 $ 198,787 $12,054 $1,714
Ratio of expenses to average net
assets......................... 1.01% 1.26% 2.01% 0.98% 1.23% 1.95%(b)
Ratio of net investment income to
average net assets............. 2.85% 2.61% 1.88% 3.18% 3.01% 2.70%(b)
Ratio of expenses to average net
assets*........................ 1.01% 1.36% 2.02% 1.05% 1.40% 1.95%(b)
Ratio of net investment income to
average net assets*............ 2.85% 2.51% 1.87% 3.11% 2.84% 2.70%(b)
Portfolio Turnover............... 4.03% 4.03% 4.03% 22.69% 22.69% 22.69%
<CAPTION>
1993 1992 1991
--------------------- ------------------------ ---------
FIDUCIARY CLASS A FIDUCIARY CLASS A (a) FIDUCIARY
---------- -------- ---------- ----------- ---------
<S> <C> <C> <C> <C> <C>
Net Asset Value,
Beginning of Period............... $ 12.24 $12.23 $ 11.35 $12.34 $ 11.06
---------- -------- ---------- ----------- ---------
Investment Activities
Net Investment Income............ 0.43 0.40 0.49 0.20 0.54
Net Realized and Unrealized Gain
(Losses) from Investments...... 0.97 0.98 0.90 (0.10) 0.26
---------- -------- ---------- ----------- ---------
Total from Investment Activities... 1.40 1.38 1.39 0.10 0.80
---------- -------- ---------- ----------- ---------
Distributions
Net Investment Income............ (0.43) (0.41) (0.50) (0.21) (0.51)
In Excess of Net Investment
Income.........................
Net Realized Gains...............
---------- -------- ---------- ----------- ---------
Total Distributions................ (0.43) (0.41) (0.50) (0.21) (0.51)
---------- -------- ---------- ----------- ---------
Net Asset Value, End of Period..... $ 13.21 $13.20 $ 12.24 $12.23 $ 11.35
---------- -------- ---------- ----------- ---------
---------- -------- ---------- ----------- ---------
Total Return (Excludes Sales
Charge)........................... 11.56% 11.38% 12.36% 2.16%(b) 7.48%
Ratios/Supplementary Data:
Net Assets at end of period
(000).......................... $153,144 $9,513 $125,050 $ 118 $73,552
Ratio of expenses to average net
assets......................... 0.90% 1.11% 0.70% 1.29%(b) 0.42%
Ratio of net investment income to
average net assets............. 3.37% 3.32% 4.12% 3.97%(b) 4.80%
Ratio of expenses to average net
assets*........................ 1.07% 1.43% 1.23% 1.49%(b) 1.16%
Ratio of net investment income to
average net assets*............ 3.20% 3.00% 3.59% 3.77%(b) 4.06%
Portfolio Turnover............... 7.53% 7.53% 5.99% 5.99% 9.36%
</TABLE>
- --------------------
* During the period certain fees were voluntarily reduced. If such voluntary
fee reductions had not occurred, the ratios would have been as indicated.
(a) Class A Shares commenced offering on February 18, 1992.
(b) Annualized.
(c) Class B Shares commenced offering on January 14, 1994.
(d) Not Annualized.
PROSPECTUS 6
<PAGE>
THE FUND
The One Group-Registered Trademark- Income Equity Fund (the "Fund") is part of
The One Group-Registered Trademark- (the "Trust"), which is an open-end
management investment company that offers units of beneficial interest
("shares") in 29 separate funds and different classes of certain of the funds.
This Prospectus relates to the Class A, Class B and Fiduciary Class shares of
The One Group-Registered Trademark- Income Equity Fund, which provide for
variations in distribution costs, voting rights, dividends and per share net
asset value pursuant to a multiple class plan (the "Multiple Class Plan")
adopted by the Board of Trustees of the Trust. Except for these differences
among classes, each share of the Fund represents an undivided, proportionate
interest in the Fund. The Fund is a diversified mutual fund. Information
regarding the Trust's other funds and their classes is contained in separate
prospectuses which may be obtained from the Trust's Distributor, The One
Group-Registered Trademark- Services Company, 3435 Stelzer Road, Columbus, Ohio
43219, or by calling 1-800-480-4111.
INVESTMENT OBJECTIVE
The Fund seeks current income through regular payment of dividends with the
secondary goal of achieving capital appreciation by investing primarily in
equity securities.
The investment objective of the Fund is fundamental and may not be changed
without a vote of the holders of a majority of the Fund's outstanding shares (as
defined in the Statement of Additional Information).
There is no assurance that the Fund will meet its investment objective.
INVESTMENT POLICIES
The investment policies of the Fund may be changed without an affirmative vote
of the holders of a majority of the Fund's outstanding shares unless a policy is
expressly deemed to be fundamental or is expressly deemed to be changeable only
by such a majority vote.
PERMISSIBLE INVESTMENTS
The Fund will, under normal conditions, invest at least 80% of the value of its
total assets in equity securities consisting of common stocks, and debt
securities and preferred stocks which are convertible into common stocks. The
Fund may also enter into futures contracts, provided that the value of these
contracts does not exceed 25% of the Fund's total assets. In addition, the Fund
may write covered call options on securities it owns and enter into related
closing purchase transactions when such activity will further the Fund's
investment objective, and may also engage in other options transactions in
furtherance of its investment objective. The balance of the Fund's assets will
be held in cash equivalents possessing one of the ratings described below in
"Description of Ratings" at the time of investment or, if unrated, determined by
the Adviser to be of comparable quality.
The Fund will make investments in an attempt to keep its yield above the
Standard & Poor's 500 Composite Stock Price Index.(1) Achieving such a yield
will be the primary consideration in selecting securities. However, to the
extent not inconsistent with this primary consideration, a security's potential
for capital appreciation will also be considered. Investments will be made in
common stocks of corporations which regularly pay dividends, although continued
payment of dividends cannot be assured. The Fund will invest primarily in stocks
with favorable, long-term fundamental characteristics, but stocks of companies
that are out of favor in the financial community may also be purchased. The Fund
may eliminate its holdings of a stock when the Adviser determines that there is
a significant fundamental change that impairs a company's ability to pay
dividends.
In addition to the permissible investments described above, the Fund may invest
in U.S. Treasury obligations, including Separately Traded Registered Interest
and Principal Securities ("STRIPS") and Coupon Under Book Entry Safekeeping
("CUBES"), receipts, including Treasury Receipts ("TRS"), Treasury Investment
Growth Receipts ("TIGRS"), and Certificates of Accrual on Treasury Securities
("CATS"), certificates of deposit, time deposits, U.S. government agency
securities, repurchase agreements, reverse repurchase agreements, securities of
other investment companies, when-issued securities, forward commitments,
options, futures contracts, and options on futures contracts. The Fund may also
invest in variable and floating rate notes, bankers' acceptances, commercial
paper and securities of foreign issuers, including sponsored and unsponsored
American Depository Receipts ("ADRs"). The Fund may also engage in securities
lending transactions. All of the Fund's investments, where applicable, must
possess one of the ratings described below in the "Description of Ratings" at
the time of investment, or, if unrated, determined by the Adviser to be of
comparable quality.
This list of permissible investments includes select securities that may be
commonly considered to be derivatives, including: options, futures contracts and
options on futures contracts. These securities and limitations on their use are
more fully described in the "Description of Permitted Investments."
For a description of the Fund's permitted investments, see "Description of
Permitted Investments." For a description of permitted investments for temporary
defensive purposes, see "Temporary Defensive Position."
RISK FACTORS
Changes in the value of portfolio securities will not affect cash income, if
any, derived from these securities but will affect the
- -------------
(1) "Standard & Poor's 500" is a registered service mark of Standard & Poor's
Corporation, which does not sponsor and is in no way affiliated with the
Fund.
7 PROSPECTUS
<PAGE>
Fund's net asset value. Because the Fund invests primarily in equity securities,
which fluctuate in value, the Fund's shares will fluctuate in value.
Certain investment management techniques that the Fund may use, such as the
purchase and sale of futures, options, and forward commitments, could expose the
Fund to potentially greater risk of loss than more traditional equity
investments.
Investments in securities of foreign issuers may involve greater risks than are
present in U.S. investments. In general, issuers in many foreign countries are
not subject to accounting, auditing and financial reporting standards, practices
and requirements comparable to those applicable to U.S. companies. There is
generally less information publicly available about and less regulation of
foreign issuers than U.S. companies. Transaction costs are generally higher for
investments in foreign issuers. Securities of some foreign companies are less
liquid, and their prices more volatile, than securities of comparable U.S.
companies. Settlement of transactions in some foreign markets may be delayed or
may be less frequent than in the United States, which could adversely affect the
liquidity of the Fund. In addition, with respect to some foreign countries,
there are the possibilities of expropriation or confiscatory taxation, the
imposition of additional taxes or tax withholding, limitations on the removal of
securities, property or other assets of the Fund, political or social
instability, and diplomatic developments, which could affect the value of
investments in those countries.
For additional information on each of the Fund's permitted investments and
associated risks, see "Description of Permitted Investments."
HOW TO DO BUSINESS WITH
THE ONE GROUP-REGISTERED TRADEMARK-
HOW TO INVEST IN THE ONE GROUP-REGISTERED TRADEMARK-
Shares of the Fund are sold on a continuous basis and may be purchased directly
from the Trust's Distributor, The One Group-Registered Trademark- Services
Company by mail, by telephone, or by wire. Shares may also be purchased through
a financial institution, such as a bank, savings and loan association or
insurance company (each a "Shareholder Servicing Agent"), that has established a
Shareholder servicing agreement with the Distributor or through a broker-dealer
that has established a dealer agreement with the Distributor.
Purchases and redemptions of shares of the Fund may be made on any day that the
New York Stock Exchange is open for trading ("Business Days"). The minimum
initial and subsequent investments in the Fund are $1,000 and $100, respectively
($100 and $25, respectively, for employees of BANC ONE CORPORATION and its
affiliates). The initial and subsequent minimum investments may be waived at the
Distributor's discretion. Investors may purchase up to a maximum of $250,000 of
Class B shares per individual purchase order.
Class A and Class B shares are offered to the general public. Fiduciary Class
shares are offered to institutional investors, including affiliates of BANC ONE
CORPORATION and any bank, depository institution, insurance company, pension
plan or other organization authorized to act in fiduciary, advisory, agency,
custodial or similar capacities (each an "Authorized Financial Organization").
For additional details regarding eligibility, call the Distributor at
1-800-480-4111.
BY MAIL
Investors may purchase Class A and Class B shares of the Fund by completing and
signing an Account Application Form and mailing it, along with a check (or other
negotiable bank instrument or money order) payable to "The One Group-Registered
Trademark-," to State Street Bank and Trust Company (the Trust's Transfer Agent
and Custodian), P.O. Box 8500, Boston, MA 02266-8500. Subsequent purchases of
shares may be made at any time by mailing a check to the Transfer Agent. Account
Application Forms are available through the Distributor by calling
1-800-480-4111.
Purchases of Fiduciary Class shares and Class A shares that are being offered to
investors in certain retirement plans such as 401(k) and similar plans, other
than Individual Retirement Accounts, are made by an institutional investor
and/or other intermediary on behalf of an investor (each also a "Shareholder
Servicing Agent"). The Shareholder Servicing Agent may require an investor to
complete forms in addition to the Account Application Form and to follow
procedures established by the Shareholder Servicing Agent. Such Shareholders
should contact their Shareholder Servicing Agents regarding purchases, exchanges
and redemptions of shares. See "Additional Information Regarding Purchases."
BY TELEPHONE OR BY WIRE
Once an Account Application Form has been received, Shareholders are eligible to
make purchases by telephone or wire (if that option has been selected by a
Shareholder) by calling the Transfer Agent at 1-800-480-4111 or the Shareholder
Servicing Agent, if applicable.
Shareholders may revoke their automatic eligibility to make purchases and/or
redemptions by telephone or by wire, by sending a letter so stating to the
Transfer Agent, State Street Bank and Trust Company, P.O. Box 8500, Boston, MA
02266-8500.
SYSTEMATIC INVESTMENT PLAN
Class A and Class B investors may make automatic monthly investments in the Fund
from their bank, savings and loan or other depository institution accounts. The
minimum initial and subsequent investments must be $25 under the Systematic
Investment Plan, which minimum may be waived at the discretion of the
Distributor. The Trust pays the costs associated with these transfers, but
reserves the right, upon thirty days' written notice, to impose reasonable
charges for this service. A depository institution may impose a charge for
debiting an investor's account which would reduce the investor's return from an
investment in the Fund.
PROSPECTUS 8
<PAGE>
FUND-DIRECT IRA
The Trust offers a tax-advantaged retirement plan for which shares of the Fund
may be an appropriate investment. The Trust's retirement plan allows
participants to defer taxes while helping them build their retirement savings.
The One Group-Registered Trademark-'s Fund-Direct IRA is a retirement plan with
a wide choice of investments offering people with earned income the opportunity
to compound earnings on a tax-deferred basis. An IRA Adoption Agreement may be
obtained by calling the Distributor at 1-800-480-4111.
ADDITIONAL INFORMATION REGARDING PURCHASES
A purchase order will be effective as of the day received by the Distributor if
the Distributor receives the order before 4:00 p.m., eastern time. However, an
order may be cancelled if the Transfer Agent does not receive Federal funds
before the close of business on the next Business Day for Fiduciary Class
shares, and before the close of business on the third Business Day for Class A
and Class B shares, and the investor could be liable for any fees or expenses
incurred by the Trust. Federal funds are monies credited to a bank's account
with a Federal Reserve Bank. The purchase price of shares of the Fund is the net
asset value next determined after a purchase order is effected plus any
applicable sales charge (the "offering price"). The net asset value per share of
the Fund is determined by dividing the total market value of the Fund's
investments and other assets allowable to a class, less any liabilities
allocable to that class, by the total number of outstanding shares of such
class. Net asset value per share is determined daily as of 4:00 p.m., eastern
time, on each Business Day. For a further discussion of the calculation of net
asset value, see the Statement of Additional Information. Shares may also be
issued in transactions involving the acquisition by the Fund of securities held
by collective investment funds sponsored and administered by affiliates of the
Adviser. Purchases will be made in full and fractional shares of the Fund
calculated to three decimal places. Although the methodology and procedures are
identical, the net asset value per share of classes within the Fund may differ
because the distribution expenses charged to Class A shares and Class B shares
are not charged to Fiduciary Class shares.
The Trust reserves the right to reject a purchase order when the Distributor
determines that it is not in the best interest of the Trust and/or its
Shareholders to accept such order. Except as provided below, neither the Trust's
Transfer Agent nor the Trust will be responsible for any loss, liability, cost
or expense for acting upon telephone or wire instructions, and the investor will
bear all risk of loss. The Trust will employ reasonable procedures to confirm
that instructions communicated by telephone are genuine, including requiring a
form of personal identification prior to acting upon instructions received by
telephone and recording telephone instructions. If such procedures are not
employed, the Trust may be liable for any losses due to unauthorized or
fraudulent instructions.
Fiduciary Class shares offered to institutional investors and to investors in
certain retirement plans, and Class A shares that are being offered to investors
in certain retirement plans such as 401(k) and similar plans, other than
Individual Retirement Accounts, will normally be held in the name of the
Shareholder Servicing Agent effecting the purchase on the Shareholder's behalf,
and it is the Shareholder Servicing Agent's responsibility to transmit purchase
orders to the Distributor. A Shareholder Servicing Agent may impose an earlier
cut-off time for receipt of purchase orders directed through it to allow for
processing and transmittal of these orders to the Distributor for effectiveness
the same day. The Shareholder should contact his or her Shareholder Servicing
Agent for information as to the Shareholder Servicing Agent's procedures for
transmitting purchase, exchange or redemption orders to the Trust. A Shareholder
who desires to transfer the registration of shares beneficially owned by him or
her, but held of record by a Shareholder Servicing Agent, should contact the
Shareholder Servicing Agent to accomplish such change. Other Shareholders who
desire to transfer the registration of their shares should contact the Transfer
Agent.
No certificates representing the shares of the Fund will be issued. In
communications to Shareholders, the Fund will not duplicate mailings of Fund
material to Shareholders who reside at the same address.
SALES CHARGE
The following table shows the initial sales charge on Class A shares to a
"single purchaser" (defined below) together with the sales charge reallowed to
financial institutions and intermediaries (the "commission"):
<TABLE>
<CAPTION>
SALES CHARGE
SALES CHARGE AS APPROPRIATE COMMISSION
AS A PERCENTAGE OF AS A
PERCENTAGE OF NET AMOUNT PERCENTAGE OF
AMOUNT OF PURCHASE OFFERING PRICE INVESTED OFFERING PRICE
- --------------------------- ------------------ ------------------- ------------------
<S> <C> <C> <C>
less than $50,000.......... 4.50% 4.71% 4.05%
$50,000 but less than
$100,000................. 3.50% 3.63% 3.15%
$100,000 but less than
$250,000................. 2.50% 2.56% 2.25%
$250,000 but less than
$500,000................. 1.50% 1.52% 1.35%
$500,000 but less than
$1,000,000............... 1.00% 1.01% 0.90%
$1,000,000 or more......... 0.00% 0.00% 0.00%
</TABLE>
The commissions shown in the table apply to sales through financial institutions
and intermediaries. Under certain circumstances, the Distributor will use its
own funds to compensate financial institutions and intermediaries in amounts
that are additional to the commission shown above. The maximum cash compensation
payable by the Distributor as a sales charge is 4.50% of the offering price
(including the commission shown above and additional cash compensation described
below). In addition, the Distributor will, from time to time and at its own
expense, provide promotional incentives to financial institutions and
intermediaries, whose registered representatives have sold or are expected to
sell significant amounts of shares of the Fund, in the form of payment for
travel expenses, including lodging, incurred in connection with trips taken by
qualifying registered representatives to places within or outside the United
States, and additional compensation in an amount up to .50% of the
9 PROSPECTUS
<PAGE>
offering price of Class A shares of the Fund for sales of $1 million or more.
However, the Distributor will be reimbursed by the person receiving such
additional compensation for sales of the Fund of $1 million or more, if a
Shareholder redeems any or all of the shares for which such additional
compensation was paid by the Distributor prior to the first year anniversary of
purchase. Under certain circumstances, commissions up to the amount of the
entire sales charge will be reallowed to financial institutions and
intermediaries, which might then be deemed to be "underwriters" under the
Securities Act of 1933.
RIGHT OF ACCUMULATION
In calculating the sales charge rates applicable to current purchases of Class A
shares, a "single purchaser" is entitled to cumulate current purchases with the
current value at the offering price of previously purchased Class A and Class B
shares of the Fund and other eligible funds of the Trust, other than the Trust's
money market funds, that are sold subject to a comparable sales charge.
The term "single purchaser" refers to (i) an individual, (ii) an individual and
spouse purchasing shares of the Fund for their own account or for trust or
custodial accounts for their minor children, or (iii) a fiduciary purchasing for
any one trust, estate or fiduciary account, including employee benefit plans
created under Sections 401 or 457 of the Internal Revenue Code of 1986, as
amended (the "Code"), and including related plans of the same employer. To be
entitled to a reduced sales charge based upon shares already owned, the investor
must ask the Distributor for such reduction at the time of purchase and provide
the account number(s) of the investor, the investor and spouse, and their minor
children, and give the age of such children. The Fund may amend or terminate
this right of accumulation at any time as to subsequent purchases.
LETTER OF INTENT
By initially investing at least $2,000 in Class A shares of one or more funds of
the Trust that impose a comparable sales charge over the next 13 months, the
sales charge may be reduced by completing the Letter of Intent section of the
Account Application Form. The Letter of Intent includes a provision for a sales
charge adjustment depending on the amount actually purchased within the 13-month
period. In addition, pursuant to a Letter of Intent, the Custodian will hold in
escrow the difference between the sales charge applicable to the amount
initially purchased and the sales charge paid at the time of the investment,
which is based on the amount covered by the Letter of Intent.
For example, assume an investor signs a Letter of Intent to purchase $250,000 in
Class A shares of one (or more) of the funds of the Trust that impose a
comparable sales charge and, at the time of signing the Letter of Intent,
purchases $100,000 of Class A shares of one of these funds. The investor would
pay an initial sales charge of 1.50% (the sales charge applicable to purchases
of $250,000) and 1.00% of the investment (representing the difference between
the 2.50% sales charge applicable to purchases of $100,000 and the 1.50% sales
charge already paid) would be held in escrow until the investor has purchased
the remaining $150,000 or more in Class A shares under the investor's Letter of
Intent.
The amount held in escrow will be applied to the investor's account at the end
of the 13-month period unless the amount specified in the Letter of Intent is
not purchased. In order to qualify for a Letter of Intent, the investor will be
required to make a minimum purchase of at least $2,000.
The Letter of Intent will not obligate the investor to purchase Class A shares,
but if he or she does, each purchase during the period will be at the sales
charge applicable to the total amount intended to be purchased. The Letter of
Intent may be dated as of a prior date to include any purchases made within the
past 90 days.
OTHER CIRCUMSTANCES
No sales charge is imposed on Class A shares of the Fund: (i) issued through
reinvestment of dividends and capital gains distributions; (ii) acquired through
the exercise of exchange privileges where a comparable sales charge has been
paid for exchanged shares; (iii) purchased by officers, directors or trustees,
retirees and employees (and their spouses and immediate family members) of the
Trust, of BANC ONE CORPORATION and its subsidiaries and affiliates, of the
Distributor and its subsidiaries and affiliates, or of an investment sub-adviser
of a fund of the Trust and such sub-adviser's subsidiaries and affiliates; (iv)
sold to affiliates of BANC ONE CORPORATION and certain accounts (other than
Individual Retirement Accounts) for which Authorized Financial Organizations act
in fiduciary, advisory, agency, custodial or similar capacities, or purchased by
investment advisers, financial planners or other intermediaries who have a
dealer arrangement with the Distributor, who place trades for their own accounts
or for the accounts of their clients and who charge a management, consulting or
other fee for their services, as well as clients of such investment advisers,
financial planners or other intermediaries who place trades for their own
accounts if the accounts are linked to the master account of such investment
adviser, financial planner or other intermediary; (v) purchased with proceeds
from the recent redemption of Fiduciary Class shares of a fund of the Trust, or
acquired in an exchange of Fiduciary Class shares of a fund for Class A shares
of the same fund; (vi) purchased with proceeds from the recent redemption of
shares of a mutual fund (other than a fund of the Trust) for which a sales
charge was paid; (vii) purchased in an Individual Retirement Account with the
proceeds of a distribution from an employee benefit plan, provided that, at the
time of distribution, the employee benefit plan had plan assets invested in a
fund of the Trust; (viii) purchased with Trust assets; (ix) purchased in
accounts as to which a bank or broker-dealer charges an asset allocation fee,
provided the bank or broker-dealer has an agreement with the Distributor; or (x)
directly purchased with the proceeds of a distribution on a bond for which a
BANC ONE CORPORATION affiliate bank or trust company is the Trustee or Paying
Agent.
An investor relying upon any of the categories of waivers of the sales charge
must qualify for such waiver in advance of the
PROSPECTUS 10
<PAGE>
purchase with the Distributor or the financial institution or intermediary
through which shares are purchased by the investor.
The waiver of the sales charge under circumstances (v), (vi) and (vii) above
applies only if the purchase is made within 60 days of the redemption or
distribution and if conditions imposed by the Distributor are met. The waiver
policy with respect to the purchase of shares through the use of proceeds from a
recent redemption or distribution as described in clauses (v), (vi) and (vii)
above will not be continued indefinitely and may be discontinued at any time
without notice. Investors should call the Distributor at 1-800-480-4111 to
determine whether they are eligible to purchase shares without paying a sales
charge through the use of proceeds from a recent redemption or distribution as
described above, and to confirm continued availability of these waiver policies
prior to initiating the procedures described in clauses (v), (vi) and (vii).
ALTERNATIVE SALES ARRANGEMENTS
CLASS B SHARES
Class B shares are not subject to a sales charge when they are purchased, but
are subject to a sales charge (the "Contingent Deferred Sales Charge") if a
Shareholder redeems them prior to the sixth anniversary of purchase. When a
Shareholder purchases Class B shares, the full purchase amount is invested
directly in the Fund. Class B shares of the Fund are subject to an ongoing
distribution and Shareholder service fee at an annual rate of 1.00% of the
Fund's average daily net assets as provided in the Class B Plan (described below
under "The Distributor"). This ongoing fee will cause Class B shares to have a
higher expense ratio and to pay lower dividends than Class A shares. Class B
shares convert automatically to Class A shares after eight years, commencing
from the end of the calendar month in which the purchase order was accepted
under the circumstances and subject to the qualifications described in this
Prospectus.
Proceeds from the Contingent Deferred Sales Charge and the distribution and
Shareholder service fees under the Class B Plan are payable to the Distributor
and financial intermediaries to defray the expenses of advance brokerage
commissions and expenses related to providing distribution-related and
Shareholder services to the Fund in connection with the sale of the Class B
shares, such as the payment of compensation to dealers and agents for selling
Class B shares. A dealer reallowance of 4.00% of the original purchase price of
the Class B shares will be paid to financial institutions and intermediaries.
CONTINGENT DEFERRED SALES CHARGE
If the Shareholder redeems Class B shares prior to the sixth anniversary of
purchase, the Shareholder will pay a Contingent Deferred Sales Charge at the
rates set forth below. The Contingent Deferred Sales Charge is assessed on an
amount equal to the lesser of the then-current market value or the cost of the
shares being redeemed. Accordingly, no sales charge is imposed on increases in
net asset value above the initial purchase price. In addition, no charge is
assessed on shares derived from reinvestment of dividends or capital gain
distributions.
The amount of the Contingent Deferred Sales Charge, if any, varies depending on
the number of years from the time of payment for the purchase of Class B shares
until the time of redemption of such shares. Solely for purposes of determining
the number of years from the time of any payment for the purchase of shares, all
payments during a month are aggregated and deemed to have been made on the first
day of the month.
<TABLE>
<CAPTION>
CONTINGENT DEFERRED
SALES CHARGE AS A
YEAR(S) PERCENTAGE OF DOLLAR
SINCE AMOUNT SUBJECT TO
PURCHASE CHARGE
- ----------------------------------------- -----------------------
<S> <C>
0-1...................................... 5.00%
1-2...................................... 4.00%
2-3...................................... 3.00%
3-4...................................... 3.00%
4-5...................................... 2.00%
5-6...................................... 1.00%
6-7...................................... None
7-8...................................... None
</TABLE>
In determining whether a particular redemption is subject to a Contingent
Deferred Sales Charge, it is assumed that the redemption is first of any Class A
shares in the Shareholder's Fund account (unless the Shareholder elects to have
Class B shares redeemed first) or shares representing capital appreciation, next
of shares acquired pursuant to reinvestment of dividends and capital gain
distributions, and finally of other shares held by the Shareholder for the
longest period of time. This method should result in the lowest possible sales
charge.
To provide an example, assume you purchased 100 shares at $10 per share (a total
cost of $1,000) and prior to the second anniversary after purchase, the net
asset value per share is $12 and during such time you have acquired 10
additional shares through dividends paid in shares. If you then make your first
redemption of 50 shares (proceeds of $600), 10 shares will not be subject to
charge because you received them as dividends. With respect to the remaining 40
shares, the charge is applied only to the original cost of $10 per share and not
to the increase in net asset value of $2 per share. Therefore, $400 of the $600
redemption proceeds is subject to a Contingent Deferred Sales Charge at a rate
of 4.00% (the applicable rate prior to the second anniversary after purchase).
The Contingent Deferred Sales Charge is waived on redemption of shares: (i) for
distributions that are made under a Systematic Withdrawal Plan of the Trust and
that are limited to no more than 10% of the account value annually, determined
in the first year as of the date the redemption request is received by the
Transfer Agent, and in subsequent years, as of the most recent anniversary of
that date; (ii) following the death or disability (as defined in the Code) of a
Shareholder or a participant or beneficiary of a qualifying retirement plan if
redemption is made within one year of such death or disability; or (iii) to the
extent that the redemption represents a minimum required distribution from an
11 PROSPECTUS
<PAGE>
Individual Retirement Account or other qualifying retirement plan to a
Shareholder who has attained the age of 70 1/2. A Shareholder or his or her
representative should contact the Transfer Agent to determine whether a
retirement plan qualifies for a waiver and must notify the Transfer Agent prior
to the time of redemption if such circumstances exist and the Shareholder is
eligible for this waiver. In addition, the following circumstances are not
deemed to result in a "redemption" of Class B shares for purposes of the
assessment of a Contingent Deferred Sales Charge, which is therefore waived: (i)
plans of reorganization of the Fund, such as mergers, asset acquisitions and
exchange offers to which the Fund is a party; or (ii) exchanges for Class B
shares of other funds of the Trust as described under "Exchanges."
CONVERSION FEATURE
Class B shares include all shares purchased pursuant to the Contingent Deferred
Sales Charge which have been outstanding for less than the period ending eight
years after the end of the month in which the shares were purchased. At the end
of this period, Class B shares will automatically convert to Class A shares and
will be subject to the lower distribution and Shareholder service fees charged
to Class A shares. Such conversion will be on the basis of the relative net
asset values of the two classes, without the imposition of any sales charge, fee
or other charge. The conversion is not a taxable event to a Shareholder.
For purposes of conversion to Class A shares, shares received as dividends and
other distributions paid on Class B shares in a Shareholder's Fund account will
be considered to be held in a separate sub-account. Each time any Class B shares
in a Shareholder's Fund account (other than those in the sub-account) convert to
Class A shares, a pro-rata portion of the Class B shares in the subaccount will
also convert to Class A shares.
If a Shareholder effects one or more exchanges among Class B shares of the funds
of the Trust during the eight-year period, the Trust will aggregate the holding
periods for the shares of each fund of the Trust for purposes of calculating
that eight-year period. Because the per share net asset value of the Class A
shares may be higher than that of the Class B shares at the time of conversion,
a Shareholder may receive fewer Class A shares than the number of Class B shares
converted, although the dollar value will be the same.
EXCHANGES
CLASS A AND FIDUCIARY CLASS
Fiduciary Class Shareholders of the Fund may exchange their shares for Class A
shares of the Fund or for Class A shares or Fiduciary Class shares of another
fund of the Trust.
Class A Shareholders may exchange their shares for Fiduciary Class shares of the
Fund or for Fiduciary Class shares or Class A shares of another fund of the
Trust, if the Shareholder is eligible to purchase such shares.
The exchange privilege may be exercised only in those states where the shares of
the Fund or such other fund of the Trust may be legally sold. All exchanges
discussed herein are made at the net asset value of the exchanged shares, except
as provided below. The Trust does not impose a charge for processing exchanges
of shares. If a Shareholder seeks to exchange Class A shares of a fund that does
not impose a sales charge for Class A shares of a fund that does or the fund
being exchanged into has a higher sales charge, the Shareholder will be required
to pay a sales charge in the amount equal to the difference between the sales
charge applicable to the fund into which the shares are being exchanged and any
sales charges previously paid for the exchanged shares, including any sales
charges incurred on any earlier exchanges of the shares (unless such sales
charge is otherwise waived, as provided in "Other Circumstances"). The exchange
of Fiduciary Class shares for Class A shares also will require payment of the
sales charge unless the sales charge is waived, as provided in "Other
Circumstances."
CLASS B
Class B Shareholders of the Fund may exchange their shares for Class B shares of
any other fund of the Trust on the basis of the net asset value of the exchanged
Class B shares, without the payment of any Contingent Deferred Sales Charge that
might otherwise be due upon redemption of the outstanding Class B shares. The
newly acquired Class B shares will be subject to the higher Contingent Deferred
Sales Charge of either the fund from which the shares were exchanged or the fund
into which the shares were exchanged. With respect to outstanding Class B shares
as to which previous exchanges have taken place, "higher Contingent Deferred
Sales Charge" shall mean the higher of the Contingent Deferred Sales Charge
applicable to either the fund the shares are exchanging into or any other fund
from which the shares previously have been exchanged. For purposes of computing
the Contingent Deferred Sales Charge that may be payable upon a disposition of
the newly acquired Class B shares, the holding period for outstanding Class B
shares of the fund from which the exchange was made is "tacked" to the holding
period of the newly acquired Class B shares. For purposes of calculating the
holding period applicable to the newly acquired Class B shares, the newly
acquired Class B shares shall be deemed to have been issued on the date of
receipt of the Shareholder's order to purchase the outstanding Class B shares of
the fund from which the initial exchange was made.
ADDITIONAL INFORMATION REGARDING EXCHANGES
In the case of shares held of record by a Shareholder Servicing Agent but
beneficially owned by a Shareholder, to exchange such shares the Shareholder
should contact the Shareholder Servicing Agent, who will contact the Transfer
Agent and effect the exchange on behalf of the Shareholder. If an exchange
request in good order is received by the Transfer Agent by 4:00 p.m., eastern
time, on any Business Day, the exchange usually will occur on that day. Any
Shareholder who wishes to make an exchange must receive a current prospectus of
the fund of the Trust in which he or she wishes to invest before the exchange
will be effected.
PROSPECTUS 12
<PAGE>
The Trust reserves the right to change the terms and conditions of the exchange
privilege discussed herein upon sixty days' written notice. An exchange between
classes of shares of the same fund is not considered a taxable event; however,
an exchange between funds of the Trust is considered a sale of shares and
usually results in a capital gain or loss for Federal income tax purposes.
Shareholders should consult their tax advisers for a more complete explanation
of the Federal income tax consequences of an exchange of shares of the Fund.
A more detailed description of the above is set forth in the Statement of
Additional Information.
REDEMPTIONS
Shareholders may redeem their shares without charge (except Class B shares, as
provided above) on any Business Day; shares may ordinarily be redeemed by mail,
by telephone or by wire. All redemption orders are effected at the net asset
value per share next determined for Class A and Fiduciary shares, and at net
asset value per share next determined reduced by any applicable Contingent
Deferred Sales Charge for Class B shares, after receipt of a valid request for
redemption. Payment to Shareholders for shares redeemed will be made within
seven days after receipt by the Transfer Agent of the request for redemption.
BY MAIL
A written request for redemption must be received by the Transfer Agent in order
to constitute a valid request for redemption. All written redemption requests
should be sent to The One Group-Registered Trademark-, c/o State Street Bank and
Trust Company, P.O. Box 8500, Boston, MA 02266-8500, or the Shareholder
Servicing Agent, if applicable. The Transfer Agent may require that the
signature on the written request be guaranteed by a commercial bank, a member
firm of a domestic stock exchange or by a member of the Securities Transfer
Association Medallion Program or the Stock Exchange Medallion Program.
The signature guarantee requirement will be waived if all of the following
conditions apply: (i) the redemption is for $5,000 worth of shares or less; (ii)
the redemption check is payable to the Shareholder(s) of record; and (iii) the
redemption check is mailed to the Shareholder(s) at the address of record. The
Shareholder may also have the proceeds mailed to a commercial bank account
previously designated on the Account Application Form or by written instruction
to the Transfer Agent or the Shareholder Servicing Agent, if applicable. There
is no charge for having redemption requests mailed to a designated bank account.
BY TELEPHONE OR BY WIRE
Shareholders may have the payment of redemption requests wired or mailed to a
domestic commercial bank account previously designated on the Account
Application Form. Wire redemption requests may be made by the Shareholder by
telephone to the Transfer Agent at 1-800-480-4111, provided that the Shareholder
has elected the telephone redemption privilege in writing to the Distributor, or
to the Shareholder Servicing Agent, if applicable. The Transfer Agent may reduce
the amount of a wire redemption payment by its then-current wire redemption
charge, which, as of the date of this Prospectus, is $7.00.
Neither the Trust nor the Transfer Agent will be responsible for the
authenticity of the redemption instructions received by telephone if it
reasonably believes those instructions to be genuine. The Trust and the Transfer
Agent will each employ reasonable procedures to confirm that telephone
instructions are genuine, and may be liable for losses resulting from
unauthorized or fraudulent telephone transactions if it does not employ those
procedures. Such procedures may include requesting personal identification
information or recording telephone conversations.
SYSTEMATIC WITHDRAWAL PLAN
Shareholders whose accounts have a value of at least $10,000 may elect to
receive, or may designate another person to receive, monthly, quarterly or
annual payments in a specified amount of not less than $100 each. There is no
charge for this service. Under the Systematic Withdrawal Plan, all dividends and
distributions must be reinvested in shares of the Fund. Purchases of additional
Class A shares while the Systematic Withdrawal Plan is in effect are generally
undesirable because a sales charge is incurred whenever purchases are made.
Pursuant to the Systematic Withdrawal Plan, Class B Shareholders may elect to
receive, or may designate another person to receive, distributions provided the
distributions are limited to no more than 10% of their account value annually,
determined in the first year as of the date the redemption request is received
by the Transfer Agent, and in subsequent years, as of the most recent
anniversary of that date. In addition, Shareholders who have attained the age of
70 1/2 may elect to receive distributions, to the extent that the redemption
represents a minimum required distribution from an Individual Retirement Account
or other qualifying retirement plan.
If the amount of the systematic withdrawal exceeds the income accrued since the
previous withdrawal under the Systematic Withdrawal Plan, the principal balance
invested will be reduced and shares will be redeemed.
OTHER INFORMATION REGARDING REDEMPTIONS
At various times, the Fund may be requested to redeem shares for which it has
not yet received good payment. In such circumstances, the forwarding of proceeds
may be delayed for 15 or more days until payment has been collected for the
purchase of such shares. The Fund intends to pay cash for all shares redeemed.
Due to the relatively high costs of handling small investments, the Fund
reserves the right to redeem, at net asset value, the shares of any Shareholder
if, because of redemptions of shares by or on behalf of the Shareholder, the
account of such Shareholder in the Fund has a value of less than $1,000, the
minimum initial purchase amount. Accordingly, an investor purchasing shares of
the Fund in only the minimum investment amount may be subject to such
involuntary redemption if he or she
13 PROSPECTUS
<PAGE>
thereafter redeems any of these shares. Before the Fund exercises its right to
redeem such shares and to send the proceeds to the Shareholder, the Shareholder
will be given notice that the value of the shares in his or her account is less
than the minimum amount and will be allowed 60 days to make an additional
investment in the Fund in an amount which will increase the value of the account
to at least $1,000.
See the Statement of Additional Information for examples of when the Trust may
suspend the right of redemption or redeem shares involuntarily if it appears
appropriate to do so in light of the Trust's responsibilities under the
Investment Company Act of 1940.
FUND MANAGEMENT
THE ADVISER
The Trust and Banc One Investment Advisors Corporation (the "Adviser") have
entered into an investment advisory agreement (the "Advisory Agreement"). Under
the Advisory Agreement, the Adviser makes the investment decisions for the
assets of the Fund and continuously reviews, supervises and administers the
Fund's investment program. The Adviser discharges its responsibilities subject
to the supervision of, and policies established by, the Trustees of the Trust.
The Trust's shares are not deposits or obligations of, or endorsed or guaranteed
by BANC ONE CORPORATION or its bank or non-bank affiliates. The Trust's shares
are not insured or guaranteed by the Federal Deposit Insurance Corporation
("FDIC") or by any other governmental agency or government sponsored agency of
the Federal government or any state.
The Adviser is an indirect, wholly-owned subsidiary of BANC ONE CORPORATION, a
bank holding company incorporated in the state of Ohio. BANC ONE CORPORATION
currently has affiliate banking organizations in Arizona, Colorado, Illinois,
Indiana, Kentucky, Ohio, Oklahoma, Texas, Utah, West Virginia and Wisconsin. In
addition, BANC ONE CORPORATION has several affiliates that engage in data
processing, venture capital, investment and merchant banking, and other
diversified services including trust management, investment management,
brokerage, equipment leasing, mortgage banking, consumer finance and insurance.
On a consolidated basis, BANC ONE CORPORATION had assets of over $86 billion as
of June 30, 1995.
The Adviser represents a consolidation of the investment advisory staffs of a
number of bank affiliates of BANC ONE CORPORATION, which have considerable
experience in the management of open-end management investment company
portfolios, including The One Group-Registered Trademark- since 1985 (then known
as "The Helmsman Fund"). Prior to January 1993, Bank One, Milwaukee, NA served
as investment adviser to the Fund. Bank One, Milwaukee, NA is an indirect,
wholly-owned subsidiary of BANC ONE CORPORATION.
Richard R. Jandrain, III, Senior Managing Director of Equity Securities, is
responsible for the development and implementation of the equity investment
policies of the Adviser. Mr. Jandrain has over 18 years of investment experience
and has served in various investment management positions with the Adviser and
its affiliates for the past five years.
R. Lynn Yturri is the Manager of the Fund, having served in that position since
July 1993. Mr. Yturri also is the Portfolio Manager of The One Group-Registered
Trademark- Large Company Growth Fund. Prior to January 1994, Mr. Yturri served
as the Director of Portfolio Management at Bank One Investment Advisors
Corporation. Mr. Yturri also served as Manager of Trust Investments at Valley
National Bank of Arizona before the Bank was acquired by BANC ONE CORPORATION in
1993 and as Portfolio Manager of the predecessor funds of The One
Group-Registered Trademark- Large Company Growth Fund since 1981.
The Adviser is entitled to a fee, which is calculated daily and paid monthly, at
an annual rate of .74% of the average daily net assets of the Fund. The Adviser
may voluntarily agree to waive a part of its fees. (See "About the Fund --
Expense Summary.") These fee waivers would be voluntary and may be terminated at
any time. Shareholders will be notified in advance if and when these waivers are
terminated. The total compensation to the Adviser for investment advisory and
sub-administration services exceeds 0.75%, which is considered by the SEC staff
to be higher than such fees paid by most other mutual funds. However, the
Adviser believes it is comparable to compensation paid by other mutual funds
having similar investment objectives and policies. During the fiscal year ended
June 30, 1995, the Fund paid investment advisory fees to the Adviser of .74% the
Fund's average daily net assets.
THE DISTRIBUTOR
The One Group-Registered Trademark- Services Company (the "Distributor"), a
wholly-owned subsidiary of the BISYS Group, Inc., and the Trust are parties to a
distribution agreement (the "Distribution Agreement") under which shares of the
Fund are sold on a continuous basis.
Class A shares are subject to a distribution and Shareholder services plan (the
"Plan"). As provided in the Plan, the Trust will pay the Distributor a fee of
.35% of the average daily net assets of Class A shares of the Fund. Currently,
the Distributor has voluntarily agreed to limit payments under the Plan to .25%
of the average daily net assets of Class A shares of the Fund. Up to .25% of the
fees payable under the Plan may be used as compensation for Shareholder services
by the Distributor and/ or financial institutions and intermediaries. All such
fees that may be paid under the Plan will be paid pursuant to Rule 12b-1 of the
Investment Company Act of 1940. The Distributor may apply these fees toward: (i)
compensation for its services in connection with distribution assistance or
provision of Shareholder services; or (ii) payments to financial institutions
and intermediaries such as banks (including affiliates of the Adviser), savings
and loan associations, insurance companies, investment counselors,
broker-dealers, and the Distributor's
PROSPECTUS 14
<PAGE>
affiliates and subsidiaries, as compensation for services or reimbursement of
expenses incurred in connection with distribution assistance or provision of
Shareholder services.
Class B shares are subject to a Contingent Deferred Sales Charge if such shares
are redeemed prior to the sixth anniversary of purchase. Class B shares of the
Fund are subject to an ongoing distribution and Shareholder service fee as
provided in the Class B distribution and Shareholder services plan (the "Class B
Plan") at an annual rate of 1.00% of the Fund's average daily net assets, which
includes Shareholder servicing fees of .25% of the Fund's average daily net
assets.
Proceeds from the Contingent Deferred Sales Charge and the distribution and
Shareholder service fees under the Class B Plan are payable to the Distributor
and financial intermediaries to defray the expenses of advance brokerage
commissions and expenses related to providing distribution-related and
Shareholder services to the Fund in connection with the sale of Class B shares,
such as the payment of compensation to dealers and agents for selling Class B
shares. The combination of the Contingent Deferred Sales Charge and the
distribution and Shareholder service fees facilitate the ability of the Fund to
sell the Class B shares without a sales charge being deducted at the time of
purchase.
The Plan and the Class B Plan are characterized as compensation plans since the
distribution fees will be paid to the Distributor without regard to the
distribution or Shareholder service expenses incurred by the Distributor or the
amount of payments made to financial institutions and intermediaries. The Fund
also may execute brokerage or other agency transactions through an affiliate of
the Adviser or through the Distributor for which the affiliate or the
Distributor receives compensation. Pursuant to guidelines adopted by the Board
of Trustees of the Trust, any such compensation will be reasonable and fair
compared to compensation received by other brokers in connection with comparable
transactions.
During the fiscal year ended June 30, 1995, 440 Financial Distributors, Inc.,
the previous distributor to the Trust, received fees aggregating .25% of the
average daily net assets of the Class A shares of the Fund. In addition, 440
Financial Distributors, Inc. received annualized fees of 1.00% of the average
daily net assets of the Class B shares of the Fund.
Fiduciary Class shares of the Fund are offered without distribution fees to
institutional investors, including Authorized Financial Organizations. It is
possible that an institution may offer different classes of shares to its
customers and thus receive different compensation with respect to different
classes of shares. In addition, a financial institution that is the record owner
of shares for the account of its customers may impose separate fees for account
services to its customers.
THE ADMINISTRATOR
The One Group-Registered Trademark- Services Company (the "Administrator"), a
wholly-owned subsidiary of the BISYS Group, Inc., and the Trust are parties to
an administration agreement relating to the Fund (the "Administration
Agreement"). Under the terms of the Administration Agreement, the Administrator
is responsible for providing the Trust with administrative services (other than
investment advisory services), including regulatory reporting and all necessary
office space, equipment, personnel and facilities.
The Adviser serves as Sub-Administrator to each fund of the Trust, pursuant to
an agreement between the Administrator and the Adviser. Pursuant to this
agreement, the Adviser performs many of the Administrator's duties, for which
the Adviser receives a fee paid by the Administrator.
The Administrator is entitled to a fee for administrative services, which is
calculated daily and paid monthly, at an annual rate of .20% of each fund's
average daily net assets on the first $1.5 billion in Trust assets, (excluding
the Treasury Only Money Market Fund and the Government Money Market Fund) .18%
of each fund's average daily net assets to $2 billion in Trust assets (excluding
the Treasury Only Money Market Fund and the Government Money Market Fund), and
.16% of each fund's average daily net assets when Trust assets exceed $2 billion
(excluding the Treasury Only Money Market Fund and the Government Money Market
Fund). During the fiscal year ended June 30, 1995, 440 Financial, the previous
administrator to the Trust, received annualized fees of .17% of the Fund's
average daily net assets.
THE TRANSFER AGENT AND CUSTODIAN
State Street Bank and Trust Company, P.O. Box 8500, Boston, MA 02266-8500 acts
as Transfer Agent and Custodian for the Trust for which it receives a fee. The
Custodian holds cash, securities and other assets of the Trust as required by
the Investment Company Act of 1940. Bank One Trust Company, N.A. serves as
Sub-Custodian in connection with the Trust's securities lending activities,
pursuant to an agreement between State Street Bank and Trust Company and Bank
One Trust Company. Bank One Trust Company receives a fee paid by the Trust.
COUNSEL AND INDEPENDENT ACCOUNTANTS
Ropes & Gray serves as counsel to the Trust. Coopers & Lybrand L.L.P. serves as
the independent accountants of the Trust.
OTHER INFORMATION
THE TRUST
The Trust was organized as a Massachusetts Business Trust under a Declaration of
Trust filed on May 23, 1985. The Declaration of Trust permits the Trust to offer
separate funds and different classes of each fund. All consideration received by
the Trust for shares of any fund and all assets of such fund belong to that fund
and would be subject to liabilities related thereto.
15 PROSPECTUS
<PAGE>
The Trust pays its expenses, including fees of its service providers, audit and
legal expenses, expenses of preparing prospectuses, proxy solicitation material
and reports to Shareholders, costs of custodial services and registering the
shares under Federal and state securities laws, pricing, insurance expenses,
litigation and other extraordinary expenses, brokerage costs, interest charges,
taxes and organizational expenses. During the fiscal year of the Trust ended
June 30, 1995, the total operating expenses of the Fund were 1.26% of the
average daily net assets of the Class A shares of the Fund, 2.01% of the average
daily net assets of the Class B shares of the Fund on an annual basis and 1.01%
of the average daily net assets of the Fiduciary Class shares of the Fund. These
expenses would have been 1.36% of the average daily net assets of the Class A
shares, but for the voluntary reduction of fees.
The Adviser and the Administrator of the Fund each bears all expenses incurred
in connection with the performance of their services as investment adviser and
administrator, respectively, other than the cost of securities (including
brokerage commissions, if any) purchased for the Fund.
As a general matter, as set forth in the Multiple Class Plan, expenses are
allocated to each class of shares of the Fund on the basis of the net asset
value of that class in relation to the net asset value of the Fund. At present,
the only expenses that are allocated to Class A and Class B shares, other than
in accordance with the relative net asset value of the class, are the different
distribution and Shareholder services costs. See "Expense Summary." At present,
no expenses are allocated to Fiduciary Class shares as a class that are not also
borne by the other classes of shares of the Fund in proportion to the relative
net asset values of the shares of such classes.
TRUSTEES OF THE TRUST
The management and affairs of the Trust are supervised by the Trustees under the
laws governing business trusts in the Commonwealth of Massachusetts. The
Trustees have approved contracts under which, as described above, certain
companies provide essential management services to the Trust.
VOTING RIGHTS
As set forth in the Multiple Class Plan, each share held entitles the
Shareholder of record to one vote. Each fund of the Trust will vote separately
on matters relating solely to that fund. In addition, each class of a fund shall
have exclusive voting rights on any matter submitted to Shareholders that
relates solely to that class, and shall have separate voting rights on any
matter submitted to Shareholders in which the interests of one class differ from
the interests of any other class. However, all fund Shareholders will have equal
voting rights on matters that affect all fund Shareholders equally. As a
Massachusetts Business Trust, the Trust is not required to hold annual meetings
of Shareholders but approval will be sought for certain changes in the operation
of the Trust and for the election of Trustees under certain circumstances. In
addition, a Trustee may be elected or removed by the remaining Trustees or by
Shareholders at a special meeting called upon written request of Shareholders
owning at least 10% of the outstanding shares of the Trust. In the event that
such a meeting is requested, the Trust will provide appropriate assistance and
information to the Shareholders requesting the meeting.
DIVIDENDS
Substantially all of the net investment income (exclusive of capital gains) of
the Fund is declared on the last Business Day of each month as a dividend for
Shareholders of record as of the close of business on that day and is
distributed in the form of periodic dividends to such Shareholders of the Fund
on the first Business Day of each month. Capital gains of the Fund, if any, will
be distributed at least annually.
Shareholders automatically receive all income dividends and capital gain
distributions in additional Class A, Class B, or Fiduciary Class shares, as
applicable, at the net asset value next determined following the record date,
unless the Shareholder has elected to take such payment in cash. Such election,
or any revocation thereof, must be made in writing, at least 15 days prior to
distribution, to the Transfer Agent at P.O. Box 8500, Boston, MA 02266-8500, and
will become effective with respect to dividends and distributions having record
dates after its receipt by the Transfer Agent. Reinvested dividends and
distribution receive the same tax treatment as dividends and distributions paid
in cash.
Class B shares received as dividends and capital gains distributions at the net
asset value next determined following the record date shall be held in a
separate Class B sub-account. Each time any Class B shares (other than those in
the sub-account) convert to Class A shares, a pro-rata portion of the Class B
shares in the sub-account will also convert to Class A shares. (See "Conversion
Feature.")
Dividends and distributions of the Fund are paid on a per-share basis. The value
of each share will be reduced by the amount of the payment. If shares are
purchased shortly before the record date for a dividend or the distribution of
capital gains, a Shareholder will pay the full price for the shares and receive
some portion of the price back as a taxable dividend or distribution even though
such distribution would in effect represent a return of the Shareholder's
investment.
The amount of dividends payable on Fiduciary Class shares will be more than the
dividends payable on Class A and Class B shares because of the distribution
expenses charged to Class A and Class B shares.
SHAREHOLDER INQUIRIES
Shareholder inquiries should be directed to the Administrator, The One
Group-Registered Trademark- Services Company, 3435 Stelzer Road, Columbus, Ohio
43219.
REPORTING
The Trust issues unaudited financial information semiannually and audited
financial statements annually. The Trust furnishes proxy statements and other
reports to Shareholders of record.
PROSPECTUS 16
<PAGE>
OTHER INVESTMENT POLICIES
TEMPORARY DEFENSIVE POSITION
For temporary defensive purposes during periods when the Adviser determines that
market conditions warrant such action, the Fund may invest up to 100% of its
assets in cash equivalents (including securities issued or guaranteed as to
principal and interest by the U.S. government, its agencies or
instrumentalities, repurchase agreements, certificates of deposit and bankers'
acceptances issued by banks or savings and loan associations having net assets
of at least $1 billion as of the end of their most recent fiscal year,
commercial paper rated in one of the two highest short-term rating categories by
at least one nationally recognized statistical rating organization ("NRSRO") or,
if unrated, determined by the Adviser to be of comparable quality, variable
amount master demand notes and bank money market deposit accounts), and may hold
cash for liquidity purposes.
To the extent the Fund is engaged in a temporary defensive position, the Fund
will not be pursuing its investment objective.
For a further description of the Fund's permitted investments, see "Description
of Permitted Investments" and the Statement of Additional Information, and for a
description of ratings, see "Description of Ratings."
PORTFOLIO TURNOVER
The Fund may engage in short-term trading, which involves selling securities
that have been held for a short period of time in order to increase the
potential for capital appreciation and/or income of the Fund or to take
advantage of a temporary disparity in the normal price or yield relationship
between two securities or changes in market, industry or company conditions or
outlook. Any such trading would increase a portfolio's turnover rate and its
transaction costs.
The Adviser will choose brokers by judging professional ability, quality of
service and reasonableness of commissions. Higher commissions may be paid to
those firms that provide research, superior execution and other services. The
Adviser may use any such research information in managing the assets of the
Fund.
For the fiscal year ended June 30, 1995, the portfolio turnover rate for the
Fund was 4.03%. The portfolio turnover rate for the Fund may vary greatly from
year to year, as well as within a particular year. Higher portfolio turnover
rates will likely result in higher transaction costs to the Fund and may result
in additional tax consequences to the Fund's Shareholders.
INVESTMENT LIMITATIONS
The investment objective and the following investment limitations are
fundamental policies of the Fund. Fundamental policies cannot be changed without
the consent of the holders of a majority of the Fund's outstanding shares. The
term "majority of the outstanding shares" means the vote of (i) 67% or more of
the Fund's shares present at a meeting, if more than 50% of the outstanding
shares of the Fund are present or represented by proxy, or (ii) more than 50% of
the Fund's outstanding shares, whichever is less.
The Fund may not:
1. Purchase securities of any issuer (except securities issued or guaranteed by
the United States, its agencies or instrumentalities and, if consistent with the
Fund's investment objective and policies, repurchase agreements involving
securities) if as a result more than 5% of the total assets of the Fund would be
invested in the securities of such issuer or the Fund would own more than 10% of
the outstanding voting securities of such issuer. These restrictions apply to
75% of the Fund's assets. For purposes of these limitations, a security is
considered to be issued by the government entity whose assets and revenues
guarantee or back the security. With respect to private activity bonds or
industrial development bonds backed only by the assets and revenues of a
non-governmental user, such user would be considered the issuer.
2. Purchase any securities that would cause more than 25% of the total assets of
the Fund to be invested in the securities of one or more issuers conducting
their principal business activities in the same industry, provided that this
limitation does not apply to investments in the obligations issued or guaranteed
by the U.S. government or its agencies and instrumentalities and repurchase
agreements involving such securities. For purposes of this limitation (i)
utilities will be divided according to their services (for example, gas, gas
transmission, electric and telephone will each be considered a separate
industry), and (ii) wholly-owned finance companies will be considered to be in
the industries of their parents if their activities are primarily related to
financing the activities of their parents.
3. Make loans, except that the Fund may (i) purchase or hold debt instruments in
accordance with its investment objective and policies, (ii) enter into
repurchase agreements, and (iii) engage in securities lending as described in
this Prospectus and in the Statement of Additional Information.
The foregoing percentages will apply at the time of the purchase of a security.
Additional investment limitations are set forth in the Statement of Additional
Information.
DESCRIPTION OF PERMITTED INVESTMENTS
The following is a description of certain of the permitted investments for the
Fund.
The Fund invests in common stocks including sponsored and unsponsored American
Depository Receipts ("ADRs") and convertible securities only if they are listed
on registered exchanges or actively traded in the over-the-counter market,
except that the Fund may invest up to 5% of its assets in restricted securities.
U.S. TREASURY OBLIGATIONS -- The Fund may invest in bills, notes and bonds
issued by the U.S. Treasury and separately
17 PROSPECTUS
<PAGE>
traded interest and principal component parts of such obligations that are
transferable through the Federal book-entry system, known as Separately Traded
Registered Interest and Principal Securities ("STRIPS") and Coupon Under Book
Entry Safekeeping ("CUBES").
RECEIPTS -- The Fund may purchase interests in separately traded interest and
principal component parts of U.S. Treasury obligations that are issued by banks
or brokerage firms and are created by depositing U.S. Treasury notes and U.S.
Treasury bonds into a special account at a custodian bank. The custodian holds
the interest and principal payments for the benefit of the registered owners of
the certificates or receipts. The custodian arranges for the issuance of the
certificates or receipts evidencing ownership and maintains the register.
Receipts include Treasury Receipts ("TRS"), Treasury Investment Growth Receipts
("TIGRS") and Certificates of Accrual on Treasury Securities ("CATS").
STRIPS, CUBES, TRS, TIGRS and CATS are sold as zero coupon securities, which
means that they are sold at a substantial discount and redeemed at face value at
their maturity date without interim cash payments of interest or principal. This
discount is amortized over the life of the security, and such amortization will
constitute the income earned on the security for both accounting and tax
purposes. Because of these features, these securities may be subject to greater
interest rate volatility than interest-paying U.S. Treasury obligations. The
Fund may invest up to 20% of its total assets in STRIPS, CUBES, TRS, TIGRS and
CATS. See also "Taxes."
CERTIFICATES OF DEPOSIT -- Certificates of deposit are negotiable interest
bearing instruments with a specific maturity. Certificates of deposit ("CDs")
are issued by banks and savings and loan institutions in exchange for the
deposit of funds and normally can be traded in the secondary market prior to
maturity.
TIME DEPOSITS -- Time deposits are non-negotiable receipts issued by a bank in
exchange for the deposit of funds. Like a certificate of deposit, a time deposit
("TD") earns a specified rate of interest over a definite period of time,
however, it cannot be traded in the secondary market. Time deposits with a
withdrawal penalty are considered to be illiquid securities; therefore, the Fund
will not invest more than 15% of its total assets in such time deposits and
other illiquid securities.
BANKERS' ACCEPTANCES -- Bankers' acceptances are bills of exchange or time
drafts drawn on and accepted by (i.e., made an obligation of) a commercial bank.
They are used by corporations to finance the shipment and storage of goods and
to furnish dollar exchange. Maturities are generally six months or less.
COMMERCIAL PAPER -- Commercial paper is the term used to designate unsecured
short-term promissory notes issued by corporations and other entities.
Maturities on these issues vary from a few days to nine months.
U.S. GOVERNMENT AGENCIES -- Certain Federal agencies have been established as
instrumentalities of the U.S. government to supervise and finance certain types
of activities. Select agencies, such as the Government National Mortgage
Association ("Ginnie Mae") and the Export-Import Bank, are supported by the full
faith and credit of the U.S. Treasury; others, such as the Federal National
Mortgage Association ("Fannie Mae"), are supported by the credit of the
instrumentality and have the right to borrow from the U.S. Treasury; others are
supported by the authority of the U.S. government to purchase the agency's
obligations; while still others, such as the Federal Farm Credit Banks and the
Federal Home Loan Mortgage Corporation ("Freddie Mac"), are supported solely by
the credit of the instrumentality itself. No assurance can be given that the
U.S. government would provide financial support to U.S. government sponsored
agencies or instrumentalities if it is not obligated to do so by law.
Obligations of U.S. government agencies include debt issues and mortgage backed
securities issued or guaranteed by select agencies.
CONVERTIBLE SECURITIES -- Convertible securities have characteristics similar to
both fixed income and equity securities. Because of the conversion feature, the
market value of convertible securities tends to move together with the market
value of the underlying stock. As a result, the Fund's selection of convertible
securities is based, to a great extent, on the potential for capital
appreciation that may exist in the underlying stock. The value of convertible
securities is also affected by prevailing interest rates, the credit quality of
the issuer, and any call provisions.
INVESTMENT COMPANY SECURITIES -- The Fund may invest up to 5% of its total
assets in the securities of any one investment company, but may not own more
than 3% of the securities of any one investment company or invest more than 10%
of its assets in the securities of other investment companies. In accordance
with an exemptive order issued to the Trust by the SEC, such other investment
company securities may include securities of a money market fund of the Trust,
and such companies may include companies of which the Adviser or a sub-adviser
to a fund of the Trust, or an affiliate of such Adviser or sub-adviser, serves
as investment adviser, administrator or distributor. Because other investment
companies employ an investment adviser, such investment by the Fund may cause
Shareholders to bear duplicative fees. The Adviser will waive its fees
attributable to the assets of the investing fund invested in a money market fund
of the Trust, and, to the extent required by the laws of any state in which
shares of the Trust are sold, the Adviser will waive their fees attributable to
the assets of the Fund invested in any investment company.
REPURCHASE AGREEMENTS -- Repurchase agreements are agreements by which a person
obtains a security and simultaneously commits to return the security to the
seller at an agreed upon price (including principal and interest) on an agreed
upon date within a number of days from the date of purchase. The custodian or
its agent will hold the security as collateral for the repurchase agreement.
Collateral must be maintained at a value at least equal to 100% of the
repurchase price. The Fund bears a risk of loss in the event the other party
defaults on its obligations and the Fund is delayed or prevented from its right
to dispose of the collateral securities or if the Fund realizes a loss
PROSPECTUS 18
<PAGE>
on the sale of the collateral securities. The Adviser will enter into repurchase
agreements on behalf of the Fund only with financial institutions deemed to
present minimal risk of bankruptcy during the term of the agreement based on
guidelines established and periodically reviewed by the Trustees. Repurchase
agreements are considered by the SEC to be loans under the Investment Company
Act of 1940.
REVERSE REPURCHASE AGREEMENTS -- The Fund may borrow funds for temporary
purposes by entering into reverse repurchase agreements. Pursuant to such
agreements, the Fund would sell portfolio securities to financial institutions
such as banks and broker-dealers, and agree to repurchase them at a mutually
agreed-upon date and price. The Fund will enter into reverse repurchase
agreements only to avoid otherwise selling securities during unfavorable market
conditions to meet redemptions. At the time the Fund enters into a reverse
repurchase agreement, it would place in a segregated custodial account assets,
such as liquid high grade debt securities, consistent with the Fund's investment
restrictions and having a value equal to the repurchase price (including accrued
interest), and would subsequently monitor the account to ensure that such
equivalent value was maintained. Reverse repurchase agreements involve the risk
that the market value of the securities sold by the Fund may decline below the
price at which the Fund is obligated to repurchase the securities. Reverse
repurchase agreements are considered by the SEC to be borrowings by a Fund under
the Investment Company Act of 1940.
SECURITIES LENDING -- In order to generate additional income, the Fund may lend
up to 33% of the securities in which it is invested pursuant to agreements
requiring that the loan be continuously secured by cash, securities of the U.S.
government or its agencies, shares of an investment trust or mutual fund or any
combination of cash and such securities as collateral equal at all times to at
least 100% of the market value plus accrued interest on the securities lent. The
Fund will continue to receive interest on the securities lent while
simultaneously seeking to earn interest on the investment of cash collateral in
U.S. government securities, shares of an investment trust or mutual fund, or
other short-term, highly liquid investments. Collateral is marked to market
daily to provide a level of collateral at least equal to the market value of the
securities lent. There may be risks of delay in recovery of the securities or
even loss of rights in the collateral should the borrower of the securities fail
financially. However, loans will only be made to borrowers deemed by the Adviser
to be of good standing under guidelines established by the Trust's Board of
Trustees and when, in the judgment of the Adviser, the consideration which can
be earned currently from such securities loans justifies the attendant risk. The
Fund will enter into loan arrangements only with counterparties which the
Adviser has deemed to be credit worthy under guidelines established by the Board
of Trustees. Loans are subject to termination by the Fund or the borrower at any
time, and are, therefore, not considered to be illiquid investments.
RESTRICTED SECURITIES -- The Fund may invest in commercial paper issued in
reliance on the exemption from registration afforded by Section 4(2) of the
Securities Act of 1933. Section 4(2) commercial paper is restricted as to
disposition under Federal securities law and is generally sold to institutional
investors, such as the Fund, who agree that they are purchasing the paper for
investment purposes and not with a view to public distribution. Any resale by
the purchaser must be in an exempt transaction. Section 4(2) commercial paper is
normally resold to other institutional investors like the Fund through or with
the assistance of the issuer or investment dealers who make a market in Section
4(2) commercial paper, thus providing liquidity. The Fund believes that Section
4(2) commercial paper and possibly certain other restricted securities that meet
the criteria for liquidity established by the Trustees are quite liquid. The
Fund intends, therefore, to treat the restricted securities that meet the
criteria for liquidity established by the Trustees, including Section 4(2)
commercial paper, as determined by the Adviser, as liquid and not subject to the
investment limitation applicable to illiquid securities. In addition, because
Section 4(2) commercial paper is liquid, the Fund will not subject such paper to
the limitation applicable to restricted securities.
The ability of the Trustees to determine the liquidity of certain restricted
securities is permitted under an SEC staff position set forth in the adopting
release for Rule 144A under the Securities Act of 1933 (the "Rule"). The Rule is
a nonexclusive safe harbor for certain secondary market transactions involving
securities subject to restrictions on resale under Federal securities laws. The
Rule provides an exemption from registration for resales of otherwise restricted
securities to qualified institutional buyers. The Rule is expected to further
enhance the liquidity of the secondary market for securities eligible for resale
under Rule 144A. The Fund believes that the staff of the SEC has left the
question of determining the liquidity of all restricted securities to the
Trustees. The Trustees have directed the Adviser to consider the following
criteria in determining the liquidity of certain restricted securities:
- - the frequency of trades and quotes for the security;
- - the number of dealers willing to purchase or sell the security and the number
of other potential buyers;
- - dealer undertakings to make a market in the security; and
- - the nature of the security and the nature of the marketplace trades.
VARIABLE AND FLOATING RATE INSTRUMENTS -- Certain of the obligations purchased
by the Fund may carry variable or floating rates of interest, may involve a
conditional or unconditional demand feature and may include variable amount
master demand notes. A demand instrument with a demand notice period exceeding
seven days may be considered illiquid if there is no secondary market for such
security; therefore, the Fund will not invest more than 15% of its assets in
such instruments and other illiquid securities. The interest rates on these
securities may be reset daily, weekly, quarterly or some other reset period, and
may have a floor or ceiling on interest rate charges. There is a risk that the
current interest rate on such obligations may not
19 PROSPECTUS
<PAGE>
accurately reflect existing market interest rates. The Fund will not invest more
than 5% of its total assets in variable rate master demand notes.
There is no limit on the extent to which the Fund may purchase variable and
floating rate instruments that are not illiquid. The Fund will purchase variable
and floating rate instruments to facilitate portfolio liquidity or to permit the
investment of the Fund's assets at a favorable rate of return.
SECURITIES PURCHASED ON A WHEN-ISSUED BASIS AND FORWARD COMMITMENTS -- The Fund
may purchase securities on a when-issued basis when deemed by the Adviser to
present attractive investment opportunities. When-issued securities are
purchased for delivery beyond the normal settlement date at a stated price and
yield, thereby involving the risk that the yield obtained will be less than that
available in the market at delivery. Although the purchase of securities on a
when-issued basis is not considered leveraging, it has the effect of leveraging.
When the Adviser purchases a when-issued security, the Custodian will set aside
cash or liquid securities to satisfy the purchase commitment. The Fund generally
will not pay for such securities or earn interest on them until received.
Commitments to purchase when-issued securities will not, under normal market
conditions, exceed 25% of the Fund's total assets, and a commitment will not
exceed 90 days. The Fund will only purchase when-issued securities for the
purpose of acquiring portfolio securities and not for speculative purposes.
In a forward commitment transaction, the Fund contracts to purchase securities
for a fixed price at a future date beyond customary settlement time. The Fund is
required to hold and maintain in a segregated account until the settlement date,
cash, U.S. government securities or liquid high-grade debt obligations in an
amount sufficient to meet the purchase price. Alternatively, the Fund may enter
into offsetting contracts for the forward sale of other securities that it owns.
The purchase of securities on a when-issued or forward commitment basis involves
a risk of loss if the value of the security to be purchased declines prior to
the settlement date. Although the Fund would generally purchase securities on a
when-issued or forward commitment basis with the intention of actually acquiring
securities for its portfolio, the Fund may dispose of a when-issued security or
forward commitment prior to settlement if the Adviser deems it appropriate to do
so.
OPTIONS -- The Fund may purchase and write (i.e., sell) call options and put
options on securities and indices, which options are traded on national
securities exchanges. A call option gives the purchaser the right to buy, and
obligates the writer of the option to sell, the underlying security at the
agreed upon exercise (or "strike") price during the option period. A put option
gives the purchaser the right to sell, and obligates the writer to buy, the
underlying security at the strike price during the option period. Purchasers of
options pay an amount, known as a premium, to the option writer in exchange for
the right under the option contract. Option contracts may be written with terms
that would permit the holder of the option to purchase or sell the underlying
security only upon the expiration date of the option. The initial purchase
(sale) of an option contract is an "opening transaction." In order to close out
an option position, the Fund may enter into a "closing transaction," the sale
(purchase) of an option contract on the same security with the same exercise
price and expiration date as the option contract originally opened.
The Fund may purchase put and call options in hedging transactions to protect
against a decline in the market value of the securities in the Fund (e.g., by
the purchase of a put option) and to protect against an increase in the cost of
fixed-income securities that the Fund may seek to purchase in the future (e.g.,
by the purchase of a call option). In the event that paying premiums for put and
call options, together with price movements in the underlying securities, are
such that exercise of the options would not be profitable for the Fund, losses
of the premiums paid may be offset by an increase in the value of the Fund's
securities (in the case of a purchase of put options) or by a decrease in the
cost of acquisition of securities by the Fund (in the case of a purchase of call
options).
The Fund also may write secured put and covered call options as a means of
increasing the yield on the Fund and as a means of providing limited protection
against decreases in market value of the Fund.
There are risks associated with options transactions, including the following:
(i) the success of a hedging strategy may depend on the ability of the Adviser
to predict movements in the prices of the individual securities, fluctuations in
markets and movements in interest rates; (ii) there may be an imperfect or no
correlation between the changes in market value of the securities held by the
Fund and the prices of options; (iii) there may not be a liquid secondary market
for options; and (iv) while the Fund will receive a premium when it writes
covered call options, it may not participate fully in a rise in the market value
of the underlying security. It is expected that the Fund will only engage in
option transactions with respect to permitted investments and related indices.
Generally, the policy of the Fund, in order to avoid the exercise of an option
sold by it, will be to cancel its obligation under the option by entering into a
closing purchase transaction, if available, unless selling (in the case of a
call option) or purchasing (in the case of a put option) the underlying
securities is determined to be in the Fund's interest. A closing purchase
transaction consists of the Fund purchasing an option having the same terms as
the option sold by the Fund, and has the effect of canceling the Fund's position
as a seller. The premium which the Fund will pay in executing a closing purchase
transaction may be higher (or lower) than the premium received when the option
was sold, depending in large part upon the relative price of the underlying
security at the time of each transaction. To the extent options sold by the Fund
are exercised and the Fund either delivers securities to the holder of a call
option or liquidates securities as a source of funds to purchase securities put
to the Fund, the Fund's turnover rate will increase, which would cause the Fund
to incur additional brokerage expenses.
PROSPECTUS 20
<PAGE>
During the option period, the Fund, as a covered call writer, gives up the
potential appreciation above the exercise price should the underlying security
rise in value, and the Fund, as a covered put writer, retains the risk of loss
should the underlying security decline in value. For the covered call writer,
substantial appreciation in the value of the underlying security would result in
the security being "called away" at the strike price of the option which may be
substantially below the fair market value of such security. For the covered put
writer, substantial depreciation in the value of the underlying security would
result in the security being "put to" the writer at the strike price of the
option which may be substantially in excess of the fair market value of such
security. If a covered call option or a covered put option expires unexercised,
the writer realizes a gain, and the buyer a loss, in the amount of the premium.
The SEC requires that obligations of investment companies such as the Fund, in
connection with option sale positions, must comply with certain segregation or
coverage requirements, which are more fully described in the Statement of
Additional Information.
The Fund will only write covered call options on its securities and will limit
such activities to provide that the aggregate market value of such options and
the Fund's obligations under such written puts does not exceed 25% of the Fund's
total assets as of the time such options are entered into by the Fund.
FUTURES CONTRACTS AND RELATED OPTIONS -- The Fund may enter into futures
contracts, options on futures contracts, index futures and options thereon that
are traded on an exchange regulated by the Commodities Futures Trading
Commission ("CFTC") if, to the extent that such futures and options are not for
"bona fide hedging purposes" (as defined by the CFTC), the aggregate initial
margin and premiums on such positions (excluding the amount by which options are
in the money) do not exceed 5% of the Fund's total assets at current value. The
Fund, however, may invest more than such amount for bona fide hedging purposes,
and also may invest more than such amount if it obtains authority to do so from
the appropriate regulatory agencies without rendering the Fund a commodity pool
operator or adversely affecting its status as an investment company for Federal
securities law or income tax purposes. However, the Fund may enter into futures
contracts and options on futures only to the extent that obligations under such
contracts or transactions, together with options on securities, represent not
more than 25% of the Fund's total assets.
The Fund may buy and sell futures contracts and related options to manage its
exposure to changing interest rates and security prices. Some futures
strategies, including selling futures, buying puts and writing calls, may reduce
the Fund's exposure to price fluctuations. Other strategies, including buying
futures, writing puts and buying calls, tend to increase market exposure.
Futures and options may be combined with each other in order to adjust the risk
and return characteristics of the overall portfolio. The Fund expects to enter
into these transactions to "lock in" a return or spread on a particular
investment or portion of its assets, to protect against any increase in the
price of securities the Fund anticipates purchasing at a later date, or for
other risk management strategies.
Options and futures can be volatile instruments, and involve certain risks. If
the Adviser applies a hedge at an inappropriate time or judges interest rates
incorrectly, options and futures strategies may lower the Fund's return. The
Fund could also experience losses if the prices of its options and futures
positions were poorly correlated with its other instruments, or if it could not
close out its positions because of an illiquid secondary market.
Typically, investment in these contracts requires the Fund to deposit with the
applicable exchange or other specified financial intermediary as a good faith
deposit for its obligations, known as "initial margin," an amount of cash or
specified debt securities that initially is 1%-15% of the face amount of the
contract and that thereafter fluctuates on a periodic basis as the value of the
contract fluctuates. Thereafter, the Fund must make additional deposits equal to
any net losses due to unfavorable price movements of the contract and will be
credited with an amount equal to any net gains due to favorable price movements.
These additional deposits or credits are calculated and required daily and are
known as "variation margin."
The SEC requires that when an investment company such as the Fund effects
transactions of the foregoing nature, it must either segregate cash or high
quality, readily marketable portfolio securities with its custodian in the
amount of its obligations under the foregoing transactions or must cover such
obligations by maintaining positions in portfolio securities, futures contracts
or options that would serve to satisfy or offset the risk of such obligations.
When effecting transactions of the foregoing nature, the Fund will comply with
such segregation or cover requirements. No limitation exists on the amount of
the Fund's assets that may be used to comply with such segregation or cover
requirements.
The Fund may engage in straddles and spreads with respect to 5% of its total
assets. In a straddle transaction, the Fund either buys a call and a put or
sells a call and a put on the same security. In a spread, the Fund purchases and
sells a call or a put. The Fund will sell a straddle when the Adviser believes
the price of a security will be stable. The Fund will receive a premium on the
sale of the put and the call. A spread permits the Fund to make a hedged
investment that the price of a security will increase or decline.
SECURITIES OF FOREIGN ISSUERS -- The Fund may invest in securities of foreign
issuers to achieve income or capital appreciation. Foreign investments involve
risks that are different from investments in securities of U.S. issuers. These
risks may include future unfavorable political and economic developments,
possible withholding taxes, seizure of foreign deposits, currency controls,
interest limitations or other governmental restrictions which might affect
payment of principal or interest. Additionally, there may be less public
information available about foreign issuers. Foreign branches of foreign banks
are not regulated by
21 PROSPECTUS
<PAGE>
U.S. banking authorities and generally are not bound by accounting, auditing and
financial reporting standards comparable to U.S. banks. The Fund may invest in
commercial paper of foreign issuers and obligations of foreign branches of U.S.
banks, U.S. and London branches of foreign banks, and supranational entities
which are established through the joint participation of several governments
(e.g., the Asian Development Bank and the Inter-American Development Bank).
Securities of foreign issuers may include sponsored and unsponsored ADRs, which
are securities typically issued by a U.S. financial institution that evidence
ownership interests in a pool of securities issued by a foreign issuer. There
may be less information available on the foreign issuers of unsponsored ADRs
than on the issuers of sponsored ADRs. ADRs include American Depository Shares
and New York Shares.
DESCRIPTION OF RATINGS
The following descriptions are summaries of published ratings.
DESCRIPTION OF COMMERCIAL PAPER RATINGS
The following descriptions of commercial paper ratings have been published by
Standard & Poor's Corporation ("S&P"), Moody's Investors Service ("Moody's"),
Fitch's Investors Service ("Fitch"), Duff and Phelps ("Duff") and IBCA Limited
("IBCA"), respectively.
Commercial paper rated A by S&P is regarded by S&P as having the greatest
capacity for timely payment. Issues rated A are further refined by use of the
numbers 1+, 1 and 2 to indicate the relative degree of safety. Issues rated A-1+
are those with an "overwhelming degree" of credit protection. Those rated A-1
reflect a "very strong" degree of safety regarding timely payment. Those rated
A-2 reflect a high degree of safety regarding timely payment but not as high as
A-1.
Commercial paper issues rated Prime-1 and Prime-2 by Moody's are judged by
Moody's to be of the "highest" quality and "higher" quality, respectively, on
the basis of relative repayment capacity.
The rating Fitch-1 (Highest Grade) is the highest commercial rating assigned by
Fitch. Paper rated Fitch-1 is regarded as having the strongest degree of
assurance for timely payment. The rating Fitch-2 (Very Good Grade) is the second
highest commercial paper rating assigned by Fitch which reflects an assurance of
timely payment only slightly less in degree than the strongest issues.
The rating Duff-1 is the highest commercial paper rating assigned by Duff. Paper
rated Duff-1 is regarded as having very high certainty of timely payment with
excellent liquidity factors which are supported by ample asset protection. Risk
factors are minor. Paper rated Duff-2 is regarded as having good certainty of
timely payment, good access to capital markets and sound liquidity factors and
company fundamentals. Risk factors are small.
The designation A1 by IBCA indicates that the obligation is supported by a very
strong capacity for timely repayment. Those obligations rated A1+ are supported
by the highest capacity for timely repayment. Obligations rated A2 are supported
by a strong capacity for timely repayment, although such capacity may be
susceptible to adverse changes in business, economic or financial conditions.
DESCRIPTION OF CORPORATE BOND RATINGS
The following descriptions of S&P's and Moody's corporate bond ratings have been
published by S&P and Moody's, respectively.
Bonds rated AAA have the highest rating S&P assigns to a debt obligation. Such a
rating indicates an extremely strong capacity to pay principal and interest.
Bonds rated AA also qualify as high-quality debt obligations. Capacity to pay
principal and interest is very strong, and in the majority of instances they
differ from AAA issues only in a small degree. Debt rated A has a strong
capacity to pay interest and repay principal although it is somewhat more
susceptible to the adverse effects of changes in circumstances and economic
conditions than debt in higher rated categories.
Bonds that are rated Aaa by Moody's are judged to be of the best quality. They
carry the smallest degree of investment risk and are generally referred to as
"gilt edge." Interest payments are protected by a large, or an exceptionally
stable, margin and principal is secure. While the various protective elements
are likely to change, such changes as can be visualized are most unlikely to
impair the fundamentally strong position of such issues.
Bonds rated Aa by Moody's are judged by Moody's to be of high quality by all
standards. Together with bonds rated Aaa, they comprise what are generally known
as high-grade bonds. They are rated lower than the best bonds because margins of
protection may not be as large as in Aaa securities or fluctuation of protective
elements may be of greater amplitude or there may be other elements present that
make the long-term risks appear somewhat larger than in Aaa securities.
Bonds that are rated A possess many favorable investment attributes and are to
be considered as upper-medium grade obligations. Factors giving security to
principal and interest are considered adequate, but elements may be present
which suggest a susceptibility to impairment sometime in the future.
MISCELLANEOUS
The Trust believes that as of August 4, 1995, BANC ONE CORPORATION (100 East
Broad Street, Columbus, OH 43271), through its affiliates, owned of record
substantially all the Fiduciary Class shares of the Fund. The Trust believes
that as of the same date, BANC ONE CORPORATION, through its affiliates,
possessed on behalf of its underlying accounts, voting or investment power with
respect to approximately 88.3% of the Fiduciary Class shares of the Fund. As a
consequence, BANC
PROSPECTUS 22
<PAGE>
ONE CORPORATION may be deemed to be a controlling person of the Fiduciary Class
shares of the Fund under the Investment Company Act of 1940.
PERFORMANCE
From time to time, the Fund may advertise yield, total return and/or
distribution rate. These figures will be based on historical earnings and are
not intended to indicate future performance. The yield of the Fund refers to the
annualized income generated by an investment in the Fund over a specified 30-day
period. The yield is calculated by assuming that the income generated by the
investment during that period is generated over a one-year period and is shown
as a percentage of the investment.
Total return is the change in value of an investment in the Fund over a given
period, assuming reinvestment of any dividends and capital gains. A cumulative
total return reflects an actual rate of return over a stated period of time. An
average annual total return is a hypothetical rate of return, that if achieved
annually, would have produced the same cumulative total return if performance
had been constant over the entire period. Average annual total returns smooth
out variations in performance; they are not the same as actual year-by-year
results.
The distribution rate is computed by dividing the total amount of the dividends
per share paid out during the past period by the maximum offering price or
month-end net asset value depending on the class of the Fund. This figure is
then "annualized" (multiplied by 365 days and divided by the applicable number
of days in the period). Funds with a front-end sales charge would incorporate
the offering price into the distribution yield in place of month-end net asset
value.
Distribution rate is a measure of the level of income paid out in cash to
Shareholders over a specified period. It differs from yield and total return and
is not intended to be a complete measure of performance. Furthermore, the
distribution rate may include return of principal and/or capital gains. Total
return is the change in value of a hypothetical investment over a given period
assuming reinvestment of dividends and capital gain distributions. The yield
refers to the cumulative 30-day rolling net investment income, divided by
maximum offering price and multiplied by average shares outstanding during this
period. See the Statement of Additional Information.
The Trust will include information on all classes of the Fund in any
advertisement or information containing performance data for the Fund. The
performance of Fiduciary Class shares may be higher than for Class A shares and
Class B shares because Fiduciary Class shares are not subject to sales charges
and distribution expenses.
The performance of each class of the Fund may from time to time be compared to
that of other mutual funds tracked by mutual fund rating services, to that of
broad groups of comparable mutual funds or to that of unmanaged indices that may
assume investment of dividends but do not reflect deductions for administrative
and management costs. In addition, the performance of each class of the Fund may
be compared to other funds or to relevant indices that may calculate total
return without reflecting sales charges; in that case, the Fund may advertise
its total return in the same manner. If reflected, sales charges would reduce
these total return calculations.
Further information about the performance of each class of the Fund is contained
in the Trust's Annual Report to Shareholders for The One Group-Registered
Trademark- Income Equity Fund, which may be obtained without charge by calling
1-800-480-4111.
TAXES
The following summary of Federal income tax consequences is based on current tax
laws and regulations, which may be changed by legislative, judicial, or
administrative action. No attempt has been made to present a complete
explanation of the Federal, state, local, or foreign tax treatment of the Fund
or its Shareholders. Accordingly, Shareholders are urged to consult their tax
advisers regarding specific questions as to the tax consequences of investing in
the Fund.
TAX STATUS OF THE FUND
The Fund is treated as a separate entity for Federal income tax purposes and is
not combined with the Trust's other funds. The Fund intends to qualify as a
"regulated investment company" for Federal income tax purposes and to meet all
other requirements that are necessary for it to be relieved of Federal taxes on
that part of its net investment income and net capital gains (the excess of net
long-term capital gain over net short-term capital loss) that is distributed to
Shareholders.
TAX STATUS OF DISTRIBUTIONS
The Fund will distribute substantially all of its net investment income
(including, for this purpose, net short-term capital gain) to Shareholders of
each class of shares of the Fund on at least an annual basis. Generally,
dividends from net investment income will be taxable to Shareholders as ordinary
income whether received in cash or in additional shares, and any net capital
gains will be distributed at least annually and will be taxed to Shareholders as
long-term capital gains, regardless of how long the Shareholder has held shares.
Distributions by the Fund to retirement plans that qualify for tax-exempt
treatment under the Code ("qualified retirement plans") will not be taxable. The
Federal tax treatment of qualified retirement plans, as well as distributions
from such plans, is governed by specific provisions of the Code. If shares are
held by a retirement plan that ceases to qualify for tax-exempt treatment under
the Code or by an individual who has received such shares as a distribution from
a retirement plan, the Fund's distributions will be taxable to such plan or
individual as described in the preceding paragraph. Persons considering
directing the investment of their qualified retirement plan account in the Fund
and qualified retirement plan trusts considering purchasing such shares, should
consult their tax advisers for a more complete explanation of the Federal tax
consequences, and for an explanation of the state, local, and (if applicable)
foreign tax consequences of making such an investment.
23 PROSPECTUS
<PAGE>
The Fund will make annual reports to Shareholders of the Federal income tax
status of all distributions.
Certain securities purchased by the Fund (such as STRIPS, CUBES, TRS, TIGRS and
CATS), as defined in the "Description of Permitted Investments," are sold at
original issue discount and thus do not make periodic cash interest payments.
The Fund will be required to include as part of its current income the imputed
interest on such obligations even though the Fund has not received any interest
payments on such obligations during that period. Because the Fund distributes
substantially all of its net investment income to its Shareholders (including
such imputed interest), the Fund may have to sell portfolio securities in order
to generate the cash necessary for the required distributions. Such sales may
occur at a time when the Adviser would not have chosen to sell such securities
and may result in a taxable gain or loss.
Dividends declared by the Fund in October, November or December of any year and
payable to Shareholders of record on a date in such a month will be deemed to
have been paid by the Fund and received by Shareholders on December 31 of that
year, if paid by the Fund at any time during the following January.
The Fund intends to make sufficient distributions prior to the end of each
calendar year to avoid liability for Federal excise tax.
Dividends received by a Shareholder that are derived from the Fund's investments
in U.S. government obligations may not be entitled to the exemptions from state
and local income taxes that would be available if the Shareholder had purchased
U.S. government obligations directly. The Fund will inform Shareholders annually
of the percentage of income and distributions derived from U.S. government
obligations. Shareholders should consult their tax advisers regarding the state
and local tax treatment of the dividends received from the Fund.
The Fund may be subject to foreign withholding taxes on income derived from
obligations of foreign issuers. The Fund will not be able to elect to treat
Shareholders as having paid their proportionate share of such foreign taxes.
Sale, exchange, or redemption of Fund shares by a Shareholder will generally be
a taxable event to such Shareholder. Shareholders should consult their tax
advisers.
PROSPECTUS 24
<PAGE>
(This page has been left blank intentionally.)
25 PROSPECTUS
<PAGE>
Investment Adviser and Sub-Administrator
Banc One Investment Advisors Corporation
774 Park Meadow Road
Columbus, OH 43271-0211
Distributor
The One Group-Registered Trademark- Services Company
3435 Stelzer Road
Columbus, OH 43219
Administrator
The One Group-Registered Trademark- Services Company
3435 Stelzer Road
Columbus, OH 43219
Transfer Agent and Custodian
State Street Bank and Trust Company
P.O. Box 8500
Boston, MA 02266-8500
Legal Counsel
Ropes & Gray
Suite 1200 South
1001 Pennsylvania Avenue, N.W.
Washington, D.C. 20004
Independent Accountants
Coopers & Lybrand L.L.P.
One Post Office Square
Boston, MA 02109
TOG-F-105-1
<PAGE>
THE ONE GROUP-REGISTERED TRADEMARK- LOUISIANA MUNICIPAL BOND FUND PROSPECTUS
- --------------------------------------------------------------------------------
Investment Adviser: BANC ONE INVESTMENT ADVISORS CORPORATION
The One Group-Registered Trademark- (the "Trust") is a mutual fund seeking to
provide a convenient and economical means of investing in one or more
professionally managed portfolios of securities. This Prospectus relates to The
One Group-Registered Trademark- Louisiana Municipal Bond Fund Class A, Class B
and Fiduciary Class shares.
THE ONE GROUP-REGISTERED TRADEMARK- LOUISIANA MUNICIPAL BOND FUND (THE "FUND")
SEEKS CURRENT INCOME BOTH CONSISTENT WITH THE PRESERVATION OF PRINCIPAL AND
EXEMPT FROM FEDERAL INCOME TAX AND LOUISIANA INCOME TAX.
CLASS A AND CLASS B SHARES ARE OFFERED TO THE GENERAL PUBLIC.
FIDUCIARY CLASS SHARES ARE OFFERED TO INSTITUTIONAL INVESTORS, INCLUDING
AFFILIATES OF BANC ONE CORPORATION AND ANY BANK, DEPOSITORY INSTITUTION,
INSURANCE COMPANY, PENSION PLAN OR OTHER ORGANIZATION AUTHORIZED TO ACT IN
FIDUCIARY, ADVISORY, AGENCY, CUSTODIAL OR SIMILAR CAPACITIES (EACH AN
"AUTHORIZED FINANCIAL ORGANIZATION").
THE TRUST'S SHARES ARE NOT DEPOSITS OR OBLIGATIONS OF, OR ENDORSED OR GUARANTEED
BY BANC ONE CORPORATION OR ITS BANK OR NON-BANK AFFILIATES. THE TRUST'S SHARES
ARE NOT INSURED OR GUARANTEED BY THE FEDERAL DEPOSIT INSURANCE CORPORATION OR BY
ANY OTHER GOVERNMENTAL AGENCY OR GOVERNMENT SPONSORED AGENCY OF THE FEDERAL
GOVERNMENT OR ANY STATE. AN INVESTMENT IN MUTUAL FUND SHARES INVOLVES INVESTMENT
RISKS, INCLUDING THE POSSIBLE LOSS OF THE PRINCIPAL AMOUNT INVESTED. BANC ONE
INVESTMENT ADVISORS CORPORATION RECEIVES FEES FROM THE FUND FOR INVESTMENT
ADVISORY AND OTHER SERVICES.
This Prospectus sets forth concisely the information about the Trust that a
prospective investor should know before investing. Investors are advised to read
this Prospectus and retain it for future reference. A Statement of Additional
Information dated [ ] has been filed with the Securities and
Exchange Commission and is available without charge through the Distributor, The
One Group Services Company, 3435 Stelzer Road, Columbus, OH 43219, or by calling
1-800-480-4111 during business hours. The Statement of Additional Information is
incorporated into this Prospectus by reference.
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED UPON THE
ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A
CRIMINAL OFFENSE.
[ ]
<PAGE>
TABLE OF CONTENTS
<TABLE>
<S> <C>
SUMMARY.......................................................................................... 3
ABOUT THE FUND................................................................................... 4
Expense Summary................................................................................ 4
The Fund....................................................................................... 6
Investment Objective........................................................................... 6
Investment Policies............................................................................ 6
HOW TO DO BUSINESS WITH THE ONE GROUP-REGISTERED TRADEMARK-...................................... 8
How to Invest in The One Group-Registered Trademark-........................................... 8
Alternative Sales Arrangements................................................................. 10
Exchanges...................................................................................... 12
Redemptions.................................................................................... 12
FUND MANAGEMENT.................................................................................. 13
The Adviser.................................................................................... 13
The Distributor................................................................................ 14
The Administrator.............................................................................. 15
The Transfer Agent and Custodian............................................................... 15
Counsel and Independent Accountants............................................................ 15
OTHER INFORMATION................................................................................ 15
The Trust...................................................................................... 15
Other Investment Policies...................................................................... 16
Description of Permitted Investments........................................................... 17
Description of Ratings......................................................................... 24
Performance.................................................................................... 25
Taxes.......................................................................................... 26
</TABLE>
PROSPECTUS 2
<PAGE>
SUMMARY
The One Group-Registered Trademark- (the "Trust") is an open-end management
investment company that provides a convenient way to invest in professionally
managed portfolios of securities. The following provides basic information about
Class A, Class B and Fiduciary Class shares of The One Group-Registered
Trademark- Louisiana Municipal Bond Fund.
WHAT IS THE INVESTMENT OBJECTIVE? The Fund seeks current income both consistent
with the preservation of principal and exempt from Federal income tax and
Louisiana income tax. See "Investment Objective."
WHAT ARE THE PERMITTED INVESTMENTS? As a matter of fundamental policy, the Fund
will invest at least 80% of its net assets in investment grade municipal
securities issued by or on behalf of the State of Louisiana and its political
subdivisions, agencies and instrumentalities, the interest on which is exempt
from both Federal income tax and Louisiana state income tax. The Fund's
investments are subject to market and interest rate fluctuations which may
affect the value of the Fund's shares. The Fund is a non-diversified mutual
fund. See "Investment Policies." The Fund may only invest in select derivatives;
their characteristics and limitations on their use are more fully described in
"Description of Permitted Investments." There are many types of derivative
securities with varying degrees of potential risk and return. Investment in the
Fund involves special risk considerations. See "Investment Policies -- Risk
Factors."
WHO IS THE ADVISER? Banc One Investment Advisors Corporation, an indirect
subsidiary of BANC ONE CORPORATION, serves as the Adviser of the Trust. The
Adviser is entitled to a fee for advisory services provided to the Trust. The
Adviser may voluntarily agree to waive a part of its fees. See "The Adviser" and
"Expense Summary."
WHO IS THE ADMINISTRATOR? The One Group Services Company serves as the
Administrator of the Trust. The Administrator is entitled to a fee for services
provided to the Trust. Banc One Investment Advisors Corporation serves as the
Sub-Administrator of the Trust, pursuant to an agreement with the Administrator
for which Banc One Investment Advisors Corporation receives a fee paid by the
Administrator. See "The Administrator" and "Expense Summary."
WHO IS THE TRANSFER AGENT AND CUSTODIAN? State Street Bank and Trust Company
serves as Transfer Agent and Custodian for the Trust, for which services it
receives a fee. Bank One Trust Company, N.A. serves as Sub-Custodian for the
Trust, for which services it receives a fee. See "The Transfer Agent and
Custodian."
WHO IS THE DISTRIBUTOR? The One Group Services Company acts as Distributor of
the Trust's shares. The Distributor is entitled to fees for distribution
services for the Class A and Class B shares. No compensation is paid to the
Distributor for the distribution services for the Fiduciary Class shares of the
Fund. See "The Distributor."
HOW DO I PURCHASE AND REDEEM SHARES? Purchases and redemptions may be made
through the Distributor on any day that the New York Stock Exchange is open for
trading ("Business Days"). See "How to Invest in The One Group-Registered
Trademark-" and "Redemptions."
HOW ARE DIVIDENDS PAID? Substantially all of the net investment income
(exclusive of capital gains) of the Fund is determined and declared daily, and
is distributed in the form of periodic dividends to Shareholders of the Fund on
the first Business Day of each month. Any capital gains are distributed at least
annually. Distributions are paid in additional shares of the same class unless
the Shareholder elects to take the payment in cash. See "Dividends."
3 PROSPECTUS
<PAGE>
ABOUT THE FUND
EXPENSE SUMMARY -- THE ONE GROUP-REGISTERED TRADEMARK- LOUISIANA MUNICIPAL BOND
FUND
<TABLE>
<CAPTION>
FIDUCIARY
CLASS A CLASS B CLASS
<S> <C> <C> <C>
- --------------------------------------------------------------------------------------------------------------------------
SHAREHOLDER TRANSACTION EXPENSES(1)
Maximum Sales Charge Imposed on Purchases
(as a percentage of offering price).............................................. 4.50% none none
Maximum Contingent Deferred Sales Charge
(as a percentage of original purchase price
or redemption proceeds, as applicable)........................................... none 5.00% none
Redemption Fees.................................................................... none none none
Exchange Fees...................................................................... none none none
ANNUAL OPERATING EXPENSES(2)
(as a percentage of average daily net assets)
Investment Advisory Fees (after fee waivers)(3).................................... .40% .40% .40%
12b-1 Fees (after fee waivers)(4).................................................. .25% .90% none
Other Expenses..................................................................... .31% .31% .31%
- --------------------------------------------------------------------------------------------------------------------------
TOTAL OPERATING EXPENSES(3)........................................................ .96% 1.61% .71%
- --------------------------------------------------------------------------------------------------------------------------
</TABLE>
(1) A person who purchases shares through an account with a financial
institution or broker-dealer may be charged separate transaction fees by the
financial institution or broker-dealer. In addition, a wire redemption
charge, currently $7.00, is deducted from the amount of a wire redemption
payment made at the request of a Shareholder.
(2) The expense information in the table has been restated to reflect current
fees that would have been applicable had they been in effect during the
previous fiscal year.
(3) Investment Advisory Fees and Total Operating Expenses reflect fee waivers
effective as of the date of this Prospectus. The Adviser may voluntarily
agree to waive a part of its fees. Absent this voluntary reduction,
Investment Advisory Fees would be .60% for all classes of shares, and Total
Operating Expenses would be 1.26% for Class A shares, 1.91% for Class B
shares and .91% for Fiduciary Class shares.
(4) Absent the voluntary waiver of fees under the Trust's Distribution and
Shareholder Services Plans, 12b-1 fees (as a percentage of average daily net
assets) would be .35% for Class A shares and 1.00% for Class B shares. There
are no 12b-1 fees charged to Fiduciary Class shares. The 12b-1 fees include
a Shareholder servicing fee of .25% of the average daily net assets of the
Fund's Class B shares and may include a Shareholder servicing fee of .25% of
the average daily net assets of the Class A shares of the Fund. See "The
Distributor."
EXAMPLE: An investor would pay the following expenses on a $1,000 investment in
Class A and Fiduciary Class shares of the Fund, assuming: (1) imposition of the
maximum sales load for Class A shares; (2) 5% annual return; and (3) redemption
at the end of each time period.
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
1 YEAR 3 YEARS
<CAPTION>
- --------------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Class A $ 54 $ 74
Fiduciary Class $ 7 $ 23
</TABLE>
Absent the voluntary reduction of fees, the dollar amounts in the above example
would be as follows:
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
1 YEAR 3 YEARS
<CAPTION>
- --------------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Class A $ 57 $ 83
Fiduciary Class $ 9 $ 29
- --------------------------------------------------------------------------------------------------------------------------
- --------------------------------------------------------------------------------------------------------------------------
</TABLE>
PROSPECTUS 4
<PAGE>
EXAMPLE: An investor would pay the following expenses on a $1,000 investment in
Class B shares of the Fund, assuming: (1) deduction of the applicable maximum
Contingent Deferred Sales Charge; and (2) 5% annual return.
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
1 YEAR 3 YEARS
<CAPTION>
- --------------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Assuming a complete redemption at end of period $ 66 $ 81
Assuming no redemption $ 16 $ 51
</TABLE>
Absent the voluntary reduction of fees, the dollar amounts in the above example
would be as follows:
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
1 YEAR 3 YEARS
<CAPTION>
- --------------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Assuming a complete redemption at end of period $ 69 $ 90
Assuming no redemption $ 19 $ 60
- --------------------------------------------------------------------------------------------------------------------------
- --------------------------------------------------------------------------------------------------------------------------
</TABLE>
THESE EXAMPLES SHOULD NOT BE CONSIDERED A REPRESENTATION OF PAST OR FUTURE
EXPENSES AND ACTUAL EXPENSES MAY BE GREATER OR LESS THAN THOSE SHOWN. The
purpose of these tables is to assist the investor in understanding the various
costs and expenses that may be directly or indirectly borne by investors in the
Trust.
The rules of the Securities and Exchange Commission (the "SEC") require that the
maximum sales charge be reflected in the above tables. However, investors in the
Fund ("Shareholders") may, under certain circumstances, qualify for reduced
sales charges. See "How to Invest in The One Group-Registered Trademark-."
Long-term Shareholders of Class A and Class B shares may pay more than the
equivalent of the maximum front-end sales charges otherwise permitted by the
National Association of Securities Dealers' Rules.
5 PROSPECTUS
<PAGE>
THE FUND
The One Group-Registered Trademark- Louisiana Municipal Bond Fund (the "Fund")
is part of The One Group-Registered Trademark- (the "Trust"), which is an
open-end management investment company that offers units of beneficial interest
("shares") in 32 separate funds and different classes of certain of the funds.
This Prospectus relates to Class A, Class B and Fiduciary Class shares of The
One Group-Registered Trademark- Louisiana Municipal Bond Fund, which provide for
variations in distribution costs, voting rights, dividends and per share net
asset value pursuant to a multiple class plan (the "Multiple Class Plan")
adopted by the Board of Trustees of the Trust. Except for these differences
among classes, each share of the Fund represents an undivided, proportionate
interest in the Fund. The Fund is a non-diversified mutual fund. Information
regarding the Trust's other funds and their classes is contained in separate
prospectuses which may be obtained from the Trust's Distributor, The One Group
Services Company, 3435 Stelzer Road, Columbus, OH 43219, or by calling
1-800-480-4111.
INVESTMENT OBJECTIVE
The Fund seeks current income both consistent with the preservation of principal
and exempt from Federal income tax and Louisiana income tax.
The investment objective of the Fund is fundamental and may not be changed
without a vote of the holders of a majority of the Fund's outstanding shares (as
defined in the Statement of Additional Information).
There is no assurance that the Fund will meet its investment objective.
INVESTMENT POLICIES
The investment policies of the Fund may be changed without an affirmative vote
of the holders of a majority of the Fund's outstanding shares unless a policy is
expressly deemed to be fundamental or is expressly deemed to be changeable only
by such a majority vote.
The Fund will, as a matter of fundamental policy, invest at least 80% of its net
assets in investment grade municipal securities issued by or on behalf of the
State of Louisiana and its political subdivisions, agencies and
instrumentalities, the interest on which is exempt from both Federal income tax
and Louisiana state income tax. It is anticipated that the Fund normally will
invest in long-term municipal securities and that the Fund's average weighted
maturity will, under normal conditions, range between 5 and 15 years, although
the Fund may invest in securities of any maturity. For purposes of the foregoing
policy, "municipal securities" include debt instruments issued by the U.S.
Treasury and U.S. Government agencies and municipalities and zero coupon
obligations. The municipal securities in which the Fund invests may carry fixed
rates of return or have floating or variable rates.
Although the Fund intends to invest all of its assets in the municipal
securities described above, up to 20% of its net assets may be held in cash or
invested in municipal securities of other states, short-term taxable investments
including repurchase agreements, U.S. Government Securities or other cash
equivalents and Louisiana municipal securities such as "private activity" bonds
the interest on which may be treated as a tax preference item under the Federal
alternative minimum tax for individuals. Thus, a portion of your income from the
Fund may not be exempt from Federal alternative minimum and/or Louisiana state
income taxes. See "Tax Status of Distributions."
The Fund may invest its assets in: (i) general obligation bonds; (ii) revenue
bonds, including industrial development revenue bonds; (iii) short-term
municipal securities of all types, including tax anticipation notes, revenue
anticipation notes and bond anticipation notes; and (iv) certificates of
participation in a pool of municipal securities held by a bank or other
financial institution, the interest from which is, in the opinion of counsel to
the issuer, exempt from Federal and Louisiana income tax. As a matter of
nonfundamental policy, at least 50% of the Fund's total assets will be invested
in escrow secured bonds and bonds insured as to principal and interest.
All bonds purchased by the Fund must be investment grade, which means they must
be rated in one of the four highest rating categories by at least one nationally
recognized statistical rating organization ("NRSRO") at the time of investment
(for example, BBB or better by Standard & Poor's Corporation ("S&P") or Baa or
better by Moody's Investors Service ("Moody's")) or, if unrated, determined by
the Adviser to be of comparable quality. The Fund may also invest in short-term
tax-exempt municipal securities rated at least MIG-3 (VMIG-3) by Moody's or SP-2
by S&P, or, if unrated, determined by the Adviser to be of comparable quality.
Securities rated Baa, BBB, MIG-3 (VMIG-3) and SP-2 may have speculative elements
as well as investment grade characteristics.
In order to enhance the liquidity, stability, or quality of a municipal security
meeting the standards described above, the Fund may acquire the right to sell
the security to another party at a guaranteed price and date. These rights may
be referred to as puts, demand features, or standby commitments, depending on
their characteristics, and may involve letters of credit issued by domestic or
foreign banks supporting the other party's ability to purchase the security from
the Fund. The right to sell may be exercisable on demand or at specified
intervals, and may form part of a security or be acquired separately by the
Fund. In considering whether a security meets the Fund's quality standards, the
Fund will look to the creditworthiness of the party providing the Fund with the
right to sell as well as the quality of the security itself.
PERMISSIBLE INVESTMENTS
In addition to the permissible investments described above, the Fund also may
invest in securities purchased on a when-issued basis and forward commitments,
variable and floating rate notes, commercial paper, time deposits, certificates
of deposit, receipts, which may include Treasury Receipts ("TRS"), Treasury
PROSPECTUS 6
<PAGE>
Investment Growth Receipts ("TIGRS") and Certificates of Accrual on Treasury
Securities ("CATS"), U.S. Treasury obligations, which may include Separately
Traded Registered Interest and Principal Securities ("STRIPS") and Coupon Under
Book Entry Safekeeping ("CUBES"), bankers' acceptances, repurchase agreements,
reverse repurchase agreements and securities of other investment companies. The
Fund also may invest in options, futures contracts, options on futures
contracts, securities subject to demand features, zero coupon obligations, swap
transactions, structured instruments, municipal leases and participation
interests. The Fund also may engage in securities lending transactions.
In addition to those instruments and techniques listed above, the Fund may
invest in new options, futures contracts and other financial products that may
be developed to the extent that these products are consistent with the Fund's
investment objective and policies.
This list of permissible investments includes select securities that may be
commonly considered to be derivatives, including: options, futures contracts,
options on futures contracts, swap, cap and floor transactions, new financial
products and structured instruments. These securities and limitations on their
use are more fully described in the "Description of Permitted Investments."
For a description of the Fund's permitted investments and ratings, see
"Description of Permitted Investments," "Description of Ratings" and the
Statement of Additional Information. For a description of permitted investments
for temporary defensive purposes, see "Temporary Defensive Position." In the
event a security owned by the Fund is downgraded below the rating categories
described above, the Adviser will review the reclassification and take
appropriate action with regard to the security.
DIVERSIFICATION AND CONCENTRATION
The Fund is a "non-diversified" investment company and, accordingly, is not
limited in the proportion of its assets that may be invested in securities of a
single issuer. However, the Fund intends to conduct its operations so as to
qualify as a "regulated investment company" for purposes of the Internal Revenue
Code of 1986, as amended (the "Code"). To so qualify, the Fund, along with
satisfying other requirements, will limit its investments so that, at the close
of each quarter of the taxable year, (i) at least 50% of the market value of the
Fund's total assets will be invested in cash, cash items, U.S. government
securities and other securities that are, for purposes of this requirement,
limited in respect of a single issuer to an amount not greater in market value
than 5% of the market value of its total assets and to not more than 10% of the
outstanding voting securities of a single issuer; and (ii) not more than 25% of
the market value of the Fund's total assets will be invested in the securities
(other than U.S. government securities or the securities of other regulated
investment companies) of a single issuer. Because of the relatively small number
of issuers of Louisiana municipal securities, the Fund may invest a higher
percentage of its assets in the securities of a single issuer than an investment
company that invests in a broad range of tax-exempt securities. This
concentration involves an increased risk of loss to the Fund if the issuer were
unable to make interest or principal payments or if the market value of such
securities were to decline and, consequently, may cause greater fluctuation in
the net asset value of the Fund's shares.
As a matter of nonfundamental policy, the Fund will not concentrate in any
industry. However, the Fund may invest up to 25% of its total assets in revenue
securities that are based, directly or indirectly, on the credit of private
entities in any one industry.
RISK FACTORS
The market value of the Fund's fixed income investments will change in response
to interest rate changes and other factors. During periods of falling interest
rates, the values of outstanding fixed income securities generally rise.
Conversely, during periods of rising interest rates, the values of such
securities generally decline. Moreover, while securities with longer maturities
tend to produce higher yields, the prices of longer maturity securities are also
subject to greater market fluctuations as a result of changes in interest rates.
Changes by recognized agencies in the rating of any fixed income security and in
the ability of an issuer to make payments of interest and principal also affect
the value of these investments. Except under condition of default, changes in
the value of fixed income securities will not affect cash income derived from
these securities but will affect the Fund's net asset value.
Certain investment techniques that the Fund may use may expose the Fund to
special risks. These include, but are not limited to, engaging in hedging
transactions (including interest rate swaps, caps and floors), purchasing and
selling futures and options, making forward commitments, purchasing structured
instruments and lending portfolio securities. These practices could expose the
Fund to potentially greater risk of loss than more traditional fixed income
investments.
For additional information on each of the Fund's permitted investments and
associated risks, see "Description of Permitted Investments."
SPECIAL CONSIDERATIONS RELATED TO LOUISIANA MUNICIPAL SECURITIES.
The Fund is more susceptible to factors adversely affecting issuers of Louisiana
municipal securities than is a comparable municipal bond fund that is not
concentrated in these issuers to this degree. Although it has recovered in
recent years, Louisiana experienced severe financial difficulties in the late
nineteen-eighties and continues to face the risks associated with a non-
diversified economy. In particular, the significance of the oil and gas industry
in Louisiana's economy has resulted in financial difficulties during unfavorable
markets for oil and gas products and in financial benefits during favorable
markets. Louisiana's general obligation bonds were rated as high as Aa by
Moody's and AA by S&P, respectively, in 1984. The decline in oil prices affected
the state through a loss of severance taxes and royalties, which together peaked
at 26% of state governmental revenues in fiscal year 1982-1983 compared with
4.3% in fiscal year
7 PROSPECTUS
<PAGE>
1993-1994. Indirectly the decline in economic activity also affected the state's
collection of various excise taxes. As a result, during the period from fiscal
year 1987-1988 through fiscal year 1993-1994, Louisiana experienced operating
budget deficits in three of the seven fiscal years, and its bonds were
downgraded to Baa1/BBB+. After eliminating its deficit through the issuance of
long-term bonds in 1988, the state has maintained positive ending General Fund
balances through fiscal year 1993-1994. The State forecasts for fiscal year
1995-1996 indicate a potential revenue shortfall of $192 million in order to
continue State operations in fiscal year 1995-1996 at current levels. The
State's budget projections may also be impacted by certain matters relating to
the Medicaid program. However, the State is presently negotiating with the U.S.
Secretary of Health and Human Services for a waiver proposal providing for a
phase-in of a managed care program which utilizes a capitated payment system.
S&P upgraded the state's bond rating to A in 1990. If either Louisiana or any of
its local governmental entities is unable to meet its financial obligations, the
income derived by the Fund, the Fund's net asset value, the ability to preserve
or realize appreciation of the Fund's capital or the Fund's liquidity could be
adversely affected. As a result of potential budget problems in fiscal year
1995-1996, S&P lowered Louisiana's rating to A minus from A.
HOW TO DO BUSINESS WITH
THE ONE GROUP-REGISTERED TRADEMARK-
HOW TO INVEST IN THE ONE GROUP-REGISTERED TRADEMARK-
Shares of the Fund are sold on a continuous basis and may be purchased directly
from the Trust's Distributor, The One Group Services Company, by mail, by
telephone, or by wire. Shares also may be purchased through a financial
institution, such as a bank, savings and loan association or insurance company
(each a "Shareholder Servicing Agent"), that has established a Shareholder
servicing agreement with the Distributor, or through a broker-dealer that has
established a dealer agreement with the Distributor.
Purchases and redemptions of shares of the Fund may be made on any day that the
New York Stock Exchange is open for trading ("Business Days"). The minimum
initial and subsequent investments in the Fund are $1,000 and $100, respectively
$100 and $25, respectively, for employees of BANC ONE CORPORATION and its
affiliates). Initial and subsequent investment minimums may be waived at the
Distributor's discretion. Investors may purchase up to a maximum of $250,000 of
Class B shares per individual purchase order.
Class A and Class B shares are offered to the general public. Fiduciary Class
shares are offered to institutional investors, including affiliates of BANC ONE
CORPORATION and any bank, depository institution, insurance company, pension
plan or other organization authorized to act in fiduciary, advisory, agency,
custodial or similar capacities (each an "Authorized Financial Organization").
For additional details regarding eligibility, call the Distributor at
1-800-480-4111.
BY MAIL
Investors may purchase Class A and Class B shares of the Fund by completing and
signing an Account Application Form and mailing it, along with a check (or other
negotiable bank instrument or money order) payable to "The One Group-Registered
Trademark-," to State Street Bank and Trust Company (the Trust's Transfer Agent
and Custodian), P.O. Box 8500, Boston, MA 02266-8500. Subsequent purchases of
shares may be made at any time by mailing a check to the Transfer Agent. Account
Application Forms are available through the Distributor by calling
1-800-480-4111.
Purchases of Fiduciary Class shares are made by an institutional investor and/or
other intermediary on behalf of an investor (each also a "Shareholder Servicing
Agent"). The Shareholder Servicing Agent may require an investor to complete
forms in addition to the Account Application Form and to follow procedures
established by the Shareholder Servicing Agent. Such Shareholders should contact
their Shareholder Servicing Agents regarding purchases, exchanges and
redemptions of shares. See "Additional Information Regarding Purchases."
BY TELEPHONE OR BY WIRE
Once an Account Application Form has been received, Shareholders are eligible to
make purchases by telephone or wire (if that option has been selected by a
Shareholder) by calling the Transfer Agent at 1-800-480-4111 or the Shareholder
Servicing Agents, if applicable.
Shareholders may revoke their automatic eligibility to make purchases and/or
redemptions by telephone or by wire, by sending a letter so stating to the
Transfer Agent, State Street Bank and Trust Company, P.O. Box 8500, Boston, MA
02266-8500.
SYSTEMATIC INVESTMENT PLAN
Class A and Class B investors may make automatic monthly investments in the Fund
from their bank, savings and loan or other depository institution accounts. The
minimum initial and subsequent investments must be $25 under the Systematic
Investment Plan, which minimum may be waived at the discretion of the
Distributor. The Trust pays the costs associated with these transfers, but
reserves the right, upon thirty days' written notice, to impose reasonable
charges for this service. A depository institution may impose a charge for
debiting an investor's account which would reduce the investor's return from an
investment in the Fund.
ADDITIONAL INFORMATION REGARDING PURCHASES
A purchase order will be effective as of the day received by the Distributor if
the Distributor receives the order before 4:00 p.m., eastern time. However, an
order may be cancelled if the Transfer Agent does not receive Federal funds
before close of business on the next Business Day for Fiduciary Class shares,
and before the close of business on the third Business Day for Class A and Class
B shares, and the investor could be liable for any fees or expenses incurred by
the Trust. Federal funds are monies credited to a bank's account with a Federal
Reserve Bank. The purchase price of shares of the Fund is the net asset
PROSPECTUS 8
<PAGE>
value next determined after a purchase order is effected, plus any applicable
sales charge (the "offering price"). The net asset value per share of the Fund
is determined by dividing the total market value of the Fund's investments and
other assets allocable to a class, less any liabilities allocable to that class,
by the total number of outstanding shares of such class. Net asset value per
share is determined daily as of 4:00 p.m., eastern time, on each Business Day.
For a further discussion of the calculation of net asset value, see the
Statement of Additional Information. Shares also may be issued in transactions
involving the acquisition by the Fund of securities held by collective
investment funds sponsored and administered by affiliates of the Adviser.
Purchases will be made in full and fractional shares of the Fund calculated to
three decimal places. Although the methodology and procedures are identical, the
net asset value per share of classes within the Fund may differ because the
distribution expenses charged to Class A shares and Class B shares are not
charged to Fiduciary Class shares.
The Trust reserves the right to reject a purchase order when the Distributor
determines that it is not in the best interest of the Trust and/or its
Shareholders to accept such order. Except as provided below, neither the Trust's
Transfer Agent, the Distributor, the Adviser nor the Trust will be responsible
for any loss, liability, cost or expense for acting upon telephone or wire
instructions, and the investor will bear all risk of loss. The Trust will employ
reasonable procedures to confirm that instructions communicated by telephone are
genuine, including requiring a form of personal identification prior to acting
upon instructions received by telephone and recording telephone instructions. If
such procedures are not employed, the Trust may be liable for any losses due to
unauthorized or fraudulent instructions.
Fiduciary Class shares offered to institutional investors will normally be held
in the name of the Shareholder Servicing Agent effecting the purchase on the
Shareholder's behalf, and it is the Shareholder Servicing Agent's responsibility
to transmit purchase orders to the Distributor. A Shareholder Servicing Agent
may impose an earlier cut-off time for receipt of purchase orders directed
through it to allow for processing and transmittal of these orders to the
Distributor for effectiveness the same day. The Shareholder should contact his
or her Shareholder Servicing Agent for information as to the Shareholder
Servicing Agent's procedures for transmitting purchase, exchange or redemption
orders to the Trust. A Shareholder who desires to transfer the registration of
shares beneficially owned by him or her, but held of record by a Shareholder
Servicing Agent, should contact the Shareholder Servicing Agent to accomplish
such change. Other Shareholders who desire to transfer the registration of their
shares should contact the Transfer Agent.
No certificates representing shares of the Fund will be issued. In
communications to Shareholders, the Fund will not duplicate mailings of Fund
material to Shareholders who reside at the same address.
SALES CHARGE
The following table shows the initial sales charge on Class A shares to a
"single purchaser" (defined below) together with the sales charge reallowed to
financial institutions and intermediaries (the "commission"):
<TABLE>
<CAPTION>
SALES CHARGE
SALES CHARGE AS APPROPRIATE COMMISSION
AS A PERCENTAGE OF AS A
PERCENTAGE OF NET AMOUNT PERCENTAGE OF
AMOUNT OF PURCHASE OFFERING PRICE INVESTED OFFERING PRICE
- --------------------------- ------------------ ------------------- ------------------
<S> <C> <C> <C>
less than $50,000.......... 4.50% 4.71% 4.05%
$50,000 but less than
$100,000................. 3.50% 3.63% 3.15%
$100,000 but less than
$250,000................. 2.50% 2.56% 2.25%
$250,000 but less than
$500,000................. 1.50% 1.52% 1.35%
$500,000 but less than
$1,000,000............... 1.00% 1.01% 0.90%
$1,000,000 or more......... 0.00% 0.00% 0.00%
</TABLE>
The commissions shown in the table apply to sales through financial institutions
and intermediaries. Under certain circumstances, the Distributor will use its
own funds to compensate financial institutions and intermediaries in amounts
that are additional to the commissions shown above. The maximum cash
compensation payable by the Distributor as a sales charge is 4.50% of the
offering price (including the commission shown above and additional cash
compensation described below). In addition, the Distributor will, from time to
time and at its own expense, provide promotional incentives to financial
institutions and intermediaries, whose registered representatives have sold or
are expected to sell significant amounts of the shares of the Fund, in the form
of payment for travel expenses, including lodging, incurred in connection with
trips taken by qualifying registered representatives to places within or outside
the United States, and additional compensation in an amount up to .25% of the
offering price of Class A shares of the Fund for sales of $1 million or more.
However, the Distributor will be reimbursed by the person receiving such
additional compensation for sales of the Fund of $1 million or more, if a
Shareholder redeems any or all of the shares for which such additional
compensation was paid by the Distributor prior to the first year anniversary of
purchase. Under certain circumstances, commissions up to the amount of the
entire sales charge will be reallowed to financial institutions and
intermediaries, which might then be deemed to be "underwriters" under the
Securities Act of 1933.
RIGHT OF ACCUMULATION
In calculating the sales charge rates applicable to current purchases of Class A
shares, a "single purchaser" is entitled to cumulate current purchases with the
current value at the offering price of previously purchased Class A and Class B
shares of the Fund and other eligible funds of the Trust, other than the Trust's
money market funds, that are sold subject to a comparable sales charge.
The term "single purchaser" refers to (i) an individual, (ii) an individual and
spouse purchasing shares of the Fund for their own account or for trust or
custodial accounts for their minor children, or (iii) a fiduciary purchasing for
any one trust, estate or fiduciary account, including employee benefit plans
created
9 PROSPECTUS
<PAGE>
under Sections 401 or 457 of the Code, and including related plans of the same
employer. To be entitled to a reduced sales charge based upon shares already
owned, the investor must ask the Distributor for such reduction at the time of
purchase and provide the account number(s) of the investor, the investor and
spouse, and their minor children, and give the age(s) of such children. The Fund
may amend or terminate this right of accumulation at any time as to subsequent
purchases.
LETTER OF INTENT
By initially investing at least $2,000 in Class A shares of one or more funds
that impose a comparable sales charge over the next 13 months, an investor may
reduce the sales charge by completing the Letter of Intent section of the
Account Application Form. The Letter of Intent includes a provision for a sales
charge adjustment depending on the amount actually purchased within the 13-month
period. In addition, pursuant to a Letter of Intent, the Custodian will hold in
escrow the difference between the sales charge applicable to the amount
initially purchased and the sales charge paid at the time of investment, which
is based on the amount covered by the Letter of Intent.
For example, assume an investor signs a Letter of Intent to purchase $250,000 in
Class A shares of one (or more) of the funds of the Trust that impose a
comparable sales charge and, at the time of signing the Letter of Intent,
purchases $100,000 of Class A shares of one of these funds. The investor would
pay an initial sales charge of 1.50% (the sales charge applicable to purchases
of $250,000) and 1.00% of the investment (representing the difference between
the 2.50% sales charge applicable to purchases of $100,000 and the 1.50% sales
charge already paid) would be held in escrow until the investor has purchased
the remaining $150,000 or more in Class A shares under the investor's Letter of
Intent.
The amount held in escrow will be applied to the investor's account at the end
of the 13-month period unless the amount specified in the Letter of Intent is
not purchased. In order to qualify for a Letter of Intent, the investor will be
required to make a minimum purchase of at least $2,000.
The Letter of Intent will not obligate the investor to purchase Class A shares,
but if he or she does, each purchase during the period will be at the sales
charge applicable to the total amount intended to be purchased. The Letter of
Intent may be dated as of a prior date to include any purchases made within the
past 90 days.
OTHER CIRCUMSTANCES
No sales charge is imposed on Class A shares of the Fund: (i) issued through
reinvestment of dividends and capital gains distributions; (ii) acquired through
the exercise of exchange privileges where a comparable sales charge has been
paid for exchanged shares; (iii) purchased by officers, directors or trustees,
retirees and employees (and their spouses and immediate family members) of the
Trust, of BANC ONE CORPORATION and its subsidiaries and affiliates, of the
Distributor and its subsidiaries and affiliates, or of an investment sub-adviser
of a fund of the Trust and such sub-adviser's subsidiaries and affiliates; (iv)
sold to affiliates of BANC ONE CORPORATION and certain accounts (other than
Individual Retirement Accounts) for which Authorized Financial Organizations act
in fiduciary, advisory, agency, custodial or similar capacities, or purchased by
investment advisers, financial planners or other intermediaries who have a
dealer arrangement with the Distributor, who place trades for their own accounts
or for the accounts of their clients and who charge a management, consulting or
other fee for their services, as well as clients of such investment advisers,
financial planners or other intermediaries who place trades for their own
accounts if the accounts are linked to the master account of such investment
adviser, financial planner or other intermediary; (v) purchased with proceeds
from the recent redemption of Fiduciary Class shares of a fund of the Trust or
acquired in an exchange of Fiduciary Class shares of a fund for Class A shares
of the same fund; (vi) purchased with proceeds from the recent redemption of
shares of a mutual fund (other than a fund of the Trust) for which a sales
charge was paid; (vii) purchased in an Individual Retirement Account with the
proceeds of a distribution from an employee benefit plan, provided that, at the
time of distribution, the employee benefit plan had plan assets invested in a
fund of the Trust; (viii) purchased with Trust assets; (ix) purchased in
accounts as to which a bank or broker-dealer charges an asset allocation fee,
provided the bank or broker-dealer has an agreement with the Distributor; or (x)
directly purchased with the proceeds of a distribution on a bond for which a
Banc One Corporation affiliate bank or trust company is the Trustee or Paying
Agent.
An investor relying upon any of the categories of waivers of the sales charge
must qualify for such waiver in advance of the purchase with the Distributor or
the financial institution or intermediary through which shares are purchased by
the investor.
The waiver of the sales charge under circumstances (v), (vi) and (vii) above
applies only if the purchase is made within 60 days of the redemption or
distribution and if conditions imposed by the Distributor are met. The waiver
policy with respect to the purchase of shares through the use of proceeds from a
recent redemption or distribution as described in clauses (v), (vi) and (vii)
above will not be continued indefinitely and may be discontinued at any time
without notice. Investors should call the Distributor at 1-800-480-4111 to
determine whether they are eligible to purchase shares without paying a sales
charge through the use of proceeds from a recent redemption or distribution as
described above, and to confirm continued availability of these waiver policies
prior to initiating the procedures described in clauses (v), (vi) and (vii).
ALTERNATIVE SALES ARRANGEMENTS
CLASS B SHARES
Class B shares are not subject to a sales charge when they are purchased, but
are subject to a sales charge (the "Contingent Deferred Sales Charge") if a
Shareholder redeems them prior to the sixth anniversary of purchase. When a
Shareholder purchases Class B shares, the full purchase amount is invested
PROSPECTUS 10
<PAGE>
directly in the Fund. Class B shares of the Fund are subject to an ongoing
distribution and Shareholder service fee at an annual rate of 1.00% of the
Fund's average daily net assets as provided in the Class B Plan (described below
under "The Distributor"). The Distributor has voluntarily agreed to reduce the
amount of this fee to .90% of the Fund's average daily net assets attributable
to the Class B shares, for the indefinite future. This ongoing fee will cause
Class B shares to have a higher expense ratio and to pay lower dividends than
Class A shares. Class B shares convert automatically to Class A shares after
eight years, commencing from the end of the calendar month in which the purchase
order was accepted under the circumstances and subject to the qualifications
described in this Prospectus.
Proceeds from the Contingent Deferred Sales Charge and the distribution and
Shareholder service fees under the Class B Plan are payable to the Distributor
and financial intermediaries to defray the expenses of advance brokerage
commissions and expenses related to providing distribution-related and
Shareholder services to the Fund in connection with the sale of the Class B
shares, such as the payment of compensation to dealers and agents for selling
Class B shares. A dealer reallowance of 4.00% of the original purchase price of
the Class B shares will be paid to financial institutions and intermediaries.
CONTINGENT DEFERRED SALES CHARGE
If the Shareholder redeems Class B shares prior to the sixth anniversary of
purchase, the Shareholder will pay a Contingent Deferred Sales Charge at the
rates set forth below. The Contingent Deferred Sales Charge is assessed on an
amount equal to the lesser of the then-current market value or the cost of the
shares being redeemed. Accordingly, no sales charge is imposed on increases in
net asset value above the initial purchase price. In addition, no charge is
assessed on shares derived from reinvestment of dividends or capital gain
distributions.
The amount of the Contingent Deferred Sales Charge, if any, varies depending on
the number of years from the time of payment for the purchase of Class B shares
until the time of redemption of such shares. Solely for purposes of determining
the number of years from the time of any payment for the purchase of shares, all
payments during a month are aggregated and deemed to have been made on the first
day of the month.
<TABLE>
<CAPTION>
CONTINGENT DEFERRED
SALES CHARGE AS A
YEAR(S) PERCENTAGE OF DOLLAR
SINCE AMOUNT SUBJECT TO
PURCHASE CHARGE
- ----------------------------------------- -----------------------
<S> <C>
0-1...................................... 5.00%
1-2...................................... 4.00%
2-3...................................... 3.00%
3-4...................................... 3.00%
4-5...................................... 2.00%
5-6...................................... 1.00%
6-7...................................... None
7-8...................................... None
</TABLE>
In determining whether a particular redemption is subject to a Contingent
Deferred Sales Charge, it is assumed that the redemption is first of any Class
shares in the Shareholder's Fund account (unless the Shareholder elects to have
Class B shares redeemed first) or shares representing capital appreciation, next
of shares acquired pursuant to reinvestment of dividends and capital gain
distributions, and finally of other shares held by the Shareholder for the
longest period of time. This method should result in the lowest possible sales
charge.
To provide an example, assume you purchased 100 shares at $10 per share (a total
cost of $1,000) and prior to the second anniversary after purchase, the net
asset value per share is $12 and during such time you have acquired 10
additional shares through dividends paid in shares. If you then make your first
redemption of 50 shares (proceeds of $600), 10 shares will not be subject to
charge because you received them as dividends. With respect to the remaining 40
shares, the charge is applied only to the original cost of $10 per share and not
to the increase in net asset value of $2 per share. Therefore, $400 of the $600
redemption proceeds is subject to a Contingent Deferred Sales Charge at a rate
of 4.00% (the applicable rate prior to the second anniversary after purchase).
The Contingent Deferred Sales Charge is waived on redemption of shares: (i) for
distributions that are made under a Systematic Withdrawal Plan of the Trust and
that are limited to no more than 10% of the account value annually, determined
in the first year as of the date the redemption request is received by the
Transfer Agent, and in subsequent years, as of the most recent anniversary of
that date; (ii) following the death or disability (as defined in the Code) of a
Shareholder or a participant or beneficiary of a qualifying retirement plan if
redemption is made within one year of such death or disability; or (iii) to the
extent that the redemption represents a minimum required distribution from an
Individual Retirement Account or other qualifying retirement plan to a
Shareholder who has attained the age of 70 1/2. A Shareholder or his or her
representative should contact the Transfer Agent to determine whether a
retirement plan qualifies for a waiver and must notify the Transfer Agent prior
to the time of redemption if such circumstances exist and the Shareholder is
eligible for this waiver. In addition, the following circumstances are not
deemed to result in a "redemption" of Class B shares for purposes of the
assessment of a Contingent Deferred Sales Charge, which is therefore waived: (i)
plans of reorganization of the Fund, such as mergers, asset acquisitions and
exchange offers to which the Fund is a party; or (ii) exchanges for Class B
shares of other funds of the Trust as described under "Exchanges."
CONVERSION FEATURE
Class B shares include all shares purchased pursuant to the Contingent Deferred
Sales Charge which have been outstanding for less than the period ending eight
years after the end of the month in which the shares were purchased. At the end
of this period, Class B shares will automatically convert to Class A shares and
will be subject to the lower distribution and Shareholder service fees charged
to Class A shares. Such conversion will be on the basis of the relative net
asset values of the two classes, without the imposition of any sales charge, fee
or other charge. The conversion is not a taxable event to a Shareholder.
11 PROSPECTUS
<PAGE>
For purposes of conversion to Class A shares, shares received as dividends and
other distributions paid on Class B shares in a Shareholder's Fund account will
be considered to be held in a separate sub-account. Each time any Class B shares
in a Shareholder's Fund account (other than those in the sub-account) convert to
Class A shares, a pro-rata portion of the Class B shares in the sub-account will
also convert to Class A shares.
If a Shareholder effects one or more exchanges among Class B shares of the funds
of the Trust during the eight-year period, the Trust will aggregate the holding
periods for the shares of each fund of the Trust for purposes of calculating
that eight-year period. Because the per share net asset value of the Class A
shares may be higher than that of the Class B shares at the time of conversion,
a Shareholder may receive fewer Class A shares than the number of Class B shares
converted, although the dollar value will be the same.
EXCHANGES
CLASS A AND FIDUCIARY CLASS
Fiduciary Class Shareholders of the Fund may exchange their shares for Class A
shares of the Fund or for Class A shares or Fiduciary Class shares of another
fund of the Trust.
Class A Shareholders may exchange their shares for Fiduciary Class shares of the
Fund or for Fiduciary Class shares or Class A shares of another fund of the
Trust, if the Shareholder is eligible to purchase such shares.
The exchange privilege may be exercised only in those states where the shares of
the Fund or such other fund of the Trust may be legally sold. All exchanges
discussed herein are made at the net asset value of the exchanged shares, except
as provided below. The Trust does not impose a charge for processing exchanges
of shares. If a Shareholder seeks to exchange Class A shares of a fund that does
not impose a sales charge for Class A shares of a fund that does or the fund
being exchanged into has a higher sales charge, the Shareholder will be required
to pay a sales charge in the amount equal to the difference between the sales
charge applicable to the fund into which the shares are being exchanged and any
sales charges previously paid for the exchanged shares, including any sales
charges incurred on any earlier exchanges of the shares (unless such sales
charge is otherwise waived, as provided in "Other Circumstances"). The exchange
of Fiduciary Class shares for Class A shares also will require payment of the
sales charge unless the sales charge is waived, as provided in "Other
Circumstances."
CLASS B
Class B Shareholders of the Fund may exchange their shares for Class B shares of
any other fund of the Trust on the basis of the net asset value of the exchanged
Class B shares, without the payment of any Contingent Deferred Sales Charge that
might otherwise be due upon redemption of the outstanding Class B shares. The
newly acquired Class B shares will be subject to the higher Contingent Deferred
Sales Charge of either the fund from which the shares were exchanged or the fund
into which the shares were exchanged. With respect to outstanding Class B shares
as to which previous exchanges have taken place, "higher Contingent Deferred
Sales Charge" shall mean the higher of the Contingent Deferred Sales Charge
applicable to either the fund the shares are exchanging into or any other fund
from which the shares previously have been exchanged. For purposes of computing
the Contingent Deferred Sales Charge that may be payable upon a disposition of
the newly acquired Class B shares, the holding period for outstanding Class B
shares of the fund from which the exchange was made is "tacked" to the holding
period of the newly acquired Class B shares. For purposes of calculating the
holding period applicable to the newly acquired Class B shares, the newly
acquired Class B shares shall be deemed to have been issued on the date of
receipt of the Shareholder's order to purchase the outstanding Class B shares of
the fund from which the initial exchange was made.
ADDITIONAL INFORMATION REGARDING EXCHANGES
In the case of shares held of record by a Shareholder Servicing Agent but
beneficially owned by a Shareholder, to exchange such shares the Shareholder
should contact the Shareholder Servicing Agent, who will contact the Transfer
Agent and effect the exchange on behalf of the Shareholder. If an exchange
request in good order is received by the Transfer Agent by 4:00 p.m., eastern
time, on any Business Day, the exchange usually will occur on that day. Any
Shareholder who wishes to make an exchange must receive a current prospectus of
the fund of the Trust in which he or she wishes to invest before the exchange
will be effected.
The Trust reserves the right to change the terms or conditions of the exchange
privilege discussed herein upon sixty days' written notice. An exchange between
classes of shares of the same fund is not considered a taxable event; however,
an exchange between funds of the Trust is considered a sale of shares and
usually results in a capital gain or loss for Federal income tax purposes.
Shareholders should consult their tax advisers for a more complete explanation
of the Federal income tax consequences of an exchange of shares of the Fund.
A more detailed description of the above is set forth in the Statement of
Additional Information.
REDEMPTIONS
Shareholders may redeem their shares without charge (except Class B shares, as
provided above) on any Business Day; shares may ordinarily be redeemed by mail,
by telephone or by wire. All redemption orders are effected at the net asset
value per share next determined for Class A shares and Fiduciary Class shares,
and at net asset value per share next determined reduced by any applicable
Contingent Deferred Sales Charge for Class B shares, after receipt of a valid
request for redemption. Payment to Shareholders for shares redeemed will be made
within seven days after receipt by the Transfer Agent of the request for
redemption.
PROSPECTUS 12
<PAGE>
BY MAIL
A written request for redemption must be received by the Transfer Agent in order
to constitute a valid request for redemption. All written redemption requests
should be sent to The One Group-Registered Trademark-, c/o State Street Bank and
Trust Company, P.O. Box 8500, Boston, MA 02266-8500, or the Shareholder
Servicing Agent, if applicable. The Transfer Agent may require that the
signature on the written request be guaranteed by a commercial bank, a member
firm of a domestic stock exchange, or by a member of the Securities Transfer
Association Medallion Program or the Stock Exchange Medallion Program.
The signature guarantee requirement will be waived if all of the following
conditions apply: (i) the redemption is for $5,000 worth of shares or less; (ii)
the redemption check is payable to the Shareholder(s) of record; and (iii) the
redemption check is mailed to the Shareholder(s) at the address of record. The
Shareholder may also have the proceeds mailed to a commercial bank account
previously designated on the Account Application Form or by written instruction
to the Transfer Agent or the Shareholder Servicing Agent, if applicable. There
is no charge for having redemption requests mailed to a designated bank account.
BY TELEPHONE OR BY WIRE
Shareholders may have the payment of redemption requests wired or mailed to a
domestic commercial bank account previously designated on the Account
Application Form. Wire redemption requests may be made by the Shareholder by
telephone to the Transfer Agent at 1-800-480-4111, provided that the Shareholder
has elected the telephone redemption privilege in writing to the Distributor, or
to the Shareholder Servicing Agent, if applicable. The Transfer Agent may reduce
the amount of a wire redemption payment by its then-current wire redemption
charge, which, as of the date of this Prospectus, is $7.00.
Neither the Trust nor the Transfer Agent will be responsible for the
authenticity of the redemption instructions received by telephone if it
reasonably believes those instructions to be genuine. The Trust and the Transfer
Agent will each employ reasonable procedures to confirm that telephone
instructions are genuine, and may be liable for losses resulting from
unauthorized or fraudulent telephone transactions if it does not employ those
procedures. Such procedures may include requesting personal identification
information or recording telephone conversations.
SYSTEMATIC WITHDRAWAL PLAN
Shareholders whose accounts have a value of at least $10,000 may elect to
receive, or may designate another person to receive, monthly, quarterly or
annual payments in a specified amount of not less than $100 each. There is no
charge for this service. Under the Systematic Withdrawal Plan, all dividends and
distributions must be reinvested in shares of the Fund. Purchases of additional
Class A shares while the Systematic Withdrawal Plan is in effect are generally
undesirable because a sales charge is incurred whenever purchases are made.
Pursuant to the Systematic Withdrawal Plan, Class B Shareholders may elect to
receive, or may designate another person to receive, distributions provided the
distributions are limited to no more than 10% of their account value annually,
determined in the first year as of the date the redemption request is received
by the Transfer Agent, and in subsequent years, as of the most recent
anniversary of that date.
If the amount of the systematic withdrawal exceeds the income accrued since the
previous withdrawal under the Systematic Withdrawal Plan, the principal balance
invested will be reduced and shares will be redeemed.
OTHER INFORMATION REGARDING REDEMPTIONS
At various times, the Fund may be requested to redeem shares for which it has
not yet received good payment. In such circumstances, the forwarding of proceeds
may be delayed for 15 or more days until payment has been collected for the
purchase of such shares. The Fund intends to pay cash for all shares redeemed.
Due to the relatively high costs of handling small investments, the Fund
reserves the right to redeem, at net asset value, the shares of any Shareholder
if, because of redemptions of shares by or on behalf of the Shareholder, the
account of such Shareholder in the Fund has a value of less than $1,000, the
minimum initial purchase amount. Accordingly, an investor purchasing shares of
the Fund in only the minimum investment amount may be subject to such
involuntary redemption if he or she thereafter redeems any of these shares.
Before the Fund exercises its right to redeem such shares and to send the
proceeds to the Shareholder, the Shareholder will be given notice that the value
of the shares in his or her account is less than the minimum amount and will be
allowed 60 days to make an additional investment in the Fund in an amount which
will increase the value of the account to at least $1,000.
See the Statement of Additional Information for examples of when the Trust may
suspend the right of redemption or redeem shares involuntarily if it appears
appropriate to do so in light of the Trust's responsibilities under the
Investment Company Act of 1940.
FUND MANAGEMENT
THE ADVISER
The Trust and Banc One Investment Advisors Corporation (the "Adviser") have
entered into an investment advisory agreement (the "Advisory Agreement"). Under
the Advisory Agreement, the Adviser makes the investment decisions for the
assets of the Fund and continuously reviews, supervises and administers the
Fund's investment program. The Adviser discharges its responsibilities subject
to the supervision of, and policies established by, the Trustees of the Trust.
The Trust's shares are not deposits or obligations of, or endorsed or guaranteed
by BANC ONE CORPORATION or its bank or non-bank affiliates. The Trust's shares
are not insured or guaranteed by the Federal
13 PROSPECTUS
<PAGE>
Deposit Insurance Corporation ("FDIC") or by any other governmental agency or
government sponsored agency of the Federal government or any state.
The Adviser is an indirect, wholly-owned subsidiary of BANC ONE CORPORATION, a
bank holding company incorporated in the state of Ohio. BANC ONE CORPORATION
currently has affiliate banking organizations in Arizona, Colorado, Illinois,
Indiana, Kentucky, Ohio, Oklahoma, Texas, Utah, West Virginia and Wisconsin. In
addition, BANC ONE CORPORATION has several affiliates that engage in data
processing, venture capital, investment and merchant banking, and other
diversified services including trust management, investment management,
brokerage, equipment leasing, mortgage banking, consumer finance and insurance.
On a consolidated basis, BANC ONE CORPORATION had assets of over $88 billion as
of September 30, 1995.
The Adviser represents a consolidation of the investment advisory staffs of a
number of bank affiliates of BANC ONE CORPORATION, which have considerable
experience in the management of open-end management investment company
portfolios, including The One Group-Registered Trademark- since 1985 (then known
as "The Helmsman Fund").
Gary J. Madich, CFA, is Senior Managing Director of Fixed Income Securities. Mr.
Madich joined the Adviser in February 1995. Prior to joining the Adviser, Mr.
Madich was a Senior Vice President and Portfolio Manager with Federated
Investors. Mr. Madich has seventeen years of investment management experience.
David M. Sivinski, CFA, will be the Manager of the Fund. Mr. Sivinski has been
with the Adviser or its affiliates since 1975, working primarily in fixed-income
portfolio management and mortgage/asset-backed research. Mr. Sivinski also
serves as the Manager of The One Group-Registered Trademark- Kentucky Municipal
Bond Fund and The One Group-Registered Trademark- Ohio Municipal Bond Fund.
The Adviser is entitled to a fee, which is calculated daily and paid monthly, at
an annual rate of .60% of the average daily net assets of the Fund. The Adviser
may voluntarily agree to waive a part of its fees. (See "About the Fund --
Expense Summary") These waivers are voluntary and may be terminated at any time.
Shareholders will be notified in advance if and when these waivers are
terminated.
THE DISTRIBUTOR
The One Group Services Company (the "Distributor"), a wholly-owned subsidiary of
the BISYS Group, Inc., and the Trust are parties to a distribution agreement
(the "Distribution Agreement") under which shares of the Fund are sold on a
continuous basis.
Class A shares are subject to a distribution and Shareholder services plan (the
"Plan"). As provided in the Plan, the Trust will pay the Distributor a fee of
.35% of the average daily net assets of Class A shares of the Fund. Currently,
the Distributor has voluntarily agreed to limit payments under the Plan to .25%
of the average daily net assets of Class A shares of the Fund. Up to .25% of the
fees payable under the Plan may be used as compensation for Shareholder services
by the Distributor and/ or financial institutions and intermediaries. All such
fees that may be paid under the Plan will be paid pursuant to Rule 12b-1 of the
Investment Company Act of 1940. The Distributor may apply these fees toward: (i)
compensation for its services in connection with distribution assistance or
provision of Shareholder services; or (ii) payments to financial institutions
and intermediaries such as banks (including affiliates of the Adviser), savings
and loan associations, insurance companies, investment counselors,
broker-dealers, and the Distributor's affiliates and subsidiaries, as
compensation for services or reimbursement of expenses incurred in connection
with distribution assistance or provision of Shareholder services.
Class B shares are subject to a Contingent Deferred Sales Charge if such shares
are redeemed prior to the sixth anniversary of purchase. Class B shares of the
Fund are subject to an ongoing distribution and Shareholder service fee as
provided in the Class B distribution and Shareholder services plan (the "Class B
Plan") at an annual rate of 1.00% of the Fund's average daily net assets, which
includes Shareholder service fees of .25% of the Fund's average daily net
assets. Currently, the Distributor has voluntarily agreed to limit payments
under the Class B Plan to .90% of the average daily net assets of the Class B
shares of the Fund.
Proceeds from the Contingent Deferred Sales Charge and the distribution and the
Shareholder service fees under the Class B Plan are payable to the Distributor
and financial intermediaries to defray the expenses of advance brokerage
commissions and expenses related to providing distribution-related and
Shareholder services to the Fund in connection with the sale of Class B shares,
such as the payment of compensation to dealers and agents for selling Class B
shares. The combination of the Contingent Deferred Sales Charge and the
distribution and Shareholder service fees facilitate the ability of the Fund to
sell the Class B shares without a sales charge being deducted at the time of
purchase.
The Plan and the Class B Plan are characterized as compensation plans since the
distribution fees will be paid to the Distributor without regard to the
distribution or Shareholder service expenses incurred by the Distributor or the
amount of payments made to financial institutions and intermediaries. The Fund
also may execute brokerage or other agency transactions through an affiliate of
the Adviser, or through the Distributor for which the affiliate or the
Distributor receives compensation. Pursuant to guidelines adopted by the Board
of Trustees of the Trust, any such compensation will be reasonable and fair
compared to compensation received by other brokers in connection with comparable
transactions.
PROSPECTUS 14
<PAGE>
Fiduciary Class shares of the Fund are offered without distribution fees to
institutional investors, including Authorized Financial Organizations. It is
possible that an institution may offer different classes of shares to its
customers and thus receive different compensation with respect to different
classes of shares. In addition, a financial institution that is the record owner
of shares for the account(s) of its customers may impose separate fees for
account services to its customers.
THE ADMINISTRATOR
The One Group Services Company (the "Administrator"), a wholly-owned subsidiary
of the BISYS Group, Inc., and the Trust are parties to an administration
agreement relating to the Fund (the "Administration Agreement"). Under the terms
of the Administration Agreement, the Administrator is responsible for providing
the Trust with administrative services (other than investment advisory
services), including regulatory reporting and all necessary office space,
equipment, personnel and facilities.
The Adviser also serves as Sub-Administrator to each fund of the Trust, pursuant
to an agreement between the Administrator and the Adviser. Pursuant to this
agreement, the Adviser performs many of the Administrator's duties, for which
the Adviser receives a fee paid by the Administrator.
The Administrator is entitled to a fee for administrative services, which is
calculated daily and paid monthly, at an annual rate of .20% of each fund's
average daily net assets on the first $1.5 billion in Trust assets (excluding
the Treasury Only Money Market Fund and the Government Money Market Fund), .18%
of each fund's average daily net assets to $2 billion in Trust assets (excluding
the Treasury Only Money Market Fund and the Government Money Market Fund), and
.16% of each fund's average daily net assets when Trust assets exceed $2 billion
(excluding the Treasury Only Money Market Fund and the Government Money Market
Fund).
THE TRANSFER AGENT AND CUSTODIAN
State Street Bank and Trust Company, P.O. Box 8500, Boston, MA 02266-8500 acts
as Transfer Agent and Custodian for the Trust for which services it receives a
fee. The Custodian holds cash, securities and other assets of the Trust as
required by the Investment Company Act of 1940. Bank One Trust Company, N.A.
serves as Sub-Custodian in connection with the Trust's securities lending
activities, pursuant to an agreement between State Street Bank and Trust Company
and Bank One Trust Company. Bank One Trust Company receives a fee paid by the
Trust.
COUNSEL AND INDEPENDENT ACCOUNTANTS
Ropes & Gray serves as counsel to the Trust. Coopers & Lybrand L.L.P. serves as
the independent accountants of the Trust.
OTHER INFORMATION
THE TRUST
The Trust was organized as a Massachusetts Business Trust under a Declaration of
Trust filed on May 23, 1985. The Declaration of Trust permits the Trust to offer
separate funds and different classes of each fund. All consideration received by
the Trust for shares of any fund and all assets of such fund belong to that fund
and would be subject to liabilities related thereto.
The Trust pays its expenses, including fees of its service providers, audit and
legal expenses, expenses of preparing prospectuses, proxy solicitation material
and reports to Shareholders, costs of custodial services and registering the
shares under Federal and state securities laws, pricing, insurance expenses,
litigation and other extraordinary expenses, brokerage costs, interest charges,
taxes and organizational expenses.
The Adviser and the Administrator of the Fund each bears all expenses incurred
in connection with the performance of their services as investment adviser and
administrator, respectively, other than the cost of securities (including
brokerage commissions, if any) purchased for the Fund.
As a general matter, as set forth in the Multiple Class Plan, expenses are
allocated to each class of shares of the Fund on the basis of the net asset
value of that class in relation to the net asset value of the Fund. At present,
the only expenses that are allocated to Class A and Class B shares, other than
in accordance with the relative net asset value of the class, are the different
distribution and Shareholders services costs. See "Expense Summary." At present,
no expenses are allocated to Fiduciary Class shares as a class that are not also
borne by the other classes of shares of the Fund in proportion to the relative
net asset values of the shares of such classes.
The organizational expenses of the Fund have been capitalized and are being
amortized in the first five years of the Fund's operations. Such amortization
will reduce the amount of income available for payment as dividends.
TRUSTEES OF THE TRUST
The management and affairs of the Trust are supervised by the Trustees under the
laws governing business trusts in the Commonwealth of Massachusetts. The
Trustees have approved contracts under which, as described above, certain
companies provide essential management services to the Trust.
VOTING RIGHTS
As set forth in the Multiple Class Plan, each share held entitles the
Shareholder of record to one vote. Each fund of the Trust will vote separately
on matters relating solely to that fund. In addition, each class of a fund shall
have exclusive voting rights on any matter submitted to Shareholders that
relates solely to that class, and shall have separate voting rights on any
matter submitted to Shareholders in which the interests of one class differ from
the interests of any other class. However, all fund
15 PROSPECTUS
<PAGE>
Shareholders will have equal voting rights on matters that affect all fund
Shareholders equally. As a Massachusetts Business Trust, the Trust is not
required to hold annual meetings of Shareholders but approval will be sought for
certain changes in the operation of the Trust and for the election of Trustees
under certain circumstances. In addition, a Trustee may be elected or removed by
the remaining Trustees or by Shareholders at a special meeting called upon
written request of Shareholders owning at least 10% of the outstanding shares of
the Trust. In the event that such a meeting is requested, the Trust will provide
appropriate assistance and information to the Shareholders requesting the
meeting.
DIVIDENDS
Net investment income (exclusive of capital gains) is determined and declared
daily, and is distributed in the form of periodic dividends to Shareholders of
the Fund on the first Business Day of each month. Capital gains of the Fund, if
any, will be distributed at least annually.
To maintain a relatively even rate of distributions from the Fund rather than
having substantial fluctuations from period to period, the monthly distributions
level from the Fund may be fixed from time to time at rates consistent with the
Adviser's long-term earnings expectations.
Shareholders automatically receive all income dividends and capital gain
distributions in additional Class A, Class B or Fiduciary Class shares, as
applicable, at the net asset value next determined following the record date,
unless the Shareholder has elected to take such payment in cash. Such election,
or any revocation thereof, must be made in writing, at least 15 days prior to
distribution, to the Transfer Agent at P.O. Box 8500, Boston, MA 02266-8500, and
will become effective with respect to dividends and distributions having record
dates after its receipt by the Transfer Agent. Reinvested dividends and
distributions receive the same tax treatment as dividends and distributions paid
in cash.
Class B shares received as dividends and capital gains distributions at the net
asset value next determined following the record date shall be held in a
separate Class B sub-account. Each time any Class B shares (other than those in
the sub-account) convert to Class A shares, a pro-rata portion of the Class B
shares in the sub-account will also convert to Class A shares. (See "Conversion
Feature.")
Dividends and distributions of the Fund are paid on a per-share basis. The value
of each share will be reduced by the amount of the payment. If shares are
purchased shortly before the record date for a dividend or the distribution of
capital gains, a Shareholder will pay the full price for the shares and receive
some portion of the price back as a taxable dividend or distribution even though
such distribution would, in effect, represent a return of the Shareholder's
investment.
The amount of dividends payable on Fiduciary Class shares will be more than the
dividends payable on Class A and Class B shares because of the distribution
expenses charged to Class A and Class B shares.
SHAREHOLDER INQUIRIES
Shareholder inquiries should be directed to the Administrator, The One Group
Services Company, 3435 Stelzer Road, Columbus, OH 43219.
REPORTING
The Trust issues unaudited financial information semiannually and audited
financial statements annually. The Trust furnishes proxy statements and other
reports to Shareholders of record.
OTHER INVESTMENT POLICIES
TEMPORARY DEFENSIVE POSITION
For temporary defensive purposes during periods when the Adviser determines that
market conditions warrant such action, the Fund may invest up to 100% of its
assets in money market instruments and may hold a portion of its assets in cash
for liquidity purposes.
The Fund may also invest more than 20% of its net assets in municipal securities
other than Louisiana municipal securities if deemed appropriate for temporary
defensive purposes.
To the extent the Fund is engaged in a temporary defensive position, the Fund
will not be pursuing its investment objective.
PORTFOLIO TURNOVER
Portfolio turnover may vary greatly from year to year, as well as within a
particular year. It is presently estimated that the annual portfolio turnover
rate of the Fund will not exceed 100%.
INVESTMENT LIMITATIONS
The investment objective and the following investment limitations are
fundamental policies of the Fund. Fundamental policies cannot be changed without
the consent of the holders of a majority of the Fund's outstanding shares. The
term "majority of the outstanding shares" means the vote of (i) 67% or more of
the Fund's shares present at a meeting, if more than 50% of the outstanding
shares of the Fund are present or represented by proxy, or (ii) more than 50% of
the Fund's outstanding shares, whichever is less.
The Fund may not:
1. Purchase securities of any issuer (except securities issued or guaranteed by
the United States, its agencies or instrumentalities, and if consistent with the
Fund's investment objective and policies, repurchase agreements involving such
securities) if as a result more than 25% of the total assets of the Fund would
be invested in the securities of such issuer. This restriction applies to 50% of
the Fund's total assets. For purposes of this limitation,
PROSPECTUS 16
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a security is considered to be issued by the government entity whose assets and
revenues guarantee or back the security. With respect to private activity bonds
or industrial development bonds backed only by the assets and revenues of a
non-governmental user, such user would be considered the issuer.
2. Purchase any securities that would cause more than 25% of the total assets of
the Fund to be invested in the securities of one or more issuers conducting
their principal business activities in the same industry, provided that (i) this
limitation does not apply to investments in obligations issued or guaranteed by
the U.S. government or its agencies and instrumentalities and repurchase
agreements involving such securities; and (ii) this limitation shall not apply
to municipal securities or governmental guarantees of municipal securities. In
addition, for purposes of this limitation only, private activity bonds that are
backed only by the assets and revenues of a non-governmental issuer shall not be
deemed to be municipal securities. For purposes of this limitation (i) utilities
will be divided according to their services (for example, gas, gas transmission,
electric and telephone will each be considered a separate industry); and (ii)
wholly-owned finance companies will be considered to be in the industries of
their parents if their activities are primarily related to financing the
activities of their parents.
3. Make loans except that the Fund may (i) purchase or hold debt instruments in
accordance with its investment objective and policies; (ii) enter into
repurchase agreements; and (iii) engage in securities lending as described in
this Prospectus and in the Statement of Additional Information.
The foregoing percentages will apply at the time of the purchase of a security.
Additional investment limitations are set forth in the Statement of Additional
Information.
DESCRIPTION OF PERMITTED INVESTMENTS
The following is a description of certain of the permitted investments for the
Fund.
U.S. TREASURY OBLIGATIONS -- The Fund may invest in bills, notes and bonds
issued by the U.S. Treasury and separately traded interest and principal
component parts of such obligations that are transferable through the Federal
book-entry system known as Separately Traded Registered Interest and Principal
Securities ("STRIPS") and Coupon Under Book Entry Safekeeping ("CUBES").
RECEIPTS -- The Fund may purchase interests in separately traded interest and
principal component parts of U.S. Treasury obligations that are issued by banks
or brokerage firms and are created by depositing U.S. Treasury notes and U.S.
Treasury bonds into a special account at a custodian bank. The custodian holds
the interest and principal payments for the benefit of the registered owners of
the certificates or receipts. The custodian arranges for the issuance of the
certificates or receipts evidencing ownership and maintains the register.
Receipts include Treasury Receipts ("TRS"), Treasury Investment Growth Receipts
("TIGRS"), and Certificates of Accrual on Treasury Securities ("CATS").
STRIPS, CUBES, TRS, TIGRS and CATS are sold as zero coupon securities, which
means that they are sold at a substantial discount and redeemed at face value at
their maturity date without interim cash payments of interest or principal. This
discount is amortized over the life of the security, and such amortization will
constitute the income earned on the security for both accounting and tax
purposes. Because of these features, these securities may be subject to greater
interest rate volatility than interest-paying U.S. Treasury obligations. The
Fund may invest up to 20% of its total assets in STRIPS, CUBES, TRS, TIGRS, and
CATS. See also "Taxes."
CERTIFICATES OF DEPOSIT -- Certificates of deposit are negotiable interest
bearing instruments with a specific maturity. Certificates of deposit ("CDs")
are issued by banks and savings and loan institutions in exchange for the
deposit of funds and normally can be traded in the secondary market prior to
maturity.
TIME DEPOSITS -- Time deposits are non-negotiable receipts issued by a bank in
exchange for the deposit of funds. Like a certificate of deposit, a time deposit
("TD") earns a specified rate of interest over a definite period of time;
however, it cannot be traded in the secondary market. Time deposits with a
withdrawal penalty are considered to be illiquid securities; therefore, the Fund
will not invest more than 15% of its net assets in such time deposits and other
illiquid securities.
BANKERS' ACCEPTANCES -- Bankers' acceptances are bills of exchange or time
drafts drawn on and accepted by (i.e., made an obligation of) a commercial bank.
They are used by corporations to finance the shipment and storage of goods and
to furnish dollar exchange. Maturities are generally six months or less.
COMMERCIAL PAPER -- Commercial paper is the term used to designate unsecured
short-term promissory notes issued by corporations and other entities.
Maturities on these issues vary from a few days to nine months.
U.S. GOVERNMENT AGENCIES -- Certain Federal agencies have been established as
instrumentalities of the U.S. government to supervise and finance specific types
of activities. Select agencies, such as the Government National Mortgage
Association ("Ginnie Mae") and the Export-Import Bank, are supported by the full
faith and credit of the U.S. Treasury; others, such as the Federal National
Mortgage Association ("Fannie Mae"), are supported by the credit of the
instrumentality and have the right to borrow from the U.S. Treasury; others are
supported by the authority of the U.S. government to purchase the agency's
obligations; while still others, such as the Federal Farm Credit Banks and the
Federal Home Loan Mortgage Corporation ("Freddie Mac"), are supported solely by
the credit of the instrumentality itself. No assurance can be given that the
U.S. government would provide financial support to U.S. government sponsored
agencies or instrumentalities if it is not obligated to do so by law.
Obligations of U.S. government agencies include debt issues and mortgage-backed
securities issued or guaranteed by select agencies.
17 PROSPECTUS
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INVESTMENT COMPANY SECURITIES -- The Fund may invest up to 5% of its total
assets in the securities of any one investment company, but may not own more
than 3% of the securities of any one investment company or invest more than 10%
of its total assets in the securities of other investment companies. In
accordance with an exemptive order issued to the trust by the SEC, such other
investment company securities may include securities of a money market fund of
the Trust, and such companies may include companies of which the Adviser or a
sub-adviser to a fund of the Trust, or an affiliate of such Adviser or
sub-adviser, serves as investment adviser, administrator or distributor. Because
other investment companies employ an investment adviser, such investment by the
Fund may cause Shareholders to bear duplicate fees. The Adviser will waive its
fee attributable to the assets of the investing fund invested in a money market
fund of the Trust; and, to the extent required by the laws of any state in which
shares of the Trust are sold, the Adviser will waive its fees attributable to
assets of the Fund invested in any investment company.
REPURCHASE AGREEMENTS -- Repurchase agreements are agreements by which a person
obtains a security and simultaneously commits to return the security to the
seller at an agreed upon price (including principal and interest) on an agreed
upon date within a number of days from the date of purchase. The custodian or
its agent will hold the security as collateral for the repurchase agreement.
Collateral must be maintained at a value at least equal to 100% of the
repurchase price. The Fund bears a risk of loss in the event the other party
defaults on its obligations and the Fund is delayed or prevented from its right
to dispose of the collateral securities or if the Fund realizes a loss on the
sale of the collateral securities. The Adviser will enter into repurchase
agreements on behalf of the Fund only with financial institutions deemed to
present minimal risk of bankruptcy during the term of the agreement based on
guidelines established and periodically reviewed by the Trustees. Repurchase
agreements are considered by the SEC to be loans under the Investment Company
Act of 1940.
REVERSE REPURCHASE AGREEMENTS -- The Fund may borrow funds for temporary
purposes by entering into reverse repurchase agreements. Pursuant to such
agreements, the Fund would sell Fund securities to financial institutions such
as banks and broker-dealers and agree to repurchase them at a mutually
agreed-upon date and price. The Fund will enter into reverse repurchase
agreements only to avoid otherwise selling securities during unfavorable market
conditions to meet redemptions. At the time the Fund enters into a reverse
repurchase agreement, it would place in a segregated custodial account assets,
such as liquid high grade debt securities, consistent with the Fund's investment
restrictions and having a value equal to the repurchase price (including accrued
interest), and would subsequently monitor the account to ensure that such
equivalent value was maintained. Reverse repurchase agreements involve the risk
that the market value of securities sold by the Fund may decline below the price
at which the Fund is obligated to repurchase the securities. Reverse repurchase
agreements are considered by the SEC to be borrowings by the Fund under the
Investment Company Act of 1940.
SECURITIES LENDING -- In order to generate additional income, the Fund may lend
up to 33% of the securities in which it is invested pursuant to agreements
requiring that the loan be continuously secured by cash, securities of the U.S.
government or its agencies, shares of an investment trust or mutual fund or any
combination of cash and such securities as collateral equal at all times to at
least 100% of the market value plus accrued interest on the securities lent. The
Fund will continue to receive interest on the securities lent while
simultaneously seeking to earn interest on the investment of cash collateral in
U.S. government securities, shares of an investment trust or mutual fund, or
other short-term, highly liquid investments. Collateral is marked to market
daily to provide a level of collateral at least equal to the market value of the
securities lent. There may be risks of delay in recovery of the securities or
even loss of rights in the collateral should the borrower of the securities fail
financially. However, loans will only be made to borrowers deemed by the Adviser
to be of good standing under guidelines established by the Trust's Board of
Trustees and when, in the judgment of the Adviser, the consideration which can
be earned currently from such securities loans justifies the attendant risk. The
Fund will enter into loan arrangements only with counterparties which the
Adviser has deemed to be creditworthy under guidelines established by the Board
of Trustees. Loans are subject to termination by the Fund or the borrower at any
time, and therefore, are not considered to be illiquid investments.
VARIABLE AND FLOATING RATE INSTRUMENTS -- Certain of the obligations purchased
by the Fund may carry variable or floating rates of interest, may involve a
conditional or unconditional demand feature and may include variable amount
master demand notes. A demand instrument with a demand notice period exceeding
seven days may be considered illiquid if there is no secondary market for such
security; therefore, the Fund will not invest more than 15% of its net assets in
such instruments and other illiquid securities. The interest rates on these
securities may be reset daily, weekly, quarterly or some other reset period, and
may have a floor or ceiling on interest rate changes. There is a risk that the
current interest rate on such obligations may not accurately reflect existing
market interest rates.
There is no limit on the extent to which the Fund may purchase variable and
floating rate instruments that are not illiquid. The Fund will purchase variable
and floating rate instruments to facilitate portfolio liquidity or to permit the
investment of the Fund's assets at a favorable rate of return.
SECURITIES PURCHASED ON A WHEN-ISSUED BASIS AND FORWARD COMMITMENTS -- The Fund
may purchase securities on a when-issued basis when deemed by the Adviser to
present attractive investment opportunities. When-issued securities are
purchased for delivery beyond the normal settlement date at a stated price and
yield, thereby involving the risk that the yield obtained will be less than that
available in the market at delivery. Although the purchase of securities on a
when-issued basis is not considered leveraging, it has the effect of leveraging.
When the Adviser purchases a when-issued security, the Custodian will set aside
cash or liquid securities to satisfy the purchase
PROSPECTUS 18
<PAGE>
commitment. The Fund generally will not pay for such securities or earn interest
on them until received. Commitments to purchase when-issued securities will not,
under normal market conditions, exceed 40% of the Fund's total assets, and a
commitment will not exceed 180 days. The Fund will only purchase when-issued
securities for the purpose of acquiring portfolio securities and not for
speculative purposes.
In a forward commitment transaction, the Fund contracts to purchase securities
for a fixed price at a future date beyond customary settlement time. The Fund is
required to hold and maintain in a segregated account until the settlement date,
cash, U.S. government securities or liquid high-grade debt obligations in an
amount sufficient to meet the purchase price. Alternatively, the Fund may enter
into offsetting contracts for the forward sale of other securities that it owns.
The purchase of securities on a when-issued or forward commitment basis involves
a risk of loss if the value of the security to be purchased declines prior to
the settlement date. Although the Fund would generally purchase securities on a
when-issued or forward commitment basis with the intention of actually acquiring
securities for its portfolio, the Fund may dispose of a when-issued security or
forward commitment prior to settlement if the Adviser deems it appropriate to do
so.
OPTIONS -- The Fund may purchase and write (i.e., sell) call options and put
options on securities and indices, which options are traded on national
securities exchanges. A call option gives the purchaser the right to buy, and
obligates the writer of the option to sell, the underlying security at the
agreed upon exercise (or "strike") price during the option period. A put option
gives the purchaser the right to sell, and obligates the writer to buy, the
underlying security at the strike price during the option period. Purchasers of
options pay an amount, known as a premium, to the option writer in exchange for
the right under the option contract. Option contracts may be written with terms
that would permit the holder of the option to purchase or sell the underlying
security only upon the expiration date of the option. The initial purchase
(sale) of an option contract is an "opening transaction." In order to close out
an option position, the Fund may enter into a "closing transaction," the sale
(purchase) of an option contract on the same security with the same exercise
price and expiration date as the option contract originally opened.
The Fund may purchase put and call options in hedging transactions to protect
against a decline in the market value of the securities in the Fund (e.g., by
the purchase of a put option) and to protect against an increase in the cost of
fixed-income securities that the Fund may seek to purchase in the future (e.g.,
by the purchase of a call option). In the event that paying premiums for put and
call options, together with price movements in the underlying securities, are
such that exercise of the options would not be profitable for the Fund, losses
of the premiums paid may be offset by an increase in the value of the Fund's
securities (in the case of a purchase of put options) or by a decrease in the
cost of acquisition of securities by the Fund (in the case of a purchase of call
options).
The Fund also may write secured put and covered call options as a means of
increasing the yield on the Fund and as a means of providing limited protection
against decreases in market value of the Fund.
There are risks associated with options transactions, including the following:
(i) the success of a hedging strategy may depend on the ability of the Adviser
to predict movements in the prices of the individual securities, fluctuations in
markets and movements in interest rates; (ii) there may be an imperfect or no
correlation between the changes in market value of the securities held by the
Fund and the prices of options; (iii) there may not be a liquid secondary market
for options; and (iv) while the Fund will receive a premium when it writes
covered call options, it may not participate fully in a rise in the market value
of the underlying security. It is expected that the Fund will only engage in
option transactions with respect to permitted investments and related indices.
Generally, the policy of the Fund, in order to avoid the exercise of an option
sold by it, will be to cancel its obligation under the option by entering into a
closing purchase transaction, if available, unless selling (in the case of a
call option) or purchasing (in the case of a put option) the underlying
securities is determined to be in the Fund's interest. A closing purchase
transaction consists of the Fund purchasing an option having the same terms as
the option sold by the Fund, and has the effect of cancelling the Fund's
position as a seller. The premium which the Fund will pay in executing a closing
purchase transaction may be higher (or lower) than the premium received when the
option was sold, depending in large part upon the relative price of the
underlying security at the time of each transaction. To the extent options sold
by the Fund are exercised and the Fund either delivers securities to the holder
of a call option or liquidates securities as a source of funds to purchase
securities put to the Fund, the Fund's turnover rate will increase, which would
cause the Fund to incur additional brokerage expenses.
During the option period, the Fund, as a covered call writer, gives up the
potential appreciation above the exercise price should the underlying security
rise in value, and the Fund, as a covered put writer, retains the risk of loss
should the underlying security decline in value. For the covered call writer,
substantial appreciation in the value of the underlying security would result in
the security being "called away" at the strike price of the option which may be
substantially below the fair market value of such security. For the covered put
writer, substantial depreciation in the value of the underlying security would
result in the security being "put to" the writer at the strike price of the
option which may be substantially in excess of the fair market value of such
security. If a covered call option or a covered put option expires unexercised,
the writer realizes a gain, and the buyer a loss, in the amount of the premium.
The SEC requires that obligations of investment companies such as the Fund, in
connection with option sale positions, must comply with certain segregation or
coverage requirements, which are more fully described in the Statement of
Additional Information.
19 PROSPECTUS
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The Fund will only write covered call options on its securities and will limit
such activities to provide that the aggregate market value of such options and
the Fund's obligations under such written puts does not exceed 25% of the Fund's
net assets as of the time such options are entered into by the Fund.
FUTURES CONTRACTS AND RELATED OPTIONS -- The Fund may enter into futures
contracts, options on futures contracts, index futures and options thereon that
are traded on an exchange regulated by the Commodities Futures Trading
Commission ("CFTC") if, to the extent that such futures and options are not for
"bona fide hedging purposes" (as defined by the CFTC), the aggregate initial
margin and premiums on such positions (excluding the amount by which options are
in the money) do not exceed 5% of the Fund's total assets at current value. The
Fund, however, may invest more than such amount for bona fide hedging purposes,
and also may invest more than such amount if it obtains authority to do so from
the appropriate regulatory agencies without rendering the Fund a commodity pool
operator or adversely affecting its status as an investment company for Federal
securities law or income tax purposes.
The Fund may buy and sell futures contracts and related options to manage its
exposure to changing interest rates and security prices. Some futures
strategies, including selling futures, buying puts and writing calls, may reduce
the Fund's exposure to price fluctuations. Other strategies, including buying
futures, writing puts and buying calls, tend to increase market exposure.
Futures and options may be combined with each other in order to adjust the risk
and return characteristics of the overall portfolio. The Fund expects to enter
into these transactions to "lock in" a return or spread on a particular
investment or portion of its assets, to protect against any increase in the
price of securities the Fund anticipates purchasing at a later date, or for
other risk management strategies.
Options and futures can be volatile instruments, and involve certain risks. If
the Adviser applies a hedge at an inappropriate time or judges interest rates
incorrectly, options and futures strategies may lower the Fund's return. The
Fund also could experience losses if the prices of its options and futures
positions were poorly correlated with its other instruments, or if it could not
close out its positions because of an illiquid secondary market.
Typically, investment in these contracts requires the Fund to deposit with the
applicable exchange or other specified financial intermediary as a good faith
deposit for its obligations, known as "initial margin," an amount of cash or
specified debt securities that initially is 1%-15% of the face amount of the
contract and that thereafter fluctuates on a periodic basis as the value of the
contract fluctuates. Thereafter, the Fund must make additional deposits equal to
any net losses due to unfavorable price movements of the contract and will be
credited with an amount equal to any net gains due to favorable price movements.
These additional deposits or credits are calculated and required daily and are
known as "variation margin."
The SEC requires that when an investment company such as the Fund effects
transactions of the foregoing nature, it must either segregate cash or high
quality, readily marketable Fund securities with its custodian in the amount of
its obligations under the foregoing transactions or must cover such obligations
by maintaining positions in portfolio securities, futures contracts or options
that would serve to satisfy or offset the risk of such obligations. When
effecting transactions of the foregoing nature, the Fund will comply with such
segregation or cover requirements. No limitation exists on the amount of the
Fund's assets that may be used to comply with such segregation or cover
requirements.
The Fund also may engage in straddles and spreads with respect to 15% of its
total assets. In a straddle transaction, the Fund either buys a call and a put
or sells a call and a put on the same security. In a spread, the Fund purchases
and sells a call or a put. The Fund will sell a straddle when the Adviser
believes the price of a security will be stable. The Fund will receive a premium
on the sale of the put and the call. A spread permits the Fund to make a hedged
investment that the price of a security will increase or decline.
STRUCTURED INSTRUMENTS -- The Fund may invest, from time to time, in one or more
structured instruments. Structured instruments are debt securities issued by
agencies of the U.S. government (such as the Student Loan Marketing Association
("Sallie Mae"), Ginnie Mae, Fannie Mae, and Freddie Mac), banks, corporations,
municipalities and other business entities whose interest and/or principal
payments are indexed to certain specific foreign currency exchange rates,
interest rates, or one or more other reference indexes. Structured instruments
frequently are assembled in the form of medium-term notes, but a variety of
forms are available and may be used in particular circumstances.
The terms of such structured instruments provide that their principal and/or
interest payments are adjusted upwards or downwards to reflect changes in the
reference index while the structured instruments are outstanding. In addition,
the reference index may be used in determining when the principal is redeemed.
As a result, the interest and/or principal payments that may be made on a
structured product may vary widely, depending on a variety of factors, including
the volatility of the reference index and the effect of changes in the reference
index on principal and/or interest payments.
While structured instruments may offer the potential for a favorable rate of
return, from time to time, they also entail certain risks. Structured
instruments may be less liquid than other debt securities, and the price of
structured instruments may be more volatile. If the value of the reference index
changes in a manner other than that expected by the Adviser, principal and/or
interest payments on the structured instrument may be substantially less than
expected. The Fund will only invest in structured securities that are consistent
with the Fund's investment objective, policies and restrictions and the
Adviser's outlook on market conditions. In some cases, depending on the
PROSPECTUS 20
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terms of the reference index, a structured instrument may provide that the
principal and/or interest payments may be adjusted below zero; however, the Fund
will not invest in structured instruments if the terms of the structured
instrument provide that the Fund may be obligated to pay more than its initial
investment in the structured instrument, or to repay any interest or principal
that has already been collected or paid back. In addition, many structured
instruments may not be registered under the Federal securities laws. In that
event, the Fund's ability to resell such a structured instrument may be more
limited than its ability to resell other portfolio securities. The Fund will
treat such instruments as illiquid, and will limit its investments in such
instruments to no more than 15% of its total assets, when combined with all
other illiquid investments of the Fund. Structured instruments that are
registered under Federal securities laws may be treated as liquid. In addition,
although structured instruments may be sold in the form of a corporate debt
obligation, they may not have some of the protection against counterparty
default that may be available with respect to publicly traded debt securities
(i.e., the existence of a trust indenture). In that respect, the risks of
default associated with structured instruments may be similar to those
associated with swap contracts. See "Swaps, Caps and Floors."
SWAPS, CAPS AND FLOORS -- In order to protect the value of the Fund from
interest rate fluctuations and to hedge against fluctuations in the floating
rate market in which the Fund's investments are traded, the Fund may enter into
swaps, caps, and floors on various securities (such as U.S. government
securities), securities indexes, interest rates, prepayment rates, foreign
currencies or other financial instruments or indexes, for both hedging and
non-hedging purposes. While swaps, caps, and floors (sometimes hereinafter
collectively referred to as "swap contracts") are different from futures
contracts (and options on futures contracts) in that swap contracts are
individually negotiated with specific counterparties, the Fund will use swap
contracts for purposes similar to the purposes for which it uses options,
futures, and options on futures. Those uses of swap contracts (i.e., risk
management and hedging) present the Fund with risks and opportunities similar to
those associated with options contracts, futures contracts, and options on
futures. See "Futures Contracts and Related Options" and "Options."
The Fund may enter into these transactions to manage its exposure to changing
interest rates and other market factors. Some transactions may reduce the Fund's
exposure to market fluctuations while others may tend to increase market
exposure.
Swap contracts typically involve an exchange of obligations by two sophisticated
parties. For example, in an interest rate swap, the Fund may exchange with
another party their respective rights to receive interest, such as an exchange
of fixed rate payments for floating rate payments. Currency swaps involve the
exchange of respective rights to make or receive payments in specified
currencies. Mortgage swaps are similar to interest rate swaps in that they
represent commitments to pay and receive interest. The notional principal
amount, however, is tied to a reference pool or pools of mortgages.
Caps and floors are variations on swaps. The purchase of a cap entitles the
purchaser to receive a principal amount from the party selling the cap to the
extent that a specified index exceeds a predetermined interest rate or amount.
The purchase of an interest rate floor entitles the purchaser to receive
payments on a notional principal amount from the party selling the floor to the
extent that a specified index falls below a predetermined interest rate or
amount. Caps and floors are similar in many respects to over-the-counter options
transactions, and may involve investment risks that are similar to those
associated with options transactions and options on futures contracts.
Because swap contracts are individually negotiated, they remain the obligation
of the respective counterparties, and there is a risk that a counterparty will
be unable to meet its obligations under a particular swap contract. If a
counterparty defaults on a swap contract with the Fund, the Fund may suffer a
loss. To address this risk, the Fund will usually enter into interest rate swaps
on a net basis, which means that the two payment streams (one from the Fund to
the counterparty, one to the Fund from the counterparty) are netted out, with
the Fund receiving or paying, as the case may be, only the net amount of the two
payments. Interest rate swaps do not involve the delivery of securities, other
underlying assets, or principal, except for purposes of collateralization, as
discussed below. Accordingly, the risk of loss with respect to interest rate
swaps entered into on a net basis would be limited to the net amount of the
interest payments that the Fund is contractually obligated to make. If the other
party to an interest rate swap defaults, the Fund's risk of loss consists of the
net amount of interest payments that the Fund is contractually entitled to
receive. To protect against losses related to counterparty default, the Fund may
enter into swaps that require transfers of collateral for changes in market
value. In contrast, currency swaps and other types of swaps may involve the
delivery of the entire principal value of one designated currency or financial
instrument in exchange for the other designated currency or financial
instrument. Therefore, the entire principal value of such swaps may be subject
to the risk that the other party will default on its contractual delivery
obligations.
In addition, because swap contracts are individually negotiated and ordinarily
non-transferable, there also may be circumstances in which it would be
impossible for the Fund to close out its obligations under the swap contract
prior to its maturity. Under such circumstances, the Fund might be able to
negotiate another swap contract with a different counterparty to offset the risk
associated with the first swap contract. Unless the Fund is able to negotiate
such an offsetting swap contract, however, the Fund could be subject to
continued adverse developments, even after the Adviser has determined that it
would be prudent to close out or offset the first swap contract.
The Fund will not enter into any mortgage swap, interest rate swap, cap or floor
transaction unless the unsecured commercial paper, senior debt, or the claims
paying ability of the other party thereto is rated in the highest or second
highest rating category by at least one NRSRO at the time of investment, or, if
unrated, determined by the Adviser to be of comparable quality.
21 PROSPECTUS
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The use of swaps involves investment techniques and risks different from and
potentially greater than those associated with ordinary portfolio securities
transactions. If the Adviser is incorrect in its expectations of market values,
interest rates, or currency exchange rates, the investment performance of the
Fund would be less favorable than it would have been if this investment
technique were not used.
The staff of the SEC is presently considering its position with respect to
swaps, caps and floors as senior securities. Pending a determination by the
staff, the Fund will either treat swaps, caps and floors as being subject to its
senior securities restrictions or will refrain from engaging in swaps, caps and
floors. Once the staff has expressed a position with respect to swaps, caps and
floors, the Fund intends to engage in swaps, caps and floors, if at all, in a
manner consistent with such position. To the extent the net amount of an
interest rate or mortgage swap is held in a segregated account, consisting of
cash or liquid, high grade debt securities, the Adviser believes that swaps do
not constitute senior securities under the Investment Company Act of 1940 and,
accordingly, will not treat them as being subject to the Fund's borrowing
restrictions. The net amount of the excess, if any, of the Fund's obligations
over its entitlements with respect to each interest rate swap will be accrued on
a daily basis and an amount of cash or liquid securities having an aggregate net
asset value at least equal to the accrued excess will be maintained in a
segregated account by the Fund's Custodian.
The Fund will generally limit its investments in swaps, caps and floors to 25%
of its total assets.
NEW FINANCIAL PRODUCTS -- New options and futures contracts and other financial
products, and various combinations thereof, continue to be developed and the
Fund may invest in any such options, contracts and products as may be developed
to the extent consistent with its investment objective, policies and
restrictions and the regulatory requirements applicable to investment companies.
These various products may be used to adjust the risk and return characteristics
of the Fund's portfolio of investments. These various products may increase or
decrease exposure to security prices, interest rates, commodity prices, or other
factors that affect security values, regardless of the issuer's credit risk. If
market conditions do not perform consistent with expectations, the performance
of the Fund will be less favorable than it would have been if these products
were not used. In addition, losses may occur if counterparties involved in
transactions do not perform as promised. These products may expose the Fund to
potentially greater return as well as potentially greater risk of loss than more
traditional fixed income investments.
The Fund will generally limit its investments in new financial products to 25%
of its total assets.
MUNICIPAL SECURITIES -- The Fund may invest in municipal securities. Municipal
securities consist of (i) debt obligations issued by or on behalf of public
authorities to obtain funds to be used for various public facilities, for
refunding outstanding obligations, for general operating expenses, and for
lending such funds to other public institutions and facilities; and (ii) certain
private activity and industrial development bonds issued by or on behalf of
public authorities to obtain funds to provide for the construction, equipment,
repair, or improvement of privately operated facilities. Municipal notes include
general obligation notes, tax anticipation notes, revenue anticipation notes,
bond anticipation notes, certificates of indebtedness, demand notes and
construction loan notes and participation interests in municipal notes.
Municipal bonds include general obligation bonds, revenue or special obligation
bonds, private activity and industrial development bonds, and participation
interests in municipal bonds. General obligation bonds are backed by the taxing
power of the issuing municipality. Revenue bonds are backed by the revenues of a
project or facility, tolls from a toll bridge for example. The payment of
principal and interest on private activity and industrial development bonds
generally is dependent solely on the ability of the facility's user to meet its
financial obligations and the pledge, if any, of real and personal property so
financed as security for such payment.
Municipal securities may include obligations of municipal housing authorities
and single-family mortgage revenue bonds. Weaknesses in Federal housing subsidy
programs and their administration may result in a decrease of subsidies
available for payment of principal and interest on housing authority bonds.
Economic developments, including fluctuations in interest rates and increasing
construction and operating costs, may also adversely impact revenues of housing
authorities. In the case of some housing authorities, inability to obtain
additional financing could also reduce revenues available to pay existing
obligations. Single-family mortgage revenue bonds are subject to extraordinary
mandatory redemption at par in whole or in part from the proceeds derived from
prepayments of underlying mortgage loans and also from the unused proceeds of
the issue within a stated period which may be within a year from the date of
issue.
Municipal leases are obligations issued by state and local governments or
authorities to finance the acquisition of equipment and facilities and may be
considered to be illiquid. They may take the form of a lease, an installment
purchase contract, a conditional sales contract, or a participation interest in
any of the above. The Fund will limit its investment in municipal leases to no
more than 5% of its total assets. The Board of Trustees is responsible for
determining the credit quality of unrated municipal leases, on an ongoing basis,
including an assessment of likelihood that the lease will not be cancelled.
The exclusion from gross income for Federal income tax purposes for certain
housing authority bonds depends on qualification under relevant provisions of
the Code and on other provisions of Federal law. These provisions of Federal law
contain certain ongoing requirements relating to the cost and location of the
residences financed with the proceeds of the single-family mortgage bonds and
the income levels of tenants of the rental projects financed with the proceeds
of the multi-family housing bonds. While the issuers of the bonds, and other
parties, including the originators and servicers of the single-family
PROSPECTUS 22
<PAGE>
mortgages and the owners of the rental projects financed with the multi-family
housing bonds, covenant to meet these ongoing requirements and generally agree
to institute procedures designed to insure that these requirements are met,
there can be no assurance that these ongoing requirements will be consistently
met. The failure to meet these requirements could cause the interest on the
bonds to become taxable, possibly retroactively from the date of issuance,
thereby reducing the value of the bonds and subjecting Shareholders to
unanticipated tax liabilities. Furthermore, any failure to meet these ongoing
requirements might constitute an event of default under the applicable mortgage
or permit the holder to accelerate payment of the bond or require the issuer to
redeem the bond. In any event, where the mortgage is insured by the Federal
Housing Administration ("FHA"), the consent of the FHA may be required before
insurance proceeds would become payable to redeem the mortgage subsidy bonds.
PARTICIPATION INTERESTS -- The Fund may purchase interests in municipal
securities from financial institutions such as commercial and investment banks,
savings and loan associations and insurance companies. These interests may take
the form of participations, beneficial interests in a trust, partnership
interests, or any other form of indirect ownership that allows the Fund to treat
the income from the investment as exempt from Federal income tax. The Fund
invests in these participation interests in order to obtain credit enhancement
or demand features that would not be available through direct ownership of the
underlying municipal securities.
DEMAND FEATURES -- The Fund may acquire securities that are subject to puts and
standby commitments ("demand features") to purchase the securities at their
principal amount (usually with accrued interest) within a fixed period (usually
seven days) following a demand by the Fund. The demand feature may be issued by
the issuer of the underlying securities, a dealer in the securities or by
another third party, and may not be transferred separately from the underlying
security.
The underlying municipal securities subject to a put may be sold at any time at
the market rates. However, unless the put was an integral part of the security
as originally issued, it may not be marketable or assignable; therefore, the put
would only have value to the Fund. The Fund expects that it will generally
acquire puts only where the puts are available without the payment of any direct
or indirect consideration. However, if advisable or necessary, in certain cases
a premium may be paid for put features. A premium paid will have the effect of
reducing the yield otherwise payable on the underlying security. The purpose of
engaging in transactions involving puts is to maintain flexibility and liquidity
to permit the Fund to meet redemption requests and remain as fully invested as
possible in municipal securities. The Fund will limit its put transactions to
institutions that the Adviser believes present minimal credit risk.
There is no limit to the percentage of portfolio securities that may be
purchased subject to a put. However, the Fund will not acquire a put which was
not an integral part of the security as originally issued if such acquisition
would cause the aggregate value of all such puts held in the Fund to exceed 1/2
of 1% of the value of the Fund's total assets.
Under a "stand-by commitment," a dealer would agree to purchase, at the Fund's
option, specified municipal securities at a specified price. When entering into
stand-by commitments, the Fund will set aside sufficient assets invested in cash
equivalent securities to pay for all stand-by commitments on their scheduled
delivery dates. The Fund will acquire these commitments solely to facilitate
portfolio liquidity and does not intend to exercise its rights thereunder for
trading purposes. Stand-by commitments may also be referred to as put options.
The Fund will limit its investment in stand-by commitments to 25% of total
assets.
ZERO COUPON OBLIGATIONS -- The Fund may acquire zero coupon obligations, which
have greater price volatility than coupon obligations and which will not result
in the payment of interest until maturity. The Fund will purchase these
obligations to permit investment of assets at a more favorable rate of return.
23 PROSPECTUS
<PAGE>
DESCRIPTION OF RATINGS
The following descriptions are summaries of published ratings.
DESCRIPTION OF COMMERCIAL PAPER RATINGS
The following descriptions of commercial paper ratings have been published by
Standard & Poor's Corporation ("S&P"), Moody's Investors Service ("Moody's"),
Fitch's Investors Service ("Fitch"), Duff and Phelps ("Duff") and IBCA Limited
("IBCA"), respectively.
Commercial paper rated A by S&P is regarded by S&P as having the greatest
capacity for timely payment. Issues rated A are further refined by use of the
numbers 1+, 1 and 2 to indicate the relative degree of safety. Issues rated A-1+
are those with an "overwhelming degree" of credit protection. Those rated A-1
reflect a "very strong" degree of safety regarding timely payment. Those rated
A-2 reflect a high degree of safety regarding timely payment but not as high as
A-1.
Commercial paper issues rated Prime-1 and Prime-2 by Moody's are judged by
Moody's to be of the "highest" quality and "higher" quality, respectively, on
the basis of relative repayment capacity.
The rating Fitch-1 (Highest Grade) is the highest commercial rating assigned by
Fitch. Paper rated Fitch-1 is regarded as having the strongest degree of
assurance for timely payment. The rating Fitch-2 (Very Good Grade) is the second
highest commercial paper rating assigned by Fitch which reflects an assurance of
timely payment only slightly less in degree than the strongest issues.
The rating Duff-1 is the highest commercial paper rating assigned by Duff. Paper
rated Duff-1 is regarded as having very high certainty of timely payment with
excellent liquidity factors which are supported by ample asset protection. Risk
factors are minor. Paper rated Duff-2 is regarded as having good certainty of
timely payment, good access to capital markets and sound liquidity factors and
company fundamentals. Risk factors are small.
The designation A1 by IBCA indicates that the obligation is supported by a very
strong capacity for timely repayment. Those obligations rated A1 + are supported
by the highest capacity for timely repayment. Obligations rated A2 are supported
by a strong capacity for timely repayment, although such capacity may be
susceptible to adverse changes in business, economic or financial conditions.
SHORT-TERM DEBT RATINGS
Thomson BankWatch, Inc. ("TBW") ratings are based upon a qualitative and
quantitative analysis of all segments of the organization including, where
applicable, holding company and operating subsidiaries.
BankWatch-TM- Ratings do not constitute a recommendation to buy or sell
securities of any of these companies. Further, BankWatch does not suggest
specific investment criteria for individual clients.
The TBW Short-Term Ratings apply to commercial paper, other senior short-term
obligations and deposit obligations of the entities to which the rating has been
assigned.
The TBW Short-Term Ratings apply only to unsecured instruments that have a
maturity of one year or less.
The TBW Short-Term Ratings specifically assess the likelihood of an untimely
payment of principal or interest.
<TABLE>
<S> <C>
TBW-1 The highest category; indicates a
very high degree of likelihood that
principal and interest will be paid
on a timely basis.
TBW-2 The second highest category; while
the degree of safety regarding
timely repayment of principal and
interest is strong, the relative
degree of safety is not as high as
for issues rated "TBW-1."
TBW-3 The lowest investment grade
category; indicates that while more
susceptible to adverse developments
(both internal and external) than
obligations with higher ratings,
capacity to service principal and
interest in a timely fashion is
considered adequate.
TBW-4 The lowest rating category; this
rating is regarded as non-investment
grade and therefore speculative.
</TABLE>
DESCRIPTION OF CORPORATE/MUNICIPAL BOND RATINGS
The following descriptions of S&P's and Moody's corporate and municipal bond
ratings have been published by S&P and Moody's, respectively.
Bonds rated AAA have the highest rating S&P assigns to a debt obligation. Such a
rating indicates an extremely strong capacity to pay principal and interest.
Bonds rated AA also qualify as high-quality debt obligations. Capacity to pay
principal and interest is very strong and, in the majority of instances they
differ from AAA issues only in a small degree. Debt rated A has a
PROSPECTUS 24
<PAGE>
strong capacity to pay interest and repay principal although it is somewhat more
susceptible to the adverse effects of changes in circumstances and economic
conditions than debt in higher rated categories. Debt rated BBB is regarded as
having an adequate capacity to pay interest and repay principal. Whereas it
normally exhibits adequate protection parameters, adverse economic conditions or
changing circumstances are more likely to lead to a weakened capacity to pay
interest and repay principal for debt in this category than in higher rated
categories.
Bonds that are rated Aaa by Moody's are judged to be of the best quality. They
carry the smallest degree of investment risk and are generally referred to as
"gilt edge." Interest payments are protected by a large, or an exceptionally
stable, margin and principal is secure. While the various protective elements
are likely to change, such changes as can be visualized are most unlikely to
impair the fundamentally strong position of such issues.
Bonds rated Aa by Moody's are judged by Moody's to be of high quality by all
standards. Together with bonds rated Aaa, they comprise what are generally known
as high-grade bonds. They are rated lower than the best bonds because margins of
protection may not be as large as in Aaa securities or fluctuation of protective
elements may be of greater amplitude or there may be other elements present that
make the long-term risks appear somewhat larger than in Aaa securities.
Bonds that are rated A possess many favorable investment attributes and are to
be considered as upper-medium grade obligations. Factors giving security to
principal and interest are considered adequate, but elements may be present that
suggest a susceptibility to impairment sometime in the future.
Bonds which are rated Baa are considered as medium grade obligations, i.e., they
are neither highly protected nor poorly secured. Interest payments and principal
security appear adequate for the present but certain protective elements may be
lacking or may be characteristically unreliable over any great length of time.
Such bonds lack outstanding investment characteristics and in fact have
speculative characteristics as well.
DESCRIPTION OF MUNICIPAL NOTE RATINGS
Moody's highest rating for state, municipal and other short-term notes is MIG-1
and VMIG-1. Short-term municipal securities rated MIG-1 or VMIG-1 are of the
best quality. They have strong protection from established cash flows of funds
for their servicing or from established and broad-based access to the market for
refinancing or both. Short-term municipal securities rated MIG-2 and VMIG-2 are
of high quality. Margins of protection are ample although not so large as in the
preceding group.
An S&P note rating reflects the liquidity concerns and market access risks
unique to notes. Notes due in three years or less will likely receive a note
rating. Notes maturing beyond three years will most likely receive a long-term
debt rating. The following criteria will be used in making that assessment:
- - Amortization schedule (the larger the final maturity relative to other
maturities the more likely it will be treated as a note).
- - Source of Payment (the more dependent the issue is on the market for its
refinancing, the more likely it will be treated as a note).
Note rating symbols are as follows:
SP-1 Very strong or strong capacity to pay principal and interest. Those issues
determined to possess overwhelming safety characteristics will be given a plus
(+) designation.
SP-2 Satisfactory capacity to pay principal and interest.
PERFORMANCE
From time to time, the Fund may advertise yield, total return and/or
distribution rate. These figures will be based on historical earnings and are
not intended to indicate future performance. The yield of the Fund refers to the
annualized income generated by an investment in the Fund over a specified 30-day
period. The yield is calculated by assuming that the income generated by the
investment during that period is generated over a one-year period and is shown
as a percentage of the investment.
Total return is the change in value of an investment in the Fund over a given
period, assuming reinvestment of any dividends and capital gains. A cumulative
total return reflects an actual rate of return over a stated period of time. An
average annual total return is a hypothetical rate of return that, if achieved
annually, would have produced the same cumulative total return if performance
had been constant over the entire period. Average annual total returns smooth
out variations in performance; they are not the same as actual year-by-year
results.
The distribution rate is computed by dividing the total amount of the dividends
per share paid out during the past period by the maximum offering price or
month-end net asset value depending on the class of the Fund. This figure is
then "annualized" (multiplied by 365 days and divided by the applicable number
of days in
25 PROSPECTUS
<PAGE>
the period). Funds with a front-end sales charge would incorporate the offering
price into the distribution yield in place of month-end net asset value.
Distribution rate is a measure of the level of income paid out in cash to
Shareholders over a specified period. It differs from yield and total return and
is not intended to be a complete measure of performance. Furthermore, the
distribution rate may include return of principal and/or capital gains. Total
return is the change in value of a hypothetical investment over a given period
assuming reinvestment of dividends and capital gain distributions. The yield
refers to the cumulative 30-day rolling net investment income, divided by
maximum offering price and multiplied by average shares outstanding during this
period. See the Statement of Additional Information.
The Fund also may advertise a "taxable equivalent yield" which is calculated by
taking into account the investor's current tax bracket. This is the yield the
investor would need to earn from a taxable investment in order to realize an
"after-tax" benefit equal to the tax-free yield provided by the Fund. See the
Statement of Additional Information.
The Trust will include information on all classes of shares of the Fund in any
advertisement or information including performance data for the Fund. The
performance for Fiduciary Class shares may be higher than for Class A shares and
Class B shares because Fiduciary Class shares are not subject to sales charges
and distribution expenses.
The performance of each class of the Fund may from time to time be compared to
that of other mutual funds tracked by mutual fund rating services, to that of
broad groups of comparable mutual funds or to that of unmanaged indices that may
assume investment of dividends but do not reflect deductions for administrative
and management costs. In addition, the performance of each class of the Fund may
be compared to other funds or to relevant indices that may calculate total
return without reflecting sales charges; in which case, the Fund may advertise
its total return in the same manner. If reflected, sales charges would reduce
these total return calculations.
TAXES
The following summary of Federal income tax consequences is based on current tax
laws and regulations, which may be changed by legislative, judicial, or
administrative action. No attempt has been made to present a complete
explanation of the Federal, state, local or foreign tax treatment of the Fund or
its Shareholders. Accordingly, Shareholders are urged to consult their tax
advisers regarding specific questions as to the tax consequences of investing in
the Fund.
TAX STATUS OF THE FUND
The Fund is treated as a separate entity for Federal income tax purposes and is
not combined with the Trust's other funds. The Fund intends to qualify as a
"regulated investment company" for Federal income tax purposes and to meet all
other requirements that are necessary for it to be relieved of Federal taxes on
that part of its net investment income and net capital gains (the excess of net
long-term capital gain over net short-term capital loss) that is distributed to
Shareholders.
TAX STATUS OF DISTRIBUTIONS
The Fund will distribute substantially all of its net investment income
(including net short-term capital gain) to Shareholders of each class of shares
of the Fund on at least an annual basis. If, at the close of each quarter of its
taxable year, at least 50% of the value of the Fund's assets consists of
obligations the interest on which is excludable from gross income, the Fund may
pay "exempt-interest dividends" to Shareholders. Those dividends constitute the
portion of the aggregate dividends as designated by the Fund, equal to the
excess of the excludable interest over certain amounts disallowed as deductions.
Exempt-interest dividends are generally excludable from a Shareholder's gross
income for regular Federal income tax purposes. However, the receipt of
exempt-interest dividends may cause persons receiving Social Security or
Railroad Retirement benefits to be taxed on a portion of such benefits. In
addition, the receipt of exempt-interest dividends may result in liability for
Federal alternative minimum tax and for state and local taxes, both for
individual and corporate Shareholders. See the Statement of Additional
Information.
Current Federal law limits the types and volume of bonds qualifying for Federal
income tax exemption of interest, which may have an effect on the ability of the
Fund to purchase sufficient amounts of tax-exempt securities to satisfy the
Code's requirements for the payment of "exempt-interest dividends."
Any dividends attributable to the Fund's taxable investment income (if any) will
be taxable to Shareholders as ordinary income (whether received in cash or
additional shares) to the extent of the Fund's earnings and profits and will not
qualify for the corporate dividends-received deduction. Any distributions of net
long-term capital gains will be taxable to Shareholders as such regardless of
how long the Shareholder has held shares.
Interest on indebtedness incurred or continued by a Shareholder in order to
purchase shares is not deductible. Furthermore, entities or persons who are
"substantial users" (or persons related to "substantial
PROSPECTUS 26
<PAGE>
users") of facilities financed by "private activity bonds" or certain industrial
development bonds should consult their tax advisers before purchasing shares.
The Fund will make annual reports to Shareholders of the Federal income tax
status of distributions.
Certain securities purchased by the Fund (such as STRIPS, CUBES, TRS, TIGRS and
CATS), as defined in the "Description of Permitted Investments," are sold at
original issue discount and thus do not make periodic cash interest payments.
The Fund will be required to include as part of its current income the imputed
interest on such obligations even though the Fund has not received any interest
payments on such obligations during that period. Because the Fund distributes
substantially all of its net investment income to its Shareholders (including
such imputed interest), the Fund may have to sell portfolio securities in order
to generate the cash necessary for the required distributions. Such sales may
occur at a time when the Adviser would not have chosen to sell such securities
and may result in a taxable gain or loss.
Dividends declared by the Fund in October, November or December of any year and
payable to Shareholders of record on a date in such a month will be deemed to
have been paid by the Fund and received by Shareholders on December 31 of that
year, if paid by the Fund at any time during the following January.
The Fund intends to make sufficient distributions prior to the end of each
calendar year to avoid liability for Federal excise tax.
Dividends received by a Shareholder that are derived from the Fund's investments
in U.S. government obligations may not be entitled to the exemptions from state
and local income taxes that would be available if the Shareholder had purchased
U.S. government obligations directly. The Fund will inform Shareholders annually
of the percentage of income and distributions derived from U.S. government
obligations. Shareholders should consult their tax advisers regarding the state
and local tax treatment of the dividends received from the Fund.
Sale, exchange, or redemption of Fund shares by a Shareholder will generally be
a taxable event to such Shareholder.
LOUISIANA TAXES
The Trust has obtained a ruling from the Louisiana Department of Revenue and
Taxation to the effect that distributions to shareholders of The One
Group-Registered Trademark-Louisiana Municipal Bond Fund who are Louisiana
residents, which are derived from interest on tax-exempt obligations of the
State of Louisiana or its political subdivisions and certain obligations of the
United States or its territories, will not be subject to Louisiana income tax.
27 PROSPECTUS
<PAGE>
Investment Adviser and Sub-Administrator
Banc One Investment Advisors Corporation
774 Park Meadow Road
Columbus, OH 43271-0211
Distributor
The One Group Services Company
3435 Stelzer Road
Columbus, OH 43219
Administrator
The One Group Services Company
3435 Stelzer Road
Columbus, OH 43219
Transfer Agent and Custodian
State Street Bank and Trust Company
P.O. Box 8500
Boston, MA 02266-8500
Legal Counsel
Ropes & Gray
One Franklin Square
1301 K Street, N.W.
Suite 800 East
Washington, D.C. 20005
Independent Accountants
Coopers & Lybrand L.L.P.
100 East Broad Street
Columbus, OH 43215
TOG-F-063
<PAGE>
THE ONE GROUP-REGISTERED TRADEMARK- VALUE GROWTH FUND PROSPECTUS
- --------------------------------------------------------------------------------
Investment Adviser: BANC ONE INVESTMENT ADVISORS CORPORATION
The One Group-Registered Trademark- (the "Trust") is a mutual fund seeking to
provide a convenient and economical means of investing in one or more
professionally managed portfolios of securities. This Prospectus relates to The
One Group-Registered Trademark- Value Growth Fund Class A, Class B and Fiduciary
Class shares.
THE ONE GROUP-REGISTERED TRADEMARK- VALUE GROWTH FUND (THE "FUND") SEEKS
LONG-TERM CAPITAL GROWTH AND GROWTH OF INCOME WHILE, AS A SECONDARY OBJECTIVE,
PROVIDING A MODERATE LEVEL OF CURRENT INCOME.
CLASS A AND CLASS B SHARES ARE OFFERED TO THE GENERAL PUBLIC.
FIDUCIARY CLASS SHARES ARE OFFERED TO INSTITUTIONAL INVESTORS, INCLUDING
AFFILIATES OF BANC ONE CORPORATION AND ANY BANK, DEPOSITORY INSTITUTION,
INSURANCE COMPANY, PENSION PLAN OR OTHER ORGANIZATION AUTHORIZED TO ACT IN
FIDUCIARY, ADVISORY, AGENCY, CUSTODIAL OR SIMILAR CAPACITIES (EACH AN
"AUTHORIZED FINANCIAL ORGANIZATION").
THE TRUST'S SHARES ARE NOT DEPOSITS OR OBLIGATIONS OF, OR ENDORSED OR GUARANTEED
BY BANC ONE CORPORATION OR ITS BANK OR NON-BANK AFFILIATES. THE TRUST'S SHARES
ARE NOT INSURED OR GUARANTEED BY THE FEDERAL DEPOSIT INSURANCE CORPORATION OR BY
ANY OTHER GOVERNMENTAL AGENCY OR GOVERNMENT SPONSORED AGENCY OF THE FEDERAL
GOVERNMENT OR ANY STATE. AN INVESTMENT IN MUTUAL FUND SHARES INVOLVES INVESTMENT
RISKS, INCLUDING THE POSSIBLE LOSS OF THE PRINCIPAL AMOUNT INVESTED. BANC ONE
INVESTMENT ADVISORS CORPORATION RECEIVES FEES FROM THE FUND FOR INVESTMENT
ADVISORY AND OTHER SERVICES.
This Prospectus sets forth concisely the information about the Trust that a
prospective investor should know before investing. Investors are advised to read
this Prospectus and retain it for future reference. A Statement of Additional
Information dated [ ] has been filed with the Securities and
Exchange Commission and is available without charge through the Distributor, The
One Group Services Company, 3435 Stelzer Road, Columbus, OH 43219 or by calling
1-800-480-4111 during business hours. The Statement of Additional Information is
incorporated into this Prospectus by reference.
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED UPON THE
ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A
CRIMINAL OFFENSE.
[ ]
<PAGE>
TABLE OF CONTENTS
<TABLE>
<S> <C>
SUMMARY.......................................................................................... 3
ABOUT THE FUND................................................................................... 4
Expense Summary................................................................................ 4
Financial Highlights...........................................................................
The Fund....................................................................................... 6
Investment Objective........................................................................... 6
Investment Policies............................................................................ 6
HOW TO DO BUSINESS WITH THE ONE GROUP-REGISTERED TRADEMARK-...................................... 7
How to Invest in The One Group-Registered Trademark-........................................... 7
Alternative Sales Arrangements................................................................. 10
Exchanges...................................................................................... 11
Redemptions.................................................................................... 12
FUND MANAGEMENT.................................................................................. 13
The Adviser.................................................................................... 13
The Distributor................................................................................ 13
The Administrator.............................................................................. 14
The Transfer Agent and Custodian............................................................... 14
Counsel and Independent Accountants............................................................ 14
OTHER INFORMATION................................................................................ 14
The Trust...................................................................................... 14
Other Investment Policies...................................................................... 16
Description of Permitted Investments........................................................... 16
Description of Ratings......................................................................... 21
Performance.................................................................................... 22
Taxes.......................................................................................... 22
</TABLE>
PROSPECTUS 2
<PAGE>
SUMMARY
The One Group-Registered Trademark- (the "Trust") is an open-end management
investment company that provides a convenient way to invest in professionally
managed portfolios of securities. The following provides basic information about
the Class A, Class B and Fiduciary Class shares of The One Group-Registered
Trademark- Value Growth Fund.
WHAT IS THE INVESTMENT OBJECTIVE? The Fund seeks long-term capital growth and
growth of income while, as a secondary objective, providing a moderate level of
current income.
WHAT ARE THE PERMITTED INVESTMENTS? The Fund will invest primarily in a
portfolio of common stocks, debt securities, preferred stocks, convertible
securities, warrants and other equity securities of companies that show the
potential for growth of earnings over time. Equity securities such as those in
which the Fund may invest are more volatile and carry more risk than some other
forms of investment. Accordingly, the net asset value per share of the Fund may
decrease over time. The Fund may only invest in a select few derivatives; their
characteristics and limitations on their use are more fully described in
"Description of Permitted Investments." There are many different types of
derivative securities with varying degrees of potential risk and return. See
"Investment Policies."
WHO IS THE ADVISER? Banc One Investment Advisors Corporation, an indirect
subsidiary of BANC ONE CORPORATION, serves as the Adviser of the Trust. The
Adviser is entitled to a fee for advisory services provided to the Trust. The
Adviser may voluntarily agree to waive a part of its fees. See "The Adviser" and
"Expense Summary."
WHO IS THE ADMINISTRATOR? The One Group Services Company serves as the
Administrator of the Trust. The Administrator is entitled to a fee for services
provided to the Trust. Banc One Investment Advisors Corporation serves as the
Sub-Administrator of the Trust, pursuant to an agreement with the Administrator
for which Banc One Investment Advisors Corporation receives a fee paid by the
Administrator. See "The Administrator" and "Expense Summary."
WHO IS THE TRANSFER AGENT AND CUSTODIAN? State Street Bank and Trust Company
serves as Transfer Agent and Custodian for the Trust for which services it
receives a fee. Bank One Trust Company, N.A. serves as Sub-Custodian for the
Trust, for which services it receives a fee. See "The Transfer Agent and
Custodian."
WHO IS THE DISTRIBUTOR? The One Group Services Company acts as Distributor of
the Trust's shares. The Distributor is entitled to fees for distribution
services for the Class A and Class B shares of the Fund. No compensation is paid
to the Distributor for distribution services for the Fiduciary Class shares of
the Fund. See "The Distributor."
HOW DO I PURCHASE AND REDEEM SHARES? Purchases and redemptions of shares of the
Fund may be made through the Distributor on any day that the New York Stock
Exchange is open for trading ("Business Days"). See "How to Invest in The One
Group-Registered Trademark-" and "Redemptions."
HOW ARE DIVIDENDS PAID? Substantially all of the net investment income
(exclusive of capital gains) of the Fund is declared on the last Business Day of
each month as a dividend for Shareholders of record as of the close of business
on that day and is distributed in the form of periodic dividends to such
Shareholders of the Fund on the first Business Day of each month. Any capital
gains are distributed at least annually. Distributions are paid in additional
shares of the same class unless the Shareholder elects to take the payment in
cash. See "Dividends."
3 PROSPECTUS
<PAGE>
ABOUT THE FUND
EXPENSE SUMMARY -- THE ONE GROUP-REGISTERED TRADEMARK- VALUE GROWTH FUND
<TABLE>
<CAPTION>
FIDUCIARY
CLASS A CLASS B CLASS
- ---------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
SHAREHOLDER TRANSACTION EXPENSES(1)
Maximum Sales Charge Imposed on Purchases
(as a percentage of offering price)................................... 4.50% none none
Maximum Contingent Deferred Sales Charge
(as a percentage of original purchase price or redemption proceeds, as
applicable)........................................................... none 5.00% none
Redemption Fees......................................................... none none none
Exchange Fees........................................................... none none none
ANNUAL OPERATING EXPENSES(2)
(as a percentage of average daily net assets)
Investment Advisory Fees(4)............................................. .65% .65% .65%
12b-1 Fees (after fee waiver)(3)........................................ .25% 1.00% none
Other Expenses.......................................................... .31% .31% .31%
- ---------------------------------------------------------------------------------------------------------------
TOTAL OPERATING EXPENSES(4)............................................. 1.21% 1.96% .96%
- ---------------------------------------------------------------------------------------------------------------
</TABLE>
(1) A person who purchases shares through an account with a financial
institution or broker-dealer may be charged separate transaction fees by the
financial institution or broker-dealer. In addition, a wire redemption
charge, currently $7.00, is deducted from the amount of a wire redemption
payment made at the request of a Shareholder.
(2) The expense information in the table has been restated to reflect current
fees that would have been applicable had they been in effect during the
previous fiscal year.
(3) Absent the voluntary waiver of fees under the Trust's Distribution and
Shareholder Services Plans, 12b-1 fees (as a percentage of average daily net
assets) would be .35% for Class A shares. There are no 12b-1 fees charged to
Fiduciary Class shares. See "The Distributor." The 12b-1 fees include a
Shareholder servicing fee of .25% of the average daily net assets of the
Fund's Class B shares and may include a Shareholder servicing fee of .25% of
the average daily net assets of the Fund's Class A shares.
(4) Investment Advisory Fees and Total Operating Expenses have been revised to
reflect fee waivers effective as of the date of this Prospectus. The Adviser
may voluntarily agree to waive a part of its fees. Absent this voluntary
reduction, Investment Advisory Fees would be .74% for all classes of shares,
and Total Operating Expenses would be 1.40% for Class A shares, 2.05% for
Class B shares and 1.05% for Fiduciary Class shares.
EXAMPLE: An investor would pay the following expenses on a $1,000 investment in
Class A and Fiduciary Class shares of the Fund, assuming: (1) imposition of the
maximum sales charge for Class A shares; (2) 5% annual return; and (3)
redemption at the end of each time period.
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------------------------------------
1 YEAR 3 YEARS
- --------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Class A $ 57 $ 82
Fiduciary Class $ 10 $ 31
</TABLE>
Absent the voluntary reduction of 12b-1 fees, the dollar amounts in the above
example would be as follows:
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------------------------------------
1 YEAR 3 YEARS
- --------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Class A $ 59 $ 87
Fiduciary Class $ 11 $ 33
- --------------------------------------------------------------------------------------------------------------
- --------------------------------------------------------------------------------------------------------------
</TABLE>
PROSPECTUS 4
<PAGE>
EXAMPLE: An investor would pay the following expenses on a $1,000 investment in
Class B shares, assuming: (1) deduction of the applicable maximum Contingent
Deferred Sales Charge; and (2) 5% annual return.
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------------------------------------
1 YEAR 3 YEARS
- --------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Assuming a complete redemption at end of period $ 70 $ 92
Assuming no redemption $ 20 $ 62
</TABLE>
Absent the voluntary reduction of fees, the dollar amounts in the above example
would be as follows:
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------------------------------------
1 YEAR 3 YEARS
- --------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Assuming a complete redemption at end of period $ 71 $ 94
Assuming no redemption $ 21 $ 64
- --------------------------------------------------------------------------------------------------------------
- --------------------------------------------------------------------------------------------------------------
</TABLE>
THESE EXAMPLES SHOULD NOT BE CONSIDERED A REPRESENTATION OF PAST OR FUTURE
EXPENSES AND ACTUAL EXPENSES MAY BE GREATER OR LESS THAN THOSE SHOWN. The
purpose of these tables is to assist the investor in understanding the various
costs and expenses that may be directly or indirectly borne by investors in the
Trust.
The rules of the Securities and Exchange Commission (the "SEC") require that the
maximum sales charge be reflected in the above table. However, investors in the
Fund ("Shareholders") may, under certain circumstances, qualify for reduced
sales charges. See "How to Invest in The One Group-Registered Trademark-."
Long-term Shareholders of Class A shares and Class B shares may pay more than
the equivalent of the maximum front-end sales charges otherwise permitted by the
National Association of Securities Dealers' Rules.
5 PROSPECTUS
<PAGE>
THE FUND
The One Group-Registered Trademark- Value Growth Fund (the "Fund") is part of
The One Group-Registered Trademark- (the "Trust"), which is an open-end
management investment company that offers units of beneficial interest
("shares") in 32 separate funds and different classes of certain of the funds.
This Prospectus relates to the Class A, Class B and Fiduciary Class shares of
The One Group-Registered Trademark- Value Growth Fund which provide for
variations in distribution costs, voting rights, dividends and per share net
asset value pursuant to a multiple class plan (the "Multiple Class Plan")
adopted by the Board of Trustees of the Trust. Except for these differences
among classes, each share of the Fund represents an undivided, proportionate
interest in the Fund. The Fund is a diversified mutual fund. Information
regarding the Trust's other funds and their classes is contained in separate
prospectuses which may be obtained from the Trust's Distributor, The One Group
Services Company, 3435 Stelzer Road, Columbus, OH 43219 or by calling
1-800-480-4111.
INVESTMENT OBJECTIVE
The Fund seeks long-term capital growth and growth of income while, as a
secondary objective providing a moderate level of current income.
The investment objective of the Fund is fundamental and may not be changed
without a vote of the holders of a majority of the Fund's outstanding shares (as
defined in the Statement of Additional Information).
There is no assurance that the Fund will meet its investment objective.
INVESTMENT POLICIES
The investment policies of the Fund may be changed without an affirmative vote
of the holders of a majority of the Fund's outstanding shares unless a policy is
expressly deemed to be fundamental or is expressly deemed to be changeable only
by such a majority vote.
PERMISSIBLE INVESTMENTS
The Fund pursues its objectives by investing primarily in a portfolio of common
stocks, debt securities, preferred stocks, convertible securities, warrants and
other equity securities of companies that show the potential for growth of
earnings over time. Stock selection is guided by current valuation relative to a
stock's historical valuation and relative to the Adviser's estimates of future
growth of earnings and dividends. Over the long term, continued earnings growth
tends to lead to both higher dividends and capital appreciation. The Fund
expects to invest in securities currently paying a moderate level of income,
although it may invest in non-income producing securities when the Adviser
considers their potential for growth of capital or future income to be
promising. The Fund diversifies its investments among different industries and
companies and changes its portfolio securities for investment considerations and
not for trading purposes.
In selecting portfolio securities for the Fund, the Adviser analyzes its outlook
for the economy and each economic sector over a 12 to 18 month period and the
relative attractiveness of the various securities markets and individual market
sectors. The Adviser then selects securities within these sectors and markets
when it believes that a company's fundamental outlook as well as the company's
ability to achieve earnings growth are not sufficiently reflected in the market
values of the company's securities. Accordingly, the Fund may emphasize
securities of companies that the Adviser believes are overlooked or undervalued
by investors, which fact should contribute to an increase in the market value of
the security over time. Portfolio securities are generally sold when there is a
substantial reduction in the Adviser's forecast of the company's future earnings
potential or when the price of a security appreciates to such an extent that it
is believed to have realized the Adviser's appreciation goal. No effort is made
by the Fund to time the market.
The Fund will ordinarily invest at least 65% of the value of its total assets in
securities with the characteristics described above. Although the Fund intends
to invest all of its assets in such securities, up to 35% of its total assets
may be held in cash or invested in U.S. Government Securities, other investment
grade fixed-income securities and cash equivalents. The Fund may also enter into
futures contracts, provided that the value of these contracts does not exceed
25% of the Fund's total assets. In addition, the Fund may write covered call
options on securities it owns and enter into related closing purchase
transactions when such activity will further the Fund's investment objective,
and may also engage in other options transactions in furtherance of its
investment objective. The balance of the Fund's assets will be held in cash
equivalents rated within one of the highest two rating categories assigned by at
least one nationally recognized statistical rating organization ("NRSRO"), which
categories are described below in "Description of Ratings," at the time of
investment or, if unrated, to be of comparable quality.
In addition to the permissible investments described above, the Fund may invest
in U.S. Treasury obligations, including Separately Traded Registered Interest
and Principal Securities ("STRIPS") and Coupon Under Book Entry Safekeeping
("CUBES"), receipts, including Treasury Receipts ("TRS"), Treasury Investment
Growth Receipts ("TIGRS"), and Certificates of Accrual on Treasury Securities
("CATS"), certificates of deposit, time deposits, U.S. government agency
securities, repurchase agreements, reverse repurchase agreements, securities of
other investment companies, when-issued securities, forward commitments,
options, futures contracts, and options on futures contracts. The Fund may also
invest in variable and floating rate notes, bankers' acceptances, commercial
paper and securities of foreign issuers, including sponsored and unsponsored
American Depository Receipts ("ADRs"). The Fund may also engage in securities
lending transactions. All of the Fund's investments, where applicable, must
possess one of the ratings described below in the "Description of Ratings" at
the time of investment or, if unrated, to be of comparable quality.
This list of permissible investments includes select securities that may be
commonly considered to be derivatives, including: options, futures contracts and
options on futures contracts.
PROSPECTUS 6
<PAGE>
These securities and limitations on their use are more fully described in the
"Description of Permitted Investments." For a description of the Fund's
permitted investments, see "Description of Permitted Investments."
For a description of permitted investments for temporary defensive purposes, see
"Temporary Defensive Position."
RISK FACTORS
Changes in the value of portfolio securities will not affect cash income, if
any, derived from these securities but will affect the Fund's net asset value.
Because the Fund invests primarily in equity securities, which fluctuate in
value, the Fund's shares will fluctuate in value.
Certain investment management techniques that the Fund may use, such as the
purchase and sale of futures, options and forward commitments, could expose the
Fund to potentially greater risk of loss than more traditional equity
investments.
Investments in securities of foreign issuers may involve greater risks than are
present in U.S. investments. In general, issuers in many foreign countries are
not subject to accounting, auditing and financial reporting standards, practices
and requirements comparable to those applicable to U.S. companies. There is
generally less information publicly available about, and less regulation of,
foreign issuers than U.S. companies. Transaction costs are generally higher for
investments in foreign issuers. Securities of some foreign companies are less
liquid, and their prices are more volatile, than securities of comparable U.S.
companies. Settlement of transactions in some foreign markets may be delayed or
may be less frequent than in the United States, which could adversely affect the
liquidity of the Fund. In addition, with respect to some foreign countries,
there are the possibilities of expropriation or confiscatory taxation, the
imposition of additional taxes or tax withholding, limitations on the removal of
securities, property or other assets of the Fund, political or social
instability, and diplomatic developments, which could affect the value of
investments in those countries.
For additional information on each of the Fund's permitted investments and
associated risks, see "Description of Permitted Investments."
HOW TO DO BUSINESS WITH
THE ONE GROUP-REGISTERED TRADEMARK-
HOW TO INVEST IN THE ONE GROUP-REGISTERED TRADEMARK-
Shares of the Fund are sold on a continuous basis and may be purchased directly
from the Trust's Distributor, The One Group Services Company by mail, by
telephone, or by wire. Shares may also be purchased through a financial
institution, such as a bank, savings and loan association or insurance company
(each a "Shareholder Servicing Agent"), that has established a Shareholder
servicing agreement with the Distributor or through a broker-dealer that has
established a dealer agreement with the Distributor.
Purchases and redemptions of shares of the Fund may be made on any day that the
New York Stock Exchange is open for trading ("Business Days"). The minimum
initial and subsequent investments in the Fund are $1,000 and $100, respectively
($100 and $25, respectively, for employees of BANC ONE CORPORATION and its
affiliates). Initial and subsequent investment minimums may be waived at the
Distributor's discretion. Investors may purchase up to a maximum of $250,000 of
Class B shares per individual purchase order.
Class A and Class B shares are offered to the general public. Fiduciary Class
shares are offered to institutional investors, including affiliates of BANC ONE
CORPORATION and any bank, depository institution, insurance company, pension
plan or other organization authorized to act in fiduciary, advisory, agency,
custodial or similar capacities (each an "Authorized Financial Organization").
For additional details regarding eligibility, call the Distributor at
1-800-480-4111.
BY MAIL
Investors may purchase Class A and Class B shares of the Fund by completing and
signing an Account Application Form and mailing it, along with a check (or other
negotiable bank instrument or money order) payable to "The One Group-Registered
Trademark-," to State Street Bank and Trust Company (the Trust's Transfer Agent
and Custodian), P.O. Box 8500, Boston, MA 02266-8500. Subsequent purchases of
shares may be made at any time by mailing a check to the Transfer Agent. Account
Application Forms are available through the Distributor by calling
1-800-480-4111.
Purchases of Fiduciary Class shares and Class A shares that are being offered to
investors in certain retirement plans such as 401(k) and similar plans, other
than Individual Retirement Accounts, are made by an institutional investor
and/or other intermediary on behalf of an investor (each also a "Shareholder
Servicing Agent"). The Shareholder Servicing Agent may require an investor to
complete forms in addition to the Account Application Form and to follow
procedures established by the Shareholder Servicing Agent. Such Shareholders
should contact their Shareholder Servicing Agents regarding purchases, exchanges
and redemptions of shares. See "Additional Information Regarding Purchases."
BY TELEPHONE OR BY WIRE
Once an Account Application Form has been received, Shareholders are eligible to
make purchases by telephone or wire (if that option has been selected by a
Shareholder) by calling the Transfer Agent at 1-800-480-4111 or their
Shareholder Servicing Agents, if applicable.
Shareholders may revoke their automatic eligibility to make purchases and/or
redemptions by telephone or by wire, by sending a letter so stating to the
Transfer Agent, State Street Bank and Trust Company, P.O. Box 8500, Boston, MA
02266-8500.
7 PROSPECTUS
<PAGE>
SYSTEMATIC INVESTMENT PLAN
Class A and Class B investors may make automatic monthly investments in the Fund
from their bank, savings and loan or other depository institution accounts. The
minimum initial and subsequent investments must be $25 under the Systematic
Investment Plan, which minimum may be waived at the discretion of the
Distributor. The Trust pays the costs associated with these transfers, but
reserves the right, upon thirty days' written notice, to impose reasonable
charges for this service. A depository institution may impose a charge for
debiting an investor's account, which would reduce the investor's return from an
investment in the Fund.
FUND-DIRECT IRA
The Trust offers a tax-advantaged retirement plan for which shares of the Fund
may be an appropriate investment. The Trust's retirement plan allows
participants to defer taxes while helping them build their retirement savings.
The One Group-Registered Trademark-'s Fund-Direct IRA is a retirement plan with
a wide choice of investments, offering people with earned income the opportunity
to compound earnings on a tax-deferred basis. An IRA Adoption Agreement may be
obtained by calling the Distributor at 1-800-480-4111.
ADDITIONAL INFORMATION REGARDING PURCHASES
A purchase order will be effective as of the day received by the Distributor if
the Distributor receives the order before 4:00 p.m., eastern time. However, an
order may be canceled if the Transfer Agent does not receive Federal funds
before close of business on the next Business Day for Fiduciary Class shares,
and before the close of business on the third Business Day for Class A and Class
B shares, and the investor could be liable for any fees or expenses incurred by
the Trust. Federal funds are monies credited to a bank's account with a Federal
Reserve Bank. The purchase price of shares of the Fund is the net asset value
next determined after a purchase order is effected plus any applicable sales
charge (the "offering price"). The net asset value per share of the Fund is
determined by dividing the total market value of the Fund's investments and
other assets allocable to a class, less any liabilities allocable to that class,
by the total number of outstanding shares of such class. Net asset value per
share is determined daily as of 4:00 p.m., eastern time, on each Business Day.
For a further discussion of the calculation of net asset value, see the
Statement of Additional Information. Shares may also be issued in transactions
involving the acquisition by the Fund of securities held by collective
investment funds sponsored and administered by affiliates of the Adviser.
Purchases will be made in full and fractional shares of the Fund calculated to
three decimal places. Although the methodology and procedures are identical, the
net asset value per share of classes within the Fund may differ because the
distribution fees and expenses charged to Class A shares and Class B shares are
not charged to Fiduciary Class shares.
The Trust reserves the right to reject a purchase order when the Distributor
determines that it is not in the best interest of the Trust and/or its
Shareholders to accept such order. Except as provided below, neither the Trust's
Transfer Agent, the Distributor, the Adviser nor the Trust will be responsible
for any loss, liability, cost or expense for acting upon telephone or wire
instructions, and the investor will bear all risk of loss. The Trust will employ
reasonable procedures to confirm that instructions communicated by telephone are
genuine, including requiring a form of personal identification prior to acting
upon instructions received by telephone and recording telephone instructions. If
such procedures are not employed, the Trust may be liable for any losses due to
unauthorized or fraudulent instructions.
Fiduciary Class shares offered to institutional investors and investors in
certain retirement plans, and Class A shares that are being offered to investors
in certain retirement plans such as 401(k) and similar plans, other than
Individual Retirement Accounts, will normally be held in the name of the
Shareholder Servicing Agent effecting the purchase on the Shareholder's behalf,
and it is the Shareholder Servicing Agent's responsibility to transmit purchase
orders to the Distributor. A Shareholder Servicing Agent may impose an earlier
cut-off time for receipt of purchase orders directed through it to allow for
processing and transmittal of these orders to the Distributor for effectiveness
the same day. The Shareholder should contact his or her Shareholder Servicing
Agent for information as to the Shareholder Servicing Agent's procedures for
transmitting purchase, exchange or redemption orders to the Trust. A Shareholder
who desires to transfer the registration of shares beneficially owned by him or
her, but held of record by a Shareholder Servicing Agent, should contact the
Shareholder Servicing Agent to accomplish such change. Other Shareholders who
desire to transfer the registration of their shares should contact the Transfer
Agent.
No certificates representing the shares of the Fund will be issued. In
communications to Shareholders, the Fund will not duplicate mailings of Fund
material to Shareholders who reside at the same address.
SALES CHARGE
The following table shows the initial sales charge on Class A shares to a
"single purchaser" (defined below) together with the sales charge reallowed to
financial institutions and intermediaries (the "commission"):
<TABLE>
<CAPTION>
SALES CHARGE AS
SALES CHARGE AS A APPROPRIATE COMMISSION AS A
PERCENTAGE OF PERCENTAGE OF NET PERCENTAGE OF
AMOUNT OF PURCHASE OFFERING PRICE AMOUNT INVESTED OFFERING PRICE
- --------------------------- ------------------ ------------------- ------------------
<S> <C> <C> <C>
less than $50,000.......... 4.50% 4.71% 4.05%
$50,000 but less than
$100,000................. 3.50% 3.63% 3.15%
$100,000 but less than
$250,000................. 2.50% 2.56% 2.25%
$250,000 but less than
$500,000................. 1.50% 1.52% 1.35%
$500,000 but less than
$1,000,000............... 1.00% 1.01% 0.90%
$1,000,000 or more......... 0.00% 0.00% 0.00%
</TABLE>
The commissions shown in the table apply to sales through financial institutions
and intermediaries. Under certain circumstances, the Distributor will use its
own funds to compensate
PROSPECTUS 8
<PAGE>
financial institutions and intermediaries in amounts that are additional to the
commission shown above. The maximum cash compensation payable by the Distributor
as a sales charge is 4.50% of the offering price (including the commission shown
above and additional cash compensation described below). In addition, the
Distributor will, from time to time and at its own expense, provide promotional
incentives to financial institutions and intermediaries, whose registered
representatives have sold or are expected to sell significant amounts of shares
of the Fund, in the form of payment for travel expenses, including lodging,
incurred in connection with trips taken by qualifying registered representatives
to places within or outside the United States, and additional compensation in an
amount up to .50% of the offering price of Class A shares of the Fund for sales
of $1 million or more. However, the Distributor will be reimbursed by the person
receiving such additional compensation for sales of the Fund of $1 million or
more, if a Shareholder redeems any or all of the shares for which such
additional compensation was paid by the Distributor prior to the first year
anniversary of purchase. Under certain circumstances, commissions up to the
amount of the entire sales charge will be reallowed to financial institutions
and intermediaries, which might then be deemed to be "underwriters" under the
Securities Act of 1933.
RIGHT OF ACCUMULATION
In calculating the sales charge rates applicable to current purchases of Class A
shares, a "single purchaser" is entitled to cumulate current purchases with the
current value at the offering price of previously purchased Class A and Class B
shares of the Fund and other eligible funds of the Trust, other than the Trust's
money market funds, that are sold subject to a comparable sales charge.
The term "single purchaser" refers to (i) an individual, (ii) an individual and
spouse purchasing shares of the Fund for their own account or for trust or
custodial accounts for their minor children, or (iii) a fiduciary purchasing for
any one trust, estate or fiduciary account, including employee benefit plans
created under Sections 401 or 457 of the Internal Revenue Code of 1986, as
amended (the "Code"), and including related plans of the same employer. To be
entitled to a reduced sales charge based upon shares already owned, the investor
must ask the Distributor for such reduction at the time of purchase and provide
the account number(s) of the investor, the investor and spouse, and their minor
children, and give the age of such children. The Fund may amend or terminate
this right of accumulation at any time as to subsequent purchases.
LETTER OF INTENT
By initially investing at least $2,000 in Class A shares of one or more funds of
the Trust that impose a comparable sales charge over the next 13 months, the
sales charge may be reduced by completing the Letter of Intent section of the
Account Application Form. The Letter of Intent includes a provision for a sales
charge adjustment depending on the amount actually purchased within the 13-month
period. In addition, pursuant to a Letter of Intent, the Custodian will hold in
escrow the difference between the sales charge applicable to the amount
initially purchased and the sales charge paid at the time of the investment,
which is based on the amount covered by the Letter of Intent.
For example, assume an investor signs a Letter of Intent to purchase $250,000 in
Class A shares of one (or more) of the funds of the Trust that impose a
comparable sales charge and, at the time of signing the Letter of Intent,
purchases $100,000 of Class A shares of one of these funds. The investor would
pay an initial sales charge of 1.50% (the sales charge applicable to purchases
of $250,000) and 1.00% of the investment (representing the difference between
the 2.50% sales charge applicable to purchases of $100,000 and the 1.50% sales
charge already paid) would be held in escrow until the investor has purchased
the remaining $150,000 or more in Class A shares under the investor's Letter of
Intent.
The amount held in escrow will be applied to the investor's account at the end
of the 13-month period unless the amount specified in the Letter of Intent is
not purchased. In order to qualify for a Letter of Intent, the investor will be
required to make a minimum purchase of at least $2,000.
The Letter of Intent will not obligate the investor to purchase Class A shares,
but if he or she does, each purchase during the period will be at the sales
charge applicable to the total amount intended to be purchased. The Letter of
Intent may be dated as of a prior date to include any purchases made within the
past 90 days.
OTHER CIRCUMSTANCES
No sales charge is imposed on Class A shares of the Fund: (i) issued through
reinvestment of dividends and capital gains distributions; (ii) acquired through
the exercise of exchange privileges where a comparable sales charge has been
paid for exchanged shares; (iii) purchased by officers, directors or trustees,
retirees and employees (and their spouses and immediate family members) of the
Trust, of BANC ONE CORPORATION and its subsidiaries and affiliates, of the
Distributor and its subsidiaries and affiliates, or of an investment sub-adviser
of a fund of the Trust and such sub-adviser's subsidiaries and affiliates; (iv)
sold to affiliates of BANC ONE CORPORATION and to certain accounts (other than
Individual Retirement Accounts) for which Authorized Financial Organizations act
in fiduciary, advisory, agency, custodial or similar capacities, or purchased by
investment advisers, financial planners or other intermediaries who have a
dealer arrangement with the Distributor, who place trades for their own accounts
or for the accounts of their clients and who charge a management, consulting or
other fee for their services, as well as clients of such investment advisers,
financial planners or other intermediaries who place trades for their own
accounts if the accounts are linked to the master account of such investment
adviser, financial planner or other intermediary; (v) purchased with proceeds
from the recent redemption of Fiduciary Class shares of a fund of the Trust or
acquired in an exchange of Fiduciary Class shares of a fund for Class A shares
of the same fund; (vi) purchased with proceeds from the recent redemption of
shares of a mutual fund (other than a fund of the Trust) for which a sales
charge was paid; (vii) purchased in an
9 PROSPECTUS
<PAGE>
Individual Retirement Account with the proceeds of a distribution from an
employee benefit plan, provided that, at the time of distribution, the employee
benefit plan had plan assets invested in a fund of the Trust; (viii) purchased
with Trust assets; (ix) purchased in accounts as to which a bank or
broker-dealer charges an asset allocation fee, provided the bank or broker-
dealer has an agreement with the Distributor; or (x) directly purchased with the
proceeds of a distribution on a bond for which a Banc One Corporation affiliate
bank or trust company is the Trustee or Paying Agent.
An investor relying upon any of the categories of waivers of the sales charge
must qualify for such waiver in advance of the purchase with the Distributor or
the financial institution or intermediary through which shares are purchased by
the investor.
The waiver of the sales charge under circumstances (v), (vi) and (vii) above
applies only if the purchase is made within 60 days of the redemption or
distribution and if conditions imposed by the Distributor are met. The waiver
policy with respect to the purchase of shares through the use of proceeds from a
recent redemption or distribution as described in clauses (v), (vi) and (vii)
above will not be continued indefinitely and may be discontinued at any time
without notice. Investors should call the Distributor at 1-800-480-4111 to
determine whether they are eligible to purchase shares without paying a sales
charge through the use of proceeds from a recent redemption or distribution as
described above, and to confirm continued availability of these waiver policies
prior to initiating the procedures described in clauses (v), (vi) and (vii).
ALTERNATIVE SALES ARRANGEMENTS
CLASS B SHARES
Class B shares are not subject to a sales charge when they are purchased, but
are subject to a sales charge (the "Contingent Deferred Sales Charge") if a
Shareholder redeems them prior to the sixth anniversary of purchase. When a
Shareholder purchases Class B shares, the full purchase amount is invested
directly in the Fund. Class B shares of the Fund are subject to an ongoing
distribution and Shareholder service fee at an annual rate of 1.00% of the
Fund's average daily net assets as provided in the Class B Plan (described below
under "The Distributor"). This ongoing fee will cause Class B shares to have a
higher expense ratio and to pay lower dividends than Class A shares. Class B
shares convert automatically to Class A shares after eight years, commencing
from the end of the calendar month in which the purchase order was accepted
under the circumstances and subject to the qualifications described in this
Prospectus.
Proceeds from the Contingent Deferred Sales Charge and the distribution and
Shareholder service fees under the Class B Plan are payable to the Distributor
and financial intermediaries to defray the expenses of advance brokerage
commissions and expenses related to providing distribution-related and
Shareholder services to the Fund in connection with the sale of the Class B
shares, such as the payment of compensation to dealers and agents for selling
Class B shares. A dealer reallowance of 4.00% of the original purchase price of
the Class B shares will be paid to financial institutions and intermediaries.
CONTINGENT DEFERRED SALES CHARGE
If the Shareholder redeems Class B shares prior to the sixth anniversary of
purchase, the Shareholder will pay a Contingent Deferred Sales Charge at the
rates set forth below. The Contingent Deferred Sales Charge is assessed on an
amount equal to the lesser of the then-current market value or the cost of the
shares being redeemed. Accordingly, no sales charge is imposed on increases in
net asset value above the initial purchase price. In addition, no charge is
assessed on shares derived from reinvestment of dividends or capital gain
distributions.
The amount of the Contingent Deferred Sales Charge, if any, varies depending on
the number of years from the time of payment for the purchase of Class B shares
until the time of redemption of such shares. Solely for purposes of determining
the number of years from the time of any payment for the purchase of shares, all
payments during a month are aggregated and deemed to have been made on the first
day of the month.
<TABLE>
<CAPTION>
CONTINGENT DEFERRED
SALES CHARGE AS A
YEAR(S) PERCENTAGE OF DOLLAR
SINCE AMOUNT SUBJECT TO
PURCHASE CHARGE
- ----------------------------------------- -----------------------
<S> <C>
0-1...................................... 5.00%
1-2...................................... 4.00%
2-3...................................... 3.00%
3-4...................................... 3.00%
4-5...................................... 2.00%
5-6...................................... 1.00%
6-7...................................... None
7-8...................................... None
</TABLE>
In determining whether a particular redemption is subject to a Contingent
Deferred Sales Charge, it is assumed that the redemption is first of any Class A
shares in the Shareholder's Fund account (unless the Shareholder elects to have
Class B shares redeemed first) or shares representing capital appreciation, next
of shares acquired pursuant to reinvestment of dividends and capital gain
distributions, and finally of other shares held by the Shareholder for the
longest period of time. This method should result in the lowest possible sales
charge.
To provide an example, assume you purchased 100 shares at $10 per share (a total
cost of $1,000) and prior to the second anniversary after purchase, the net
asset value per share is $12 and during such time you have acquired 10
additional shares through dividends paid in shares. If you then make your first
redemption of 50 shares (proceeds of $600), 10 shares will not be subject to
charge because you received them as dividends. With respect to the remaining 40
shares, the charge is applied only to the original cost of $10 per share and not
to the increase in net asset value of $2 per share. Therefore, $400 of the $600
redemption proceeds is subject to a Contingent Deferred Sales Charge at a rate
of 4.00% (the applicable rate prior to the second anniversary after purchase).
PROSPECTUS 10
<PAGE>
The Contingent Deferred Sales Charge is waived on redemption of shares: (i) for
distributions that are made under a Systematic Withdrawal Plan of the Trust and
that are limited to no more than 10% of the account value annually, determined
in the first year as of the date the redemption request is received by the
Transfer Agent, and in subsequent years, as of the most recent anniversary of
that date; (ii) following the death or disability (as defined in the Code) of a
Shareholder or a participant or beneficiary of a qualifying retirement plan if
redemption is made within one year of such death or disability; or (iii) to the
extent that the redemption represents a minimum required distribution from an
Individual Retirement Account or other qualifying retirement plan to a
Shareholder who has attained the age of 70 1/2. A Shareholder or his or her
representative should contact the Transfer Agent to determine whether a
retirement plan qualifies for a waiver and must notify the Transfer Agent prior
to the time of redemption if such circumstances exist and the Shareholder is
eligible for this waiver. In addition, the following circumstances are not
deemed to result in a "redemption" of Class B shares for purposes of the
assessment of a Contingent Deferred Sales Charge, which is therefore waived: (i)
plans of reorganization of the Fund, such as mergers, asset acquisitions and
exchange offers to which the Fund is a party; or (ii) exchanges for Class B
shares of other funds of the Trust as described under "Exchanges."
CONVERSION FEATURE
Class B shares include all shares purchased pursuant to the Contingent Deferred
Sales Charge which have been outstanding for less than the period ending eight
years after the end of the month in which the shares were purchased. At the end
of this period, Class B shares will automatically convert to Class A shares and
will be subject to the lower distribution and Shareholder service fees charged
to Class A shares. Such conversion will be on the basis of the relative net
asset values of the two classes, without the imposition of any sales charge, fee
or other charge. The conversion is not a taxable event to a Shareholder.
For purposes of conversion to Class A shares, shares received as dividends and
other distributions paid on Class B shares in a Shareholder's Fund account will
be considered to be held in a separate sub-account. Each time any Class B shares
in a Shareholder's Fund account (other than those in the sub-account) convert to
Class A shares, a pro-rata portion of the Class B shares in the sub-account will
also convert to Class A shares.
If a Shareholder effects one or more exchanges among Class B shares of the funds
of the Trust during the eight-year period, the Trust will aggregate the holding
periods for the shares of each fund of the Trust for purposes of calculating
that eight-year period. Because the per share net asset value of the Class A
shares may be higher than that of the Class B shares at the time of conversion,
a Shareholder may receive fewer Class A shares than the number of Class B shares
converted, although the dollar value will be the same.
EXCHANGES
CLASS A AND FIDUCIARY CLASS
Fiduciary Class Shareholders of the Fund may exchange their shares for Class A
shares of the Fund or for Class A shares or Fiduciary Class shares of another
fund of the Trust.
Class A Shareholders may exchange their shares for Fiduciary Class shares of the
Fund or for Fiduciary Class shares or Class A shares of another fund of the
Trust, if the Shareholder is eligible to purchase such shares.
The exchange privilege may be exercised only in those states where the shares of
the Fund or such other fund of the Trust may be legally sold. All exchanges
discussed herein are made at the net asset value of the exchanged shares, except
as provided below. The Trust does not impose a charge for processing exchanges
of shares. If a Shareholder seeks to exchange Class A shares of a fund that does
not impose a sales charge for Class A shares of a fund that does or the fund
being exchanged into has a higher sales charge, the Shareholder will be required
to pay a sales charge in the amount equal to the difference between the sales
charge applicable to the fund into which the shares are being exchanged and any
sales charges previously paid for the exchanged shares, including any sales
charges incurred on any earlier exchanges of the shares (unless such sales
charge is otherwise waived, as provided in "Other Circumstances"). The exchange
of Fiduciary Class shares for Class A shares also will require payment of the
sales charge unless the sales charge is waived, as provided in "Other
Circumstances."
CLASS B
Class B Shareholders of the Fund may exchange their shares for Class B shares of
any other fund of the Trust on the basis of the net asset value of the exchanged
Class B shares, without the payment of any Contingent Deferred Sales Charge that
might otherwise be due upon redemption of the outstanding Class B shares. The
newly acquired Class B shares will be subject to the higher Contingent Deferred
Sales Charge of either the fund from which the shares were exchanged or the fund
into which the shares were exchanged. With respect to outstanding Class B shares
as to which previous exchanges have taken place, "higher Contingent Deferred
Sales Charge" shall mean the higher of the Contingent Deferred Sales Charge
applicable to either the fund the shares are exchanging into or any other fund
from which the shares previously have been exchanged. For purposes of computing
the Contingent Deferred Sales Charge that may be payable upon a disposition of
the newly acquired Class B shares, the holding period for outstanding Class B
shares of the fund from which the exchange was made is "tacked" to the holding
period of the newly acquired Class B shares. For purposes of calculating the
holding period applicable to the newly acquired Class B shares, the newly
acquired Class B shares shall be deemed to have been issued on the date of
receipt of the Shareholder's order to purchase the outstanding Class B shares of
the fund from which the initial exchange was made.
11 PROSPECTUS
<PAGE>
ADDITIONAL INFORMATION REGARDING EXCHANGES
In the case of shares held of record by a Shareholder Servicing Agent but
beneficially owned by a Shareholder, to exchange such shares the Shareholder
should contact the Shareholder Servicing Agent, who will contact the Transfer
Agent and effect the exchange on behalf of the Shareholder. If an exchange
request in good order is received by the Transfer Agent by 4:00 p.m., eastern
time, on any Business Day, the exchange usually will occur on that day. Any
Shareholder who wishes to make an exchange must receive a current prospectus of
the fund of the Trust in which he or she wishes to invest before the exchange
will be effected.
The Trust reserves the right to change the terms and conditions of the exchange
privilege discussed herein upon sixty days' written notice. An exchange between
classes of shares of the same fund is not considered a taxable event; however,
an exchange between funds of the Trust is considered a sale of shares and
usually results in a capital gain or loss for Federal income tax purposes.
Shareholders should consult their tax advisers for a more complete explanation
of the Federal income tax consequences of an exchange of shares of the Fund.
A more detailed description of the above is set forth in the Statement of
Additional Information.
REDEMPTIONS
Shareholders may redeem their shares without charge (except Class B shares, as
provided above) on any Business Day; shares may ordinarily be redeemed by mail,
by telephone or by wire. All redemption orders are effected at the net asset
value per share next determined for Class A and Fiduciary Class shares, and at
net asset value per share next determined reduced by any applicable Contingent
Deferred Sales Charge for Class B shares, after receipt of a valid request for
redemption. Payment to Shareholders for shares redeemed will be made within
seven days after receipt by the Transfer Agent of the request for redemption.
BY MAIL
A written request for redemption must be received by the Transfer Agent in order
to constitute a valid request for redemption. All written redemption requests
should be sent to The One Group-Registered Trademark-, c/o State Street Bank and
Trust Company, P.O. Box 8500, Boston, MA 02266-8500, or the Shareholder
Servicing Agent, if applicable. The Transfer Agent may require that the
signature on the written request be guaranteed by a commercial bank, a member
firm of a domestic stock exchange or by a member of the Securities Transfer
Association Medallion Program or the Stock Exchange Medallion Program.
The signature guarantee requirement will be waived if all of the following
conditions apply: (i) the redemption is for $5,000 worth of shares or less; (ii)
the redemption check is payable to the Shareholder(s) of record; and (iii) the
redemption check is mailed to the Shareholder(s) at the address of record. The
Shareholder may also have the proceeds mailed to a commercial bank account
previously designated on the Account Application Form or by written instruction
to the Transfer Agent or the Shareholder Servicing Agent, if applicable. There
is no charge for having redemption requests mailed to a designated bank account.
BY TELEPHONE OR BY WIRE
Shareholders may have the payment of redemption requests wired or mailed to a
domestic commercial bank account previously designated on the Account
Application Form. Wire redemption requests may be made by the Shareholder by
telephone to the Transfer Agent at 1-800-480-4111, provided that the Shareholder
has elected the telephone redemption privilege in writing to the Distributor, or
to the Shareholder Servicing Agent, if applicable. The Transfer Agent may reduce
the amount of a wire redemption payment by its then-current wire redemption
charge, which, as of the date of this Prospectus, is $7.00.
Neither the Trust nor the Transfer Agent will be responsible for the
authenticity of the redemption instructions received by telephone if it
reasonably believes those instructions to be genuine. The Trust and the Transfer
Agent will each employ reasonable procedures to confirm that telephone
instructions are genuine, and may be liable for losses resulting from
unauthorized or fraudulent telephone transactions if it does not employ those
procedures. Such procedures may include requesting personal identification
information or recording telephone conversations.
SYSTEMATIC WITHDRAWAL PLAN
Shareholders whose accounts have a value of at least $10,000 may elect to
receive, or may designate another person to receive, monthly, quarterly or
annual payments in a specified amount of not less than $100 each. There is no
charge for this service. Under the Systematic Withdrawal Plan, all dividends and
distributions must be reinvested in shares of the Fund. Purchases of additional
Class A shares while the Systematic Withdrawal Plan is in effect are generally
undesirable because a sales charge is incurred whenever purchases are made.
Pursuant to the Systematic Withdrawal Plan, Class B Shareholders may elect to
receive, or may designate another person to receive, distributions provided the
distributions are limited to no more than 10% of their account value annually,
determined in the first year as of the date the redemption request is received
by the Transfer Agent, and in subsequent years, as of the most recent
anniversary of that date. In addition, Shareholders who have attained the age of
70 1/2 may elect to receive distributions, to the extent that the redemption
represents a minimum required distribution from an Individual Retirement Account
or other qualifying retirement plan.
If the amount of the systematic withdrawal exceeds the income accrued since the
previous withdrawal under the Systematic Withdrawal Plan, the principal balance
invested will be reduced and shares will be redeemed.
PROSPECTUS 12
<PAGE>
OTHER INFORMATION REGARDING REDEMPTIONS
At various times, the Fund may be requested to redeem shares for which it has
not yet received good payment. In such circumstances, the forwarding of proceeds
may be delayed for 15 or more days until payment has been collected for the
purchase of such shares. The Fund intends to pay cash for all shares redeemed.
Due to the relatively high costs of handling small investments, the Fund
reserves the right to redeem, at net asset value, the shares of any Shareholder
if, because of redemptions of shares by or on behalf of the Shareholder, the
account of such Shareholder in the Fund has a value of less than $1,000, the
minimum initial purchase amount. Accordingly, an investor purchasing shares of
the Fund in only the minimum investment amount may be subject to such
involuntary redemption if he or she thereafter redeems any of these shares.
Before the Fund exercises its right to redeem such shares and to send the
proceeds to the Shareholder, the Shareholder will be given notice that the value
of the shares in his or her account is less than the minimum amount and will be
allowed 60 days to make an additional investment in the Fund in an amount which
will increase the value of the account to at least $1,000.
See the Statement of Additional Information for examples of when the Trust may
suspend the right of redemption or redeem shares involuntarily if it appears
appropriate to do so in light of the Trust's responsibilities under the
Investment Company Act of 1940.
FUND MANAGEMENT
THE ADVISER
The Trust and Banc One Investment Advisors Corporation (the "Adviser") have
entered into an investment advisory agreement (the "Advisory Agreement"). Under
the Advisory Agreement, the Adviser makes the investment decisions for the
assets of the Fund and continuously reviews, supervises and administers the
Fund's investment program. The Adviser discharges its responsibilities subject
to the supervision of, and policies established by, the Trustees of the Trust.
The Trust's shares are not deposits or obligations of, or endorsed or guaranteed
by BANC ONE CORPORATION or its bank or non-bank affiliates. The Trust's shares
are not insured or guaranteed by the Federal Deposit Insurance Corporation
("FDIC") or by any other governmental agency or government sponsored agency of
the Federal government or any state.
The Adviser is an indirect, wholly-owned subsidiary of BANC ONE CORPORATION, a
bank holding company incorporated in the state of Ohio. BANC ONE CORPORATION
currently has affiliate banking organizations in Arizona, Colorado, Illinois,
Indiana, Kentucky, Ohio, Oklahoma, Texas, Utah, West Virginia and Wisconsin. In
addition, BANC ONE CORPORATION has several affiliates that engage in data
processing, venture capital, investment and merchant banking, and other
diversified services including trust management, investment management,
brokerage, equipment leasing, mortgage banking, consumer finance and insurance.
On a consolidated basis, BANC ONE CORPORATION had assets of over $88 billion as
of September 30, 1995.
The Adviser represents a consolidation of the investment advisory staffs of a
number of bank affiliates of BANC ONE CORPORATION, which have considerable
experience in the management of open-end management investment company
portfolios, including The One Group-Registered Trademark- since 1985 (then known
as "The Helmsman Fund").
Richard R. Jandrain, III, serves as the Senior Managing Director of Equity
Securities for the Adviser and in this capacity is responsible for the
development and implementation of the equity investment policies of the Adviser.
Mr. Jandrain has over 18 years of investment experience and has served in
various investment management positions with the Adviser and its affiliates for
the past five years.
Michael D. Weiner will serve as the Manager of the Fund. Mr. Weiner has served
as Director of Equity Research with the Adviser since June 1994. Prior to
joining the Adviser, Mr. Weiner served as Director of Research and Head of U.S.
Equities for the Dupont Pension Fund Investment Company of Wilmington, Delaware
from 1986 to 1994.
The Adviser is entitled to a fee, which is calculated daily and paid monthly, at
an annual rate of .74% of the average daily net assets of the Fund. The Adviser
may voluntarily agree to waive a part of its fees. (See "About the Fund --
Expense Summary.") These fee waivers would be voluntary and may be terminated at
any time. Shareholders will be notified in advance if and when these waivers are
terminated. The total compensation to the Adviser for investment advisory and
sub-administration services exceeds 0.75%, which is considered by the SEC staff
to be higher than such fees paid by most other mutual funds. However, the
Adviser believes it is comparable to compensation paid by other mutual funds
having similar investment objectives and policies.
THE DISTRIBUTOR
The One Group Services Company (the "Distributor"), a wholly-owned subsidiary of
the BISYS Group, Inc., and the Trust are parties to a distribution agreement
(the "Distribution Agreement") under which shares of the Fund are sold on a
continuous basis.
Class A shares are subject to a distribution and Shareholder services plan (the
"Plan"). As provided in the Plan, the Trust will pay the Distributor a fee of
.35% of the average daily net assets of Class A shares of the Fund. Currently,
the Distributor has voluntarily agreed to limit payments under the Plan to .25%
of the average daily net assets of the Class A shares of the Fund. Up to .25% of
the fees payable under the Plan may be used as compensation for Shareholder
services by the Distributor
13 PROSPECTUS
<PAGE>
and/or financial institutions and intermediaries. All such fees that may be paid
under the Plan will be paid pursuant to Rule 12b-1 of the Investment Company Act
of 1940. The Distributor may apply these fees toward: (i) compensation for its
services in connection with distribution assistance or provision of Shareholder
services; or (ii) payments to financial institutions and intermediaries such as
banks (including affiliates of the Adviser), savings and loan associations,
insurance companies, investment counselors, broker-dealers, and the
Distributor's affiliates and subsidiaries, as compensation for services or
reimbursement of expenses incurred in connection with distribution assistance or
provision of Shareholder services.
Class B shares are subject to a Contingent Deferred Sales Charge if such shares
are redeemed prior to the sixth anniversary of purchase. Class B shares of the
Fund are subject to an ongoing distribution and Shareholder service fee as
provided in the Class B distribution and Shareholder services plan (the "Class B
Plan") at an annual rate of 1.00% of the Fund's average daily net assets, which
includes Shareholder servicing fees of .25% of the Fund's average daily net
assets.
Proceeds from the Contingent Deferred Sales Charge and the distribution and
Shareholder service fees under the Class B Plan are payable to the Distributor
and financial intermediaries to defray the expenses of advance brokerage
commissions and expenses related to providing distribution-related and
Shareholder services to the Fund in connection with the sale of Class B shares,
such as the payment of compensation to dealers and agents for selling Class B
shares. The combination of the Contingent Deferred Sales Charge and the
distribution and Shareholder service fees facilitate the ability of the Fund to
sell the Class B shares without a sales charge being deducted at the time of
purchase.
The Plan and the Class B Plan are characterized as compensation plans since the
distribution fees will be paid to the Distributor without regard to the
distribution or Shareholder service expenses incurred by the Distributor or the
amount of payments made to financial institutions and intermediaries. The Fund
also may execute brokerage or other agency transactions through an affiliate of
the Adviser or through the Distributor for which the affiliate or the
Distributor receives compensation. Pursuant to guidelines adopted by the Board
of Trustees of the Trust, any such compensation will be reasonable and fair
compared to compensation received by other brokers in connection with comparable
transactions.
Fiduciary Class shares of the Fund are offered without distribution fees to
institutional investors, including Authorized Financial Organizations. It is
possible that an institution may offer different classes of shares to its
customers and thus receive different compensation with respect to different
classes of shares. In addition, a financial institution that is the record owner
of shares for the account of its customers may impose separate fees for account
services to its customers.
THE ADMINISTRATOR
The One Group Services Company (the "Administrator"), a wholly-owned subsidiary
of the BISYS Group, Inc., and the Trust are parties to an administration
agreement relating to the Fund (the "Administration Agreement"). Under the terms
of the Administration Agreement, the Administrator is responsible for providing
the Trust with administrative services (other than investment advisory
services), including regulatory reporting and all necessary office space,
equipment, personnel and facilities.
The Adviser also serves as Sub-Administrator to each fund of the Trust, pursuant
to an agreement between the Administrator and the Adviser. Pursuant to this
agreement, the Adviser performs many of the Administrator's duties for which the
Adviser receives a fee paid by the Administrator.
The Administrator is entitled to a fee for administrative services, which is
calculated daily and paid monthly, at an annual rate of .20% of each fund's
average daily net assets on the first $1.5 billion in Trust assets (excluding
the Treasury Only Money Market Fund and the Government Money Market Fund), .18%
of each fund's average daily net assets to $2 billion in Trust assets (excluding
the Treasury Only Money Market Fund and the Government Money Market Fund), and
.16% of each fund's average daily net assets when Trust assets exceed $2 billion
(excluding the Treasury Only Money Market Fund and the Government Money Market
Fund).
THE TRANSFER AGENT AND CUSTODIAN
State Street Bank and Trust Company, P.O. Box 8500, Boston, MA 02266-8500 acts
as Transfer Agent and Custodian for the Trust for which services it receives a
fee. The Custodian holds cash, securities and other assets of the Trust as
required by the Investment Company Act of 1940. Bank One Trust Company, N.A.
serves as Sub-Custodian in connection with the Trust's securities lending
activities, pursuant to an agreement between State Street Bank and Trust Company
and Bank One Trust Company. Bank One Trust Company receives a fee paid by the
Trust.
COUNSEL AND INDEPENDENT ACCOUNTANTS
Ropes & Gray serves as counsel to the Trust. Coopers & Lybrand L.L.P. serves as
the independent accountants of the Trust.
OTHER INFORMATION
THE TRUST
The Trust was organized as a Massachusetts Business Trust under a Declaration of
Trust filed on May 23, 1985. The Declaration of Trust permits the Trust to offer
separate funds and different classes of each fund. All consideration received by
the Trust for shares of any Fund and all assets of such fund belong to that fund
and would be subject to liabilities related thereto.
PROSPECTUS 14
<PAGE>
The Trust pays its expenses, including fees of its service providers, audit and
legal expenses, expenses of preparing prospectuses, proxy solicitation material
and reports to Shareholders, costs of custodial services and registering the
shares under Federal and state securities laws, pricing, insurance expenses,
litigation and other extraordinary expenses, brokerage costs, interest charges,
taxes and organizational expenses.
The Adviser and the Administrator of the Fund each bears all expenses incurred
in connection with the performance of their services as investment adviser and
administrator, respectively, other than the cost of securities (including
brokerage commissions, if any) purchased for the Fund.
As a general matter, as set forth in the Multiple Class Plan, expenses are
allocated to each class of shares of the Fund on the basis of the net asset
value of that class in relation to the net asset value of the Fund. At present,
the only expenses that are allocated to Class A and Class B shares, other than
in accordance with the relative net asset value of the class, are the different
distribution and Shareholder services costs. See "Expense Summary." At present,
no expenses are allocated to Fiduciary Class shares as a class that are not also
borne by the other classes of shares of the Fund in proportion to the relative
net asset values of the shares of such classes.
TRUSTEES OF THE TRUST
The management and affairs of the Trust are supervised by the Trustees under the
laws governing business trusts in the Commonwealth of Massachusetts. The
Trustees have approved contracts under which, as described above, certain
companies provide essential management services to the Trust.
VOTING RIGHTS
As set forth in the Multiple Class Plan, each share held entitles the
Shareholder of record to one vote. Each fund of the Trust will vote separately
on matters relating solely to that fund. In addition, each class of a fund shall
have exclusive voting rights on any matter submitted to Shareholders that
relates solely to that class, and shall have separate voting rights on any
matter submitted to Shareholders in which the interests of one class differ from
the interests of any other class. However, all fund Shareholders will have equal
voting rights on matters that affect all fund Shareholders equally. As a
Massachusetts Business Trust, the Trust is not required to hold annual meetings
of Shareholders but approval will be sought for certain changes in the operation
of the Trust and for the election of Trustees under certain circumstances. In
addition, a Trustee may be elected or removed by the remaining Trustees or by
Shareholders at a special meeting called upon written request of Shareholders
owning at least 10% of the outstanding shares of the Trust. In the event that
such a meeting is requested, the Trust will provide appropriate assistance and
information to the Shareholders requesting the meeting.
DIVIDENDS
Substantially all of the net investment income (exclusive of capital gains) of
the Fund is declared on the last Business Day of each month as a dividend for
Shareholders of record as of the close of business on that day and is
distributed in the form of periodic dividends to such Shareholders of the Fund
on the first Business Day of each month. Capital gains of the Fund, if any, will
be distributed at least annually.
Shareholders automatically receive all income dividends and capital gain
distributions in additional Class A, Class B, or Fiduciary Class shares, as
applicable, at the net asset value next determined following the record date,
unless the Shareholder has elected to take such payment in cash. Such election,
or any revocation thereof, must be made in writing, at least 15 days prior to
distribution, to the Transfer Agent at P.O. Box 8500, Boston, MA 02266-8500, and
will become effective with respect to dividends and distributions having record
dates after its receipt by the Transfer Agent. Reinvested dividends and
distribution receive the same tax treatment as dividends and distributions paid
in cash.
Class B shares received as dividends and capital gains distributions at the net
asset value next determined following the record date shall be held in a
separate Class B sub-account. Each time any Class B shares (other than those in
the subaccount) convert to Class A shares, a pro-rata portion of the Class B
shares in the sub-account will also convert to Class A shares. (See "Conversion
Feature.") Reinvested dividends and distributions receive the same tax treatment
as dividends and distributions paid in cash.
Dividends and distributions of the Fund are paid on a per-share basis. The value
of each share will be reduced by the amount of the payment. If shares are
purchased shortly before the record date for a dividend or the distribution of
capital gains, a Shareholder will pay the full price for the shares and receive
some portion of the price back as a taxable dividend or distribution even though
such distribution would, in effect, represent a return of the Shareholder's
investment.
The amount of dividends payable on Fiduciary Class shares will be more than the
dividends payable on Class A and Class B shares because of the distribution
expenses charged to Class A and Class B shares.
SHAREHOLDER INQUIRIES
Shareholder inquiries should be directed to the Administrator, The One Group
Services Company, 3435 Stelzer Road, Columbus, OH 43219.
REPORTING
The Trust issues unaudited financial information semiannually and audited
financial statements annually. The Trust furnishes proxy statements and other
reports to Shareholders of record.
15 PROSPECTUS
<PAGE>
OTHER INVESTMENT POLICIES
TEMPORARY DEFENSIVE POSITION
For temporary defensive purposes during periods when the Adviser determines that
market conditions warrant such action, the Fund may invest up to 100% of its
assets in cash equivalents (including securities issued or guaranteed as to
principal and interest by the U.S. government, its agencies or
instrumentalities, repurchase agreements, certificates of deposit and bankers'
acceptances issued by banks or savings and loan associations having net assets
of at least $1 billion as of the end of their most recent fiscal year,
commercial paper rated in one of the two highest short-term rating categories by
at least one NRSRO or, if unrated, determined by the Adviser to be of comparable
quality, variable amount master demand notes and bank money market deposit
accounts), and may hold cash for liquidity purposes.
To the extent the Fund is engaged in a temporary defensive position, the Fund
will not be pursuing its investment objective.
For a further description of the Fund's permitted investments, see "Description
of Permitted Investments" and the Statement of Additional Information, and for a
description of ratings, see "Description of Ratings."
PORTFOLIO TURNOVER
The Fund may engage in short-term trading, which involves selling securities
that have been held for a short period of time in order to increase the
potential for capital appreciation and/or income of the Fund or to take
advantage of a temporary disparity in the normal price or yield relationship
between two securities or changes in market, industry or company conditions or
outlook. Any such trading would increase a portfolio's turnover rate and its
transaction costs.
The Adviser will choose brokers by judging professional ability, quality of
service and reasonableness of commissions. Higher commissions may be paid to
those firms that provide research, superior execution and other services. The
Adviser may use any such research information in managing the assets of the
Fund.
The portfolio turnover rate for the Fund may vary greatly from year to year, as
well as within a particular year. It is presently estimated that the annual
portfolio turnover rate of the Fund will not exceed 100%.
Higher portfolio turnover rates will likely result in higher transaction costs
to the Fund and may result in additional tax consequences to the Fund's
Shareholders.
INVESTMENT LIMITATIONS
The investment objective and the following investment limitations are
fundamental policies of the Fund. Fundamental policies cannot be changed without
the consent of the holders of a majority of the Fund's outstanding shares. The
term "majority of the outstanding shares" means the vote of (i) 67% or more of
the Fund's shares present at a meeting, if more than 50% of the outstanding
shares of the Fund are present or represented by proxy, or (ii) more than 50% of
the Fund's outstanding shares, whichever is less.
The Fund may not:
1. Purchase securities of any issuer (except securities issued or guaranteed by
the United States, its agencies or instrumentalities and, if consistent with the
Fund's investment objective and policies, repurchase agreements involving such
securities) if as a result more than 5% of the total assets of the Fund would be
invested in the securities of such issuer or the Fund would own more than 10% of
the outstanding voting securities of such issuer. These restrictions apply to
75% of the Fund's total assets. For purposes of these limitations, a security is
considered to be issued by the government entity whose assets and revenues
guarantee or back the security. With respect to private activity bonds or
industrial development bonds backed only by the assets and revenues of a
non-governmental user, such user would be considered the issuer.
2. Purchase any securities that would cause more than 25% of the total assets of
the Fund to be invested in the securities of one or more issuers conducting
their principal business activities in the same industry, provided that this
limitation does not apply to investments in the obligations issued or guaranteed
by the U.S. government or its agencies and instrumentalities and repurchase
agreements involving such securities. For purposes of this limitation (i)
utilities will be divided according to their services (for example, gas, gas
transmission, electric and telephone will each be considered a separate
industry); and (ii) wholly-owned finance companies will be considered to be in
the industries of their parents if their activities are primarily related to
financing the activities of their parents.
3. Make loans, except that the Fund may (i) purchase or hold debt instruments in
accordance with its investment objective and policies; (ii) enter into
repurchase agreements; and (iii) engage in securities lending as described in
this Prospectus and in the Statement of Additional Information.
The foregoing percentages will apply at the time of the purchase of a security.
Additional investment limitations are set forth in the Statement of Additional
Information.
DESCRIPTION OF PERMITTED INVESTMENTS
The following is a description of certain of the permitted investments for the
Fund.
The Fund invests in common stocks (including sponsored and unsponsored American
Depository Receipts ("ADRs")) and convertible securities only if they are listed
on registered exchanges or actively traded in the over-the-counter market,
except that the Fund may invest up to 5% of its net assets in restricted
securities.
U.S. TREASURY OBLIGATIONS -- The Fund may invest in bills, notes and bonds
issued by the U.S. Treasury and separately
PROSPECTUS 16
<PAGE>
traded interest and principal component parts of such obligations that are
transferable through the Federal book-entry system, known as Separately Traded
Registered Interest and Principal Securities ("STRIPS") and Coupon Under Book
Entry Safekeeping ("CUBES").
RECEIPTS -- The Fund may purchase interests in separately traded interest and
principal component parts of U.S. Treasury obligations that are issued by banks
or brokerage firms and are created by depositing U.S. Treasury notes and U.S.
Treasury bonds into a special account at a custodian bank. The custodian holds
the interest and principal payments for the benefit of the registered owners of
the certificates or receipts. The custodian arranges for the issuance of the
certificates or receipts evidencing ownership and maintains the register.
Receipts include Treasury Receipts ("TRS"), Treasury Investment Growth Receipts
("TIGRS") and Certificates of Accrual on Treasury Securities ("CATS").
STRIPS, CUBES, TRS, TIGRS AND CATS are sold as zero coupon securities, which
means that they are sold at a substantial discount and redeemed at face value at
their maturity date without interim cash payments of interest or principal. This
discount is amortized over the life of the security, and such amortization will
constitute the income earned on the security for both accounting and tax
purposes. Because of these features, these securities may be subject to greater
interest rate volatility than interest-paying U.S. Treasury obligations. The
Fund may invest up to 20% of its total assets in STRIPS, CUBES, TRS, TIGRS and
CATS. See also "Taxes."
CERTIFICATES OF DEPOSIT -- Certificates of deposit are negotiable interest
bearing instruments with a specific maturity. Certificates of deposit ("CDs")
are issued by banks and savings and loan institutions in exchange for the
deposit of funds and normally can be traded in the secondary market prior to
maturity.
TIME DEPOSITS -- Time deposits are non-negotiable receipts issued by a bank in
exchange for the deposit of funds. Like a certificate of deposit, a time deposit
("TD") earns a specified rate of interest over a definite period of time;
however, it cannot be traded in the secondary market. Time deposits with a
withdrawal penalty are considered to be illiquid securities; therefore, the Fund
will not invest more than 15% of its net assets in such time deposits and other
illiquid securities.
BANKERS' ACCEPTANCES -- Bankers' acceptances are bills of exchange or time
drafts drawn on and accepted by (i.e., made an obligation of) a commercial bank.
They are used by corporations to finance the shipment and storage of goods and
to furnish dollar exchange. Maturities are generally six months or less.
COMMERCIAL PAPER -- Commercial paper is the term used to designate unsecured
short-term promissory notes issued by corporations and other entities.
Maturities on these issues vary from a few days to nine months.
U.S. GOVERNMENT AGENCIES -- Certain Federal agencies have been established as
instrumentalities of the U.S. government to supervise and finance certain types
of activities. Select agencies, such as the Government National Mortgage
Association ("Ginnie Mae") and the Export-Import Bank, are supported by the full
faith and credit of the U.S. Treasury; others, such as the Federal National
Mortgage Association ("Fannie Mae"), are supported by the credit of the
instrumentality and have the right to borrow from the U.S. Treasury; others are
supported by the authority of the U.S. government to purchase the agency's
obligations; while still others, such as the Federal Farm Credit Banks and the
Federal Home Loan Mortgage Corporation ("Freddie Mac"), are supported solely by
the credit of the instrumentality itself. No assurance can be given that the
U.S. government would provide financial support to U.S. government sponsored
agencies or instrumentalities if it is not obligated to do so by law.
Obligations of U.S. government agencies include debt issues and mortgage-backed
securities issued or guaranteed by select agencies.
CONVERTIBLE SECURITIES -- Convertible securities have characteristics similar to
both fixed income and equity securities. Because of the conversion feature, the
market value of convertible securities tends to move together with the market
value of the underlying stock. As a result, the Fund's selection of convertible
securities is based, to a great extent, on the potential for capital
appreciation that may exist in the underlying stock. The value of convertible
securities is also affected by prevailing interest rates, the credit quality of
the issuer, and any call provisions.
INVESTMENT COMPANY SECURITIES -- The Fund may invest up to 5% of its total
assets in the securities of any one investment company, but may not own more
than 3% of the securities of any one investment company or invest more than 10%
of its total assets in the securities of other investment companies. In
accordance with an exemptive order issued to the Trust by the SEC, such other
investment company securities may include securities of a money market fund of
the Trust, and such companies may include companies of which the Adviser or a
sub-adviser to a fund of the Trust, or an affiliate of such Adviser or
sub-adviser, serves as investment adviser, administrator or distributor. Because
other investment companies employ an investment adviser, such investment by the
Fund may cause Shareholders to bear duplicative fees. The Adviser will waive its
fee attributable to the assets of the investing fund invested in a money market
fund of the Trust; and, to the extent required by the laws of any state in which
shares of the Trust are sold, the Adviser will waive its fees attributable to
the assets of the Fund invested in any investment company.
REPURCHASE AGREEMENTS -- Repurchase agreements are agreements by which a person
obtains a security and simultaneously commits to return the security to the
seller at an agreed upon price (including principal and interest) on an agreed
upon date within a number of days from the date of purchase. The custodian or
its agent will hold the security as collateral for the repurchase agreement.
Collateral must be maintained at a value at least equal to 100% of the
repurchase price. The Fund bears a
17 PROSPECTUS
<PAGE>
risk of loss in the event the other party defaults on its obligations and the
Fund is delayed or prevented from its right to dispose of the collateral
securities or if the Fund realizes a loss on the sale of the collateral
securities. The Adviser will enter into repurchase agreements on behalf of the
Fund only with financial institutions deemed to present minimal risk of
bankruptcy during the term of the agreement based on guidelines established and
periodically reviewed by the Trustees. Repurchase agreements are considered by
the SEC to be loans under the Investment Company Act of 1940.
REVERSE REPURCHASE AGREEMENTS -- The Fund may borrow funds for temporary
purposes by entering into reverse repurchase agreements. Pursuant to such
agreements, the Fund would sell portfolio securities to financial institutions
such as banks and broker-dealers, and agree to repurchase them at a mutually
agreed-upon date and price. The Fund will enter into reverse repurchase
agreements only to avoid otherwise selling securities during unfavorable market
conditions to meet redemptions. At the time the Fund enters into a reverse
repurchase agreement, it would place in a segregated custodial account assets,
such as liquid high grade debt securities, consistent with the Fund's investment
restrictions and having a value equal to the repurchase price (including accrued
interest), and would subsequently monitor the account to ensure that such
equivalent value was maintained. Reverse repurchase agreements involve the risk
that the market value of the securities sold by the Fund may decline below the
price at which the Fund is obligated to repurchase the securities. Reverse
repurchase agreements are considered by the SEC to be borrowings by a Fund under
the Investment Company Act of 1940.
SECURITIES LENDING -- In order to generate additional income, the Fund may lend
up to 33% of the securities in which it is invested pursuant to agreements
requiring that the loan be continuously secured by cash, securities of the U.S.
government or its agencies, shares of an investment trust or mutual fund or any
combination of cash and such securities as collateral equal at all times to at
least 100% of the market value plus accrued interest on the securities lent. The
Fund will continue to receive interest on the securities lent while
simultaneously seeking to earn interest on the investment of cash collateral in
U.S. government securities, shares of an investment trust or mutual fund, or
other short-term, highly liquid investments. Collateral is marked to market
daily to provide a level of collateral at least equal to the market value of the
securities lent. There may be risks of delay in recovery of the securities or
even loss of rights in the collateral should the borrower of the securities fail
financially. However, loans will only be made to borrowers deemed by the Adviser
to be of good standing under guidelines established by the Trust's Board of
Trustees and when, in the judgment of the Adviser, the consideration which can
be earned currently from such securities loans justifies the attendant risk. The
Fund will enter into loan arrangements only with counterparties which the
Adviser has deemed to be creditworthy under guidelines established by the Board
of Trustees. Loans are subject to termination by the Fund or the borrower at any
time, and are, therefore, not considered to be illiquid investments.
RESTRICTED SECURITIES -- The Fund may invest in commercial paper issued in
reliance on the exemption from registration afforded by Section 4(2) of the
Securities Act of 1933. Section 4(2) commercial paper is restricted as to
disposition under Federal securities law and is generally sold to institutional
investors, such as the Fund, who agree that they are purchasing the paper for
investment purposes and not with a view to public distribution. Any resale by
the purchaser must be in an exempt transaction. Section 4(2) commercial paper is
normally resold to other institutional investors like the Fund through or with
the assistance of the issuer or investment dealers who make a market in Section
4(2) commercial paper, thus providing liquidity. The Fund believes that Section
4(2) commercial paper and possibly certain other restricted securities that meet
the criteria for liquidity established by the Trustees are quite liquid. The
Fund intends, therefore, to treat the restricted securities that meet the
criteria for liquidity established by the Trustees, including Section 4(2)
commercial paper, as determined by the Adviser, as liquid and not subject to the
investment limitation applicable to illiquid securities. In addition, because
Section 4(2) commercial paper is liquid, the Fund will not subject such paper to
the limitation applicable to restricted securities.
The ability of the Trustees to determine the liquidity of certain restricted
securities is permitted under an SEC staff position set forth in the adopting
release for Rule 144A under the Securities Act of 1933 (the "Rule"). The Rule is
a nonexclusive safe-harbor for certain secondary market transactions involving
securities subject to restrictions on resale under Federal securities laws. The
Rule provides an exemption from registration for resales of otherwise restricted
securities to qualified institutional buyers. The Rule is expected to further
enhance the liquidity of the secondary market for securities eligible for resale
under Rule 144A. The Fund believes that the staff of the SEC has left the
question of determining the liquidity of all restricted securities to the
Trustees. The Trustees have directed the Adviser to consider the following
criteria in determining the liquidity of certain restricted securities:
- - the frequency of trades and quotes for the security;
- - the number of dealers willing to purchase or sell the security and the number
of other potential buyers;
- - dealer undertakings to make a market in the security; and
- - the nature of the security and the nature of the marketplace trades.
VARIABLE AND FLOATING RATE INSTRUMENTS -- Certain of the obligations purchased
by the Fund may carry variable or floating rates of interest, may involve a
conditional or unconditional demand feature and may include variable amount
master demand notes. A demand instrument with a demand notice period exceeding
seven days may be considered illiquid if there is no secondary market for such
security; therefore, the Fund will not invest more than 15% of its net assets in
such instruments and other illiquid securities. The interest rates on these
securities may be reset daily, weekly, quarterly or some other reset period, and
may have a floor or ceiling on interest rate charges. There is
PROSPECTUS 18
<PAGE>
a risk that the current interest rate on such obligations may not accurately
reflect existing rates. The Fund will not invest more than 5% of its total
assets in variable rate master demand notes.
There is no limit on the extent to which the Fund may purchase variable and
floating rate instruments that are not illiquid. The Fund will purchase variable
and floating rate instruments to facilitate portfolio liquidity or to permit the
investment of the Fund's assets at a favorable rate of return.
SECURITIES PURCHASED ON A WHEN-ISSUED BASIS AND FORWARD COMMITMENTS -- The Fund
may purchase securities on a when-issued basis when deemed by the Adviser to
present attractive investment opportunities. When-issued securities are
purchased for delivery beyond the normal settlement date at a stated price and
yield, thereby involving the risk that the yield obtained will be less than that
available in the market at delivery. Although the purchase of securities on a
when-issued basis is not considered leveraging, it has the effect of leveraging.
When the Adviser purchases a when-issued security, the Custodian will set aside
cash or liquid securities to satisfy the purchase commitment. The Fund generally
will not pay for such securities or earn interest on them until received.
Commitments to purchase when-issued securities will not, under normal market
conditions, exceed 25% of the Fund's total assets, and a commitment will not
exceed 90 days. The Fund will only purchase when-issued securities for the
purpose of acquiring portfolio securities and not for speculative purposes.
In a forward commitment transaction, the Fund contracts to purchase securities
for a fixed price at a future date beyond customary settlement time. The Fund is
required to hold and maintain in a segregated account until the settlement date,
cash, U.S. government securities or liquid high-grade debt obligations in an
amount sufficient to meet the purchase price. Alternatively, the Fund may enter
into offsetting contracts for the forward sale of other securities that it owns.
The purchase of securities on a when-issued or forward commitment basis involves
a risk of loss if the value of the security to be purchased declines prior to
the settlement date. Although the Fund would generally purchase securities on a
when-issued or forward commitment basis with the intention of actually acquiring
securities for its portfolio, the Fund may dispose of a when-issued security or
forward commitment prior to settlement if the Adviser deems it appropriate to do
so.
OPTIONS -- The Fund may purchase and write (i.e., sell) call options and put
options on securities and indices, which options are traded on national
securities exchanges. A call option gives the purchaser the right to buy, and
obligates the writer of the option to sell, the underlying security at the
agreed upon exercise (or "strike") price during the option period. A put option
gives the purchaser the right to sell, and obligates the writer to buy, the
underlying security at the strike price during the option period. Purchasers of
options pay an amount, known as a premium, to the option writer in exchange for
the right under the option contract. Option contracts may be written with terms
that would permit the holder of the option to purchase or sell the underlying
security only upon the expiration date of the option. The initial purchase
(sale) of an option contract is an "opening transaction." In order to close out
an option position, the Fund may enter into a "closing transaction," the sale
(purchase) of an option contract on the same security with the same exercise
price and expiration date as the option contract originally opened.
The Fund may purchase put and call options in hedging transactions to protect
against a decline in the market value of the securities in the Fund (e.g., by
the purchase of a put option) and to protect against an increase in the cost of
fixed-income securities that the Fund may seek to purchase in the future (e.g.,
by the purchase of a call option). In the event that paying premiums for put and
call options, together with price movements in the underlying securities, are
such that exercise of the options would not be profitable for the Fund, losses
of the premiums paid may be offset by an increase in the value of the Fund's
securities (in the case of a purchase of put options) or by a decrease in the
cost of acquisition of securities by the Fund (in the case of a purchase of call
options).
The Fund also may write secured put and covered call options as a means of
increasing the yield on the Fund and as a means of providing limited protection
against decreases in market value of the Fund.
There are risks associated with options transactions, including the following:
(i) the success of a hedging strategy may depend on the ability of the Adviser
to predict movements in the prices of the individual securities, fluctuations in
markets and movements in interest rates; (ii) there may be an imperfect or no
correlation between the changes in market value of the securities held by the
Fund and the prices of options; (iii) there may not be a liquid secondary market
for options; and (iv) while the Fund will receive a premium when it writes
covered call options, it may not participate fully in a rise in the market value
of the underlying security. It is expected that the Fund will only engage in
option transactions with respect to permitted investments and related indices.
Generally, the policy of the Fund, in order to avoid the exercise of an option
sold by it, will be to cancel its obligation under the option by entering into a
closing purchase transaction, if available, unless selling (in the case of a
call option) or purchasing (in the case of a put option) the underlying
securities is determined to be in the Fund's interest. A closing purchase
transaction consists of the Fund purchasing an option having the same terms as
the option sold by the Fund, and has the effect of canceling the Fund's position
as a seller. The premium which the Fund will pay in executing a closing purchase
transaction may be higher (or lower) than the premium received when the option
was sold, depending in large part upon the relative price of the underlying
security at the time of each transaction. To the extent options sold by the Fund
are exercised and the Fund either delivers securities to the holder of a call
option or liquidates securities as a source of funds to purchase securities put
to the Fund, the Fund's turnover rate will increase, which would cause the Fund
to incur additional brokerage expenses.
19 PROSPECTUS
<PAGE>
During the option period, the Fund, as a covered call writer, gives up the
potential appreciation above the exercise price should the underlying security
rise in value, and the Fund, as a covered put writer, retains the risk of loss
should the underlying security decline in value. For the covered call writer,
substantial appreciation in the value of the underlying security would result in
the security being "called away" at the strike price of the option which may be
substantially below the fair market value of such security. For the covered put
writer, substantial depreciation in the value of the underlying security would
result in the security being "put to" the writer at the strike price of the
option which may be substantially in excess of the fair market value of such
security. If a covered call option or a covered put option expires unexercised,
the writer realizes a gain, and the buyer a loss, in the amount of the premium.
The SEC requires that obligations of investment companies such as the Fund, in
connection with option sale positions, must comply with certain segregation or
coverage requirements, which are more fully described in the Statement of
Additional Information.
The Fund will only write covered call options on its securities and will limit
such activities to provide that the aggregate market value of such options and
the Fund's obligations under such written puts does not exceed 25% of the Fund's
net assets as of the time such options are entered into by the Fund.
FUTURES CONTRACTS AND RELATED OPTIONS -- The Fund may enter into futures
contracts, options on futures contracts, index futures and options thereon that
are traded on an exchange regulated by the Commodities Futures Trading
Commission ("CFTC") if, to the extent that such futures and options are not for
"bona fide hedging purposes" (as defined by the CFTC), the aggregate initial
margin and premiums on such positions (excluding the amount by which options are
in the money) do not exceed 5% of the Fund's total assets at current value. The
Fund, however, may invest more than such amount for bona fide hedging purposes,
and also may invest more than such amount if it obtains authority to do so from
the appropriate regulatory agencies without rendering the Fund a commodity pool
operator or adversely affecting its status as an investment company for Federal
securities law or income tax purposes. However, the Fund may enter into futures
contracts and options on futures only to the extent that obligations under such
contracts or transactions, together with options on securities, represent not
more than 25% of the Fund's total assets.
The Fund may buy and sell futures contracts and related options to manage its
exposure to changing interest rates and security prices. Some futures
strategies, including selling futures, buying puts and writing calls, may reduce
the Fund's exposure to price fluctuations. Other strategies, including buying
futures, writing puts and buying calls, tend to increase market exposure.
Futures and options may be combined with each other in order to adjust the risk
and return characteristics of the overall portfolio. The Fund expects to enter
into these transactions to "lock in" a return or spread on a particular
investment or portion of its assets, to protect against any increase in the
price of securities the Fund anticipates purchasing at a later date, or for
other risk management strategies.
Options and futures can be volatile instruments, and involve certain risks. If
the Adviser applies a hedge at an inappropriate time or judges interest rates
incorrectly, options and futures strategies may lower the Fund's return. The
Fund could also experience losses if the prices of its options and futures
positions were poorly correlated with its other instruments, or if it could not
close out its positions because of an illiquid secondary market.
Typically, investment in these contracts requires the Fund to deposit with the
applicable exchange or other specified financial intermediary as a good faith
deposit for its obligations, known as "initial margin," an amount of cash or
specified debt securities which initially is 1%-15% of the face amount of the
contract and that thereafter fluctuates on a periodic basis as the value of the
contract fluctuates. Thereafter, the Fund must make additional deposits equal to
any net losses due to unfavorable price movements of the contract and will be
credited with an amount equal to any net gains due to favorable price movements.
These additional deposits or credits are calculated and required daily and are
known as "variation margin."
The SEC requires that when an investment company such as the Fund effects
transactions of the foregoing nature, it must either segregate cash or high
quality, readily marketable portfolio securities with its custodian in the
amount of its obligations under the foregoing transactions or must cover such
obligations by maintaining positions in portfolio securities, futures contracts
or options that would serve to satisfy or offset the risk of such obligations.
When effecting transactions of the foregoing nature, the Fund will comply with
such segregation or cover requirements. No limitation exists on the amount of
the Fund's assets that may be used to comply with such segregation or cover
requirements.
The Fund also may engage in straddles and spreads with respect to 5% of its
total assets. In a straddle transaction, the Fund either buys a call and a put
or sells a call and a put on the same security. In a spread, the Fund purchases
and sells a call or a put. The Fund will sell a straddle when the Adviser
believes the price of a security will be stable. The Fund will receive a premium
on the sale of the put and the call. A spread permits the Fund to make a hedged
investment that the price of a security will increase or decline.
SECURITIES OF FOREIGN ISSUERS -- The Fund may invest in securities of foreign
issuers to achieve income or capital appreciation. Foreign investments involve
risks that are different from investments in securities of U.S. issuers. These
risks may include future unfavorable political and economic developments,
possible withholding taxes, seizure of foreign deposits, currency controls,
interest limitations or other governmental restrictions which might affect
payment of principal or interest. Additionally, there may be less public
information available about foreign issuers. Foreign branches of foreign banks
are not regulated by
PROSPECTUS 20
<PAGE>
U.S. banking authorities and generally are not bound by accounting, auditing and
financial reporting standards comparable to U.S. banks. The Fund may invest in
commercial paper of foreign issuers and obligations of foreign branches of U.S.
banks, U.S. and London branches of foreign banks, and supranational entities
which are established through the joint participation of several governments
(e.g., the Asian Development Bank and the Inter-American Development Bank).
Securities of foreign issuers may include sponsored and unsponsored ADRs, which
are securities typically issued by a U.S. financial institution that evidence
ownership interests in a pool of securities issued by a foreign issuer. There
may be less information available on the foreign issuers of unsponsored ADRs
than on the issuers of sponsored ADRs. ADRs include American Depository Shares
and New York Shares.
DESCRIPTION OF RATINGS
The following descriptions are summaries of published ratings.
DESCRIPTION OF COMMERCIAL PAPER RATINGS
The following descriptions of commercial paper ratings have been published by
Standard & Poor's Corporation ("S&P"), Moody's Investors Service ("Moody's"),
Fitch's Investors Service ("Fitch"), Duff and Phelps ("Duff") and IBCA Limited
("IBCA"), respectively.
Commercial paper rated A by S&P is regarded by S&P as having the greatest
capacity for timely payment. Issues rated A are further refined by use of the
numbers 1+, 1, and 2 to indicate the relative degree of safety. Issues rated
A-1+ are those with an "overwhelming degree" of credit protection. Those rated
A-1 reflect a "very strong" degree of safety regarding timely payment. Those
rated A-2 reflect a high degree of safety regarding timely payment but not as
high as A-1.
Commercial paper issues rated Prime-1 and Prime-2 by Moody's are judged by
Moody's to be of the "highest" quality and "higher" quality, respectively, on
the basis of relative repayment capacity.
The rating Fitch-1 (Highest Grade) is the highest commercial rating assigned by
Fitch. Paper rated Fitch-1 is regarded as having the strongest degree of
assurance for timely payment. The rating Fitch-2 (Very Good Grade) is the second
highest commercial paper rating assigned by Fitch which reflects an assurance of
timely payment only slightly less in degree than the strongest issues.
The rating Duff-1 is the highest commercial paper rating assigned by Duff. Paper
rated Duff-1 is regarded as having very high certainty of timely payment with
excellent liquidity factors which are supported by ample asset protection. Risk
factors are minor. Paper rated Duff-2 is regarded as having good certainty of
timely payment, good access to capital markets and sound liquidity factors and
company fundamentals. Risk factors are small.
The designation A1 by IBCA indicates that the obligation is supported by a very
strong capacity for timely repayment. Those obligations rated A1+ are supported
by the highest capacity for timely repayment. Obligations rated A2 are supported
by a strong capacity for timely repayment, although such capacity may be
susceptible to adverse changes in business, economic or financial conditions.
SHORT-TERM DEBT RATINGS
Thomson BankWatch, Inc. ("TBW") ratings are based upon a qualitative and
quantitative analysis of all segments of the organization including, where
applicable, holding company and operating subsidiaries.
BankWatch-TM- Ratings do not constitute a recommendation to buy or sell
securities of any of these companies. Further, BankWatch does not suggest
specific investment criteria for individual clients.
The TBW Short-Term Ratings apply to commercial paper, other senior short-term
obligations and deposit obligations of the entities to which the rating has been
assigned.
The TBW Short-Term Ratings apply only to unsecured instruments that have a
maturity of one year or less.
The TBW Short-Term Ratings specifically assess the likelihood of an untimely
payment of principal or interest.
<TABLE>
<S> <C>
TBW-1 The highest category; indicates a very high
degree of likelihood that principal and interest
will be paid on a timely basis.
TBW-2 The second highest category; while the degree of
safety regarding timely repayment of principal
and interest is strong, the relative degree of
safety is not as high as for issues rated
"TBW-1."
TBW-3 The lowest investment grade category; indicates
that while more susceptible to adverse
developments (both internal and external) than
obligations with higher ratings, capacity to
service principal and interest in a timely
fashion is considered adequate.
TBW-4 The lowest rating category; this rating is
regarded as non-investment grade and therefore
speculative.
</TABLE>
DESCRIPTION OF CORPORATE BOND RATINGS
The following descriptions of S&P's and Moody's corporate bond ratings have been
published by S&P and Moody's, respectively.
Bonds rated AAA have the highest rating S&P assigns to a debt obligation. Such a
rating indicates an extremely strong capacity to pay principal and interest.
Bonds rated AA also qualify as high-quality debt obligations. Capacity to pay
principal and interest is very strong, and in the majority of instances they
differ from AAA issues only in a small degree. Debt rated A has a strong
capacity to pay interest and repay principal although it is
21 PROSPECTUS
<PAGE>
somewhat more susceptible to the adverse effects of changes in circumstances and
economic conditions than debt in higher rated categories.
Bonds that are rated Aaa by Moody's are judged to be of the best quality. They
carry the smallest degree of investment risk and are generally referred to as
"gilt edge." Interest payments are protected by a large, or an exceptionally
stable, margin and principal is secure. While the various protective elements
are likely to change, such changes as can be visualized are most unlikely to
impair the fundamentally strong position of such issues.
Bonds rated Aa by Moody's are judged by Moody's to be of high quality by all
standards. Together with bonds rated Aaa, they comprise what are generally known
as high-grade bonds. They are rated lower than the best bonds because margins of
protection may not be as large as in Aaa securities or fluctuation of protective
elements may be of greater amplitude or there may be other elements present that
make the long-term risks appear somewhat larger than in Aaa securities.
Bonds that are rated A possess many favorable investment attributes and are to
be considered as upper-medium grade obligations. Factors giving security to
principal and interest are considered adequate, but elements may be present
which suggest a susceptibility to impairment sometime in the future.
PERFORMANCE
From time to time, the Fund may advertise yield, total return and/or
distribution rate. These figures will be based on historical earnings and are
not intended to indicate future performance. The yield of the Fund refers to the
annualized income generated by an investment in the Fund over a specified 30-day
period. The yield is calculated by assuming that the income generated by the
investment during that period is generated over a one-year period and is shown
as a percentage of the investment.
Total return is the change in value of an investment in the Fund over a given
period, assuming reinvestment of any dividends and capital gains. A cumulative
total return reflects an actual rate of return over a stated period of time. An
average annual total return is a hypothetical rate of return that, if achieved
annually, would have produced the same cumulative total return if performance
had been constant over the entire period. Average annual total returns smooth
out variations in performance; they are not the same as actual year-by-year
results.
The distribution rate is computed by dividing the total amount of the dividends
per share paid out during the past period by the maximum offering price or
month-end net asset value depending on the class of the Fund. This figure is
then "annualized" (multiplied by 365 days and divided by the applicable number
of days in the period). Funds with a front-end sales charge would incorporate
the offering price into the distribution yield in place of month-end net asset
value.
Distribution rate is a measure of the level of income paid out in cash to
Shareholders over a specified period. It differs from yield and total return and
is not intended to be a complete measure of performance. Furthermore, the
distribution rate may include return of principal and/or capital gains. Total
return is the change in value of a hypothetical investment over a given period
assuming reinvestment of dividends and capital gain distributions. The yield
refers to the cumulative 30-day rolling net investment income, divided by
maximum offering price and multiplied by average shares outstanding during this
period. See the Statement of Additional Information.
The Trust will include information on all classes of the Fund in any
advertisement or information containing performance data for the Fund. The
performance of Fiduciary Class shares may be higher than for Class A shares and
Class B shares because Fiduciary Class shares are not subject to sales charges
and distribution expenses.
The performance of each class of the Fund may from time to time be compared to
that of other mutual funds tracked by mutual fund rating services, to that of
broad groups of comparable mutual funds or to that of unmanaged indices that may
assume investment of dividends but do not reflect deductions for administrative
and management costs. In addition, the performance of each class of the Fund may
be compared to other funds or to relevant indices that may calculate total
return without reflecting sales charges; in which case, the Fund may advertise
its total return in the same manner. If reflected, sales charges would reduce
these total return calculations.
TAXES
The following summary of Federal income tax consequences is based on current tax
laws and regulations, which may be changed by legislative, judicial, or
administrative action. No attempt has been made to present a complete
explanation of the Federal, state, local or foreign tax treatment of the Fund or
its Shareholders. Accordingly, Shareholders are urged to consult their tax
advisers regarding specific questions as to the tax consequences of investing in
the Fund.
TAX STATUS OF THE FUND
The Fund is treated as a separate entity for Federal income tax purposes and is
not combined with the Trust's other funds. The Fund intends to qualify as a
"regulated investment company" for Federal income tax purposes and to meet all
other requirements that are necessary for it to be relieved of Federal taxes on
that part of its net investment income and net capital gains (the excess of net
long-term capital gain over net short-term capital loss) that is distributed to
Shareholders.
TAX STATUS OF DISTRIBUTIONS
The Fund will distribute substantially all of its net investment income
(including, for this purpose, net short-term capital gain) to Shareholders of
each class of shares of the Fund on at least an annual basis. Generally,
dividends from net investment income will be taxable to Shareholders as ordinary
income whether received in cash or in additional shares, and any net capital
gains
PROSPECTUS 22
<PAGE>
will be distributed at least annually and will be taxed to Shareholders as
long-term capital gains, regardless of how long the Shareholder has held shares.
Distributions by the Fund to retirement plans that qualify for tax-exempt
treatment under the Code ("qualified retirement plans") will not be taxable. The
Federal tax treatment of qualified retirement plans, as well as distributions
from such plans, is governed by specific provisions of the Code. If shares are
held by a retirement plan that ceases to qualify for tax-exempt treatment under
the Code or by an individual who has received such shares as a distribution from
a retirement plan, the Fund's distributions will be taxable to such plan or
individual as described in the preceding paragraph. Persons considering
directing the investment of their qualified retirement plan account in the Fund
and qualified retirement plan trusts considering purchasing such shares, should
consult their tax advisers for a more complete explanation of the Federal tax
consequences, and for an explanation of the state, local and (if applicable)
foreign tax consequences of making such an investment.
The Fund will make annual reports to Shareholders of the Federal income tax
status of all distributions.
Certain securities purchased by the Fund (such as STRIPS, CUBES, TRS, TIGRS and
CATS), as defined in the "Description of Permitted Investments," are sold at
original issue discount and thus do not make periodic cash interest payments.
The Fund will be required to include as part of its current income the imputed
interest on such obligations even though the Fund has not received any interest
payments on such obligations during that period. Because the Fund distributes
substantially all of its net investment income to its Shareholders (including
such imputed interest), the Fund may have to sell portfolio securities in order
to generate the cash necessary for the required distributions. Such sales may
occur at a time when the Adviser would not have chosen to sell such securities
and may result in a taxable gain or loss.
Dividends declared by the Fund in October, November or December of any year and
payable to Shareholders of record on a date in such a month will be deemed to
have been paid by the Fund and received by Shareholders on December 31 of that
year, if paid by the Fund at any time during the following January.
The Fund intends to make sufficient distributions prior to the end of each
calendar year to avoid liability for Federal excise tax.
Dividends received by a Shareholder that are derived from the Fund's investments
in U.S. government obligations may not be entitled to the exemptions from state
and local income taxes that would be available if the Shareholder had purchased
U.S. government obligations directly. The Fund will inform Shareholders annually
of the percentage of income and distributions derived from U.S. government
obligations. Shareholders should consult their tax advisers regarding the state
and local tax treatment of the dividends received from the Fund.
The Fund may be subject to foreign withholding taxes on income derived from
obligations of foreign issuers . The Fund will not be able to elect to treat
Shareholders as having paid their proportionate share of such foreign taxes.
Sale, exchange, or redemption of Fund shares by a Shareholder will generally be
a taxable event to such Shareholder.
23 PROSPECTUS
<PAGE>
Investment Adviser and Sub-Administrator
Banc One Investment Advisors Corporation
774 Park Meadow Road
Columbus, OH 43271-0211
Distributor
The One Group-Registered Trademark- Services Company
3435 Stelzer Road
Columbus, OH 43219
Administrator
The One Group-Registered Trademark- Services Company
3435 Stelzer Road
Columbus, OH 43219
Transfer Agent and Custodian
State Street Bank and Trust Company
P.O. Box 8500
Boston, MA 02266-8500
Legal Counsel
Ropes & Gray
One Franklin Square
1301 K Street, N.W. Suite 800 East
Washington, D.C. 20005
Independent Accountants
Coopers & Lybrand L.L.P.
100 East Broad Street
Columbus, OH 43215
TOG-F-062
<PAGE>
THE ONE GROUP-REGISTERED TRADEMARK- GULF SOUTH GROWTH FUND PROSPECTUS
- --------------------------------------------------------------------------------
Investment Adviser: BANC ONE INVESTMENT ADVISORS CORPORATION
The One Group-Registered Trademark- (the "Trust") is a mutual fund seeking to
provide a convenient and economical means of investing in one or more
professionally managed portfolios of securities. This Prospectus relates to The
One Group-Registered Trademark- Gulf South Growth Fund Class A, Class B and
Fiduciary Class shares.
THE ONE GROUP-REGISTERED TRADEMARK- GULF SOUTH GROWTH FUND (THE "FUND") SEEKS
LONG-TERM CAPITAL GROWTH BY INVESTMENT IN A PORTFOLIO OF EQUITY SECURITIES OF
SMALL CAPITALIZATION, EMERGING GROWTH AND MEDIUM CAPITALIZATION COMPANIES WHICH
ARE EITHER HEADQUARTERED IN OR WHOSE PRIMARY MARKET IS IN THE SOUTHEASTERN
REGION OF THE UNITED STATES.
CLASS A AND CLASS B SHARES ARE OFFERED TO THE GENERAL PUBLIC.
FIDUCIARY CLASS SHARES ARE OFFERED TO INSTITUTIONAL INVESTORS, INCLUDING
AFFILIATES OF BANC ONE CORPORATION AND ANY BANK, DEPOSITORY INSTITUTION,
INSURANCE COMPANY, PENSION PLAN OR OTHER ORGANIZATION AUTHORIZED TO ACT IN
FIDUCIARY, ADVISORY, AGENCY, CUSTODIAL OR SIMILAR CAPACITIES (EACH AN
"AUTHORIZED FINANCIAL ORGANIZATION").
THE TRUST'S SHARES ARE NOT DEPOSITS OR OBLIGATIONS OF, OR ENDORSED OR GUARANTEED
BY BANC ONE CORPORATION OR ITS BANK OR NON-BANK AFFILIATES. THE TRUST'S SHARES
ARE NOT INSURED OR GUARANTEED BY THE FEDERAL DEPOSIT INSURANCE CORPORATION OR BY
ANY OTHER GOVERNMENTAL AGENCY OR GOVERNMENT SPONSORED AGENCY OF THE FEDERAL
GOVERNMENT OR ANY STATE. AN INVESTMENT IN MUTUAL FUND SHARES INVOLVES INVESTMENT
RISKS, INCLUDING THE POSSIBLE LOSS OF THE PRINCIPAL AMOUNT INVESTED. BANC ONE
INVESTMENT ADVISORS CORPORATION RECEIVES FEES FROM THE FUND FOR INVESTMENT
ADVISORY AND OTHER SERVICES.
This Prospectus sets forth concisely the information about the Trust that a
prospective investor should know before investing. Investors are advised to read
this Prospectus and retain it for future reference. A Statement of Additional
Information dated [ ] has been filed with the Securities and
Exchange Commission and is available without charge through the Distributor, The
One Group Services Company, 3435 Stelzer Road, Columbus, OH 43219 or by calling
1-800-480-4111 during business hours. The Statement of Additional Information is
incorporated into this Prospectus by reference.
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED UPON THE
ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A
CRIMINAL OFFENSE.
[ ]
<PAGE>
TABLE OF CONTENTS
<TABLE>
<S> <C>
SUMMARY.......................................................................................... 3
ABOUT THE FUND................................................................................... 4
Expense Summary................................................................................ 4
The Fund....................................................................................... 6
Investment Objective........................................................................... 6
Investment Policies............................................................................ 6
HOW TO DO BUSINESS WITH THE ONE GROUP-REGISTERED TRADEMARK-...................................... 7
How to Invest in The One Group-Registered Trademark-........................................... 7
Alternative Sales Arrangements................................................................. 10
Exchanges...................................................................................... 11
Redemptions.................................................................................... 12
FUND MANAGEMENT.................................................................................. 13
The Adviser.................................................................................... 13
The Distributor................................................................................ 14
The Administrator.............................................................................. 14
The Transfer Agent and Custodian............................................................... 15
Counsel and Independent Accountants............................................................ 15
OTHER INFORMATION................................................................................ 15
The Trust...................................................................................... 15
Other Investment Policies...................................................................... 16
Description of Permitted Investments........................................................... 17
Description of Ratings......................................................................... 21
Performance.................................................................................... 22
Taxes.......................................................................................... 23
</TABLE>
PROSPECTUS 2
<PAGE>
SUMMARY
The One Group-Registered Trademark- (the "Trust") is an open-end management
investment company that provides a convenient way to invest in professionally
managed portfolios of securities. The following provides basic information about
the Class A, Class B and Fiduciary Class shares of The One Group-Registered
Trademark- Gulf South Growth Fund.
WHAT IS THE INVESTMENT OBJECTIVE? The Fund seeks long-term capital growth by
investment in a portfolio of equity securities of small capitalization, emerging
growth and medium capitalization companies which are either headquartered in or
whose primary market is in the southeastern region of the United States. See
"Investment Objective."
WHAT ARE THE PERMITTED INVESTMENTS? The Fund will invest primarily in common
stocks, debt securities, preferred stock, convertible securities, warrants and
other equity securities of the types of companies described in the investment
objective. Equity securities such as those in which the Fund may invest are more
volatile and carry more risk than some other forms of investment. Accordingly,
the net asset value per share of the Fund may decrease over time. The Fund may
only invest in a select few derivatives; their characteristics and limitations
on their use are more fully described in "Description of Permitted Investments."
There are many different types of derivative securities with varying degrees of
potential risk and return. See "Investment Policies."
WHO IS THE ADVISER? Banc One Investment Advisors Corporation, an indirect
subsidiary of BANC ONE CORPORATION, serves as the Adviser of the Trust. The
Adviser is entitled to a fee for advisory services provided to the Trust. The
Adviser may voluntarily agree to waive a part of its fees. See "The Adviser" and
"Expense Summary."
WHO IS THE ADMINISTRATOR? The One Group Services Company serves as the
Administrator of the Trust. The Administrator is entitled to a fee for services
provided to the Trust. Banc One Investment Advisors Corporation serves as the
Sub-Administrator of the Trust, pursuant to an agreement with the Administrator
for which Banc One Investment Advisors Corporation receives a fee paid by the
Administrator. See "The Administrator" and "Expense Summary."
WHO IS THE TRANSFER AGENT AND CUSTODIAN? State Street Bank and Trust Company
serves as Transfer Agent and Custodian for the Trust for which services it
receives a fee. Bank One Trust Company, N.A. serves as Sub-Custodian for the
Trust, for which services it receives a fee. See "The Transfer Agent and
Custodian."
WHO IS THE DISTRIBUTOR? The One Group Services Company acts as Distributor of
the Trust's shares. The Distributor is entitled to fees for distribution
services for the Class A and Class B shares of the Fund. No compensation is paid
to the Distributor for distribution services for the Fiduciary Class shares of
the Fund. See "The Distributor."
HOW DO I PURCHASE AND REDEEM SHARES? Purchases and redemptions of shares of the
Fund may be made through the Distributor on any day that the New York Stock
Exchange is open for trading ("Business Days"). See "How to Invest in The One
Group-Registered Trademark-" and "Redemptions."
HOW ARE DIVIDENDS PAID? Substantially all of the net investment income
(exclusive of capital gains) of the Fund is declared on the last Business Day of
each month as a dividend for Shareholders of record as of the close of business
on that day and is distributed in the form of periodic dividends to such
Shareholders of the Fund on the first Business Day of each month. Any capital
gains are distributed at least annually. Distributions are paid in additional
shares of the same class unless the Shareholder elects to take the payment in
cash. See "Dividends."
3 PROSPECTUS
<PAGE>
ABOUT THE FUND
EXPENSE SUMMARY -- THE ONE GROUP-REGISTERED TRADEMARK- GULF SOUTH GROWTH FUND
<TABLE>
<CAPTION>
FIDUCIARY
CLASS A CLASS B CLASS
- ----------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
SHAREHOLDER TRANSACTION EXPENSES(1)
Maximum Sales Charge Imposed on Purchases
(as a percentage of offering price).................................... 4.50% none none
Maximum Contingent Deferred Sales Charge
(as a percentage of original purchase price or redemption proceeds, as
applicable)............................................................ none 5.00% none
Redemption Fees.......................................................... none none none
Exchange Fees............................................................ none none none
ANNUAL OPERATING EXPENSES(2)
(as a percentage of average daily net assets)
Investment Advisory Fees(4).............................................. .65% .65% .65%
12b-1 Fees (after fee waiver)(3)......................................... .25% 1.00% none
Other Expenses........................................................... .32% .32% .32%
- ----------------------------------------------------------------------------------------------------------------
Total Operating Expenses(4).............................................. 1.22% 1.97% .97%
- ----------------------------------------------------------------------------------------------------------------
</TABLE>
(1) A person who purchases shares through an account with a financial
institution or broker-dealer may be charged separate transaction fees by the
financial institution or broker-dealer. In addition, a wire redemption
charge, currently $7.00, is deducted from the amount of a wire redemption
payment made at the request of a Shareholder.
(2) The expense information in the table has been restated to reflect current
fees that would have been applicable had they been in effect during the
previous fiscal year.
(3) Absent the voluntary waiver of fees under the Trust's Distribution and
Shareholder Services Plans, 12b-1 fees (as a percentage of average daily net
assets) would be .35% for Class A shares. There are no 12b-1 fees charged to
Fiduciary Class shares. See "The Distributor." The 12b-1 fees include a
Shareholder servicing fee of .25% of the average daily net assets of the
Fund's Class B shares and may include a Shareholder servicing fee of .25% of
the average daily net assets of the Fund's Class A shares.
(4) Investment Advisory Fees and Total Operating Expenses have been revised to
reflect fee waivers effective as of the date of this Prospectus. The Adviser
may voluntarily agree to waive a part of its fees. Absent this voluntary
reduction, Investment Advisory Fees would be .74% for all classes of shares,
and Total Operating Expenses would be 1.41% for Class A shares, 2.06% for
the Class B shares and 1.06% for the Fiduciary Class Shares.
PROSPECTUS 4
<PAGE>
EXAMPLE: An investor would pay the following expenses on a $1,000 investment in
Class A and Fiduciary Class shares of the Fund, assuming: (1) imposition of the
maximum sales charge for Class A shares; (2) 5% annual return; and (3)
redemption at the end of each time period.
<TABLE>
<CAPTION>
- --------------------------------------------------------------
1 YEAR 3 YEARS
- --------------------------------------------------------------
<S> <C> <C>
Class A $ 57 $ 82
Fiduciary Class $ 10 $ 31
</TABLE>
Absent the voluntary reduction of 12b-1 fees, the dollar amounts in the above
example would be as follows:
<TABLE>
<CAPTION>
- --------------------------------------------------------------
1 YEAR 3 YEARS
- --------------------------------------------------------------
<S> <C> <C>
Class A $ 59 $ 88
Fiduciary Class $ 11 $ 34
- --------------------------------------------------------------
- --------------------------------------------------------------
</TABLE>
EXAMPLE: An investor would pay the following expenses on a $1,000 investment in
Class B shares, assuming: (1) deduction of the applicable maximum Contingent
Deferred Sales Charge; and (2) 5% annual return.
<TABLE>
<CAPTION>
- --------------------------------------------------------------
1 YEAR 3 YEARS
- --------------------------------------------------------------
<S> <C> <C>
Assuming a complete redemption at end of
period $ 70 $ 92
Assuming no redemption $ 20 $ 62
</TABLE>
Absent voluntary reduction of fees, the dollar amounts in the above example
would be as follows:
<TABLE>
<CAPTION>
- --------------------------------------------------------------
1 YEAR 3 YEARS
- --------------------------------------------------------------
<S> <C> <C>
Assuming a complete redemption at end of
period $ 71 $ 95
Assuming no redemption $ 21 $ 65
- --------------------------------------------------------------
- --------------------------------------------------------------
</TABLE>
THESE EXAMPLES SHOULD NOT BE CONSIDERED A REPRESENTATION OF PAST OR FUTURE
EXPENSES AND ACTUAL EXPENSES MAY BE GREATER OR LESS THAN THOSE SHOWN. The
purpose of these tables is to assist the investor in understanding the various
costs and expenses that may be directly or indirectly borne by investors in the
Trust.
The rules of the Securities and Exchange Commission (the "SEC") require that the
maximum sales charge be reflected in the above table. However, investors in the
Fund ("Shareholders") may, under certain circumstances, qualify for reduced
sales charges. See "How to Invest in The One Group-Registered Trademark-."
Long-term Shareholders of Class A shares and Class B shares may pay more than
the equivalent of the maximum front-end sales charges otherwise permitted by the
National Association of Securities Dealers' Rules.
5 PROSPECTUS
<PAGE>
THE FUND
The One Group-Registered Trademark- Gulf South Growth Fund (the "Fund") is part
of The One Group-Registered Trademark- (the "Trust"), which is an open-end
management investment company that offers units of beneficial interest
("shares") in 32 separate funds and different classes of certain of the funds.
This Prospectus relates to the Class A, Class B and Fiduciary Class shares of
The One Group-Registered Trademark- Gulf South Growth Fund which provide for
variations in distribution costs, voting rights, dividends and per share net
asset value pursuant to a multiple class plan (the "Multiple Class Plan")
adopted by the Board of Trustees of the Trust. Except for these differences
among classes, each share of the Fund represents an undivided, proportionate
interest in the Fund. The Fund is a non-diversified mutual fund. Information
regarding the Trust's other funds and their classes is contained in separate
prospectuses which may be obtained from the Trust's Distributor, The One Group
Services Company, 3435 Stelzer Road, Columbus, OH 43219 or by calling
1-800-480-4111.
INVESTMENT OBJECTIVE
The Fund seeks long-term capital growth by investing in a portfolio of equity
securities of small-capitalization, emerging growth and medium capitalization
companies, which are either headquartered in or whose primary market is in the
southeastern region of the United States.
The investment objective of the Fund is fundamental and may not be changed
without a vote of the holders of a majority of the Fund's outstanding shares (as
defined in the Statement of Additional Information).
There is no assurance that the Fund will meet its investment objective.
INVESTMENT POLICIES
The investment policies of the Fund may be changed without an affirmative vote
of the holders of a majority of the Fund's outstanding shares unless a policy is
expressly deemed to be fundamental or is expressly deemed to be changeable only
by such a majority vote.
PERMISSIBLE INVESTMENTS
The Fund pursues its objective by investing primarily in a portfolio of common
stocks, debt securities, preferred stocks, convertible securities, warrants and
other equity securities of small capitalization, emerging growth and medium
capitalization growth companies, which are either headquartered in or whose
primary market is in the southeastern region of the United States. In the
Adviser's opinion, small to medium capitalization companies in general and those
located in the southeast in particular will provide above average investment
performance over the long term as they grow and become more recognized by the
investment community.
Dividend income, if any, is a consideration incidental to the Fund's objective
of capital growth.
The Adviser anticipates that the Fund's portfolio will normally consist of
securities of approximately twenty-five to sixty emerging growth companies from
Virginia, North Carolina, South Carolina, Florida, Georgia, Tennessee, Alabama,
Mississippi, Arkansas, Louisiana, Kentucky and Texas. In selecting portfolio
securities for the Fund, the Adviser analyzes emerging growth companies whose
securities have been analyzed by several regional brokerage firms. Stock
selection is guided by a company's earnings forecasts over a one to two year
period, as well as by its financial strength. In addition, on an ongoing basis,
the Adviser reviews a stock's current valuation relative to (1) the entire stock
market, (2) that of other companies in the same industry, and (3) its recent and
expected earnings growth rate. It is expected that companies selected would
generally have market capitalizations ranging from $50,000,000 to
$2,000,000,000, although the Fund may occasionally hold securities of companies
whose market capitalizations are considerably larger if doing so contributes to
the Fund's investment objective. Companies selected would also be expected to
show earnings growth over time that is well above the growth rate of the overall
economy and the rate of inflation.
As a matter of non-fundamental policy, the Fund will ordinarily invest at least
65% of the value of its total assets in securities with the characteristics
described above. Although the Fund intends to invest all of its assets in such
securities, up to 35% of its total assets may be held in cash or invested in
U.S. Government Securities, other investment grade fixed-income securities and
cash equivalents, when the Adviser's assessment of the attractiveness of the
entire stock market and individual market sectors changes.
The Fund may also enter into futures contracts, provided that the value of these
contracts does not exceed 25% of the Fund's total assets. In addition, the Fund
may write covered call options on securities it owns and enter into related
closing purchase transactions when such activity will further the Fund's
investment objective, and may also engage in other options transactions in
furtherance of its investment objective. The balance of the Fund's assets will
be held in cash equivalents rated within one of the highest two rating
categories assigned by at least one nationally recognized statistical rating
organization ("NRSRO"), which categories are described below in "Description of
Ratings," at the time of investment or, if unrated, to be of comparable quality.
In addition to the permissible investments described above, the Fund may invest
in U.S. Treasury obligations, including Separately Traded Registered Interest
and Principal Securities ("STRIPS") and Coupon Under Book Entry Safekeeping
("CUBES"), receipts, including Treasury Receipts ("TRS"), Treasury Investment
Growth Receipts ("TIGRS"), and Certificates of Accrual on Treasury Securities
("CATS"), certificates of deposit, time deposits, mortgage-backed securities,
zero coupon obligations, U.S. government agency securities, repurchase
agreements, reverse repurchase agreements, securities of other investment
companies, when-issued securities, forward commitments, options, futures
contracts, and options on futures contracts. The Fund may also invest in
variable and floating rate
PROSPECTUS 6
<PAGE>
notes, bankers' acceptances, commercial paper and securities of foreign issuers,
including sponsored and unsponsored American Depository Receipts ("ADRs"). The
Fund may also engage in securities lending transactions. All of the Fund's
investments, where applicable, must possess one of the ratings described below
in the "Description of Ratings" at the time of investment or, if unrated, to be
of comparable quality.
This list of permissible investments includes select securities that may be
commonly considered to be derivatives, including: options, futures contracts and
options on futures contracts. These securities and limitations on their use are
more fully described in the "Description of Permitted Investments."
For a description of the Fund's permitted investments, see "Description of
Permitted Investments." For a description of permitted investments for temporary
defensive purposes, see "Temporary Defensive Position."
DIVERSIFICATION AND CONCENTRATION
The Fund is a "non-diversified" investment company and, accordingly, is not
limited in the proportion of its assets that may be invested in securities of a
single issuer. However, the Fund intends to conduct its operations so as to
qualify as a "regulated investment company" for purposes of the Internal Revenue
Code of 1986, as amended (the "Code"). To so qualify, the Fund, along with
satisfying other requirements, will limit its investments so that, at the close
of each quarter of the taxable year, (i) at least 50% of the market value of the
Fund's total assets will be invested in cash, cash items, U.S. government
securities and other securities that are, for purposes of this requirement,
limited in respect of a single issuer to an amount not greater in market value
than 5% of the market value of its total assets and to not more than 10% of the
outstanding voting securities of a single issuer; and (ii) not more than 25% of
the market value of the Fund's total assets will be invested in the securities
(other than U.S. government securities or the securities of other regulated
investment companies) of a single issuer.
As a matter of nonfundamental policy, the Fund will not concentrate in any
industry.
RISK FACTORS
Changes in the value of portfolio securities will not affect cash income, if
any, derived from these securities but will affect the Fund's net asset value.
Because the Fund invests primarily in equity securities, which fluctuate in
value, the Fund's shares will fluctuate in value. Because the Fund is
non-diversified, its share price may be subject to greater fluctuations as a
result of changes in an issuer's financial condition or the market's assessment
of an individual issuer.
Smaller, less seasoned companies may be subject to greater business risk than
larger, established companies. They may be more vulnerable to changes in
economic conditions, specific industry conditions, market fluctuations and other
factors affecting the profitability of companies. Therefore, the stock price of
smaller capitalization companies may be subject to greater price fluctuations
than that of larger, established companies. Due to these and other risk factors,
the price movement of the securities held by the Fund may be volatile and the
net asset value of a share of the Fund may fluctuate.
Certain investment management techniques that the Fund may use, such as the
purchase and sale of futures, options and forward commitments, could expose the
Fund to potentially greater risk of loss than more traditional equity
investments.
Investments in securities of foreign issuers may involve greater risks than are
present in U.S. investments. In general, issuers in many foreign countries are
not subject to accounting, auditing and financial reporting standards, practices
and requirements comparable to those applicable to U.S. companies. There is
generally less information publicly available about, and less regulation of,
foreign issuers than U.S. companies. Transaction costs are generally higher for
investments in foreign issuers. Securities of some foreign companies are less
liquid, and their prices are more volatile, than securities of comparable U.S.
companies. Settlement of transactions in some foreign markets may be delayed or
may be less frequent than in the United States, which could adversely affect the
liquidity of the Fund. In addition, with respect to some foreign countries,
there are the possibilities of expropriation or confiscatory taxation, the
imposition of additional taxes or tax withholding, limitations on the removal of
securities, property or other assets of the Fund, political or social
instability, and diplomatic developments, which could affect the value of
investments in those countries.
For additional information on each of the Fund's permitted investments and
associated risks, see "Description of Permitted Investments."
HOW TO DO BUSINESS WITH
THE ONE GROUP-REGISTERED TRADEMARK-
HOW TO INVEST IN THE ONE GROUP-REGISTERED TRADEMARK-
Shares of the Fund are sold on a continuous basis and may be purchased directly
from the Trust's Distributor, The One Group Services Company by mail, by
telephone, or by wire. Shares may also be purchased through a financial
institution, such as a bank, savings and loan association or insurance company
(each a "Shareholder Servicing Agent"), that has established a Shareholder
servicing agreement with the Distributor or through a broker-dealer that has
established a dealer agreement with the Distributor.
Purchases and redemptions of shares of the Fund may be made on any day that the
New York Stock Exchange is open for trading ("Business Days"). The minimum
initial and subsequent investments in the Fund are $1,000 and $100, respectively
($100 and $25, respectively, for employees of BANC ONE CORPORATION and its
affiliates). Initial and subsequent investment minimums may be waived at the
Distributor's discretion. Investors may purchase up to a maximum of $250,000 of
Class B shares per individual purchase order.
7 PROSPECTUS
<PAGE>
Class A and Class B shares are offered to the general public. Fiduciary Class
shares are offered to institutional investors, including affiliates of BANC ONE
CORPORATION and any bank, depository institution, insurance company, pension
plan or other organization authorized to act in fiduciary, advisory, agency,
custodial or similar capacities (each an "Authorized Financial Organization").
For additional details regarding eligibility, call the Distributor at
1-800-480-4111.
BY MAIL
Investors may purchase Class A and Class B shares of the Fund by completing and
signing an Account Application Form and mailing it, along with a check (or other
negotiable bank instrument or money order) payable to "The One Group-Registered
Trademark-," to State Street Bank and Trust Company (the Trust's Transfer Agent
and Custodian), P.O. Box 8500, Boston, MA 02266-8500. Subsequent purchases of
shares may be made at any time by mailing a check to the Transfer Agent. Account
Application Forms are available through the Distributor by calling
1-800-480-4111.
Purchases of Fiduciary Class shares and Class A shares that are being offered to
investors in certain retirement plans such as 401(k) and similar plans, other
than Individual Retirement Accounts, are made by an institutional investor
and/or other intermediary on behalf of an investor (each also a "Shareholder
Servicing Agent"). The Shareholder Servicing Agent may require an investor to
complete forms in addition to the Account Application Form and to follow
procedures established by the Shareholder Servicing Agent. Such Shareholders
should contact their Shareholder Servicing Agents regarding purchases, exchanges
and redemptions of shares. See "Additional Information Regarding Purchases."
BY TELEPHONE OR BY WIRE
Once an Account Application Form has been received, Shareholders are eligible to
make purchases by telephone or wire (if that option has been selected by a
Shareholder) by calling the Transfer Agent at 1-800-480-4111 or their
Shareholder Servicing Agents, if applicable.
Shareholders may revoke their automatic eligibility to make purchases and/or
redemptions by telephone or by wire, by sending a letter so stating to the
Transfer Agent, State Street Bank and Trust Company, P.O. Box 8500, Boston, MA
02266-8500.
SYSTEMATIC INVESTMENT PLAN
Class A and Class B investors may make automatic monthly investments in the Fund
from their bank, savings and loan or other depository institution accounts. The
minimum initial and subsequent investments must be $25 under the Systematic
Investment Plan, which minimum may be waived at the discretion of the
Distributor. The Trust pays the costs associated with these transfers, but
reserves the right, upon thirty days' written notice, to impose reasonable
charges for this service. A depository institution may impose a charge for
debiting an investor's account, which would reduce the investor's return from an
investment in the Fund.
FUND-DIRECT IRA
The Trust offers a tax-advantaged retirement plan for which shares of the Fund
may be an appropriate investment. The Trust's retirement plan allows
participants to defer taxes while helping them build their retirement savings.
The One Group-Registered Trademark-'s Fund-Direct IRA is a retirement plan with
a wide choice of investments, offering people with earned income the opportunity
to compound earnings on a tax-deferred basis. An IRA Adoption Agreement may be
obtained by calling the Distributor at 1-800-480-4111.
ADDITIONAL INFORMATION REGARDING PURCHASES
A purchase order will be effective as of the day received by the Distributor if
the Distributor receives the order before 4:00 p.m., eastern time. However, an
order may be canceled if the Transfer Agent does not receive Federal funds
before close of business on the next Business Day for Fiduciary Class shares,
and before the close of business on the third Business Day for Class A and Class
B shares, and the investor could be liable for any fees or expenses incurred by
the Trust. Federal funds are monies credited to a bank's account with a Federal
Reserve Bank. The purchase price of shares of the Fund is the net asset value
next determined after a purchase order is effected plus any applicable sales
charge (the "offering price"). The net asset value per share of the Fund is
determined by dividing the total market value of the Fund's investments and
other assets allocable to a class, less any liabilities allocable to that class,
by the total number of outstanding shares of such class. Net asset value per
share is determined daily as of 4:00 p.m., eastern time, on each Business Day.
For a further discussion of the calculation of net asset value, see the
Statement of Additional Information. Shares may also be issued in transactions
involving the acquisition by the Fund of securities held by collective
investment funds sponsored and administered by affiliates of the Adviser.
Purchases will be made in full and fractional shares of the Fund calculated to
three decimal places. Although the methodology and procedures are identical, the
net asset value per share of classes within the Fund may differ because the
distribution fees and expenses charged to Class A shares and Class B shares are
not charged to Fiduciary Class shares.
The Trust reserves the right to reject a purchase order when the Distributor
determines that it is not in the best interest of the Trust and/or its
Shareholders to accept such order. Except as provided below, neither the Trust's
Transfer Agent, the Distributor, the Adviser nor the Trust will be responsible
for any loss, liability, cost or expense for acting upon telephone or wire
instructions, and the investor will bear all risk of loss. The Trust will employ
reasonable procedures to confirm that instructions communicated by telephone are
genuine, including requiring a form of personal identification prior to acting
upon instructions received by telephone and recording telephone instructions. If
such procedures are not employed, the Trust may be liable for any losses due to
unauthorized or fraudulent instructions.
Fiduciary Class shares offered to institutional investors and investors in
certain retirement plans, and Class A shares that
PROSPECTUS 8
<PAGE>
are being offered to investors in certain retirement plans such as 401(k) and
similar plans, other than Individual Retirement Accounts, will normally be held
in the name of the Shareholder Servicing Agent effecting the purchase on the
Shareholder's behalf, and it is the Shareholder Servicing Agent's responsibility
to transmit purchase orders to the Distributor. A Shareholder Servicing Agent
may impose an earlier cut-off time for receipt of purchase orders directed
through it to allow for processing and transmittal of these orders to the
Distributor for effectiveness the same day. The Shareholder should contact his
or her Shareholder Servicing Agent for information as to the Shareholder
Servicing Agent's procedures for transmitting purchase, exchange or redemption
orders to the Trust. A Shareholder who desires to transfer the registration of
shares beneficially owned by him or her, but held of record by a Shareholder
Servicing Agent, should contact the Shareholder Servicing Agent to accomplish
such change. Other Shareholders who desire to transfer the registration of their
shares should contact the Transfer Agent.
No certificates representing the shares of the Fund will be issued. In
communications to Shareholders, the Fund will not duplicate mailings of Fund
material to Shareholders who reside at the same address.
SALES CHARGE
The following table shows the initial sales charge on Class A shares to a
"single purchaser" (defined below) together with the sales charge reallowed to
financial institutions and intermediaries (the "commission"):
<TABLE>
<CAPTION>
SALES CHARGE
SALES CHARGE AS APPROPRIATE COMMISSION
AS A PERCENTAGE OF AS A
PERCENTAGE OF NET AMOUNT PERCENTAGE OF
AMOUNT OF PURCHASE OFFERING PRICE INVESTED OFFERING PRICE
- --------------------------- ------------------ ------------------- ------------------
<S> <C> <C> <C>
less than $50,000.......... 4.50% 4.71% 4.05%
$50,000 but less than
$100,000................. 3.50% 3.63% 3.15%
$100,000 but less than
$250,000................. 2.50% 2.56% 2.25%
$250,000 but less than
$500,000................. 1.50% 1.52% 1.35%
$500,000 but less than
$1,000,000............... 1.00% 1.01% 0.90%
$1,000,000 or more......... 0.00% 0.00% 0.00%
</TABLE>
The commissions shown in the table apply to sales through financial institutions
and intermediaries. Under certain circumstances, the Distributor will use its
own funds to compensate financial institutions and intermediaries in amounts
that are additional to the commission shown above. The maximum cash compensation
payable by the Distributor as a sales charge is 4.50% of the offering price
(including the commission shown above and additional cash compensation described
below). In addition, the Distributor will, from time to time and at its own
expense, provide promotional incentives to financial institutions and
intermediaries, whose registered representatives have sold or are expected to
sell significant amounts of shares of the Fund, in the form of payment for
travel expenses, including lodging, incurred in connection with trips taken by
qualifying registered representatives to places within or outside the United
States, and additional compensation in an amount up to .50% of the offering
price of Class A shares of the Fund for sales of $1 million or more. However,
the Distributor will be reimbursed by the person receiving such additional
compensation for sales of the Fund of $1 million or more, if a Shareholder
redeems any or all of the shares for which such additional compensation was paid
by the Distributor prior to the first year anniversary of purchase. Under
certain circumstances, commissions up to the amount of the entire sales charge
will be reallowed to financial institutions and intermediaries, which might then
be deemed to be "underwriters" under the Securities Act of 1933.
RIGHT OF ACCUMULATION
In calculating the sales charge rates applicable to current purchases of Class A
shares, a "single purchaser" is entitled to cumulate current purchases with the
current value at the offering price of previously purchased Class A and Class B
shares of the Fund and other eligible funds of the Trust, other than the Trust's
money market funds, that are sold subject to a comparable sales charge.
The term "single purchaser" refers to (i) an individual, (ii) an individual and
spouse purchasing shares of the Fund for their own account or for trust or
custodial accounts for their minor children, or (iii) a fiduciary purchasing for
any one trust, estate or fiduciary account, including employee benefit plans
created under Sections 401 or 457 of the Internal Revenue Code of 1986, as
amended (the "Code"), and including related plans of the same employer. To be
entitled to a reduced sales charge based upon shares already owned, the investor
must ask the Distributor for such reduction at the time of purchase and provide
the account number(s) of the investor, the investor and spouse, and their minor
children, and give the age of such children. The Fund may amend or terminate
this right of accumulation at any time as to subsequent purchases.
LETTER OF INTENT
By initially investing at least $2,000 in Class A shares of one or more funds of
the Trust that impose a comparable sales charge over the next 13 months, the
sales charge may be reduced by completing the Letter of Intent section of the
Account Application Form. The Letter of Intent includes a provision for a sales
charge adjustment depending on the amount actually purchased within the 13-month
period. In addition, pursuant to a Letter of Intent, the Custodian will hold in
escrow the difference between the sales charge applicable to the amount
initially purchased and the sales charge paid at the time of the investment,
which is based on the amount covered by the Letter of Intent. For example,
assume an investor signs a Letter of Intent to purchase $250,000 in Class A
shares of one (or more) of the funds of the Trust that impose a comparable sales
charge and, at the time of signing the Letter of Intent, purchases $100,000 of
Class A shares of one of these funds. The investor would pay an initial sales
charge of 1.50% (the sales charge applicable to purchases of $250,000) and 1.00%
of the investment (representing the difference between the 2.50% sales charge
applicable to purchases of $100,000 and the 1.50% sales charge already paid)
9 PROSPECTUS
<PAGE>
would be held in escrow until the investor has purchased the remaining $150,000
or more in Class A shares under the investor's Letter of Intent.
The amount held in escrow will be applied to the investor's account at the end
of the 13-month period unless the amount specified in the Letter of Intent is
not purchased. In order to qualify for a Letter of Intent, the investor will be
required to make a minimum purchase of at least $2,000.
The Letter of Intent will not obligate the investor to purchase Class A shares,
but if he or she does, each purchase during the period will be at the sales
charge applicable to the total amount intended to be purchased. The Letter of
Intent may be dated as of a prior date to include any purchases made within the
past 90 days.
OTHER CIRCUMSTANCES
No sales charge is imposed on Class A shares of the Fund: (i) issued through
reinvestment of dividends and capital gains distributions; (ii) acquired through
the exercise of exchange privileges where a comparable sales charge has been
paid for exchanged shares; (iii) purchased by officers, directors or trustees,
retirees and employees (and their spouses and immediate family members) of the
Trust, of BANC ONE CORPORATION and its subsidiaries and affiliates, of the
Distributor and its subsidiaries and affiliates, or of an investment sub-adviser
of a fund of the Trust and such sub-adviser's subsidiaries and affiliates; (iv)
sold to affiliates of BANC ONE CORPORATION and to certain accounts (other than
Individual Retirement Accounts) for which Authorized Financial Organizations act
in fiduciary, advisory, agency, custodial or similar capacities, or purchased by
investment advisers, financial planners or other intermediaries who have a
dealer arrangement with the Distributor, who place trades for their own accounts
or for the accounts of their clients and who charge a management, consulting or
other fee for their services, as well as clients of such investment advisers,
financial planners or other intermediaries who place trades for their own
accounts if the accounts are linked to the master account of such investment
adviser, financial planner or other intermediary; (v) purchased with proceeds
from the recent redemption of Fiduciary Class shares of a fund of the Trust or
acquired in an exchange of Fiduciary Class shares of a fund for Class A shares
of the same fund; (vi) purchased with proceeds from the recent redemption of
shares of a mutual fund (other than a fund of the Trust) for which a sales
charge was paid; (vii) purchased in an Individual Retirement Account with the
proceeds of a distribution from an employee benefit plan, provided that, at the
time of distribution, the employee benefit plan had plan assets invested in a
fund of the Trust; (viii) purchased with Trust assets; (ix) purchased in
accounts as to which a bank or broker-dealer charges an asset allocation fee,
provided the bank or broker-dealer has an agreement with the Distributor; or (x)
directly purchased with the proceeds of a distribution on a bond for which a
Banc One Corporation affiliate bank or trust company is the Trustee or Paying
Agent.
An investor relying upon any of the categories of waivers of the sales charge
must qualify for such waiver in advance of the purchase with the Distributor or
the financial institution or intermediary through which shares are purchased by
the investor.
The waiver of the sales charge under circumstances (v), (vi) and (vii) above
applies only if the purchase is made within 60 days of the redemption or
distribution and if conditions imposed by the Distributor are met. The waiver
policy with respect to the purchase of shares through the use of proceeds from a
recent redemption or distribution as described in clauses (v), (vi) and (vii)
above will not be continued indefinitely and may be discontinued at any time
without notice. Investors should call the Distributor at 1-800-480-4111 to
determine whether they are eligible to purchase shares without paying a sales
charge through the use of proceeds from a recent redemption or distribution as
described above, and to confirm continued availability of these waiver policies
prior to initiating the procedures described in clauses (v), (vi) and (vii).
ALTERNATIVE SALES ARRANGEMENTS
CLASS B SHARES
Class B shares are not subject to a sales charge when they are purchased, but
are subject to a sales charge (the "Contingent Deferred Sales Charge") if a
Shareholder redeems them prior to the sixth anniversary of purchase. When a
Shareholder purchases Class B shares, the full purchase amount is invested
directly in the Fund. Class B shares of the Fund are subject to an ongoing
distribution and Shareholder service fee at an annual rate of 1.00% of the
Fund's average daily net assets as provided in the Class B Plan (described below
under "The Distributor"). This ongoing fee will cause Class B shares to have a
higher expense ratio and to pay lower dividends than Class A shares. Class B
shares convert automatically to Class A shares after eight years, commencing
from the end of the calendar month in which the purchase order was accepted
under the circumstances and subject to the qualifications described in this
Prospectus.
Proceeds from the Contingent Deferred Sales Charge and the distribution and
Shareholder service fees under the Class B Plan are payable to the Distributor
and financial intermediaries to defray the expenses of advance brokerage
commissions and expenses related to providing distribution-related and
Shareholder services to the Fund in connection with the sale of the Class B
shares, such as the payment of compensation to dealers and agents for selling
Class B shares. A dealer reallowance of 4.00% of the original purchase price of
the Class B shares will be paid to financial institutions and intermediaries.
CONTINGENT DEFERRED SALES CHARGE
If the Shareholder redeems Class B shares prior to the sixth anniversary of
purchase, the Shareholder will pay a Contingent Deferred Sales Charge at the
rates set forth below. The Contingent Deferred Sales Charge is assessed on an
amount equal to the lesser of the then-current market value or the cost of the
shares being redeemed. Accordingly, no sales charge is imposed on increases in
net asset value above the initial purchase price.
PROSPECTUS 10
<PAGE>
In addition, no charge is assessed on shares derived from reinvestment of
dividends or capital gain distributions. The amount of the Contingent Deferred
Sales Charge, if any, varies depending on the number of years from the time of
payment for the purchase of Class B shares until the time of redemption of such
shares. Solely for purposes of determining the number of years from the time of
any payment for the purchase of shares, all payments during a month are
aggregated and deemed to have been made on the first day of the month.
<TABLE>
<CAPTION>
CONTINGENT DEFERRED
SALES CHARGE AS A
YEAR(S) PERCENTAGE OF DOLLAR
SINCE AMOUNT SUBJECT OF
PURCHASE CHARGE
- ----------------------------------------- -----------------------
<S> <C>
0-1...................................... 5.00%
1-2...................................... 4.00%
2-3...................................... 3.00%
3-4...................................... 3.00%
4-5...................................... 2.00%
5-6...................................... 1.00%
6-7...................................... None
7-8...................................... None
</TABLE>
In determining whether a particular redemption is subject to a Contingent
Deferred Sales Charge, it is assumed that the redemption is first of any Class A
shares in the Shareholder's Fund account (unless the Shareholder elects to have
Class B shares redeemed first) or shares representing capital appreciation, next
of shares acquired pursuant to reinvestment of dividends and capital gain
distributions, and finally of other shares held by the Shareholder for the
longest period of time. This method should result in the lowest possible sales
charge.
To provide an example, assume you purchased 100 shares at $10 per share (a total
cost of $1,000) and prior to the second anniversary after purchase, the net
asset value per share is $12 and during such time you have acquired 10
additional shares through dividends paid in shares. If you then make your first
redemption of 50 shares (proceeds of $600), 10 shares will not be subject to
charge because you received them as dividends. With respect to the remaining 40
shares, the charge is applied only to the original cost of $10 per share and not
to the increase in net asset value of $2 per share. Therefore, $400 of the $600
redemption proceeds is subject to a Contingent Deferred Sales Charge at a rate
of 4.00% (the applicable rate prior to the second anniversary after purchase).
The Contingent Deferred Sales Charge is waived on redemption of shares: (i) for
distributions that are made under a Systematic Withdrawal Plan of the Trust and
that are limited to no more than 10% of the account value annually, determined
in the first year as of the date the redemption request is received by the
Transfer Agent, and in subsequent years, as of the most recent anniversary of
that date; (ii) following the death or disability (as defined in the Code) of a
Shareholder or a participant or beneficiary of a qualifying retirement plan if
redemption is made within one year of such death or disability; or (iii) to the
extent that the redemption represents a minimum required distribution from an
Individual Retirement Account or other qualifying retirement plan to a
Shareholder who has attained the age of 70 1/2. A Shareholder or his or her
representative should contact the Transfer Agent to determine whether a
retirement plan qualifies for a waiver and must notify the Transfer Agent prior
to the time of redemption if such circumstances exist and the Shareholder is
eligible for this waiver. In addition, the following circumstances are not
deemed to result in a "redemption" of Class B shares for purposes of the
assessment of a Contingent Deferred Sales Charge, which is therefore waived: (i)
plans of reorganization of the Fund, such as mergers, asset acquisitions and
exchange offers to which the Fund is a party; or (ii) exchanges for Class B
shares of other funds of the Trust as described under "Exchanges."
CONVERSION FEATURE
Class B shares include all shares purchased pursuant to the Contingent Deferred
Sales Charge which have been outstanding for less than the period ending eight
years after the end of the month in which the shares were purchased. At the end
of this period, Class B shares will automatically convert to Class A shares and
will be subject to the lower distribution and Shareholder service fees charged
to Class A shares. Such conversion will be on the basis of the relative net
asset values of the two classes, without the imposition of any sales charge, fee
or other charge. The conversion is not a taxable event to a Shareholder.
For purposes of conversion to Class A shares, shares received as dividends and
other distributions paid on Class B shares in a Shareholder's Fund account will
be considered to be held in a separate sub-account. Each time any Class B shares
in a Shareholder's Fund account (other than those in the sub-account) convert to
Class A shares, a pro-rata portion of the Class B shares in the sub-account will
also convert to Class A shares.
If a Shareholder effects one or more exchanges among Class B shares of the funds
of the Trust during the eight-year period, the Trust will aggregate the holding
periods for the shares of each fund of the Trust for purposes of calculating
that eight-year period. Because the per share net asset value of the Class A
shares may be higher than that of the Class B shares at the time of conversion,
a Shareholder may receive fewer Class A shares than the number of Class B shares
converted, although the dollar value will be the same.
EXCHANGES
CLASS A AND FIDUCIARY CLASS
Fiduciary Class Shareholders of the Fund may exchange their shares for Class A
shares of the Fund or for Class A shares or Fiduciary Class shares of another
fund of the Trust.
Class A Shareholders may exchange their shares for Fiduciary Class shares of the
Fund or for Fiduciary Class shares or Class A shares of another fund of the
Trust, if the Shareholder is eligible to purchase such shares.
The exchange privilege may be exercised only in those states where the shares of
the Fund or such other fund of the Trust
11 PROSPECTUS
<PAGE>
may be legally sold. All exchanges discussed herein are made at the net asset
value of the exchanged shares, except as provided below. The Trust does not
impose a charge for processing exchanges of shares. If a Shareholder seeks to
exchange Class A shares of a fund that does not impose a sales charge for Class
A shares of a fund that does or the fund being exchanged into has a higher sales
charge, the Shareholder will be required to pay a sales charge in the amount
equal to the difference between the sales charge applicable to the fund into
which the shares are being exchanged and any sales charges previously paid for
the exchanged shares, including any sales charges incurred on any earlier
exchanges of the shares (unless such sales charge is otherwise waived, as
provided in "Other Circumstances"). The exchange of Fiduciary Class shares for
Class A shares also will require payment of the sales charge unless the sales
charge is waived, as provided in "Other Circumstances."
CLASS B
Class B Shareholders of the Fund may exchange their shares for Class B shares of
any other fund of the Trust on the basis of the net asset value of the exchanged
Class B shares, without the payment of any Contingent Deferred Sales Charge that
might otherwise be due upon redemption of the outstanding Class B shares. The
newly acquired Class B shares will be subject to the higher Contingent Deferred
Sales Charge of either the fund from which the shares were exchanged or the fund
into which the shares were exchanged. With respect to outstanding Class B shares
as to which previous exchanges have taken place, "higher Contingent Deferred
Sales Charge" shall mean the higher of the Contingent Deferred Sales Charge
applicable to either the fund the shares are exchanging into or any other fund
from which the shares previously have been exchanged. For purposes of computing
the Contingent Deferred Sales Charge that may be payable upon a disposition of
the newly acquired Class B shares, the holding period for outstanding Class B
shares of the fund from which the exchange was made is "tacked" to the holding
period of the newly acquired Class B shares. For purposes of calculating the
holding period applicable to the newly acquired Class B shares, the newly
acquired Class B shares shall be deemed to have been issued on the date of
receipt of the Shareholder's order to purchase the outstanding Class B shares of
the fund from which the initial exchange was made.
ADDITIONAL INFORMATION REGARDING EXCHANGES
In the case of shares held of record by a Shareholder Servicing Agent but
beneficially owned by a Shareholder, to exchange such shares the Shareholder
should contact the Shareholder Servicing Agent, who will contact the Transfer
Agent and effect the exchange on behalf of the Shareholder. If an exchange
request in good order is received by the Transfer Agent by 4:00 p.m., eastern
time, on any Business Day, the exchange usually will occur on that day. Any
Shareholder who wishes to make an exchange must receive a current prospectus of
the fund of the Trust in which he or she wishes to invest before the exchange
will be effected.
The Trust reserves the right to change the terms and conditions of the exchange
privilege discussed herein upon sixty days' written notice. An exchange between
classes of shares of the same fund is not considered a taxable event; however,
an exchange between funds of the Trust is considered a sale of shares and
usually results in a capital gain or loss for Federal income tax purposes.
Shareholders should consult their tax advisers for a more complete explanation
of the Federal income tax consequences of an exchange of shares of the Fund.
A more detailed description of the above is set forth in the Statement of
Additional Information.
REDEMPTIONS
Shareholders may redeem their shares without charge (except Class B shares, as
provided above) on any Business Day; shares may ordinarily be redeemed by mail,
by telephone or by wire. All redemption orders are effected at the net asset
value per share next determined for Class A and Fiduciary Class shares, and at
net asset value per share next determined reduced by any applicable Contingent
Deferred Sales Charge for Class B shares, after receipt of a valid request for
redemption. Payment to Shareholders for shares redeemed will be made within
seven days after receipt by the Transfer Agent of the request for redemption.
BY MAIL
A written request for redemption must be received by the Transfer Agent in order
to constitute a valid request for redemption. All written redemption requests
should be sent to The One Group-Registered Trademark-, c/o State Street Bank and
Trust Company, P.O. Box 8500, Boston, MA 02266-8500, or the Shareholder
Servicing Agent, if applicable. The Transfer Agent may require that the
signature on the written request be guaranteed by a commercial bank, a member
firm of a domestic stock exchange or by a member of the Securities Transfer
Association Medallion Program or the Stock Exchange Medallion Program.
The signature guarantee requirement will be waived if all of the following
conditions apply: (i) the redemption is for $5,000 worth of shares or less; (ii)
the redemption check is payable to the Shareholder(s) of record; and (iii) the
redemption check is mailed to the Shareholder(s) at the address of record. The
Shareholder may also have the proceeds mailed to a commercial bank account
previously designated on the Account Application Form or by written instruction
to the Transfer Agent or the Shareholder Servicing Agent, if applicable. There
is no charge for having redemption requests mailed to a designated bank account.
BY TELEPHONE OR BY WIRE
Shareholders may have the payment of redemption requests wired or mailed to a
domestic commercial bank account previously designated on the Account
Application Form. Wire redemption requests may be made by the Shareholder by
telephone to the Transfer Agent at 1-800-480-4111, provided
PROSPECTUS 12
<PAGE>
that the Shareholder has elected the telephone redemption privilege in writing
to the Distributor, or to the Shareholder Servicing Agent, if applicable. The
Transfer Agent may reduce the amount of a wire redemption payment by its
then-current wire redemption charge, which, as of the date of this Prospectus,
is $7.00.
Neither the Trust nor the Transfer Agent will be responsible for the
authenticity of the redemption instructions received by telephone if it
reasonably believes those instructions to be genuine. The Trust and the Transfer
Agent will each employ reasonable procedures to confirm that telephone
instructions are genuine, and may be liable for losses resulting from
unauthorized or fraudulent telephone transactions if it does not employ those
procedures. Such procedures may include requesting personal identification
information or recording telephone conversations.
SYSTEMATIC WITHDRAWAL PLAN
Shareholders whose accounts have a value of at least $10,000 may elect to
receive, or may designate another person to receive, monthly, quarterly or
annual payments in a specified amount of not less than $100 each. There is no
charge for this service. Under the Systematic Withdrawal Plan, all dividends and
distributions must be reinvested in shares of the Fund. Purchases of additional
Class A shares while the Systematic Withdrawal Plan is in effect are generally
undesirable because a sales charge is incurred whenever purchases are made.
Pursuant to the Systematic Withdrawal Plan, Class B Shareholders may elect to
receive, or may designate another person to receive, distributions provided the
distributions are limited to no more than 10% of their account value annually,
determined in the first year as of the date the redemption request is received
by the Transfer Agent, and in subsequent years, as of the most recent
anniversary of that date. In addition, Shareholders who have attained the age of
70 1/2 may elect to receive distributions, to the extent that the redemption
represents a minimum required distribution from an Individual Retirement Account
or other qualifying retirement plan.
If the amount of the systematic withdrawal exceeds the income accrued since the
previous withdrawal under the Systematic Withdrawal Plan, the principal balance
invested will be reduced and shares will be redeemed.
OTHER INFORMATION REGARDING REDEMPTIONS
At various times, the Fund may be requested to redeem shares for which it has
not yet received good payment. In such circumstances, the forwarding of proceeds
may be delayed for 15 or more days until payment has been collected for the
purchase of such shares. The Fund intends to pay cash for all shares redeemed.
Due to the relatively high costs of handling small investments, the Fund
reserves the right to redeem, at net asset value, the shares of any Shareholder
if, because of redemptions of shares by or on behalf of the Shareholder, the
account of such Shareholder in the Fund has a value of less than $1,000, the
minimum initial purchase amount. Accordingly, an investor purchasing shares of
the Fund in only the minimum investment amount may be subject to such
involuntary redemption if he or she thereafter redeems any of these shares.
Before the Fund exercises its right to redeem such shares and to send the
proceeds to the Shareholder, the Shareholder will be given notice that the value
of the shares in his or her account is less than the minimum amount and will be
allowed 60 days to make an additional investment in the Fund in an amount which
will increase the value of the account to at least $1,000.
See the Statement of Additional Information for examples of when the Trust may
suspend the right of redemption or redeem shares involuntarily if it appears
appropriate to do so in light of the Trust's responsibilities under the
Investment Company Act of 1940.
FUND MANAGEMENT
THE ADVISER
The Trust and Banc One Investment Advisors Corporation (the "Adviser") have
entered into an investment advisory agreement (the "Advisory Agreement"). Under
the Advisory Agreement, the Adviser makes the investment decisions for the
assets of the Fund and continuously reviews, supervises and administers the
Fund's investment program. The Adviser discharges its responsibilities subject
to the supervision of, and policies established by, the Trustees of the Trust.
The Trust's shares are not deposits or obligations of, or endorsed or guaranteed
by BANC ONE CORPORATION or its bank or non-bank affiliates. The Trust's shares
are not insured or guaranteed by the Federal Deposit Insurance Corporation
("FDIC") or by any other governmental agency or government sponsored agency of
the Federal government or any state.
The Adviser is an indirect, wholly-owned subsidiary of BANC ONE CORPORATION, a
bank holding company incorporated in the state of Ohio. BANC ONE CORPORATION
currently has affiliate banking organizations in Arizona, Colorado, Illinois,
Indiana, Kentucky, Ohio, Oklahoma, Texas, Utah, West Virginia and Wisconsin. In
addition, BANC ONE CORPORATION has several affiliates that engage in data
processing, venture capital, investment and merchant banking, and other
diversified services including trust management, investment management,
brokerage, equipment leasing, mortgage banking, consumer finance and insurance.
On a consolidated basis, BANC ONE CORPORATION had assets of over $88 billion as
of September 30, 1995.
The Adviser represents a consolidation of the investment advisory staffs of a
number of bank affiliates of BANC ONE CORPORATION, which have considerable
experience in the management of open-end management investment company
portfolios, including The One Group-Registered Trademark- since 1985 (then known
as "The Helmsman Fund").
13 PROSPECTUS
<PAGE>
Donald E. Allred will serve as Fund Manager and Richard R. Jandrain, III will
serve as Assistant Fund Manager for the Fund. Mr. Allred previously served as
the President, Chief Executive Officer and Chief Investment Officer at Premier
Investment Advisors, L.L.C., where he also served as the Portfolio Manager of
the Paragon Gulf South Growth Fund from its inception in 1991. Mr. Allred has
over 30 years of investment experience.
Mr. Jandrain also serves as the Senior Managing Director of Equity Securities
for the Adviser and in this capacity is responsible for the development and
implementation of the equity investment policies of the Adviser. Mr. Jandrain
has over 18 years of investment experience and has served in various investment
management positions with the Adviser and its affiliates for the past five
years.
The Adviser is entitled to a fee, which is calculated daily and paid monthly, at
an annual rate of .74% of the average daily net assets of the Fund. The Adviser
may voluntarily agree to waive a part of its fees. (See "About the Fund --
Expense Summary.") These fee waivers would be voluntary and may be terminated at
any time. Shareholders will be notified in advance if and when these waivers are
terminated. The total compensation to the Adviser for investment advisory and
sub-administration services exceeds 0.75%, which is considered by the SEC staff
to be higher than such fees paid by most other mutual funds. However, the
Adviser believes it is comparable to compensation paid by other mutual funds
having similar investment objectives and policies.
THE DISTRIBUTOR
The One Group Services Company (the "Distributor"), a wholly-owned subsidiary of
the BISYS Group, Inc., and the Trust are parties to a distribution agreement
(the "Distribution Agreement") under which shares of the Fund are sold on a
continuous basis.
Class A shares are subject to a distribution and Shareholder services plan (the
"Plan"). As provided in the Plan, the Trust will pay the Distributor a fee of
.35% of the average daily net assets of Class A shares of the Fund. Currently,
the Distributor has voluntarily agreed to limit payments under the Plan to .25%
of the average daily net assets of the Class A shares of the Fund. Up to .25% of
the fees payable under the Plan may be used as compensation for Shareholder
services by the Distributor and/ or financial institutions and intermediaries.
All such fees that may be paid under the Plan will be paid pursuant to Rule
12b-1 of the Investment Company Act of 1940. The Distributor may apply these
fees toward: (i) compensation for its services in connection with distribution
assistance or provision of Shareholder services; or (ii) payments to financial
institutions and intermediaries such as banks (including affiliates of the
Adviser), savings and loan associations, insurance companies, investment
counselors, broker-dealers, and the Distributor's affiliates and subsidiaries,
as compensation for services or reimbursement of expenses incurred in connection
with distribution assistance or provision of Shareholder services.
Class B shares are subject to a Contingent Deferred Sales Charge if such shares
are redeemed prior to the sixth anniversary of purchase. Class B shares of the
Fund are subject to an ongoing distribution and Shareholder service fee as
provided in the Class B distribution and Shareholder services plan (the "Class B
Plan") at an annual rate of 1.00% of the Fund's average daily net assets, which
includes Shareholder servicing fees of .25% of the Fund's average daily net
assets.
Proceeds from the Contingent Deferred Sales Charge and the distribution and
Shareholder service fees under the Class B Plan are payable to the Distributor
and financial intermediaries to defray the expenses of advance brokerage
commissions and expenses related to providing distribution-related and
Shareholder services to the Fund in connection with the sale of Class B shares,
such as the payment of compensation to dealers and agents for selling Class B
shares. The combination of the Contingent Deferred Sales Charge and the
distribution and Shareholder service fees facilitate the ability of the Fund to
sell the Class B shares without a sales charge being deducted at the time of
purchase.
The Plan and the Class B Plan are characterized as compensation plans since the
distribution fees will be paid to the Distributor without regard to the
distribution or Shareholder service expenses incurred by the Distributor or the
amount of payments made to financial institutions and intermediaries. The Fund
also may execute brokerage or other agency transactions through an affiliate of
the Adviser or through the Distributor for which the affiliate or the
Distributor receives compensation. Pursuant to guidelines adopted by the Board
of Trustees of the Trust, any such compensation will be reasonable and fair
compared to compensation received by other brokers in connection with comparable
transactions.
Fiduciary Class shares of the Fund are offered without distribution fees to
institutional investors, including Authorized Financial Organizations. It is
possible that an institution may offer different classes of shares to its
customers and thus receive different compensation with respect to different
classes of shares. In addition, a financial institution that is the record owner
of shares for the account of its customers may impose separate fees for account
services to its customers.
THE ADMINISTRATOR
The One Group Services Company (the "Administrator"), a wholly-owned subsidiary
of the BISYS Group, Inc., and the Trust are parties to an administration
agreement relating to the Fund (the "Administration Agreement"). Under the terms
of the Administration Agreement, the Administrator is responsible for providing
the Trust with administrative services (other than investment advisory
services), including regulatory reporting and all necessary office space,
equipment, personnel and facilities.
The Adviser also serves as Sub-Administrator to each fund of the Trust, pursuant
to an agreement between the Administrator
PROSPECTUS 14
<PAGE>
and the Adviser. Pursuant to this agreement, the Adviser performs many of the
Administrator's duties for which the Adviser receives a fee paid by the
Administrator.
The Administrator is entitled to a fee for administrative services, which is
calculated daily and paid monthly, at an annual rate of .20% of each fund's
average daily net assets on the first $1.5 billion in Trust assets (excluding
the Treasury Only Money Market Fund and the Government Money Market Fund), .18%
of each fund's average daily net assets to $2 billion in Trust assets (excluding
the Treasury Only Money Market Fund and the Government Money Market Fund), and
.16% of each fund's average daily net assets when Trust assets exceed $2 billion
(excluding the Treasury Only Money Market Fund and the Government Money Market
Fund).
THE TRANSFER AGENT AND CUSTODIAN
State Street Bank and Trust Company, P.O. Box 8500, Boston, MA 02266-8500 acts
as Transfer Agent and Custodian for the Trust for which services it receives a
fee. The Custodian holds cash, securities and other assets of the Trust as
required by the Investment Company Act of 1940. Bank One Trust Company, N.A.
serves as Sub-Custodian in connection with the Trust's securities lending
activities, pursuant to an agreement between State Street Bank and Trust Company
and Bank One Trust Company. Bank One Trust Company receives a fee paid by the
Trust.
COUNSEL AND INDEPENDENT ACCOUNTANTS
Ropes & Gray serves as counsel to the Trust. Coopers & Lybrand L.L.P. serves as
the independent accountants of the Trust.
OTHER INFORMATION
THE TRUST
The Trust was organized as a Massachusetts Business Trust under a Declaration of
Trust filed on May 23, 1985. The Declaration of Trust permits the Trust to offer
separate funds and different classes of each fund. All consideration received by
the Trust for shares of any Fund and all assets of such fund belong to that fund
and would be subject to liabilities related thereto.
The Trust pays its expenses, including fees of its service providers, audit and
legal expenses, expenses of preparing prospectuses, proxy solicitation material
and reports to Shareholders, costs of custodial services and registering the
shares under Federal and state securities laws, pricing, insurance expenses,
litigation and other extraordinary expenses, brokerage costs, interest charges,
taxes and organizational expenses.
The Adviser and the Administrator of the Fund each bears all expenses incurred
in connection with the performance of their services as investment adviser and
administrator, respectively, other than the cost of securities (including
brokerage commissions, if any) purchased for the Fund.
As a general matter, as set forth in the Multiple Class Plan, expenses are
allocated to each class of shares of the Fund on the basis of the net asset
value of that class in relation to the net asset value of the Fund. At present,
the only expenses that are allocated to Class A and Class B shares, other than
in accordance with the relative net asset value of the class, are the different
distribution and Shareholder services costs. See "Expense Summary." At present,
no expenses are allocated to Fiduciary Class shares as a class that are not also
borne by the other classes of shares of the Fund in proportion to the relative
net asset values of the shares of such classes.
TRUSTEES OF THE TRUST
The management and affairs of the Trust are supervised by the Trustees under the
laws governing business trusts in the Commonwealth of Massachusetts. The
Trustees have approved contracts under which, as described above, certain
companies provide essential management services to the Trust.
VOTING RIGHTS
As set forth in the Multiple Class Plan, each share held entitles the
Shareholder of record to one vote. Each fund of the Trust will vote separately
on matters relating solely to that fund. In addition, each class of a fund shall
have exclusive voting rights on any matter submitted to Shareholders that
relates solely to that class, and shall have separate voting rights on any
matter submitted to Shareholders in which the interests of one class differ from
the interests of any other class. However, all fund Shareholders will have equal
voting rights on matters that affect all fund Shareholders equally. As a
Massachusetts Business Trust, the Trust is not required to hold annual meetings
of Shareholders but approval will be sought for certain changes in the operation
of the Trust and for the election of Trustees under certain circumstances. In
addition, a Trustee may be elected or removed by the remaining Trustees or by
Shareholders at a special meeting called upon written request of Shareholders
owning at least 10% of the outstanding shares of the Trust. In the event that
such a meeting is requested, the Trust will provide appropriate assistance and
information to the Shareholders requesting the meeting.
DIVIDENDS
Substantially all of the net investment income (exclusive of capital gains) of
the Fund is declared on the last Business Day of each month as a dividend for
Shareholders of record as of the close of business on that day and is
distributed in the form of periodic dividends to such Shareholders of the Fund
on the first Business Day of each month. Capital gains of the Fund, if any, will
be distributed at least annually.
Shareholders automatically receive all income dividends and capital gain
distributions in additional Class A, Class B, or Fiduciary Class shares, as
applicable, at the net asset value next determined following the record date,
unless the Shareholder has elected to take such payment in cash. Such election,
or any revocation thereof, must be made in writing, at least 15 days prior to
distribution, to the Transfer Agent at P.O. Box 8500, Boston, MA 02266-8500, and
will become effective with respect
15 PROSPECTUS
<PAGE>
to dividends and distributions having record dates after its receipt by the
Transfer Agent. Reinvested dividends and distribution receive the same tax
treatment as dividends and distributions paid in cash.
Class B shares received as dividends and capital gains distributions at the net
asset value next determined following the record date shall be held in a
separate Class B sub-account. Each time any Class B shares (other than those in
the subaccount) convert to Class A shares, a pro-rata portion of the Class B
shares in the sub-account will also convert to Class A shares. (See "Conversion
Feature.") Reinvested dividends and distributions receive the same tax treatment
as dividends and distributions paid in cash.
Dividends and distributions of the Fund are paid on a per-share basis. The value
of each share will be reduced by the amount of the payment. If shares are
purchased shortly before the record date for a dividend or the distribution of
capital gains, a Shareholder will pay the full price for the shares and receive
some portion of the price back as a taxable dividend or distribution even though
such distribution would, in effect, represent a return of the Shareholder's
investment.
The amount of dividends payable on Fiduciary Class shares will be more than the
dividends payable on Class A and Class B shares because of the distribution
expenses charged to Class A and Class B shares.
SHAREHOLDER INQUIRIES
Shareholder inquiries should be directed to the Administrator, The One Group
Services Company, 3435 Stelzer Road, Columbus, OH 43219.
REPORTING
The Trust issues unaudited financial information semiannually and audited
financial statements annually. The Trust furnishes proxy statements and other
reports to Shareholders of record.
OTHER INVESTMENT POLICIES
TEMPORARY DEFENSIVE POSITION
For temporary defensive purposes during periods when the Adviser determines that
market conditions warrant such action, the Fund may invest up to 100% of its
assets in cash equivalents (including securities issued or guaranteed as to
principal and interest by the U.S. government, its agencies or
instrumentalities, repurchase agreements, certificates of deposit and bankers'
acceptances issued by banks or savings and loan associations having net assets
of at least $1 billion as of the end of their most recent fiscal year,
commercial paper rated in one of the two highest short-term rating categories by
at least one NRSRO or, if unrated, determined by the Adviser to be of comparable
quality, variable amount master demand notes and bank money market deposit
accounts), and may hold cash for liquidity purposes.
To the extent the Fund is engaged in a temporary defensive position, the Fund
will not be pursuing its investment objective.
For a further description of the Fund's permitted investments, see "Description
of Permitted Investments" and the Statement of Additional Information, and for a
description of ratings, see "Description of Ratings."
PORTFOLIO TURNOVER
The Fund may engage in short-term trading, which involves selling securities
that have been held for a short period of time in order to increase the
potential for capital appreciation and/or income of the Fund or to take
advantage of a temporary disparity in the normal price or yield relationship
between two securities or changes in market, industry or company conditions or
outlook. Any such trading would increase a portfolio's turnover rate and its
transaction costs.
The Adviser will choose brokers by judging professional ability, quality of
service and reasonableness of commissions. Higher commissions may be paid to
those firms that provide research, superior execution and other services. The
Adviser may use any such research information in managing the assets of the
Fund.
The portfolio turnover rate for the Fund may vary greatly from year to year, as
well as within a particular year. It is presently estimated that the annual
portfolio turnover rate of the Fund will not exceed 100%.
Higher portfolio turnover rates will likely result in higher transaction costs
to the Fund and may result in additional tax consequences to the Fund's
Shareholders.
INVESTMENT LIMITATIONS
The investment objective and the following investment limitations are
fundamental policies of the Fund. Fundamental policies cannot be changed without
the consent of the holders of a majority of the Fund's outstanding shares. The
term "majority of the outstanding shares" means the vote of (i) 67% or more of
the Fund's shares present at a meeting, if more than 50% of the outstanding
shares of the Fund are present or represented by proxy, or (ii) more than 50% of
the Fund's outstanding shares, whichever is less.
The Fund may not:
1. Purchase securities of any issuer (except securities issued or guaranteed by
the United States, its agencies or instrumentalities, and if consistent with the
Fund's investment objective and policies, repurchase agreements involving such
securities) if as a result more than 25% of the total assets of the Fund would
be invested in the securities of such issuer. This restriction applies to 50% of
the Fund's total assets. For purposes of this limitation, a security is
considered to be issued by the government entity whose assets and revenues
guarantee or back the security. With respect to private activity bonds or
industrial development bonds backed only by the assets and revenues of a
non-governmental user, such user would be considered the issuer.
PROSPECTUS 16
<PAGE>
2. Purchase any securities that would cause more than 25% of the total assets of
the Fund to be invested in the securities of one or more issuers conducting
their principal business activities in the same industry, provided that this
limitation does not apply to investments in the obligations issued or guaranteed
by the U.S. government or its agencies and instrumentalities and repurchase
agreements involving such securities. For purposes of this limitation (i)
utilities will be divided according to their services (for example, gas, gas
transmission, electric and telephone will each be considered a separate
industry); and (ii) wholly-owned finance companies will be considered to be in
the industries of their parents if their activities are primarily related to
financing the activities of their parents.
3. Make loans, except that the Fund may (i) purchase or hold debt instruments in
accordance with its investment objective and policies; (ii) enter into
repurchase agreements; and (iii) engage in securities lending as described in
this Prospectus and in the Statement of Additional Information.
The foregoing percentages will apply at the time of the purchase of a security.
Additional investment limitations are set forth in the Statement of Additional
Information.
DESCRIPTION OF PERMITTED INVESTMENTS
The following is a description of certain of the permitted investments for the
Fund.
The Fund invests in common stocks (including sponsored and unsponsored American
Depository Receipts ("ADRs")) and convertible securities only if they are listed
on registered exchanges or actively traded in the over-the-counter market,
except that the Fund may invest up to 5% of its net assets in restricted
securities.
U.S. TREASURY OBLIGATIONS -- The Fund may invest in bills, notes and bonds
issued by the U.S. Treasury and separately traded interest and principal
component parts of such obligations that are transferable through the Federal
book-entry system, known as Separately Traded Registered Interest and Principal
Securities ("STRIPS") and Coupon Under Book Entry Safekeeping ("CUBES").
RECEIPTS -- The Fund may purchase interests in separately traded interest and
principal component parts of U.S. Treasury obligations that are issued by banks
or brokerage firms and are created by depositing U.S. Treasury notes and U.S.
Treasury bonds into a special account at a custodian bank. The custodian holds
the interest and principal payments for the benefit of the registered owners of
the certificates or receipts. The custodian arranges for the issuance of the
certificates or receipts evidencing ownership and maintains the register.
Receipts include Treasury Receipts ("TRS"), Treasury Investment Growth Receipts
("TIGRS") and Certificates of Accrual on Treasury Securities ("CATS").
STRIPS, CUBES, TRS, TIGRS AND CATS are sold as zero coupon securities, which
means that they are sold at a substantial discount and redeemed at face value at
their maturity date without interim cash payments of interest or principal. This
discount is amortized over the life of the security, and such amortization will
constitute the income earned on the security for both accounting and tax
purposes. Because of these features, these securities may be subject to greater
interest rate volatility than interest-paying U.S. Treasury obligations. The
Fund may invest up to 20% of its total assets in STRIPS, CUBES, TRS, TIGRS and
CATS. See also "Taxes."
CERTIFICATES OF DEPOSIT -- Certificates of deposit are negotiable interest
bearing instruments with a specific maturity. Certificates of deposit ("CDS")
are issued by banks and savings and loan institutions in exchange for the
deposit of funds and normally can be traded in the secondary market prior to
maturity.
TIME DEPOSITS -- Time deposits are non-negotiable receipts issued by a bank in
exchange for the deposit of funds. Like a certificate of deposit, a time deposit
("TD") earns a specified rate of interest over a definite period of time;
however, it cannot be traded in the secondary market. Time deposits with a
withdrawal penalty are considered to be illiquid securities; therefore, the Fund
will not invest more than 15% of its net assets in such time deposits and other
illiquid securities.
BANKERS' ACCEPTANCES -- Bankers' acceptances are bills of exchange or time
drafts drawn on and accepted by (i.e., made an obligation of) a commercial bank.
They are used by corporations to finance the shipment and storage of goods and
to furnish dollar exchange. Maturities are generally six months or less.
COMMERCIAL PAPER -- Commercial paper is the term used to designate unsecured
short-term promissory notes issued by corporations and other entities.
Maturities on these issues vary from a few days to nine months.
U.S. GOVERNMENT AGENCIES -- Certain Federal agencies have been established as
instrumentalities of the U.S. government to supervise and finance certain types
of activities. Select agencies, such as the Government National Mortgage
Association ("Ginnie Mae") and the Export-Import Bank, are supported by the full
faith and credit of the U.S. Treasury; others, such as the Federal National
Mortgage Association ("Fannie Mae"), are supported by the credit of the
instrumentality and have the right to borrow from the U.S. Treasury; others are
supported by the authority of the U.S. government to purchase the agency's
obligations; while still others, such as the Federal Farm Credit Banks and the
Federal Home Loan Mortgage Corporation ("Freddie Mac"), are supported solely by
the credit of the instrumentality itself. No assurance can be given that the
U.S. government would provide financial support to U.S. government sponsored
agencies or instrumentalities if it is not obligated to do so by law.
Obligations of U.S. government agencies include debt issues and mortgage-backed
securities issued or guaranteed by select agencies.
CONVERTIBLE SECURITIES -- Convertible securities have characteristics similar to
both fixed income and equity securities. Because of the conversion feature, the
market value of convertible securities tends to move together with the market
value of
17 PROSPECTUS
<PAGE>
the underlying stock. As a result, the Fund's selection of convertible
securities is based, to a great extent, on the potential for capital
appreciation that may exist in the underlying stock. The value of convertible
securities is also affected by prevailing interest rates, the credit quality of
the issuer, and any call provisions.
INVESTMENT COMPANY SECURITIES -- The Fund may invest up to 5% of its total
assets in the securities of any one investment company, but may not own more
than 3% of the securities of any one investment company or invest more than 10%
of its total assets in the securities of other investment companies. In
accordance with an exemptive order issued to the Trust by the SEC, such other
investment company securities may include securities of a money market fund of
the Trust, and such companies may include companies of which the Adviser or a
sub-adviser to a fund of the Trust, or an affiliate of such Adviser or
sub-adviser, serves as investment adviser, administrator or distributor. Because
other investment companies employ an investment adviser, such investment by the
Fund may cause Shareholders to bear duplicative fees. The Adviser will waive its
fee attributable to the assets of the investing fund invested in a money market
fund of the Trust; and, to the extent required by the laws of any state in which
shares of the Trust are sold, the Adviser will waive its fees attributable to
the assets of the Fund invested in any investment company.
REPURCHASE AGREEMENTS -- Repurchase agreements are agreements by which a person
obtains a security and simultaneously commits to return the security to the
seller at an agreed upon price (including principal and interest) on an agreed
upon date within a number of days from the date of purchase. The custodian or
its agent will hold the security as collateral for the repurchase agreement.
Collateral must be maintained at a value at least equal to 100% of the
repurchase price. The Fund bears a risk of loss in the event the other party
defaults on its obligations and the Fund is delayed or prevented from its right
to dispose of the collateral securities or if the Fund realizes a loss on the
sale of the collateral securities. The Adviser will enter into repurchase
agreements on behalf of the Fund only with financial institutions deemed to
present minimal risk of bankruptcy during the term of the agreement based on
guidelines established and periodically reviewed by the Trustees. Repurchase
agreements are considered by the SEC to be loans under the Investment Company
Act of 1940.
REVERSE REPURCHASE AGREEMENTS -- The Fund may borrow funds for temporary
purposes by entering into reverse repurchase agreements. Pursuant to such
agreements, the Fund would sell portfolio securities to financial institutions
such as banks and broker-dealers, and agree to repurchase them at a mutually
agreed-upon date and price. The Fund will enter into reverse repurchase
agreements only to avoid otherwise selling securities during unfavorable market
conditions to meet redemptions. At the time the Fund enters into a reverse
repurchase agreement, it would place in a segregated custodial account assets,
such as liquid high grade debt securities, consistent with the Fund's investment
restrictions and having a value equal to the repurchase price (including accrued
interest), and would subsequently monitor the account to ensure that such
equivalent value was maintained. Reverse repurchase agreements involve the risk
that the market value of the securities sold by the Fund may decline below the
price at which the Fund is obligated to repurchase the securities. Reverse
repurchase agreements are considered by the SEC to be borrowings by a Fund under
the Investment Company Act of 1940.
SECURITIES LENDING -- In order to generate additional income, the Fund may lend
up to 33% of the securities in which it is invested pursuant to agreements
requiring that the loan be continuously secured by cash, securities of the U.S.
government or its agencies, shares of an investment trust or mutual fund or any
combination of cash and such securities as collateral equal at all times to at
least 100% of the market value plus accrued interest on the securities lent. The
Fund will continue to receive interest on the securities lent while
simultaneously seeking to earn interest on the investment of cash collateral in
U.S. government securities, shares of an investment trust or mutual fund, or
other short-term, highly liquid investments. Collateral is marked to market
daily to provide a level of collateral at least equal to the market value of the
securities lent. There may be risks of delay in recovery of the securities or
even loss of rights in the collateral should the borrower of the securities fail
financially. However, loans will only be made to borrowers deemed by the Adviser
to be of good standing under guidelines established by the Trust's Board of
Trustees and when, in the judgment of the Adviser, the consideration which can
be earned currently from such securities loans justifies the attendant risk. The
Fund will enter into loan arrangements only with counterparties which the
Adviser has deemed to be creditworthy under guidelines established by the Board
of Trustees. Loans are subject to termination by the Fund or the borrower at any
time, and are, therefore, not considered to be illiquid investments.
RESTRICTED SECURITIES -- The Fund may invest in commercial paper issued in
reliance on the exemption from registration afforded by Section 4(2) of the
Securities Act of 1933. Section 4(2) commercial paper is restricted as to
disposition under Federal securities law and is generally sold to institutional
investors, such as the Fund, who agree that they are purchasing the paper for
investment purposes and not with a view to public distribution. Any resale by
the purchaser must be in an exempt transaction. Section 4(2) commercial paper is
normally resold to other institutional investors like the Fund through or with
the assistance of the issuer or investment dealers who make a market in Section
4(2) commercial paper, thus providing liquidity. The Fund believes that Section
4(2) commercial paper and possibly certain other restricted securities that meet
the criteria for liquidity established by the Trustees are quite liquid. The
Fund intends, therefore, to treat the restricted securities that meet the
criteria for liquidity established by the Trustees, including Section 4(2)
commercial paper, as determined by the Adviser, as liquid and not subject to the
investment limitation applicable to illiquid securities. In addition, because
Section 4(2) commercial paper is liquid, the Fund will not subject such paper to
the limitation applicable to restricted securities.
PROSPECTUS 18
<PAGE>
The ability of the Trustees to determine the liquidity of certain restricted
securities is permitted under an SEC staff position set forth in the adopting
release for Rule 144A under the Securities Act of 1933 (the "Rule"). The Rule is
a nonexclusive safe-harbor for certain secondary market transactions involving
securities subject to restrictions on resale under Federal securities laws. The
Rule provides an exemption from registration for resales of otherwise restricted
securities to qualified institutional buyers. The Rule is expected to further
enhance the liquidity of the secondary market for securities eligible for resale
under Rule 144A. The Fund believes that the staff of the SEC has left the
question of determining the liquidity of all restricted securities to the
Trustees. The Trustees have directed the Adviser to consider the following
criteria in determining the liquidity of certain restricted securities:
- - the frequency of trades and quotes for the security;
- - the number of dealers willing to purchase or sell the security and the number
of other potential buyers;
- - dealer undertakings to make a market in the security; and
- - the nature of the security and the nature of the marketplace trades.
VARIABLE AND FLOATING RATE INSTRUMENTS -- Certain of the obligations purchased
by the Fund may carry variable or floating rates of interest, may involve a
conditional or unconditional demand feature and may include variable amount
master demand notes. A demand instrument with a demand notice period exceeding
seven days may be considered illiquid if there is no secondary market for such
security; therefore, the Fund will not invest more than 15% of its net assets in
such instruments and other illiquid securities. The interest rates on these
securities may be reset daily, weekly, quarterly or some other reset period, and
may have a floor or ceiling on interest rate charges. There is a risk that the
current interest rate on such obligations may not accurately reflect existing
rates. The Fund will not invest more than 5% of its total assets in variable
rate master demand notes.
There is no limit on the extent to which the Fund may purchase variable and
floating rate instruments that are not illiquid. The Fund will purchase variable
and floating rate instruments to facilitate portfolio liquidity or to permit the
investment of the Fund's assets at a favorable rate of return.
SECURITIES PURCHASED ON A WHEN-ISSUED BASIS AND FORWARD COMMITMENTS -- The Fund
may purchase securities on a when-issued basis when deemed by the Adviser to
present attractive investment opportunities. When-issued securities are
purchased for delivery beyond the normal settlement date at a stated price and
yield, thereby involving the risk that the yield obtained will be less than that
available in the market at delivery. Although the purchase of securities on a
when-issued basis is not considered leveraging, it has the effect of leveraging.
When the Adviser purchases a when-issued security, the Custodian will set aside
cash or liquid securities to satisfy the purchase commitment. The Fund generally
will not pay for such securities or earn interest on them until received.
Commitments to purchase when-issued securities will not, under normal market
conditions, exceed 25% of the Fund's total assets, and a commitment will not
exceed 90 days. The Fund will only purchase when-issued securities for the
purpose of acquiring portfolio securities and not for speculative purposes.
In a forward commitment transaction, the Fund contracts to purchase securities
for a fixed price at a future date beyond customary settlement time. The Fund is
required to hold and maintain in a segregated account until the settlement date,
cash, U.S. government securities or liquid high-grade debt obligations in an
amount sufficient to meet the purchase price. Alternatively, the Fund may enter
into offsetting contracts for the forward sale of other securities that it owns.
The purchase of securities on a when-issued or forward commitment basis involves
a risk of loss if the value of the security to be purchased declines prior to
the settlement date. Although the Fund would generally purchase securities on a
when-issued or forward commitment basis with the intention of actually acquiring
securities for its portfolio, the Fund may dispose of a when-issued security or
forward commitment prior to settlement if the Adviser deems it appropriate to do
so.
OPTIONS -- The Fund may purchase and write (i.e., sell) call options and put
options on securities and indices, which options are traded on national
securities exchanges. A call option gives the purchaser the right to buy, and
obligates the writer of the option to sell, the underlying security at the
agreed upon exercise (or "strike") price during the option period. A put option
gives the purchaser the right to sell, and obligates the writer to buy, the
underlying security at the strike price during the option period. Purchasers of
options pay an amount, known as a premium, to the option writer in exchange for
the right under the option contract. Option contracts may be written with terms
that would permit the holder of the option to purchase or sell the underlying
security only upon the expiration date of the option. The initial purchase
(sale) of an option contract is an "opening transaction." In order to close out
an option position, the Fund may enter into a "closing transaction," the sale
(purchase) of an option contract on the same security with the same exercise
price and expiration date as the option contract originally opened.
The Fund may purchase put and call options in hedging transactions to protect
against a decline in the market value of the securities in the Fund (e.g., by
the purchase of a put option) and to protect against an increase in the cost of
fixed-income securities that the Fund may seek to purchase in the future (e.g.,
by the purchase of a call option). In the event that paying premiums for put and
call options, together with price movements in the underlying securities, are
such that exercise of the options would not be profitable for the Fund, losses
of the premiums paid may be offset by an increase in the value of the Fund's
securities (in the case of a purchase of put options) or by a decrease in the
cost of acquisition of securities by the Fund (in the case of a purchase of call
options).
19 PROSPECTUS
<PAGE>
The Fund also may write secured put and covered call options as a means of
increasing the yield on the Fund and as a means of providing limited protection
against decreases in market value of the Fund.
There are risks associated with options transactions, including the following:
(i) the success of a hedging strategy may depend on the ability of the Adviser
to predict movements in the prices of the individual securities, fluctuations in
markets and movements in interest rates; (ii) there may be an imperfect or no
correlation between the changes in market value of the securities held by the
Fund and the prices of options; (iii) there may not be a liquid secondary market
for options; and (iv) while the Fund will receive a premium when it writes
covered call options, it may not participate fully in a rise in the market value
of the underlying security. It is expected that the Fund will only engage in
option transactions with respect to permitted investments and related indices.
Generally, the policy of the Fund, in order to avoid the exercise of an option
sold by it, will be to cancel its obligation under the option by entering into a
closing purchase transaction, if available, unless selling (in the case of a
call option) or purchasing (in the case of a put option) the underlying
securities is determined to be in the Fund's interest. A closing purchase
transaction consists of the Fund purchasing an option having the same terms as
the option sold by the Fund, and has the effect of canceling the Fund's position
as a seller. The premium which the Fund will pay in executing a closing purchase
transaction may be higher (or lower) than the premium received when the option
was sold, depending in large part upon the relative price of the underlying
security at the time of each transaction. To the extent options sold by the Fund
are exercised and the Fund either delivers securities to the holder of a call
option or liquidates securities as a source of funds to purchase securities put
to the Fund, the Fund's turnover rate will increase, which would cause the Fund
to incur additional brokerage expenses.
During the option period, the Fund, as a covered call writer, gives up the
potential appreciation above the exercise price should the underlying security
rise in value, and the Fund, as a covered put writer, retains the risk of loss
should the underlying security decline in value. For the covered call writer,
substantial appreciation in the value of the underlying security would result in
the security being "called away" at the strike price of the option which may be
substantially below the fair market value of such security. For the covered put
writer, substantial depreciation in the value of the underlying security would
result in the security being "put to" the writer at the strike price of the
option which may be substantially in excess of the fair market value of such
security. If a covered call option or a covered put option expires unexercised,
the writer realizes a gain, and the buyer a loss, in the amount of the premium.
The SEC requires that obligations of investment companies such as the Fund, in
connection with option sale positions, must comply with certain segregation or
coverage requirements, which are more fully described in the Statement of
Additional Information.
The Fund will only write covered call options on its securities and will limit
such activities to provide that the aggregate market value of such options and
the Fund's obligations under such written puts does not exceed 25% of the Fund's
net assets as of the time such options are entered into by the Fund.
FUTURE CONTRACTS AND RELATED OPTIONS -- The Fund may enter into futures
contracts, options on futures contracts, index futures and options thereon that
are traded on an exchange regulated by the Commodities Futures Trading
Commission ("CFTC") if, to the extent that such futures and options are not for
"bona fide hedging purposes" (as defined by the CFTC), the aggregate initial
margin and premiums on such positions (excluding the amount by which options are
in the money) do not exceed 5% of the Fund's total assets at current value. The
Fund, however, may invest more than such amount for bona fide hedging purposes,
and also may invest more than such amount if it obtains authority to do so from
the appropriate regulatory agencies without rendering the Fund a commodity pool
operator or adversely affecting its status as an investment company for Federal
securities law or income tax purposes. However, the Fund may enter into futures
contracts and options on futures only to the extent that obligations under such
contracts or transactions, together with options on securities, represent not
more than 25% of the Fund's total assets.
The Fund may buy and sell futures contracts and related options to manage its
exposure to changing interest rates and security prices. Some futures
strategies, including selling futures, buying puts and writing calls, may reduce
the Fund's exposure to price fluctuations. Other strategies, including buying
futures, writing puts and buying calls, tend to increase market exposure.
Futures and options may be combined with each other in order to adjust the risk
and return characteristics of the overall portfolio. The Fund expects to enter
into these transactions to "lock in" a return or spread on a particular
investment or portion of its assets, to protect against any increase in the
price of securities the Fund anticipates purchasing at a later date, or for
other risk management strategies.
Options and futures can be volatile instruments, and involve certain risks. If
the Adviser applies a hedge at an inappropriate time or judges interest rates
incorrectly, options and futures strategies may lower the Fund's return. The
Fund could also experience losses if the prices of its options and futures
positions were poorly correlated with its other instruments, or if it could not
close out its positions because of an illiquid secondary market.
Typically, investment in these contracts requires the Fund to deposit with the
applicable exchange or other specified financial intermediary as a good faith
deposit for its obligations, known as "initial margin," an amount of cash or
specified debt securities which initially is 1%-15% of the face amount of the
contract and that thereafter fluctuates on a periodic basis as the value of the
contract fluctuates. Thereafter, the Fund must make additional deposits equal to
any net losses due to unfavorable price movements of the contract and will be
credited with an amount equal
PROSPECTUS 20
<PAGE>
to any net gains due to favorable price movements. These additional deposits or
credits are calculated and required daily and are known as "variation margin."
The SEC requires that when an investment company such as the Fund effects
transactions of the foregoing nature, it must either segregate cash or high
quality, readily marketable portfolio securities with its custodian in the
amount of its obligations under the foregoing transactions or must cover such
obligations by maintaining positions in portfolio securities, futures contracts
or options that would serve to satisfy or offset the risk of such obligations.
When effecting transactions of the foregoing nature, the Fund will comply with
such segregation or cover requirements. No limitation exists on the amount of
the Fund's assets that may be used to comply with such segregation or cover
requirements.
The Fund also may engage in straddles and spreads with respect to 5% of its
total assets. In a straddle transaction, the Fund either buys a call and a put
or sells a call and a put on the same security. In a spread, the Fund purchases
and sells a call or a put. The Fund will sell a straddle when the Adviser
believes the price of a security will be stable. The Fund will receive a premium
on the sale of the put and the call. A spread permits the Fund to make a hedged
investment that the price of a security will increase or decline.
SECURITIES OF FOREIGN ISSUERS -- The Fund may invest in securities of foreign
issuers to achieve income or capital appreciation. Foreign investments involve
risks that are different from investments in securities of U.S. issuers. These
risks may include future unfavorable political and economic developments,
possible withholding taxes, seizure of foreign deposits, currency controls,
interest limitations or other governmental restrictions which might affect
payment of principal or interest. Additionally, there may be less public
information available about foreign issuers. Foreign branches of foreign banks
are not regulated by U.S. banking authorities and generally are not bound by
accounting, auditing and financial reporting standards comparable to U.S. banks.
The Fund may invest in commercial paper of foreign issuers and obligations of
foreign branches of U.S. banks, U.S. and London branches of foreign banks, and
supranational entities which are established through the joint participation of
several governments (e.g., the Asian Development Bank and the Inter-American
Development Bank). Securities of foreign issuers may include sponsored and
unsponsored ADRs, which are securities typically issued by a U.S. financial
institution that evidence ownership interests in a pool of securities issued by
a foreign issuer. There may be less information available on the foreign issuers
of unsponsored ADRs than on the issuers of sponsored ADRs. ADRs include American
Depository Shares and New York Shares.
DESCRIPTION OF RATINGS
The following descriptions are summaries of published ratings.
DESCRIPTION OF COMMERCIAL PAPER RATINGS
The following descriptions of commercial paper ratings have been published by
Standard & Poor's Corporation ("S&P"), Moody's Investors Service ("Moody's"),
Fitch's Investors Service ("Fitch"), Duff and Phelps ("Duff") and IBCA Limited
("IBCA"), respectively.
Commercial paper rated A by S&P is regarded by S&P as having the greatest
capacity for timely payment. Issues rated A are further refined by use of the
numbers 1+, 1, and 2 to indicate the relative degree of safety. Issues rated
A-1+ are those with an "overwhelming degree" of credit protection. Those rated
A-1 reflect a "very strong" degree of safety regarding timely payment. Those
rated A-2 reflect a high degree of safety regarding timely payment but not as
high as A-1.
Commercial paper issues rated Prime-1 and Prime-2 by Moody's are judged by
Moody's to be of the "highest" quality and "higher" quality, respectively, on
the basis of relative repayment capacity.
The rating Fitch-1 (Highest Grade) is the highest commercial rating assigned by
Fitch. Paper rated Fitch-1 is regarded as having the strongest degree of
assurance for timely payment. The rating Fitch-2 (Very Good Grade) is the second
highest commercial paper rating assigned by Fitch which reflects an assurance of
timely payment only slightly less in degree than the strongest issues.
The rating Duff-1 is the highest commercial paper rating assigned by Duff. Paper
rated Duff-1 is regarded as having very high certainty of timely payment with
excellent liquidity factors which are supported by ample asset protection. Risk
factors are minor. Paper rated Duff-2 is regarded as having good certainty of
timely payment, good access to capital markets and sound liquidity factors and
company fundamentals. Risk factors are small.
The designation A1 by IBCA indicates that the obligation is supported by a very
strong capacity for timely repayment. Those obligations rated A1+ are supported
by the highest capacity for timely repayment. Obligations rated A2 are supported
by a strong capacity for timely repayment, although such capacity may be
susceptible to adverse changes in business, economic or financial conditions.
SHORT-TERM DEBT RATINGS
Thomson BankWatch, Inc. ("TBW") ratings are based upon a qualitative and
quantitative analysis of all segments of the organization including, where
applicable, holding company and operating subsidiaries.
BankWatch(TM) Ratings do not constitute a recommendation to buy or sell
securities of any of these companies. Further, BankWatch does not suggest
specific investment criteria for individual clients.
21 PROSPECTUS
<PAGE>
The TBW Short-Term Ratings apply to commercial paper, other senior short-term
obligations and deposit obligations of the entities to which the rating has been
assigned.
The TBW Short-Term Ratings apply only to unsecured instruments that have a
maturity of one year or less.
The TBW Short-Term Ratings specifically assess the likelihood of an untimely
payment of principal or interest.
TBW-1 The highest category; indicates a very high degree of likelihood that
principal and interest will be paid on a timely basis.
TBW-2 The second highest category; while the degree of safety regarding timely
repayment of principal and interest is strong, the relative degree of
safety is not as high as for issues rated "TBW-1."
TBW-3 The lowest investment grade category; indicates that while more
susceptible to adverse developments (both internal and external) than
obligations with higher ratings, capacity to service principal and
interest in a timely fashion is considered adequate.
TBW-4 The lowest rating category; this rating is regarded as non-investment
grade and therefore speculative.
DESCRIPTION OF CORPORATE BOND RATINGS
The following descriptions of S&P's and Moody's corporate bond ratings have been
published by S&P and Moody's, respectively.
Bonds rated AAA have the highest rating S&P assigns to a debt obligation. Such a
rating indicates an extremely strong capacity to pay principal and interest.
Bonds rated AA also qualify as high-quality debt obligations. Capacity to pay
principal and interest is very strong, and in the majority of instances they
differ from AAA issues only in a small degree. Debt rated A has a strong
capacity to pay interest and repay principal although it is somewhat more
susceptible to the adverse effects of changes in circumstances and economic
conditions than debt in higher rated categories.
Bonds that are rated Aaa by Moody's are judged to be of the best quality. They
carry the smallest degree of investment risk and are generally referred to as
"gilt edge." Interest payments are protected by a large, or an exceptionally
stable, margin and principal is secure. While the various protective elements
are likely to change, such changes as can be visualized are most unlikely to
impair the fundamentally strong position of such issues.
Bonds rated Aa by Moody's are judged by Moody's to be of high quality by all
standards. Together with bonds rated Aaa, they comprise what are generally known
as high-grade bonds. They are rated lower than the best bonds because margins of
protection may not be as large as in Aaa securities or fluctuation of protective
elements may be of greater amplitude or there may be other elements present that
make the long-term risks appear somewhat larger than in Aaa securities.
Bonds that are rated A possess many favorable investment attributes and are to
be considered as upper-medium grade obligations. Factors giving security to
principal and interest are considered adequate, but elements may be present
which suggest a susceptibility to impairment sometime in the future.
PERFORMANCE
From time to time, the Fund may advertise yield, total return and/or
distribution rate. These figures will be based on historical earnings and are
not intended to indicate future performance. The yield of the Fund refers to the
annualized income generated by an investment in the Fund over a specified 30-day
period. The yield is calculated by assuming that the income generated by the
investment during that period is generated over a one-year period and is shown
as a percentage of the investment.
Total return is the change in value of an investment in the Fund over a given
period, assuming reinvestment of any dividends and capital gains. A cumulative
total return reflects an actual rate of return over a stated period of time. An
average annual total return is a hypothetical rate of return that, if achieved
annually, would have produced the same cumulative total return if performance
had been constant over the entire period. Average annual total returns smooth
out variations in performance; they are not the same as actual year-by-year
results.
The distribution rate is computed by dividing the total amount of the dividends
per share paid out during the past period by the maximum offering price or
month-end net asset value depending on the class of the Fund. This figure is
then "annualized" (multiplied by 365 days and divided by the applicable number
of days in the period). Funds with a front-end sales charge would incorporate
the offering price into the distribution yield in place of month-end net asset
value.
Distribution rate is a measure of the level of income paid out in cash to
Shareholders over a specified period. It differs from yield and total return and
is not intended to be a complete measure of performance. Furthermore, the
distribution rate may include return of principal and/or capital gains. Total
return is the change in value of a hypothetical investment over a given period
assuming reinvestment of dividends and capital gain distributions. The yield
refers to the cumulative 30-day rolling net investment income, divided by
maximum offering price and multiplied by average shares outstanding during this
period. See the Statement of Additional Information.
The Trust will include information on all classes of the Fund in any
advertisement or information containing performance data for the Fund. The
performance of Fiduciary Class shares may be higher than for Class A shares and
Class B shares because Fiduciary Class shares are not subject to sales charges
and distribution expenses.
The performance of each class of the Fund may from time to time be compared to
that of other mutual funds tracked by mutual fund rating services, to that of
broad groups of comparable mutual funds or to that of unmanaged indices that may
assume investment of dividends but do not reflect deductions
PROSPECTUS 22
<PAGE>
for administrative and management costs. In addition, the performance of each
class of the Fund may be compared to other funds or to relevant indices that may
calculate total return without reflecting sales charges; in which case, the Fund
may advertise its total return in the same manner. If reflected, sales charges
would reduce these total return calculations.
TAXES
The following summary of Federal income tax consequences is based on current tax
laws and regulations, which may be changed by legislative, judicial, or
administrative action. No attempt has been made to present a complete
explanation of the Federal, state, local or foreign tax treatment of the Fund or
its Shareholders. Accordingly, Shareholders are urged to consult their tax
advisers regarding specific questions as to the tax consequences of investing in
the Fund.
TAX STATUS OF THE FUND
The Fund is treated as a separate entity for Federal income tax purposes and is
not combined with the Trust's other funds. The Fund intends to qualify as a
"regulated investment company" for Federal income tax purposes and to meet all
other requirements that are necessary for it to be relieved of Federal taxes on
that part of its net investment income and net capital gains (the excess of net
long-term capital gain over net short-term capital loss) that is distributed to
Shareholders.
TAX STATUS OF DISTRUBUTIONS
The Fund will distribute substantially all of its net investment income
(including, for this purpose, net short-term capital gain) to Shareholders of
each class of shares of the Fund on at least an annual basis. Generally,
dividends from net investment income will be taxable to Shareholders as ordinary
income whether received in cash or in additional shares, and any net capital
gains will be distributed at least annually and will be taxed to Shareholders as
long-term capital gains, regardless of how long the Shareholder has held shares.
Distributions by the Fund to retirement plans that qualify for tax-exempt
treatment under the Code ("qualified retirement plans") will not be taxable. The
Federal tax treatment of qualified retirement plans, as well as distributions
from such plans, is governed by specific provisions of the Code. If shares are
held by a retirement plan that ceases to qualify for tax-exempt treatment under
the Code or by an individual who has received such shares as a distribution from
a retirement plan, the Fund's distributions will be taxable to such plan or
individual as described in the preceding paragraph. Persons considering
directing the investment of their qualified retirement plan account in the Fund
and qualified retirement plan trusts considering purchasing such shares, should
consult their tax advisers for a more complete explanation of the Federal tax
consequences, and for an explanation of the state, local and (if applicable)
foreign tax consequences of making such an investment.
The Fund will make annual reports to Shareholders of the Federal income tax
status of all distributions.
Certain securities purchased by the Fund (such as STRIPS, CUBES, TRS, TIGRS and
CATS), as defined in the "Description of Permitted Investments," are sold at
original issue discount and thus do not make periodic cash interest payments.
The Fund will be required to include as part of its current income the imputed
interest on such obligations even though the Fund has not received any interest
payments on such obligations during that period. Because the Fund distributes
substantially all of its net investment income to its Shareholders (including
such imputed interest), the Fund may have to sell portfolio securities in order
to generate the cash necessary for the required distributions. Such sales may
occur at a time when the Adviser would not have chosen to sell such securities
and may result in a taxable gain or loss.
Dividends declared by the Fund in October, November or December of any year and
payable to Shareholders of record on a date in such a month will be deemed to
have been paid by the Fund and received by Shareholders on December 31 of that
year, if paid by the Fund at any time during the following January.
The Fund intends to make sufficient distributions prior to the end of each
calendar year to avoid liability for Federal excise tax.
Dividends received by a Shareholder that are derived from the Fund's investments
in U.S. government obligations may not be entitled to the exemptions from state
and local income taxes that would be available if the Shareholder had purchased
U.S. government obligations directly. The Fund will inform Shareholders annually
of the percentage of income and distributions derived from U.S. government
obligations. Shareholders should consult their tax advisers regarding the state
and local tax treatment of the dividends received from the Fund.
The Fund may be subject to foreign withholding taxes on income derived from
obligations of foreign issuers . The Fund will not be able to elect to treat
Shareholders as having paid their proportionate share of such foreign taxes.
Sale, exchange, or redemption of Fund shares by a Shareholder will generally be
a taxable event to such Shareholder.
23 PROSPECTUS
<PAGE>
Investment Adviser and Sub-Administrator
Banc One Investment Advisors Corporation
774 Park Meadow Road
Columbus, OH 43271-0211
Distributor
The One Group-Registered Trademark- Services Company
3435 Stelzer Road
Columbus, OH 43219
Administrator
The One Group-Registered Trademark- Services Company
3435 Stelzer Road
Columbus, OH 43219
Transfer Agent and Custodian
State Street Bank and Trust Company
P.O. Box 8500
Boston, MA 02266-8500
Legal Counsel
Ropes & Gray
One Franklin Square
1301 K Street, N.W.
Suite 800 East
Washington, D.C. 20005
Independent Accountants
Coopers & Lybrand L.L.P.
100 East Broad Street
Columbus, OH 43215
TOG-F-061
<PAGE>
PARAGON PORTFOLIO
4900 SEARS TOWER
CHICAGO, ILLINOIS 60606
Paragon Portfolio (the "Trust") is an open-end, management investment
company (a "mutual fund") seven portfolios of which (the "Funds") are offered
pursuant to this Prospectus. Each of the Funds offers two classes of shares,
Class A shares and Class B shares. Class B shares of Paragon Treasury Money
Market Fund will be typically issued only upon an exchange of Class B shares of
any of the other Funds.
The Funds provide different investment alternatives. Their objectives are:
PARAGON TREASURY MONEY MARKET FUND. Maximum current income to the extent
consistent with preservation of capital and the maintenance of liquidity by
investment in a diversified portfolio of U.S. Treasury money market instruments.
AN INVESTMENT IN PARAGON TREASURY MONEY MARKET FUND IS NEITHER INSURED NOR
GUARANTEED BY THE U.S. GOVERNMENT AND THERE CAN BE NO ASSURANCE THAT THE FUND
WILL BE ABLE TO MAINTAIN A STABLE NET ASSET VALUE OF $1.00 PER SHARE.
PARAGON SHORT-TERM GOVERNMENT FUND. A high level of current income
consistent with stability of principal by investment in a diversified portfolio
of securities of the U.S. Government, its agencies, authorities and
instrumentalities.
PARAGON INTERMEDIATE-TERM BOND FUND. A high level of current income,
consistent with prudent investment risk, by investment in a diversified
portfolio of investment grade fixed-income securities.
PARAGON LOUISIANA TAX-FREE FUND. To provide Louisiana taxpayers with as
high a level of current income exempt from Federal income tax and Louisiana
income tax as is consistent with preservation of capital by investment in a
diversified portfolio of investment grade Louisiana state and municipal
securities.
PARAGON VALUE GROWTH FUND. Long-term capital growth and growth of income
while, as a secondary objective, providing a moderate level of current income by
investment in a diversified portfolio of equity securities that have the
potential for earnings growth.
PARAGON VALUE EQUITY INCOME FUND. Capital growth and current income by
investment in a diversified portfolio of equity securities with low
price-earnings ratios.
PARAGON GULF SOUTH GROWTH FUND. Long-term capital growth by investment in a
non-diversified portfolio of equity securities of small capitalization, emerging
growth and medium capitalization companies which are either headquartered in or
whose primary market is in the southeastern region of the United States.
- --------------------------------------------------------------------------------
ADDITIONAL INFORMATION
Account and Sales Information...................... (toll free) (800) 525-7907
This Prospectus provides you with information about the Trust and each of
the Funds that you should know before investing. It should be read and retained
for future reference. If you would like more detailed information, the Statement
of Additional Information dated March 30, 1995, as amended or supplemented from
time to time, is available upon request without charge by calling the Goldman,
Sachs & Co. telephone number listed above or by writing Goldman, Sachs & Co.,
4900 Sears Tower, Chicago, Illinois 60606. The Statement of Additional
Information, which is incorporated by reference into this Prospectus, has been
filed with the Securities and Exchange Commission.
- --------------------------------------------------------------------------------
SHARES OF THE TRUST ARE NOT DEPOSITS OR OBLIGATIONS OF, OR GUARANTEED OR
ENDORSED BY, PREMIER BANK, N.A. OR ANY OTHER INSURED DEPOSITORY INSTITUTION AND
ARE NOT INSURED BY THE FEDERAL DEPOSIT INSURANCE CORPORATION, THE FEDERAL
RESERVE BANK, OR ANY OTHER GOVERNMENT AGENCY. SHARES OF THE TRUST INVOLVE
INVESTMENT RISKS, INCLUDING POSSIBLE LOSS OF PRINCIPAL.
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED UPON THE
ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A
CRIMINAL OFFENSE.
THE DATE OF THIS PROSPECTUS IS MARCH 30, 1995.
<PAGE>
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
---------
<S> <C>
An Introduction to Paragon Portfolio....................................................................... 3
Shareholder and Fund Expenses.............................................................................. 4
Financial Highlights....................................................................................... 6
Investment Objective and Policies of Paragon Treasury Money Market Fund.................................... 13
Investment Objective and Policies of Paragon Short-Term Government Fund.................................... 13
Investment Objective and Policies of Paragon Intermediate-Term Bond Fund................................... 13
Investment Objective and Policies of Paragon Louisiana Tax-Free Fund....................................... 14
Investment Objective and Policies of Paragon Value Growth Fund............................................. 16
Investment Objective and Policies of Paragon Value Equity Income Fund...................................... 16
Investment Objective and Policies of Paragon Gulf South Growth Fund........................................ 17
Permissible Investments for the Funds...................................................................... 18
Investment Practices Common to the Funds................................................................... 21
Investment Restrictions.................................................................................... 24
Portfolio Transactions..................................................................................... 25
The Advisers, Administrator and Distributor................................................................ 25
Alternative Purchase Arrangements.......................................................................... 28
Purchase of Shares......................................................................................... 29
Class B Distribution Plan.................................................................................. 35
Retirement Plans........................................................................................... 36
Reports to Shareholders.................................................................................... 36
Distributions and Taxes.................................................................................... 36
Exchanges.................................................................................................. 38
Redemption of Shares....................................................................................... 39
Net Asset Value............................................................................................ 42
Performance and Yield Information.......................................................................... 42
Organization and Shares of the Funds....................................................................... 44
Backup Withholding Instructions............................................................................ 45
Appendix A................................................................................................. A-1
</TABLE>
2
<PAGE>
AN INTRODUCTION TO PARAGON PORTFOLIO
Paragon Portfolio (the "Trust") is an open-end, management investment
company registered under the Investment Company Act of 1940, as amended (the
"Investment Company Act"), consisting of separate portfolios. Each Fund offers
two classes of shares, Class A shares and Class B shares. Class B shares of
Paragon Treasury Money Market Fund will be typically issued only upon an
exchange of Class B shares of any of the other Funds. Each Fund is a separate
pool of assets and has a different investment objective which it pursues through
separate investment policies, as described below. Premier Investment Advisors,
L.L.C. ("Premier"), the successor to Premier Investment Advisors, Inc., serves
as the investment adviser to Paragon Short-Term Government Fund, Paragon
Intermediate-Term Bond Fund, Paragon Louisiana Tax-Free Fund, Paragon Value
Growth Fund, Paragon Value Equity Income Fund and Paragon Gulf South Growth Fund
and as subadviser to Paragon Treasury Money Market Fund. Goldman Sachs Asset
Management ("GSAM"), a separate operating division of Goldman, Sachs & Co.
("Goldman Sachs"), serves as the investment adviser to Paragon Treasury Money
Market Fund and as the Trust's administrator. Premier and GSAM are sometimes
each referred to as an "Adviser" or jointly as the "Advisers."
Premier is an indirect subsidiary of one of Louisiana's largest bank holding
companies. Goldman Sachs, which serves as the Trust's distributor and transfer
agent (the "Transfer Agent"), is one of the largest international investment
banking and brokerage firms in the United States.
None of the Funds alone constitutes a complete investment program. There can
be no assurance that the Funds will achieve their investment objectives.
3
<PAGE>
SHAREHOLDER AND FUND EXPENSES (NOTE 1)
<TABLE>
<CAPTION>
PARAGON TREASURY PARAGON PARAGON INTER- PARAGON LOUISI-
MONEY MARKET SHORT-TERM GOV- MEDIATE-TERM BOND ANA TAX-FREE FUND
FUND ERNMENT FUND FUND (NOTE 4)
------------------ ----------------- ----------------- -----------------
CLASS A CLASS B+ CLASS A CLASS B CLASS A CLASS B CLASS A CLASS B
------- -------- ------- ------- ------- ------- ------- -------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
SHAREHOLDER TRANSACTION EXPENSES
(as a percentage of offering price)
Maximum Sales Charge Imposed on Purchases (Note
2)............................................. None None 4.5% None 4.5% None 4.5% None
Sales Charge Imposed on Reinvested
Distributions.................................. None None None None None None None None
Maximum Deferred Sales Charge (Note 2).......... None 5.0% None 5.0% None 5.0% None 5.0%
Redemption Fee.................................. None None None None None None None None
Exchange Fee (Note 3)........................... $ 5 $ 5 $ 5 $ 5 $ 5 $ 5 $ 5 $ 5
ANNUAL FUND OPERATING EXPENSES
(as a percentage of average net assets after
adjustments)
Management Fees................................. .20% .20% .50% .50% .50% .50% .40% .40%
Administration Fees............................. .15 .15 .15 .15 .15 .15 .10 .10
12b-1 Fees...................................... None .75 None .75 None .75 None .75
Other Expenses.................................. .08 .08 .12 .12 .11 .11 .15 .15
------- -------- ------- ------- ------- ------- ------- -------
Total Fund Operating Expenses..................... .43% 1.18% .77% 1.52% .76% 1.51% .65% 1.40%
------- -------- ------- ------- ------- ------- ------- -------
------- -------- ------- ------- ------- ------- ------- -------
<CAPTION>
PARAGON VALUE PARAGON GULF
PARAGON VALUE EQUITY INCOME SOUTH GROWTH
GROWTH FUND FUND FUND
----------------- ----------------- -----------------
CLASS A CLASS B CLASS A CLASS B CLASS A CLASS B
------- ------- ------- ------- ------- -------
<S> <C> <C> <C> <C> <C> <C>
SHAREHOLDER TRANSACTION EXPENSES
(as a percentage of offering price)
Maximum Sales Charge Imposed on Purchases (Note
2)............................................. 4.5% None 4.5% None 4.5% None
Sales Charge Imposed on Reinvested
Distributions.................................. None None None None None None
Maximum Deferred Sales Charge (Note 2).......... None 5.0% None 5.0% None 5.0%
Redemption Fee.................................. None None None None None None
Exchange Fee (Note 3)........................... $ 5 $ 5 $ 5 $ 5 $ 5 $ 5
ANNUAL FUND OPERATING EXPENSES
(as a percentage of average net assets after
adjustments)
Management Fees................................. .65% .65% .65% .65% .65% .65%
Administration Fees............................. .15 .15 .15 .15 .15 .15
12b-1 Fees...................................... None .75 None .75 None .75
Other Expenses.................................. .16 .16 .13 .13 .20 .20
------- ------- ------- ------- ------- -------
Total Fund Operating Expenses..................... .96% 1.71% .93% 1.68% 1.00% 1.75%
------- ------- ------- ------- ------- -------
------- ------- ------- ------- ------- -------
</TABLE>
EXAMPLE OF FUND EXPENSES
You would pay the following expenses on a hypothetical $1,000 investment,
assuming a 5% annual return and redemption at the end of each time period:
<TABLE>
<CAPTION>
10
1 YEAR 3 YEARS 5 YEARS YEARS
------ ------- ------- -------
<S> <C> <C> <C> <C>
Paragon Treasury Money Market Fund
Class A Shares............................. $ 4 $14 $24 $ 54
Class B Shares
--Assuming complete redemption at end of
period.................................... $62 $67 $75 $112
--Assuming no redemption................... $12 $37 $65 $112
Paragon Short-Term Government Fund
Class A Shares............................. $53 $68 $86 $136
Class B Shares
--Assuming complete redemption at end of
period.................................... $65 $78 $93 $151
--Assuming no redemption................... $15 $48 $83 $151
Paragon Intermediate-Term Bond Fund
Class A Shares............................. $52 $68 $85 $135
Class B Shares
--Assuming complete redemption at end of
period.................................... $65 $78 $92 $150
--Assuming no redemption................... $15 $48 $82 $150
</TABLE>
4
<PAGE>
<TABLE>
<CAPTION>
1 YEAR 3 YEARS 5 YEARS 10 YEARS
------ ------- ------- --------
<S> <C> <C> <C> <C>
Paragon Louisiana Tax-Free Fund
Class A Shares............................. $51 $65 $ 80 $122
Class B Shares
--Assuming complete redemption at end of
period.................................... $64 $74 $ 87 $138
--Assuming no redemption................... $14 $44 $ 77 $138
Paragon Value Growth Fund
Class A Shares............................. $54 $74 $ 96 $158
Class B Shares
--Assuming complete redemption at end of
period.................................... $67 $84 $103 $172
--Assuming no redemption................... $17 $54 $ 93 $172
Paragon Value Equity Income Fund
Class A Shares............................. $54 $73 $ 94 $154
Class B Shares
--Assuming complete redemption at end of
period.................................... $67 $83 $101 $169
--Assuming no redemption................... $17 $53 $ 91 $169
Paragon Gulf South Growth Fund
Class A Shares............................. $55 $75 $ 98 $162
Class B Shares
--Assuming complete redemption at end of
period.................................... $68 $85 $105 $177
--Assuming no redemption................... $18 $55 $ 95 $177
</TABLE>
- ----------------------------------
Notes:
(1) The purpose of the table provided above is to assist investors in
understanding the various costs and expenses that a shareholder in the Funds
will bear directly or indirectly. Except as described in Note (4), the costs
and expenses included in the table and hypothetical example are based on
actual fees and expenses of the Class A shares for the fiscal year ended
November 30, 1994. The costs and expenses in the table and hypothetical
example for the Class B shares are based on estimated fees and expenses of
the Class B Shares assuming that such Shares were outstanding throughout the
fiscal year ended November 30, 1994. Other expenses and total fund operating
expenses actually incurred by Class B shares during the period from
commencement of operations of the respective Class B shares to November 30,
1994 were as follows: Paragon Short-Term Government Fund -- 0.13% and 1.53%,
respectively; Paragon Intermediate-Term Bond Fund -- 0.12% and 1.52%,
respectively; Paragon Louisiana Tax-Free Fund -- 0.16% and 1.41%,
respectively; Paragon Value Growth Fund -- 0.16% and 1.71%, respectively;
Paragon Value Equity Income Fund -- 0.12% and 1.67%, respectively; Paragon
Value Equity Income Fund -- 0.12% and 1.67%, respectively; and Paragon Gulf
South Growth Fund -- 0.20% and 1.75%, respectively. The costs and expenses
included in the table and hypothetical example should not be considered as
representative of past or future expenses. Actual expenses may be greater or
less than those indicated. Moreover, while the example assumes a 5% annual
return, the Fund's actual performance will vary and might result in actual
return greater or less than 5%. See "The Adviser, Administrator and
Distributor", "Purchase of Shares" and "Class B Distribution Plan."
(2) The Trust's transfer agent may impose a transaction fee of $7.50 for each
wire purchase.
(3) In addition to free reinvestments of dividends and distributions in shares
of the other Funds and free automatic exchanges pursuant to the Automatic
Exchange Program, five free exchanges are permitted in each twelve month
period without the imposition of any transaction fee; a fee of $5 is charged
for each subsequent exchange during such period. See "Exchanges."
(4) During the fiscal year ended November 30, 1994, Premier voluntarily reduced
its advisory fee to 0.40% of Paragon Louisiana Tax-Free Fund's average daily
net assets and Goldman Sachs voluntary agreed to reduce its administration
fee to 0.10% of Paragon Louisiana Tax-Free Fund's average daily net assets.
During such fiscal year, the Paragon Louisiana Tax-Free Fund's total
operating expenses attributable to the Class A Shares were 0.65% of its
average daily net assets. The estimated total operating expenses
attributable to the Class B Shares of the Paragon Louisiana Tax-Free Fund
were 1.40% of its average daily net assets, assuming that such Class B
Shares were outstanding throughout the fiscal year ended November 30, 1994.
Had the reduction of fees for the fiscal year ended November 30, 1994
otherwise payable not been reflected in the above table, the advisory fees
would be 0.50%, its administration fees would be 0.15%, and its total
operating expenses attributable to the Class A Shares would be 0.80% of its
average daily net assets. Without such fee reductions, the estimated total
operating expenses attributable to the Class B Shares of the Paragon
Louisiana Tax-Free Fund would be 1.55% of its average daily net assets,
assuming that such Class B Shares were outstanding throughout the fiscal
year ended November 30, 1994.
+ Investors wishing to purchase shares of Paragon Treasury Money Market Fund
are generally required to purchase Class A shares. Class B shares of Paragon
Treasury Money Market Fund will typically be issued only in exchange for
Class B shares of any of the other Funds.
* Class B shares convert to Class A shares seven years after purchase;
therefore, Class A expenses are used in the hypothetical example after year
seven.
Investors should be aware that, due to distribution fees, a long-term holder
of Class B shares of the Funds may pay over time more than the economic
equivalent of the maximum front-end sales charge permitted under the rules of
the National Association of Securities Dealers, Inc. ("NASD").
5
<PAGE>
PARAGON PORTFOLIO
FINANCIAL HIGHLIGHTS
The following per share data and ratios for a share of beneficial interest
of each Fund outstanding throughout each period presented below have been
audited by Price Waterhouse, independent accountants, as indicated in their
report, incorporated by reference into the Additional Statement, from the
Trust's annual report to shareholders for the fiscal year ended November 30,
1994 (the "Annual Report"). This information should be read in conjunction with
the financial statements and related notes incorporated by reference and
attached to the Additional Statement. The Annual Report also contains
performance information and is available upon request and without charge by
writing to the address on the cover of this Prospectus.
PARAGON PORTFOLIO
TREASURY MONEY MARKET FUND
FINANCIAL HIGHLIGHTS
SELECTED DATA FOR A SHARE OUTSTANDING THROUGHOUT EACH PERIOD
<TABLE>
<CAPTION>
INCOME FROM INVESTMENT OPERATIONS DISTRIBUTIONS TO SHAREHOLDERS FROM:
---------------------------------------- ----------------------------------------
NET ASSET NET REALIZED TOTAL NET TOTAL
VALUE AT NET GAIN INCOME FROM NET REALIZED DISTRIBUTIONS
BEGINNING INVESTMENT ON INVESTMENT INVESTMENT INVESTMENT GAIN ON TO
OF PERIOD INCOME TRANSACTIONS OPERATIONS INCOME INVESTMENTS SHAREHOLDERS
--------- ---------- ------------- ----------- ---------- ----------- -------------
<S> <C> <C> <C> <C> <C> <C> <C>
FOR THE YEARS ENDED NOVEMBER 30,
- ----------------------------------
1994 Class A Shares............... $1.00 $0.04 $-- $0.04 $(0.04) $-- $(0.04)
1993 Class A Shares............... 1.00 0.03 -- 0.03 (0.03) -- (0.03)
1992 Class A Shares............... 1.00 0.04 -- 0.04 (0.04) -- (0.04)
1991 Class A Shares............... 1.00 0.06 -- 0.06 (0.06) -- (0.06)
FOR THE PERIOD DECEMBER 29,
1989 (COMMENCEMENT OF OPERATIONS)
THROUGH NOVEMBER 30,
- ----------------------------------
1990 Class A Shares............... 1.00 0.07 -- 0.07 (0.07) -- (0.07)
<CAPTION>
RATIO OF NET
NET ASSET RATIO OF NET INVESTMENT NET ASSETS
VALUE EXPENSES TO INCOME TO AT END
AT END TOTAL AVERAGE NET AVERAGE OF PERIOD
OF PERIOD RETURN (a) ASSETS NET ASSETS (000'S)
--------- --------- ------------ ------------ ----------
<S> <C> <C> <C> <C> <C>
FOR THE YEARS ENDED NOVEMBER 30,
- ----------------------------------
1994 Class A Shares............... $1.00 3.68% 0.43% 3.60% $296,365
1993 Class A Shares............... 1.00 2.84 0.45 2.76 296,130
1992 Class A Shares............... 1.00 3.71 0.46 3.43 334,003
1991 Class A Shares............... 1.00 6.00 0.50 5.67 300,539
FOR THE PERIOD DECEMBER 29,
1989 (COMMENCEMENT OF OPERATIONS)
THROUGH NOVEMBER 30,
- ----------------------------------
1990 Class A Shares............... 1.00 7.91(b) 0.46(b) 7.73(b) 236,504
</TABLE>
- ----------------------------------
(a) Assumes investment at the net asset value at the beginning of the period,
reinvestment of all dividends and distributions, a complete redemption of
the investment at the net asset value at the end of the period.
(b) Annualized.
6
<PAGE>
PARAGON PORTFOLIO
SHORT-TERM GOVERNMENT FUND
FINANCIAL HIGHLIGHTS
SELECTED DATA FOR A SHARE OUTSTANDING THROUGHOUT EACH PERIOD
<TABLE>
<CAPTION>
INCOME FROM INVESTMENT OPERATIONS
---------------------------------------
NET REALIZED TOTAL DISTRIBUTIONS TO SHAREHOLDERS FROM:
AND INCOME --------------------------------------
NET ASSET UNREALIZED (LOSS) NET TOTAL
VALUE AT NET GAIN (LOSS) FROM NET REALIZED DISTRIBUTIONS
BEGINNING INVESTMENT ON INVESTMENT INVESTMENT INVESTMENT GAIN ON TO
OF PERIOD INCOME TRANSACTIONS OPERATIONS INCOME INVESTMENTS SHAREHOLDERS
---------- ----------- ------------- ----------- ---------- ----------- -------------
<S> <C> <C> <C> <C> <C> <C> <C>
FOR THE YEARS ENDED NOVEMBER 30,
- ------------------------------------
1994 Class A Shares................. $10.34 $0.50 $ (0.49) $ 0.01 $(0.50) $-- $(0.50)
1994 Class B Shares (c)............. 9.95 0.05 (0.10) (0.05) (0.05) -- (0.05)
1993 Class A Shares................. 10.30 0.56 0.04 0.60 (0.56) -- (0.56)
1992 Class A Shares................. 10.35 0.67 (0.03) 0.64 (0.67) -- (0.69)
1991 Class A Shares................. 10.04 0.74 0.31 1.05 (0.74) -- (0.74)
FOR THE PERIOD DECEMBER 29,
1989 (COMMENCEMENT OF OPERATIONS)
THROUGH NOVEMBER 30,
- ------------------------------------
1990 Class A Shares................. 10.00 0.69 0.04 0.73 (0.69) -- (0.69)
<CAPTION>
RATIO OF NET
NET ASSET RATIO OF NET INVESTMENT NET ASSETS
VALUE EXPENSES TO INCOME TO PORTFOLIO AT END
AT END TOTAL AVERAGE NET AVERAGE TURNOVER OF PERIOD
OF PERIOD RETURN (a) ASSETS NET ASSETS RATE (000'S)
--------- ---------- ------------ ------------ --------- ----------
<S> <C> <C> <C> <C> <C> <C>
FOR THE YEARS ENDED NOVEMBER 30,
- ------------------------------------
1994 Class A Shares................. $9.85 0.12% 0.77% 4.89% 40% $142,958
1994 Class B Shares (c)............. 9.85 (0.39) 1.53(b) 4.92(b) 40 41
1993 Class A Shares................. 10.34 5.91 0.78 5.35 44 169,990
1992 Class A Shares................. 10.30 6.29 0.81 6.44 22 123,528
1991 Class A Shares................. 10.35 10.90 0.84 7.34 15 76,921
FOR THE PERIOD DECEMBER 29,
1989 (COMMENCEMENT OF OPERATIONS)
THROUGH NOVEMBER 30,
- ------------------------------------
1990 Class A Shares................. 10.04 7.67 0.84(b) 7.60(b) 33 87,096
</TABLE>
- ----------------------------------
(a) Assumes investment at the net asset value at the beginning of the period,
reinvestment of all dividends and distributions, a complete redemption of
the investment at the net asset value at the end of the period and no sales
charges. Total return would be reduced if a sales charge for Class A Shares
or a contingent deferred sales charge for Class B Shares were taken into
account.
(b) Annualized.
(c) Class B Share activity commenced on October 19, 1994.
7
<PAGE>
PARAGON PORTFOLIO
INTERMEDIATE-TERM BOND FUND
FINANCIAL HIGHLIGHTS
SELECTED DATA FOR A SHARE OUTSTANDING THROUGHOUT EACH PERIOD
<TABLE>
<CAPTION>
INCOME FROM INVESTMENT OPERATIONS
------------------------------------------- DISTRIBUTIONS TO SHAREHOLDERS FROM:
NET REALIZED TOTAL ---------------------------------------
NET ASSET AND UNREALIZED INCOME (LOSS) NET TOTAL
VALUE AT NET GAIN (LOSS) FROM NET REALIZED DISTRIBUTIONS
BEGINNING INVESTMENT ON INVESTMENT INVESTMENT INVESTMENT GAIN ON TO
OF PERIOD INCOME TRANSACTIONS OPERATIONS INCOME INVESTMENTS SHAREHOLDERS
--------- ---------- -------------- ------------- ---------- ----------- ------------
<S> <C> <C> <C> <C> <C> <C> <C>
FOR THE YEARS ENDED
NOVEMBER 30,
- ---------------------------
1994 Class A Shares........ $10.84 $0.66 $(1.16) $(0.50) $(0.66) $(0.14) $(0.80)
1994 Class B Shares (c).... 9.74 0.10 (0.18) (0.08) (0.10) -- (0.10)
1993 Class A Shares........ 10.53 0.71 0.36 1.07 (0.70) (0.06) (0.76)
1992 Class A Shares........ 10.41 0.76 0.12 0.88 (0.76) -- (0.76)
1991 Class A Shares........ 9.91 0.77 0.50 1.27 (0.77) -- (0.77)
FOR THE PERIOD DECEMBER 29,
1989 (COMMENCEMENT OF
OPERATIONS) THROUGH
NOVEMBER 30,
- ---------------------------
1990 Class A Shares........ 10.00 0.71 (0.09) 0.62 (0.71) -- (0.71)
<CAPTION>
RATIO OF NET
NET ASSET RATIO OF NET INVESTMENT NET ASSETS
VALUE EXPENSES TO INCOME TO PORTFOLIO AT END
AT END TOTAL AVERAGE NET AVERAGE TURNOVER OF PERIOD
OF PERIOD RETURN (a) ASSETS NET ASSETS RATE (000'S)
--------- ---------- ------------ ------------ --------- ----------
<S> <C> <C> <C> <C> <C> <C>
FOR THE YEARS ENDED
NOVEMBER 30,
- ---------------------------
1994 Class A Shares........ $ 9.54 (4.77)% 0.76% 6.56% 38% $297,123
1994 Class B Shares (c).... 9.56 (0.76) 1.52(b) 6.38(b) 38 250
1993 Class A Shares........ 10.84 10.32 0.74 6.46 38 341,535
1992 Class A Shares........ 10.53 8.71 0.78 7.17 24 285,684
1991 Class A Shares........ 10.41 13.34 0.78 7.69 15 221,916
FOR THE PERIOD DECEMBER 29,
1989 (COMMENCEMENT OF
OPERATIONS) THROUGH
NOVEMBER 30,
- ---------------------------
1990 Class A Shares........ 9.91 6.59 0.80(b) 7.91(b) 14 165,464
</TABLE>
- ----------------------------------
(a) Assumes investment at the net asset value at the beginning of the period,
reinvestment of all dividends and distributions, a complete redemption of
the investment at the net asset value at the end of the period and no sales
charges. Total return would be reduced if a sales charge for Class A Shares
or a contingent deferred sales charge for Class B shares were taken into
account.
(b) Annualized.
(c) Class B Share activity commenced on September 28, 1994.
8
<PAGE>
PARAGON PORTFOLIO
LOUISIANA TAX-FREE FUND
FINANCIAL HIGHLIGHTS
SELECTED DATA FOR A SHARE OUTSTANDING THROUGHOUT EACH PERIOD
<TABLE>
<CAPTION>
INCOME FROM INVESTMENT OPERATIONS
----------------------------------------- DISTRIBUTIONS TO SHAREHOLDERS FROM:
NET REALIZED TOTAL -------------------------------------
NET ASSET AND UNREALIZED INCOME (LOSS) NET TOTAL NET ASSET
VALUE AT NET GAIN (LOSS) FROM NET REALIZED DISTRIBUTIONS VALUE
BEGINNING INVESTMENT ON INVESTMENT INVESTMENT INVESTMENT GAIN ON TO AT END
OF PERIOD INCOME TRANSACTIONS OPERATIONS INCOME INVESTMENTS SHAREHOLDERS OF PERIOD
--------- ---------- -------------- ------------- ---------- ----------- ------------ ---------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
FOR THE YEARS ENDED
NOVEMBER 30,
- ----------------------------------------------------------------------------------------------------------------------------------
1994 Class A Shares........ $10.96 $0.52 $(0.84) $(0.32) $(0.52) $(0.11) $(0.63) $10.01
1994 Class B Shares (c).... 10.41 0.09 (0.40) (0.31) (0.09) -- (0.09) 10.01
1993 Class A Shares........ 10.59 0.55 0.45 1.00 (0.55) (0.08) (0.63) 10.96
1992 Class A Shares........ 10.38 0.59 0.28 0.87 (0.59) (0.07) (0.66) 10.59
1991 Class A Shares........ 10.15 0.60 0.23 0.83 (0.60) -- (0.60) 10.38
FOR THE PERIOD DECEMBER 29,
1989 (COMMENCEMENT OF
OPERATIONS) THROUGH
NOVEMBER 30,
- ---------------------------
1990 Class A Shares........ 10.00 0.57 0.15 0.72 (0.57) -- (0.57) 10.15
<CAPTION>
RATIOS ASSUMING NO
WAIVER OF FEES
------------------------
RATIO OF NET RATIO OF NET
RATIO OF NET INVESTMENT NET ASSETS RATIO OF INVESTMENT
EXPENSES TO INCOME TO PORTFOLIO AT END EXPENSES INCOME TO
TOTAL AVERAGE NET AVERAGE TURNOVER OF PERIOD TO AVERAGE AVERAGE
RETURN (a) ASSETS NET ASSETS RATE (000'S) NET ASSETS NET ASSETS
---------- ------------ ------------ --------- ---------- ---------- ------------
<S> <C> <C> <C> <C> <C> <C> <C>
FOR THE YEARS ENDED
NOVEMBER 30,
- ---------------------------
1994 Class A Shares........ (2.97)% 0.65% 4.97% 24% $ 196,820 0.80% 4.82%
1994 Class B Shares (c).... (2.94) 1.41(b) 4.45(b) 24 204 1.56(b) 4.30(b)
1993 Class A Shares........ 9.65 0.62 5.07 25 196,534 0.78 4.91
1992 Class A Shares........ 8.64 0.58 5.70 32 135,692 0.83 5.45
1991 Class A Shares........ 8.45 0.61 5.86 35 88,503 0.86 5.61
FOR THE PERIOD DECEMBER 29,
1989 (COMMENCEMENT OF
OPERATIONS) THROUGH
NOVEMBER 30,
- ---------------------------
1990 Class A Shares........ 7.48 0.64(b) 6.20(b) 5 59,375 0.86(b) 5.98(b)
</TABLE>
- ----------------------------------------
(a) Assumes investment at the net asset value at the beginning of the period,
reinvestment of all dividends and distributions, a complete redemption of
the investment at the net asset value at the end of the period and no sales
charges. Total return would be reduced if a sales charge for Class A Shares
or a contingent deferred sales charge for Class B Shares were taken into
account.
(b) Annualized.
(c) Class B Share activity commenced on September 16, 1994.
9
<PAGE>
PARAGON PORTFOLIO
VALUE GROWTH FUND
FINANCIAL HIGHLIGHTS
SELECTED DATA FOR A SHARE OUTSTANDING THROUGHOUT EACH PERIOD
<TABLE>
<CAPTION>
INCOME FROM INVESTMENT OPERATIONS
----------------------------------------- DISTRIBUTIONS TO SHAREHOLDERS FROM:
NET REALIZED TOTAL -------------------------------------
NET ASSET AND UNREALIZED INCOME (LOSS) NET TOTAL NET ASSET
VALUE AT NET GAIN (LOSS) FROM NET REALIZED DISTRIBUTIONS VALUE
BEGINNING INVESTMENT ON INVESTMENT INVESTMENT INVESTMENT GAIN ON TO AT END
OF PERIOD INCOME TRANSACTIONS OPERATIONS INCOME INVESTMENTS SHAREHOLDERS OF PERIOD
--------- ---------- -------------- ------------- ---------- ----------- ------------ ---------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
FOR THE YEARS ENDED
NOVEMBER 30,
- ----------------------------
1994 Class A Shares......... $15.29 $0.20 $(0.86) $(0.66) $(0.21) $(0.69) $(0.90) $13.73
1994 Class B Shares (d)..... 14.98 0.03 (1.28) (1.25) (0.03) -- (0.03) 13.70
1993 Class A Shares......... 14.38 0.17 1.25 1.42 (0.18) (0.33) (0.51) 15.29
1992 Class A Shares......... 11.90 0.17 2.68 2.85 (0.15) (0.22) (0.37) 14.38
1991 Class A Shares......... 9.75 0.19 2.19 2.38 (0.21) (0.02) (0.23) 11.90
FOR THE PERIOD DECEMBER 29,
1989 (COMMENCEMENT OF
OPERATIONS) THROUGH NOVEMBER
30,
- ----------------------------
1990 Class A Shares......... 10.00 0.24 (0.28) (0.04) (0.21) 0.00 (0.21) 9.75
<CAPTION>
RATIO OF NET
RATIO OF NET INVESTMENT NET ASSETS
EXPENSES TO INCOME TO PORTFOLIO AT END
TOTAL AVERAGE NET AVERAGE TURNOVER OF PERIOD
RETURN (a) ASSETS NET ASSETS RATE (000'S)
---------- ------------ ------------ --------- ----------
<S> <C> <C> <C> <C> <C>
FOR THE YEARS ENDED
NOVEMBER 30,
- ----------------------------
1994 Class A Shares......... (4.32)% 0.96% 1.34% 53% $173,198
1994 Class B Shares (d)..... (8.31) 1.71(b) 0.76(b) 53 412
1993 Class A Shares......... 10.13 0.96 1.21 66 171,141
1992 Class A Shares......... 24.27 0.97 1.25 43 133,614
1991 Class A Shares......... 24.97 0.95(c) 1.73(c) 54 93,400
FOR THE PERIOD DECEMBER 29,
1989 (COMMENCEMENT OF
OPERATIONS) THROUGH NOVEMBER
30,
- ----------------------------
1990 Class A Shares......... (0.40) 1.03(b) 2.68(b) 53 45,937
</TABLE>
- ----------------------------------
(a) Assumes investment at the net asset value at the beginning of the period,
reinvestment of all dividends and distributions, a complete redemption of
the investment at the net asset value at the end of the period and no sales
charges. Total return would be reduced if a sales charge for Class A Shares
or a contingent deferred sales charge for Class B Shares were taken into
account.
(b) Annualized.
(c) Had the Administrator not voluntarily waived a portion of the administration
fee, the expense ratio and the ratio of net investment income to average net
assets for the year ended November 30, 1991 would have been 1.02% and 1.66%
for Class A Shares.
(d) Class B Share activity commenced on September 9, 1994.
10
<PAGE>
PARAGON PORTFOLIO
VALUE EQUITY INCOME FUND
FINANCIAL HIGHLIGHTS
SELECTED DATA FOR A SHARE OUTSTANDING THROUGHOUT EACH PERIOD
<TABLE>
<CAPTION>
INCOME FROM INVESTMENT OPERATIONS
------------------------------------------- DISTRIBUTIONS TO SHAREHOLDERS FROM:
NET REALIZED TOTAL ---------------------------------------
NET ASSET AND UNREALIZED INCOME (LOSS) NET TOTAL
VALUE AT NET GAIN (LOSS) FROM NET REALIZED DISTRIBUTIONS
BEGINNING INVESTMENT ON INVESTMENT INVESTMENT INVESTMENT GAIN ON TO
OF PERIOD INCOME TRANSACTIONS OPERATIONS INCOME INVESTMENTS SHAREHOLDERS
--------- ---------- -------------- ------------- ---------- ----------- ------------
<S> <C> <C> <C> <C> <C> <C> <C>
FOR THE YEARS ENDED
NOVEMBER 30,
- ----------------------------
1994 Class A Shares......... $12.74 $0.30 $(0.54) $(0.24) $(0.34) $(0.61) $(0.95)
1994 Class B Shares (d)..... 12.01 0.04 (0.45) (0.41) (0.04) -- (0.04)
1993 Class A Shares......... 12.20 0.28 0.93 1.21 (0.28) (0.39) (0.67)
1992 Class A Shares......... 10.42 0.27 1.76 2.03 (0.25) -- (0.25)
1991 Class A Shares......... 9.00 0.29 1.45 1.74 (0.32) -- (0.32)
FOR THE PERIOD DECEMBER 28,
1994 (COMMENCEMENT OF
OPERATIONS) THROUGH NOVEMBER
30,
- ----------------------------
1990 Class A Shares......... 10.00 0.31 (1.04) (0.73) (0.27) -- (0.27)
<CAPTION>
RATIO OF NET
NET ASSET RATIO OF NET INVESTMENT NET ASSETS
VALUE EXPENSES TO INCOME TO PORTFOLIO AT END
AT END TOTAL AVERAGE NET AVERAGE TURNOVER OF PERIOD
OF PERIOD RETURN (a) ASSETS NET ASSETS RATE (000'S)
--------- ---------- ------------ ------------ --------- ----------
<S> <C> <C> <C> <C> <C> <C>
FOR THE YEARS ENDED
NOVEMBER 30,
- ----------------------------
1994 Class A Shares......... $11.55 (1.69)% 0.93% 2.50% 49% $103,364
1994 Class B Shares (d)..... 11.56 (3.40) 1.67(b) 1.71(b) 49 31
1993 Class A Shares......... 12.74 10.24 0.93 2.30 51 102,799
1992 Class A Shares......... 12.20 19.65 0.98 2.38 36 83,136
1991 Class A Shares......... 10.42 20.03 0.95(c) 3.53(c) 50 59,854
FOR THE PERIOD DECEMBER 28,
1994 (COMMENCEMENT OF
OPERATIONS) THROUGH NOVEMBER
30,
- ----------------------------
1990 Class A Shares......... 9.00 (7.40) 0.99(b) 3.62(b) 56 72,783
</TABLE>
- ----------------------------------
(a) Assumes investment at the net asset value at the beginning of the period,
reinvestment of all dividends and distributions, a complete redemption of
the investment at the net asset value at the end of the period and no sales
charges. Total return would be reduced if a sales charge for Class A Shares
or a contingent deferred sales charge for Class B Shares were taken into
account.
(b) Annualized.
(c) Had the Administrator not voluntarily waived a portion of the administration
fee, the expense ratio and the ratio of net investment income to average net
assets for the year ended November 30, 1991 would have been 1.01% and 3.47%
for Class A Shares.
(d) Class B Share activity commenced on October 3, 1994.
11
<PAGE>
PARAGON PORTFOLIO
GULF SOUTH GROWTH FUND
FINANCIAL HIGHLIGHTS
SELECTED DATA FOR A SHARE OUTSTANDING THROUGHOUT EACH PERIOD
<TABLE>
<CAPTION>
INCOME FROM INVESTMENT OPERATIONS
------------------------------------------- DISTRIBUTIONS TO SHAREHOLDERS FROM:
NET REALIZED TOTAL ---------------------------------------
NET ASSET AND UNREALIZED INCOME (LOSS) NET TOTAL
VALUE AT NET GAIN (LOSS) FROM NET REALIZED DISTRIBUTIONS
BEGINNING INVESTMENT ON INVESTMENT INVESTMENT INVESTMENT GAIN ON TO
OF PERIOD INCOME TRANSACTIONS OPERATIONS INCOME INVESTMENTS SHAREHOLDERS
--------- ---------- -------------- ------------- ---------- ----------- ------------
<S> <C> <C> <C> <C> <C> <C> <C>
FOR THE YEARS ENDED
NOVEMBER 30,
- ----------------------------
1994 Class A Shares......... $15.88 $(0.06) $(0.99) $(1.05) $-- $(0.13) $(0.13)
1994 Class B Shares (c)..... 16.10 (0.01) (1.43) (1.44) -- -- --
1993 Class A Shares......... 14.89 (0.03) 1.38 1.35 (0.01) (0.35) (0.36)
1992 Class A Shares......... 11.59 0.02 3.29 3.31 (0.01) -- (0.01)
FOR THE PERIOD JULY 1,
1991 (COMMENCEMENT OF
OPERATIONS) THROUGH NOVEMBER
30,
- ----------------------------
1991 Class A Shares......... 10.00 0.02 1.59 1.61 (0.02) -- (0.02)
<CAPTION>
RATIO OF NET
INVESTMENT
NET ASSET RATIO OF NET INCOME NET ASSETS
VALUE EXPENSES TO (LOSS) PORTFOLIO AT END
AT END TOTAL AVERAGE NET TO AVERAGE TURNOVER OF PERIOD
OF PERIOD RETURN (a) ASSETS NET ASSETS RATE (000'S)
--------- ---------- ------------ ------------ --------- ----------
<S> <C> <C> <C> <C> <C> <C>
FOR THE YEARS ENDED
NOVEMBER 30,
- ----------------------------
1994 Class A Shares......... $14.70 (6.66)% 1.00% (0.38)% 51% $77,540
1994 Class B Shares (c)..... 14.66 (9.08) 1.75(b) (0.90)(b) 51 231
1993 Class A Shares......... 15.88 9.10 1.01 (0.21) 59 74,982
1992 Class A Shares......... 14.89 28.59 1.00 0.15 42 55,719
FOR THE PERIOD JULY 1,
1991 (COMMENCEMENT OF
OPERATIONS) THROUGH NOVEMBER
30,
- ----------------------------
1991 Class A Shares......... 11.59 16.12 1.05(b) 0.31(b) 12 34,546
</TABLE>
- ----------------------------------
(a) Assumes investment at the net asset value at the beginning of the period,
reinvestment of all dividends and distributions, a complete redemption of
the investment at the net asset value at the end of the period and no sales
charges. Total return would be reduced if a sales charge for Class A Shares
or a contingent deferred sales charge for Class B shares were taken into
account.
(b) Annualized.
(c) Class B Share activity commenced on September 12, 1994.
12
<PAGE>
INVESTMENT OBJECTIVE AND POLICIES OF PARAGON TREASURY MONEY MARKET FUND
The investment objective of Paragon Treasury Money Market Fund is to
maximize current income to the extent consistent with preservation of capital
and the maintenance of liquidity. The Fund pursues its objective by limiting its
investments to securities issued or guaranteed by the U.S. Treasury and
repurchase agreements relating to such securities. The Fund is diversified under
the Investment Company Act.
The Fund offers investors a convenient way to enjoy money market returns and
professional management while seeking the safety and stability of their
principal. The Fund provides a high degree of safety because its securities,
excluding repurchase agreements, are issued or guaranteed by the U.S. Treasury.
As a matter of fundamental policy, at least 65% of the Fund's total assets will
consist of securities issued by the U.S. Treasury and repurchase agreements
relating to such securities.
The Fund seeks to maintain a stable net asset value of $1.00 per share.
There is no assurance that the Fund will be able to achieve this objective.
However, to facilitate this goal, the Fund's portfolio securities are valued by
the amortized cost method as permitted by a rule of the Securities and Exchange
Commission. The rule requires that all portfolio securities have at the time of
purchase a maximum remaining maturity of thirteen months and that they meet
certain quality standards. The Fund must also maintain a dollar-weighted average
portfolio maturity of not more than 90 days.
INVESTMENT OBJECTIVE AND POLICIES OF PARAGON SHORT-TERM GOVERNMENT FUND
The investment objective of Paragon Short-Term Government Fund is to seek a
high level of current income consistent with stability of principal by investing
primarily in a diversified portfolio of securities of the U.S. Government, its
agencies, authorities and instrumentalities. The Fund's portfolio will normally
consist of securities with remaining maturities of six years or less. As a
matter of fundamental policy, at least 65% of the Fund's total assets will
consist of securities issued or guaranteed as to principal and interest by the
U.S. Government, its agencies, authorities and instrumentalities with a
dollar-weighted average portfolio maturity of one to three years.
As a matter of nonfundamental policy, under normal market conditions, at
least 80% of the value of the Fund's total assets will be invested in securities
that are issued or guaranteed as to principal and interest by the U.S.
Government, its agencies, authorities or instrumentalities, including
mortgage-related securities, ("U.S. Government Securities") and repurchase
agreements relating to U.S. Government Securities. Although the Fund intends to
invest all of its total assets in such securities, up to 20% of its total assets
may be held in cash or invested in other investment grade fixed-income
securities and cash equivalents.
INVESTMENT OBJECTIVE AND POLICIES OF PARAGON INTERMEDIATE-TERM BOND FUND
The investment objective of Paragon Intermediate-Term Bond Fund is to
provide a high level of current income, consistent with prudent investment risk,
by investment in a diversified portfolio of investment grade fixed-income
securities.
As a matter of fundamental policy, at least 65% of the Fund's total assets
will consist of investment grade bonds and debentures with a dollar-weighted
average portfolio maturity of three to ten years. Markets, securities and
maturities selected will be those that offer the greatest potential for
providing high current income without assuming undue risk. In making these
selections, Premier
13
<PAGE>
considers yield curves, interest rate expectations, technical aspects of the
market, and spread relationships among various sectors of the fixed-income
securities markets. The proportion of the Fund's assets invested in securities
with particular characteristics (such as maturity, type and coupon rate) may
vary based on Premier's outlook for the economy, the financial market, and other
factors.
The Fund may invest its assets in: (i) U.S. Government Securities; (ii) U.S.
dollar denominated debt securities issued by foreign governments and their
political subdivisions and other foreign issuers; (iii) foreign and domestic
corporate debt securities, some of which may involve equity features; (iv)
asset-backed securities; and (v) obligations of banks or savings and loan
associations.
As a matter of nonfundamental policy, under normal market conditions, at
least 80% of the value of the Fund's total assets will be invested in the
fixed-income securities described above. For this purpose, the Fund will
consider convertible debt securities to be fixed-income securities. The Fund
intends to invest all of its assets in fixed-income securities.
The Fund will invest only in investment grade debt securities, which are
those rated Baa or higher by Moody's Investors Service Inc. ("Moody's") or BBB
or higher by Standard & Poor's Ratings Group ("S&P") or, if unrated, determined
by Premier to be of comparable quality. Securities rated Baa and BBB may have
speculative elements as well as investment grade characteristics. In the event
that the rating for any security held in the Fund's portfolio drops below the
minimal acceptable rating, such change will be considered by Premier in
evaluating the overall composition of the Fund's portfolio.
INVESTMENT OBJECTIVE AND POLICIES OF PARAGON LOUISIANA TAX-FREE FUND
The investment objective of Paragon Louisiana Tax-Free Fund is to seek as
high a level of current income exempt from Federal income tax and Louisiana
income tax as is consistent with preservation of capital. As a matter of
fundamental policy at least 80% of the Fund's net assets will consist of
investment grade municipal securities issued by or on behalf of the State of
Louisiana and its political subdivisions, agencies and instrumentalities, the
interest on which is exempt from both Federal income tax and Louisiana state
income tax. The Fund is diversified under the Investment Company Act.
It is anticipated that the Fund normally will invest in long-term municipal
securities and that the dollar-weighted average maturity of the Fund's portfolio
generally will vary between 5 and 15 years, although the Fund may invest in
securities of any maturity. The municipal securities in which the Fund invests
may carry fixed rates of return or have floating or variable rates. Although the
Fund intends to invest all of its assets in the municipal securities described
above, up to 20% of its assets may be held in cash or invested in municipal
securities of other states, short-term taxable investments including repurchase
agreements, U.S. Government Securities or other cash equivalents and Louisiana
municipal securities such as "private activity" bonds the interest on which may
be treated as a tax preference item under the Federal alternative minimum tax. A
portion of the Fund's distributions may be subject to Federal and/or Louisiana
state income tax.
The Fund may invest its assets in: (i) general obligation bonds; (ii)
revenue bonds, including industrial development revenue bonds; (iii) short-term
municipal securities of all types, including tax anticipation notes, revenue
anticipation notes and bond anticipation notes; and (iv) certificates of
participation in a pool of municipal securities held by a bank or other
financial institution, the interest
14
<PAGE>
from which is, in the opinion of counsel to the issuer, exempt from Federal and
Louisiana income tax. As a matter of nonfundamental policy, at least 50% of the
Fund's total assets will be invested in escrow secured bonds and bonds insured
as to principal and interest.
All bonds purchased by the Fund are investment grade, which are those rated
at least Baa by Moody's or BBB by S&P, or short-term tax-exempt municipal
securities rated at least MIG-3 (VMIG-3) by Moody's or SP-2 by S&P or, if
unrated, securities of equivalent quality as determined by Premier. Securities
rated Baa, BBB, MIG-3 (VMIG-3) and SP-2 may have speculative elements as well as
investment grade characteristics. In the event that the rating for any security
held in the Fund's portfolio drops below the minimal acceptable rating, such
change will be considered by Premier in evaluating the overall composition of
the Fund's portfolio.
In order to enhance the liquidity, stability, or quality of a municipal
security meeting the standards described above, the Fund may acquire the right
to sell the security to another party at a guaranteed price and date. These
rights may be referred to as puts, demand features, or standby commitments,
depending on their characteristics, and may involve letters of credit issued by
domestic or foreign banks supporting the other party's ability to purchase the
security from the Fund. The right to sell may be exercisable on demand or at
specified intervals, and may form part of a security or be acquired separately
by the Fund. In considering whether a security meets the Fund's quality
standards, the Fund will look to the creditworthiness of the partyproviding the
Fund with the right to sell as well as the quality of the security itself.
The Fund is more susceptible to factors adversely affecting issuers of
Louisiana municipal securities than is a comparable municipal bond fund that is
not concentrated in these issuers to this degree. Although it has recovered in
recent years, Louisiana experienced severe financial difficulties in the late
nineteen-eighties and continues to face the risks associated with a
non-diversified economy. In particular, the significance of the oil and gas
industry in Louisiana's economy has resulted in financial difficulties during
unfavorable markets for oil and gas products and in financial benefits during
favorable markets. Louisiana's general obligation bonds were rated as high as Aa
by Moody's and AA by S&P, respectively, in 1984. The decline in oil prices
affected the state through a loss of severance taxes and royalties, which
together peaked at 26% of state governmental revenues in fiscal year 1982-1983
compared with 4.3% in fiscal year 1993-1994. Indirectly the decline in economic
activity also affected the state's collection of various excise taxes. As a
result, during the period from fiscal year 1987-1988 through fiscal year
1993-1994, Louisiana experienced operating budget deficits in three of the seven
fiscal years, and its bonds were downgraded to Baa1/BBB+. After eliminating its
deficit through the issuance of long-term bonds in 1988, the state has
maintained positive ending General Fund balances through fiscal year 1993-1994.
The State forecasts for fiscal year 1995-1996 indicate a potential revenue
shortfall of $192 million in order to continue State operations in fiscal year
1995-1996 at current levels. The State's budget projections may also be impacted
by certain matters relating to the Medicaid program. However, the State is
presently negotiating with the U.S. Secretary of Health and Human Services for a
waiver proposal providing for a phase-in of a managed care program which
utilizes a capitated payment system. S&P upgraded the state's bond rating to A
in 1990. If either Louisiana or any of its local governmental entities is unable
to meet its financial obligations, the income derived by the Fund, the Fund's
net asset value, the ability to preserve or realize appreciation of the Fund's
capital or the Fund's liquidity could be adversely affected.
15
<PAGE>
INVESTMENT OBJECTIVE AND POLICIES OF PARAGON VALUE GROWTH FUND
The investment objective of Paragon Value Growth Fund is to seek long-term
capital growth and growth of income while, as a secondary objective, providing a
moderate level of current income.
The Fund pursues its objectives by investing primarily in a diversified
portfolio of common stocks, preferred stocks, convertible securities, warrants
and other equity securities of companies that show the potential for growth of
earnings over time. Stock selection is guided by current valuation relative to a
stock's historical valuation and relative to Premier's estimates of future
growth of earnings and dividends. Over the long term, continued earnings growth
tends to lead to both higher dividends and capital appreciation. The Fund
expects to invest in securities currently paying a moderate level of income,
although it may invest in non-income producing securities when Premier considers
their potential for growth of capital or future income to be promising. The Fund
diversifies its investments among different industries and companies and changes
its portfolio securities for investment considerations and not for trading
purposes.
In selecting portfolio securities for the Fund, Premier analyzes its outlook
for the economy and each economic sector over a 12 to 18 month period and the
relative attractiveness of the various securities markets and individual market
sectors. Premier then selects securities within these sectors and markets when
it believes that a company's fundamental outlook as well as the company's
ability to achieve earnings growth are not sufficiently reflected in the market
values of the company's securities. Accordingly, the Fund may emphasize
securities of companies that Premier believes are overlooked or undervalued by
investors, which fact should contribute to an increase in the market value of
the security over time. Portfolio securities are generally sold when there is a
substantial reduction in Premier's forecast of the company's future earnings
potential or when the price of a security appreciates to such an extent that it
is believed to have realized Premier's appreciation goal. No effort is made by
the Fund to time the market.
The Fund will ordinarily invest at least 80% of the value of its total
assets in securities with the characteristics described above. Although the Fund
intends to invest all of its assets in such securities, up to 20% of its total
assets may be held in cash or invested in U.S. Government Securities, other
investment grade fixed-income securities and cash equivalents.
INVESTMENT OBJECTIVE AND POLICIES OF PARAGON VALUE EQUITY INCOME FUND
The investment objective of Paragon Value Equity Income Fund is to seek
capital growth and current income. The Fund pursues its objective by investing
primarily in a diversified portfolio of common stocks, preferred stocks,
convertible securities, warrants and other equity securities of companies which
are, in Premier's opinion, undervalued relative to their intrinsic value and to
the stock market in general due to an overly pessimistic appraisal by the
marketplace. A low price-earnings ratio is the dominant factor in the selection
of investments for the Fund's portfolio. The Fund expects to maintain a dividend
yield equal to or in excess of the composite yield on the securities comprising
the Standard & Poor's Index of 500 Common Stocks.
Premier uses a disciplined approach in its review and selection of portfolio
securities for the Fund. To identify undervalued companies, Premier first
screens a broad universe of securities by systematically evaluating such factors
as historical earnings, dividend yield, market price relative to book value,
earnings per share and financial strength. Premier then ranks such securities
according to price-earnings ratios using 18-month earnings forecasts.
Sophisticated computer technology is then used to
16
<PAGE>
identify those securities which present the optimal combination of return and
risk. At least quarterly, the securities in the Fund's portfolio are compared to
those securities identified by the computer at that time. If a security is
believed to have reached a fully-valued position, it will, under most
circumstances, be sold and replaced by securities which are deemed to be
undervalued in the marketplace in accordance with the foregoing analysis. No
effort is made by Premier to time the market.
As a matter of nonfundamental policy the Fund will ordinarily invest at
least 80% of the value of its total assets in securities with the
characteristics described above. Although the Fund intends to invest all of its
assets in such securities, up to 20% of its total assets may be held in cash or
invested in U.S. Government Securities, other investment grade fixed-income
securities and cash equivalents.
INVESTMENT OBJECTIVE AND POLICIES OF PARAGON GULF SOUTH GROWTH FUND
The investment objective of Paragon Gulf South Growth Fund is to seek
long-term capital growth. The Fund pursues its objective by investing primarily
in a portfolio of common stocks, preferred stocks, convertible securities,
warrants and other equity securities of small capitalization, emerging growth
and medium capitalization growth companies, which are either headquartered in or
whose primary market is in the southeastern region of the United States. In
Premier's opinion, small to medium capitalization companies in general and those
located in the southeast in particular will provide above average investment
performance over the long term as they grow and become more recognized by the
investment community. Dividend income, if any, is a consideration incidental to
the Fund's objective of capital growth.
Premier anticipates that the Fund's portfolio will normally consist of
securities of approximately twenty to forty emerging growth companies from
Virginia, North Carolina, South Carolina, Florida, Georgia, Tennessee, Alabama,
Mississippi, Arkansas, Louisiana, Kentucky and Texas. In selecting portfolio
securities for the Fund, Premier analyzes emerging growth companies whose
securities have been analyzed by several regional brokerage firms. Stock
selection is guided by a company's earnings forecasts over a one to two year
period, as well as by its financial strength. In addition, on an ongoing basis,
Premier reviews a stock's current valuation relative to (1) the entire stock
market, (2) that of other companies in the same industry, and (3) its recent and
expected earnings growth rate. It is ex-pected that companies selected would
generally have market capitalizations ranging from $50,000,000 to
$2,000,000,000, though the Fund may occasionally hold securities of companies
whose market capitalizations are considerably larger if doing so contributes to
the Fund's investment objective. Companies selected would also be expected to
show earnings growth over time that is well above the growth rate of the overall
economy and the rate of inflation.
Because the Fund is non-diversified, its share price may be subject to
greater fluctuations as a result of changes in an issuer's financial condition
or the market's assessment of an individual issuer. In addition, investing in
emerging growth companies involves greater risk than is customarily associated
with investments in more established companies. Emerging growth companies often
have limited product lines, markets, or financial resources, and they may be
dependent on fewer management resources. The securities of emerging growth
companies may have limited marketability and may be subject to more abrupt or
erratic market movements than securities of larger, more established growth
companies or the market averages in general. Shares of the Fund, therefore, are
subject to greater fluctuation in value than shares of a growth fund which
invests entirely in proven growth stocks. The Fund is intended for investors who
can bear the risk of losing a portion or all of their investment.
17
<PAGE>
As a matter of non-fundamental policy, the Fund will ordinarily invest at
least 75% of the value of its total assets in securities with the
characteristics described above. Although the Fund intends to invest all of its
assets in such securities, up to 25% of its total assets may be held in cash or
invested in U.S. Government Securities, other investment grade fixed-income
securities and cash equivalents, when Premier's assessment of the attractiveness
of the entire stock market and individual market sectors changes.
PERMISSIBLE INVESTMENTS FOR THE FUNDS
CORPORATE DEBT SECURITIES
Each Fund, except Paragon Treasury Money Market Fund and Paragon Louisiana
Tax-Free Fund, may invest in certain types of corporate debt securities.
Corporate debt securities of both domestic and foreign issuers (denominated in
U.S. dollars) in which the Funds may invest include all types of long- or
short-term debt obligations, such as bonds, debentures, notes, and commercial
paper (including obligations secured by such instruments) and, in the case of
Paragon Value Growth Fund, Paragon Value Equity Income Fund and Paragon Gulf
South Growth Fund, preferred and preference stock.
Corporate debt securities may bear fixed, fixed and contingent, or variable
rates of interest and may involve equity features, such as conversion or
exchange rights or warrants for the acquisition of stock of the same or a
different issuer; participations based on revenues, sales or profits; or the
purchase of common stock in a unit transaction (where corporate debt securities
and common stock are offered as a unit).
U.S. GOVERNMENT SECURITIES
Each Fund may invest in U.S. Government Securities in varying degrees. U.S.
Government Securities are obligations of, or guaranteed by, the U.S. Government,
its agencies, authorities or instrumentalities. Some U.S. Government Securities,
such as Treasury bills, notes and bonds and Government National Mortgage
Association certificates (see below) are supported by the full faith and credit
of the United States; others, such as those of the Federal Home Loan Banks, are
supported by the right of the issuer to borrow from the Treasury; others, such
as those of the Federal Home Loan Mortgage Corporation are supported only by the
credit of the particular agency or instrumentality; and still others, such as
those of the Federal National Mortgage Association, are supported by the
discretionary authority of the U.S. Government to purchase the agency's
obligations. No assurance can be given that the U.S. Government will provide
financial support to U.S. Government agencies or instrumentalities in the
future. U.S. Government Securities may include certain government agency zero
coupon bonds.
A Fund may also invest in separately traded principal and interest
components of securities guaranteed or issued by the U.S. Treasury if such
components are traded independently under the Separate Trading of Registered
Interest and Principal of Securities program ("STRIPS").
CUSTODIAL RECEIPTS
Although they are not considered obligations of the U.S. Government for
certain purposes, a Fund, other than the Paragon Treasury Money Market Fund, may
acquire securities issued or guaranteed as to principal and interest by the U.S.
Government in the form of custodial receipts that evidence ownership of future
interest payments, principal payments or both on certain U.S. Treasury notes or
bonds.
18
<PAGE>
MORTGAGE-RELATED SECURITIES
Paragon Short-Term Government Fund, Paragon Intermediate-Term Bond Fund and,
to a limited extent, Paragon Value Growth Fund, Paragon Value Equity Income Fund
and Paragon Gulf South Growth Fund, may invest in mortgage-related securities.
Mortgage pass-through securities are securities representing interests in
"pools" of residential mortgage loans. Monthly payments of interest and
principal by the individual borrowers on the mortgages are passed through to the
holders of the securities (net of fees paid to the issuer or guarantor of the
securities). The maturities of mortgage-related securities are variable and
unknown when issued because their maturities depend on prepayment rates. Early
repayment of principal on mortgage pass-through securities may expose a Fund to
a lower rate of return upon reinvestment and, if such security was purchased at
a premium, a loss of the value of the premium which may increase the volatility
of such investments relative to similar rated debt securities. Mortgage
prepayments generally increase with falling interest rates and decrease with
rising interest rates. When interest rates rise the value of a mortgage-related
security generally will decline; however, when interest rates are declining, the
value of mortgage-related securities with prepayment features may not increase
as much as that of other fixed-income securities.
Payment of principal and interest on some mortgage pass-through securities
(but not the market value of the securities themselves) may be guaranteed by the
full faith and credit of the U.S. Government (in the case of securities
guaranteed by the Government National Mortgage Association ("GNMA")); or
guaranteed by agencies or instrumentalities of the U.S. Government (in the case
of securities guaranteed by the Federal National Mortgage Association ("FNMA")
or the Federal Home Loan Mortgage Corporation ("FHLMC"), which are supported
only by the discretionary authority of the U.S. Government to purchase the
agency's obligations). Mortgage pass-through securities created by
non-governmental issuers may be supported by various forms of insurance or
guarantees which may be issued by governmental or private entities.
Collateralized Mortgage Obligations ("CMOs") are hybrid instruments with
characteristics of both mortgage-backed bonds and mortgage pass-through
securities. As with a bond, interest and pre-paid principal on a CMO are paid,
in most cases, semi-annually. CMOs are usually collateralized by portfolios of
mortgage pass-through securities guaranteed by GNMA, FHLMC, or FNMA but may be
collateralized by whole mortgage loans or private mortgage pass-through
securities. Interests in CMOs are structured as classes of securities with
different maturities. Under a common structure, monthly payments of principal,
including prepayments, are first made to investors holding the shortest maturity
class; investors holding the longer maturity classes receive principal payments
only after the first class has been retired.
Real Estate Mortgage Investment Conduits ("REMICs") are CMO vehicles that
qualify for special tax treatment under the Internal Revenue Code and invest in
mortgages principally secured by interests in real property and other
investments permitted by the Internal Revenue Code. No Fund that may purchase
REMICs will invest more than 5% of its total assets in REMICs.
Paragon Intermediate-Term Bond Fund may also invest in asset-backed
securities, which represent participations in, or are secured by and payable
from, pools of assets such as motor vehicle installment sale contracts,
installment loan contracts, leases of various types of real and personal
property, receivables from revolving credit (credit card) agreements and other
categories of receivables. Such asset pools are securitized through the use of
privately-formed trusts or special purpose corporations. Payments or
distributions of principal and interest may be guaranteed up to certain
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<PAGE>
amounts and for a certain time period by a letter of credit or a pool insurance
policy issued by a financial institution unaffiliated with the trust or
corporation, or other credit enhancements may be present. Asset-backed
securities present certain risks that are not presented by mortgage-related
securities because asset-backed securities generally do not have the benefit of
a security interest in collateral that is comparable to mortgage assets.
A Fund may invest in new types of mortgage-related securities and in other
asset-backed securities that may be developed in the future to the extent
consistent with its investment objective and policies and approved by the
Trust's Board of Trustees.
RISKS ASSOCIATED WITH DERIVATIVE MORTGAGE-BACKED AND FLOATING RATE SECURITIES
Derivative mortgage-backed securities are subject to different combinations
of interest rate and/ or prepayment risks. In addition, particular derivative
securities may be leveraged such that their exposure (I.E., price sensitivity)
to interest rate and/or prepayment risks is magnified. A Fund may acquire
derivative mortgage-backed securities and other derivative securities to the
extent consistent with the Fund's investment objective and for various purposes,
including adjusting the average duration or interest rate sensitivity of the
Fund's portfolio or attempting to enhance the Fund's total return. The
Investment Adviser manages the risks and benefits of derivative securities
through prudent analysis, selection and monitoring of each Fund's investments in
these securities.
The risk of faster than anticipated prepayments generally has an adverse
effect on interest-only securities (IOs), super floaters and premium priced
mortgage-backed securities. The risk of slower than anticipated prepayments
generally has an adverse effect on principal-only securities (POs), floating
rate securities subject to interest rate caps, support tranches of CMOs and
discount priced mortgage-backed securities.
Other types of floating rate derivative securities present more complex
types of interest rate risks. For example, range floaters are subject to the
risk that the coupon will be reduced to below market rates if a designated
interest rate floats outside of a specified interest rate band or collar. Dual
index or yield curve floaters may decline in value in the event of an
unfavorable change in the spread between two designated interest rates.
FOREIGN SECURITIES
Paragon Intermediate-Term Bond Fund may invest in securities of foreign
issuers denominated in U.S. dollars. Paragon Value Growth Fund and Paragon Value
Equity Fund may invest in securities of foreign issuers in the form of American
Depository Receipts ("ADRs"). ADRs are receipts issued by a U.S. bank or trust
company which evidence ownership of underlying securities of foreign
corporations. Investment in foreign securities may present a greater degree of
risk than investment in domestic securities because of the possibility of less
publicly-available financial and other information, more volatile and less
liquid markets, less securities regulation, higher brokerage costs, imposition
of foreign withholding and other taxes, war, expropriation or other adverse
governmental actions.
INTEREST RATE AND MARKET RISK FACTORS
Since shares of a Fund represent an investment in securities with
fluctuating market prices, the net asset value per share of each Fund, other
than Paragon Treasury Money Market Fund, and the value of a shareholder's
holdings will vary as the aggregate value of a Fund's portfolio securities
increases or decreases. It is anticipated that shares of the Paragon Treasury
Money Market Fund will be purchased and redeemed at the net asset value of $1.00
per share although there is no assurance
20
<PAGE>
that the $1.00 net asset value per share will remain constant. The dividends
paid by each Fund will increase or decrease in relation to the income received
from its investments and the expenses incurred by the Fund.
The net asset value of Paragon Short-Term Government Fund, Paragon
Intermediate-Term Bond Fund and Paragon Louisiana Tax-Free Fund generally will
change as the general levels of interest rates fluctuate. During periods of
falling interest rates, the market value of fixed-income securities generally
rises, and conversely, during periods of rising interest rates, the market value
of fixed-income securities generally declines. The magnitude of the fluctuation
is generally greater for securities with longer maturities and durations. Market
values of fixed-income securities are also affected by general economic
conditions, business conditions affecting the issuer or the industry in which it
competes, and changes by rating agencies in their ratings of a fixed-income
security. The market value of different types of fixed-income securities varies
in response to the foregoing factors affecting market values.
TEMPORARY DEFENSIVE INVESTMENTS
When the relevant Adviser believes that investment for defensive purposes is
appropriate, part or all of a Fund's assets may be temporarily invested in cash
or cash equivalent short-term obligations including, but not limited to,
certificates of deposit, commercial paper, notes, U.S. Government Securities,
foreign government securities (if permitted) and repurchase agreements. Under
such circumstance or in order to invest uninvested cash balances, the Funds may
also invest in securities issued by other investment companies that invest
primarily in high quality, short-term money market instruments and which
determine their net asset value per share based on the amortized cost valuation
and/or penny rounding pricing methods. The amount of a Fund's investments in
securities of other investment companies will be subject to the limitations on
such investments prescribed by the Investment Company Act. These limits include
a prohibition on a Fund acquiring more than 3% of the voting shares of any other
fund, and investing more than 5% of its assets in securities of any one fund or
more than 10% of its assets in securities of all funds. A Fund will indirectly
bear its proportionate shares of any management fees paid by investment
companies in which it invests in addition to the advisory fee paid by the Fund.
INVESTMENT PRACTICES COMMON TO THE FUNDS
REPURCHASE AGREEMENTS
Each Fund may enter into repurchase agreements with selected broker-dealers,
banks or other financial institutions. A repurchase agreement is an agreement
under which a Fund purchases securities and the seller agrees to repurchase the
securities within a particular time at a specified price. Such price will exceed
the original purchase price, the difference being income to the Fund, and will
be unrelated to the interest rate on the purchased security. The Trust's
custodian or subcustodian will maintain custody of the purchased securities for
the duration of the agreement. At the time the Fund enters into a repurchase
agreement the value of the purchased securities, including accrued interest,
will be equal to or exceed the value of the repurchase agreement including
accrued interest. For purposes of the Investment Company Act, a repurchase
agreement is deemed to be a loan from the Fund to the seller. In the event of
bankruptcy of the seller or failure of the seller to repurchase the securities
as agreed, the Fund could suffer losses, including loss of interest on or
principal of the security and costs associated with delay and enforcement of the
repurchase agreement. In evaluating
21
<PAGE>
whether to enter into a repurchase agreement, the Adviser will carefully
consider the creditworthiness of the seller pursuant to procedures reviewed and
approved by the Trustees. In addition, Paragon Treasury Money Market Fund,
together with other registered investment companies having advisory agreements
with GSAM or its affiliates, may transfer uninvested cash balances into a single
joint account, the daily aggregate balance of which will be invested in one or
more repurchase agreements.
ZERO COUPON AND DEFERRED INTEREST BONDS
Each Fund, except Paragon Treasury Money Market Fund and Paragon Louisiana
Tax-Free Fund, may purchase zero coupon and deferred interest bonds. Zero coupon
and deferred interest bonds are issued at a significant discount from face
value. The discount approximates the total amount of interest the bonds would
accrue and compound over the period until maturity at a rate of interest
reflecting market rate at the time of issuance. Zero coupon bonds do not require
the periodic payment of interest. Deferred interest bonds provide for a period
of delay before regular payment of interest begins. The value of such
investments fluctuates more in response to interest rate changes and,
accordingly, is subject to greater market volatility than the value of debt
obligations which require regular cash payments of interest. If it holds zero
coupon bonds or deferred interest bonds, in its portfolio, however, a Fund would
recognize income currently in the amount of the unpaid, accrued interest and
would be required in order to avoid Federal taxes on undistributed amounts to
distribute such income to shareholders from cash from other sources, including
the proceeds of sales of portfolio securities or the proceeds of Fund shares
sold, even though funds representing such income would not have been received by
the Fund. To the extent that a Fund is required to use the proceeds from the
sale of portfolio securities or Fund shares to pay such distributions, it may
forego the opportunity to invest such funds in additional income producing
securities. This may ultimately result in a reduction in the income earned and
distributed by the Fund.
FORWARD COMMITMENTS AND WHEN-ISSUED SECURITIES
Each Fund may purchase when-issued securities, i.e. make contracts to
purchase securities for a fixed price at a future date beyond customary
settlement time. A Fund is required to hold and maintain in a segregated account
until the settlement date of such purchases, cash or other liquid, high-grade
debt obligations in an amount sufficient to meet the purchase price.
Alternatively, the Fund may enter into offsetting contracts for the forward sale
of other securities that it owns. The purchase of securities on a when-issued or
forward commitment basis involves a risk of loss if the value of the security to
be purchased declines prior to the settlement date. Although a Fund would
generally purchase securities on a when-issued or forward commitment basis with
the intention of acquiring securities for its portfolio, the Fund may dispose of
a when-issued security or forward commitment prior to settlement if the relevant
Adviser deems it appropriate to do so.
OPTIONS ON SECURITIES
WRITING COVERED OPTIONS. Paragon Short-Term Government Fund, Paragon
Intermediate-Term Bond Fund, Paragon Value Growth Fund, Paragon Value Equity
Income Fund and Paragon Gulf South Growth Fund may each write (sell) exchange
traded covered call and put options on any securities in which it may invest. A
call option written by a Fund obligates the Fund to sell specified securities to
the holder of the option at a specified price if the option is exercised at any
time before the expiration date. All call options written by a Fund are covered,
which means that the Fund will own the securities subject to the option for such
period as the option is outstanding. The purpose of writing
22
<PAGE>
covered call options is for the Fund to realize greater income than would be
realized on portfolio securities transactions alone. However, the Fund may
forego the opportunity to profit from an increase in the market price of the
underlying security.
A put option written by a Fund would obligate the Fund to purchase specified
securities from the option holder at a specified price if the option is
exercised at any time before the expiration date. All put options written by a
Fund would be covered, which means that the Fund would have deposited with its
custodian cash or other liquid, high-grade debt securities with a value at least
equal to the exercise price of the put option. The purpose of writing such
options is to generate additional income for the Fund. However, in return for
the option premium, the Fund accepts the risk that it will be required to
purchase the underlying securities at a price in excess of the securities'
market value at the time of purchase.
A Fund may terminate its obligations under an exchange traded call or put
option at any time prior to its exercise by purchasing an option identical to
the one it has written. Such purchases are referred to as "closing purchase
transactions."
PURCHASING OPTIONS. Paragon Short-Term Government Fund, Paragon
Intermediate-Term Bond Fund, Paragon Value Growth Fund, Paragon Value Equity
Income Fund and Paragon Gulf South Growth Fund may each purchase put and call
options on any securities in which it may invest. The Fund would also be able to
enter into closing sale transactions in order to realize gains or minimize
losses on options it had purchased.
A Fund would normally purchase call options in anticipation of an increase
in the market value of securities of the type in which it may invest. The
purchase of a call option would entitle the Fund, in return for the premium
paid, to purchase specified securities at a specified price during the option
period. The Fund would ordinarily realize a gain if, during the option period,
the value of such securities exceeded the sum of the exercise price, the premium
paid and transaction costs; otherwise the Fund would realize a loss on the
purchase of the call option.
A Fund would normally purchase put options in anticipation of a decline in
the market value of securities in its portfolio ("protective puts") or in
securities in which it may invest. The purchase of a put option would entitle
the Fund, in exchange for the premium paid, to sell specified securities at a
specified price during the option period. The purchase of protective puts is
designed to offset or hedge against a decline in the market value of the Fund's
portfolio securities. Put options may also be purchased by a Fund for the
purpose of affirmative-ly benefiting from a decline in the price of securities
which it does not own. A Fund would ordinarily realize a gain if, during the
option period, the value of the underlying securities decreased below the
exercise price sufficiently to cover the premium and transaction costs;
otherwise the Fund would realize a loss on the purchase of the put option. Gains
and losses on the purchase of protective put options would tend to be offset by
countervailing changes in the value of underlying portfolio securities.
RISKS ASSOCIATED WITH OPTIONS TRANSACTIONS. There is no assurance that a
liquid secondary market on an options exchange will exist for any particular
option or at any particular time. If a Fund is unable to effect a closing
purchase transaction with respect to covered options it has written, the Fund
will not be able to sell the underlying securities or dispose of assets held in
a segregated account until the options expire or are exercised. Similarly, if a
Fund is unable to effect a closing sale transaction with respect to options it
has purchased, it would have to exercise the options in order to realize any
profit and will incur transaction costs upon the purchase or sale of underlying
securities.
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<PAGE>
A Fund may purchase and sell only options which are traded on United States
exchanges.
The writing and purchase of options is a highly specialized activity which
involves investment techniques and risks different from those associated with
ordinary portfolio securities transactions. The successful use of protective
puts for hedging purposes depends in part on Premier's ability to predict future
price fluctuations and the degree of correlation between the options and
securities markets.
LENDING OF PORTFOLIO SECURITIES
Each Fund may also seek to increase its income by lending portfolio
securities provided that the value of the securities loaned would not exceed
one-third of the value of the total assets of each Fund. Under present
regulatory policies, such loans may be made to institutions, such as
broker-dealers, and are required to be secured continuously by collateral in
cash, cash equivalents, or U.S. Government Securities maintained on a current
basis at an amount at least equal to the market value of the securities loaned.
Cash collateral will be invested in short-term debt securities. A Fund may
experience loss or delay in the recovery of its securities if the institution
with which it has engaged in a portfolio loan transaction breaches its agreement
with such Fund.
RESTRICTED AND ILLIQUID SECURITIES
Each Fund may purchase securities that are not registered ("restricted
securities") under the Securities Act of 1933 ("1933 Act"), including securities
offered and sold to "qualified institutional buyers" under Rule 144A under the
1933 Act. However, each Fund will not invest more than 15% (10% in the case of
Paragon Treasury Money Market Fund) of its net assets (taken at market value) in
illiquid investments, which includes certain repurchase agreements maturing in
more than seven days, securities that are not readily marketable and restricted
securities, unless the Board of Trustees determines, based upon a continuing
review of the trading markets for the specific restricted security, that such
restricted securities are liquid. The Board of Trustees may adopt guidelines and
delegate to the Adviser the daily function of determining and monitoring
liquidity of restricted securities. The Board, however, will retain sufficient
oversight and be ultimately responsible for the determinations. Since it is not
possible to predict with assurance exactly how this market for restricted
securities sold and offered under Rule 144A will develop, the Board will
carefully monitor each Fund's investments in these securities, focusing on such
important factors, among others, as valuation, liquidity and availability of
information. This investment practice could have the effect of increasing the
level of illiquidity in a Fund to the extent that qualified institutional buyers
become for a time uninterested in purchasing these restricted securities.
The purchase price and subsequent valuation of restricted securities
normally reflect a discount from the price at which such securities trade when
they are not restricted, since the restriction makes them less liquid. The
amount of the discount from the prevailing market price is expected to vary
depending upon the type of security, the character of the issuer, the party who
will bear the expenses of registering the restricted securities and prevailing
supply and demand conditions.
INVESTMENT RESTRICTIONS
The Trust, on behalf of each Fund, has adopted certain fundamental
investment restrictions which are enumerated in detail in the Statement of
Additional Information and which may not be changed with respect to any Fund
unless authorized by the holders of a majority of outstanding securities of that
Fund. Among other restrictions, a Fund may not, with respect to 75% (50% in the
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<PAGE>
case of Paragon Gulf South Growth Fund) of its total assets taken at market
value, invest more than 5% of its total assets in the securities of any one
issuer (except U.S. Government Securities) or acquire more than 10% of any class
of the outstanding voting securities of any one issuer. In addition, no Fund may
invest more than 25% of its total assets in any one industry, except that for
purposes of this limitation, the issuers of U.S. Government Securities and of
certain municipal obligations are not considered to be part of any industry. In
addition, each Fund may borrow money from banks only for temporary or emergency
purposes in an aggregate amount not exceeding one-third of the value of its
total assets, and a Fund may not pledge more than 15% of its total assets in
connection with such borrowings. A Fund may not purchase securities while such
borrowings exceed 5% of the value of the Fund's assets. Except for such
enumerated restrictions and as otherwise indicated in this Prospectus, the
investment objectives and policies of each Fund are not fundamental policies and
accordingly may be changed by the Trust's Board of Trustees without obtaining
the approval of the shareholders.
PORTFOLIO TRANSACTIONS
The Advisers are responsible for selecting brokers and dealers to effect
portfolio securities transactions and for negotiating brokerage commissions and
dealers' charges. Fixed-income securities are generally traded in the
over-the-counter market on a net basis with dealers acting as principal for
their own accounts without a stated commission.
The primary consideration in selecting broker-dealers to execute portfolio
security transactions is the execution of such portfolio transactions at the
most favorable prices. Subject to this requirement, securities may be bought
from or sold to brokers who have furnished statistical, research and other
information or services to the Advisers. Higher commissions may be paid to
brokers that provide research services. Goldman Sachs and Premier Securities
Corporation, an affiliate of Premier, may each act as a broker for the Trust in
accordance with applicable rules of the Securities and Exchange Commission
("SEC") and the restrictions of the Glass-Steagall Act on the activities of
broker-dealer subsidiaries of national banks. Pursuant to an SEC order, Paragon
Treasury Money Market Fund may enter into principal transactions in certain
taxable money market instruments, including repurchase agreements, with Goldman
Sachs or its affiliate, Goldman Sachs Money Market, L.P.
PORTFOLIO TURNOVER
Although none of the Funds invests for short-term profits, securities in a
Fund's portfolio will be sold whenever the relevant Adviser believes it is
appropriate to do so without regard to the length of time the particular
security may have been held. This policy is subject to certain requirements for
qualification as a regulated investment company for Federal income tax purposes.
A higher portfolio turnover rate involves greater expenses to a Fund and may
increase the possibility of shareholders receiving taxable distributions.
THE ADVISERS, ADMINISTRATOR AND DISTRIBUTOR
THE ADVISERS
Premier, 451 Florida Street, Baton Rouge, Louisiana, acts as investment
adviser to Paragon Short-Term Government Fund, Paragon Intermediate-Term Bond
Fund, Paragon Louisiana Tax-Free Fund, Paragon Value Growth Fund, Paragon Value
Equity Income Fund and Paragon Gulf South
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Growth Fund and as subadviser to Paragon Treasury Money Market Fund. Premier is
a registered investment adviser, a subsidiary of Premier Bank, N.A., and an
indirect subsidiary of Premier Bancorp, Inc., one of the largest bank holding
companies in Louisiana.
Premier became the Funds' investment adviser or subadviser on December 31,
1993 as the result of the transfer to it of each Fund's Investment Advisory or
Subadvisory Agreement with Premier Investment Advisors, Inc. ("PIA Inc."), the
Funds' previous investment adviser or subadviser. The transfer resulted in no
actual change of control of the Funds' investment adviser or subadviser since
both Premier and PIA Inc. are under the control of Premier Bancorp, Inc. All
employees, services and resources previously utilized by PIA Inc. in managing
the Funds' investments will continue to be available through Premier. Prior to
its incorporation in 1985, Premier was the Investment Department of the Trust
Division of Louisiana National Bank of Baton Rouge (Premier Bank's predecessor),
the flagship bank of the holding company. In addition to managing the assets of
the Funds, Premier also manages approximately $700 million in assets for
tax-exempt organizations, pension plans, other employee benefit plans,
foundations, endowments and personal trusts as of December 31, 1994.
The portfolio managers for Paragon Short-Term Government Fund, Paragon
Intermediate-Term Bond Fund, Paragon Louisiana Tax-Free Fund, Paragon Value
Growth Fund, Paragon Value Equity Fund and Paragon Gulf South Growth Fund are
Donald E. Allred, Richard L. Chauvin, Jr. and Keith W. Mooney.
Mr. Allred joined Louisiana National Bank (Premier Bank's predecessor) in
1965 where his employment has been exclusively in trust business activities,
serving as Senior Investment Manager of that institution since 1979. Upon
formation of PIA Inc. in 1985, he assumed the duties of Chief Investment
Officer. Mr. Allred was manager of Premier Bank's Value Growth and Gulf South
strategies at the time of conversion to the Paragon Value Growth Fund and
Paragon Gulf South Growth Fund. Mr. Chauvin joined Louisiana National Bank
(Premier Bank's predecessor) in 1978. He joined the bank's trust division in
1982 as portfolio manager. He joined PIA Inc. in 1986 as a portfolio manager.
Mr. Chauvin assumed responsibility as portfolio manager of the Paragon Value
Equity Income Fund. Mr. Mooney joined Premier in September, 1990 as a Fixed
Income Portfolio Manager. Prior to that he joined Louisiana National Bank in
1980 in the Management Trainee Program.
GSAM, One New York Plaza, New York, New York 10004, a separate operating
division of Goldman Sachs, acts as investment adviser to Paragon Treasury Money
Market Fund and also serves as the Funds' administrator. Goldman Sachs was
registered as an investment adviser in 1981. As of January 31, 1995, GSAM,
together with its advisory affiliates, acted as investment adviser,
administrator or distributor for approximately $48.7 billion in assets.
Under each Fund's Investment Advisory Agreement, the Fund's Adviser
continually manages the portfolio of the Fund, including the purchase, retention
and disposition of its securities and other
26
<PAGE>
assets. The management of each Fund's portfolio is subject to the supervision of
the Trust's Board of Trustees and the Fund's investment policies. For these
services and facilities, each Fund pays to its Adviser a monthly fee at an
annual rate of the Fund's average daily net assets as follows:
<TABLE>
<CAPTION>
RATE PAID FOR THE
STATED ANNUAL FISCAL YEAR ENDED
RATE NOVEMBER 30, 1994
--------------- ---------------------
<S> <C> <C>
Paragon Treasury Money Market Fund........................ .20% .20%
Paragon Short-Term Government Fund........................ .50% .50%
Paragon Intermediate-Term Bond Fund....................... .50% .50%
Paragon Louisiana Tax-Free Fund........................... .50% .40%
Paragon Value Growth Fund................................. .65% .65%
Paragon Value Equity Income Fund.......................... .65% .65%
Paragon Gulf South Growth Fund............................ .65% .65%
</TABLE>
Premier has advised the Trust that, with respect to Paragon Louisiana
Tax-Free Fund, it has voluntarily elected to reduce its advisory fee from .50%
to .40% of the Fund's average daily net assets until further notice.
Pursuant to the Subadvisory Agreement among Paragon Treasury Money Market
Fund, GSAM and Premier, Premier will review on a quarterly basis the portfolio
and investment strategy of Paragon Treasury Money Market Fund and will consult
with GSAM as needed concerning that Fund's investments. As compensation, GSAM
will pay to Premier quarterly a subadvisory fee equal, on an annual basis, to
.10% of that Fund's average daily net assets. The Fund pays only the .20%
advisory fee to GSAM, and is not responsible for the payment of the .10%
subadvisory fee to Premier. For the fiscal year ended November 30, 1994, Premier
was paid by GSAM at the above rate.
Each Fund is responsible for all expenses other than those expressly borne
by its Adviser under the Fund's Investment Advisory Agreement. These expenses
include each Fund's investment advisory and administration fees, shareholder
service expenses, expenses of issuing reports to shareholders, its proportionate
share of custodian fees, registration fees under Federal and state securities
laws, legal fees, auditing and tax return preparation fees, taxes, Trustees'
fees, other expenses of administering the Fund and any expenses assumed by the
Fund pursuant to its plan of distribution applicable to Class B shares. In the
event that the expenses of a Fund (including the fees of its Adviser, but
excluding expenses under the plan of distribution applicable to Class B shares,
interest, taxes, litigation and indemnification expenses and other extraordinary
expenses) for any fiscal year exceed the limits set by certain state securities
administrators, the investment advisory fee payable on behalf of such Fund will
be reduced by the amount of such excess to the extent of each Fund's respective
fee. Fee reductions on account of any excess amounts will be made on a monthly
basis.
THE ADMINISTRATOR
GSAM is the Administrator for the Funds. Under the Administration Agreement
of the Trust, GSAM administers the Trust's business affairs, subject to the
supervision of the Board of Trustees, and in connection therewith furnishes the
Trust with office facilities and is responsible for ordinary clerical,
recordkeeping and bookkeeping services required to be maintained by the Trust
(excluding those maintained by the Trust's custodian, Transfer Agent or
Adviser), preparation and filing of documents required to comply with Federal
and state securities laws, supervising the activities of the Trust's custodian
and Transfer Agent, providing assistance in connection with meetings of the
Board
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<PAGE>
of Trustees and shareholders and other administrative services necessary to
conduct the Trust's business. For these services and facilities, each Fund pays
to GSAM a monthly fee at an annual rate of the Fund's average daily net assets
as follows:
<TABLE>
<CAPTION>
RATE PAID FOR THE
STATED ANNUAL FISCAL YEAR ENDED
RATE NOVEMBER 30, 1994
--------------- ---------------------
<S> <C> <C>
Paragon Treasury Money Market Fund........................ .15% .15%
Paragon Short-Term Government Fund........................ .15% .15%
Paragon Intermediate-Term Bond Fund....................... .15% .15%
Paragon Louisiana Tax-Free Fund........................... .15% .10%
Paragon Value Growth Fund................................. .15% .15%
Paragon Value Equity Income Fund.......................... .15% .15%
Paragon Gulf South Growth Fund............................ .15% .15%
</TABLE>
GSAM has advised the Trust that, with respect to Paragon Louisiana Tax-Free
Fund, it has voluntarily elected to reduce its administration fee from .15% to
.10% of the Fund's average daily net assets until further notice.
THE DISTRIBUTOR
Goldman Sachs serves as the Distributor of shares of the Funds pursuant to a
Distribution Agreement with the Trust. Shares may also be sold by investment
dealers who are members of the NASD and certain other financial service firms,
who have entered into dealers agreements with Goldman Sachs ("Authorized
Dealers"). The minimum investment requirements, services, programs and purchase
and redemption options for shares purchased through a particular Authorized
Dealer may be different from those available to investors purchasing through
other Authorized Dealers. The Distributor will assist in the sale of shares of
the Funds upon the terms and at the offering price described herein. The
Distributor also assists in advertising and marketing shares of the Funds,
including the distribution of the Funds' Prospectus and Statement of Additional
Information and marketing materials.
ALTERNATIVE PURCHASE ARRANGEMENTS
Each Fund continuously offers two classes of shares designated as Class A
and Class B shares, as described more fully in "How to Purchase Shares." Class B
shares of Paragon Treasury Money Market Fund will be typically issued only upon
an exchange of Class B shares of any of the other Funds. If you do not specify
in your instructions to the Funds which class of shares you wish to purchase,
exchange or redeem, the Funds will assume that your instructions apply to Class
A shares.
CLASS A SHARES. If you invest less than $5 million in Class A shares, you
will pay an initial sales charge. Certain purchases may qualify for reduced
initial sales charges. If you invest $5 million or more in Class A shares, no
sales charge will be imposed at the time of purchase. Class A shares are not
subject to any fee for distribution services.
CLASS B SHARES. Class B shares are sold without an initial sales charge,
but are subject to a contingent deferred sales charge ("CDSC") of up to 5% if
redeemed within five years. Class B shares are subject to a distribution and
personal and account maintenance fee at the annual rate of .75% of each Fund's
average daily net assets attributable to Class B shares. See "Class B
Distribution Plan". Your entire investment in Class B shares is available to
work for you from the time you make your
28
<PAGE>
investment, but the distribution fee paid by Class B shares will cause your
Class B shares (until conversion to Class A shares) to have a higher expense
ratio and to pay lower dividends, to the extent dividends are paid, than Class A
shares. Class B shares will automatically convert to Class A shares, based on
their relative net asset values, seven years after the initial purchase.
FACTORS TO CONSIDER IN CHOOSING CLASS A OR CLASS B SHARES. The decision as
to which class to purchase depends on the amount you invest, the intended length
of the investment and your personal situation. For instance, if you are making
an investment in excess of $100,000 that qualifies for a reduced sales charge,
you should consider purchasing Class A shares. A brief description of when the
initial sales charge may be reduced or eliminated is set forth below under
"Right of Accumulation" and "Statement of Intention." If you prefer not to pay
an initial sales charge on an investment, you might consider purchasing Class B
shares.
PURCHASE OF SHARES
Investors may purchase Class A and Class B shares of the Funds through
representatives of securities dealers at Investment Centre Networks "ICN
Centres" which are located at the offices of Premier Bank, N.A., among other
places, and through certain other Authorized Dealers. Class A and Class B shares
of each Fund are sold at their public offering price.
Investors purchasing shares of Paragon Treasury Money Market Fund are
generally required to purchase Class A shares, since such shares are not subject
to any initial sales charge, CDSC or distribution fee. Class B shares of Paragon
Treasury Money Market Fund are typically intended to be purchased in connection
with exchanges of Class B shares of any of the other Funds.
The Distributor may, from time to time, at its own expense, provide
additional incentives to Authorized Dealers which employ registered
representatives who sell a minimum dollar amount of the Funds' shares. In some
instances, such additional incentives may be offered only to certain dealers
whose representatives are expected to sell significant amounts of shares.
Authorized Dealers may receive different levels of compensation depending on
which class of shares they sell.
CLASS A SHARES
The public offering price for Class A shares is based on the net asset value
per share of the Fund next determined after such purchase, plus the applicable
initial sales charge. The public offering price for Class A shares of Paragon
Treasury Money Market Fund is their net asset value, since shares of that Fund
are not subject to any sales charge. The Funds receive the net asset value,
while the sales charge is paid to the Distributor. Authorized Dealers using ICN
Centres or other facilities provided by Premier Bank, N.A. may make payments to
Premier Bank, N.A. that are computed as a percentage of commissions received by
such dealers on the sale of securities, including Fund shares.
29
<PAGE>
The current initial sales charges on Class A shares applicable to all of the
Funds (except Paragon Treasury Money Market Fund) are:
<TABLE>
<CAPTION>
MAXIMUM DEALER
SALES CHARGE AS SALES CHARGES AS RETENTION AS
PERCENTAGE OF PERCENTAGE OF PERCENTAGE OF
AMOUNT OF PURCHASE AMOUNT INVESTED OFFERING PRICE OFFERING PRICE
- -------------------------------------------------- ------------------- ------------------- -------------------
<S> <C> <C> <C>
Less than $100,000................................ 4.71% 4.50% 4.50%
$100,000 but less than $250,000................... 3.62 3.50 3.50
$250,000 but less than $500,000................... 2.56 2.50 2.50
$500,000 but less than $1,000,000................. 1.78 1.75 1.75
$1,000,000 but less than $2,500,000............... 1.26 1.25 1.25
$2,500,000 but less than $5,000,000............... .50 .50 .50
$5,000,000 or more................................ .00 .00 .00
</TABLE>
QUALIFYING FOR A REDUCED SALES CHARGE. The initial sales charge on Class A
shares may vary depending on the size of the purchase and the number of Class A
shares of a Fund that the investor already owns, or any arrangement to purchase
additional Class A shares during a 13-month period or special purchase programs.
A brief description of these arrangements under which the initial sales charge
may be reduced or eliminated is set forth below under "Right of Accumulation"
and "Statement of Intention." Complete details of how investors may purchase
shares at reduced sales charges under a Statement of Intention or Right of
Accumulation are available from the securities dealers located at ICN Centres
and certain other authorized securities dealers.
Class A shares of the Funds may be sold at net asset value to Premier (or
any of its affiliates) in its capacity as trustee, executor, administrator or
other fiduciary; to tax-qualified retirement plans and other institutional,
investment advisory or trust clients of Premier and its affiliates; to current
and retired Trustees of the Trust; to retired as well as current directors,
partners, officers and employees of Premier and Goldman Sachs and their
affiliates; to registered representatives and employees of Authorized Dealers
and to such persons' spouses and children and their beneficial accounts; to
directors, officers, employees and trust clients of banks that provide
facilities for Authorized Dealers to sell shares of the Funds and to such
persons' spouses and children and their beneficial accounts; and to other
investment companies or their shareholders pursuant to certain reorganization,
merger and acquisition transactions. In addition, under certain circumstances,
dividends and distributions from any Fund may be reinvested in shares of the
same class of any other Fund at net asset value, as described under "Purchase of
Shares -- Cross-Reinvestment of Dividends and Distributions."
CLASS B SHARES
Investors may purchase Class B shares of the Funds at net asset value
without the imposition of an initial sales charge. However, Class B shares
redeemed within five years of purchase will be subject to a CDSC at the rates
shown in the table that follows. At redemption, the charge will be assessed on
the amount equal to the lesser of the current market value or the original
purchase cost of the shares being redeemed. No CDSC will be imposed on increases
in account value above the initial purchase price, including shares derived from
the reinvestment of dividends or capital gains distributions.
The amount of the CDSC, if any, will vary depending on the number of years
from the time of purchase until the time of redemption of Class B shares. For
the purpose of determining the number of years from the time of any purchase,
all payments during a month will be aggregated and deemed to
30
<PAGE>
have been made on the first day of that month. In processing redemptions of
Class B shares, the Funds will first redeem shares not subject to any CDSC, and
then shares held longest during the seven-year period. As a result, an investor
will pay the lowest possible CDSC.
<TABLE>
<CAPTION>
CDSC AS A
PERCENTAGE OF
DOLLAR AMOUNT
YEAR SINCE PURCHASE SUBJECT TO CDSC
- ----------------------------------------------------------------------------- -----------------
<S> <C>
First........................................................................ 5.0%
Second....................................................................... 4.0%
Third........................................................................ 3.0%
Fourth....................................................................... 2.0%
Fifth........................................................................ 1.0%
Sixth and thereafter......................................................... none
</TABLE>
Proceeds from the CDSC are payable to the Distributor and may be used in
whole or in part to defray the Distributor's expenses related to providing
distribution-related services to the Funds in connection with the sale of Class
B shares, including the payment of compensation to Authorized Dealers.
Class B shares of a Fund will automatically convert into Class A shares of
the same Fund at the end of the calendar quarter that is seven years after the
purchase date, except as noted below. Class B shares of a Fund acquired by
exchange from Class B shares of another Fund will convert into Class A shares of
such Fund based on the date of the initial purchase. Class B shares acquired
through reinvestment of distributions will convert into Class A shares based on
the date of the initial purchase to which such shares relate. The conversion of
Class B shares to Class A shares is subject to the continuing availability of a
ruling from the Internal Revenue Service, for which the Funds have applied, or
an opinion of counsel that such conversions will not constitute taxable events
for Federal tax purposes. There can be no assurance that such ruling or opinion
will be available. The conversion of Class B shares to Class A shares will not
occur if such ruling or opinion is not available and, therefore, Class B shares
would continue to be subject to higher expenses than Class A shares for an
indeterminate period.
WAIVER OR REDUCTION OF CONTINGENT DEFERRED SALES CHARGE. The CDSC on Class
B shares may be waived or reduced if the redemption results from the death or
disability (as defined in Section 72 of the Internal Revenue Code of 1986, as
amended (the "Code")), of a shareholder if the redemption is made within one
year of such event.
INITIAL PURCHASES
Investors may purchase Class A and Class B shares of any of the Funds by
wire or by check through securities dealers located at ICN Centres or other
Authorized Dealer firms. In order to make an initial investment in the Funds, an
investor must first complete and deliver to the investor's securities dealer at
a ICN Centre or another Authorized Dealer an Account Information Form, copies of
which are attached to this Prospectus and are available at each ICN Centre.
Every purchase order, other than those made by wire, should be accompanied by a
check, Federal Reserve Draft, or other negotiable bank draft, drawn on a U.S.
bank and payable in U.S. dollars, to the order of the Fund whose shares are
being purchased. Investors should indicate on the Account Information Form
whether Class A or Class B shares are being purchased. The Transfer Agent may
charge a transaction fee of $7.50 for each wire purchase.
31
<PAGE>
SUBSEQUENT PURCHASES
Additional purchases of Class A or Class B shares may be made at any time
through Authorized Dealers or directly with the Trust's Transfer Agent, c/o
Paragon Portfolio, c/o NFDS, P.O. Box 419711, Kansas City, MO 64141-6711.
Additional investments through the wire procedure may be made at any time by
contacting your Authorized Dealer or a representative at any ICN Centre by
telephone (toll-free) (800) 777-5143.
GENERAL PURCHASE INFORMATION
Purchases of Class A and Class B shares of a Fund will be effected at the
respective public offering price of the appropriate Class next determined after
receipt by a dealer's representative at the ICN Centre, certain other Authorized
Dealers (in the case of initial purchases) or the Transfer Agent (in the case of
subsequent purchases) of the investor's check or wire transfer and purchase
order.
Since the net asset value of Paragon Treasury Money Market Fund is
determined daily at 4:00 p.m. New York time (3:00 p.m. Louisiana time), wire
purchases of shares of that Fund received prior to 2:30 p.m. New York time will
be eligible to receive dividends or distributions beginning that day. Wire
purchases of shares of Paragon Treasury Money Market Fund made after 2:30 p.m.
and before 4:00 p.m. and all wire purchases of Class A or Class B shares of the
other Funds made before 4:00 p.m. will be eligible to receive dividends or
distributions beginning on the next Business Day. On any Business Day when the
Public Securities Association (PSA) recommends that the securities market closes
early, the Paragon Treasury Money Market Fund reserves the right to cease
accepting purchase and redemption orders for the same Business Day credit at the
early closing time recommended by the PSA. On days the Paragon Treasury Money
Market Fund closes early, purchase and redemption orders received after the PSA
recommended closing time will be credited for the next Business Day. In
addition, the Paragon Treasury Money Market Fund reserves the right to advance
the time by which purchase and redemption orders must be received for the same
Business Day credit as permitted by the SEC. A Business Day means any day on
which the New York Stock Exchange is open except, in the case of Paragon
Treasury Money Market Fund, for days on which Chicago, Boston or New York banks
are closed for local holidays. Holidays include: New Year's Day, Presidents'
Day, Good Friday, Memorial Day, Independence Day, Labor Day, Thanksgiving Day,
Christmas Day and, in the case of Paragon Treasury Money Market Fund, also
include Martin Luther King Jr. Day, Columbus Day and Veteran's Day.
For purchases by check, Class A and Class B shares of Paragon Treasury Money
Market Fund, Paragon Short-Term Government Fund, Paragon Louisiana Tax-Free Fund
and Paragon Intermediate-Term Bond Fund will begin earning dividends and
distributions on the next Business Day after the Transfer Agent has received
payment for the investor's order. In the case of Paragon Value Growth Fund,
Paragon Value Equity Income Fund and Paragon Gulf South Growth Fund shareholders
of record on the record date of any dividend or distribution will be eligible to
receive such dividend or distribution. See "Distribution and Taxes."
Information concerning purchases through an Authorized Dealer should be
obtained directly from the Authorized Dealer. In the case of purchases made
through the investor's Authorized Dealer, it is the responsibility of the
Authorized Dealer to promptly forward payment to the Trust for shares being
purchased. Authorized Dealers who receive a portion of the sales charge
applicable to the purchase of Class A or Class B shares of a Fund are not
permitted to impose any other fees in connection with the purchase of such
shares.
32
<PAGE>
The Trust does not issue share certificates representing Fund shares except
upon request. No share certificates will be issued representing shares of
Paragon Treasury Money Market Fund. Goldman Sachs, as the Trust's Transfer
Agent, will maintain a complete record of transactions and shares held in each
shareholder's account. Goldman Sachs issues confirmations showing purchases and
sales of shares of the Funds to each shareholder. Any dividends and
distributions paid by the Funds are also reflected in regular statements issued
by Goldman Sachs.
The Trust and Goldman Sachs each reserves the right to reject any specific
purchase order (including exchanges) or to restrict purchases or exchanges by a
particular purchaser (or group of related purchasers). The Trust or Goldman
Sachs may reject or restrict purchases or exchanges of shares by a particular
purchaser or group, for example, when a pattern of frequent purchases and sales
or exchanges of shares of a Fund is evident, or if the purchase and sale or
exchange orders are, or a subsequent abrupt redemption might be, of a size that
would disrupt management of a Fund.
Investors may reach a ICN Centre by calling toll free (800) 777-5143 from
9:00 A.M. to 5:00 p.m. (Louisiana time) on any Business Day to obtain
information concerning the purchase of Class A and Class B shares of the Funds
and other information.
REINVESTMENT PRIVILEGE (CLASS A SHARES ONLY)
A shareholder in a Fund, other than Class A shares of Paragon Treasury Money
Market Fund, whose shares are repurchased or redeemed may reinvest any portion
or all of his repurchase or redemption proceeds (plus that amount necessary to
acquire a fractional share to round off his purchase to the nearest full share)
in Class A shares of the same class of any Fund at net asset value.
This reinvestment privilege is subject to the condition that the shares
repurchased or redeemed have been held for at least thirty (30) days before the
repurchase or redemption and that the reinvestment is effected within thirty
(30) days after such repurchase or redemption. Shares are sold to a reinvesting
shareholder at the net asset value next determined following timely receipt of a
written purchase order by the Distributor. A reinvesting shareholder may realize
a gain or loss for Federal tax purposes as a result of such repurchase or
redemption. If the redemption occurs within ninety (90) days after the original
purchase of the Class A shares and new Class A shares are purchased at net asset
value pursuant to the reinvestment privilege, any sales charge paid on the
original purchase cannot be taken into account for purposes of determining gain
or loss realized on the redemption. Such sales charge, however, is added to the
basis of the new Class A shares. To the extent that any loss is realized upon a
redemption and shares of the same Fund are purchased within thirty (30) days
before or after such redemption, some or all of the loss generally may not be
allowed as a deduction depending upon the number of shares purchased. The
reinvestment privilege may be exercised only once annually by a shareholder with
respect to the Funds, except that there is no such limit as to the availability
of this privilege in connection with transactions whose sole purpose is to
reinvest the proceeds at net asset value in a tax-sheltered retirement plan.
RIGHT OF ACCUMULATION (CLASS A SHARES ONLY)
A shareholder qualifies for cumulative quantity discounts if the net asset
values of the new investment and the shareholder's current holdings of existing
Class A shares of the Funds (excluding shares of Paragon Treasury Money Market
Fund not acquired by exchange from another Fund) total the requisite amount for
receiving a discount. For example, if a shareholder owns Class A shares with a
current market value of $75,000 and purchases an additional $25,000 of Class A
shares, the sales charge for the $25,000 purchase would be 3.5% (the rate
applicable to a single purchase of $100,000).
33
<PAGE>
STATEMENT OF INTENTION (CLASS A SHARES ONLY)
If a shareholder anticipates purchasing at least $100,000 of Class A shares
of one or more Funds (excluding Paragon Treasury Money Market Fund) within a
13-month period, the shareholder may purchase Class A shares of such Fund(s) at
a reduced sales charge by submitting a Statement of Intention (the "Statement").
Class A shares purchased under a Statement will be eligible for the same sales
charge discount that would have been available if all of the Class A share
purchases had been made at the same time. A Statement must be filed with the
Transfer Agent within 90 days after the first purchase of Class A shares under
the Statement. There is no obligation to purchase the full amount of Class A
shares indicated in the Statement. The shareholder or his Authorized Dealer must
inform the Transfer Agent that the Statement is in effect each time Class A
shares are purchased. A shareholder may include the value of all Class A shares
on which a sales charge has previously been paid as an "accumulation credit"
toward the completion of the Statement, but a price readjustment will be made
only on Class A shares purchased within ninety (90) days of submitting the
Statement. The Statement authorizes the Transfer Agent to hold in escrow a
sufficient number of Class A shares which can be redeemed to make up any
difference in the sales charge on the amount actually invested. For purposes of
satisfying the amount specified on the Statement, the gross amount of each
investment, exclusive of any appreciation on Class A shares previously
purchased, will be taken into account. Required forms are available at any ICN
Centre or from any Authorized Dealer.
AUTOMATIC INVESTMENT PLAN
Automatic investments in Class A or Class B shares of $50 or more may be
made through a shareholder's checking account via the Automated Clearing House
Network or via bank draft each month or quarter. Required forms are available
through the ICN Centres, certain other authorized securities dealers or from the
Transfer Agent.
CROSS-REINVESTMENT OF DIVIDENDS AND DISTRIBUTIONS
A shareholder in the Funds may elect to cross-reinvest dividends and capital
gain distributions paid by a Fund with respect to a class in shares of the same
class of any other Fund in the Trust. Shares of the other Fund will be purchased
at net asset value and will not be subject to any initial or contingent deferred
sales charge. The value of the account in the acquired Fund must equal or exceed
the acquired Fund's minimum initial investment requirement. A Fund shareholder
should consider the investment objective, policies and applicable fees of the
acquired Fund, as described in this Prospectus, before electing
cross-reinvestment into that Fund. The election to cross-reinvest dividends and
capital gain distributions will not affect the tax treatment of such dividends
and distributions, which will be treated as received by the shareholder and then
used to purchase shares of the acquired Fund. Such reinvestment of dividends and
distributions in shares of other Funds is available only in states where such
reinvestment may legally be made.
MINIMUM INVESTMENTS
The minimum initial investment in each Fund is $250. The minimum amount
required for subsequent investments in Class A and Class B shares of a Fund is
$50. These minimums may be waived at the discretion of the Trust's officers.
AUTOMATIC EXCHANGE PROGRAM
Shareholders of any Fund may elect on the Account Information Form to
automatically exchange a specified dollar amount of shares of a Fund for shares
of the same class of any other Fund. No sales
34
<PAGE>
charge is imposed on exchanges except that the applicable initial sales charge
will be imposed on exchanges of Class A shares of Paragon Treasury Money Market
Fund not previously acquired by exchange from one of the other Funds.
An exchange of Class B shares will not be subject to the applicable CDSC at
the time of the exchange. Class B shares acquired in an exchange will be subject
to the CDSC of the shares originally held. For purposes of determining the
amount of any applicable CDSC, the length of time a shareholder has owned Class
B shares acquired by exchange will be measured from the date the shareholder
acquired the original Class B shares and will not be affected by any subsequent
exchange.
These automatic exchanges are made monthly on the fifteenth day of each
month or the first Business Day thereafter and are subject to the following
conditions. The minimum dollar amount for automatic exchanges must be at least
$50 per month. In addition, at the time the election is made, the value of the
account in the acquired Fund must equal or exceed the acquired Fund's minimum
initial investment requirement. The names, addresses and social security or
other taxpayer identification numbers for the shareholder accounts with the
exchanged and acquired Funds must be identical. A Fund shareholder should
consider the investment objective, policies and applicable fees and expenses of
the acquired Fund, as described in this Prospectus, before electing an automatic
exchange into that Fund.
CLASS B DISTRIBUTION PLAN
The Trust, on behalf of each Fund, has adopted a Distribution Plan for Class
B shares (the "Class B Plan") pursuant to Rule 12b-1 under the Investment
Company Act. Under the Plan, each Fund will pay to Goldman Sachs a quarterly fee
for distribution services equal, on an annual basis, to .75% of each Fund's
average daily net assets attributable to the Class B shares of such Fund. For
the period ended November 30, 1994, the Trust on behalf of each Fund paid .75%
(on an annual basis) of each Fund's average daily net assets attributable to the
Class B shares to Goldman Sachs pursuant to the Class B Plan.
The Distributor may use the fee for its expenses of distributing Class B
shares of a Fund, including printing reports and prospectuses for other than
existing shareholders and preparation, printing and distribution of sales
literature and advertising materials. In addition, the Distributor may pay up to
the entire amount of such fee to Authorized Dealers and their officers, sales
representatives and employees for providing services in connection with the sale
of Class B shares of a Fund. The types of expenses for which the Distributor and
Authorized Dealers may be compensated for distribution services under the Plan
include compensation paid to and expenses incurred by their respective officers,
employees and sales representatives, allocable overhead, telephone and travel
expenses, the printing of prospectuses for prospective shareholders, preparation
and distribution of sales literature, advertising of any type and all other
expenses incurred in connection with activities primarily intended to result in
the sale of Class B shares of a Fund. If the fee received by the Distributor
exceeds its expenses, the Distributor may realize a profit from these
arrangements. The Plan will be reviewed and is subject to approval annually by
the Board of Trustees. The aggregate compensation that may be received under the
Plan for distribution services, together with sales charges paid by
shareholders, may not exceed the limitations imposed by the Rules of Fair
Practice of the NASD.
The Distributor will pay to Authorized Dealers at the time of the sale of
Class B shares a commission equal to 4.0% of the public offering price.
35
<PAGE>
RETIREMENT PLANS
TAX-SHELTERED RETIREMENT PLANS
Shares of the Funds may be available for purchase in connection with the
following tax-sheltered retirement plans:
-- Pension and Profit Sharing Plans for self-employed individuals,
corporations and non-profit organizations
-- Individual Retirement Account Plans for individuals and their
non-employed spouses
-- 401(k) Retirement Plans
Detailed information concerning these plans and copies of the plans are
available from the Transfer Agent. This information should be read carefully and
consultation with an attorney or tax adviser may be advisable. The information
sets forth the service fee charged for retirement plans (initial account
establishment fee of $10.00 and an annual maintenance fee of $10.00) and
describes the Federal income tax consequences of establishing a plan. Under all
plans, dividends and distributions will be automatically reinvested in
additional shares. The initial investment minimums apply to purchases in
connection with tax sheltered retirement plans.
REPORTS TO SHAREHOLDERS
Shareholders of each Fund will receive an annual report containing audited
financial statements and a semi-annual report. Each shareholder will also be
furnished with a printed confirmation for each transaction (other than
transactions in shares of Paragon Treasury Money Market Fund) and an individual
monthly statement. A year-to-date statement for any account will be provided
upon request made to the Transfer Agent. Shareholders with inquiries concerning
account information may call (toll-free) (800) 525-7907.
DISTRIBUTIONS AND TAXES
DISTRIBUTIONS
Each of Paragon Treasury Money Market Fund, Paragon Short-Term Government
Fund, Paragon Intermediate-Term Bond Fund and Paragon Louisiana Tax-Free Fund
will declare a dividend of its net investment income daily and distribute such
dividend on or about the last calendar day of the month. All or substantially
all long-term and short-term capital gains in excess of available capital
losses, if any, of Paragon Short-Term Government Fund, Paragon Intermediate-Term
Bond Fund and Paragon Louisiana Tax-Free Fund will be distributed at least
annually.
Net short-term capital gains, if any, of the Paragon Treasury Money Market
Fund will be distributed in accordance with the requirements of the Code, as
amended, and may be reflected in this Fund's daily distributions. Each of
Paragon Value Growth Fund and Paragon Value Equity Income Fund will typically
declare and distribute a dividend of its net investment income on or about the
last calendar day of every month and will distribute all long-term and
short-term capital gains in excess of available capital losses, if any, at least
annually. Paragon Gulf South Growth Fund will typically declare and distribute a
dividend of its net investment income semi-annually and will distribute all
long-term and short-term capital gains in excess of available capital losses, if
any, at least annually.
36
<PAGE>
Although realized gains and losses on the assets of Paragon Treasury Money
Market Fund are reflected in the net asset value of such Fund, they are not
expected to be of an amount which would affect the Fund's net asset value of
$1.00 per share.
A shareholder may elect on the Account Information Form to have dividends,
capital gains distributions or both either paid in cash or reinvested in shares
of the same class of the same Fund or one of the other Funds, as described under
"Purchase of Shares -- Cross-Reinvestment of Dividends and Distributions." Such
reinvestments will be made at the net asset value per share and will not be
subject to any initial or contingent deferred sales charge.
This election may be changed upon written notice to the Transfer Agent at
any time prior to the record date for a particular dividend or distribution. If
no election is made, all dividends and capital gain distributions will be
reinvested in the same Fund. The election to reinvest dividends and
distributions paid by a Fund in additional shares of the Fund or any other Fund
of the Trust will not affect the tax treatment of such dividends and
distributions, which will be treated as received by the shareholder and then
used to purchase shares of the Fund or another Fund of the Trust.
FEDERAL TAXES
Each Fund is treated as a separate entity for tax purposes, has qualified
and elected to be treated as a regulated investment company under Subchapter M
of the Code and intends to continue to qualify for such treatment. To qualify as
such, each Fund must satisfy certain requirements relating to the sources of its
income, diversification of its assets and distribution of its income to
shareholders. As a regulated investment company, a Fund will not be subject to
Federal income or excise tax on any net investment income and net realized
capital gains that are distributed to its shareholders in accordance with
certain timing requirements of the Code.
Dividends paid by a Fund from net investment income (including original
issue discount, certain market discount income, and, except for Paragon
Louisiana Tax-Free Fund any interest from municipal obligations) and
distributions of the excess of net short-term capital gain over net long-term
capital loss will be taxable to shareholders as ordinary income. Dividends paid
by a Fund from the excess of net long-term capital gain over net short-term
capital loss will be taxable as long-term capital gains regardless of how long
the shareholders have held their shares. These tax consequences will apply
regardless of whether distributions are received in cash or reinvested in
shares. Certain distributions paid by a Fund in January of a given year may be
taxable to shareholders as if received the prior December 31. Shareholders will
be informed annually about the amount and character of distributions received
from a Fund for Federal income tax purposes.
Paragon Louisiana Tax-Free Fund intends to satisfy certain requirements of
the Code so that it may distribute the tax-exempt interest it receives as
"exempt-interest dividends." These dividends will be exempt from regular Federal
income tax, although all or a portion of such distributions may be subject to
the alternative minimum tax and/or be includable in the tax base for determining
taxability of social security or railroad retirement benefits. Persons who are
"substantial users" of facilities financed by industrial revenue or certain
private activity bonds (or related persons thereof) should consult their own tax
advisers before purchasing shares of the Fund.
Interest on indebtedness incurred or continued to purchase or carry shares
of Paragon Louisiana Tax-Free Fund is not deductible to the extent attributable
to its distributions that are exempt-interest dividends.
37
<PAGE>
Investors should consider the tax implications of buying shares immediately
prior to a distribution. Investors who purchase shares shortly before the record
date for a distribution will pay a per share price that includes the value of
the anticipated distribution and will be taxed on any taxable distribution even
though the distribution represents a return of a portion of the purchase price.
Redemptions and exchanges of shares are taxable events on which a
shareholder may recognize a gain or loss.
Individuals and certain other classes of shareholders may be subject to 31%
backup withholding of Federal income tax on distributions, redemptions and
exchanges if they fail to furnish the Trust with their correct taxpayer
identification number and certain certifications or if they are otherwise
subject to backup withholding. Individuals, corporations and other shareholders
that are not U.S. persons under the Code are subject to different tax rules and
may be subject to nonresident alien withholding at the rate of 30% (or a lower
rate provided by an applicable tax treaty) on amounts treated as ordinary
dividends from a Fund.
Certain Funds may be subject to foreign withholding taxes or other foreign
taxes on income (possibly including capital gains) on foreign securities and do
not expect to be able to pass through to shareholders such foreign taxes,
subject to possible allowance of tax credits or deductions with respect to such
taxes.
OTHER TAXES
In addition to Federal taxes, a shareholder may be subject to state and
local or foreign taxes on payments received from a Fund. A state income (and
possible local income and/or intangible property) tax exemption is generally
available to the extent a Fund's distributions are derived from interest on (or,
in the case of intangibles taxes, the value of its assets is attributable to)
certain U.S. Government obligations, provided in some states that certain
thresholds for holdings of such obligations and/or reporting requirements are
satisfied. The Trust has obtained a ruling from the Louisiana Department of
Revenue and Taxation to the effect that distributions to shareholders of Paragon
Louisiana Tax-Free Fund who are Louisiana residents, which are derived from
interest on tax-exempt obligations of the State of Louisiana or its political
subdivisions and certain obligations of the United States or its territories,
will not be subject to Louisiana income tax.
EXCHANGES
Except as described below, shares of each Fund (except Class A shares of the
Paragon Treasury Money Market Fund) may be exchanged for shares of the same
class of the other Funds at the net asset value next determined after receipt of
a proper exchange request by either writing to the Transfer Agent at the address
shown on the back cover of this Prospectus or, if previously elected in the
Fund's Account Information Form, by calling (toll-free) (800) 525-7907 (8:00
a.m. to 3:00 p.m. Chicago time). All telephone exchanges must be registered in
the same name(s) and with the same address as are registered in the Fund from
which the exchange is being made. In times of drastic economic or market changes
the telephone exchange privilege may be difficult to implement. Certain
procedures are employed to prevent unauthorized or fraudulent exchange requests
as set forth under "Redemption of Shares."
In addition to free automatic exchanges pursuant to the Automatic Exchange
Program, five free exchanges are permitted in each twelve-month period.
Additional exchanges may incur a $5 exchange
38
<PAGE>
fee. No sales charge is imposed on exchanges except that the applicable initial
sales charge will be imposed on exchanges of Class A shares of Paragon Treasury
Money Market Fund not previously acquired by exchange from one of the other
Funds.
An exchange of Class B shares will not be subject to the applicable CDSC at
the time of the exchange. Class B shares acquired in an exchange will be subject
to the CDSC of the shares originally held. For purposes of determining the
amount of any applicable CDSC, the length of time a shareholder has owned Class
B shares acquired by exchange will be measured from the date the shareholder
acquired the original Class B shares and will not be affected by any subsequent
exchange.
An exchange may result in a taxable gain or loss. Any initial sales charge
paid on the original purchase of Class A shares cannot be taken into account in
determining such gain or loss if the exchange occurs within ninety (90) days
after the original purchase of Class A shares to the extent no sales charge is
imposed on such exchange pursuant to the exchange privilege. Such disregarded
sales charge, however is added to the basis of the new Class A shares acquired
in the exchange. All exchanges are subject to the minimum investment
requirements of the Fund into which shares are being exchanged. The exchange
privilege and related fees may be modified or withdrawn at any time on 60 days'
written notice to shareholders. Exchanges are only available in states where
exchanges may legally be made. In addition, the exchange privilege is subject to
certain restrictions. See "General Purchase Information" above.
REDEMPTION OF SHARES
HOW TO REDEEM
Shareholders may redeem shares of any Fund upon request on any Business Day
at the next deter-mined net asset value less any applicable CDSC on Class B
shares. Redemption proceeds will normally be sent to the redeeming shareholder
by mail on the next Business Day following the redemption request provided that
such request is received by 3:00 p.m. Louisiana time (4:00 p.m. New York time)
by the Transfer Agent. If so requested, redemption proceeds of shares of Paragon
Treasury Money Market Fund will be sent by wire on the same Business Day,
provided that the request is received by 12:00 noon Louisiana time. However, the
payment of redemption proceeds for shares recently purchased by check may be
delayed for up to 15 days until the check has cleared.
REDEMPTION BY MAIL
Shares may be redeemed directly from a Fund at the net asset value per share
next determined less any applicable CDSC on Class B shares after the Transfer
Agent receives a proper request to do so from a ICN Centre, certain other
Authorized Dealers or directly from the shareholder. A shareholder who wishes to
redeem shares by mail must submit a clear letter of instruction to the Transfer
Agent indicating the number and class of shares to be redeemed, the Fund from
which shares are being redeemed, the account number, and the exact registration
on the account. The letter must be signed by all shareholders and must also be
signature guaranteed. A notarization is not a signature guarantee. The
signature(s) must be guaranteed by a bank, a securities broker or dealer, a
credit union having authority to issue signature guarantees, a savings and loan
association, a building and loan association, a cooperative bank, a federal
savings bank or association, a national securities exchange, a registered
securities association or a clearing agency, provided that such institution
satisfies the standards established by the Transfer Agent. A signature guarantee
may be obtained from a securities
39
<PAGE>
dealer located at a ICN Centre, certain other Authorized Dealers or from Premier
Bank, N.A. Signature guarantees are required for shareholders' protection to
prevent fraudulent redemptions. In cases where redemption is requested by a
corporation, partnership, trust, fiduciary or any person other than the record
owner, written evidence of authority acceptable to the Transfer Agent must be
submitted before the redemption request will be accepted. Any shares represented
by share certificates may be redeemed only by enclosing such certificates, duly
endorsed or with an executed stock power (signature guaranteed) and otherwise in
good order for transfer.
REDEMPTION BY TELEPHONE
If the appropriate box is indicated on the Account Information Form, or an
authorization form has been completed by the shareholder, shares not represented
by any outstanding share certificates may be redeemed at the net asset value per
share next determined after receipt of a proper redemption request, less any
applicable CDSC on Class B shares, by telephoning the Transfer Agent toll-free
at (800) 525-7907. It may be difficult to implement redemptions by telephone in
times of drastic economic or market changes.
In an effort to prevent unauthorized or fraudulent redemption and exchange
requests by telephone, Goldman Sachs and NFDS each employ reasonable procedures
specified by the Trust to confirm that such instructions are genuine.
Consequently, proceeds of telephone redemption requests will only be sent to the
shareholder's address of record or authorized bank account designated in the
Account Information Form and exchanges of shares will only be made to an
identical account. Telephone requests may also be recorded. The Trust may
implement other procedures from time to time. If reasonable procedures are not
imple-mented, the Trust may be liable for any loss due to unauthorized or
fraudulent transactions. In all other cases, neither the Funds, the Trust nor
Goldman Sachs will be responsible for the authenticity of instructions received
by telephone. Proceeds of telephone redemptions will only be mailed to the
shareholder's address of record or wired to the authorized bank account
indicated on the Account Information Form, unless the shareholder provides
written instructions (accompanied by a signature guarantee) indicating another
address.
WIRING OF REDEMPTION PROCEEDS
In addition, redemption proceeds may be wired as Federal funds to a bank
account at Premier Bank, N.A. or another bank designated on the shareholder's
Account Information Form. Redemption proceeds will normally be wired on the next
Business Day in Federal funds (for a total one business-day delay) following
receipt of a properly executed wire transfer redemption request. Wiring of
redemption proceeds may be delayed one additional Business Day if the Federal
Reserve Bank is closed on the day redemption proceeds would ordinarily be wired.
In order to change the bank designated on the Account Information Form to
receive redemption proceeds, a written request must be received by the Transfer
Agent. This request must be signature guaranteed as set forth above. Further
documentation may be required for executors, trustees or corporations. After a
wire has been initiated the Transfer Agent, The Northern Trust Company
("Northern"), 50 South LaSalle Street, Chicago, Illinois 60603, (acting as
subcustodian for State Street Bank and Trust Company), State Street Bank and
Trust Company and the Trust assume no further responsibility for the performance
of intermediaries or the investor's bank in the transfer process. If a problem
with such performance arises, the investor should deal directly with such
intermediaries or bank.
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<PAGE>
CHECK REDEMPTION PRIVILEGE (CLASS A SHARES ONLY)
Class A shareholders of Paragon Treasury Money Market Fund may elect to have
a special account with State Street Bank and Trust Company (the "Bank") for the
purpose of redeeming Class A shares from their accounts in the Fund by check.
When the Bank receives a completed signature card and authorization form, the
shareholder will be provided with a supply of checks. Checks drawn on this
account may be payable to the order of any person in any amount of $500 or more.
The payee of the check may cash or deposit it like any other check drawn on a
bank. When such a check is presented to the Bank for payment, a sufficient
number of full and fractional Class A shares will be redeemed to cover the
amount of the check. Cancelled checks will be returned to the shareholder by the
Bank. A charge of $1.00 per check may be charged to the shareholder's account.
The check redemption privilege enables a shareholder to receive the
dividends declared on the shares to be redeemed until such time as the check is
processed. Because of this feature, the check redemption privilege may not be
used for a complete liquidation of a shareholder's account. If the amount of a
check is greater than the value of the uncertificated shares held in the
shareholder's Fund account, the check will be returned unpaid, and the
shareholder may be subject to extra charges.
The Trust and the Bank each reserves the right at any time to suspend the
procedure permitting redemption by check and each intends to do so in the event
that Federal legislation or regulations impose reserve requirements or other
restrictions deemed by the Trustees to be adverse to the interests of other
shareholders of the Funds. For further information or to request the check
redemption privilege, please contact an ICN Centre toll-free at (800) 777-5143.
SYSTEMATIC WITHDRAWAL PLAN (CLASS A SHARES ONLY)
A systematic withdrawal plan is available for shareholders having Class A
shares not represented by outstanding share certificates of a Fund with a
minimum value of $10,000 based upon the net asset value per share. The plan
provides for monthly or quarterly payments to the participating shareholder of
any amount not less than $100.
Dividends and capital gain distributions on Class A shares held under the
Systematic Withdrawal Plan are reinvested in additional full and fractional
Class A shares of the same Fund at net asset value. The Funds' Transfer Agent
acts as agent for the shareholder in redeeming sufficient full and fractional
shares to provide the amount of the systematic withdrawal payment. The
Systematic Withdrawal Plan may be terminated at any time. The Distributor
reserves the right to initiate a fee of up to $5 per withdrawal, upon thirty
(30) days' written notice to the shareholder. Withdrawal payments should not be
considered to be dividends, yield or income. If periodic withdrawals
continuously exceed reinvested dividends and capital gains distributions, the
shareholder's original investment will be correspondingly reduced and ultimately
exhausted. Furthermore, each withdrawal constitutes a redemption of shares, and
any gain or loss realized must be reported for Federal and state income tax
purposes. A shareholder should consult his or her own tax adviser with regard to
the tax consequences of participating in the plan. For further information or to
request a Systematic Withdrawal Plan, please contact an ICN Centre toll-free at
(800) 777-5143.
THROUGH AUTHORIZED DEALERS
To sell shares of a Fund through an Authorized Dealer (a repurchase), a
shareholder can place a repurchase order with the Authorized Dealer, who may
charge a fee. The value of shares repurchased through a securities dealer will
be the net asset value next determined after the dealer places the order with
the Transfer Agent less any applicable CDSC on Class B shares.
41
<PAGE>
INVOLUNTARY REDEMPTIONS
In an attempt to reduce the expenses of the Funds, each Fund may redeem at
net asset value (without imposing any applicable CDSC) all of the shares of any
shareholder whose account in any Fund has a net asset value of less than $250.
Involuntary redemptions will not be implemented if the value of a shareholder's
account falls below the minimum required investment solely as a result of market
conditions. The Trust will give sixty (60) days' prior written notice to
shareholders whose shares are being redeemed to allow them to purchase
sufficient additional shares of the applicable Fund to avoid such redemption.
OTHER REDEMPTION INFORMATION
The right to redeem can be suspended and the payment of the redemption price
deferred when the New York Stock Exchange is closed (other than for customary
weekend and holiday closings), during periods when trading on the Exchange is
restricted as determined by the SEC, during any emergency as determined by the
SEC which makes it impracticable for a Fund to dispose of its securities or
value its assets, or during any other period permitted by order of the SEC for
the protection of investors.
NET ASSET VALUE
The net asset value of Class A and Class B shares of each Fund, except for
the Paragon Treasury Money Market Fund, is determined at the close of regular
trading on the New York Stock Exchange (normally 3:00 p.m. Louisiana time, 4:00
p.m. New York time) on each Business Day (defined above under "General Purchase
Information"). The net asset value of Paragon Treasury Money Market Fund's
shares is determined daily at 3:00 p.m. Louisiana time (4:00 p.m. New York
time), and immediately after the determination of net investment income earned
by shareholders of record, at 3:00 p.m. Louisiana time (4:00 p.m. New York time)
on each Business Day. Net asset value per share of a class of each Fund is
calculated by determining the net assets attributable to each class and dividing
by the number of shares of that class. The net asset value of Paragon Treasury
Money Market Fund will be determined by using the amortized cost method of
valuation.
For purposes of determining net asset value per share, equity securities
traded on a national securities exchange or the Nasdaq National Market
("NASDAQ") are valued at their last sale price on the principal exchange on
which they are traded or NASDAQ (if NASDAQ is the principal market for such
securities) on the valuation day or, if no sale occurs, at the mean between the
closing bid and asked price. Unlisted equity securities for which market
quotations are available are valued at the mean between the most recent bid and
asked prices.
Fixed-income securities will be valued at prices supplied by a pricing agent
selected by the Trustees, which prices reflect broker/dealer-supplied valuations
and electronic data processing techniques. Short-term obligations maturing in
sixty days or less are valued at amortized cost. Other assets and assets whose
market value does not, in the Adviser's opinion, reflect fair value are valued
at fair value using methods determined in good faith by the Board of Trustees.
PERFORMANCE AND YIELD INFORMATION
From time to time a Fund may publish its average annual total return and/or
yield in advertisements and communications to shareholders. A Fund's average
annual total return for each class is determined by computing the average annual
percentage change in value of a $1,000 investment.
42
<PAGE>
Total return calculations for Class A shares include the effect of paying the
maximum sales charge of up to 4.50%. Investments at lower sales charges would
result in higher performance figures. Total return calculations for Class B
shares reflect deduction of any applicable CDSC imposed on a redemption of
shares held for the applicable period. All calculations assume the reinvestment
of all dividends and distributions at net asset value. The total return
calculation assumes a complete redemption of the investment at the end of the
relevant period. The total return of Class A and Class B shares will be
calculated separately, and, because each class is subject to different expenses,
the total return with respect to the classes of a Fund for the same period may
differ. Each Fund will include the total return of both Class A and Class B
shares in any advertisement or promotional materials including that Fund's
performance data.
A Fund may also from time to time advertise total return on a cumulative,
average, year-by-year or other basis for various specified periods by means of
quotations, charts, graphs or schedules. In addition, a Fund may furnish total
return calculations based on investments at various sales charge levels or at
net asset value. Any performance data which is based on the net asset value per
share would be reduced if a sales charge were taken into account. In addition to
the above, a Fund may from time to time advertise its performance relative to
certain performance rankings and indices.
The yield of a Fund, other than Paragon Treasury Money Market Fund, will be
calculated by dividing the net investment income per share during a recent
30-day period by the maximum offering price per share of the Fund on the last
day of the period. The results are compounded on a bond equivalent (semi-annual)
basis and then annualized.
Paragon Treasury Money Market Fund may also advertise its yield and
effective yield. The yield of that Fund refers to the income generated by an
investment in the Fund over a seven-day period (which period will be stated in
the advertisement). This income is then annualized; that is, the amount of
income generated by the investment during the seven-day period is assumed to be
generated ratably throughout the year and is shown as a percentage of the
investment. The effective yield is calculated similarly but, when annualized,
the income earned by an investment in the Fund is assumed to be reinvested. The
effective yield will be slightly higher than the yield because of the
compounding effect of this assumed reinvestment.
TAX-FREE YIELDS AND CORRESPONDING TAXABLE EQUIVALENTS
Paragon Louisiana Tax-Free Fund may also quote tax equivalent yield, which
shows the taxable yield an investor would have to earn to equal, after taxes,
that Fund's tax-free yield. A tax equivalent yield is calculated by dividing the
Fund's tax exempt yield by one minus a stated Federal and/or state tax rate. The
following table shows what a Louisiana investor would have to earn from a
comparable taxable investment to match Paragon Louisiana Tax-Free Fund's double
tax-free yield. To the extent that less than all of Paragon Louisiana Tax-Free
Fund's income is exempt from Louisiana income tax,
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<PAGE>
the tax equivalent yield actually realized by shareholders will be less than
that shown below. The hypothetical yields shown are for illustrative purposes
only, and should not be considered an indication of what the Fund will yield.
<TABLE>
<CAPTION>
TAX EXEMPT YIELD
---------------------------------------------------
COMBINED 3.00% 4.00% 5.00% 6.00% 7.00% 8.00%
FEDERAL AND ------ ------ ------ ------ ------ ------
TAXABLE INCOME* JOINT STATE
SINGLE RETURN RETURN BRACKET** EQUIVALENT TAXABLE YIELD
- --------------- -------- ----------- ---------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
$ 6,250 $ 11,250 16.70% 3.60% 4.80% 6.00% 7.20% 8.40% 9.60%
$ 22,750 $ 38,000 30.88% 4.34% 5.79% 7.23% 8.68% 10.13% 11.57%
$ 55,100 $ 91,850 35.14% 4.63% 6.17% 7.71% 9.25% 10.79% 12.33%
$115,000 $140,000 39.84% 4.99% 6.65% 8.31% 9.97% 11.64% 13.30%
$250,000 $250,000 43.22% 5.28% 7.05% 8.81% 10.57% 12.33% 14.09%
</TABLE>
- ------------------------
*Represents taxable income as currently defined by the Code.
**Federal and state tax rates include the effect of fully deducting state
taxes on your Federal return. However, taxpayers with adjusted gross income
in excess of $114,700 ($57,350 for a married individual filing as separate
return) (adjusted annually for inflation) would be required to reduce their
deduction for such state taxes, as provided in the Code. In addition,
single taxpayers with adjusted gross income in excess of $114,700 (adjusted
annually for inflation) and married individuals filing jointly with
adjusted gross income in excess of $172,050 (adjusted annually for
inflation) are required to phase-out the benefit of any personal exemptions
claimed. The taxable income and rate brackets take into account the
deductibility of the federal income tax liability in determining the
Louisiana tax liability.
Note: In determining the Combined Federal and State Bracket, it is assumed that
none of the tax-free obligations would give rise to a tax-preference and
that the alternative minimum tax is otherwise inapplicable.
Investors should note that the investment results of a Fund are based on
historical performance and will fluctuate over time. The value of a Fund's
shares, when redeemed, may be more or less than their original cost. Any
presentation of a Fund's yield, effective yield, tax-exempt equivalent yield or
total return for any prior period should not be considered a representation of
what an investment may earn or what a Fund's yield, effective yield, tax-exempt
equivalent yield or total return may be in any future period.
From time to time any Fund may publish an indication of its past performance
(including investment standings and rankings) as measured by independent sources
such as Lipper Analytical Services, Incorporated, Weisenberger Investment
Companies Service, Donoghue's Money Fund Report, Barron's, Business Week,
Changing Times, Financial World, Forbes, Money, Personal Investor, Sylvia
Porter's Personal Finance, and The Wall Street Journal. The Funds may also
advertise information which has been provided to the NASD for publication in
regional and local newspapers.
ORGANIZATION AND SHARES OF THE FUNDS
The Trust was formed as a business trust under the laws of The Commonwealth
of Massachusetts on October 2, 1989. The Trustees of the Trust are responsible
for the overall management and supervision of its affairs. As of the date
hereof, the Trustees have established eleven portfolios, seven of which are
described in this Prospectus. Also as of the date hereof, the Trustees have
authorized the
44
<PAGE>
issuance of two classes of shares of each Fund, designated as Class A and Class
B. Shares of each class of a Fund represent an interest in the same portfolio of
investments of that Fund. When issued, shares will be fully paid and
nonassessable. As of February 17, 1995, Labanc & Co-Premier Bank, N.A. Trustee,
owned beneficially and of record 95%, 92%, 89%, 69%, 80%, 94% and 76% of the
outstanding shares of beneficial interest of Paragon Treasury Money Market Fund,
Paragon Short-Term Government Fund, Paragon Intermediate-Term Bond Fund, Paragon
Louisiana Tax-Free Fund, Paragon Value Growth Fund, Paragon Equity Income Fund
and Paragon Gulf South Growth Fund, respectively. Shares entitle their holders
to one vote per share, are freely transferable and have no preemptive,
subscription or conversion rights.
Shares of a Fund will be voted separately by Fund with respect to matters
pertaining to that Fund except for the election of Trustees and ratification of
independent accountants. For example, shareholders of each Fund are required to
approve the adoption of any investment advisory agreement relating to such Fund
and any changes in fundamental investment restrictions or policies of such Fund.
Approval by the shareholders of one Fund is effective only as to that Fund.
Shares of each class of a Fund have equal rights as to voting, redemption,
dividends and liquidation with each other share of that Fund, except that each
class bears different distribution and transfer agent fees. Class B shareholders
have exclusive voting rights with respect to the Class B Plan.
The Trust does not intend to hold annual shareholder meetings, although
special meetings may be called for purposes such as electing or removing
Trustees or such other purposes as are set forth above.
BACKUP WITHHOLDING INSTRUCTIONS
You are required by law to provide the Paragon Portfolio with your correct
Taxpayer Identification Number (TIN), regardless of whether you file tax
returns. Failure to do so may subject you to penalties. Failure to provide your
correct TIN, to check the appropriate boxes in the Shareholder Signature and
Back-up Withholding Certification section (the "Certification Section") of the
Application and to sign your name in that section could result in backup
withholding of Federal income tax by the Funds of 31% of distributions,
redemptions, exchanges and other payments made to your account.
Any tax withheld may be credited against taxes owed on your Federal income
tax return.
Special rules apply for certain entities. For example, for an account
established under the Uniform Gift to Minors Act, the TIN of the minor should be
furnished.
If you do not have a TIN but have applied for or intend to apply for one,
you should check the first box. If you do not provide your TIN and required
certifications within 60 days, 31% backup withholding may apply. Backup
withholding could also apply to payments relating to your account prior to
Paragon Portfolio's receipt of your TIN and required certifications.
If you have been notified by the IRS that you are subject to backup
withholding because you failed to report all your interest and/or dividend
income on your tax return and you have not been notified by the IRS that such
withholding should cease, you must cross out item (2) in the Certification
Section.
If you are an exempt recipient, you should furnish your TIN and check the
second box in the Certification Section. Exempt recipients include:
corporations, tax-exempt pension plans and IRA's, governmental agencies,
financial institutions, registered securities and commodities dealers and
others.
45
<PAGE>
If you are a nonresident alien or foreign entity, check the third box in the
Certification Section and provide a completed Form W-8 to the Paragon Portfolio
in order to avoid backup withholding on redemptions and other certain payments.
Dividends paid to your account by the Paragon Portfolio may be subject to up to
30% nonresident alien withholding instead of backup withholding.
For further information, see Sections 1441, 1442 and 3406 of the Internal
Revenue Code and consult your tax adviser.
46
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<PAGE>
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<PAGE>
APPENDIX A
(APPLICABLE ONLY TO CLASS A SHARES)
STATEMENT OF INTENTION
If a shareholder anticipates purchasing $100,000 or more of Class A shares
of one or more Funds (excluding Paragon Treasury Money Market Fund) within a
13-month period, the shareholder may obtain Class A shares of such Funds at a
reduced sales charge as though the total quantity were invested in one lump sum
by filing this Statement of Intention incorporated by reference in the Account
Information Form.
Instructions for issuance of shares in the name of a person who does not
sign the Account Information Form must be accompanied by a written statement
from an Authorized Dealer stating that the shares were paid for by a person who
signed the Account Information Form.
To insure that the reduced price will be received on future purchases, the
investor or his Authorized Dealer must inform Goldman, Sachs & Co. that this
Statement of Intention is in effect each time such Class A shares are purchased.
Subject to the conditions mentioned below, each purchase will be made at a
public offering price applicable to a single transaction of the dollar amount
specified on the Account Information Form, as described in the Prospectus. The
investor makes no commitment to purchase additional Class A shares, but if his
purchases of Class A shares within 13 months plus the value of Class A shares
credited toward completion do not total the sum specified, he will pay the
increased amount of the sales charge prescribed in the Escrow Agreement.
Income dividends and capital gain distributions taken in additional Class A
shares will apply toward the completion of this Statement of Intention.
This Statement of Intention is not effective until accepted by Goldman,
Sachs & Co.
ESCROW AGREEMENT
Out of the initial purchase (or subsequent purchases if necessary) 5% of the
dollar amount specified on the Account Information Form shall be held in escrow
by the Transfer Agent in the form of Class A shares registered in the investor's
name. All income dividends and capital gains distributions on escrowed shares
will be paid to the investor or to his order.
When the minimum investment so specified is completed (either prior to or by
the end of the thirteenth month), the shareholder will be notified and the
escrowed shares will be released.
If the intended investment is not completed, the investor will be asked to
remit to Goldman, Sachs & Co. any difference between the sales charge on the
amount specified and on the amount actually attained. If the investor does not
within 20 days after written request by Goldman, Sachs & Co. or the Authorized
Dealer pay such difference in the sales charge, the Transfer Agent will redeem
an appropriate number of the escrowed shares in order to realize such
difference. Shares remaining after any such redemption will be released by the
Transfer Agent.
In signing the Account Information Form, the investor irrevocably
constitutes and appoints the Transfer Agent his attorney to surrender for
redemption any or all escrowed shares with full power of substitution in the
premises.
A-1
<PAGE>
PARAGON PORTFOLIO
4900 Sears Tower
Chicago, Illinois 60606
INVESTMENT ADVISERS & ADMINISTRATOR
Premier Investment Advisors, L.L.C.
451 Florida Street
Baton Rouge, Louisiana 70821
Goldman Sachs Asset Management
One New York Plaza
New York, New York 10004
DISTRIBUTOR
Goldman, Sachs & Co.
85 Broad Street
New York, New York 10004
CUSTODIAN
LOGO
State Street Bank and Trust Company
225 Franklin Street
Boston, Massachusetts 02110
TRANSFER AGENT
Goldman, Sachs & Co.
4900 Sears Tower
Chicago, Illinois 60606
INDEPENDENT ACCOUNTANTS
Price Waterhouse LLP
1177 Avenue of the Americas
New York, NY 10036
LEGAL COUNSEL
Hale and Dorr
60 State Street
Boston, Massachusetts 02109
CLASS A AND CLASS B SHARES
PROSPECTUS
MARCH 30, 1995
<PAGE>
Exhibit (17)(c)
<PAGE>
STATEMENT OF ADDITIONAL INFORMATION
The One Group(R)
The One Group(R) U.S. Treasury Securities Money Market Fund
(the "U.S. Treasury Securities Money Market Fund")
The One Group(R) Prime Money Market Fund (the "Prime Money Market Fund")
The One Group(R) Municipal Money Market Fund
(the "Municipal Money Market Fund")
The One Group(R) Ohio Municipal Money Market Fund
(the "Ohio Municipal Money Market Fund")
The One Group(R) Income Equity Fund (the "Income Equity Fund")
The One Group(R) Disciplined Value Fund (the "Disciplined Value Fund")
The One Group(R) Growth OPPORTUNITIES Fund (the "GROWTH OPPORTUNITIES Fund")
The One Group(R) International Equity Index Fund
(the "International Equity Index Fund")
The One Group(R) Equity Index Fund (the "Equity Index Fund")
The One Group(R) Large Company Value Fund (the "Large Company Value Fund")
The One Group(R) Large Company Growth Fund (the "Large Company Growth Fund")
The One Group(R) Asset Allocation Fund (the "Asset Allocation Fund")
The One Group(R) Income Bond Fund (the "Income Bond Fund")
The One Group(R) Limited Volatility Bond Fund
(the "Limited Volatility Bond Fund")
The One Group(R) Intermediate Bond Fund (the "Intermediate Bond Fund")
The One Group(R) Government Bond Fund (the "Government Bond Fund")
The One Group(R) Government ARM Fund (the "Government ARM Fund")
The One Group(R) MUNICIPAL INCOME Fund (the "MUNICIPAL INCOME Fund")
The One Group(R) Intermediate Tax-Free Bond Fund
(the "Intermediate Tax-Free Bond Fund")
The One Group(R) Ohio Municipal Bond Fund (the "Ohio Municipal Bond Fund")
The One Group(R) Texas Tax-Free Bond Fund (the "Texas Tax-Free Bond Fund")
The One Group(R) West Virginia Tax-Free Bond Fund
(the "West Virginia Tax-Free Bond Fund")
The One Group(R) Kentucky Municipal Bond Fund
(the "Kentucky Municipal Bond Fund")
The One Group(R) Arizona Tax-Free Bond Fund (the "Arizona Tax-Free Bond Fund")
The One Group(R) Treasury Money Market Fund (the "Treasury Money Market Fund")
The One Group(R) Treasury Only Money Market Fund
(the "Treasury Only Money Market Fund")
The One Group(R) Government Money Market Fund
(the "Government Money Market Fund")
The One Group(R) Tax Exempt Money Market Fund
(the "Tax Exempt Money Market Fund")
The One Group(R) Institutional Prime Money Market Fund
(the "Institutional Prime Money Market Fund")
THE ONE GROUP(R) LOUISIANA MUNICIPAL BOND FUND
(THE "LOUISIANA MUNICIPAL BOND FUND")
THE ONE GROUP(R) VALUE GROWTH FUND (THE "VALUE GROWTH FUND")
THE ONE GROUP(R) GULF SOUTH GROWTH FUND (THE "GULF SOUTH GROWTH FUND")
[____________________]
This Statement of Additional Information is not a Prospectus, but should be read
in conjunction with the Prospectuses for the U.S. Treasury Securities Money
Market Fund, the Prime Money Market Fund, the Municipal Money Market Fund, the
Income Equity Fund, the Disciplined Value Fund, the Growth
OPPORTUNITIES Fund, the International Equity Index Fund, the Equity
Index Fund, the Large Company Value Fund, the Large Company Growth Fund, the
Income Bond Fund, the Limited Volatility Bond Fund, the Intermediate Bond Fund,
the Intermediate Tax-Free Bond Fund, the Ohio Municipal Bond Fund, the
Government Bond Fund, the Government ARM Fund, the Asset Allocation Fund, the
MUNICIPAL INCOME Fund, the Texas Tax-Free Bond Fund, the West Virginia
Tax-Free Bond Fund, the Kentucky Municipal Bond Fund, the Arizona Tax-Free Bond
Fund and the Ohio Municipal Money Market Fund, the Treasury Money Market Fund,
the Treasury Only Money Market Fund, the Government Money Market Fund, the Tax
Exempt Money Market Fund , the Institutional Prime Money Market
Fund, THE LOUISIANA MUNICIPAL BOND FUND, THE VALUE GROWTH FUND AND THE GULF
SOUTH GROWTH FUND . The Prospectuses for each of The One Group(R) Funds are
dated November 1, 1995 (EXCEPT THE PROSPECTUSES FOR THE LOUISIANA MUNICIPAL
BOND FUND, THE VALUE GROWTH FUND AND THE GULF SOUTH GROWTH FUND WHICH
ARE DATED [____________________]. This Statement of Additional Information
is incorporated in its entirety into each of those Prospectuses. A copy of each
of the Prospectuses for the Trust may be obtained by writing to the Distributor
for the Trust, The One GROUP Services Company, 3435 Stelzer Road,
Columbus, Ohio 43219, or by telephoning toll free (800)-480-4111.
- --------------------------------------------------------------------------------
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TABLE OF CONTENTS
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THE TRUST. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
INVESTMENT OBJECTIVES AND POLICIES . . . . . . . . . . . . . . . . . . . . . 2
Additional Information on Fund Instruments . . . . . . . . . . . . . . 2
High Quality Investments With Regard to the Money Market and
Institutional Money Market Funds . . . . . . . . . . . . . . 2
Bank Obligations . . . . . . . . . . . . . . . . . . . . . . . . . 4
Commercial Paper . . . . . . . . . . . . . . . . . . . . . . . . . 5
Repurchase Agreements . . . . . . . . . . . . . . . . . . . . . . 5
Reverse Repurchase Agreements . . . . . . . . . . . . . . . . . . 6
Government Securities . . . . . . . . . . . . . . . . . . . . . . 7
Futures and Options Trading . . . . . . . . . . . . . . . . . . . 7
Futures Contracts . . . . . . . . . . . . . . . . . . . . . . 7
Restrictions on the Use of Futures Contracts . . . . . . . . 9
Risk Factors in Futures Transactions . . . . . . . . . . . . 10
Options Contracts . . . . . . . . . . . . . . . . . . . . . . 11
Covered Calls. . . . . . . . . . . . . . . . . . . . . . . . . . . 12
Puts . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14
Purchasing Call Options . . . . . . . . . . . . . . . . . . . . . 15
Risk Factors in Options Transactions . . . . . . . . . . . . . . . 15
Mortgage-related Securities . . . . . . . . . . . . . . . . . . . 16
Yield, Market Value and Risk Considerations of Mortgage-Backed
Securities . . . . . . . . . . . . . . . . . . . . . . . . . 18
Foreign Investments . . . . . . . . . . . . . . . . . . . . . . . 19
PERCS* . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20
When-Issued Securities . . . . . . . . . . . . . . . . . . . . . . 20
Securities Lending . . . . . . . . . . . . . . . . . . . . . . . . 21
Index Investing by the Equity Index and International
Equity Index Funds . . . . . . . . . . . . . . . . . . . . . 21
Foreign Currency Transactions. . . . . . . . . . . . . . . . . . . 23
Transaction Hedging . . . . . . . . . . . . . . . . . . . . . 23
Position Hedging. . . . . . . . . . . . . . . . . . . . . . . 24
Currency Forward and Futures Contracts. . . . . . . . . . . . 25
General Characteristics of Currency Futures Contracts. . . . . . . 26
Foreign Currency Options. . . . . . . . . . . . . . . . . . . 27
Foreign Currency Conversion . . . . . . . . . . . . . . . . . 28
Variable and Floating Rate Notes . . . . . . . . . . . . . . . . . 28
Municipal Securities . . . . . . . . . . . . . . . . . . . . . . 30
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Demand Features . . . . . . . . . . . . . . . . . . . . . . . . . 33
Swaps, Caps and Floors . . . . . . . . . . . . . . . . . . . . . . 34
Structured Instruments . . . . . . . . . . . . . . . . . . . . . . 36
New Financial Products . . . . . . . . . . . . . . . . . . . . . . 37
Restricted Securities . . . . . . . . . . . . . . . . . . . . . . 37
Ohio Municipal Securities. . . . . . . . . . . . . . . . . . . . . 38
Risk Factors Regarding Investments in
Ohio Municipal Securities . . . . . . . . . . . . . . . 38
West Virginia Municipal Securities . . . . . . . . . . . . . . . . 39
Risk Factors Regarding Investments in
West Virginia Municipal Securities . . . . . . . . . . . 39
Kentucky Municipal Securities. . . . . . . . . . . . . . . . . . . 40
Risk Factors Regarding Investments in
Kentucky Municipal Securities . . . . . . . . . . . . . 41
Texas Municipal Securities . . . . . . . . . . . . . . . . . . . . 41
Risk Factors Regarding Investments in
Texas Municipal Securities . . . . . . . . . . . . . . . 41
Arizona Municipal Securities . . . . . . . . . . . . . . . . . . . 41
Risk Factors Regarding Investments in
Arizona Municipal Securities . . . . . . . . . . . . . . 42
Louisiana Municipal Securities . . . . . . . . . . . . . . . . . . 42
Risk Factors Regarding Investments in
Louisiana Municipal Securities . . . . . . . . . . . . . 42
Investment Restrictions . . . . . . . . . . . . . . . . . . . . . . . . 45
Portfolio Turnover. . . . . . . . . . . . . . . . . . . . . . . . . . . 49
Additional Tax Information Concerning All Funds of the Trust . . . . . 51
Additional Tax Information Concerning the Tax-Free Funds . . . . . . . 54
Additional Tax Information Concerning the
International Equity Index Fund . . . . . . . . . . . . . . . . . 55
Foreign Tax Credit. . . . . . . . . . . . . . . . . . . . . . . . . . . 56
VALUATION. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 57
Valuation of the Money Market and Institutional
Money Market Funds . . . . . . . . . . . . . . . . . . . . . . . . 57
Valuation of the Equity Funds, the Bond Funds and the
Municipal Bond Funds . . . . . . . . . . . . . . . . . . . . . . . 57
ADDITIONAL INFORMATION REGARDING THE CALCULATION OF
PER SHARE NET ASSET VALUE . . . . . . . . . . . . . . . . . . . . . . . 58
ADDITIONAL PURCHASE AND REDEMPTION INFORMATION . . . . . . . . . . . . . . . 58
MANAGEMENT OF THE TRUST . . . . . . . . . . . . . . . . . . . . . . . . . . 62
Trustees & Officers . . . . . . . . . . . . . . . . . . . . . . . . . . 62
Investment Adviser . . . . . . . . . . . . . . . . . . . . . . . . . . 65
Banc One Investment Advisors Corporation . . . . . . . . . . . . . 65
Boston International Advisors, Inc.. . . . . . . . . . . . . . . . 67
Glass-Steagall Act . . . . . . . . . . . . . . . . . . . . . . . . . . 68
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Portfolio Transactions. . . . . . . . . . . . . . . . . . . . . . . . . 69
Administrator . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 72
Expenses. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 76
Distributor . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 76
Distribution Plan . . . . . . . . . . . . . . . . . . . . . . . . . . . 77
Custodian and Transfer Agent. . . . . . . . . . . . . . . . . . . . . . 79
Experts . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 80
ADDITIONAL INFORMATION . . . . . . . . . . . . . . . . . . . . . . . . . . . 81
Description of Shares . . . . . . . . . . . . . . . . . . . . . . . . . 81
Shareholder and Trustee Liability . . . . . . . . . . . . . . . . . . . 82
Calculation of Performance Data . . . . . . . . . . . . . . . . . . . . 83
Miscellaneous . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 87
APPENDIX . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 272
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<PAGE>
THE TRUST
The One Group (R) (the "Trust") is an open-end management investment
company. The Trust consists of THIRTY-TWO series of units of beneficial
interest ("Shares") each representing interests in one of THIRTY-TWO separate
investment portfolios ("Funds", formerly "Portfolios"), i.e., the U.S. Treasury
Securities Money Market Fund (formerly the U.S. Treasury Money Market
Portfolio), the Prime Money Market Fund, the Municipal Money Market Fund
(formerly the Tax-Free Obligations Portfolio) and the Ohio Municipal Money
Market Fund (these four Funds being collectively referred to as the "Money
Market Funds"), the Income Equity Fund, the Disciplined Value Fund, THE GROWTH
OPPORTUNITIES FUND (FORMERLY the Small Company Growth Fund AND the Growth
Equity Portfolio), the Equity Index Fund, the International Equity Index Fund,
the Large Company Value Fund (formerly, the Quantitative Equity Portfolio), the
Large Company Growth Fund, the Asset Allocation Fund (formerly, the Flexible
Balanced Portfolio), THE VALUE GROWTH FUND AND THE GULF SOUTH GROWTH FUND
(THESE TEN Funds being collectively referred to as the "Equity Funds"), the
Income Bond Fund (formerly the Income Portfolio), the Limited Volatility Bond
Fund, the Intermediate Bond Fund, the Government Bond Fund, and the Government
ARM Fund (these five Funds being collectively referred to as the "Bond Funds"),
the Intermediate Tax-Free Bond Fund, THE MUNICIPAL INCOME FUND (FORMERLY the
Tax-Free Bond Fund), the Ohio Municipal Bond Fund, the Texas Tax-Free Bond Fund,
the West Virginia Tax-Free Bond Fund, the Kentucky Municipal Bond Fund, the
Arizona Tax-Free Bond Fund, AND THE LOUISIANA MUNICIPAL BOND FUND (THESE EIGHT
Funds being collectively referred to as the "Municipal Bond Funds"), the
Treasury Money Market Fund, the Treasury Only Money Market Fund, the Government
Money Market Fund, the Tax Exempt Money Market Fund, and the Institutional Prime
Money Market Fund (these five Funds being collectively referred to as the
"Institutional Money Market Funds"). The Municipal Money Market Fund, the Ohio
Municipal Money Market Fund, the Ohio Municipal Bond Fund, the Intermediate
Tax-Free Bond Fund, the MUNICIPAL INCOME Fund, the Texas Tax-Free Bond Fund,
the West Virginia Tax-Free Bond Fund, the Kentucky Municipal Bond Fund, the
Arizona Tax-Free Bond Fund , the Tax Exempt Money Market FUND AND THE LOUISIANA
MUNICIPAL BOND Fund are sometimes referred to herein as the "Tax-Free Funds."
All of the Trust's Funds are diversified, as defined under the
Investment Company Act of 1940, as amended (the "1940 Act"), with the exception
of the Ohio Municipal Bond Fund, the Kentucky Municipal Bond Fund, the West
Virginia Tax-Free Bond Fund, the Texas Tax-Free Bond Fund, the Arizona Tax-Free
Bond Fund , the Ohio Municipal Money Market Fund, THE LOUISIANA MUNICIPAL BOND
FUND AND THE GULF SOUTH GROWTH FUND, which are non-diversified. The shares in
the Funds of the Trust (other than the Institutional Money Market Funds, the
U.S. Treasury Securities Money Market Fund and the Prime Money Market Fund) are
offered in three separate classes: Fiduciary Class Shares, Class A Shares and
Class B Shares. The U.S. Treasury Securities Money Market Fund and the Prime
Money
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Market Fund offer Class A Shares, Fiduciary Class Shares and Service Class
Shares. Much of the information contained herein expands upon subjects discussed
in the Prospectuses for the respective Funds. No investment in a particular
class of Shares of a Fund should be made without first reading that Fund's
Prospectus.
INVESTMENT OBJECTIVES AND POLICIES
The following policies supplement each Fund's investment objective and
policies as set forth in the respective Prospectus for that Fund.
ADDITIONAL INFORMATION ON FUND INSTRUMENTS
High Quality Investments With Regard to the Money Market and
Institutional Money Market Funds
As noted in the Prospectuses for the Money Market and Institutional
Money Market Funds, each such Fund may invest only in obligations determined by
the Fund's investment adviser ("Adviser") to present minimal credit risks under
guidelines adopted by the Trust's Board of Trustees.
The Treasury Money Market Fund and the Treasury Only Money Market Fund
may only invest in U.S. Treasury bills, notes and other U.S. Treasury
obligations issued or guaranteed by the U.S. government. Some of the securities
held by the Treasury Money Market Fund may be subject to repurchase agreements.
The Government Money Market Fund invests exclusively in securities
issued or guaranteed by the U.S. Government or its agencies or
instrumentalities, some of which may be subject to repurchase agreements.
The Tax Exempt Money Market Fund may invest only in obligations which,
at the time of purchase, (i) possess the highest short-term ratings from a
nationally recognized statistical rating organization (an "NRSRO") in the case
of single-rated securities; or (ii) possess, in the case of multiple-rated
securities, the highest short-term ratings by at least two NRSROs; or (iii) do
not possess a rating (i.e., are unrated) but are determined by the
Adviser or the Sub-Adviser to be of comparable quality to the rated instruments
eligible for purchase by the Fund under guidelines adopted by the Board of
Trustees (collectively, "First Tier Securities"). Some of the securities of the
Tax Exempt Money Market Fund may be subject to repurchase agreements.
With regard to the Money Market Funds and the Institutional Money
Market Funds other than the Tax Exempt Money Market Fund, investments will be
limited to those obligations which, at the time of purchase, (i) possess one of
the two highest short-term ratings from an NRSRO in the case of single-rated
securities; or (ii) possess, in the case of multiple-
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rated securities, one of the two highest short-term ratings by at least two
NRSROs or (iii) do not possess a rating (i.e., are unrated) but are
determined by the Adviser or the Sub-Adviser to be of comparable quality to the
rated instruments eligible for purchase by the Trust under guidelines adopted by
the Board of Trustees (collectively, "Eligible Securities"). A security that has
not received a rating will be deemed to possess the rating assigned to an
outstanding class of the issuer's short-term debt obligations if determined by
the Adviser or the Sub-Adviser to be comparable in priority and security to the
obligation selected for purchase by the Trust.
A security subject to a tender or demand feature will be considered an
Eligible Security only if both the demand feature and the underlying security
possess a high quality rating or, if such do not possess a rating, are
determined by the Adviser or the Sub-Adviser to be of comparable quality;
provided, however, that where the demand feature would be readily exercisable in
the event of a default in payment of principal or interest on the underlying
security, the obligation may be acquired based on the rating possessed by the
demand feature or, if the demand feature does not possess a rating, a
determination of comparable quality by the Adviser or the Sub-Adviser. A
security which at the time of issuance had a maturity exceeding 397 days but, at
the time of purchase, has a remaining maturity of 397 days or less, is not
considered an Eligible Security if it does not possess a high quality rating and
the long-term rating, if any, is not within the two highest rating categories.
Eligible Securities include First-Tier Securities and Second-Tier
Securities. First-Tier Securities include those that possess a rating in the
highest category, in the case of a single-rated security, or at least two
ratings in the highest rating category, in the case of multiple-rated
securities, or, if the securities do not possess a rating, are determined to be
of comparable quality by the Adviser or the Sub-Adviser pursuant to the
guidelines adopted by the Board of Trustees. Second-Tier Securities are all
other Eligible Securities.
Each Money Market and Institutional Money Market Fund other than the
Ohio Municipal Money Market, Municipal Money Market and Tax Exempt Money Market
Funds will not invest more than 5% of its total assets in the First Tier
Securities of any one issuer. In addition, each Fund other than the Municipal
Money Market Fund, the Ohio Municipal Money Market Fund, and the Tax Exempt
Money Market Fund may not invest more than 5% of its total assets in Second Tier
Securities, with investment in the Second Tier Securities of any one issuer
further limited to the greater of 1% of the Fund's total assets or $1.0 million.
If a percentage limitation is satisfied at the time of purchase, a later
increase in such percentage resulting from a change in the Fund's net asset
value or a subsequent change in a security's qualification as a First Tier or
Second Tier Security will not constitute a violation of the limitation. In
addition, there is no limit on the percentage of a Fund's assets that may be
invested in obligations issued or guaranteed by the U.S. government, its
agencies, or instrumentalities and, with respect to each Money Market Fund and
each Institutional Money Market Fund other than the Treasury Only Money Market
Fund, repurchase agreements fully collateralized by such obligations.
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Under the guidelines adopted by the Trust's Board of Trustees and in
accordance with Rule 2a-7 under the 1940 Act, the Adviser may be required to
promptly dispose of an obligation held in a Fund's portfolio in the event of
certain developments that indicate a diminishment of the instrument's credit
quality, such as where an NRSRO downgrades an obligation below the second
highest rating category, or in the event of a default relating to the financial
condition of the issuer.
The Appendix to this Statement of Additional Information identifies
each NRSRO which may be utilized by the Adviser with regard to portfolio
investments for the Funds and provides a description of relevant ratings
assigned by each such NRSRO. A rating by an NRSRO may be utilized only where the
NRSRO is neither controlling, controlled by, or under common control with the
issuer of, or any issuer, guarantor, or provider of credit support for, the
instrument.
Bank Obligations
Each Fund except the U.S. Treasury Securities Money Market Fund, the
International Equity Index Fund, the Treasury Money Market Fund, the Treasury
Only Money Market Fund, and the Government Money Market Fund may invest in bank
obligations such as bankers' acceptances, certificates of deposit, and demand
and time deposits. The International Equity Index Fund may invest in bank
obligations such as certificates of deposit and demand and time deposits.
Bankers' acceptances are negotiable drafts or bills of exchange
typically drawn by an importer or exporter to pay for specific merchandise,
which are "accepted" by a bank, meaning, in effect, that the bank
unconditionally agrees to pay the face value of the instrument on maturity.
Bankers' acceptances invested in by the Funds will be those guaranteed by
domestic and foreign banks having, at the time of investment, total assets in
excess of $1 billion (AS of the date of their most recently published
financial statements).
Certificates of deposit are negotiable certificates issued against
funds deposited in a commercial bank or a savings and loan association for a
definite period of time and earning a specified return. Certificates of deposit
will be those of domestic and foreign branches of U.S. commercial banks which
are members of the Federal Reserve System or the deposits of which are insured
by the Federal Deposit Insurance Corporation and in certificates of deposit of
domestic savings and loan associations the deposits of which are insured by the
Federal Deposit Insurance Corporation if, at the time of purchase, such
institutions have total assets in excess of $1 billion (as of the date of their
most recently published financial statements). Certificates of deposit may also
include those issued by foreign banks outside the United States with total
assets at the time of purchase in excess of the equivalent of $1 billion. The
Funds may also invest in Eurodollar certificates of deposit, which are U.S.
dollar-denominated certificates of deposit issued by branches of foreign and
domestic banks located outside the
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United States, and Yankee certificates of deposit, which are certificates of
deposit issued by a U.S. branch of a foreign bank denominated in U.S. dollars
and held in the United States. The International Equity Index Fund may also
invest in obligations (including banker's acceptances and certificates of
deposit) denominated in foreign currencies (see "Foreign Investments" herein).
Time deposits are interest-bearing non-negotiable deposits at a bank or
a savings and loan association that have a specific maturity date. Demand
deposits are funds deposited in a commercial bank or a savings and loan
association which, without prior notice to the bank, may be withdrawn generally
by negotiable draft. Time and demand deposits will be maintained only at banks
or savings and loan associations from which a Fund could purchase certificates
of deposit.
Commercial Paper
Commercial paper consists of unsecured promissory notes issued by
corporations. Except as noted below with respect to variable amount master
demand notes, issues of commercial paper normally have maturities of less than
nine months and fixed rates of return.
The Limited Volatility Bond Fund may purchase commercial paper
consisting of issues rated at the time of purchase in the highest rating
category by at least one NRSRO (such as A-1 by Standard & Poor's Corporation
("S&P"), P-1 by Moody's Investor Service, Inc. ("Moody's") or F-1 by Fitch
Investors Services ("Fitch")) or if unrated, determined by the Adviser to be of
comparable quality. The Asset Allocation Fund, the Equity Funds other than the
International Equity Index Fund, the Municipal Bond Funds, the Income Bond Fund,
the Intermediate Bond Fund, the Government Bond Fund and the Government ARM Fund
may purchase commercial paper consisting of issues rated at the time of purchase
in the highest or second highest rating category by at least one NRSRO (such as
A-2 or better by S&P, P-2 or better by Moody's or F-2 or better by Fitch) or if
unrated, determined by the Adviser or Investment Sub-Adviser ("Sub-Adviser") to
be of comparable quality.
Repurchase Agreements
Securities held by each Fund other than the Treasury Only Money Market
Fund may be subject to repurchase agreements. Under the terms of a repurchase
agreement, a Fund would acquire securities from member banks of the Federal
Deposit Insurance Corporation (or in the case of the International Equity Index
Fund, such banks or foreign banks) with total assets in excess of $1 billion (or
in the case of the International Equity Index Fund, the equivalent of $1
billion) and registered broker-dealers (or in the case of the International
Equity Index Fund, broker-dealers which may or may not be registered) which the
Fund's Adviser deems creditworthy under guidelines approved by the Board of
Trustees, subject to the seller's agreement to repurchase such securities at a
mutually agreed-upon date and price. The repurchase price would generally equal
the price paid by the Fund plus interest negotiated on
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<PAGE>
the basis of current short-term rates, which may be more or less than the rate
on the underlying portfolio securities. The seller under a repurchase agreement
will be required to maintain the value of collateral held pursuant to the
agreement at not less than the repurchase price (including accrued interest). If
the seller were to default on its repurchase obligation or become insolvent, the
Fund holding such obligation would suffer a loss to the extent that the proceeds
from a sale of the underlying portfolio securities were less than the repurchase
price under the agreement, or to the extent that the disposition of such
securities by the Fund were delayed pending court action. Additionally, there is
no controlling legal precedent under U.S. law and there may be no controlling
legal precedents under the laws of certain foreign jurisdictions confirming that
a Fund would be entitled, as against a claim by such seller or its receiver or
trustee in bankruptcy, to retain the underlying securities, although (with
respect to repurchase agreements subject to U.S. law) the Board of Trustees of
the Trust believes that, under the regular procedures normally in effect for
custody of a Fund's securities subject to repurchase agreements and under
federal laws, a court of competent jurisdiction would rule in favor of the Trust
if presented with the question. Securities subject to repurchase agreements will
be held by the Trust's custodian or another qualified custodian or in the
Federal Reserve/Treasury book-entry system. Although there is no current
intention to do so, the International Equity Index Fund reserves the right in
the future to enter into repurchase agreements. Repurchase agreements are
considered by the Securities and Exchange Commission to be loans by a Fund under
the 1940 Act.
Reverse Repurchase Agreements
Each of the Funds other than the Treasury Only Money Market Fund and
Ohio Municipal Money Market Fund may borrow funds for temporary purposes by
entering into reverse repurchase agreements, although the International Equity
Index Fund and the Government ARM Fund have no current intention to do so.
Pursuant to such agreements, a Fund would sell portfolio securities to financial
institutions such as banks and broker-dealers, and agree to repurchase them at a
mutually agreed-upon date and price. A Fund would enter into reverse repurchase
agreements only to avoid otherwise selling securities during unfavorable market
conditions to meet redemptions. At the time a Fund entered into a reverse
repurchase agreement, it would place in a segregated custodial account assets,
such as liquid high grade debt securities consistent with the Fund's investment
restrictions and having a value equal to the repurchase price (including accrued
interest), and would subsequently monitor the account to ensure that such
equivalent value was maintained. Reverse repurchase agreements involve the risk
that the market value of the securities sold by a Fund may decline below the
price at which the Fund is obligated to repurchase the securities. Reverse
repurchase agreements are considered by the Securities and Exchange Commission
to be borrowings by a Fund under the 1940 Act.
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<PAGE>
Government Securities
With the exception of the U.S. Treasury Securities Money Market Fund,
the Treasury Money Market Fund and the Treasury Only Money Market Fund, which
will invest only in obligations issued or guaranteed by the U.S. Treasury, each
of the Funds may invest in obligations issued or guaranteed by agencies and
instrumentalities of the U.S. government. Obligations of certain agencies and
instrumentalities of the U.S. government are supported by the full faith and
credit of the U.S. Treasury; others are supported by the right of the issuer to
borrow from the Treasury; others are supported by the discretionary authority of
the U.S. government to purchase the agency's obligations; and still others are
supported only by the credit of the instrumentality. No assurance can be given
that the U.S. government would provide financial support to U.S.
government-sponsored agencies or instrumentalities if it is not obligated to do
so by law. A Fund will invest in the obligations of such agencies or
instrumentalities only when its Adviser or Sub-Adviser believes that the credit
risk with respect thereto is minimal. For information on mortgage-related
securities issued by certain agencies or instrumentalities of the U.S.
government, see "Investment Objectives and Policies--Mortgage-related
Securities" in this Statement of Additional Information.
Futures and Options Trading
Futures Contracts. The Equity Funds and the Bond Funds may enter into futures
contracts, options, options on futures contracts and stock index futures
contracts and options thereon for risk management and hedging purposes. Futures
contracts provide for the future sale by one party and purchase by another party
of a specified amount of a specific security, class of securities, or an index
at a specified future time and at a specified price. A stock index futures
contract is a bilateral agreement pursuant to which two parties agree to take or
make delivery of an amount of cash equal to a specified dollar amount times the
difference between the stock index value at the close of trading of the
contracts and the price at which the futures contract is originally struck.
Futures contracts which are standardized as to maturity date and underlying
financial instrument are traded on national futures exchanges. Futures exchanges
and trading are regulated under the Commodity Exchange Act by the Commodity
Futures Trading Commission ("CFTC"), a U.S. government agency.
Although futures contracts by their terms call for actual delivery and
acceptance of the underlying securities, in most cases the contracts are closed
out before the settlement date without the making or taking of delivery. Closing
out an open futures position is done by taking an opposite position ("buying" a
contract which has previously been "sold," or "selling" a contract previously
purchased) in an identical contract to terminate the position. A futures
contract on a securities index is an agreement obligating either party to pay,
and entitling the other party to receive, while the contract is outstanding,
cash payments based on the level of a specified securities index. The
acquisition of put and call options on futures contracts will, respectively,
give a Fund the right (but not the obligation), for a specified price, to sell
or to
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purchase the underlying futures contract, upon exercise of the option, at any
time during the option period. Brokerage commissions are incurred when a futures
contract is bought or sold.
Futures traders are required to make a good faith margin deposit in
cash or government securities with a broker or custodian to initiate and
maintain open positions in futures contracts. A margin deposit is intended to
assure completion of the contract (delivery or acceptance of the underlying
security) if it is not terminated prior to the specified delivery date. Minimal
initial margin requirements are established by the futures exchange and may be
changed. Brokers may establish deposit requirements which are higher than the
exchange minimums. Initial margin deposits on futures contracts are customarily
set at levels much lower than the prices at which the underlying securities are
purchased and sold, typically ranging upward from less than 5% of the value of
the contract being traded.
After a futures contract position is opened, the value of the contract
is marked to market daily. If the futures contract price changes to the extent
that the margin on deposit does not satisfy margin requirements, payment of
additional "variation" margin will be required. Conversely, change in the
contract value may reduce the required margin, resulting in a repayment of
excess margin to the contract holder. Variation margin payments are made to and
from the futures broker for as long as the contract remains open. The Funds
expect to earn interest income on their margin deposits.
Traders in futures contracts may be broadly classified as either
"hedgers" or "speculators." Hedgers use the futures markets primarily to offset
unfavorable changes in the value of securities otherwise held for investment
purposes or expected to be acquired by them. Speculators are less inclined to
own the securities underlying the futures contracts which they trade, and use
futures contracts with the expectation of realizing profits from fluctuations in
the prices of underlying securities. The Funds intend to ENTER INTO FUTURES
CONTRACTS, OPTIONS ON FUTURES CONTRACTS, INDEX FUTURES AND OPTIONS THEREON THAT
ARE TRADED ON AN EXCHANGE REGULATED BY THE CFTC IF, TO THE EXTENT THAT SUCH
FUTURES AND OPTIONS ARE NOT FOR "bona fide hedging purposes" (AS DEFINED BY THE
CFTC), THE AGGREGATE INITIAL MARGIN AND PREMIUMS ON SUCH POSITIONS (EXCLUDING
THE AMOUNT BY WHICH OPTIONS ARE IN THE MONEY) DO NOT EXCEED 5% OF THE FUND'S
TOTAL ASSETS AT CURRENT VALUE.
When interest rates are expected to rise or market values of portfolio
securities are expected to fall, a Fund can seek through the sale of futures
contracts to offset a decline in the value of its portfolio securities. When
interest rates are expected to fall or market values are expected to rise, a
Fund, through the purchase of such contracts, can attempt to secure better rates
or prices for the Fund than might later be available in the market when it
effects anticipated purchases.
The Funds will only sell futures contracts to protect securities they
own against price declines or purchase contracts to protect against an increase
in the price of securities they
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intend to purchase. When futures contracts or options thereon are purchased to
protect against a price increase on securities intended to be purchased later,
the Funds expect that approximately 75% of their futures contract purchases will
be "completed," that is, equivalent amounts of related securities will have been
purchased or will be purchased by the Funds upon sale of open futures contracts.
Although techniques other than the sale and purchase of futures
contracts could be used to control the Funds' exposure to market fluctuations,
the use of futures contracts may be a more effective means of hedging this
exposure. While the Funds will incur commission expenses in both opening and
closing out futures positions, these costs are lower than transaction costs that
would be incurred in the purchase and sale of the underlying securities.
A Fund's ability to effectively utilize futures trading depends on
several factors. First, it is possible that there will not be a perfect price
correlation between the futures contracts and their underlying stock index.
Second, it is possible that a lack of liquidity for futures contracts could
exist in the secondary market, resulting in an inability to close a futures
position prior to its maturity date. Third, the purchase of a futures contract
involves the risk that a Fund could lose more than the original margin deposit
required to initiate a futures transaction.
Restrictions on the Use of Futures Contracts. None of the Funds will enter into
futures contract transactions for purposes other than bona fide hedging purposes
to the extent that, immediately thereafter, the sum of its initial margin
deposits AND PREMIUMS on open contracts exceeds 5% of the market value of the
respective Fund's total assets. In addition, none of the Equity Funds will enter
into futures contracts to the extent that the value of the futures contracts
held would exceed 25% of the respective Fund's total assets. Futures
transactions will be limited to the extent necessary to maintain each Fund's
qualification as a regulated investment company.
The Funds have undertaken to restrict their futures contract trading as
follows: first, the Funds will not engage in transactions in futures if, to the
extent that such futures are not for "bona fide hedging purposes", the aggregate
initial margins and premiums on such positions does not exceed 5% of the Fund's
total assets at current value; second, the Funds will not market themselves to
the public as commodity pools or otherwise as vehicles for trading in the
commodities futures or commodity options markets; third, the Funds will disclose
to all prospective Shareholders the purpose of and limitations on their
commodity futures trading; fourth, the Funds will submit to the CFTC special
calls for information. Accordingly, registration as a commodities pool operator
with the CFTC is not required.
In addition to the margin restrictions discussed above, transactions in
futures contracts may involve the segregation of funds pursuant to requirements
imposed by the Securities and Exchange Commission. Under those requirements,
where a Fund has a long position in a futures contract, it may be required to
establish a segregated account (not with a futures commission merchant or
broker) containing cash or certain liquid assets equal to the purchase
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price of the contract (less any margin on deposit). For a short position in
futures or forward contracts held by a Fund, those requirements may mandate the
establishment of a segregated account (not with a futures commission merchant or
broker) with cash or certain liquid assets that, when added to the amounts
deposited as margin, equal the market value of the instruments underlying the
futures contracts (but are not less than the price at which the short positions
were established). However, segregation of assets is not required if a Fund
"covers" a long position. For example, instead of segregating assets, a Fund,
when holding a long position in a futures contract, could purchase a put option
on the same futures contract with a strike price as high or higher than the
price of the contract held by the Fund. In addition, where a Fund takes short
positions, or engages in sales of call options, it need not segregate assets if
it "covers" these positions. For example, where a Fund holds a short position in
a futures contract, it may cover by owning the instruments underlying the
contract. The Funds may also cover such a position by holding a call option
permitting it to purchase the same futures contract at a price no higher than
the price at which the short position was established. Where a Fund sells a call
option on a futures contract, it may cover either by entering into a long
position in the same contract at a price no higher than the strike price of the
call option or by owning the instruments underlying the futures contract. A Fund
could also cover this position by holding a separate call option permitting it
to purchase the same futures contract at a price no higher than the strike price
of the call option sold by the Fund.
In addition, the extent to which a Fund may enter into transactions
involving futures contracts may be limited by the Internal Revenue Code's
requirements for qualification as a registered investment company and the
Trust's intention to qualify as such.
Risk Factors in Futures Transactions. Positions in futures contracts may be
closed out only on an exchange which provides a secondary market for such
futures. However, there can be no assurance that a liquid secondary market will
exist for any particular futures contract at any specific time. Thus, it may not
be possible to close a futures position. In the event of adverse price
movements, a Fund would continue to be required to make daily cash payments to
maintain the required margin. In such situations, if a Fund has insufficient
cash, it may have to sell portfolio securities to meet daily margin requirements
at a time when it may be disadvantageous to do so. In addition, a Fund may be
required to make delivery of the instruments underlying futures contracts it
holds. The inability to close options and futures positions also could have an
adverse impact on the ability to effectively hedge them. The Funds will minimize
the risk that they will be unable to close out a futures contract by only
entering into futures contracts which are traded on national futures exchanges
and for which there appears to be a liquid secondary market.
The risk of loss in trading futures contracts in some strategies can be
substantial, due both to the low margin deposits required, and the extremely
high degree of leverage involved in futures pricing. Because the deposit
requirements in the futures markets are less onerous than margin requirements in
the securities market, there may be increased participation by speculators in
the futures market which may also cause temporary price distortions. A
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relatively small price movement in a futures contract may result in immediate
and substantial loss (as well as gain) to the investor. For example, if at the
time of purchase, 10% of the value of the futures contract is deposited as
margin, a subsequent 10% decrease in the value of the futures contract would
result in a total loss of the margin deposit, before any deduction for the
transaction costs, if the account were then closed out. A 15% decrease would
result in a loss equal to 150% of the original margin deposit if the contract
were closed out. Thus, a purchase or sale of a futures contract may result in
losses in excess of the amount invested in the contract. However, because the
futures strategies engaged in by the Funds are for risk management and hedging
purposes, the respective Advisers and Sub-Advisers do not believe that the Funds
are subject to the risks of loss frequently associated with futures
transactions. Each Fund would presumably have sustained comparable losses if,
instead of the futures contract, it had invested in the underlying financial
instrument and sold it after the decline.
Utilization of futures transactions by a Fund does involve the risk of
imperfect or no correlation where the securities underlying futures contract
have different maturities than the portfolio securities being hedged. It is also
possible that a Fund could both lose money on futures contracts and also
experience a decline in value of its portfolio securities. There is also the
risk of loss by a Fund of margin deposits in the event of bankruptcy of a broker
with whom the Fund has an open position in a futures contract or related option.
Most futures exchanges limit the amount of fluctuation permitted in
futures contract prices during a single trading day. The daily limit establishes
the maximum amount that the price of a futures contract may vary either up or
down from the previous day's settlement price at the end of a trading session.
Once the daily limit has been reached in a particular type of contract, no
trades may be made on that day at a price beyond that limit. The daily limit
governs only price movement during a particular trading day and therefore does
not limit potential losses, because the limit may prevent the liquidation of
unfavorable positions. Futures contract prices have occasionally moved to the
daily limit for several consecutive trading days with little or no trading,
thereby preventing prompt liquidation of future positions and subjecting some
futures traders to substantial losses.
Options Contracts. The respective Adviser or Sub-Adviser of the Equity and Bond
Funds may use trading of options on securities or futures contracts for risk
management and hedging purposes. An option on a futures contract gives the
purchaser of the option the right (but not the obligation) to take a position at
a specified price (the "striking," "strike" or "exercise" price) in the
underlying futures contract or security. A "call" option gives the purchaser the
right to take a long position in the underlying futures contract or security,
and the purchaser of a "put" option acquires the right to take a short position
in the underlying futures contract or security. The purchase price of an option
is referred to as its "premium." The seller (or "writer") of an option is
obligated to take a futures or securities position at a specified price if the
option is exercised. In the case of a call option, the seller must stand ready
to take a short position in the underlying futures contract or security at the
strike price if the option is exercised. A seller of a put option, on the other
hand, stands ready to take a long position in the underlying
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futures contract or security at the strike price if the option is exercised. A
"naked" option refers to an option written by a party which does not possess the
underlying futures contract or security. A "covered" option refers to an option
written by a party which does possess the underlying position.
A call option on a futures contract or security is said to be
"in-the-money" if the strike price is below current market levels. Similarly, a
put option on a futures contract or security is said to be "out-of-the-money" if
the strike price is below current market levels.
Options have limited life spans, usually tied to the delivery or
settlement date of the underlying futures contract or security. Some options,
however, expire significantly in advance of such dates. An option that is
"out-of-the-money" and not offset by the time it expires becomes worthless. On
certain exchanges "in-the-money" options are automatically exercised on their
expiration date, but on others unexercised options simply become worthless after
their expiration date. Options usually trade at a premium (referred to as the
"time value" of the option) above their intrinsic value (the difference between
the market price for the underlying futures contract or equity security and the
strike price). As an option nears its expiration date, the market value and the
intrinsic value move into parity as the time value diminishes.
The Funds other than the International Equity Index Fund will enter
into such option transactions only when the options are available on an
exchange. There will be an active over-the-counter market for such options which
will establish their pricing and liquidity. Broker/Dealers with whom the Trust
will enter into such option transactions shall have a minimum net worth of
$20,000,000.
Increased market volatility generally increases the value of options by
increasing the probability of favorable market swings, putting outstanding
options "in-the-money." Although purchasing options is a limited risk trading
approach, significant losses can be incurred by doing so.
Covered Calls
Each Equity Fund, Bond Fund, and the Ohio Municipal Bond Fund may write
(sell) only "covered" call options and purchase options to close out options
previously written by the Fund. In the case of each of the Funds other than the
International Equity Index Fund, such options must be listed on a national
securities exchange. The Funds' purpose in writing covered call options is to
generate additional premium income. This premium income will serve to enhance a
Fund's total return and will reduce the effect of any price decline of the
security involved in the option. Although the International Equity Index Fund
has no current intention to write such options, it reserves the right to do so
from time to time when such activity will further its investment objective.
Covered call options will generally be written on
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securities which, in the opinion of a Fund's Adviser or Sub-Adviser, are not
expected to make any major price moves in the near future but which, over the
long term, are deemed to be attractive investments for the Fund.
A call option gives the holder (buyer) the "right to purchase" a
security at a specified price (the exercise price) at any time until a certain
date (the expiration date). So long as the obligation of the writer of a call
option continues, the writer may be assigned an exercise notice by the
broker-dealer through whom such option was sold, requiring the writer to deliver
the underlying security against payment of the exercise price. This obligation
terminates upon the expiration of the call option, or such earlier time at which
the writer effects a closing purchase transaction by repurchasing an option
identical to that previously sold. To secure the writer's obligation to deliver
the underlying security in the case of a call option, subject to the rules of
the Options Clearing Corporation, a writer is required to deposit in escrow the
underlying security or other assets in accordance with such rules. The Funds
will write only covered call options. This means that a Fund will only write a
call option on a security which a Fund already owns. (In order to comply with
the requirements of the securities laws in several states, a Fund will not write
a covered call option if, as a result, the aggregate market value of all
portfolio securities covering call options or subject to put options exceeds 25%
of the market value of the Fund's net assets.)
Fund securities on which call options may be written will be purchased
solely on the basis of investment considerations consistent with each Fund's
investment objectives. The writing of covered call options is a conservative
investment technique believed to involve relatively little risk (in contrast to
the writing of naked or uncovered options, which a Fund will not do), but
capable of enhancing the Fund's total return. When writing a covered call
option, a Fund, in return for the premium, gives up the opportunity for profit
from a price increase in the underlying security above the exercise price, but
conversely retains the risk of loss should the price of the security decline.
Unlike one who owns securities not subject to an option, a Fund has no control
over when it may be required to sell the underlying securities, since it may be
assigned an exercise notice at any time prior to the expiration of its
obligation as a writer. If a call option which a Fund has written expires, a
Fund will realize a gain in the amount of the premium; however, such gain may be
offset by a decline in the market value of the underlying security during the
option period. If the call option is exercised, a Fund will realize a gain or
loss from the sale of the underlying security. The security covering the call
will be maintained in a segregated account of the Fund's custodian. The Funds do
not consider a security covered by a call to be "pledged" as that term is used
in each Fund's policy which limits the pledging or mortgaging of its assets.
The premium received is the market value of an option. The premium each
Fund will receive from writing a call option will reflect, among other things,
the current market price of the underlying security, the relationship of the
exercise price to such market price, the historical price volatility of the
underlying security, and the length of the option period. Once the decision to
write a call option has been made, the Fund's Adviser or Sub-Adviser, in
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determining whether a particular call option should be written on a particular
security, will consider the reasonableness of the anticipated premium and the
likelihood that a liquid secondary market will exist for those options. The
premium received by a Fund for writing covered call options will be recorded as
a liability in the Trust's statement of assets and liabilities. This liability
will be adjusted daily to the option's current market value, which will be the
latest sale price at the time at which the net asset value per Share of the Fund
is computed (close of the New York Stock Exchange), or, in the absence of such
sale, the latest asked price. The liability will be extinguished upon expiration
of the option, the purchase of an identical option in the closing transaction,
or delivery of the underlying security upon the exercise of the option.
Closing transactions will be effected in order to realize a profit on
an outstanding call option, to prevent an underlying security from being called,
or to permit the sale of the underlying security. Furthermore, effecting a
closing transaction will permit a Fund to write another call option on the
underlying security with either a different exercise price or expiration date or
both. If a Fund desires to sell a particular security from its portfolio on
which it has written a call option it will seek to effect a closing transaction
prior to, or concurrently with, the sale of the security. There is, of course,
no assurance that a Fund will be able to effect such closing transactions at a
favorable price. If a Fund cannot enter into such a transaction, it may be
required to hold a security that it might otherwise have sold, in which case it
would continue to be at market risk on the security. This could result in higher
transaction costs. A Fund will pay transaction costs in connection with the
writing of options to close out previously written options. Such transaction
costs are normally higher than those applicable to purchases and sales of
portfolio securities.
Call options written by a Fund will normally have expiration dates of
less than nine months from the date written. The exercise price of the options
may be below, equal to, or above the current market values of the underlying
securities at the time the options are written. From time to time, a Fund may
purchase an underlying security for delivery in accordance with an exercise
notice of a call option assigned to it, rather than delivering such security
from its portfolio. In such cases, additional costs will be incurred.
A Fund will realize a profit or loss from a closing purchase
transaction if the cost of the transaction is less or more than the premium
received from the writing of the option. Because increases in the market price
of a call option will generally reflect increases in the market price of the
underlying security, any loss resulting from the repurchase of a call option is
likely to be offset in whole or in part by appreciation of the underlying
security owned by the Fund.
Puts
Each Bond and Equity Fund may purchase put options to protect its
portfolio holdings in an underlying security against a decline in market value.
Such hedge protection is provided
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during the life of the put option since the Fund, as holder of the put option,
is able to sell the underlying security at the put exercise price regardless of
any decline in the underlying security's market price. For a put option to be
profitable, the market price of the underlying security must decline
sufficiently below the exercise price to cover the premium and transaction
costs. By using put options in this manner, the Fund will reduce any profit it
might otherwise have realized from appreciation of the underlying security by
the premium paid for the put option and by transaction cost. To the extent any
Fund writes put options, all such options will be covered.
Purchasing Call Options
Each Bond and Equity Fund may purchase call options to hedge against an
increase in the price of securities that the Fund wants ultimately to buy. Such
hedge protection is provided during the life of the call option since the Fund,
as holder of the call option, is able to buy the underlying security at the
exercise price regardless of any increase in the underlying security's market
price. In order for a call option to be profitable, the market price of the
underlying security must rise sufficiently above the exercise price to cover the
premium and transaction costs. These costs will reduce any profit the Fund might
have realized had it bought the underlying security at the time it purchased the
call option.
Risk Factors in Options Transactions
The successful use of the Bond Funds and the Equity Funds' options
strategies depends on the ability of their Adviser or, where applicable,
Sub-Adviser to forecast interest rate and market movements correctly.
When it purchases an option, a Fund runs the risk that it will lose its
entire investment in the option in a relatively short period of time, unless the
Fund exercises the option or enters into a closing sale transaction with respect
to the option during the life of the option. If the price of the underlying
security does not rise (in the case of a call) or fall (in the case of a put) to
an extent sufficient to cover the option premium and transaction costs, a Fund
will lose part or all of its investment in the option. This contrasts with an
investment by a Fund in the underlying securities, since the Fund may continue
to hold its investment in those securities notwithstanding the lack of a change
in price of those securities.
The effective use of options also depends on a Fund's ability to
terminate option positions at times when its Adviser or, where applicable,
Sub-Adviser deems it desirable to do so. Although a Fund will take an option
position only if its Adviser or, where applicable, Sub-Adviser believes there is
a liquid secondary market for the option, there is no assurance that a Fund will
be able to effect closing transactions at any particular time or at an
acceptable price.
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If a secondary trading market in options were to become unavailable, a
Fund could no longer engage in closing transactions. Lack of investor interest
might adversely affect the liquidity of the market for particular options or
series of options. A marketplace may discontinue trading of a particular option
or options generally. In addition, a market could become temporarily unavailable
if unusual events, such as volume in excess of trading or clearing capability,
were to interrupt normal market operations. A marketplace may at times find it
necessary to impose restrictions on particular types of options transactions,
which may limit a Fund's ability to realize its profits or limit its losses.
Disruptions in the markets for the securities underlying options
purchased or sold by a Fund could result in losses on the options. If trading is
interrupted in an underlying security, the trading of options on that security
is normally halted as well. As a result, a Fund as purchaser or writer of an
option will be unable to close out its positions until option trading resumes,
and it may be faced with losses if trading in the security reopens at a
substantially different price. In addition, the Options Clearing Corporation
("OCC") or other options markets may impose exercise restrictions. If a
prohibition on exercise is imposed at the time when trading in the option has
also been halted, a Fund as purchaser or writer of an option will be locked into
its position until one of the two restrictions has been lifted. If a prohibition
on exercise remains in effect until an option owned by a Fund has expired, the
Fund could lose the entire value of its option.
Special risks are presented by internationally-traded options. Because
of time differences between the United States and the various foreign countries,
and because different holidays are observed in different countries, foreign
option markets may be open for trading during hours or on days when U.S. markets
are closed. As a result, option premiums may not reflect the current prices of
the underlying interest in the United States.
Mortgage-related Securities
Each of the Money Market Funds (other than the U.S. Treasury Securities
Money Market Fund), THE EQUITY FUNDS (OTHER THAN INTERNATIONAL EQUITY INDEX
FUND) the Bond Funds, the Municipal Bond Funds, the Institutional Money Market
Funds (other than the Treasury Money Market Fund and Treasury Only Money Market
Fund) and the Asset Allocation Fund may, consistent with its investment
objective and policies, invest in mortgage-related securities issued or
guaranteed by the U.S. government or its agencies or instrumentalities. All the
aforementioned Funds will limit their investment in such securities as disclosed
in the relevant Prospectus for each Fund.
Mortgage-related securities, for purposes of the Trust's Prospectuses
and this Statement of Additional Information, represent pools of mortgage loans
assembled for sale to investors by various governmental agencies such as the
Government National Mortgage Association and government-related organizations
such as the Federal National Mortgage Association and the Federal Home Loan
Mortgage Corporation, as well as by nongovernmental issuers such as
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commercial banks, savings and loan institutions, mortgage bankers, and private
mortgage insurance companies. Although certain mortgage-related securities are
guaranteed by a third party or otherwise similarly secured, the market value of
the security, which may fluctuate, is not so secured. If a Fund of the Trust
purchases a mortgage-related security at a premium, that portion may be lost if
there is a decline in the market value of the security whether resulting from
changes in interest rates or prepayments in the underlying mortgage collateral.
As with other interest-bearing securities, the prices of such securities are
inversely affected by changes in interest rates. However, though the value of a
mortgage-related security may decline when interest rates rise, the converse is
not necessarily true since in periods of declining interest rates the mortgages
underlying the securities are prone to prepayment. For this and other reasons, a
mortgage-related security's stated maturity may be shortened by unscheduled
prepayments on the underlying mortgages and, therefore, it is not possible to
predict accurately the security's return to the Trust's Funds. In addition,
regular payments received in respect of mortgage-related securities include both
interest and principal. No assurance can be given as to the return the Funds of
the Trust will received when these amounts are reinvested.
The Bond and Asset Allocation Funds may invest in mortgage-related
securities which are collateralized mortgage obligations structured on pools of
mortgage pass-through certificates or mortgage loans. Collateralized mortgage
obligations will be purchased only if rated in the three highest rating
categories by a nationally recognized rating organization such as Moody's or
S&P.
There are a number of important differences among the agencies and
instrumentalities of the U.S. government that issue mortgage-related securities
and among the securities that they issue. Mortgage-related securities issued by
the Government National Mortgage Association ("Ginnie Mae") include Ginnie Mae
Mortgage Pass-Through Certificates which are guaranteed as to the timely payment
of principal and interest by Ginnie Mae and such guarantee is backed by the full
faith and credit of the United States. Ginnie Mae is a wholly-owned U.S.
government corporation within the Department of Housing and Urban Development.
Ginnie Mae certificates also are supported by the authority of Ginnie Mae to
borrow funds from the U.S. Treasury to make payments under its guarantee.
Mortgage-related securities issued by the Federal National Mortgage Association
("Fannie Mae") include Fannie Mae Guaranteed Mortgage Pass-Through Certificates
which are solely the obligations of Fannie Mae and are not backed by or entitled
to the full faith and credit of the United States. Fannie Mae is a
government-sponsored organization owned entirely by private stockholders. Fannie
Mae Certificates are guaranteed as to timely payment of the principal and
interest by Fannie Mae. Mortgage-related securities issued by the Federal Home
Loan Mortgage Corporation ("Freddie Mac") include Freddie Mac Mortgage
Participation Certificates. Freddie Mac is a corporate instrumentality of the
United States, created pursuant to an Act of Congress, which is owned entirely
by Federal Home Loan Banks. Freddie Mac Certificates are not guaranteed by the
United States or by any Federal Home Loan Banks and do not constitute a debt or
obligation of the United States or of any Federal Home Loan Bank.
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Freddie Mac Certificates entitle the holder to timely payment of interest, which
is guaranteed by Freddie Mac. Freddie Mac guarantees either ultimate collection
or timely payment of all principal payments on the underlying mortgage loans.
When Freddie Mac does not guarantee timely payment of principal, Freddie Mac may
remit the amount due on account of its guarantee of ultimate payment of
principal at any time after default on an underlying mortgage, but in no event
later than one year after it becomes payable.
Yield, Market Value and Risk Considerations of Mortgage-Backed
Securities
The Bond Funds and the Asset Allocation Fund may invest in certain
Mortgage-Backed Securities, such as Interest Only Stripped Mortgage-Backed
Securities, that are extremely sensitive to changes in prepayments and interest
rates. Even though such securities have been guaranteed by an agency or
instrumentality of the U.S. government, under certain interest rate or
prepayment rate scenarios, the Funds may fail to fully recover their investment
in such securities.
The yield characteristics of Mortgage-Backed Securities differ from
those of traditional fixed income securities. The major differences typically
include more frequent interest and principal payments, usually monthly, and the
possibility that prepayments of principal may be made at any time. Prepayment
rates are influenced by changes in current interest rates and a variety of
economic, geographic, social and other factors and cannot be predicted with
certainty. As with fixed rate mortgage loans, adjustable rate mortgage loans may
be subject to a greater prepayment rate in a declining interest rate
environment. The yields to maturity of the Mortgage-Backed Securities in which
the Trust invests will be affected by the actual rate of payment (including
prepayments) of principal of the underlying mortgage loans. The mortgage loans
underlying such securities generally may be prepaid at any time without penalty.
In a fluctuating interest rate environment, a predominant factor affecting the
prepayment rate on a pool of mortgage loans is the difference between the
interest rates on the mortgage loans and prevailing mortgage loan interest rates
(giving consideration to the cost of any refinancing). In general, if mortgage
loan interest rates fall sufficiently below the interest rates on fixed rate
mortgage loans underlying mortgage pass-through securities, the rate of
prepayment would be expected to increase. Conversely, if mortgage loan interest
rates rise above the interest rates on the fixed rate mortgage loans underlying
the mortgage pass-through securities, the rate of prepayment may be expected to
decrease.
In general, changes in both prepayment rates and interest rates will
change the yield on Mortgage-Backed Securities. The rate of principal
prepayments with respect to adjustable rate mortgage loans ("ARMs") has
fluctuated in recent years. As is the case with fixed mortgage loans, ARMs may
be subject to a greater rate of principal prepayments in a declining interest
rate environment. For example, if prevailing interest rates fall significantly,
ARMs could be subject to higher prepayment rates than if prevailing interest
rates remain constant because the availability of fixed rate mortgage loans at
competitive interest rates may encourage mortgagors to refinance their ARMs to
"lock-in" a lower fixed interest rate. Conversely, if
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prevailing interest rates rise significantly, ARMs may prepay at lower rates
than if prevailing rates remain at or below those in effect at the time such
ARMs were originated. As with fixed rate mortgages, there can be no certainty as
to the rate of prepayments on the ARMs in either stable or changing interest
rate environments. In addition, there can be no certainty as to whether
increases in the principal balances of the ARMs due to the addition of deferred
interest may result in a default rate higher than that on ARMs that do not
provide for negative amortization. Other factors affecting prepayment of ARMs
include changes in mortgagors' housing needs, job transfers, unemployment,
mortgagors' net equity in the mortgage properties and servicing decisions.
Foreign Investments
The International Equity Index Fund will invest primarily in, and the
Prime Money Market Fund, the Institutional Prime Money Market Fund, the Asset
Allocation Fund, the remaining Equity Funds (other than the Equity Index Fund),
the Income Bond Fund, the Limited Volatility Bond Fund and the Intermediate Bond
Fund, subject to their respective investment objectives and policies, may also
invest in certain obligations or securities of foreign issuers. Possible
investments include equity securities of foreign entities, obligations of
foreign branches of U.S. banks and of foreign banks, including, without
limitation, European Certificates of Deposit, European Time Deposits, European
Banker's Acceptances, Canadian Time Deposits and Yankee Certificates of
Deposits, and investments in Canadian Commercial Paper, foreign securities and
Europaper (as those terms are defined in the relevant Prospectuses of the
Trust). Securities of foreign issuers may include sponsored and unsponsored
American Depository Receipts ("ADRs"). Sponsored ADRs are listed on the New York
Stock Exchange; unsponsored ADRs are not. Therefore, there may be less
information available about the issuers of unsponsored ADRs than the issuers of
sponsored ADRs. Unsponsored ADRs are restricted securities. These instruments
may subject a Fund to investment risks that differ in some respects from those
related to investments in obligations of U.S. domestic issuers. Such risks
include future adverse political and economic developments, the possible
imposition of withholding taxes on interest or other income, possible seizure,
nationalization or expropriation of foreign deposits, the possible establishment
of exchange controls or taxation at the source, greater fluctuations in value
due to changes in exchange rates, or the adoption of other foreign governmental
restrictions which might adversely affect the payment of principal and interest
on such obligations. Such investments may also entail higher custodial fees and
sales commissions than domestic investments. Foreign issuers of securities or
obligations are often subject to accounting treatment and engage in business
practices different from those respecting domestic issuers of similar securities
or obligations. Foreign branches of U.S. banks and foreign banks may be subject
to less stringent reserve requirements than those applicable to domestic
branches of U.S. banks. Investments in all types of foreign obligations or
securities will not exceed 25% of the net assets of the Asset Allocation Fund,
the Equity Funds (with the exception of the International Equity Index Fund) and
the Income Bond and Limited Volatility Bond Funds.
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By investing in foreign securities, the International Equity Index Fund
attempts to take advantage of differences between both economic trends and the
performance of securities markets in the various countries, regions and
geographic areas as prescribed by the Fund's investment objective and policies.
During certain periods the investment return on securities in some or all
countries may exceed the return on similar investments in the United States,
while at other times the investment return may be less than that on similar U.S.
securities. Shares of the International Equity Index Fund, when included in
appropriate amounts in a portfolio otherwise consisting of domestic securities,
will provide a source of increased diversification. The International Equity
Index Fund itself seeks increased diversification by combining securities from
various countries and geographic areas that offer different investment
opportunities and are affected by different economic trends. The international
investments of the International Equity Index Fund may reduce the effect that
events in any one country or geographic area will have on its investment
holdings. Of course, negative movement by one of a Fund's investments in one
foreign market represented in its portfolio may offset potential gains from the
Fund's investments in another country's markets.
PERCS*
The Equity FUNDS may invest in Preferred Equity Redemption Cumulative
Stock ("PERCS") which is a form of convertible preferred stock that actually has
more of an equity component than it does fixed income characteristics. These
instruments permit companies to raise capital via a surrogate for common equity.
PERCS are preferred stock which convert to common stock after a specified period
of time, usually three years, and are considered the equivalent of equity by the
ratings agencies. Issuers pay holders a substantially higher dividend yield than
that on the underlying common, and in exchange, the holder's appreciation is
capped, usually at about 30 percent. PERCS are callable at any time. The PERC is
mandatorily convertible into common stock, but is callable at any time at an
initial call price that reflects a substantial premium to the stock's issue
price. PERCS offer a higher dividend than that available on the common stock,
but in exchange the investors agree to the company placing a cap on the
potential price appreciation. The call price declines daily in an amount that
reflects the incremental dividend that holders enjoy. PERCS are listed on an
exchange where the common stock is listed.
When-Issued Securities
As discussed in the Prospectuses, each Fund, except the Treasury Money
Market Fund, may purchase securities on a "when-issued" basis. When a Fund
agrees to purchase securities, the Fund's custodian will set aside cash or
liquid portfolio securities equal to the amount of the commitment in a separate
account. Normally, the custodian will set aside portfolio securities
- ---------------------
*PERCS are a registered trademark of Morgan Stanley, which does not sponsor and
is in no way affiliated with The One Group(R).
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<PAGE>
to satisfy a purchase commitment. In such a case, a Fund may be required
subsequently to place additional assets in the separate account in order to
assure that the value of the account remains equal to the amount of the Fund's
commitment. It may be expected that a Fund's net assets will fluctuate to a
greater degree when it sets aside portfolio securities to cover such purchase
commitments than when it sets aside cash. No Fund intends to purchase
"when-issued" securities for speculative purposes but only in furtherance of its
investment objective. Because a Fund will set aside cash or liquid portfolio
securities to satisfy its purchase commitments in the manner described, the
Fund's liquidity and the ability of the Adviser and Sub-Adviser to manage the
Fund might, as described in the Prospectuses, be affected in the event its
commitments to purchase when-issued securities ever exceeded 40% of the value of
its assets.
When a Fund engages in "when-issued" transactions, it relies on the
seller to consummate the trade. Failure of the seller to do so may result in the
Fund's incurring a loss or missing the opportunity to obtain a price considered
to be advantageous.
Securities Lending
Each of the Funds may lend up to 33% of its portfolio securities to
broker-dealers, banks or institutional borrowers of securities. A Fund must
receive a minimum of 100% collateral in the form of cash, U.S. government
securities, Shares of an investment trust or Shares of an investment company or
any combination of such cash and securities. This collateral must be valued
daily and should the market value of the loaned securities increase, the
borrower must furnish additional collateral to the Fund. During the time
portfolio securities are on loan, the borrower will pay the Fund any dividends
or interest paid on such securities. Loans will be subject to termination by a
Fund or the borrower at any time and are therefore not considered to be illiquid
investments. While a Fund will not have the right to vote securities on loan, it
intends to terminate the loan and regain the right to vote if that is considered
important with respect to the investment. A Fund will only enter into loan
arrangements with broker-dealers, banks or other institutions which the Fund's
Adviser has determined are creditworthy under guidelines established by the
Trust's Board of Trustees and when, in the judgement of the Adviser, the
consideration that can be earned currently from such securities loans justifies
the attendant risk.
Index Investing by the Equity Index and International Equity Index
Funds
It is anticipated that the indexing approach that will be employed by
the Equity Index Fund will be an effective method of substantially duplicating
percentage changes in the S&P 500 Index (the "Index"). It is a reasonable
expectation that there will be a close correlation between the Fund's
performance and that of the Index in both rising and falling markets. The Fund
will attempt to achieve a correlation between the performance of its portfolio
and that of the Index of at least 0.95, without taking into account expenses. A
correlation of 1.00 would indicate perfect correlation, which would be achieved
when the Fund's net asset value,
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including the value of its dividend and capital gains distributions, increases
or decreases in exact proportion to changes in the Index. The Fund's ability to
correlate its performance with the Index, however, may be affected by, among
other things, changes in securities markets, the manner in which the Index is
calculated by Standard & Poor's Corporation ("S&P") and the timing of purchases
and redemptions. In the future, the Trustees of the Trust, subject to the
approval of Shareholders, may select another index if such a standard of
comparison is deemed to be more representative of the performance of common
stocks.
S&P chooses the stocks to be included in the Index largely on a
statistical basis. Inclusion of a stock in the Index in no way implies an
opinion by S&P as to its attractiveness as an investment. The Index is
determined, composed and calculated by S&P without regard to the Equity Index
Fund. S&P is neither a sponsor of, nor in any way affiliated with the Equity
Index Fund, and S&P makes no representation or warranty, expressed or implied on
the advisability of investing in the Equity Index Fund or as to the ability of
the Index to track general stock market performance, and S&P disclaims all
warranties of merchantability or fitness for a particular purpose or use with
respect to the Index or any data included therein. "Standard and Poor's 500" is
a service mark of S&P.
The weightings of stocks in the Index are based on each stock's
relative total market value, i.e., market price per share times the number of
Shares outstanding. Because of this weighting, approximately 50% of the Index is
currently composed of the 50 largest companies in the Index, and the Index
currently represents over 65% of the market value of all U.S. common stocks
listed on the New York Stock Exchange. Typically, companies included in the
Index are the largest and most dominant firms in their respective industries.
The Adviser generally selects stocks for the Equity Index Fund in the
order of their weightings in the Index beginning with the heaviest weighted
stocks. The percentage of the Equity Index Fund's assets to be invested in each
stock is approximately the same as the percentage it represents in the Index. No
attempt is made to manage the Equity Index Fund in the traditional sense using
economic, financial and market analysis. The Equity Index Fund is managed using
a computer program to determine which stocks are to be purchased and sold to
replicate the Index to the extent feasible. From time to time, administrative
adjustments may be made in the Fund because of changes in the composition of the
Index, but such changes should be infrequent.
It is anticipated that the indexing approach that will be employed by
the International Equity Index Fund will be an effective method of substantially
duplicating percentage changes in the GDP weighted MSCI EAFE Index (the
"International Index"). The Fund will attempt to achieve a correlation between
the performance of its portfolio and that of the International Index of at least
0.95, without taking into account expenses. It is a reasonable expectation that
there will be a close correlation between the Fund's performance and that of the
International Index in both rising and falling markets. A correlation of 1.00
would indicate perfect correlation, which would be achieved when the Fund's net
asset value, including the value of
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<PAGE>
its dividend and capital gains distributions, increases or decreases in exact
proportion to changes in the International Index. The Fund's ability to
correlate its performance with the International Index, however, may be affected
by, among other things, changes in securities markets, the manner in which the
International Index is calculated by Morgan Stanley International ("MSCI") and
the timing of purchases and redemptions. In the future, the Trustees of the
Trust, subject to the approval of Shareholders, may select another index if such
a standard of comparison is deemed to be more representative of the performance
of common stocks.
MSCI computes and publishes the International Index. MSCI also computes
the country weights which are established based on annual GDP data. Gross
Domestic Product is defined as a country's Gross National Product, or total
output of goods and services, adjusted by the following two factors: net labor
income (labor income of domestic residents working abroad less labor income of
foreigners working domestically) plus net interest income (interest income
earned from foreign investments less interest income earned from domestic
investments by foreigners). Country weights are thus established in proportion
to the size of their economies as measured by Gross Domestic Product, which
results in a more uniform distribution of capital across the EAFE markets than
if capitalization weights were used as the basis. The country weights within the
International Index are systematically rebalanced annually to the most recent
GDP weights.
MSCI chooses the stocks to be included in the International Index
largely on a statistical basis. Inclusion of a stock in the International Index
in no way implies an opinion by MSCI as to its attractiveness as an investment.
The International Index is determined, composed and calculated by MSCI without
regard to the International Equity Index Fund. MSCI is neither a sponsor of, nor
in any way affiliated with the International Equity Index Fund, and MSCI makes
no representation or warranty, expressed or implied on the advisability of
investing in the International Equity Index Fund or as to the ability of the
International Index to track general stock market performance, and MSCI
disclaims all warranties of merchantability or fitness for a particular purpose
or use with respect to the International Index or any data included therein.
"MSCI EAFE Index" is a service mark of MSCI.
Foreign Currency Transactions
The Adviser or Sub-Adviser of the International Equity Index Fund may,
if it so chooses, engage in Foreign Currency Transactions, as discussed below.
Transaction Hedging. When a Fund engages in transaction hedging, it enters into
foreign currency transactions with respect to specific receivables or payables
of the Fund generally arising in connection with the purchase or sale of its
portfolio securities. The International Equity Index Fund will engage in
transaction hedging when it desires to "lock in" the U.S. dollar price of a
security it has agreed to purchase or sell, or the U.S. dollar equivalent of a
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<PAGE>
dividend or interest payment in a foreign currency. By transaction hedging, the
International Equity Index Fund will attempt to protect itself against a
possible loss resulting from an adverse change in the relationship between the
U.S. dollar and the applicable foreign currency during the period between the
date on which the security is purchased or sold, or on which the dividend or
interest payment is declared, and the date on which such payments are made or
received.
The International Equity Index Fund may purchase or sell a foreign
currency on a spot (or cash) basis at the prevailing spot rate in connection
with the settlement of transactions in portfolio securities denominated in that
foreign currency. The Fund may also enter into contracts to purchase or sell
foreign currencies at a future date ("forward contracts"). Although there is no
current intention to do so, the International Equity Index Fund reserves the
right to purchase and sell foreign currency futures contracts traded in the
United States and subject to regulation by the CFTC.
For transaction hedging purposes the International Equity Index Fund
may also purchase U.S. exchange-listed call and put options on foreign currency
futures contracts and on foreign currencies. A put option on a futures contract
gives the Fund the right to assume a short position in the futures contract
until expiration of the option. A put option on currency gives the Fund the
right to sell a currency at an exercise price until the expiration of the
option. A call option on a futures contract gives the Fund the right to assume a
long position in the futures contract until the expiration of the option. A call
option on currency gives the Fund the right to purchase a currency at the
exercise price until the expiration of the option.
Position Hedging. When it engages in position hedging, the International Equity
Index Fund enters into foreign currency exchange transactions to protect against
a decline in the values of the foreign currencies in which its portfolios
securities are denominated (or an increase in the value of currency for
securities which the Adviser or Sub-Adviser expects to purchase, when the Fund
holds cash or short-term investments). In connection with the position hedging,
the Fund may purchase or sell foreign currency forward contracts or foreign
currency on a spot basis. The International Equity Index Fund may purchase U.S.
exchange-listed put or call options on foreign currency and foreign currency
futures contracts and buy or sell foreign currency futures contracts traded in
the United States and subject to regulation by the CFTC, although the
International Equity Index Fund has no current intention to do so.
The precise matching of the amounts of foreign currency exchange
transactions and the value of the portfolio securities involved will not
generally be possible since the future value of such securities in foreign
currencies will change as a consequence of market movements in the value of
those securities between the dates the currency exchange transactions are
entered into and the dates they mature.
It is impossible to forecast with precision the market value of
portfolio securities at the expiration or maturity of a forward contract or
futures contract. Accordingly, it may be
B-24
<PAGE>
necessary for the Fund to purchase additional foreign currency on the spot
market (and bear the expense of such purchase) if the market value of the
security or securities being hedged is less than the amount of foreign currency
the Fund is obligated to deliver and if a decision is made to sell the security
or securities and make delivery of the foreign currency. Conversely, it may be
necessary to sell on the spot market some of the foreign currency received upon
the sale of the portfolio security or securities if the market value of such
security or securities exceeds the amount of foreign currency the Fund is
obligated to deliver.
Although the Fund has no current intention to do so, the International
Equity Index Fund may write covered call options on up to 100% of the currencies
in its portfolio to offset some of the costs of hedging against fluctuations in
currency exchange rates.
Transaction and position hedging do not eliminate fluctuations in the
underlying prices of the securities which the International Equity Index Fund
owns or expects to purchase or sell. They simply establish a rate of exchange
which one can achieve at some future point in time. Additionally, although these
techniques tend to minimize the risk of loss due to a decline in the value of
the hedged currency, they tend to limit any potential gain which might result
from the increase in the value of such currency.
Currency Forward and Futures Contracts. A forward foreign currency exchange
contract involves an obligation to purchase or sell a specific currency at a
future date, which may be any fixed number of days from the date of the contract
as agreed by the parties, at a price set at the time of the contract. In the
case of a cancellable forward contract, the holder has the unilateral right to
cancel the contract at maturity by paying a specified fee. The contracts are
traded in the interbank market conducted directly between currency traders
(usually large commercial banks) and their customers. A forward contract
generally has no deposit requirement, and no commissions are charged at any
stage for trades. A foreign currency futures contract is a standardized contract
for the future delivery of a specified amount of a foreign currency at a future
date at a price set at the time of the contract. Foreign currency futures
contracts traded in the United States are designed by and traded on exchanges
regulated by the CFTC, such as the New York Mercantile Exchange. The
International Equity Index Fund would enter into foreign currency futures
contracts solely for bona fide hedging or other appropriate risk management
purposes as defined in CFTC regulations.
Forward foreign currency exchange contracts differ from foreign
currency futures contracts in certain respects. For example, the maturity date
of a forward contract may be any fixed number of days from the date of the
contract agreed upon by the parties, rather than a predetermined date in a given
month. Forward contracts may be in any amounts agreed upon by the parties rather
than predetermined amounts. Also, forward foreign exchange contracts are entered
into directly between currency traders so that no intermediary is required. A
forward contract generally requires no margin or other deposit.
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<PAGE>
At the maturity of a forward or futures contract, the Fund may either
accept or make delivery of the currency specified in the contract, or at or
prior to maturity enter into a closing transaction involving the purchase or
sale of an offsetting contract. Closing transactions with respect to forward
contracts are usually effected with the currency trader who is a party to the
original forward contract. Closing transactions with respect to futures
contracts are effected on a commodities exchange; a clearing corporation
associated with the exchange assumes responsibility for closing out such
contracts.
Positions in the foreign currency futures contracts may be closed out
only on an exchange or board of trade which provides a secondary market in such
contracts. Although the International Equity Index Fund intends to purchase or
sell foreign currency futures contracts only on exchanges or boards of trade
where there appears to be an active secondary market, there is no assurance that
a secondary market on an exchange or board of trade will exist for any
particular contract or at any particular time. In such event, it may not be
possible to close a futures position and, in the event of adverse price
movements, the Fund would continue to be required to make daily cash payments of
variation margin.
General Characteristics of Currency Futures Contracts
When a Fund purchases or sells a futures contract, it is required to
deposit with its custodian an amount of cash or U.S. Treasury bills known as
"initial margin." The nature of initial margin is different from that of margin
in security transactions in that it does not involve borrowing money to finance
transactions. Rather, initial margin is similar to a performance bond or good
faith deposit that is returned to the Fund upon termination of the contract,
assuming the Fund satisfies its contractual obligation.
Subsequent payments to and from the broker occur on a daily basis in a
process known as "marking to market." These payments are called "variation
margin" and are made as the value of the underlying futures contract fluctuates.
For example, when a Fund sells a futures contract and the price of the
underlying currency rises above the delivery price, the Fund's position declines
in value. The Fund then pays a broker a variation margin payment equal to the
difference between the delivery price of the futures contract and the market
price of the currency underlying the futures contract. Conversely, if the price
of the underlying currency falls below the delivery price of the contract, the
Fund's futures position increases in value. The broker then must make a
variation margin payment equal to the difference between the delivery price of
the futures contract and the market price of the currency underlying the futures
contract.
When a Fund terminates a position in a futures contract, a final
determination of variation margin is made, additional cash is paid by or to the
Fund, and the Fund realizes a loss or gain. Such closing transactions involve
additional commission costs.
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<PAGE>
In addition to the margin requirements discussed above, transactions in
currency futures contracts may involve the segregation of funds pursuant to
requirements imposed by the Securities and Exchange Commission. Under those
requirements, where a Fund has a long position in a futures or forward contract,
it may be required to establish a segregated account (not with a futures
commission merchant or broker) containing cash or certain liquid assets equal to
the purchase price of the contract (less any margin on deposit). For a short
position in futures or forward contracts held by a Fund, those requirements may
mandate the establishment of a segregated account (not with a futures commission
merchant or broker) with cash or certain liquid assets that, when added to the
amounts deposited as margin, equal the market value of the instruments or
currency underlying the futures or forward contracts (but are not less than the
price at which the short positions were established). However, segregation of
assets is not required if the Fund "covers" a long position. For example,
instead of segregating assets, a Fund, when holding a long position in a futures
or forward contract, could purchase a put option on the same futures or forward
contract with a strike price as high or higher than the price of the contract
held by the Fund. In addition, where a Fund takes short positions, or engages in
sales of call options, it need not segregate assets if it "covers" these
positions. For example, where a Fund holds a short position in a futures or
forward contract, it may cover by owning the instruments or currency underlying
the contract. A Fund may also cover such a position by holding a call option
permitting it to purchase the same futures or forward contract at a price no
higher than the price at which the short position was established. Where a Fund
sells a call option on a futures or forward contract, it may cover either by
entering into a long position in the same contract at a price no higher than the
strike price of the call option or by owning the instruments or currency
underlying the futures or forward contract. The Fund could also cover this
position by holding a separate call option permitting it to purchase the same
futures or forward contract at a price no higher than the strike price of the
call option sold by the Fund.
Foreign Currency Options. The International Equity Index Fund may
purchase U.S. exchange-listed call and put options on foreign currencies. Such
options on foreign currencies operate similarly to options on securities.
Options on foreign currencies are affected by all of those factors which
influence foreign exchange rates and investments generally.
The value of a foreign currency option is dependent upon the value of
the foreign currency and the U.S. dollar, and may have no relationship to the
investment merits of a foreign security. Because foreign currency transactions
occurring in the interbank market involve substantially larger amounts than
those that may be involved in the use of foreign currency options, investors may
be disadvantaged by having to deal in an odd lot market (generally consisting of
transactions of less than $1 million) for the underlying foreign currencies at
prices that are less favorable than for round lots.
There is no systematic reporting of last sale information for foreign
currencies and there is no regulatory requirement that quotations available
through dealer or other market sources be firm or revised on a timely basis.
Available quotation information is generally
B-27
<PAGE>
representative of very large transactions in the interbank market and thus may
not reflect relatively smaller transactions (less than $1 million) where rates
may be less favorable. The interbank market in foreign currencies is a global,
around-the-clock market. To the extent that the U.S. options markets are closed
while the markets for the underlying currencies remain open, significant price
and rate movements may take place in the underlying markets that cannot be
reflected in the options market.
Foreign Currency Conversion. Although foreign exchange dealers do not
charge a fee for currency conversion, they do realize a profit based on the
difference (the "spread") between prices at which they are buying and selling
various currencies. Thus, a dealer may offer to sell a foreign currency to a
Fund at one rate, while offering a lesser rate of exchange should the Fund
desire to resell that currency to the dealer.
Variable and Floating Rate Notes
Variable amount master demand notes, in which the Prime Money Market
Fund, the Tax Exempt Money Market Fund, the Institutional Prime Money Market
Fund, the Bond Funds, and the Equity Funds may invest, are unsecured demand
notes that permit the indebtedness thereunder to vary and provide for periodic
adjustments in the interest rate according to the terms of the instrument.
Because master demand notes are direct lending arrangements between a Fund and
the issuer, they are not normally traded. Although there is no secondary market
in the notes, a Fund may demand payment of principal and accrued interest at any
time. While the notes are not typically rated by credit rating agencies, issuers
of variable amount master demand notes (which are normally manufacturing,
retail, financial, and other business concerns) must satisfy the same criteria
as set forth above for commercial paper. Each Fund's Adviser or Sub-Adviser will
consider the earning power, cash flow, and other liquidity ratios of the issuers
of such notes and will continuously monitor their financial status and ability
to meet payment on demand. In determining average weighted portfolio maturity, a
variable amount master demand note will be deemed to have a maturity equal to
the period of time remaining until the principal amount can be recovered from
the issuer through demand.
As described in the Prospectuses of the Bond Funds, the Equity Funds,
the Tax-Free Funds, the Ohio Municipal Money Market, the Municipal Money Market,
the Institutional Prime Money Market and the Government Money Market Funds,
subject to their investment objective policies and restrictions, each such Fund
(other than the Equity Index Fund) may acquire variable and floating rate notes.
A variable rate note is one whose terms provide for the adjustment of its
interest rate on set dates and which, upon such adjustment, can reasonably be
expected to have a market value that approximates its par value. A floating rate
note is one whose terms provide for the adjustment of its interest rate whenever
a specified interest rate changes and which, at any time, can reasonably be
expected to have a market value that approximates its par value. Such notes are
frequently not rated by credit rating
B-28
<PAGE>
agencies; however, unrated variable and floating rate notes purchased by a Fund
will be determined by the Fund's Adviser under guidelines established by the
Trust's Board of Trustees to be of comparable quality at the time of purchase to
rated instruments eligible for purchase under the Fund's investment policies. In
making such determinations, the Adviser will consider the earning power, cash
flow and other liquidity ratios of the issuers of such notes (such issuers
include financial, merchandising, bank holding and other companies) and will
continuously monitor their financial condition. Although there may be no active
secondary market with respect to a particular variable or floating rate note
purchased by a Fund, the Fund may re-sell the note at any time to a third party.
The absence of such an active secondary market, however, could make it difficult
for the Fund to dispose of the variable or floating rate note involved in the
event the issuer of the note defaulted on its payment obligations, and the Fund
could, for this or other reasons, suffer a loss to the extent of the default.
Variable or floating rate notes may be secured by bank letters of credit.
Variable or floating rate notes with stated maturities of more than 397
days may, under the Securities and Exchange Commission's amortized cost rule,
Rule 2a-7 under the 1940 Act, be deemed to have shorter maturities as follows:
(1) A note that is issued or guaranteed by the United States government
or any agency thereof which has a variable rate of interest readjusted no less
frequently than 397 days will be deemed by a Fund to have a maturity equal to
the period remaining until the next readjustment of the interest rate.
(2) A variable rate note, the principal amount of which is scheduled on
the face of the instrument to be paid in one year or less, will be deemed by a
Fund to have a maturity equal to the period remaining until the next
readjustment of the interest rate.
(3) A variable rate note that is subject to a demand feature will be
deemed by a Fund to have a maturity equal to the longer of the period remaining
until the next readjustment of the interest rate or the period remaining until
the principal amount can be recovered through demand.
(4) A floating rate note that is subject to a demand feature will be
deemed by a Fund to have a maturity equal to the period remaining until the
principal amount can be recovered through demand.
As used above, a note is "subject to a demand feature" where the Fund
is entitled to receive the principal amount of the note either at any time on no
more than thirty days' notice or at specified intervals not exceeding one year
and upon no more than 30 days notice.
Variable and floating rate notes for which no readily available market
exists will be purchased in an amount which, together with securities with legal
or contractual restrictions on resale or for which no readily available market
exists (including repurchase agreements
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<PAGE>
providing for settlement more than seven days after notice), exceeds 10% (with
respect to the Money Market and Institutional Money Market Funds) or 15% (with
respect to all Funds other than the Money Market and Institutional Money Market
Funds) of the Fund's NET assets only if such notes are subject to a demand
feature that will permit the Fund to demand payment of the principal within
seven days after demand by the Fund. If not rated, such instruments must be
found by the Fund's Adviser, under guidelines established by the Trust's Board
of Trustees, to be of comparable quality to instruments that are rated high
quality. A rating may be relied upon only if it is provided by a nationally
recognized statistical rating organization that is not affiliated with the
issuer or guarantor of the instruments. For a description of the rating symbols
of S&P, Moody's, and Fitch used in this paragraph, see the Appendix. The above
Funds may also invest in Canadian Commercial Paper which is commercial paper
issued by a Canadian corporation or a Canadian counterpart of a U.S. corporation
and in Europaper which is U.S. dollar denominated commercial paper of a foreign
issuer.
Municipal Securities
As a matter of fundamental policy, under normal market conditions, at
least 80% of the total assets of each of the Municipal Money Market Fund, the
Ohio Municipal Money Market Fund, the MUNICIPAL INCOME Fund, the Intermediate
Tax-Free Bond Fund, the Ohio Municipal Bond Fund, the Texas Tax-Free Bond Fund,
the Kentucky Municipal Bond Fund, THE LOUISIANA MUNICIPAL BOND FUND, the West
Virginia Tax-Free Bond Fund, the Arizona Tax-Free Bond Fund, and the Tax Exempt
Money Market Fund will be invested in Municipal Securities. Each of the Prime
Money Market, Asset Allocation, Income Bond, Limited Volatility Bond,
Intermediate Bond and Government Bond Funds may also invest in Municipal
Securities if the Adviser determines that such Municipal Securities offer
attractive yields. Municipal Securities are issued to obtain funds for various
public purposes, including the construction of a wide range of public facilities
such as bridges, highways, roads, schools, water and sewer works, and other
utilities. Other public purposes for which Municipal Securities may be issued
include refunding outstanding obligations, obtaining funds for general operating
expenses and obtaining funds to lend to other public institutions and
facilities. In addition, certain debt obligations known as "private activity
bonds" may be issued by or on behalf of municipalities and public authorities to
obtain funds to provide certain water, sewage and solid waste facilities,
qualified residential rental projects, certain local electric, gas and other
heating or cooling facilities, qualified hazardous waste facilities, high-speed
intercity rail facilities, governmentally-owned airports, docks and wharves and
mass commuting facilities, certain qualified mortgages, student loan and
redevelopment bonds and bonds used for certain organizations exempt from federal
income taxation. Certain debt obligations known as "industrial development
bonds" under prior federal tax law may have been issued by or on behalf of
public authorities to obtain funds to provide certain privately operated housing
facilities, sports facilities, industrial parks, convention or trade show
facilities, airport, mass transit, port or parking facilities, air or water
pollution control facilities, sewage or solid waste disposal facilities, and
certain facilities for water supply. Other private activity bonds and industrial
development bonds issued to fund the construction, improvement, equipment or
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repair of privately-operated industrial, distribution, research, or commercial
facilities may also be Municipal Securities, but the size of such issues is
limited under current and prior federal tax law. The aggregate amount of most
private activity bonds and industrial development bonds is limited (except in
the case of certain types of facilities) under federal tax law by an annual
"volume cap." The volume cap limits the annual aggregate principal amount of
such obligations issued by or on behalf of all governmental instrumentalities in
the state. The Tax-Free Funds may not be a desirable investment for "substantial
users" of facilities financed by private activity bonds or industrial
development bonds or for "related persons" of substantial users.
Private activity bonds that are issued by or on behalf of public
authorities to finance various privately-operated facilities are included within
the term "Municipal Securities" as used in the Prospectuses of the Tax-Free
Funds (other than the Ohio Municipal Money Market, Ohio Municipal Bond and
Municipal Money Market Funds) and in this Statement of Additional Information
with respect to such Funds only if the interest paid thereon is both exempt from
federal income tax and not treated as a preference item for individuals for
purposes of the federal alternative minimum tax. Private activity bonds that are
subject to federal income tax and are treated as a preference item for
individuals for purposes of the federal alternative minimum tax are included
within the term Taxable Obligations as used in the Prospectuses of the Tax-Free
Funds (other than the Ohio Municipal Money Market Fund, the Ohio Municipal Bond
Fund and Municipal Money Market Fund). As used in the Prospectuses of the Ohio
Municipal Money Market Fund, the Ohio Municipal Bond Fund and the Municipal
Money Market Fund and in this Statement of Additional Information with respect
to such Funds, the term Municipal Securities includes private activity bonds
that are issued by or on behalf of public authorities to finance privately
operated facilities only if the interest paid thereon is exempt from federal
income tax. Private activity bonds that are subject to federal income tax are
included within the term Taxable Obligations as used in the Prospectuses of the
Ohio Municipal Money Market Fund, the Ohio Municipal Bond Fund, and the
Municipal Money Market Fund.
The two principal classifications of Municipal Securities consist of
"general obligation" and "limited" (or revenue) issues. General obligation bonds
are obligations involving the credit of an issuer possessing taxing power and
are payable from the issuer's general unrestricted revenues and not from any
particular fund or source. The characteristics and method of enforcement of
general obligation bonds vary according to the law applicable to the particular
issuer, and payment may be dependent upon appropriation by the issuer's
legislative body. Limited obligation bonds are payable only from the revenues
derived from a particular facility or class of facilities or, in some cases,
from the proceeds of a special excise or other specific revenue source. Private
activity bonds and industrial development bonds generally are revenue bonds and
thus not payable from the unrestricted revenues of the issuer. The credit and
quality of such bonds is generally related to the credit of the bank selected to
provide the letter of credit underlying the bond. Payment of principal of and
interest on industrial development revenue bonds is the responsibility of the
corporate user (and any guarantor).
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The Funds may also acquire "moral obligation" issues, which are
normally issued by special purpose authorities, and in other tax-exempt
investments including pollution control bonds and tax-exempt commercial paper.
Each Fund may purchase short-term tax-exempt General Obligations Notes, Tax
Anticipation Notes, Bond Anticipation Notes, Revenue Anticipation Notes, Project
Notes, and other forms of short-term tax-exempt loans. Such notes are issued
with a short-term maturity in anticipation of the receipt of tax funds, the
proceeds of bond placements, or other revenues. Project Notes are issued by a
state or local housing agency and are sold by the Department of Housing and
Urban Development. While the issuing agency has the primary obligation with
respect to its Project Notes, they are also secured by the full faith and credit
of the United States through agreements with the issuing authority which provide
that, if required, the federal government will lend the issuer an amount equal
to the principal of and interest on the Project Notes.
There are, of course, variations in the quality of Municipal
Securities, both within a particular classification and between classifications,
and the yields on Municipal Securities depend upon a variety of factors,
including general money market conditions, the financial condition of the
issuer, general conditions of the municipal bond market, the size of a
particular offering, the maturity of the obligations, and the rating of the
issue. The ratings of Moody's and S&P represent their opinions as to the quality
of Municipal Securities. It should be emphasized, however, that ratings are
general and are not absolute standards of quality, and Municipal Securities with
the same maturity, interest rate and rating may have different yields while
Municipal Securities of the same maturity and interest rate with different
ratings may have the same yield. Subsequent to its purchase by a Fund, an issue
of Municipal Securities may cease to be rated or its rating may be reduced below
the minimum rating required for purchase by the Fund. The Fund's Adviser will
consider such an event in determining whether the Fund should continue to hold
the obligations.
Information about the financial condition of issuers of Municipal
Securities may be less available than about corporations having a class of
securities registered under the Securities Exchange Act of 1934.
An issuer's obligations under its Municipal Securities are subject to
the provisions of bankruptcy, insolvency, and other laws affecting the rights
and remedies of creditors, such as the federal bankruptcy code, and laws, if
any, which may be enacted by Congress or state legislatures extending the time
for payment of principal or interest, or both, or imposing other constraints
upon the enforcement of such obligations. The power or ability of an issuer to
meet its obligations for the payment of interest on and principal of its
Municipal Securities may be materially adversely affected by litigation or other
conditions.
Such litigation or conditions may from time to time have the effect of
introducing uncertainties in the market for tax-exempt obligations or certain
segments thereof, or may materially affect the credit risk with respect to
particular bonds or notes. Adverse economic,
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business, legal or political developments might affect all or a substantial
portion of a Fund's Municipal Securities in the same manner.
From time to time, proposals have been introduced before Congress for
the purpose of restricting or eliminating the federal income tax exemption for
interest on tax exempt bonds, and similar proposals may be introduced in the
future. A recent decision of the United States Supreme Court has held that
Congress has the constitutional authority to enact such legislation. It is not
possible to determine what effect the adoption of such proposals could have on
(i) the availability of Municipal Securities for investment by the Funds, and
(ii) the value of the investment portfolios of the Funds.
The Internal Revenue Code of 1986, as amended (the "Code") imposes
certain continuing requirements on issuers of tax-exempt bonds regarding the
use, expenditure and investment of bond proceeds and the payment of rebates to
the United States of America. Failure by the issuer to comply subsequent to the
issuance of tax-exempt bonds with certain of these requirements could cause
interest on the bonds to become includable in gross income retroactive to the
date of issuance.
The Funds may invest in Municipal Securities either by purchasing them
directly or by purchasing certificates of accrual or similar instruments
evidencing direct ownership of interest payments or principal payments, or both,
on Municipal Securities, provided that, in the opinion of counsel to the initial
seller of each such certificate or instrument, any discount accruing on such
certificate or instrument that is purchased at a yield not greater than the
coupon rate of interest on the related Municipal Securities will to the same
extent as interest on such Municipal Securities be exempt from federal income
tax and state income tax (where applicable) and not treated as a preference item
for individuals for purposes of the federal alternative minimum tax. The Funds
may also invest in Municipal Securities by purchasing from banks participation
interests in all or part of specific holdings of Municipal Securities. Such
participation may be backed in whole or in part by an irrevocable letter of
credit or guarantee of the selling bank. The selling bank may receive a fee from
a Fund in connection with the arrangement. A Fund will not purchase
participation interests unless it receives an opinion of counsel or a ruling of
the Internal Revenue Service that interest earned by it on Municipal Securities
in which it holds such participation interest is exempt from federal income tax
and state income tax (where applicable) and not treated as a preference item for
individuals for purposes of the federal alternative minimum tax.
Demand Features
The Funds may acquire securities that are subject to puts and standby
commitments ("demand features") to purchase the securities at their principal
amount (usually with accrued interest) within a fixed period (usually seven
days) following a demand by the Fund. The demand feature may be issued by the
issuer of the underlying securities, a dealer in the
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securities or by another third party, and may not be transferred separately from
the underlying security.
Swaps, Caps and Floors
All of the Bond Funds (except the Limited Volatility Bond Fund) and the
fixed income portion of the Asset Allocation Fund may enter into swaps, caps,
and floors on various securities (such as U.S. government securities),
securities indexes, interest rates, prepayment rates, foreign currencies or
other financial instruments or indexes, in order to protect the value of the
Fund from interest rate fluctuations and to hedge against fluctuations in the
floating rate market in which the Fund's investments are traded, for both
hedging and non-hedging purposes. While swaps, caps, and floors (sometimes
hereinafter collectively referred to as "swap contracts") are different from
futures contracts (and options on futures contracts) in that swap contracts are
individually negotiated with specific counterparties, the Funds will use swap
contracts for purposes similar to the purposes for which they use options,
futures, and options on futures. Those uses of swap contracts (i.e., risk
management and hedging) present the Funds with risks and opportunities similar
to those associated with options contracts, futures contracts, and options on
futures. See "Futures Contracts and Related Options;" and "Options."
The Funds may enter into these transactions to manage their exposure to
changing interest rates and other market factors. Some transactions may reduce
each Fund's exposure to market fluctuations while others may tend to increase
market exposure.
Swap contracts typically involve an exchange of obligations by two
sophisticated parties. For example, in an interest rate swap, the Fund may
exchange with another party their respective rights to receive interest, such as
an exchange of fixed rate payments for floating rate payments. Currency swaps
involve the exchange of respective rights to make or receive payments in
specified currencies. Mortgage swaps are similar to interest rate swaps in that
they represent commitments to pay and receive interest. The notional principal
amount, however, is tied to a reference pool or pools of mortgages.
Caps and floors are variations on swaps. The purchase of a cap entitles
the purchaser to receive a principal amount from the party selling the cap to
the extent that a specified index exceeds a predetermined interest rate or
amount. The purchase of an interest rate floor entitles the purchaser to receive
payments on a notional principal amount from the party selling the floor to the
extent that a specified index falls below a predetermined interest rate or
amount. Caps and floors are similar in many respects to over-the-counter options
transactions, and may involve investment risks that are similar to those
associated with options transactions and options on futures contracts.
Because swap contracts are individually negotiated, they remain the
obligation of the respective counterparties, and there is a risk that a
counterparty will be unable to meet its
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obligations under a particular swap contract. If a counterparty defaults on a
swap contract with a Fund, the Fund may suffer a loss. To address this risk,
each Fund will usually enter into interest rate swaps on a net basis, which
means that the two payment streams (one from the Fund to the counterparty, one
to the Fund from the counterparty) are netted out, with the Fund receiving or
paying, as the case may be, only the net amount of the two payments. Interest
rate swaps do not involve the delivery of securities, other underlying assets,
or principal, except for the purposes of collateralization as discussed below.
Accordingly, the risk of loss with respect to interest rate swaps entered into
on a net basis would be limited to the net amount of the interest payments that
the Fund is contractually obligated to make. If the other party to an interest
rate swap defaults, the Fund's risk of loss consists of the net amount of
interest payments that a Fund is contractually entitled to receive. To protect
against losses related to counterparty default, the Funds may enter into swaps
that require transfers of collateral for changes in market value. In contrast,
currency swaps and other types of swaps may involve the delivery of the entire
principal value of one designated currency or financial instrument in exchange
for the other designated currency or financial instrument. Therefore, the entire
principal value of such swaps may be subject to the risk that the other party
will default on its contractual delivery obligations.
In addition, because swap contracts are individually negotiated and
ordinarily non-transferable, there also may be circumstances in which it would
be impossible for a Fund to close out its obligations under the swap contract
prior to its maturity. Under such circumstances, the Fund might be able to
negotiate another swap contract with a different counterparty to offset the risk
associated with the first swap contract. Unless the Fund is able to negotiate
such an offsetting swap contract, however, the Fund could be subject to
continued adverse developments, even after the Adviser has determined that it
would be prudent to close out or offset the first swap contract.
The Funds will not enter into any mortgage swap, interest rate swap,
cap or floor transaction unless the unsecured commercial paper, senior debt, or
the claims paying ability of the other party thereto is rated in one of the top
two rating categories by at least one NRSRO, or if unrated, determined by the
Adviser to be of comparable quality.
The use of swaps involves investment techniques and risks different
from and potentially greater than those associated with ordinary Fund securities
transactions. If the Adviser is incorrect in its expectations of market values,
interest rates, or currency exchange rates, the investment performance of the
Funds would be less favorable than it would have been if this investment
technique were not used.
The Staff of the Securities and Exchange Commission is presently
considering its position with respect to swaps, caps and floors as senior
securities. Pending a determination by the Staff, the Funds will either treat
swaps, caps and floors as being subject to their senior securities restrictions
or will refrain from engaging in swaps, caps and floors. Once the Staff has
expressed a position with respect to swaps, caps and floors, the Funds intend to
engage in
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swaps, caps and floors, if at all, in a manner consistent with such position. To
the extent the net amount of an interest rate or mortgage swap is held in a
segregated account, consisting of cash or liquid, high grade debt securities,
the Funds and the Adviser believe that swaps do not constitute senior securities
under the Investment Company Act of 1940 and, accordingly, will not treat them
as being subject to each Fund's borrowing restrictions. The net amount of the
excess, if any, of each Fund's obligations over its entitlements with respect to
each interest rate swap will be accrued on a daily basis and an amount of cash
or liquid securities having an aggregate net asset value at least equal to the
accrued excess will be maintained in a segregated account by the Funds'
Custodian.
Structured Instruments
All of the Bond Funds (except the Limited Volatility Bond Fund) and the
fixed income portion of the Asset Allocation Fund may invest, from time to time,
in one or more structured instruments. Structured instruments are debt
securities issued by agencies of the U.S. government (such as Ginnie Mae, Fannie
Mae, and Freddie Mac), banks, corporations, and other business entities whose
interest and/or principal payments are indexed to certain specific foreign
currency exchange rates, interest rates, or one or more other reference indexes.
Structured instruments frequently are assembled in the form of medium-term
notes, but a variety of forms are available and may be used in particular
circumstances.
The terms of such structured instruments provide that their principal
and/or interest payments are adjusted upwards or downwards to reflect changes in
the reference index while the structured instruments are outstanding. In
addition, the reference index may be used in determining when the principal is
redeemed. As a result, the interest and/or principal payments that may be made
on a structured product may vary widely, depending on a variety of factors,
including the volatility of the reference index and the effect of changes in the
reference index on principal and/or interest payment.
While structured instruments may offer the potential for a favorable
rate of return from time to time, they also entail certain risks. Structured
instruments may be less liquid than other debt securities, and the price of
structured instruments may be more volatile. If the value of the reference index
changes in a manner other than that expected by the Adviser, principal and/or
interest payments on the structured instrument may be substantially less than
expected. The Funds will invest only in structured securities that are
consistent with each Fund's investment objective, policies and restrictions and
the Adviser's outlook on market conditions. In some cases, depending on the
terms of the reference index, a structured instrument may provide that the
principal and/or interest payments may be adjusted below zero; however, the
Funds will not invest in structured instruments if the terms of the structured
instrument provide that the Funds may be obligated to pay more than their
initial investment in the structured instrument, or to repay any interest or
principal that has already been collected or paid back. Structured instruments
that are registered under the federal securities laws may be treated as liquid.
In addition, many structured instruments may not be
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registered under the federal securities laws. In that event, a Fund's ability to
resell such a structured instrument may be more limited than its ability to
resell other Fund securities. The Funds will treat such instruments as illiquid,
and will limit their investments in such instruments to no more than 15% of each
Fund's NET assets, when combined with all other illiquid investments of each
Fund. In addition, although structured instruments may be sold in the form of a
corporate debt obligation, they may not have some of the protection against
counterparty default that may be available with respect to publicly traded debt
securities (i.e., the existence of a trust indenture). In that respect, the
risks of default associated with structured instruments may be similar to those
associated with swap contracts. See "Swaps, Caps and Floors."
New Financial Products
New options and futures contracts and other financial products, and
various combinations thereof, continue to be developed and all of the Bond Funds
(except the Limited Volatility Bond Fund) and the fixed income portion of the
Asset Allocation Fund may invest in any such options, contracts and products as
may be developed to the extent consistent with each Fund's investment objective,
policies and restrictions and the regulatory requirements applicable to
investment companies.
These various products may be used to adjust the risk and return
characteristics of each Fund's investments. These various products may increase
or decrease exposure to security prices, interest rates, commodity prices, or
other factors that affect security values, regardless of the issuer's credit
risk. If market conditions do not perform consistent with expectations, the
performance of each Fund would be less favorable than it would have been if
these products were not used. In addition, losses may occur if counterparties
involved in transactions do not perform as promised. These products may expose
the Fund to potentially greater return as well as potentially greater risk of
loss than more traditional fixed income investments.
Restricted Securities
Each of the Equity Funds (except the Equity Index Fund and the
International Equity Index Fund) and each of the Bond Funds (except the Ohio
Municipal Bond Fund) may invest in commercial paper issued in reliance on the
exemption from registration afforded by Section 4(2) of the Securities Act of
1933. Section 4(2) commercial paper is restricted as to disposition under
federal securities law and is generally sold to institutional investors, such as
the Funds, who agree that they are purchasing the paper for investment purposes
and not with a view to public distribution. Any resale by the purchaser must be
in an exempt transaction. Section 4(2) commercial paper is normally resold to
other institutional investors like the Funds through or with the assistance of
the issuer or investment dealers who make a market in Section 4(2) commercial
paper, thus providing liquidity. The Funds believe that Section 4(2) commercial
paper and possibly certain other restricted securities which meet the criteria
for
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liquidity established by the Trustees are quite liquid. The Funds intend,
therefore, to treat the restricted securities which meet the criteria for
liquidity established by the Trustees, including Section 4(2) commercial paper,
as determined by the Funds' Adviser, as liquid and not subject to the investment
limitation applicable to illiquid securities. In addition, because Section 4(2)
commercial paper is liquid, the Fund will not subject such paper to the
limitation applicable to restricted securities.
The ability of the Trustees to determine the liquidity of certain
restricted securities is permitted under a Securities and Exchange Commission
("SEC") Staff position set forth in the adopting release for Rule 144A under the
Securities Act of 1933 (the "Rule"). The Rule is a nonexclusive safe-harbor for
certain secondary market transactions involving securities subject to
restrictions on resale under federal securities laws. The Rule provides an
exemption from registration for resales of otherwise restricted securities to
qualified institutional buyers. The Rule was expected to further enhance the
liquidity of the secondary market for securities eligible for resale under Rule
144A. The Funds believe that the Staff of the SEC has left the question of
determining the liquidity of all restricted securities to the Trustees. The
Trustees have directed the Adviser to consider the following criteria in
determining the liquidity of certain restricted securities:
- the frequency of trades and quotes for the security;
- the number of dealers willing to purchase or sell the security and
the number of other potential buyers;
- dealer undertakings to make a market in the security; and
- the nature of the security and the nature of the marketplace
trades.
Ohio Municipal Securities
As used in the Trust's Prospectuses and this Statement of Additional
Information, the term "Ohio Municipal Securities" refers to debt securities
which (i) are issued by or on behalf of the State of Ohio or its respective
authorities, agencies, instrumentalities, and political subdivisions, and (ii)
produce interest which, in the opinion of issuer's counsel at the time of
issuance, is exempt from both federal income tax, and Ohio personal income tax.
Risk Factors Regarding Investments in Ohio Municipal Securities
The economy of Ohio, while becoming increasingly diversified and
increasingly reliant on the service sector, continues to rely in significant
part on durable goods manufacturing, which is largely concentrated in motor
vehicles and equipment, steel, rubber products and household appliances. As a
result, general economic activity in Ohio, as in many other industrial states,
tends to be more cyclical than in some other states and in the nation as a
whole. Agriculture also is an important segment of the Ohio economy, and the
state has instituted several programs to provide financial assistance to
farmers. Although revenue obligations of the state or its political subdivisions
may be payable from a specific source or
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project, and general obligation debt may be payable from a specific tax, there
can be no assurance that future economic difficulties and the resulting impact
on state and local government finances will not adversely affect the market
value of the Ohio Municipal Securities in the Funds of the Trust or the ability
of the respective obligators to make timely payment of interest and principal on
such obligations.
Since the Ohio Municipal Bond Fund and Ohio Municipal Money Market Fund
invest primarily in Ohio Municipal Securities, the value of each Fund's Shares
may be especially affected by factors pertaining to the economy of Ohio and
other factors specifically affecting the ability of issuers of Ohio Municipal
Securities to meet their obligations. As a result, the value of the Shares of
the Ohio Municipal Bond Fund and the Ohio Municipal Money Market Fund may
fluctuate more widely than the value of Shares of a portfolio investing in
securities relating to a number of different states. The ability of Ohio state,
county, or local governments to meet their obligations will depend primarily on
the availability of tax and other revenues to those governments and on their
fiscal conditions generally. The amounts of tax and other revenues available to
issuers of Ohio Municipal Securities may be affected from time to time by
economic, political and demographic conditions within the state. In addition,
constitutional or statutory restrictions may limit a government's power to raise
revenues or increase taxes. The availability of federal, state, and local aid to
issuers of Ohio Municipal Securities may also affect their ability to meet their
obligations. Payments of principal and interest on limited obligation securities
will depend on the economic condition of the facility or specific revenue source
from whose revenues the payments will be made, which in turn could be affected
by economic, political, and demographic conditions in the state. Any reduction
in the actual or perceived ability to meet obligations on the part of either an
issuer of an Ohio Municipal Security or a provider of credit enhancement for
such Security (including a reduction in the rating of its outstanding
securities) would likely affect adversely the market value and marketability of
that Ohio Municipal Security and could adversely affect the values of other Ohio
Municipal Securities as well.
West Virginia Municipal Securities
As used in the Prospectus and this Statement of Additional Information,
the term "West Virginia Municipal Securities" refers to debt securities which
are issued by or on behalf of West Virginia or its respective authorities,
agencies, instrumentalities and political subdivisions and which produce
interest which, in the opinion of counsel for the issuer, is exempt from federal
income tax, is not treated as a preference item for purposes of the federal
alternative minimum tax, and is exempt from West Virginia personal income tax.
Risk Factors Regarding Investments in West Virginia Municipal Securities
West Virginia's economy is heavily dependent upon the coal mining
industry. A reduction in the demand for certain types of coal and increasing
governmental regulation has had an adverse impact upon the industry and upon the
economy of the state. Notwithstanding
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the importance of the coal mining industry on the West Virginia economy, over
the course of the past few years, West Virginia's economy has benefitted from a
developing tourism industry. Tourism directly and indirectly accounts for a
material portion of the West Virginia economy.
In 1989, state taxes were substantially increased by applying sales,
service and use taxes to a vast number of consumer and industrial products and
services that were previously exempt from such tax. In 1993, the state's
gasoline tax was substantially increased.
In 1990, legislation was enacted directing a statewide reappraisal of
real property for ad valorem tax purposes. Implementation of the reappraisal
program was completed in 1994. Generally, implementation has substantially
increased ad valorem taxes of both residential and commercial real property
owners.
Despite the enactment in 1989 and 1990 of legislation designed to
provide a significant increase in revenues to the state, the state experienced a
shortfall in revenues. Even with these measures, the Governor in 1990 imposed a
two-year hiring freeze on state agencies; and in 1992, and again in January,
1993, the Governor imposed spending reductions on most state agencies in order
to bring expenditures in line with revenues.
The increase in taxes in recent years and the 1993 freeze of
expenditures did result in a surplus for the state at the end of its June 30,
1993 fiscal year. The state also had a surplus at the end of its June 30, 1994
fiscal year. However, as in many other states, the state, local governments and
school boards continue to struggle to produce sufficient revenues to fund
operations and support public education.
West Virginia led the nation in unemployment from July, 1991 through
August, 1993. Although unemployment in West Virginia declined from 10.5% in
July, 1993, to 8.7% in July, 1994, West Virginia's unemployment rate is still
well above the 6.1% national rate for July, 1994. High unemployment continues to
reflect the weakness of the West Virginia economy.
Kentucky Municipal Securities
As used in the Prospectus and this Statement of Additional Information,
the term "Kentucky Municipal Securities" refers to debt securities which are
issued by or on behalf of Kentucky or its respective authorities, agencies,
instrumentalities and political subdivisions and which produce interest which,
in the opinion of counsel for the issuer, is exempt from federal income tax, is
not treated as a preference item for purposes of the federal alternative minimum
tax, and is exempt from Kentucky personal income tax.
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Risk Factors Regarding Investments in Kentucky Municipal Securities
As of August 31, 1994, Kentucky had an unemployment rate of 4.4%, which
was below the national average of 5.9%. For calendar year 1993, Kentucky's per
capita income ranked 43rd in the nation and was 82% of the national average. The
most current audited financial statement for Kentucky indicates a surplus of
funds in the General Fund of $104.6 million, which was $88.5 million above the
budgeted balance.
Unlike many states, payment on nearly all Kentucky Municipal Securities
depends upon revenue generated by the property financed by the securities; the
securities are not general obligations of the issuer.
Texas Municipal Securities
As used in the Prospectus and this Statement of Additional Information,
the term "Texas Municipal Securities" refers to debt securities which are issued
by or on behalf of Texas or its respective authorities, agencies,
instrumentalities and political subdivisions and which produce interest which,
in the opinion of counsel for the issuer, is exempt from federal income tax and
is not treated as a preference item for purposes of the federal alternative
minimum tax.
Risk Factors Regarding Investments in Texas Municipal Securities
Because the Fund invests primarily in obligations issued by Texas
entities, the Fund's performance is partially dependent upon economic conditions
within the State of Texas generally and upon the economic condition of issuing
governments and their instrumentalities in particular. In the late 1980's,
weakness in the oil and gas related and agricultural sectors of the Texas
economy adversely affected consumer spending, financial institutions, utility
demand, and real estate values within the state. Consequently, the state and
many of its local governments had to increase sales, utilities, and ad valorem
tax rates in order to maintain revenue yields. In the past two years, however,
in contrast to the national economy, business activity in Texas has
strengthened, with employment growth occurring in most sectors. In addition,
Texas' major financial institutions have been recapitalized and bank failures
have generally ceased.
Arizona Municipal Securities
As used in the Prospectus and this Statement of Additional Information,
the term "Arizona Municipal Securities" refers to debt securities which are
issued by or on behalf of Arizona or its respective authorities, agencies,
instrumentalities and political subdivisions and which produce interest which,
in the opinion of counsel for the issuer, is exempt from federal income tax and
is not treated as a preference item for purposes of the federal alternative
minimum tax.
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Risk Factors Regarding Investments in Arizona Municipal Securities
Arizona's outlook remains uncertain as long as the state does not adopt
a plan regarding long term matching of revenues and expenditures, especially for
education, health care and corrections. Despite severe problems in the real
estate sector, Arizona's growth continues to OUT PACE the nation, for
example: (i) the state's 35% population growth during the 1980's was the third
fastest rate in the nation, next to Alaska and Nevada; (ii) Arizona's current
population growth is over 2% per year, about twice the national average, (iii)
its growth in non-agricultural employment between July 1990-1991 was 1.5%--
seventh fastest in the nation; and (iv) the state's unemployment rate currently
is 7.1%, below the 7.3% U.S. unemployment rate.
Nonetheless, growth has been expensive for Arizona. During the
high-growth 1980's, combined per capita state and local expenditures climbed to
about 105% of the U.S. average from about 95%, according to data from the
Advisory Commission on Intergovernmental Relations. This occurred just after
1980 tax reform removed food from the sales tax base and imposed limits on
property taxes. The resulting reduction in revenues reduced liquidity in the
state treasury. General Fund balances fell to a low of zero in fiscal 1983 from
a high of 21% in 1980. Balancing the budget has been a challenge ever since,
requiring numerous mid-year corrections and special sessions of the legislature.
Although growth-generated revenues picked up during the mid-decade boom, growth
in entitlements, federally mandated programs, education, and corrections still
outstripped revenue inflow. When growth started to slow in 1986, the pressure
intensified. Since fiscal 1985, the state managed five successive years of
shortfalls with internal borrowing, tax accelerations, one-time adjustments, and
budget cuts. After considerable cuts in many departments, fiscal 1991 closed
with an estimated 2% balance, and fiscal 1992 had a General Fund balance of $5
million. The forecast for fiscal 1993 is for a balanced budget.
LOUISIANA MUNICIPAL SECURITIES
AS USED IN THE PROSPECTUS AND THIS STATEMENT OF ADDITIONAL INFORMATION,
THE TERM "LOUISIANA MUNICIPAL SECURITIES" REFERS TO DEBT SECURITIES WHICH ARE
ISSUED BY OR ON BEHALF OF LOUISIANA OR ITS RESPECTIVE AUTHORITIES, AGENCIES,
INSTRUMENTALITIES AND POLITICAL SUBDIVISIONS AND WHICH PRODUCE INTEREST WHICH,
IN THE OPINION OF COUNSEL FOR THE ISSUER, IS EXEMPT FROM FEDERAL INCOME TAX AND
IS NOT TREATED AS A PREFERENCE ITEM FOR PURPOSES OF THE FEDERAL ALTERNATIVE
MINIMUM TAX.
RISK FACTORS REGARDING INVESTMENTS IN LOUISIANA MUNICIPAL SECURITIES
LOUISIANA'S GENERAL OBLIGATION BONDS ARE CURRENTLY RATED BAA1 BY
MOODY'S INVESTORS SERVICE, INC. ("MOODY'S") AND A MINUS BY STANDARD AND POOR'S
RATING GROUP ("S&P"). LOUISIANA'S RATINGS REFLECT AN ONGOING RECOVERY PROCESS
FROM THE SEVERE FINANCIAL PROBLEMS WHICH DEVELOPED AFTER OIL PRICES DECLINED IN
THE MID-TO-LATE 1980'S.
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<PAGE>
ALSO, BOTH RATING AGENCIES HAVE COMMENDED THE STATE FOR ENACTING CONSTITUTIONAL
REFORMS IN THE FALL OF 1993 THAT CURB BORROWING AND REQUIRE THAT NON-RECURRING
REVENUES BE APPLIED TO DEBT REDUCTION. HOWEVER, LOUISIANA REMAINS ONE OF THE
WEAKEST STATES IN TERMS OF ITS CREDIT FUNDAMENTALS. WHILE RATINGS OF INDIVIDUAL
CITIES, PARISHES, AGENCIES AND SPECIAL DISTRICTS VARY, MOST LOUISIANA ISSUERS
HAVE BEEN AFFECTED TO SOME DEGREE BY LOUISIANA'S ECONOMY.
THROUGH THE OIL BOOM OF THE LATE 1970S AND EARLY 1980S, LOUISIANA'S
LABOR FORCE AND EMPLOYMENT GREW STEADILY, AS DID ITS FINANCIAL POSITION.
BY JUNE 30, 1981, THE GENERAL FUND HAD RUN SEVERAL YEARS OF OPERATING SURPLUSES,
BRINGING THE ENDING FUND BALANCE TO $839.5 MILLION, A SIZEABLE 16% OF
OPERATING EXPENDITURES. WHEN THE OIL INDUSTRY WEAKENED, ECONOMIC GROWTH SLOWED
AND OPERATING DEFICITS OCCURRED, LOUISIANA'S UNDESIGNATED GENERAL FUND
DEFICIT REACHED $512 MILLION IN FISCAL 1988 (ENDED JUNE 30) AND THE FUND
BALANCE WAS A NEGATIVE $377 MILLION.
TO ADDRESS ITS DEFICITS, LOUISIANA CREATED THE LOUISIANA RECOVERY
DISTRICT IN 1988, WHICH SOLD $979 MILLION REVENUE BONDS SECURED BY (I) THE
REVENUES DERIVED FROM THE RECOVERY DISTRICT'S 1% STATEWIDE SALES AND USE TAX,
AND (II) ALL FUNDS AND ACCOUNTS HELD UNDER THE RECOVERY DISTRICT'S GENERAL BOND
RESOLUTION AND ALL INVESTMENT EARNINGS ON SUCH FUNDS AND ACCOUNTS. AS OF
DECEMBER 31, 1994, THE PRINCIPAL AMOUNT OF ALL THESE BONDS (INCLUDING BONDS
ISSUED TO DEFEASE CERTAIN PORTIONS OF THE ORIGINAL BOND ISSUE) WAS $486,795
MILLION. ARTICLE VI, SECTION 30.1 OF THE STATE CONSTITUTION, EFFECTIVE NOVEMBER
3, 1994, PROHIBITS THE RECOVERY DISTRICT FROM ISSUING ADDITIONAL BONDS EXCEPT TO
REFUND BONDS AT A LOWER EFFECTIVE INTEREST RATE. ALL BONDS OF THE RECOVERY
DISTRICT SHALL BE RETIRED NO LATER THAN THE END OF THE FISCAL YEAR 1998-1999.
DURING THE PERIOD FROM FISCAL YEAR 1987-1988 THROUGH FISCAL YEAR
1993-1994, LOUISIANA EXPERIENCED OPERATING BUDGET DEFICITS IN THREE OF
THE SEVEN FISCAL YEARS. THE OPERATING DEFICIT PROBLEM WAS EXACERBATED BY THE
HIGHLY DEPENDENT NATURE OF LOUISIANA'S BUDGET ON MINERAL REVENUES AND
THE DRAMATIC FLUCTUATIONS IN OIL PRICES OVER THE LAST DECADE.
LOUISIANA BEGAN FISCAL YEAR 1988-1989 WITH A BALANCE OF $271
MILLION IN THE GENERAL FUND AND ENDED THE YEAR WITH AN OPERATING SURPLUS
WHICH, WHEN COMBINED WITH PRIOR YEAR ADJUSTMENTS OF $384 MILLION, PROVIDED THE
STATE WITH AN ENDED BALANCE IN THE GENERAL FUND OF $655 MILLION. FISCAL
YEAR ENDED 1989-1990 ENDED WITH A SMALL OPERATING SURPLUS OF $47 MILLION WHICH,
WHEN ADDED TO THE $655 MILLION BALANCE FROM THE PRIOR FISCAL YEAR,
RESULTED IN AN ACCUMULATED SURPLUS OF $702 MILLION AS OF JUNE 30, 1990.
IN FISCAL YEAR 1990-1991, LOUISIANA ENDED THE FISCAL YEAR WITH AN
ACCUMULATED SURPLUS IN THE GENERAL FUND OF $417.98 MILLION. IN FISCAL YEAR
1991-1992, STATE OPERATIONS RESULTED IN A $487 MILLION DEFICIT WHICH, AFTER
ADJUSTMENT, RESULTED IN AN UNDESIGNATED
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<PAGE>
FUND BALANCE DEFICIT OF $83 MILLION. THIS SHORTFALL WAS ELIMINATED BY UTILIZING
A SET ASIDE AGAINST THE TOTAL BALANCE AVAILABLE FOR APPROPRIATIONS.
LOUISIANA ENDED FISCAL YEAR 1992-1993 WITH A POSITIVE UNDESIGNATED
BALANCE IN ITS GENERAL FUND OF $101 MILLION. AT THE END OF FISCAL YEAR
1993-1994, THERE WAS AN OPERATING SURPLUS OF $129 MILLION WHICH, AFTER INCLUDING
THE PRIOR YEAR'S FUND BALANCE AND RESERVE CHANGES, RESULTED IN A
POSITIVE UNDESIGNATED UNRESERVED GENERAL FUND BALANCE OF $212.9 MILLION. THE
STATE FORECASTS FOR FISCAL YEAR 1995-1996 INDICATE A POTENTIAL REVENUE
SHORTFALL OF $192 MILLION IN ORDER TO CONTINUE STATE OPERATIONS IN FISCAL
YEAR 1995-1996 AT CURRENT LEVELS.
IT SHOULD BE NOTED THAT THE GENERAL FUND COULD BE IMPACTED BY
CERTAIN PENDING MEDICAID ISSUES. CURRENTLY, LOUISIANA IS ELIGIBLE TO
RECEIVE UP TO $1.217 BILLION IN MEDICAID DISPROPORTIONATE SHARE PAYMENTS FOR
HOSPITALS. IN THE PAST, LOUISIANA HAS USED A PORTION OF THE AMOUNTS PAID
TO THE PUBLIC HOSPITALS IN THE STATE TO RETURN TO THE MEDICAID PROGRAM TO HELP
FINANCE THIS HEALTH CARE.
THE 1993 AMENDMENTS TO THE FEDERAL DISPROPORTIONATE SHARE LAW
SEVERELY RESTRICT THE STATE'S ABILITY TO CONTINUE TO HELP FINANCE HEALTH
CARE IN THIS MANNER. IT IS ESTIMATED THAT A TOTAL OF APPROXIMATELY $940 MILLION
IN DISPROPORTIONATE SHARE FUNDING WILL BE PAID OUT IN STATE FISCAL YEAR
1995, COMPARED TO THE TOTAL CAPPED AMOUNT AVAILABLE TO LOUISIANA OF $1.271
BILLION. THUS, THE 1993 AMENDMENTS REDUCED LOUISIANA'S DISPROPORTIONATE
SHARE FUND BY OVER $300 MILLION. IN FISCAL YEAR 1996, THE ESTIMATED LOSS OF
DISPROPORTIONATE SHARE FUNDING IS OVER $750 MILLION.
ON DECEMBER 31, 1994, LOUISIANA SUBMITTED A PROPOSED "SECTION 1115
WAIVER" TO THE FEDERAL GOVERNMENT TO SIGNIFICANTLY CHANGE ITS MEDICAID PROGRAM
TO ALLOW MORE FLEXIBILITY AND TO ADDRESS THE POTENTIAL FINANCING PROBLEM.
PRELIMINARY MEETINGS WITH HEALTH AND HUMAN SERVICES INDICATE THAT THE FEDERAL
GOVERNMENT IS INTERESTED IN DEVELOPING A JOINT SOLUTION TO LOUISIANA'S HEALTH
CARE FUNDING CRISIS AND IS WORKING WITH THE STATE ON THE WAIVER. THE WAIVER
PROPOSAL PROVIDES FOR A PHASE-IN OF A MANAGED CARE PROGRAM WITH EMPHASIS ON
PRIMARY AND PREVENTIVE SERVICES THROUGH A CAPITATED PAYMENT SYSTEM WHICH SHOULD
PROVIDE FOR MORE STABILITY AND CONTROLLED GROWTH IN THE MEDICAID PROGRAM. THE
STATE HAS RECEIVED A LETTER FROM U.S. SECRETARY OF HEALTH AND HUMAN SERVICES,
DONNA SHALALA, ADVISING THAT THEY HOPE TO REACH A FINAL AGREEMENT WITH 120 DAYS.
THE HEALTH CARE FINANCING ADMINISTRATION ("HCFA") HAS RECENTLY NOTIFIED
LOUISIANA THAT IT HAS QUESTIONS CONCERNING THE PROVIDER FEE LEGISLATION ENACTED
IN 1993. IF HCFA DISALLOWS THE PROVIDER FEE, THERE COULD BE A NEGATIVE $112
MILLION EFFECT AS OF JUNE 30, 1994. THE STATE IS EXPECTED TO AGGRESSIVELY OBJECT
TO ANY DISALLOWANCE BY HCFA.
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<PAGE>
ECONOMICALLY, LOUISIANA WILL CONTINUE TO BE AFFECTED BY WORLD ENERGY
MARKETS. APPROXIMATELY 15% OF THE NATION'S CRUDE OIL AND APPROXIMATELY 28% OF
ITS NATURAL GAS ARE PRODUCED IN LOUISIANA. IN THE PAST THE STATE HAS ESTIMATED
THAT UP TO 25% OF ITS ECONOMY IS DIRECTLY OR INDIRECTLY RELATED TO ENERGY. THIS
IS DESPITE THE FACT THAT ONLY 5.5% OF EMPLOYMENT IS IN OIL AND GAS EXTRACTION,
CHEMICALS AND ALLIED PRODUCTS AND PETROLEUM REFINING. OIL AND OIL RELATED JOBS
ALSO TEND TO BE AT RELATIVELY HIGH WAGES, MAGNIFYING THEIR ECONOMIC EFFECT.
SIMILARLY, ALTHOUGH SEVERANCE TAXES AND ROYALTIES ACCOUNTED FOR ALMOST 4.3% OF
OPERATING REVENUES FOR FISCAL YEAR 1993-1994, COMPARED WITH ALMOST 25% TEN YEARS
AGO, ENERGY RELATED ACTIVITY AFFECTS INDIVIDUAL AND CORPORATE TAXES, WHICH
TOGETHER WITH SALES TAXES ACCOUNT FOR 21.3% OF GENERAL REVENUES. UNEMPLOYMENT
DECLINED IN LOUISIANA FROM 12% IN 1987 TO 6.2% IN 1990. THIS WAS DUE IN PART TO
INCREASED EMPLOYMENT BUT ALSO TO OUT-MIGRATION OF POPULATION AND A DECLINE IN
LABOR FORCE. LOUISIANA'S JOBLESS RATE HAS SINCE RISEN TO 7.4% AS OF DECEMBER 31,
1994. THE COMPARABLE NATIONAL UNEMPLOYMENT RATE WAS 6.8%. IN ADDITION TO OIL AND
GAS, MAJOR CONTRIBUTORS TO LOUISIANA'S ECONOMY INCLUDE CHEMICAL PRODUCTION,
SHIPPING, AGRICULTURE AND TOURISM.
LOUISIANA'S DEBT BURDEN IS WELL ABOVE THAT OF OTHER STATES, WHILE
WEALTH AND INCOME INDICATORS ARE BELOW THE NATIONAL AVERAGE. IN 1993, FOR
EXAMPLE, THE MOST RECENT YEAR FOR WHICH DATA IS AVAILABLE, LOUISIANA'S PER
CAPITA PERSONAL INCOME WAS 80% OF THE UNITED STATES AVERAGE. ACCORDING TO
MOODY'S, LOUISIANA'S STATE-LEVEL TAX SUPPORTED DEBT IS THE SIXTH HIGHEST AS A
PERCENTAGE OF PERSONAL INCOME AND EIGHTH HIGHEST ON A PER-CAPITA BASIS.
MUNICIPAL OBLIGATIONS ARE SUBJECT TO THE PROVISIONS OF BANKRUPTCY,
INSOLVENCY AND OTHER LAWS AFFECTING THE RIGHTS AND REMEDIES OF CREDITORS, SUCH
AS THE FEDERAL BANKRUPTCY CODE, AND LAWS, IF ANY, WHICH MAY BE ENACTED BY
CONGRESS OR STATE LEGISLATURES EXTENDING THE TIME FOR PAYMENT OF PRINCIPAL OR
INTEREST, OR BOTH, OR IMPOSING OTHER CONSTRAINTS UPON ENFORCEMENT OF SUCH
OBLIGATIONS OR UPON MUNICIPALITIES TO LEVY TAXES. THERE IS ALSO THE POSSIBILITY
THAT AS A RESULT OF LITIGATION OR OTHER CONDITIONS THE POWER OR ABILITY OF ANY
ONE OR MORE ISSUERS TO PAY WHEN DUE PRINCIPAL OR INTEREST ON ITS OR THEIR
MUNICIPAL OBLIGATIONS MAY BE MATERIALLY AFFECTED.
INVESTMENT RESTRICTIONS
Unless otherwise specifically noted, the following investment
restrictions may be changed with respect to a particular Fund only by a vote of
a majority of the outstanding Shares of that Fund. See "ADDITIONAL INFORMATION--
Miscellaneous" in this Statement of Additional Information.
None of the Funds may:
1. Purchase securities on margin, sell securities short, or participate
in a joint or joint and several basis in any securities trading account, except,
in the case of the Municipal
B-45
<PAGE>
Bond Funds, for use of short-term credit necessary for clearance of purchases of
portfolio securities.
2. Underwrite the securities of other issuers except to the extent that
a Fund may be deemed to be an underwriter under certain securities laws in the
disposition of "restricted securities."
3. Purchase or sell commodities or commodity contracts (including
futures contracts), except that for bona fide hedging and other permissible
purposes: (i) the Equity, Bond and International Equity Index Funds may purchase
or sell financial futures contracts and may purchase call or put options on
financial futures contracts, and (ii) the International Equity Index Fund may
purchase or sell foreign currency futures contracts and foreign currency forward
contacts, and may purchase put or call options on foreign currency futures
contracts and on foreign currencies on appropriate U.S. exchanges, and may
purchase or sell foreign currency on a spot basis.
4. Purchase participation or other direct interests in oil, gas or
mineral exploration or development programs (although investments by all Funds
other than the U.S. Treasury Securities Money Market, Treasury Money Market,
Treasury Only Money Market and Government Money Market Funds in marketable
securities of companies engaged in such activities are not hereby precluded).
5. Invest in any issuer for purposes of exercising control or
management.
6. Purchase securities of other investment companies except as
permitted by the 1940 Act and the rules and regulations thereunder.
7. Purchase or sell real estate (however, each Fund except the Money
Market Funds may, to the extent appropriate to its investment objective,
purchase securities secured by real estate or interests therein or securities
issued by companies investing in real estate or interests therein).
8. Borrow money or issue senior securities, except that each Fund may
borrow from banks or enter into reverse repurchase agreements for temporary
purposes in amounts up to 10% of the value of its total assets at the time of
such borrowing; or mortgage, pledge, or hypothecate any assets, except in
connection with any such borrowing and in amounts not in excess of the lesser of
the dollar amounts borrowed or 10% of the value of the Fund's total assets at
the time of its borrowing. A Fund will not purchase securities while its
borrowings (including reverse repurchase agreements) in excess of 5% of its
total assets are outstanding.
B-46
<PAGE>
In addition, the U.S. Treasury Securities Money Market, the Prime Money
Market and the Institutional Money Market Funds may not:
1. Buy common stocks or voting securities.
In addition, the U.S. Treasury Securities Money Market, the Prime Money
Market, and the Government Money Market Funds may not:
1. Buy STATE, municipal, or private activity bonds.
The following investment restrictions are non-fundamental except as
noted otherwise and therefore can be changed by the Board of Trustees without
prior shareholder approval.
No Fund may:
1. Purchase or retain securities of any issuer if the officers or
Trustees of the Trust or the officers or directors of its Adviser owning
beneficially more than one-half of 1% of the securities of such issuer together
own beneficially more than 5% of such securities.
2. Invest more than 5% of a Fund's total assets in the securities of
issuers which together with any predecessors have a record of less than three
years continuous operation. (This restriction shall not apply to investments in
asset-backed securities and other mutual funds authorized for purchase by such
Fund, as described in its Prospectus. For purposes of this restriction, an
"Asset-Backed Security" means a debt obligation issued by a limited-purpose
entity whose primary business activity is acquiring and holding financial
assets.) (This restriction is fundamental with respect to the Ohio Municipal
Money Market Fund.)
3. Invest in illiquid securities in an amount exceeding, in the
aggregate 15% of the Fund's net assets (10% of net assets for a Fund that is a
Money Market Fund). An illiquid security is a security which cannot be disposed
of promptly (within seven days) and in the usual course of business without a
loss, and includes repurchase agreements maturing in excess of seven days, time
deposits with a withdrawal penalty, non-negotiable instruments and instruments
for which no market exists. (This restriction is fundamental with respect to the
Ohio Municipal Money Market Fund.)
The Equity Funds, the Municipal Bond Funds, and the Institutional Money Market
Funds may not:
1. Acquire securities that are subject to restrictions on resale
because they are not registered under the Securities Act of 1933, if
such investment would exceed 5% of the Fund's total assets.
Each of the Asset Allocation and Intermediate Bond Funds may not:
B-47
<PAGE>
1. Invest more than 15% of its NET assets in securities with legal or
contractual restrictions on resale. However, this restriction shall not
apply to securities eligible for resale to institutional buyers under
Rule 144A of the Securities and Exchange Commission or to securities
that become a part of the Fund's assets through merger, exchange or
recapitalization involving securities already held in a Fund.
None of the Money Market Funds or Institutional Money Market Funds may:
1. Write or purchase call options.
2. Write or purchase put options except that each of the Ohio Municipal
Money Market, Municipal Money Market and Tax-Exempt Money Market Funds
may acquire puts with respect to Municipal Securities in its portfolio
and sell those puts in conjunction with a sale of those Municipal
Securities.
The MUNICIPAL INCOME Fund, Ohio Municipal Money Market Fund, Municipal Money
Market Fund and the Tax-Exempt Money Market Fund may not:
1. Write or sell puts, calls, straddles, spreads or combinations
thereof except that a Fund may acquire puts with respect to Municipal
Securities in its portfolio and sell those puts in conjunction with a
sale of those Municipal Securities.
The Government ARM Fund may not:
1. Purchase any securities which would cause more than 25% of the total
assets of the Fund to be invested in the securities of one or more
issuers conducting their principal business activities in the same
industry, provided that this limitation does not apply to investments
in obligations issued or guaranteed by the U.S. government or its
agencies and instrumentalities and repurchase agreements involving such
securities. For purposes of this limitation (i) utility companies will
be divided according to their services, for example, gas, gas
transmission, electric and telephone will each be considered a separate
industry; and (ii) wholly-owned finance companies will be considered to
be in the industries of their parents if their activities are primarily
related to financing the activities of their parents.
Additionally, although not a matter controlled by their fundamental
investment policies or restrictions (and therefore subject to change without
Shareholder approval), the Equity Funds and the Bond Funds will not, so long as
their Shares are registered under the securities laws of the State of Texas and
such restrictions are required as a consequence of such registration, (1) invest
more than 5% of any Fund's net assets in warrants; provided that, of this 5%, no
more than 2% will be in warrants that are not listed on the New York Stock
Exchange or the American Stock Exchange or (2) invest more than 15% of any
Fund's net assets in securities which are not readily marketable. For purposes
of restriction (1) in the
B-48
<PAGE>
preceding sentence, warrants acquired by a Fund in units or attached to other
securities may be deemed to be without value.
Additionally, although not a matter controlled by their fundamental
investment policies or restrictions (and therefore subject to change without
Shareholder approval), the Equity Funds, the Bond Funds, the Municipal Money
Market Fund, the U.S. Treasury Securities Money Market Fund, the Prime Money
Market Fund, the Intermediate Tax-Free Bond Fund, the MUNICIPAL INCOME Fund, and
the Texas Tax-Free Bond Fund will not, so long as their Shares are registered
under the securities laws of the State of Texas and such restrictions are
required as a consequence of such registration, (1) purchase participations or
other direct interests in oil, gas, or mineral explorations or development
programs and oil, gas or mineral leases, or (2) purchase or sell real estate or
real estate limited partnership interests.
Additionally, although not a matter controlled by their fundamental
investment policies or restrictions (and therefore subject to change without
Shareholder approval), each of the Funds may, so long as their Shares are
registered under the securities laws of the State of California and such
restrictions are required as a consequence of such registration, purchase
securities of other open-end investment companies, provided that the adviser
will waive its fee on that portion of the assets placed in such open-end
investment companies.
Additionally, although not a matter controlled by their fundamental
investment policies or restrictions (and therefore subject to change without
Shareholder approval), so long as its Shares are registered under the securities
laws of the State of Arkansas and such restrictions are required as a
consequence of such registration, (1) none of the Money Market Funds, the
Institutional Money Market Funds or the Bond Funds may acquire securities that
are subject to restrictions on resale because they are not registered under the
Securities Act of 1933, if such investment would exceed 10% of such Fund's NET
assets; and (2) none of the International Equity Index Fund, the Equity Index
Fund, the Tax Exempt Money Market Fund or the Government Money Market Fund will
invest in puts, calls, straddles, spreads or any combination thereof if such
investment would exceed 5% of such Fund's total assets.
Additionally, although not a matter controlled by its fundamental
investment policies or restrictions (and therefore subject to change without
Shareholder approval), so long as its Shares are registered under the securities
laws of the State of Ohio, and such restriction is required as a consequence of
such registration, none of the Intermediate Tax-Free Bond Fund or the
Institutional Money Market Funds will acquire securities which are restricted as
to disposition, in excess of fifteen percent (15%) of such Fund's net assets.
PORTFOLIO TURNOVER
The portfolio turnover rate for each Fund is calculated by dividing the
lesser of purchases or sales of portfolio securities for the year by the monthly
average value of the portfolio securities. The calculation excludes all
securities whose maturities at the time of
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<PAGE>
acquisition were one year or less. Thus, for regulatory purposes, the portfolio
turnovers with respect to the Money Market Funds were zero for the period from
the commencement of their respective operations to June 30, 1995 and are
expected to remain zero, and the portfolio turnover rate with respect to the
Institutional Money Market Funds is expected to be zero.
The portfolio turnover rates of the Funds for the fiscal years ended
June 30, 1995 and 1994 were as follows:
THE ONE GROUP(R)
PORTFOLIO TURNOVER
<TABLE>
<CAPTION>
FISCAL YEAR ENDED
JUNE 30,
--------------------------
FUND 1995 1994
- -----------------------------------------------------------------------------------
<S> <C> <C>
U.S. Treasury Securities Money Market 0%** 0%**
Prime Money Market 0%** 0%**
Municipal Money Market 0%** 0%**
Ohio Municipal Money Market 0%** 0%**
Income Equity 4.03% 22.69%
Disciplined Value 176.66% 56.33%
Growth OPPORTUNITIES 132.63% 70.67%
Equity Index 2.71% 11.81%
Large Company Value 203.13% 111.72%
Asset Allocation 115.36% 56.55%
International Equity Index 4.67% 7.74%
Large Company Growth 14.22% 9.04%
Income Bond 262.25% 131.04%
Limited Volatility Bond 76.43% 30.61%
Intermediate Tax-Free Bond 199.76% 105.98%
MUNICIPAL INCOME 66.02% 101.48%
Ohio Municipal Bond 77.69% 16.77%
Government Bond 106.14% 377.78%
Government ARM 2.91% 242.20%
Intermediate Bond 99.71%*** 85.62%
Treasury Only Money Market 0%** 0%**
Government Money Market 0%** 0%**
Kentucky Municipal Bond 19.75%**** ****
Institutional Prime Money Market NA* NA*
Treasury Money Market NA* NA*
Tax-Exempt Money Market NA* NA*
Arizona Tax-Free Bond NA* NA*
Texas Tax-Free Bond NA* NA*
W. Virginia Tax-Free Bond NA* NA*
LOUISIANA MUNICIPAL BOND NA* NA*
VALUE GROWTH NA* NA*
GULF SOUTH GROWTH NA* NA*
</TABLE>
- ---------------------
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<PAGE>
* As of June 30, 1995, the Fund had not commenced operations.
** Turnover rate is not applicable to money market funds.
*** Portfolio turnover rate for the period from November 1, 1994 to June 30,
1995.
**** Portfolio turnover rate for the period from January 20, 1995 to June
30, 1995 for Class A and Fiduciary Class shares and from March 16, 1995
(commencement of operations) to June 30, 1995 for Class B shares. For
the period from February 1, 1994 to January 19, 1995 the portfolio
turnover rate was 10.00% and for the period from March 12, 1993 to
January 31, 1994 the portfolio turnover rate was 5.00%.
The high portfolio turnover rates for the fiscal year ended June 30, 1995
for the Disciplined Value Fund, Growth OPPORTUNITIES Fund, Large Company Value
Fund, Asset Allocation Fund, Income Bond Fund, Intermediate Tax-Free Bond,
Government Bond Fund, and Intermediate Bond Fund resulted from various factors,
including some or all of the following: investment strategies, decreasing
interest rates, unusually high market volatility and significant growth of the
Fund. Portfolio turnover may vary greatly from year to year as well as within a
particular year, and may also be affected by cash requirements for redemptions
of Shares and by requirements which enable the Trust to receive certain
favorable tax treatments. Portfolio turnover will not be a limiting factor in
making portfolio decisions.
ADDITIONAL TAX INFORMATION CONCERNING ALL FUNDS OF THE TRUST
It is the policy of each Fund of the Trust to meet the requirements
necessary to qualify as a "regulated investment company" under Subchapter M of
the Internal Revenue Code of 1986, as amended (the "Code"). By following such
policy, each Fund expects to eliminate or reduce to a nominal amount the federal
income taxes to which it may be subject.
In order to qualify as a regulated investment company, each Fund of the
Trust must, among other things, (1) derive at least 90% of its gross income from
dividends, interest, payments with respect to securities loans, and gains from
the sale or other disposition of stock or securities, foreign currencies or
other income (including gains from options, futures or forward contracts)
derived with respect to its business of investing in stock, securities or
currencies, (2) derive less than 30% of its gross income from the sale or other
disposition of stock, securities, options, futures, forward contracts, and
certain foreign currencies (or certain options, futures, or forward contracts on
foreign currencies) held for less than three months, and (3) diversify its
holdings so that at the end of each quarter of its taxable year (i) at least 50%
of the market value of the Fund's assets is represented by cash or cash items,
United States government securities, securities of other regulated investment
companies, and other securities limited, in respect of any one issuer, to an
amount not greater than 5% of the value of the Fund's assets and 10% of the
outstanding voting securities of such issuer, and (ii) not more than 25% of the
value of its assets is invested in the securities of any one issuer (other than
United States government securities or the securities of other regulated
investment companies) or of two or more issuers that the Fund controls and that
are engaged in the same, similar, or related trades or businesses. These
requirements may restrict the degree to which the Fund may engage in short-term
trading and limit the range of the Fund's investments. If a
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<PAGE>
Fund of the Trust qualifies as a regulated investment company, it will not be
subject to federal income tax on the part of its income distributed to
Shareholders, provided the Fund distributes during its taxable year at least (a)
90% of its taxable net investment income (very generally, dividends, interest,
certain other income, and the excess, if any, of net short-term capital gain
over net long-term loss), and (b) 90% of the excess of (i) its tax-exempt
interest income (if any) less (ii) certain deductions attributable to that
income. Each Fund of the Trust intends to make sufficient distributions to
Shareholders to qualify for this special tax treatment.
If a Fund failed to qualify as a regulated investment company receiving
special tax treatment in any taxable year, the Fund would be subject to tax on
its taxable income at corporate rates, and all distributions from earnings and
profits, including any distributions of net tax-exempt income and net long-term
capital gains, would be taxable to Shareholders as ordinary income. In addition,
the Fund could be required to recognize unrealized gains, pay substantial taxes
and interest and make substantial distributions before requalifying as a
regulated investment company and being accorded special tax treatment.
Regulated investment companies that do not distribute in each calendar
year (regardless of whether they otherwise have a non-calendar taxable year) an
amount equal to 98% of their "ordinary income" (as defined) for the calendar
year, plus 98% of their capital gain net income (as defined) for the one-year
period ending on October 31 of such calendar year, plus any undistributed
amounts from the previous year are subject to a non-deductible excise tax equal
to 4% of the undistributed amounts. For purposes of the excise tax, a Fund is
treated as having distributed any amount on which it is subject to income tax
for any taxable year ending in such calendar year. Each Fund of the Trust
intends to make sufficient distributions to avoid liability for the excise tax.
Shareholders of the Funds will generally pay federal income tax on
distributions received from the Funds. Dividends that are attributable to a
Fund's net investment income will be taxed to shareholders as ordinary income.
Distributions of net capital gain that are designated by a Fund as capital gain
dividends will generally be taxable to a Shareholder receiving such
distributions as long-term capital gain regardless of how long the Shareholder
has held its shares. Distributions in excess of a Fund's current and accumulated
"earnings and profits" will be treated by a Shareholder receiving such
distributions as a return of capital to the extent of such Shareholder's basis
in its Shares in the Fund, and thereafter as capital gain. A return of capital
is not taxable, but reduces a Shareholder's basis in its shares. Shareholders
not subject to tax on their income generally will not be required to pay tax on
amounts distributed to them. The sale, exchange or redemption of Fund shares by
a Shareholder may give rise to a taxable gain or loss to that Shareholder. In
general, any gain or loss realized upon a taxable disposition of shares will be
treated as long-term capital gain or loss if the Shareholder has held the shares
for more than 12 months, and otherwise as short-term capital gain or loss.
However, if a Shareholder sells shares at a loss within six months of purchase,
any loss will be disallowed for Federal income tax purposes to the extent of any
exempt-
B-52
<PAGE>
interest dividends received on such shares. In addition, any loss (not already
disallowed as provided in the preceding sentence) realized upon a taxable
disposition of shares held for six months or less will be treated as long-term
to the extent of any long-term capital gain distributions received by the
Shareholder with respect to the shares. All or a portion of any loss realized
upon a taxable disposition of Fund shares will be disallowed if other Fund
shares are purchased within 30 days before or after the disposition. In such a
case, the basis of the newly purchased shares will be adjusted to reflect the
disallowed loss.
Certain investment and hedging activities of the Funds, including
transactions in options, futures contracts, hedging transactions, forward
contracts, straddles, foreign currencies, and foreign securities will be subject
to special tax rules. In a given case, these rules may accelerate income to the
Fund, defer losses to the Fund, cause adjustments in the holding periods of the
Fund's securities, convert short-term capital losses into long-term capital
losses, or otherwise affect the character of the Fund's income. These rules
could therefore affect the amount, timing and character of distributions to
Shareholders. Income earned as a result of these transactions would, in general,
not be eligible for the dividends-received deduction or for treatment as exempt-
interest dividends when distributed to Shareholders. The Fund will endeavor to
make any available elections pertaining to such transactions in a manner
believed to be in the best interest of the Fund.
Certain securities purchased by the Funds (such as STRIPS, CUBES, TRS,
TIGRS, and CATS), as defined in the Description of Permitted Investments in the
Funds' Prospectuses, are sold at original issue discount and thus do not make
periodic cash interest payments. A Fund will be required to include as part of
its current income for tax purposes the imputed interest on such obligations
even though the Fund has not received any interest payments on such obligations
during that period. Because each Fund distributes substantially all of its net
investment income to its Shareholders (including such imputed interest), the
Fund may have to sell portfolio securities in order to generate the cash
necessary for the required distributions. Such sales may occur at a time when
the Adviser would not have chosen to sell such securities and may result in a
taxable gain or loss.
A Fund will be required in certain cases to withhold and remit to the
United States Treasury 31% of taxable dividends or of gross proceeds from
redemptions paid to any individual Shareholder who has provided to the Fund
either an incorrect tax identification number or no number at all, or who is
subject to withholding by the Internal Revenue Service for failure properly to
report payments of interest or dividends. This withholding, known as backup
withholding, is not an additional tax, and any amounts withheld may be credited
against the Shareholder's ultimate U.S. tax liability.
The foregoing is only a summary of some of the important federal tax
considerations generally affecting purchasers of Shares of a Fund of the Trust.
Further tax information regarding the Tax-Free Funds and the International
Equity Index Fund is included in following sections of this Statement of
Additional Information. No attempt is made to present herein a
B-53
<PAGE>
complete explanation of the federal income tax treatment of each Fund or its
Shareholders, and this discussion is not intended as a substitute for careful
tax planning. Accordingly, prospective purchasers of Shares of a Fund are urged
to consult their tax advisers with specific reference to their own tax
situation, including the potential application of state, local and (if
applicable) foreign taxes.
The foregoing discussion and the discussion below regarding the
Tax-Free Funds and the International Equity Index Fund are based on tax laws and
regulations which are in effect on the date of this Statement of Additional
Information; such laws and regulations may be changed by legislative, judicial
or administrative action, and such changes may be retroactive.
ADDITIONAL TAX INFORMATION CONCERNING THE TAX-FREE FUNDS
The Code permits a regulated investment company which has invested, at
the close of each quarter of its taxable year, at least 50% of its assets in
tax-free Municipal Securities and other securities the interest on which is
exempt from the regular federal income tax to pay exempt-interest dividends to
its Shareholders.
The policy of each Tax-Free Fund is to distribute each year as
exempt-interest dividends substantially all the Fund's net exempt interest
income. An exempt-interest dividend is any dividend or part thereof (other than
a capital gain dividend) paid by a Tax-Free Fund and designated as an
exempt-interest dividend in a written notice mailed to Shareholders after the
close of the Fund's taxable year, which does not exceed, in the aggregate, the
net interest income from Municipal Securities and other securities the interest
on which is exempt from the regular federal income tax received by the Fund
during the taxable year. The percentage of the total dividends paid for any
taxable year which qualifies as federal exempt-interest dividends will be the
same for all Shareholders receiving dividends from a Tax-Free Fund during such
year, regardless of the period for which the Shares were held.
Exempt-interest dividends may generally be treated by a Tax-Free Fund's
Shareholders as items of interest excludable from their gross income under
Section 103(a)(1) of the Code. However, each Shareholder of a Tax-Free Fund is
advised to consult his or her tax adviser with respect to whether such
Shareholder may be treated as a "substantial user" or a "related person" to such
user under Section 147(a) with respect to facilities financed through any of the
tax-exempt obligations held by the Fund. "Substantial user" is defined under
U.S. Treasury Regulations to include a non-exempt person who regularly uses a
part of such facilities in his trade or business and (a)(i) whose gross revenues
derived with respect to the facilities financed by the issuance of bonds are
more than 5% of the total revenues derived by all users of such facilities or
(ii) who occupies more than 5% of the usable area of the facility or (b) for
whom such facilities or a part thereof were specifically constructed,
reconstructed or acquired. "Related persons" includes certain related natural
persons, affiliated corporations, partners and partnerships.
B-54
<PAGE>
Dividends attributable to interest on certain private activity bonds
issued after August 7, 1986 must be included in alternative minimum taxable
income for purposes of determining liability (if any) for the alternative
minimum tax applicable to individuals and the alternative minimum tax applicable
to corporations. In the case of corporations, all tax-exempt interest dividends
will be taken into account in determining adjusted current earnings for the
purpose of computing the alternative minimum tax imposed on corporations (as
defined for federal income tax purposes).
Each Tax-Free Fund may at times purchase Municipal Securities (or other
securities the interest on which is exempt from the regular federal income tax)
at a discount from the price at which they were originally issued. For federal
income tax purposes, some or all of the market discount will be included in the
Fund's ordinary income and will be taxable to shareholders as such when it is
distributed to them.
Each Tax-Free Fund may acquire rights regarding specified portfolio
securities under puts. See "Puts." The policy of each Tax-Free Fund is to limit
its acquisition of puts to those under which the Fund will be treated for
federal income tax purposes as the owner of the Municipal Securities acquired
subject to the put and the interest on the Municipal Securities will be
tax-exempt to the Fund. Although the Internal Revenue Service has issued a
published ruling that provides some guidance regarding the tax consequences of
the purchase of puts, there is currently no guidance available from the Internal
Revenue Service that definitively establishes the tax consequences of many of
the types of puts that the Funds could acquire under the 1940 Act. Therefore,
although a Tax-Free Fund will only acquire a put after concluding that it will
have the tax consequences described above, the Internal Revenue Service could
reach a different conclusion from that of the Fund.
The foregoing is only a summary of some of the important tax
considerations generally affecting purchasers of Shares of a Tax-Free Fund.
Additional tax information concerning all Funds of the Trust is contained in the
immediately preceding section of this Statement of Additional Information. No
attempt is made to present a complete explanation of the federal income tax
treatment of each Tax-Free Fund or its Shareholders, and this discussion is not
intended as a substitute for careful tax planning. Accordingly, prospective
purchasers of Shares of a Tax-Free Fund are urged to consult their tax advisers
with specific reference to their own tax situation, including the potential
application of state, local and foreign taxes.
ADDITIONAL TAX INFORMATION CONCERNING THE INTERNATIONAL EQUITY INDEX FUND
Transactions of the International Equity Index Fund in foreign
currencies, foreign currency denominated debt securities and certain foreign
currency options, future contracts and forward contracts (and similar
instruments) may result in ordinary income or loss to the Fund for federal
income tax purposes which will be taxable to the Shareholders as such when it is
distributed to them.
B-55
<PAGE>
Gains from foreign currencies (including foreign currency options,
foreign currency futures and foreign currency forward contracts) will constitute
qualifying income for purposes of the 90% test. However, future Treasury
regulations may exclude from qualifying income foreign currency gains not
directly related to the Trust's business of investing in stock or securities
(and may further define those foreign currency transactions that are not
directly related).
Investment by the International Equity Index Fund in certain "passive
foreign investment companies" could subject the Fund to a U.S. federal income
tax or other charge on proceeds from the sale of its investment in such a
company or other distributions from such a company, which tax cannot be
eliminated by making distributions to International Equity Index Fund
Shareholders. If the International Equity Index Fund elects to treat a passive
foreign investment company as a "qualified electing fund," different rules would
apply, although the International Equity Index Fund does not expect to make such
an election. Rather, the Fund intends to avoid such tax or other charge by
making an election to mark such investments to market annually.
FOREIGN TAX CREDIT
If more than 50% of the International Equity Index Fund's TOTAL assets
at year end consist of the debt and equity securities of foreign corporations,
the Fund intends to elect to permit its Shareholders who are U.S. citizens to
claim a foreign tax credit or deduction on their U.S. income tax returns for
their pro rata share of foreign taxes paid by the Fund. In that case,
Shareholders will be required to include in gross income their pro rata share of
foreign taxes paid by the Fund. Each Shareholder may then claim a foreign tax
credit or a tax deduction that would offset some or all of the increased tax
liability. Generally, a credit for foreign taxes is subject to the limitation
that it may not exceed the Shareholder's U.S. tax attributable to his or her
total foreign source taxable income. For this purpose, the source of the income
to the International Equity Index Fund flows through to the Fund's Shareholders.
Gains to the International Equity Index Fund from the sale of securities
generally will be treated as derived from U.S. sources and certain currency
fluctuation gains, including fluctuation gains from foreign currency denominated
debt securities, receivables and payables, will be treated as ordinary income
derived from U.S. sources. With limited exceptions, the foreign tax credit is
allowed to offset only 90% of the alternative minimum tax imposed on
corporations and individuals. Because of these limitations, Shareholders may be
unable to claim a credit for the full amount of their proportionate share of the
foreign taxes paid by the International Equity Index Fund.
The foregoing is only a general description of the treatment of foreign
source income or foreign taxes under the United States federal income tax laws.
Because the availability of a credit or deduction depends on the particular
circumstances of each Shareholder, Shareholders are advised to consult their own
tax advisers.
B-56
<PAGE>
VALUATION
VALUATION OF THE MONEY MARKET AND INSTITUTIONAL MONEY MARKET FUNDS
The Money Market and Institutional Money Market Funds have elected to
use the amortized cost method of valuation pursuant to Rule 2a-7 under the 1940
Act. This involves valuing an instrument at its cost initially and thereafter
assuming a constant amortization to maturity of any discounts or premium,
regardless of the impact of fluctuating interest rates on the market value of
the instrument. This method may result in periods during which value, as
determined by amortized cost, is higher or lower than the price each Fund would
receive if it sold the instrument. The value of securities in the Funds can be
expected to vary inversely with changes in prevailing interest rates.
Pursuant to Rule 2a-7, the Money Market and Institutional Money Market
Funds will maintain a dollar-weighted average portfolio maturity appropriate to
their objective of maintaining a stable net asset value per Share, provided that
no Fund will purchase any security with a remaining maturity of more than 397
days (securities subject to repurchase agreements and certain variable or
floating rate instruments may bear longer maturities) nor maintain a
dollar-weighted, average portfolio maturity which exceeds 90 days. The Trust's
Board of Trustees has also undertaken to establish procedures reasonably
designed, taking into account current market conditions and a Fund's investment
objective, to stabilize the net asset value per Share of the Money Market Funds
for purposes of sales and redemptions at $1.00. These procedures include review
by the Trustees, at such intervals as they deem appropriate, to determine the
extent, if any, to which the net asset value per Share of each Fund calculated
by using available market quotations deviates from $1.00 per Share. In the event
such deviation exceeds one half of one percent, the Rule requires that the Board
promptly consider what action, if any, should be initiated. If the Trustees
believe that the extent of any deviation from a Fund's $1.00 amortized cost
price per Share may result in material dilution or other unfair results to new
or existing investors, they will take such steps as they consider appropriate to
eliminate or reduce to the extent reasonably practicable any such dilution or
unfair results. These steps may include selling portfolio instruments prior to
maturity, shortening the average portfolio maturity, withholding or reducing
dividends, reducing the number of a Fund's outstanding Shares without monetary
consideration, or utilizing a net asset value per Share determined by using
available market quotations.
VALUATION OF THE EQUITY FUNDS, THE BOND FUNDS AND THE MUNICIPAL BOND FUNDS
Except as noted below, investments of the Asset Allocation Fund, Equity
Funds, Bond Funds, and Municipal Bond Funds of the Trust in securities the
principal market for which is a securities exchange are valued at their market
values based upon the latest available sales price or, absent such a price, by
reference to the latest available bid and asked prices in the principal market
in which such securities are normally traded. Except as noted below, investments
of the International Equity Index Fund in securities the principal market for
which is a securities
B-57
<PAGE>
exchange are valued at the closing mid-market price on that exchange on the day
of computation. With regard to each of the above-mentioned Funds, securities the
principal market for which is not a securities exchange are valued at the mean
of their latest bid and ask quotations in such principal market. Securities and
other assets for which quotations either (1) are not readily available or (2) in
the case of the International Equity Index Fund are determined by that Fund's
Adviser or Sub-Adviser to not accurately reflect their value are valued at their
fair value as determined in good faith under consistently applied procedures
established by and under the general supervision of the Trustees of the Trust.
Short-term securities are valued at either amortized cost or original cost plus
accrued interest, which approximates current value.
The value of a foreign security is determined in its national currency
as of the close of trading on the foreign exchange or other principal market on
which it is traded, which value is then converted into its U.S. dollar
equivalent at the foreign exchange closing mid-market rate reported in the
Financial Times as the closing rate for that date. When an occurrence
subsequent to the time a value of a foreign security was so established is
likely to have changed the value, then the fair value of those securities will
be determined by consideration of other factors by or under the direction of the
Trustees of the Trust or their delegates.
Securities for which market quotations are readily available will be
valued on the basis of quotations provided by dealers in such securities or
furnished by a pricing service. Securities for which market quotations are not
readily available and other assets will be valued at fair value using methods
determined in good faith by the Investment Adviser under the supervision of the
Trustees and may include yield equivalents or a pricing matrix.
ADDITIONAL INFORMATION REGARDING THE CALCULATION
OF PER SHARE NET ASSET VALUE
The net asset value of each Fund is determined and its Fiduciary Class,
Class A, Class B and Service Class Shares are priced as of the times specified
in each Fund's Prospectus. The net asset value per Share of each Fund's
Fiduciary Class, Class A, Class B and Service Class Shares is calculated by
determining the value of the respective Class's proportional interest in the
securities and other assets of the Fund, less (i) such Class's proportional
share of general liabilities and (ii) the liabilities allocable only to such
Class, and dividing such amount by the number of Shares of the Class
outstanding. The net asset value of a Fund's Fiduciary Class, Class A, Class B
and Service Class Shares may differ from each other due to the expense of the
Distribution and Shareholders Services Plan fee applicable to a Fund's Class A,
Class B and Service Class Shares.
B-58
<PAGE>
ADDITIONAL PURCHASE AND REDEMPTION INFORMATION
All of the classes of Shares in each Fund are sold on a continuous
basis by The One GROUP Services Company (the "Distributor"), and the
Distributor has agreed to use appropriate efforts to solicit all purchase
orders.
Fiduciary Class Shares in a Fund may be purchased, through procedures
established by the Distributor, by institutional investors, including affiliates
of BANC ONE CORPORATION and any bank, depository institution, insurance company,
pension plan or other organization authorized to act in fiduciary, advisory,
agency, custodial or similar capacities.
Class A and Class B Shares may be purchased by any investor that does
not meet the purchase eligibility criteria, described above, with respect to
Fiduciary Shares. In addition to purchasing Class A and Class B Shares directly
from the Distributor, an investor may purchase Class A and Class B Shares
through a financial institution, such as a bank, savings and loan association,
insurance company (each a "Shareholder Servicing Agent") that has established a
Shareholder servicing agreement with the Distributor, or through a broker-dealer
that has established a dealer agreement with the Distributor. Questions
concerning the eligibility requirements for each class of the Trust's Shares may
be directed to the Distributor at 1-800-480-4111.
Service Class Shares are available only in the Prime Money Market and
U.S. Treasury Securities Money Market Funds. This class of shares is available
to broker-dealers, other financial intermediaries, banks and other depository
institutions requiring special administrative and accounting services
(e.g., sweep processing).
As described in each Prospectus for each of the Equity and Bond Funds,
and in the Multiple Class Plan, under certain circumstances, Class A Shares of a
Fund may be purchased free of the sales charge applicable to such Class A
Shares. No sales charge is imposed on Class A Shares of the Funds: (i) issued
through reinvestment of dividends and capital gains distributions; (ii) acquired
through the exercise of exchange privileges where a comparable sales charge has
been paid for exchanged Shares; (iii) purchased by officers, directors or
trustees, retirees and employees (and their spouses and immediate family
members) of the Trust, of BANC ONE CORPORATION and its subsidiaries and
affiliates, of the Distributor and its subsidiaries and affiliates, or of an
investment sub-adviser of a Fund of the Trust and such sub-adviser's
subsidiaries and affiliates; (iv) sold to affiliates of BANC ONE CORPORATION and
certain accounts (other than Individual Retirement Accounts) for which financial
organizations, including any bank, depository institution, insurance company,
pension plan or other organization are authorized to act in fiduciary, advisory,
agency, custodial or similar capacities, or purchased by investment advisers,
financial planners or other intermediaries who have a dealer arrangement with
the Distributor, who place trades for their own accounts or for the accounts of
their clients and who charge a management, consulting or other fee for their
services, as well as clients of such investment advisers, financial planners or
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<PAGE>
other intermediaries who place trades for their own accounts if the accounts are
linked to the master account of such investment adviser, financial planner or
other intermediary; (v) purchased with proceeds from the recent redemption of
Fiduciary Class Shares of a Fund of the Trust or acquired in an exchange of
Fiduciary Class Shares of a Fund for Class A Shares of the same Fund; (vi)
purchased with proceeds from the recent redemption of Shares of a mutual Fund
(other than a Fund of the Trust) for which a sales charge was paid; (vii)
purchased in an Individual Retirement Account with the proceeds of a
distribution from an employee benefit plan, provided that, at the time of
distribution, the employee benefit plan had plan assets invested in a Fund of
the Trust; (viii) purchased with Trust assets; (ix) purchased in accounts as to
which a bank or broker-dealer charges an asset allocation fee, provided the bank
or broker-dealer has an agreement with the Distributor; or (x) directly
purchased with the proceeds of a distribution on a bond for which a Banc One
Corporation affiliate bank or trust company is the Trustee or Paying Agent.
An investor relying upon any of the categories of waivers of the sales
charge must qualify for such waiver in advance of the purchase with the
Distributor or the financial institution or intermediary through which Shares
are purchased by the investor.
The waiver of the sales charge under circumstances (v), (vi), and (vii)
above applies only if the purchase is made within 60 days of the redemption and
if conditions imposed by the Distributor are met. The waiver policy with respect
to the purchase of Shares through the use of proceeds from a recent redemption
or distribution as described in clauses (v), (vi), and (vii) above will not be
continued indefinitely and may be discontinued at any time without notice.
Investors should call the Distributor at 1-800-480-4111 to determine whether
they are eligible to purchase Shares without paying a sales charge through the
use of proceeds from a recent redemption or distribution as described above, and
to confirm continued availability of these waiver policies prior to initiating
the procedures described in clauses (v), (vi), and (vii).
Fiduciary Class Shareholders of a Fund may exchange their Shares for
Class A Shares of the same Fund or for Class A Shares or Fiduciary Class Shares
of another Fund of the Trust. Class A Shareholders may exchange their Shares for
Fiduciary Class Shares of a Fund or for Fiduciary Class or Class A Shares of
another Fund or the Trust, if the Shareholder is eligible to purchase such
Shares. The exchange privilege may be exercised only in those states where the
Shares of the Fund or such other Fund may be legally sold. All exchanges
discussed herein are made at the net asset value of the exchanged Shares, except
as provided below. The Trust does not impose a charge for processing exchanges
of Shares. If a Shareholder seeks to exchange Class A Shares of a Fund that does
not impose a sales charge for Class A Shares of a Fund that does, or the Fund
being exchanged into has a higher sales charge, the Shareholder will be required
to pay a sales charge in the amount equal to the difference between the sales
charge applicable to the Fund into which the Shares are being exchanged and any
sales charge previously paid for the exchanged Shares, including any sales
charges incurred on any earlier exchanges of the Shares (unless such sales
charge is otherwise waived as provided above). The exchange of Fiduciary Class
Shares for Class A Shares also
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<PAGE>
will require payment of the sales charge unless the sales charge is waived, as
provided above. If a Shareholder (no longer eligible to purchase Fiduciary
Shares) purchases Class A Shares of a Fund, the Shareholder will be subject to
Distribution and Shareholder Services Plan Fees.
Class B Shareholders of a Fund may exchange their Shares for Class B
Shares of any other Fund of the Trust on the basis of the net asset value of the
exchanged Class B Shares, without the payment of any Contingent Deferred Sales
Charge that might otherwise be due upon redemption of the outstanding Class B
Shares. The newly acquired Class B Shares will be subject to the higher
Contingent Deferred Sales Charge of either the Fund from which the Shares were
exchanged or the Fund into which the Shares were exchanged. With respect to
outstanding Class B Shares as to which previous exchanges have taken place,
"higher Contingent Deferred Sales Charge" shall mean the higher of the
Contingent Deferred Sales Charge applicable to either the Fund the Shares are
exchanging into or any other Fund from which the Shares previously have been
exchanged. For purposes of computing the Contingent Deferred Sales Charge that
may be payable upon a disposition of the newly acquired Class B Shares, the
holding period for outstanding Class B Shares of the Fund from which the
exchange was made is "tacked" to the holding period of the newly acquired Class
B Shares. For purposes of calculating the holding period applicable to the newly
acquired Class B Shares, the newly acquired Class B Shares shall be deemed to
have been issued on the date of receipt of the Shareholder's order to purchase
the outstanding Class B Shares of the Fund from which the initial exchange was
made.
Effective January 1, 1996, Service Class Shareholders may not exchange
their Service Class Shares for Shares of any other class, nor may Shares of any
other class be exchanged for Service Class Shares.
Shares of the Institutional Money Market Funds may be purchased by
commercial and retail institutional investors, including affiliates of BANC ONE
CORPORATION, that have opened an account with the Transfer Agent either directly
or through a Shareholder Servicing Agent, by persons whose individual net worth,
or joint net worth with that person's spouse, at the time of his or her purchase
exceeds $1,000,000, or by persons whose individual annual income, or joint
annual income with that person's spouse, at the time of his or her purchase
exceeds $200,000.
The Trust may suspend the right of redemption or postpone the date of
payment for Shares during any period when (a) trading on the New York Stock
Exchange (the "Exchange") is restricted by applicable rules and regulations of
the Securities and Exchange Commission, (b) the Exchange is closed for other
than customary weekend and holiday closings, (c) the Securities and Exchange
Commission has by order permitted such suspension, or (d) an emergency exists as
determined by the Securities and Exchange Commission.
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<PAGE>
The Trust may redeem Shares involuntarily if redemption appears
appropriate in light of the Trust's responsibilities under the 1940 Act. (See
"Valuation of the Money Market and Institutional Money Market Funds and the
Municipal Money Market Fund" above.)
MANAGEMENT OF THE TRUST
TRUSTEES & OFFICERS
Overall responsibility for management of the Trust rests with the Board
of Trustees of the Trust, who are elected by the Shareholders of the Trust.
There are currently four Trustees, all of whom are not "interested persons" of
the Trust within the meaning of that term under the 1940 Act. The Trustees, in
turn, elect the officers of the Trust to supervise actively its day-to-day
operations.
The Trustees of the Trust, their addresses, and principal occupations
during the past five years are set forth below.
POSITION(S) HELD PRINCIPAL OCCUPATION
NAME AND ADDRESS WITH THE TRUST DURING PAST 5 YEARS
- ---------------- ---------------- --------------------
Peter C. Marshall Trustee From November, 1993 to present,
DCI Marketing, Inc. President, DCI Marketing, Inc.;
2727 W. Good Hope Road from 1992 to November, 1993, Vice
Milwaukee, WI 53209 President-Finance and Treasurer,
DCI Marketing, Inc.; from August,
1987 to 1992, has served as an
officer in the corporate finance
group of Blunt, Ellis & Loewi and
its successor corporation, Kemper
Securities, Inc.
Charles I. Post Trustee From July, 1986 to present, has
7615 4th Avenue West been self-employed as a
Bradenton, FL 34209 consultant.
John S. Randall Trustee Since 1972, has been self-employed
3005 North Lake Drive as a management consultant.
Milwaukee, WI 53211
Frederick W. Ruebeck Trustee From June, 1988 to present, has
Eli Lilly & Company been Director of Investments, Eli
Lilly Corporate Center Lilly and Company.
307 East McCarty
Indianapolis, IN 46285
- ----------------
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<PAGE>
The Trustees of the Trust receive fees and expenses for each meeting
of the Board of Trustees attended. No officer or employee of the Distributor
currently acts as a Trustee of the Trust.
The Compensation Table below sets forth the estimated total
compensation to the Trustees from the Trust and the operational funds of The One
Group(R) for the Trust's fiscal year ended June 30, 1995.
COMPENSATION TABLE(1)
<TABLE>
<CAPTION>
PENSION OR
AGGREGATE RETIREMENT ESTIMATED TOTAL
NAME OF COMPENSATION BENEFITS ACCRUED ANNUAL COMPENSATION
PERSON, FROM THE AS PART OF FUND BENEFITS UPON FROM THE FUND
POSITION TRUST EXPENSES RETIREMENT COMPLEX(2)
- -----------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Peter C. Marshall, $31,750 N/A N/A $34,500
Chairman
- -----------------------------------------------------------------------------------------------
Charles I. Post, $31,000 N/A N/A $33,750
Trustee
- -----------------------------------------------------------------------------------------------
John S. Randall, $29,500 N/A N/A $32,250
Trustee
- -----------------------------------------------------------------------------------------------
Frederick W. Ruebeck, $30,750 N/A N/A $33,500
Trustee
- -----------------------------------------------------------------------------------------------
</TABLE>
(1) Figures are for the Trust's fiscal year ended June 30, 1995.
(2) "Fund Complex" comprises the 23 operational funds of The One Group(R) as
well as the 4 funds of The One Group(R) Investment Trust.
The officers of the Trust receive no compensation directly from the Trust
for performing the duties of their offices. The officers of the Trust, their
addresses, and principal occupations during the past five years are shown below.
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<PAGE>
POSITION(S) HELD PRINCIPAL OCCUPATION
NAME AND ADDRESS WITH THE TRUST DURING PAST 5 YEARS
- ---------------- ---------------- --------------------
Mark Dillon President From 1993 to present,Vice-
The One Group Services Company President of BISYS Fund
3435 Stelzer Road Services, Inc. and
Columbus, Ohio 43219 President of The One GROUP
Services Company; from
1986 to 1993,
Vice-President of the
Winsbury Company
Mark Redman Vice President From February 1989 to
BISYS FUND SERVICES present, employee of the
3435 Stelzer Road Winsbury Company
Columbus, Ohio 43219
George O. Martinez Secretary From March 1995 to
BISYS Fund Services, Inc. present, Senior Vice
3435 Stelzer Road President and Director of
Columbus, OH 43219 Legal and Compliance
Services, BISYS Fund
Services, Inc.; from June
1989 - March 1995, Vice
President and Associate
General Counsel, Alliance
Capital Management
Alaina J. Metz Assistant Secretary From June 1995 to present,
BISYS Fund Services, Inc. Chief Administrator,
3435 Stelzer Road Administration and
Columbus, Ohio 43219 Regulatory Services, BISYS
Fund Services, Inc.; from
May 1989 - June 1995,
Supervisor, Mutual Fund
Legal Department, Alliance
Capital Management.
Terrance R. Dolan Treasurer Manager - Segmentation and
BANC ONE CORPORATION Analysis since 1995;
100 East Broad Street Columbus, Controller, Banc One Trust
OH 43271-0251 Corp., 1994-1995; Senior
Manager, Ernst & Young,
1983 - 1994
B-64
<PAGE>
INVESTMENT ADVISER
Banc One Investment Advisors Corporation
Investment advisory services to each of the Trust's Funds are provided
by Banc One Investment Advisors Corporation (the "Adviser"). The Adviser makes
the investment decisions for the assets of the Fund and continuously reviews,
supervises and administers the Fund's investment program, subject to the
supervision of, and policies established by, the Trustees of the Trust. The
Trust's Shares are not sponsored, endorsed or guaranteed by, and do not
constitute obligations or deposits of any bank affiliate of the Adviser and are
not insured by the FDIC or issued or guaranteed by the U.S. government or any of
its agencies.
The Adviser is an indirect, wholly-owned subsidiary of BANC ONE
CORPORATION, a bank holding company incorporated in the state of Ohio. BANC ONE
CORPORATION has affiliate banking organizations in Arizona, Colorado, Illinois,
Indiana, Kentucky, Ohio, Oklahoma, Texas, Utah, West Virginia and Wisconsin. In
addition, BANC ONE CORPORATION has several affiliates that engage in data
processing, venture capital, investment and merchant banking, and other
diversified services including trust management, investment management,
brokerage, equipment leasing, mortgage banking, consumer finance, and insurance.
On a consolidated basis, BANC ONE CORPORATION had assets of over $88 billion as
of SEPTEMBER 30, 1995.
The Adviser represents a consolidation of the investment advisory
staffs of a number of bank affiliates of BANC ONE CORPORATION, which have
considerable experience in the management of open-end management investment
company portfolios, including The One Group(R) (formerly, the Helmsman Fund)
since 1985.
Prior to January 11, 1993, investment advisory services were provided
to the Income Equity, Disciplined Value, Growth OPPORTUNITIES, and Large Company
Value Funds by Bank One, Milwaukee, NA ("Bank One, Milwaukee"). Prior to January
11, 1993, investment advisory services were provided to the Money Market Funds,
the Institutional Money Market Funds, the Bond Funds, and the Intermediate
Tax-Free Bond Fund by Bank One, Indianapolis, NA ("Bank One, Indianapolis").
Prior to January 11, 1993, investment advisory services were provided to the
International Equity Index, Equity Index, and the Ohio Municipal Bond Funds by
Bank One, Columbus, NA ("Bank One, Columbus"). Prior to January 11, 1993,
investment sub-advisory services were also provided to the Large Company Value
Fund by Bank One, Columbus. Prior to January, 1994, investment advisory services
were provided to the predecessor funds of Intermediate Bond Fund and Large
Company Growth Fund, Sun Eagle Intermediate Fixed Income Fund and Sun Eagle
Equity Growth Fund, respectively, by Bank One, Arizona, NA. Prior to January 20,
1995, investment advisory services were provided to the predecessor Fund of the
Kentucky Municipal Bond Fund, the Trademark Kentucky Municipal Bond Fund, by
Liberty National Bank and Trust Company of Kentucky.
B-65
<PAGE>
During the fiscal years ended June 30, 1995, 1994 and 1993, the Funds
of the Trust paid the following investment advisory fees to the Adviser (except
as noted above) and the Adviser voluntarily waived investment advisory fees as
follows:
THE ONE GROUP(R)
ADVISORY--NET
FISCAL YEAR ENDED JUNE 30,
<TABLE>
<CAPTION>
1995 1994 1993
- ----------------------------------------------------------------------------------------------------------------------------------
FUND NET WAIVED NET WAIVED NET WAIVED
- ----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
U.S. Treasury Securities Money Market $2,258,214 $1,956,704 $1,605,856 $1,134,557 $ 886,491 $ 683
Prime Money Market $3,991,856 $2,887,240 $2,660,254 $2,092,557 $2,138,010 $1,287,301
Municipal Money Market $ 964,943 $ 834,690 $ 618,798 $ 489,886 $ 396,701 $ 264,497
Ohio Municipal Money Market $ 163,752 $ 112,517 $ 52,130 $ 103,823 $ 0 $ 41,035
Income Equity $1,466,342 $ 7,338 $1,467,442 $ 107,348 $ 870,090 $ 230,842
Disciplined Value $3,306,317 $ 0 $2,365,739 $ 151,852 $ 866,513 $ 255,751
Growth OPPORTUNITIES $3,024,214 $ 6,973 $2,338,599 $ 141,253 $ 942,144 $ 343,790
Equity Index $ 167,195 $ 396,281 $ 281,951 $ 123,050 $ 98,521 $ 142,784
Large Company Value $1,730,555 $ 0 $ 993,450 $ 85,726 $ 434,287 $ 192,015
Asset Allocation $ 214,418 $ 68,226 $ 178,798 $ 84,284 $ 18,840 $ 23,037
International Equity Index $1,036,935 $ 0 $ 507,696 $ 0 $ 0 $ 106,033
Large Company Growth (Sun Eagle:
Equity Growth)** $2,515,585 $ 0 $ 318,079 $ 226,900 $ 0 $ 332,399
Income Bond $1,662,030 $1,317,284 $1,774,670 $1,543,297 $1,333,615 $1,266,099
Limited Volatility Bond $1,155,274 $1,393,194 $1,275,561 $1,428,366 $1,116,416 $1,070,204
Intermediate Tax-Free Bond $ 499,312 $ 699,036 $ 523,644 $ 599,746 $ 426,563 $ 533,401
MUNICIPAL INCOME $ 572,498 $ 246,244 $ 365,946 $ 166,864 $ 12,541 $ 35,411
Ohio Municipal Bond $ 299,400 $ 302,235 $ 328,834 $ 314,126 $ 196,856 $ 193,288
Government Bond $1,251,932 $ 38,861 $ 611,976 $ 21,496 $ 27,682 $ 30,024
Government ARM $ 277,435 $ 208,134 $ 848,254 $ 299,477 $ 77,667 $ 120,712
Intermediate Bond (Sun Eagle:
Intermediate Fixed Income Fund)** $ 239,603 $ 597,220 $ 0 $ 353,976 $ 0 $ 256,297
Treasury Only Money Market $ 181,522 $ 16,794 $ 82,477 $ 53,130 $ 0 $ 23,970
Government Money Market $ 478,342 $ 101,302 $ 129,862 $ 290,296 $ 0 $ 8,817
Kentucky Municipal Bond
(Trademark Kentucky Municipal Bond)*** $ 53,481 $ 59,433 $ 263,106**** $ 8,528**** $ 215,477***** $ 91,761*****
Institutional Prime Money Market NA* NA* NA* NA* NA* NA*
Treasury Money Market NA* NA* NA* NA* NA* NA*
Tax-Exempt Money Market NA* NA* NA* NA* NA* NA*
Arizona Tax-Free Bond NA* NA* NA* NA* NA* NA*
Texas Tax-Free Bond NA* NA* NA* NA* NA* NA*
W. Virginia Tax-Free Bond NA* NA* NA* NA* NA* NA*
LOUISIANA MUNICIPAL BOND NA* NA* NA* NA* NA* NA*
VALUE GROWTH NA* NA* NA* NA* NA* NA*
GULF SOUTH GROWTH NA* NA* NA* NA* NA* NA*
</TABLE>
- ---------------------------
* As of June 30, 1995, the Fund had not commenced operations.
** In the fiscal year ended June 30, 1993, the Adviser was Bank One,
Arizona, N.A.
*** In the fiscal years ended June 30, 1993 and 1994, and from July 1, 1994
through January 19, 1995, the Adviser was Liberty National Bank and
Trust Company of Kentucky.
**** Fees for the period from February 1, 1994 through January 19, 1995.
***** Fees for the fiscal year ended January 31, 1994.
B-66
<PAGE>
All investment advisory services are provided to the Funds by the
Adviser pursuant to an investment advisory agreement dated January 11, 1993 (the
"Investment Advisory Agreement"). The Investment Advisory Agreement (and the
Sub-Investment Advisory Agreement described immediately following, collectively,
the "Advisory and Sub-Advisory Agreements") will continue in effect as to a
particular Fund from year to year, if such continuance is approved at least
annually by the Trust's Board of Trustees or by vote of a majority of the
outstanding Shares of such Fund (as defined under "ADDITIONAL
INFORMATION--Miscellaneous" in this Statement of Additional Information), and a
majority of the Trustees who are not parties to the respective investment
advisory agreements or interested persons (as defined in the Investment Company
Act of 1940) of any party to the respective investment advisory agreements by
votes cast in person at a meeting called for such purpose. The Advisory and
Sub-Advisory Agreements were renewed by the Trust's Board of Trustees at their
quarterly meeting on August 17, 1995. The Advisory and Sub-Advisory Agreements
are terminable as to a particular Fund at any time on 60 days' written notice
without penalty by the Trustees, by vote of a majority of the outstanding Shares
of that Fund, or by the Fund's Adviser or Sub-Adviser as the case may be. The
Advisory and Sub-Advisory Agreements also terminate automatically in the event
of any assignment, as defined in the 1940 Act.
The Advisory and Sub-Advisory Agreements each provide that the
respective Adviser or Sub-Adviser shall not be liable for any error of judgment
or mistake of law or for any loss suffered by the Trust in connection with the
performance of the respective investment advisory agreements, except a loss
resulting from a breach of fiduciary duty with respect to the receipt of
compensation for services or a loss resulting from willful misfeasance, bad
faith, or gross negligence on the part of the Adviser or Sub-Adviser in the
performance of its duties, or from reckless disregard by it of its duties and
obligations thereunder.
Goldman Sachs Asset Management, formerly the investment Sub-Adviser to
the Government ARM Fund, received $38,737 in sub-advisory fees from the Adviser
for the fiscal year ended June 30, 1993, $417,950 in sub-advisory fees from the
Adviser for the fiscal year ended June 30, 1994, and $176,570 in sub-advisory
fees from the Adviser for the fiscal year ended June 30, 1995.
Boston International Advisors, Inc.
Boston International Advisors serves as investment Sub-Adviser to the
International Equity Index Fund pursuant to an agreement with the Adviser dated
January 11, 1993. The principal executive officers of Boston International
Advisors, Inc. ("Boston International"), Messrs. Lyle H. Davis, Norman H. Meltz,
and David A. Umstead, each own more than 25 percent of the outstanding voting
securities of Boston International. Boston International Advisors, Inc. received
$0 in sub-advisory fees from the Adviser for the fiscal year ended June 30,
1993, $113,644 in sub-advisory fees from the Adviser for the fiscal year ended
June 30, 1994 and $161,906 in sub-advisory fees from the Adviser for the fiscal
year ended June 30, 1995.
B-67
<PAGE>
GLASS-STEAGALL ACT
In 1971 the United States Supreme Court held in Investment Company
Institute v. Camp that the federal statute commonly referred to as the
Glass-Steagall Act prohibits a national bank from operating a Fund for the
collective investment of managing agency accounts. Subsequently, the Board of
Governors of the Federal Reserve System (the "Board") issued a regulation and
interpretation to the effect that the Glass-Steagall Act and such decision: (a)
forbid a bank holding company registered under the Federal Bank Holding Company
Act of 1956 (the "Holding Company Act") or any non-bank affiliate thereof from
sponsoring, organizing, or controlling a registered, open-end investment company
continuously engaged in the issuance of its Shares, but (b) do not prohibit such
a holding company or affiliate from acting as investment adviser, transfer
agent, and custodian to such an investment company. In 1981, the United States
Supreme Court held in Board of Governors of the Federal Reserve System v.
Investment Company Institute that the Board did not exceed its authority under
the Holding Company Act when it adopted its regulation and interpretation
authorizing bank holding companies and their non-bank affiliates to act as
investment advisers to registered closed-end investment companies. In the Board
of Governors case, the Supreme Court also stated that if a national bank
complied with the restrictions imposed by the Board in its regulation and
interpretation authorizing bank holding companies and their non-bank affiliates
to act as investment advisers to investment companies, a national bank
performing investment advisory services for an investment company would not
violate the Glass-Steagall Act. In addition, state securities laws on this issue
may differ from the interpretations of federal law expressed herein and banks
and financial institutions may be required to register as dealers pursuant to
state law.
In the Investment Advisory Agreement with the Trust, the Adviser has
represented to the Trust that it possesses the legal authority to perform the
investment advisory services contemplated by the agreement and described in the
Prospectuses and this Statement of Additional Information without violation of
applicable statutes and regulations. Future changes in either federal or state
statutes and regulations relating to the permissible activities of banks or bank
holding companies and the subsidiaries or affiliates of those entities, as well
as further judicial or administrative decisions or interpretations of present
and future statutes and regulations, could prevent or restrict the Adviser from
continuing to perform such services for the Trust. Depending upon the nature of
any changes in the services which could be provided by the Adviser, the Board of
Trustees of the Trust would review the Trust's relationship with the Adviser and
consider taking all action necessary in the circumstances.
Should future legislative, judicial, or administrative action prohibit
or restrict the proposed activities of BANC ONE CORPORATION subsidiary banks or
their correspondent banks in connection with customer purchases of Shares of the
Trust, these banks might be required to alter materially or discontinue the
services offered by them to customers. It is not anticipated, however, that any
change in the Trust's method of operations would affect its net asset value per
Share or result in financial losses to any customer.
B-68
<PAGE>
PORTFOLIO TRANSACTIONS
Pursuant to the Advisory and Sub-Advisory Agreements, the respective
Adviser and Sub-Advisers determine, subject to the general supervision of the
Board of Trustees of the Trust and in accordance with each Fund's investment
objective and restrictions, which securities are to be purchased and sold by
each such Fund and which brokers are to be eligible to execute its portfolio
transactions. Purchases and sales of portfolio securities with respect to the
Money Market Funds, the Bond Funds, and (to a varying degree) the Asset
Allocation Fund usually are principal transactions in which portfolio securities
are purchased directly from the issuer or from an underwriter or market maker
for the securities. Purchases from underwriters of portfolio securities include
a commission or concession paid by the issuer to the underwriter and purchases
from dealers serving as market makers may include the spread between the bid and
asked price. Transactions on stock exchanges (other than certain foreign stock
exchanges) involve the payment of negotiated brokerage commissions. Transactions
in the over-the-counter market are generally principal transactions with
dealers. With respect to the over-the-counter market, the Trust, where possible,
will deal directly with the dealers who make a market in the securities involved
except in those circumstances where better price and execution are available
elsewhere. While the Trust's Advisers generally seek competitive spreads or
commissions, the Trust may not necessarily pay the lowest spread or commission
available on each transaction, for reasons discussed below.
Allocation of transactions, including their frequency, to various
dealers is determined by each Adviser and Sub-Adviser with respect to the Funds
it serves based on its best judgment and in a manner deemed fair and reasonable
to Shareholders. The primary consideration is prompt execution of orders in an
effective manner at the most favorable price. Subject to this consideration,
dealers who provide supplemental investment research to an Adviser or
Sub-Adviser of the Trust may receive orders for transactions by the Trust.
Information so received is in addition to and not in lieu of services required
to be performed by such Adviser or Sub-Adviser and does not reduce the advisory
fees payable to such Adviser. Such information may be useful to such Adviser or
Sub-Adviser in serving both the Trust and other clients and, conversely,
supplemental information obtained by the placement of business of other clients
may be useful to such Adviser in carrying out its obligations to the Trust.
The Trust will not execute portfolio transactions through, acquire
portfolio securities issued by, make savings deposits in, or enter into
repurchase or reverse repurchase agreements with its Advisers or their
affiliates except as may be permitted under the 1940 Act, and will not give
preference to correspondents of BANC ONE CORPORATION subsidiary banks with
respect to such transactions, securities, savings deposits, repurchase
agreements, and reverse repurchase agreements.
During the Trust's fiscal year ended June 30, 1993, the Trust paid
brokerage commissions to SEI Financial Services Company, the former Distributor
for the Trust, for brokerage services provided. The Income Equity Fund, the
Disciplined Value Fund, the Growth OPPORTUNITIES Fund, and the Large
Company Growth Fund paid SEI Financial Services Company $16,480, $103,796,
$15,502 and $21,636, respectively, in brokerage
B-69
<PAGE>
commissions during the Trust's fiscal year ended June 30, 1993. During the
Trust's fiscal year ended June 30, 1994, the Trust paid no brokerage commissions
to SEI Financial Services Company for brokerage services provided.
During the Trust's fiscal year ended June 30, 1993, the Trust paid
brokerage commissions to Goldman Sachs Asset Management ("GOLDMAN") for
brokerage services provided. The Asset Allocation Fund, Disciplined Value Fund,
Growth OPPORTUNITIES Fund and Large Company Value Fund paid $32, $5,889, $2,632
and $1,879 respectively, to Goldman in brokerage commissions.
During the Trust's fiscal year ended June 30, 1994, the Trust paid
brokerage commissions to Goldman for brokerage services provided. The Asset
Allocation Fund, Disciplined Value Fund, Growth OPPORTUNITIES Fund and Large
Company Value Fund paid $419, $11,504, $17,688 and $9,208 respectively, to
Goldman in brokerage commissions.
During the Trust's fiscal year ended June 30, 1995, the Trust paid
brokerage commissions to Goldman for brokerage services provided as follows:
<TABLE>
<CAPTION>
FUND COMMISSIONS PAID
---- ----------------
<S> <C>
Income Equity $ 700
Disciplined Value $81,124
Growth OPPORTUNITIES $47,160
Large Company Value $47,640
Equity Index $ 6,741
Asset Allocation $ 6,677
Government ARM $ 531
Large Company Growth $ 3,381
</TABLE>
During the Trust's fiscal year ended June 30, 1995, the percentage of
the Trust's aggregate brokerage commissions paid to Goldman was 2.98% and the
percentage of the Trust's aggregate dollar amount of transactions involving the
payment of commissions effected through Goldman was .043%.
In the fiscal years ended June 30, 1995, 1994 and 1993, each of the
Funds of the Trust that paid brokerage commissions and the amounts paid for each
year were as follows:
B-70
<PAGE>
THE ONE GROUP(R)
BROKERAGE COMMISSIONS
<TABLE>
<CAPTION>
FISCAL YEAR ENDED JUNE 30,
------------------------------------------
FUND 1995 1994 1993
- --------------------------------------------------------------------------------
<S> <C> <C> <C>
Income Equity $ 102,275 $ 129,736 $ 96,544
- --------------------------------------------------------------------------------
Disciplined Value $2,572,895 $ 615,999 $ 883,961
- --------------------------------------------------------------------------------
Growth OPPORTUNITIES $1,242,481 $ 810,546 $ 712,330
- --------------------------------------------------------------------------------
Equity Index $ 21,858 $ 79,617 $ 4,550
- --------------------------------------------------------------------------------
Large Company Value $1,783,768 $ 539,937 $ 297,999
- --------------------------------------------------------------------------------
Asset Allocation $ 42,796 $ 34,662 $ 13,677
- --------------------------------------------------------------------------------
International Equity $ 223,386 $ 120,976 $ 0
Index
- --------------------------------------------------------------------------------
Large Company Growth $ 442,672 $ 169,455 $ 72,220
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
Government ARM $ 531 $ 0 $ 0
- --------------------------------------------------------------------------------
</TABLE>
Investment decisions for each Fund of the Trust are made independently
from those for the other Funds or any other investment company or account
managed by the Trust's Adviser or Sub-Advisers. Any such other investment
company or account may also invest in the same securities as the Trust. When a
purchase or sale of the same security is made at substantially the same time on
behalf of a given Fund and another Fund, investment company or account (or, in
the case of the International Equity Index Fund, another account), the
transaction will be averaged as to price, and available investments allocated as
to amount, in a manner which the Adviser or Sub-Adviser of the given Fund
believes to be equitable to the Fund(s) and such other investment company or
account. In some instances, this investment procedure may adversely affect the
price paid or received by a Fund or the size of the position obtained by a Fund.
To the extent permitted by law, the Trust's Adviser and Sub-Advisers may
aggregate the securities to be sold or purchased by it for a Fund with those to
be sold or purchased by it for other Funds or for other investment companies or
accounts in order to obtain best execution. As provided by the Investment
Advisory and Sub-Advisory Agreements, in making investment recommendations for
the Trust, the Trust's Adviser and Sub-Advisers will not inquire or take into
consideration whether an issuer of securities proposed for purchase or sale by
the Trust is a customer of such Adviser or Sub-Advisers or their parents or
subsidiaries or affiliates and, in dealing with its commercial customers, each
Adviser and Sub- Adviser and its parent, subsidiaries, and affiliates will not
inquire or take into consideration whether securities of such customers are held
by the Trust.
B-71
<PAGE>
ADMINISTRATOR
The One GROUP Services Company serves as Administrator (the
"Administrator") to each Fund of the Trust pursuant to a Management and
Administration Agreement with the Trust (the "Administration Agreement"). The
Board of Trustees of the Trust approved The One GROUP Services Company) as the
sole Administrator for each Fund beginning December 1, 1995. The Administrator
assists in supervising all operations of each Fund to which it serves as
Administrator (other than those performed under the respective investment
advisory agreements and Custodian and Transfer Agency Agreements for that Fund).
Under the Administration Agreement, the Administrator has agreed to
price the portfolio securities of each Fund it serves and to compute the net
asset value and net income of such Funds on a daily basis, to maintain office
facilities for the Trust, to maintain each such Fund's financial accounts and
records, and to furnish the Trust statistical and research data, data
processing, clerical, accounting, and bookkeeping services, and certain other
services required by the Trust with respect to each such Fund. The Administrator
prepares annual and semi-annual reports to the Securities and Exchange
Commission, prepares federal and STATE tax returns, prepares filings with STATE
securities commissions, and generally assists in all aspects of the Trust's
operations other than those performed under the investment advisory agreements,
and Custodian and Transfer Agency Agreements. Under the Administration
Agreement, the Administrator may delegate all or any part of its
responsibilities thereunder.
The Adviser also serves as Sub-Administrator to each Fund of the Trust,
pursuant to an agreement between the Administrator and the Adviser. Pursuant to
this agreement, the Adviser performs many of the Administrator's duties, for
which the Adviser receives a fee paid by the Administrator.
The Trust paid fees for administrative services to 440 Financial and to
SEI Financial Management, previous Administrators of the Trust, to The Winsbury
Company, the prior Administrator to the predecessor funds of the Large Company
Growth and Intermediate Bond Funds, and to Federated Administrative Services,
the prior Administrator to the predecessor Fund of the Kentucky Municipal Bond
Fund, for the fiscal years ended June 30, 1995, 1994 and 1993 as follows:
B-72
<PAGE>
THE ONE GROUP(R)
ADMINISTRATOR--NET
<TABLE>
<CAPTION>
FISCAL YEAR ENDED JUNE 30, 1995
- ----------------------------------------------------------------------------------------------------------------------
FUND 440 ADVISER** FEDERATED
- ----------------------------------------------------------------------------------------------------------------------
net waived net waived net waived
- ----------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
U.S. Treasury Securities Money Market $1,731,370 $ 122,233 $ 176,604 $0 NA NA
Prime Money Market $2,897,503 $ 111,313 $ 304,170 $0 NA NA
Municipal Money Market $ 699,142 $ 92,641 $ 75,012 $0 NA NA
Ohio Municipal Money Market $ 82,050 $ 61,415 $ 11,806 $0 NA NA
Income Equity $ 308,619 $ 0 $ 27,163 $0 NA NA
Disciplined Value $ 687,537 $ 0 $ 65,713 $0 NA NA
Growth OPPORTUNITIES $ 631,524 $ 0 $ 59,053 $0 NA NA
Equity Index $ 90,704 $ 195,567 $ 30,329 $0 NA NA
Large Company Value $ 317,839 $ 27,527 $ 48,604 $0 NA NA
Asset Allocation $ 62,570 $ 4,439 $ 6,304 $0 NA NA
International Equity Index $ 285,929 $ 0 $ 31,831 $0 NA NA
Large Company Growth $ 495,980 $ 0 $ 76,459 $0 NA NA
Income Bond $ 763,202 $ 6,504 $ 67,577 $0 NA NA
Limited Volatility Bond $ 653,915 $ 2,136 $ 60,084 $0 NA NA
Intermediate Tax-Free Bond $ 305,651 $ 0 $ 31,017 $0 NA NA
MUNICIPAL INCOME $ 198,808 $ 79,249 $ 28,635 $0 NA NA
Ohio Municipal Bond $ 124,734 $ 32,085 $ 13,946 $0 NA NA
Government Bond $ 414,276 $ 14,952 $ 53,984 $0 NA NA
Government ARM $ 68,313 $ 72,059 $ 8,546 $0 NA NA
Intermediate Bond $ 208,925 $ 0 $ 26,063 $0 NA NA
Treasury Only Money Market $ 86,438 $ 0 $ 33,470 $0 NA NA
Government Money Market $ 273,911 $ 23,414 $ 88,367 $0 NA NA
Kentucky Municipal Bond $ 24,352*** $ 1,554*** $ 6,155*** $0*** $77,852*** $0****
Institutional Prime Money Market NA* NA* NA* NA* NA NA
Treasury Money Market NA* NA* NA* NA* NA NA
Tax-Exempt Money Market NA* NA* NA* NA* NA NA
Arizona Tax-Free Bond NA* NA* NA* NA* NA NA
Texas Tax-Free Bond NA* NA* NA* NA* NA NA
W. Virginia Tax-Free Bond NA* NA* NA* NA*(1) NA NA
LOUISIANA MUNICIPAL BOND NA* NA* NA* NA* NA* NA
VALUE GROWTH NA* NA* NA* NA* NA* NA
GULF SOUTH GROWTH NA* NA* NA* NA* NA* NA
</TABLE>
- -------------------------------------
* As of June 30, 1995, the Fund had not commenced operations.
** These are fees paid by 440 to the Adviser pursuant to the
Sub-Administration Agreement for the period from April 1, 1995 through
June 30, 1995.
*** These fees are paid from January 20, 1995 through June 30, 1995.
**** These fees are paid from February 1, 1994 through January 19, 1995.
B-73
<PAGE>
THE ONE GROUP(R)
ADMINISTRATOR--NET
<TABLE>
<CAPTION>
FISCAL YEAR ENDED JUNE 30, 1994
- ----------------------------------------------------------------------------------------------------------------------------------
FUND 440 SEI WINSBURY FEDERATED
- ----------------------------------------------------------------------------------------------------------------------------------
net waived net waived *net waived net waived
- ----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
U.S. Treasury Securities Money Market $ 784,527 $ 145,627 $291,772 $120,358 NA NA NA NA
Prime Money Market $1,198,953 $ 259,937 $586,109 $267,864 NA NA NA NA
Municipal Money Market $ 297,555 $ 62,779 $114,253 $ 61,144 NA NA NA NA
Ohio Municipal Money Market $ 41,436 $ 21,037 $ 6,987 $ 19,013 NA NA NA NA
Income Equity $ 218,261 $ 8,246 $115,876 $ 21,790 NA NA NA NA
Disciplined Value $ 389,399 $ 5,841 $157,726 $ 30,050 NA NA NA NA
Growth OPPORTUNITIES $ 363,523 $ 8,369 $168,296 $ 30,159 NA NA NA NA
Equity Index $ 139,191 $ 13,656 $ 40,299 $ 36,379 NA NA NA NA
Large Company Value $ 150,681 $ 1,293 $ 79,477 $ 16,782 NA NA NA NA
Asset Allocation $ 35,653 $ 8,115 $ 9,104 $ 16,053 NA NA NA NA
International Equity Index $ 116,426 $ 476 $ 39,564 $ 0 NA NA NA NA
Large Company Growth $ 73,974 $ 901 NA NA $44,593 $0 NA NA
Income Bond $ 497,328 $ 65,405 $234,878 $143,075 NA NA NA NA
Limited Volatility Bond $ 403,410 $ 59,568 $199,661 $107,428 NA NA NA NA
Intermediate Tax-Free Bond $ 169,440 $ 19,827 $ 73,417 $ 55,558 NA NA NA NA
MUNICIPAL INCOME $ 129,864 $ 14,224 $ 39,346 $ 18,232 NA NA NA NA
Ohio Municipal Bond $ 97,895 $ 14,926 $ 43,502 $ 26,271 NA NA NA NA
Government Bond $ 168,602 $ 6,771 $ 59,555 $ 6,230 NA NA NA NA
Government ARM $ 195,828 $ 15,187 $115,709 $ 29,093 NA NA NA NA
Intermediate Bond $ 55,677 $ 19,323 NA NA $48,000 $0 NA NA
Treasury Only Money Market $ 33,500 $ 35,403 $ 0 $ 18,868 NA NA NA NA
Government Money Market $ 164,560 $ 92,943 $ 2,467 $ 78,512 NA NA NA NA
Institutional Prime Money Market NA* NA* NA* NA* NA NA NA NA
Treasury Money Market NA* NA* NA* NA* NA NA NA NA
Tax-Exempt Money Market NA* NA* NA* NA* NA NA NA NA
Arizona Tax-Free Bond NA* NA* NA* NA* NA NA NA NA
Kentucky Municipal Bond NA* NA* NA* NA* NA NA $62,930** $0**
Texas Tax-Free Bond NA* NA* NA* NA* NA NA NA NA
W. Virginia Tax-Free Bond NA* NA* NA* NA* NA NA NA NA
LOUISIANA MUNICIPAL BOND NA* NA* NA* NA* NA NA NA NA
VALUE GROWTH NA* NA* NA* NA* NA NA NA NA
GULF SOUTH GROWTH NA* NA* NA+ NA* NA NA NA NA
</TABLE>
- ---------------------
* As of June 30, 1994, the Fund had not commenced operations.
** For the fiscal year ended January 31, 1994.
B-74
<PAGE>
THE ONE GROUP(R)
ADMINISTRATOR--NET
<TABLE>
<CAPTION>
Fiscal Year Ended June 30, 1993
FUND SEI WINSBURY Federated
- ----------------------------------------------------------------------------------------------------
net waived net waived net waived
- ----------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
U.S. Treasury Securities $ 530,939 $276,000 NA NA NA NA
Money Market
Prime Money Market $1,345,450 $416,441 NA NA NA NA
Municipal Money Market $ 226,649 $113,780 NA NA NA NA
Ohio Municipal Money Market $ 0 $ 24,000 NA NA NA NA
Income Equity $ 244,061 $ 23,467 NA NA NA NA
Disciplined Value $ 244,003 $ 28,527 NA NA NA NA
Growth OPPORTUNITIES $ 265,386 $ 46,986 NA NA NA NA
Equity Index $ 61,060 $ 83,605 NA NA NA NA
Large Company Value $ 122,106 $ 29,884 NA NA NA NA
Asset Allocation $ 6,143 $ 5,137 NA NA NA NA
International Equity Index $ 0 $ 26,832 NA NA NA NA
Large Company Growth (Sun $55,972 $10,508 NA NA
Eagle: Equity Growth)
Income Bond $ 572,013 $208,000 NA NA NA NA
Limited Volatility Bond $ 474,782 $180,931 NA NA NA NA
Intermediate Tax-Free Bond $ 173,876 $114,189 NA NA NA NA
MUNICIPAL INCOME $ 4,800 $ 14,033 NA NA NA NA
Ohio Municipal Bond $ 58,491 $ 58,348 NA NA NA NA
Government Bond $ 6,860 $ 15,869 NA NA NA NA
Government ARM $ 23,341 $ 40,563 NA NA NA NA
Intermediate Bond (Sun Eagle:
Intermediate Fixed Income) $57,631 $10,715 NA NA
Treasury Only Money Market $ 0 $ 15,000 NA NA NA NA
Government Money Market $ 0 $ 5,511 NA NA NA NA
Institutional Prime Money NA* NA* NA NA NA NA
Market
Treasury Money Market NA* NA* NA NA NA NA
Tax-Exempt Money Market NA* NA* NA NA NA NA
Arizona Tax-Free Bond NA* NA* NA NA NA NA
Kentucky Municipal Bond NA* NA* NA NA NA NA
Texas Tax-Free Bond NA* NA* NA NA NA NA
W. Virginia Tax-Free Bond NA* NA* NA NA NA NA
LOUISIANA MUNICIPAL BOND NA* NA* NA NA NA NA
VALUE GROWTH NA* NA* NA NA NA NA
GULF SOUTH GROWTH NA* NA* NA NA NA NA
</TABLE>
- -----------------------
*As of June 30, 1993, the Fund had not commenced operations.
B-75
<PAGE>
Unless sooner terminated, the Administration Agreement between the
Trust and The One GROUP Services Company will continue in effect through
November 30, 1996. The Administration Agreement thereafter shall be renewed
automatically for successive one year terms, unless written notice not to renew
is given by the non-renewing party to the other party at least sixty days prior
to the expiration of the then-current term. The Administration Agreement will be
reviewed and ratified at least annually by the Trust's Board of Trustees,
provided that the Administration Agreement is also reviewed and ratified by the
majority of the Trust's Trustees who are not parties to the Administration
Agreement or interested persons (as defined in the 1940 Act) of any party to the
Administration Agreement, by vote cast in person at a meeting called for the
purpose of reviewing and ratifying the Administration Agreement. The
Administration Agreement is terminable with respect to a particular Trust only
upon mutual agreement of the parties to the Administration Agreement and for
cause (as defined in the Administration Agreement) by the party alleging cause,
on not less than sixty days' notice by the Trust's Board of Trustees or by The
One GROUP Services Company.
The Administration Agreement provides that the Administrator shall not
be liable for any error of judgment or mistake of law or any loss suffered by
the Trust in connection with the matters to which the Administration Agreement
relates, except a loss resulting from willful misfeasance, bad faith, or
negligence in the performance of its duties, or from the reckless disregard by
it of its obligations and duties thereunder.
EXPENSES
If total expenses borne by any one of the Funds in any fiscal year
exceed expense limitations imposed by applicable STATE securities regulations,
the Fund's Adviser and the Administrator will reimburse that Fund by the amount
of such excess in proportion to their respective fees. As of the date of this
Prospectus, under the most restrictive STATE expense limitation applicable to
the Trust, the annual expenses of the Trust may not exceed the total of two and
one-half percent (2.5%) of the first thirty million dollars ($30,000,000) of the
Trust's average net assets, plus two percent (2.0%) of the next seventy million
dollars ($70,000,000) of the Trust's average net assets, plus one and one-half
percent (1.5%) of the remaining amount of the Trust's average net assets. Any
expense reimbursements will be estimated daily and reconciled and paid on a
monthly basis. Fees charged to customers by certain entities in connection with
investments in a Fund on a customer's behalf are not included within Fund
expenses for purposes of any such expense limitation.
DISTRIBUTOR
The One GROUP Services Company serves as Distributor to each Fund of
the Trust pursuant to its Distribution Agreement with the Trust (the
"Distribution Agreement"). The Board of Trustees of the Trust approved The One
GROUP Services Company as the sole
B-76
<PAGE>
Distributor beginning November 1, 1995. Unless otherwise terminated, the
Distribution Agreement will continue in effect until November 30, 1996 and will
continue from year to year if approved at least annually (i) by the Trust's
Board of Trustees or by the vote of a majority of the outstanding Shares of the
Funds (see "ADDITIONAL INFORMATION--Miscellaneous," in this Statement of
Additional Information) that are parties to the Distribution Agreement, and (ii)
by the vote of a majority of the Trustees of the Trust who are not parties to
the Distribution Agreement or interested persons of any such party, cast in
person at a meeting called for the purpose of voting on such approval. The
agreement may be terminated in the event of its assignment, as defined in the
1940 Act. The One GROUP Services Company is a broker-dealer registered with
the Securities and Exchange Commission, and is a member of the National
Association of Securities Dealers, Inc.
DISTRIBUTION PLAN
The operation and fees with respect to Class A Shares, Class B Shares,
and Service Class Shares of the Trust payable under the Trust's Distribution and
Shareholder Services Plans, to which Class A Shares, Class B Shares, and Service
Class Shares of each Fund of the Trust are subject, are described in each such
Fund's Prospectuses and in the Multiple Class Plan.
The Distribution and Shareholder Services Plan with respect to Class A
Shares (the "Distribution Plan") was initially approved on July 28, 1989 by the
Trust's Board of Trustees, including a majority of the Trustees who are not
interested persons of the Trust (as defined in the 1940 Act) and who have no
direct or indirect financial interest in the Distribution Plan (the "Independent
Trustees"). The Distribution Plan originally applied to the single class of
Shares of each Fund of the Trust that existed prior to the offering of the
Funds' Shares as four separate classes. An amendment to the Distribution Plan
was approved by the Independent Trustees on October 21, 1991, and became
effective on February 7, 1992. Such amendment limited fees under the
Distribution Plan only to the Class A Shares of each Fund. The Distribution Plan
was amended again on February 11, 1993 in order to make Retirement Class Shares
(now the Service Class Shares) subject to distribution fees. A Distribution and
Shareholder Services Plan (the "Class B Distribution Plan") for Class B Shares
was initially approved on August 12, 1993 by the Independent Trustees. Prior to
February 7, 1992, distribution fees were waived with respect to every Fund of
the Trust except the U.S. Treasury Securities Money Market Fund and the Prime
Money Market Fund.
During the fiscal year ending June 30, 1995, the distribution fees paid
by the Class A, Class B and Service Class Shares (formerly Retirement Class
Shares) of the Trust to 440 Financial Distributors, the previous Distributor to
the Trust and to Federated Administrative Services, the distributor to the
predecessor Fund of the Kentucky Municipal Bond Fund, the Trademark Kentucky
Municipal Bond Fund, were as follows:
B-77
<PAGE>
THE ONE GROUP(R)
DISTRIBUTION FEES PAID FOR THE FISCAL YEAR ENDED JUNE 30, 1995
<TABLE>
<CAPTION>
- ---------------------------------------------------------------------------------------------
FUND DISTRIBUTOR CLASS A CLASS B SERVICE
CLASS
- ---------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
U.S. Treasury Securities Money Market 440 FINL: $165,554 NA $0
Prime Money Market 440 FINL: $308,616 NA $1945
Municipal Money Market 440 FINL: $114,203 NA NA
Ohio Municipal Money Market 440 FINL: $92,912 NA NA
Income Equity 440 FINL: $30,869 $23,390 NA
Disciplined Value 440 FINL: $28,652 $86,002 NA
Growth OPPORTUNITIES 440 FINL: $22,185 $18,133 NA
Equity Index 440 FINL: $4,497 $5,409 NA
Large Company Value 440 FINL: $3,830 $4,118 NA
Asset Allocation 440 FINL: $6,814 $25,292 NA
International Equity Index 440 FINL: $7,942 $30,893 NA
Large Company Growth 440 FINL: $22,628 $23,053 NA
Income Bond 440 FINL: $12,910 $10,601 NA
Limited Volatility Bond 440 FINL: $33,826 $17,985 NA
Intermediate Tax-Free Bond 440 FINL: $12,639 $7,500 NA
MUNICIPAL INCOME 440 FINL: $25,788 $60,312 NA
Ohio Municipal Bond 440 FINL: $32,350 $23,036 NA
Government Bond 440 FINL: $9,731 $11,816 NA
Government ARM 440 FINL: $30,219 $774 NA
Intermediate Bond* 440 FINL: $5,122 $192 NA
Treasury Only Money Market 440 FINL: $0 $0 NA
Government Money Market 440 FINL: $0 $0 NA
Kentucky Municipal Bond Federated:**** $0 $0 NA
440 FINL:** $10,217 $90
Treasury Money Market 440 FINL: NA*** NA*** NA***
Tax-Exempt Money Market 440 FINL: NA*** NA*** NA***
Arizona Tax-Free Bond 440 FINL: NA*** NA*** NA***
Texas Tax-Free Bond 440 FINL: NA*** NA*** NA***
W. Virginia Tax-Free Bond 440 FINL: NA*** NA*** NA***
LOUISIANA MUNICIPAL BOND 440 FINL: NA*** NA*** NA***
VALUE GROWTH 440 FINL: NA*** NA*** NA***
GULF SOUTH GROWTH 440 FINL: NA*** NA*** NA***
</TABLE>
* These are fees paid from November 30, 1994 through June 30, 1995.
** These are fees paid from January 20, 1995 through June 30, 1995.
*** As of June 30, 1995, the Fund had not commenced operations.
**** These are fees paid from February 1, 1994 through January 19, 1995.
B-78
<PAGE>
In accordance with Rule 12b-1 under the 1940 Act, the Distribution Plan
and Class B Distribution Plan may be terminated with respect to the Class A
Shares, Class B Shares or Service Class Shares of any Fund by a vote of a
majority of the Independent Trustees, or by a vote of a majority of the
outstanding Class A Shares, Class B Shares or Service Class Shares,
respectively, of that Fund. The Distribution Plan and Class B Distribution Plan
may be amended by vote of the Trust's Board of Trustees, including a majority of
the Independent Trustees, cast in person at a meeting called for such purpose,
except that any change in the Distribution Plan or Class B Distribution Plan
that would materially increase the distribution fee with respect to the Class A
Shares, Class B Shares or Service Class Shares of a Fund requires the approval
of that Fund's Class A, Class B or Service Class Shareholders, respectively. The
Trust's Board of Trustees will review on a quarterly and annual basis written
reports of the amounts received and expended under the Distribution Plan
(including amounts expended by the Distributor to Participating Organizations
pursuant to the Servicing Agreements entered into under the Distribution Plan)
indicating the purposes for which such expenditures were made.
CUSTODIAN AND TRANSFER AGENT
Cash and securities owned by the Funds of the Trust are held by State
Street Bank and Trust Company ("State Street") as Custodian. State Street serves
the respective Funds as Custodian pursuant to a Custodian Agreement with the
Trust (the "Custodian Agreement"). Under the Custodian Agreement, State Street
(i) maintains a separate account or accounts in the name of each Fund; (ii)
makes receipts and disbursements of money on behalf of each Fund; (iii) collects
and receives all income and other payments and distributions on account of the
Funds' portfolio securities; (iv) responds to correspondence from security
brokers and others relating to its duties; and (v) makes periodic reports to the
Trust's Board of Trustees concerning the Trust's operations. State Street may,
at its own expense, open and maintain a sub-custody account or accounts on
behalf of the Trust, provided that State Street shall remain liable for the
performance of all of its duties under the Custodian Agreement.
Bank One Trust Company, N.A. serves as Sub-Custodian in connection with
the Trust's securities lending activities, pursuant to an agreement between
State Street and Bank One Trust Company. Bank One Trust Company receives a fee
paid by the Trust.
Rules adopted under the 1940 Act permit the Trust to maintain its
securities and cash in the custody of certain eligible banks and securities
depositories. The Trust intends to select foreign custodians or sub-custodians
to maintain foreign securities of the International Equity Index Fund pursuant
to such rules, following a consideration of a number of factors, including, but
not limited to, the reliability and financial stability of the institution; the
ability of the institution to perform custodial services for the Trust; the
reputation of the institution in its national market; the political and economic
stability of the country in which the institution
B-79
<PAGE>
is located; and the risks of potential nationalization or expropriation of Trust
assets. In addition, the 1940 Act requires that foreign bank sub-custodians,
among other things have Shareholder equity in excess of $200 million, have no
lien on the Trust's assets and maintain adequate and accessible records.
State Street Bank & Trust ("State Street") serves as Transfer Agent and
Dividend Disbursing Agent for each Fund pursuant to Transfer Agency Agreements
with the Trust (the "Transfer Agency Agreement"). Under the Transfer Agency
Agreements, State Street has agreed (i) to issue and redeem Shares of the Trust;
(ii) to address and mail all communications by the Trust to its Shareholders,
including reports to Shareholders, dividend and distribution notices, and proxy
material for its meetings of Shareholders; (iii) to respond to correspondence or
inquiries by Shareholders and others relating to its duties; (iv) to maintain
Shareholder accounts and certain sub-accounts; and (v) to make periodic reports
to the Trust's Board of Trustees concerning the Trust's operations.
EXPERTS
The financial statements of the Trust for the fiscal year ended June
30, 1995 appearing in this Statement of Additional Information have been audited
by Coopers & Lybrand L.L.P., independent accountants, as set forth in their
reports appearing elsewhere herein, and are included in reliance upon such
reports and on the authority of such firm as experts in auditing and accounting.
The financial statements for the predecessor funds of the Intermediate
Bond Fund and Large Company Growth Fund, Sun Eagle Intermediate Fixed Income
Fund and Sun Eagle Equity Growth Fund, respectively, for the fiscal year ended
June 30, 1993 and for the period from February 28, 1992 (commencement of
operations of each Fund) to June 30, 1992 appearing in this Statement of
Additional Information have been audited by KPMG Peat Marwick LLP, independent
accountants, and are included in reliance upon the authority of such firm as
experts in auditing and accounting.
The financial statements for the predecessor Fund of the Kentucky
Municipal Bond Fund, the Trademark Kentucky Municipal Bond Fund, for the period
from February 1, 1994 to January 19, 1995, and for the period from March 12,
1993 (commencement of operations) to January 31, 1994 appearing in this
Statement of Additional Information have been audited by KPMG Peat Marwick LLP,
independent accountants, and are included in reliance upon the authority of such
firm as experts in auditing and accounting.
The law firm of Ropes & Gray, One Franklin Square, 1301 K Street, N.W.,
Suite 800 East, Washington, D.C. 20005 are counsel to the Trust. From time to
time, Ropes & Gray have rendered legal services to Bank One, Milwaukee and Bank
One, Wisconsin Trust Company, NA.
B-80
<PAGE>
ADDITIONAL INFORMATION
DESCRIPTION OF SHARES
The Trust is a Massachusetts Business Trust. The Trust's Declaration of
Trust was filed with the Secretary of State of the Commonwealth of Massachusetts
on May 23, 1985 and authorizes the Board of Trustees to issue an unlimited
number of Shares, which are units of beneficial interest, without par value. The
Trust's Declaration of Trust authorizes the Board of Trustees to establish one
or more series of Shares of the Trust, and to classify or reclassify any series
into one or more classes by setting or changing in any one or more respects the
preferences, designations, conversion, or other rights, restrictions, or
limitations as to dividends, conditions of redemption, qualifications, or other
terms applicable to the Shares of such class, subject to those matters expressly
provided for in the Declaration of Trust, as amended, with respect to the Shares
of each series of the Trust. The Trust presently includes THIRTY-TWO
series of Shares, which represent interests in the Prime Money Market Fund, the
U.S. Treasury Securities Money Market Fund, the Municipal Money Market Fund, the
Ohio Municipal Money Market Fund, the Income Equity Fund, the Disciplined Value
Fund, the GROWTH OPPORTUNITIES FUND, THE VALUE GROWTH FUND, THE GULF
SOUTH Growth Fund, the Large Company Value Fund, the Large Company Growth
Fund, the International Equity Index Fund, the Equity Index Fund, the Asset
Allocation Fund, the Income Bond Fund, the Limited Volatility Bond Fund, the
Intermediate Bond Fund, the Government Bond Fund, the Government ARM Fund, the
MUNICIPAL INCOME Fund, the Intermediate Tax-Free Bond Fund, the
Ohio Municipal Bond Fund, the Texas Tax-Free Bond Fund, the West Virginia Tax-
Free Bond Fund, the Kentucky Municipal Bond Fund, THE LOUISIANA MUNICIPAL
BOND FUND, the Arizona Tax-Free Bond Fund, the Treasury Money Market Fund,
the Treasury Only Money Market Fund, the Government Money Market Fund, the Tax
Exempt Money Market Fund and the Institutional Prime Money Market Fund (these
five Funds being called, collectively, the "Institutional Money Market Funds").
The Funds of the Trust (other than the Institutional Money Market Funds, the
U.S. Treasury Securities Money Market Fund and the Prime Money Market Fund)
offer Shares in three separate classes: Fiduciary Shares, Class A Shares and
Class B Shares. The U.S. Treasury Securities Money Market Fund and the Prime
Money Market Fund offer Fiduciary Shares, Class A Shares and Service Class
Shares. See the relevant Prospectus for those Funds for more details.
Shares have no subscription or preemptive rights and only such
conversion or exchange rights as the Board may grant in its discretion. When
issued for payment as described in the Prospectus and this Statement of
Additional Information, the Trust's Shares will be fully paid and
non-assessable. In the event of a liquidation or dissolution of the Trust,
Shares of a Fund are entitled to receive the assets available for distribution
belonging to the Fund, and a proportionate distribution, based upon the relative
asset values of the respective Funds, of any general assets not belonging to any
particular Fund which are available for distribution.
B-81
<PAGE>
Rule 18f-2 under the 1940 Act provides that any matter required to be
submitted to the holders of the outstanding voting securities of an investment
company such as the Trust shall not be deemed to have been effectively acted
upon unless approved by the holders of a majority of the outstanding Shares of
each Fund affected by the matter. For purposes of determining whether the
approval of a majority of the outstanding Shares of a Fund will be required in
connection with a matter, a Fund will be deemed to be affected by a matter
unless it is clear that the interests of each Fund in the matter are identical,
or that the matter does not affect any interest of the Fund. Under Rule 18f-2,
the approval of an investment advisory agreement or any change in investment
policy would be effectively acted upon with respect to a Fund only if approved
by a majority of the outstanding Shares of such Fund. However, Rule 18f-2 also
provides that the ratification of independent public accountants, the approval
of principal underwriting contracts, and the election of Trustees may be
effectively acted upon by Shareholders of the Trust voting without regard to
series.
Class A Shares, Class B Shares and Service Class Shares of a Fund have
exclusive voting rights with respect to matters pertaining to the Fund's
Distribution Plan.
SHAREHOLDER AND TRUSTEE LIABILITY
Under Massachusetts law, holders of units of beneficial interest in a
business trust may, under certain circumstances, be held personally liable as
partners for the obligations of the trust. However, the Trust's Declaration of
Trust provides that Shareholders shall not be subject to any personal liability
for the obligations of the Trust, and that every written agreement, obligation,
instrument, or undertaking made by the Trust shall contain a provision to the
effect that the Shareholders are not personally liable thereunder. The
Declaration of Trust provides for indemnification out of the trust property of
any Shareholder held personally liable solely by reason of his being or having
been a Shareholder. The Declaration of Trust also provides that the Trust shall,
upon request, assume the defense of any claim made against any Shareholder for
any act or obligation of the Trust, and shall satisfy any judgment thereon.
Thus, the risk of a Shareholder incurring financial loss on account of
Shareholder liability is limited to circumstances in which the Trust itself
would be unable to meet its obligations.
The Declaration of Trust states further that no Trustee, officer, or
agent of the Trust shall be personally liable in connection with the
administration or preservation of the assets of the trust or the conduct of the
Trust's business; nor shall any Trustee, officer, or agent be personally liable
to any person for any action or failure to act except for his own bad faith,
willful misfeasance, gross negligence, or reckless disregard of his duties. The
Declaration of Trust also provides that all persons having any claim against the
Trustees or the Trust shall look solely to the assets of the trust for payment.
B-82
<PAGE>
CALCULATION OF PERFORMANCE DATA
Each Money Market Fund and the Treasury Only and Government Money
Market Funds' yield was computed with respect to each class of Shares by
determining the percentage net change, excluding capital changes, in the value
of an investment in one Share of the particular class of the Fund over the base
period, and multiplying the net change by 365/7 (or approximately 52 weeks). The
effective yield of each class of each Fund represents a compounding of the yield
by adding 1 to the number representing the percentage change in value of the
investment during the base period, raising that sum to a power equal to 365/7,
and subtracting 1 from the result. No performance data is available with respect
to the Tax Exempt Money Market, Treasury Money Market and Institutional Prime
Money Market Funds because those Funds had not commenced operations as of June
30, 1995.
The tax equivalent yields for the classes of the Municipal Money
Market, Ohio Municipal Money Market, and Tax Exempt Money Market Funds are
computed by dividing that portion of the Fund's yield (with respect to a
particular class) which is tax-exempt by 1 minus a stated income tax rate and
adding the product to that portion, if any, of the yield of the Fund (with
respect to a particular class) that is not tax-exempt. The tax equivalent yields
for the classes of the Municipal Money Market Fund contained in the preceding
paragraph were computed based on an assumed effective federal income tax rate of
39.6%. No such data was provided for the Tax Exempt Money Market Fund because it
had not commenced operations as of June 30, 1995. The tax equivalent effective
yield for the classes of the Municipal Money Market Fund, Ohio Municipal Money
Market Fund, and Tax Exempt Money Market Funds are computed by dividing that
portion of the effective yield of the Fund (with respect to a particular class)
which is tax-exempt by 1 minus a stated income tax rate and adding the product
to that portion, if any, of the effective yield of the Fund (with respect to a
particular class) that is not tax-exempt.
Performance information showing a Fund's total return and/or 30-day
yield with respect to a particular class may be presented from time to time in
advertising and sales literature regarding the Equity Funds, the Bond Funds, and
the Municipal Bond Funds. A 30-day yield is calculated by dividing the net
investment income per-share earned during the 30-day base period by the maximum
offering price per share on the last day of the period, according to the
following formula:
a-b
30-Day Yield = 2[( ----- +1)(6)-1]
cd
In the above formula, "a" represents dividends and interest earned by a
particular class during the 30-day base period; "b" represents expenses accrued
to a particular class for the 30-day base period (net of reimbursements); "c"
represents the average daily number of Shares of a particular class outstanding
during the 30-day base period that were entitled to receive
B-83
<PAGE>
dividends; and "d" represents the maximum offering price per share of a
particular class on the last day of the 30-day base period.
From time to time the tax equivalent 30-day yield of a particular class
of a Municipal Bond Fund may be presented in advertising and sales literature.
The tax equivalent 30-day yield will be computed by dividing that portion of a
Fund's yield (respecting a particular class) which is tax-exempt by 1 minus a
stated income tax rate and adding the product to that portion, if any, of the
yield of the Fund (respecting a particular class) that is not tax-exempt. The
tax equivalent 30-day yields for a Municipal Bond Fund (respecting a particular
class) will, unless otherwise noted, be computed based on an assumed effective
federal income tax rate of 31%. No tax equivalent 30-day yield information is
available for the West Virginia Tax-Free Bond, Texas Tax-Free Bond, Arizona
Tax-Free BOND AND LOUISIANA MUNICIPAL Bond Funds because they had not
commenced operations as of June 30, 1995.
A Fund's respective cumulative total return and average annual total
return was determined by calculating the change in the value of a hypothetical
$1,000 investment in a particular class of the Fund for each of the periods
shown. Cumulative total return for a particular class of a Fund is computed by
determining the rate of return over the applicable period that would equate the
initial amount invested to the ending redeemable value of the investment. The
cumulative return is calculated as the total dollar increase or decrease in the
value of an account assuming reinvestment of all distributions divided by the
original initial investment. The average annual return for a particular class of
a Fund is computed by determining the average annual compounded rate of return
over the applicable period that would equate the initial amount invested to the
ending redeemable value of the investment. The ending redeemable value includes
dividends and capital gain distributions reinvested at net asset value. The
resulting percentages indicated the positive or negative investment results that
an investor would have experienced from changes in share price and reinvestment
of dividends and capital gains distributions.
Performance information showing a Fund's and/or particular Class's
distribution rate may be presented from time to time in advertising and sales
literature regarding the Bond Funds and Equity Funds. The distribution rate is
calculated as follows:
a
---
distribution yield = (b) * 365
-------------
c
In the formula, "a" represents dividends distributed by a particular
class during that period; "b" represents month end offer price or nav
["NAV"??] for a particular class; "c" represents the number of days in
the period being calculated. "365" is the number of days in a year, used to
annualize the distribution yield.
B-84
<PAGE>
Performance will fluctuate from time to time and is not necessarily
representative of future results. Accordingly, a Fund's performance may not
provide for comparison with bank deposits or other investments that pay a fixed
return for a stated period of time. Performance is a function of a Fund's
quality, composition, and maturity, as well as expenses allocated to the Fund.
Fees imposed upon customer accounts at a bank, with regard to Fiduciary Class
Shares and Service Class Shares, or a Participating Organization, with regard to
Class A and Class B Shares, will reduce a Fund's effective yield to customers.
Performance data for the Funds through June 30, 1995 (calculated as
described above) is as follows:
<TABLE>
<CAPTION>
TAX-EQUIVALENT YIELD
Fiduciary Class A
7 Day Yield 28% Tax 31% Tax 7 Day Yield 28% Tax 31% Tax
<S> <C> <C> <C> <C> <C> <C>
Municipal Money Market 3.79% 5.26% 5.49% 3.54% 4.92% 5.13%
Ohio Municipal Money
Market 3.75% 5.20% 5.43% 3.50% 4.86% 5.07%
</TABLE>
The Money Market and Institutional Money Market Funds may quote actual
total return performance in advertising and other types of literature compared
to indices or averages of alternative financial products available to
prospective investors. The performance comparisons may include the average
return of various bank instruments, some of which may carry certain return
guarantees offered by leading banks and thrifts, as monitored by the Bank
Rate Monitor, and those of corporate and government security price indices
of various durations prepared by Shearson Lehman Brothers, Salomon Brothers,
Inc. and the IBC/Donoghue organization. These indices are not managed for any
investment goals.
The Money Market and Institutional Money Market Funds may also use
comparative performance information computed by and available from certain
industry and general market research and publications, such as Lipper Analytical
Services, Inc.
Statistical and performance information compiled and maintained by CDA
Technologies, Inc. and Interactive Data Corporation may also be used. CDA is a
performance evaluation service that maintains a statistical data base of
performance, as reported by a diverse universe of independently-managed mutual
funds. Interactive Data Corporation is a statistical access service that
maintains a data base of various industry indicators, such as historical and
current price/earning information and individual stock and fixed income price
and return information.
B-85
<PAGE>
Current interest rate and yield information on government debt
obligations of various durations, as reported weekly by the Federal Reserve
(Bulletin H. 15), may also be used. Also current rate information on municipal
debt obligations of various durations, as reported daily by the Bond Buyer, may
also be used. The Bond Buyer is published daily and is an industry-accepted
source for current municipal bond market information.
Comparative information on the Consumer Price Index may also be
included. This Index, as prepared by the U.S. Bureau of Labor Statistics, is the
most commonly used measure of inflation. It indicates the cost fluctuations of a
representative group of consumer goods. It does not represent a return on
investment.
The Equity, Bond and Municipal Bond Funds may quote actual total return
performance from time to time in advertising and other types of literature
compared to results reported by the Dow Jones Industrial Average.
The Dow Jones Industrial Average is an industry-accepted unmanaged
index of generally conservative securities used for measuring general market
performance. The performance reported will reflect the reinvestment of all
distributions on a quarterly basis and market price fluctuations. The index does
not take into account any brokerage commissions or other fees. Comparative
information on the Consumer Price Index may also be included.
The Equity Funds, the Bond Funds and the Municipal Bond Funds may also
promote the yield and/or total return performance and use comparative
performance information computed by and available from certain industry and
general market research and publications, such as Lipper Analytical Services,
Inc.; they may also use indices such as the Standard & POOR'S 400
COMPOSITE STOCK INDEX, THE STANDARD & Poor's 500 Composite Stock
Index, THE STANDARD & POOR'S 600 COMPOSITE STOCK INDEX, the Russell
2000, or the Morgan Stanley International European, Asian and Far East Gross
Domestic Product Index for performance comparison. Statistical and performance
information compiled and maintained by CDA Technologies, Inc. and Interactive
Data Corporation may also be used.
The Bond Funds and the Asset Allocation Fund may quote actual yield
and/or total return performance in advertising and other types of literature
compared to indices or averages of alternative financial products available to
prospective investors. The performance comparisons may include the average
return of various bank instruments, some of which may carry certain return
guarantees offered by leading banks and thrifts as monitored by Bank Rate
Monitor, and those of corporate bond and government security price indices
of various durations. Comparative information on the Consumer Price Index may
also be included.
The Bond Funds and the Asset Allocation Fund may also use comparative
performance information computed by and available from certain industry and
general market research and publications, as well as statistical and performance
information, compiled and maintained by CDA Technologies, Inc. and Interactive
Data Corporation.
B-86
<PAGE>
The Bond Funds and the Asset Allocation Fund may also use current
interest rate and yield information on government debt obligations of various
durations, as reported weekly by the Federal Reserve (Bulletin H. 15). In
addition, current rate information on municipal debt obligations of various
durations, as reported daily by the Bond Buyer, may also be used.
MISCELLANEOUS
The Trust is not required to hold a meeting of Shareholders for the
purpose of electing Trustees except that (i) the Trust is required to hold a
Shareholders' meeting for the election of Trustees at such time as less than a
majority of the Trustees holding office have been elected by Shareholders and
(ii) if, as a result of a vacancy on the Board of Trustees, less than two-thirds
of the Trustees holding office have been elected by the Shareholders, that
vacancy may only be filled by a vote of the Shareholders. In addition, Trustees
may be removed from office by a written consent signed by the holders of Shares
representing two-thirds of the outstanding Shares of the Trust at a meeting duly
called for the purpose, which meeting shall be held upon the written request of
the holders of Shares representing not less than 20% of the outstanding Shares
of the Trust. Except as set forth above, the Trustees may continue to hold
office and may appoint successor Trustees.
As used in the Trust's Prospectuses and in this Statement of Additional
Information, "assets belonging to a Fund" means the consideration received by
the Trust upon the issuance or sale of Shares in that Fund, together with all
income, earnings, profits, and proceeds derived from the investment thereof,
including any proceeds from the sale, exchange, or liquidation of such
investments, and any funds or payments derived from any reinvestment of such
proceeds, and any general assets of the Trust not readily identified as
belonging to a particular Fund that are allocated to that Fund by the Trust's
Board of Trustees. The Board of Trustees may allocate such general assets in any
manner it deems fair and equitable. It is anticipated that the factor that will
be used by the Board of Trustees in making allocations of general assets to
particular Funds will be the relative net asset values of the respective Funds
at the time of allocation. Assets belonging to a particular Fund are charged
with the direct liabilities and expenses in respect of that Fund, and with a
share of the general liabilities and expenses of the Trust not readily
identified as belonging to a particular Fund that are allocated to that Fund in
proportion to the relative net asset values of the respective Funds at the time
of allocation. The timing of allocations of general assets and general
liabilities and expenses of the Trust to particular Funds will be determined by
the Board of Trustees of the Trust and will be in accordance with generally
accepted accounting principles. Determinations by the Board of Trustees of the
Trust as to the timing of the allocation of general liabilities and expenses and
as to the timing and allocable portion of any general assets with respect to a
particular Fund are conclusive. For information regarding the allocations of
Class Expenses to particular classes of a Fund, see the respective Prospectus of
the Fund under "MANAGEMENT-Expenses."
B-87
<PAGE>
As used in the Trust's Prospectuses and in this Statement of Additional
Information, a "vote of a majority of the outstanding Shares" of the Trust, a
particular Fund, or a particular class of Shares of a Fund, means the
affirmative vote of the lesser of (a) more than 50% of the outstanding Shares of
the Trust, such Fund, or such class of Shares of such Fund, or (b) 67% or more
of the Shares of the Trust, such Fund, or such class of Shares of such Fund
present at a meeting at which the holders of more than 50% of the outstanding
Shares of the Trust, such Fund, or such class of Shares of such Fund are
represented in person or by proxy.
The Trust is registered with the Securities and Exchange Commission as
a management investment company. Such registration does not involve supervision
by the Commission of the management or policies of the Trust.
The Prospectus and this Statement of Additional Information omit
certain of the information contained in the Registration Statement filed with
the Securities and
Exchange Commission. Copies of such information may be obtained from the
Commission upon payment of the prescribed fee.
The Prospectus and this Statement of Additional Information are not an
offering of the securities herein described in any STATE in which such
offering may not lawfully be made. No salesman, dealer, or other person is
authorized to give any information or make any representation other than those
contained in the Prospectus and Statement of Additional Information.
As of NOVEMBER 6, 1995, BANC ONE CORPORATION, 100 East Broad Street,
Columbus, Ohio 43271-0152 (an Ohio Corporation) through Bank Subsidiaries,
acting on behalf of their underlying accounts, held of record substantially all
of the Fiduciary Class Shares of the Trust, and possessed voting or investment
power as follows:
<TABLE>
<CAPTION>
FUND PERCENT OF BENEFICIAL OWNERSHIP
<S> <C>
Large Company Growth Fund 73.48%
Disciplined Value Fund 79.50%
Growth OPPORTUNITIES Fund 79.48%
Income Bond Fund 85.52%
Intermediate Tax-Free Bond Fund 93.06%
Prime Money Market Fund 94.38%
B-88
<PAGE>
U.S. Treasury Securities Money Market Fund 98.47%
Municipal Money Market Fund 86.55%
Income Equity Fund 89.74%
Equity Index Fund 45.42%
Large Company Value Fund 69.56%
Ohio Municipal Bond Fund 97.99%
Limited Volatility Bond Fund 97.54%
International Equity Fund 77.42%
Asset Allocation Fund 91.52%
Ohio Municipal Money Market Fund 72.25%
MUNICIPAL INCOME 96.92%
Kentucky Municipal Bond Fund 99.06%
Government Bond Fund 93.69%
Government ARM Fund 70.32%
Intermediate Bond Fund 94.24%
</TABLE>
As a result, BANC ONE CORPORATION may be deemed to be a "controlling person" of
the Fiduciary Class Shares of each of the aforementioned Funds under the
Investment Company Act of 1940.
In addition, as of NOVEMBER 6, 1995, the following persons were the
beneficial owners of more than 25% of the outstanding Shares of the following
class of Shares of the following Funds:
B-89
<PAGE>
25% SHAREHOLDERS
<TABLE>
<CAPTION>
NAME AND PERCENTAGE OF TYPE OF
ADDRESS FUND/CLASS OWNERSHIP OWNERSHIP
- ------- ---------- --------- ---------
<S> <C> <C> <C>
440 Financial Group 401K Income Bond Fund 25.14% Record
c/o Ann Sheputa Class A
440 Lincoln Street
Worcester, MA 01653-0002
Donaldson Lufkin Jenrette Kentucky Municipal 25.94% Record
Securities Corporation Inc. Bond Fund
P.O. Box 2052 Class B
Jersey City, NJ 07303-2052
Strafe & Co. Treasury Only Money 60.25% Record
c/o Bank One Trust Co. Market Fund
Attn: Mutual Funds
100 E. Broad Street
Columbus, OH 43215-3607
Clark & Co. US Government Money 46.72% Record
c/o Bank One Wisconsin Money Fund
P.O. Box 1631
Waukesha, WI 53187-1631
Bank One Texas NA US Government Money 27.62% Record
1717 Main Street Market Fund
Dallas, TX 75201-4605
Strafe & Co. Disciplined Value Fund 29.21% Record
Attn: Mutual Funds 0393 Fiduciary Class
100 E. Broad Street
Columbus, OH 43215-3607
Strafe & Co. Income Bond Fund 25.92% Record
Attn: Mutual Funds 0393 Fiduciary Class
100 E. Broad Street
Columbus, OH 43215-3607
Clark & Co. Income Bond Fund 26.07% Record
c/o Bank One Wisconsin Fiduciary Class
101 West Broadway
Waukesha, WI 53186-4833
Clark & Co. Intermediate Tax-Free 51.04% Record
101 West Broadway Fund
Waukesha, WI 53186-4833 Fiduciary Class
Clark & Co. Prime Money Market 39.50% Record
c/o Bank One Wisconsin Fund
P.O. Box 1631 Fiduciary Class
Waukesha, WI 53187-1631
</TABLE>
B-90
<PAGE>
25% SHAREHOLDERS
<TABLE>
<CAPTION>
NAME AND PERCENTAGE OF TYPE OF
ADDRESS FUND/CLASS OWNERSHIP OWNERSHIP
- ------- ---------- --------- ---------
<S> <S> <S> <S>
Strafe & Co. Prime Money Market 54.88% Record
Bank One Ohio Trust Co., NA Fund
Department 0393 S.T.I.F. Fiduciary Class
Columbus, OH 43271
Clark & Co. US Treasury Securities 28.85% Record
c/o Bank One Wisconsin Money Market Fund
P.O. Box 1631 Fiduciary Class
Waukesha, WI 53187-1631
Strafe & Co (N) US Treasury Securities 50.13% Record
Bank One Ohio Trust Co., NA Money Market Fund
Department 0393 S.T.I.F. Fiduciary Class
Columbus, OH 43271
Clark & Co. Municipal Money 33.66% Record
c/o Bank One Wisconsin Market Fund
P.O. Box 1631 Fiduciary Class
Waukesha, WI 53187-1631
Strafe & Co. (D) Municipal Money 52.89% Record
Bank One Ohio Trust Co., NA Market Fund
Department 0393 S.T.I.F. Fiduciary Class
Columbus, OH 43271
Strafe & Co. Income Equity Fund 26.01% Record
Attn: Mutual Funds 0393 Fiduciary Class
100 E. Broad Street
Columbus, OH 43215-3607
Strafe & Co. Equity Index Fund 25.12% Record
Attn: Mutual Funds 0393 Fiduciary Class
100 E. Broad Street
Columbus, OH 43215-3607
Strafe & Co. Ohio Municipal Bond 92.22% Record
Attn: Mutual Funds 0393 Fund
100 E. Broad Street Fiduciary Class
Columbus, OH 43215-3607
Clark & Co. Limited Volatility Bond 27.34% Record
101 W. Broadway Fund
P.O. Box 1631 Fiduciary Class
Waukesha, WI 53187-1631
Bank One Wisconsin TR CO NA Asset Allocation Fund 52.30% Record
101 West Broadway Fiduciary Class
Waukesha, WI 53186-4833
</TABLE>
B-91
<PAGE>
25% SHAREHOLDERS
<TABLE>
<CAPTION>
NAME AND PERCENTAGE OF TYPE OF
ADDRESS FUND/CLASS OWNERSHIP OWNERSHIP
- ------- ---------- --------- ---------
<S> <C> <C> <C>
Strafe & Co. Ohio Municipal Money 72.25% Record
c/o Bank One Trust Co. Market Fund
Attn: Mutual Funds Fiduciary Class
100 E. Broad Street
Columbus, OH 43215-3607
Clark & Co. Tax Free Bond Fund 59.91% Record
101 West Broadway Fiduciary Class
Waukesha, WI 53186-4833
Loutrag Kentucky Municipal 85.90% Record
Attn: Mutual Fund Clerk Bond
P.O. Box 32590 Fiduciary Class
Louisville, KY 40232-2590
Clark & Co. Intermediate Bond Fund 31.71% Record
101 West Broadway Fiduciary Class
Waukesha, WI 53186-4833
Strafe & Co. Intermediate Bond Fund 27.72% Record
Attn: Mutual Funds Fiduciary Class
100 E. Broad Street
Columbus, OH 43215-3607
440 Financial Group 401K International Equity 42.53% Record
c/o Ann Sheputa Index Fund
440 Lincoln Street Class A
Worcester, MA 01653-0002
Donaldson Lufkin Jenrette Government ARM Fund 77.48% Record
Securities Corporation Inc. Class A
P.O. Box 2052
Jersey City, NJ 07303-2052
440 Financial Group 401K Large Company Value 49.53% Record
c/o Ann Sheputa Fund
440 Lincoln Street Class A
Worcester, MA 01653-0002
Strafe & Co. Government ARM Fund 28.51% Record
Attn: Mutual Funds 0393 Fiduciary Fund
100 E. Broad Street
Columbus, OH 43215-3607
Clark & Co. International Equity 26.90% Record
101 West Broadway Index Fund
Waukesha, WI 53186-4833 Fiduciary Fund
Clark & Co. Government Bond Fund 25.33% Record
101 West Broadway Fiduciary Fund
Waukesha, WI 53186-4833
</TABLE>
B-92
<PAGE>
25% SHAREHOLDERS
<TABLE>
<CAPTION>
NAME AND PERCENTAGE OF TYPE OF
ADDRESS FUND/CLASS OWNERSHIP OWNERSHIP
- ------- ---------- --------- ---------
<S> <C> <C> <C>
Strafe & Co. Government Bond Fund 26.68% Record
Attn: Mutual Funds 0393 Fiduciary Fund
100 E. Broad Street
Columbus, OH 43215-3607
Banc One Securities Savings Plan Equity Index Fund 29.88% Beneficial
c/o Cathi Jarvis Fiduciary Fund
235 West Schrock Road
Westerville, OH 43081
</TABLE>
As a result, the aforementioned persons may be deemed to be "controlling
persons" of the class of Shares of the Fund in which they own such Shares under
the Investment Company Act of 1940. The table below indicates record and
beneficial owners of over 5% of any class of Shares of any Fund of the Trust.
B-93
<PAGE>
5% SHAREHOLDERS
<TABLE>
<CAPTION>
NAME AND PERCENTAGE OF TYPE OF
ADDRESS FUND/CLASS OWNERSHIP OWNERSHIP
- ------- ---------- --------- ---------
<S> <C> <C> <C>
Dolores E. Jarvis Kentucky Tax-Free 9.18% Beneficial
8901 Bingham Drive Bond Fund
Louisville, KY 40242-3308 Class B
Clem R. Jarvis Kentucky Tax-Free 9.18% Beneficial
8901 Bingham Drive Bond Fund
Louisville, KY 40242-3308 Class B
Donaldson Lufkin Jenrette Kentucky Tax-Free 25.94% Record
Securities Corporation Inc. Bond Fund
P.O. Box 2052 Class B
Jersey City, NJ 07303-2052
Donaldson Lufkin Jenrette Kentucky Tax-Free 9.17% Record
Securities Corporation Inc. Bond Fund
P.O. Box 2052 Class B
Jersey City, NJ -7303-2052
Donaldson Lufkin Jenrette Kentucky Tax-Free 15.55% Record
Securities Corporation Inc. Bond Fund
P.O. Box 2052 Class B
Jersey City, NJ 07303-2052
Donaldson Lufkin Jenrette Kentucky Tax-Free 11.25% Record
Securities Corporation Inc. Bond Fund
P.O. Box 2052 Class B
Jersey City, NJ 07303-2052
Donaldson Lufkin Jenrette Intermediate Tax-Free 8.13% Record
Securities Corporation Inc. Fund
P.O. Box 2052 Class B
Jersey City, NJ 07303-2052
Katherine M. Lee Intermediate Tax-Free 21.23% Beneficial
Pamela K. Adams JT WROS Fund
7740 E. Gainey Ranch Rd. Class B
Scottsdale, AZ 85258-1618
Rhoady R. Lee Intermediate Tax-Free 12.38% Beneficial
Katherine M. Lee JT WROS Fund
7740 E. Gainey Ranch Rd. Class B
Scottsdale, AZ 85258-1618
Donald Lufkin Jenrette Intermediate Tax-Free 6.21% Record
Securities Corporation Inc. Fund
P.O. Box 2052 Class B
Jersey City, NJ 07303-2052
</TABLE>
B-94
<PAGE>
5% SHAREHOLDERS
<TABLE>
<CAPTION>
NAME AND PERCENTAGE OF TYPE OF
ADDRESS FUND/CLASS OWNERSHIP OWNERSHIP
- ------- ---------- --------- ---------
<S> <C> <C> <C>
State Street Bank & Trust Co. Government ARM 10.92% Beneficial
Cust For the IRA of Fund
Bill G. Howard Class B
P.O. Box 75255
Oklahoma City, OK 73147-0255
Donaldson Lufkin Jenrette Government ARM 5.86% Record
Securities Corporation Inc. Fund
P.O. Box 2052 Class B
Jersey City, NJ 07303-2052
Donaldson Lufkin Jenrette Government ARM 8.51% Record
Securities Corporation Inc. Fund
P.O. Box 2052 Class B
Jersey City, NJ 07303-2052
Donaldson Lufkin Jenrette Government ARM 20.31% Record
Securities Corporation Inc. Fund
P.O. Box 2052 Class B
Jersey City, NJ 07303-2052
Donaldson Lufkin Jenrette Government ARM 11.60% Record
Securities Corporation Inc. Fund
P.O. Box 2052 Class B
Jersey City, NJ 07303-2052
Donaldson Lufkin Jenrette Government ARM 5.09% Record
Securities Corporation Inc. Fund
P.O. Box 2052 Class B
Jersey City, NJ 07303-2052
Donaldson Lufkin Jenrette Government ARM 21.89% Record
Securities Corporation Inc. Fund
P.O. Box 2052 Class B
Jersey City, NJ 07303-2052
Cara L. Remley Pod Intermediate Bond 5.25% Beneficial
Sueann Hoffman Fund
10401 N. Cave Creek Road, Lot 219 Class B
Phoenix, AZ 85020-1630
440 Financial Group 401K Large Company 8.83% Record
c/o Ann Sheputa Growth Fund
440 Lincoln Street Class A
Worcester, MA 01653-0002
</TABLE>
B-95
<PAGE>
5% SHAREHOLDERS
<TABLE>
<CAPTION>
NAME AND PERCENTAGE OF TYPE OF
ADDRESS FUND/CLASS OWNERSHIP OWNERSHIP
- ------- ---------- --------- ---------
<S> <C> <C> <C>
440 Financial Group 401K Disciplined Value 14.56% Record
c/o Ann Sheputa Fund
440 Lincoln Street Class A
Worcester, MA 01653-0002
440 Financial Group 401K Small Company 21.47% Record
c/o Ann Sheputa Growth Fund
440 Lincoln Street Class A
Worcester, MA 01653-0002
440 Financial Group 401K Income Bond Fund 25.14% Record
c/o Ann Sheputa Class A
440 Lincoln Street
Worcester, MA 01653-0002
Donaldson Lufkin Jenrette Income Bond Fund 5.47% Record
Securities Corporation Inc. Class A
P.O. Box 2052
Jersey City, NJ 07303-2052
Donaldson Lufkin Jenrette Limited Volatility 8.92% Record
Securities Corporation Inc. Bond Fund
P.O. Box 2052 Class A
Jersey City, NJ 07303-2052
440 Financial Group 401K Limited Volatility 15.59% Record
c/o Ann Sheputa Bond Fund
440 Lincoln Street Class A
Worcester, MA 01653-0002
Robert Stanley Jr. Intermediate Tax-Free 12.63% Beneficial
Virginia R. Stanley JT TEN Fund
P.O. Box 15583 Class A
Phoenix, AZ 85060-5583
Jacob E. Heneger Intermediate Tax-Free 12.47% Beneficial
7249 N. Central Ave. Fund
Phoenix, AZ 85020-4850 Class A
Benedict Inc. US Treasury Securities 6.39% Beneficial
P.O. Box 315 Money Market
Mc Arthur, OH 45651 Class A
Tom Lang Company Inc. US Treasury Securities 5.74% Beneficial
P.O. Box 19261 Money Market
Springfield, IL 62794-9261 Class A
</TABLE>
B-96
<PAGE>
5% SHAREHOLDERS
<TABLE>
<CAPTION>
NAME AND PERCENTAGE OF TYPE OF
ADDRESS FUND/CLASS OWNERSHIP OWNERSHIP
- ------- ---------- --------- ---------
<S> <C> <C> <C>
EXABYTE Municipal Money 15.42% Beneficial
Attn: Bob Stover Market Fund
1685 38th Street Class A
Boulder, CO 80301-2601
Joseph B. Udvare Trustee Municipal Money 15.06% Beneficial
Udvare Revocable Trust Agreement Market Fund
5301 N. 25th Place Class A
Phoenix, AZ 85016-3629
440 Financial Group 401K Income Equity Fund 7.36% Record
c/o Ann Sheputa Class A
440 Lincoln Street
Worcester, MA 01653-0002
Ann Sheputa Equity Index Fund 21.08% Record
c/o 440 Financial Group 401K Class A
440 Lincoln Street
Worcester, MA 01653-0002
Donaldson Lufkin Jenrette Equity Index Fund 6.76% Record
Securities Corporation Inc. Class A
P.O. Box 2052
Jersey City, NJ -7303-2052
440 Financial Group 401K Large Company Value 49.53% Record
c/o Ann Sheputa Fund
440 Lincoln Street Class A
Worcester, MA 01653-0002
Donaldson Lufkin Jenrette Ohio Municipal Bond 8.09% Record
Securities Corporation Inc. Fund
P.O. Box 2052 Class A
Jersey City, NJ 07303-2052
Clark & Co. Treasury Only Money 9.68% Record
c/o Bank One Wisconsin Market Fund
P.O. Box 1631
Waukesha, WI 53187-1631
Bank One Texas NA Treasury Only Money 19.49% Record
1717 Main Street Market Fund
Dallas, TX 75201-4605
Strafe & Co. Treasury Only Money 60.25% Record
c/o Bank One Trust Co. Market Fund
Attn: Mutual Funds
100 E. Broad Street
Columbus, OH 43215-3607
</TABLE>
B-97
<PAGE>
5% SHAREHOLDERS
<TABLE>
<CAPTION>
NAME AND PERCENTAGE OF TYPE OF
ADDRESS FUND/CLASS OWNERSHIP OWNERSHIP
- ------- ---------- --------- ---------
<S> <C> <C> <C>
Clark & Co. US Government 46.72% Record
c/o Bank One Wisconsin Money Market Fund
P.O. Box 1631
Waukesha, WI 53187-1631
Bank One Texas NA US Government 27.62% Record
1717 Main Street Money Market Fund
Dallas, TX 75201-4605
Bank One Trust Company NA US Government 10.76% Record
Omnibus-Corporate Cash Sweep Acct Money Market Fund
235 West Schrock Road
Attn: Cash Management DB3
Westerville, OH 43081-3607
Strafe & Co. US Government 14.90% Record
c/o Bank One Trust Co. Money Market Fund
Attn: Mutual Funds
100 E. Broad Street
Columbus, OH 43215-3607
Clark & Co. Large Company 16.60% Record
101 West Broadway Growth Fund
Waukesha, WI 53186-4833 Fiduciary Class
Bank One Wisconsin TR CO NA Large Company 11.89% Record
101 West Broadway Growth Fund
Waukesha, WI 53186-4833 Fiduciary Class
Loutrag Large Company 9.11% Record
Attn: Mutual Fund Clerk Growth Fund
P.O. Box 32590 Fiduciary Class
Louisville, KY 40232-2590
Loucourt Co Large Company 8.41% Record
P.O. Box 32590 Growth Fund
Louisville, KY 40232-2590 Fiduciary Class
Strafe & Co. Large Company 8.68% Record
Attn: Mutual Funds 0393 Growth Fund
100 E. Broad Street Fiduciary Class
Columbus, OH 43215-3607
Strafe & Co. Large Company 18.79% Record
Attn: Mutual Funds 0393 Growth Fund
100 E. Broad Street Fiduciary Class
Columbus, OH 43215-3607
</TABLE>
B-98
<PAGE>
5% SHAREHOLDERS
<TABLE>
<CAPTION>
NAME AND PERCENTAGE OF TYPE OF
ADDRESS FUND/CLASS OWNERSHIP OWNERSHIP
- ------- ---------- --------- ---------
<S> <C> <C> <C>
Clark & Co. Disciplined Value 21.35% Record
101 West Broadway Fund
Waukesha, WI 53186-4833 Fiduciary Class
Bank One Wisconsin TR CO NA Disciplined Value 20.03% Record
101 West Broadway Fund
Waukesha, WI 53186-4833 Fiduciary Class
Strafe & Co. Disciplined Value 8.91% Record
Attn: Mutual Funds 0393 Fund
100 E. Broad Street Fiduciary Class
Columbus, OH 43215-3607
Strafe & Co. Disciplined Value 29.21% Record
Attn: Mutual Funds 0393 Fund
100 E. Broad Street Fiduciary Class
Columbus, OH 43215-3607
Clark & Co. Small Company 21.44% Record
101 West Broadway Growth Fund
Waukesha, WI 53186-4833 Fiduciary Class
Bank One Wisconsin TR CO NA Small Company 19.01% Record
101 West Broadway Growth Fund
Waukesha, WI 53186-4833 Fiduciary Class
Strafe & Co./Cash Div Cash Small Company 22.28% Record
c/o Bank One Trust Co. Growth Fund
Attn: Mutual Funds 0393 Fiduciary Class
100 E. Broad Street
Columbus, OH 43215-3607
Strafe & Co. Small Company 16.75% Record
Attn: Mutual Funds 0393 Growth Fund
100 E. Broad Street Fiduciary Class
Columbus, OH 43215-3607
Clark & Co. Income Bond Fund 26.07% Record
c/o Bank One Wisconsin Fiduciary Class
P.O. Box 1631
Waukesha, WI 53187-1631
Bank One Wisconsin TR CO NA Income Bond Fund 11.24% Record
101 West Broadway Fiduciary Class
Waukesha, WI 53186-4833
</TABLE>
B-99
<PAGE>
5% SHAREHOLDERS
<TABLE>
<CAPTION>
NAME AND PERCENTAGE OF TYPE OF
ADDRESS FUND/CLASS OWNERSHIP OWNERSHIP
- ------- ---------- --------- ---------
<S> <C> <C> <C>
Strafe & Co. Income Bond Fund 22.02% Record
c/o Bank One Trust Co. Fiduciary Class
Attn: Mutual Funds
100 E. Broad Street
Columbus, OH 43215-3607
Strafe & Co. Income Bond Fund 25.92% Record
Attn: Mutual Funds 0393 Fiduciary Class
100 E. Broad Street
Columbus, OH 43215-3607
Clark & Co. Intermediate Tax-Free 51.04% Record
101 West Broadway Fund
Waukesha, WI 53186-4833 Fiduciary Class
Strafe & Co. Intermediate Tax-Free 9.14% Record
Attn: Bank One Trust Fund
235 West Schrock Road Fiduciary Class
Westerville, OH 43081-2874
Strafe & Co. Intermediate Tax-Free 24.00% Record
Attn: Mutual Funds 0393 Fund
100 E. Broad Street Fiduciary Class
Columbus, OH 43215-3607
Strafe & Co. Intermediate Tax-Free 8.88% Record
Attn: Mutual Funds 0393 Fund
100 E. Broad Street Fiduciary Class
Columbus, OH 43215-3607
Clark & Co. Prime Money Market 39.50% Record
c/o Bank One Wisconsin Fund
P.O. Box 1631 Fiduciary Class
Waukesha, WI 53187-1631
Strafe & Co. Prime Money Market 54.88% Record
Bank One Ohio Trust Co., NA Fund
Department 0393, S.T.I.F. Fiduciary Class
Columbus, OH 43271
Clark & Co. US Treasury Securities 28.85% Record
c/o Bank One Wisconsin Money Market Fund
P.O. Box 1631 Fiduciary Class
Waukesha, WI 53187-1631
</TABLE>
B-100
<PAGE>
5% SHAREHOLDERS
<TABLE>
<CAPTION>
NAME AND PERCENTAGE OF TYPE OF
ADDRESS FUND/CLASS OWNERSHIP OWNERSHIP
- ------- ---------- --------- ---------
<S> <C> <C> <C>
Bank One Trust Company NA US Treasury Securities 19.49% Record
Omnibus-Corporate Cash Sweep Acct Money Market Fund
Attn: Cash Management DB3 Fiduciary Class
235 W. Schrock Road
Westerville, OH 43081-2874
Strafe & Co. (N) US Treasury Securities 50.13% Record
Bank One Ohio Trust Co., NA Money Market Fund
Department 0393 S.T.I.F. Fiduciary Class
Columbus, OH 43271
Clark & Co. Municipal Money 33.66% Record
c/o Bank One Wisconsin Market Fund
P.O. Box 1631 Fiduciary Class
Waukesha, WI 53187-1631
Strafe & Co. (D) Municipal Money 52.89% Record
Bank One Ohio Trust Co., NA Market Fund
Department 0393 S.T.I.F. Fiduciary Class
Columbus, OH 43217
Clark & Co. Income Equity Fund 24.36% Record
c/o Bank One Wisconsin Fiduciary Class
P.O. Box 1631
Waukesha, WI 53187-1631
Bank One Wisconsin TR CO NA Income Equity Fund 15.83% Record
101 West Broadway Fiduciary Class
Waukesha, WI 53186-4833
440 Financial Group 401K Income Equity Fund 5.91% Record
c/o Ann Sheputa Fiduciary Class
440 Lincoln Street
Worcester, MA 01653-0002
Strafe & Co. Income Equity Fund 8.81% Record
Attn: Bank One Trust Fiduciary Class
235 West Schrock Road
Westerville, OH 43081-2874
Strafe & Co. Income Equity Fund 26.01% Record
Attn: Mutual Funds 0393 Fiduciary Class
100 E. Broad Street
Columbus, OH 43215-3607
Strafe & Co. Income Equity Fund 14.73% Record
Attn: Mutual Funds 0393 Fiduciary Class
100 E. Broad Street
Columbus, OH 43215-3607
</TABLE>
B-101
<PAGE>
5% SHAREHOLDERS
<TABLE>
<CAPTION>
NAME AND PERCENTAGE OF TYPE OF
ADDRESS FUND/CLASS OWNERSHIP OWNERSHIP
- ------- ---------- --------- ---------
<S> <C> <C> <C>
Clark & Co. Large Company Value 18.10% Record
c/o Bank One Wisconsin Fund
101 West Broadway Fiduciary Class
Waukesha, WI 53186-4833
Bank One Wisconsin TR CO NA Large Company Value 12.44% Record
101 West Broadway Fund
Waukesha, WI 53186-4833 Fiduciary Class
Strafe & Co. Large Company Value 22.53% Record
Attn: Mutual Funds 0393 Fund
100 E. Broad Street Fiduciary Class
Columbus, OH 43215-3607
Strafe & Co. Large Company Value 16.49% Record
Attn: Mutual Funds 0393 Fund
100 E. Broad Street Fiduciary Class
Columbus, OH 43215-3607
Strafe & Co. Ohio Municipal Bond 92.22% Record
Attn: Mutual Funds 0393 Fund
100 E. Broad Street Fiduciary Class
Columbus, OH 43215-3607
Strafe & Co. Ohio Municipal Bond 5.77% Record
Attn: Mutual Funds 0393 Fund
100 E. Broad Street Fiduciary Class
Columbus, OH 43215-3607
Clark & Co. International Equity 26.90% Record
101 West Broadway Index Fund
Waukesha, WI 53186-4833 Fiduciary Class
Bank One Wisconsin Trust NA International Equity 15.41% Record
101 West Broadway Index Fund
Waukesha, WI 53186-4833 Fiduciary Class
Strafe & Co. International Equity 10.71% Record
Attn: Mutual Funds 0393 Index Fund
100 E. Broad Street Fiduciary Class
Columbus, OH 43215-3607
Strafe & Co. International Equity 24.40% Record
Attn: Mutual Funds 0393 Index Fund
100 E. Broad Street Fiduciary Class
Columbus, OH 43215-3607
Clark & Co. Limited Volatility 6.18% Record
235 W. Schrock Road Bond Fund
Westerville, Ohio 43081-2874 Fiduciary Class
</TABLE>
B-102
<PAGE>
5% SHAREHOLDERS
<TABLE>
<CAPTION>
NAME AND PERCENTAGE OF TYPE OF
ADDRESS FUND/CLASS OWNERSHIP OWNERSHIP
- ------- ---------- --------- ---------
<S> <C> <C> <C>
Clark & Co. Limited Volatility 27.34% Record
101 West Broadway Bond Fund
P.O. Box 1631 Fiduciary Class
Waukesha, WI 53187-1631
Bank One Wisconsin Trust NA Limited Volatility 8.78% Record
101 West Broadway Bond Fund
Waukesha, WI 53186-4833 Fiduciary Class
Strafe & Co. Limited Volatility 6.26% Record
Attn: Bank One Trust Bond Fund
235 West Schrock Road Fiduciary Class
Westerville, OH 43081-2874
Strafe & Co. Limited Volatility 24.04% Record
Attn: Mutual Funds 0393 Bond Fund
100 E. Broad Street Fiduciary Class
Columbus, OH 43215-3607
Strafe & Co. Limited Volatility 24.94% Record
Attn: Mutual Funds 0393 Bond Fund
100 E. Broad Street Fiduciary Class
Columbus, OH 43215-3607
Clark & Co. Equity Index Fund 6.23% Record
101 West Broadway Fiduciary Class
Waukesha, WI 53186-4833
Bank One Wisconsin TR CO NA Equity Index Fund 8.10% Record
101 West Broadway Fiduciary Class
Waukesha, WI 53186-4833
440 Financial Group 401K Equity Index Fund 7.77% Record
c/o Ann Sheputa Fiduciary Class
440 Lincoln Street
Worcester, MA 01653-0002
Strafe & Co. Equity Index Fund 5.97% Record
Attn: Mutual Funds 0393 Fiduciary Class
100 E. Broad Street
Columbus, OH 43215-3607
Strafe & Co. Equity Index Fund 25.12% Record
Attn: Mutual Funds 0393 Fiduciary Class
100 E. Broad Street
Columbus, OH 43215-3607
Clark & Co. Asset Allocation Fund 7.40% Record
101 West Broadway Fiduciary Class
Waukesha, WI 53186-4833
</TABLE>
B-103
<PAGE>
5% SHAREHOLDERS
<TABLE>
<CAPTION>
NAME AND PERCENTAGE OF TYPE OF
ADDRESS FUND/CLASS OWNERSHIP OWNERSHIP
- ------- ---------- --------- ---------
<S> <C> <C> <C>
Bank One Wisconsin TR CO NA Asset Allocation Fund 52.30% Record
101 West Broadway Fiduciary Class
Waukesha, WI 53186-4833
440 Financial Group 401K Asset Allocation Fund 5.94% Record
c/o Ann Sheputa Fiduciary Class
440 Lincoln Street
Worcester, MA 01653-0002
Strafe & Co. Asset Allocation Fund 5.91% Record
Attn: Mutual Funds 0393 Fiduciary Class
100 E. Broad Street
Columbus, OH 43215-3607
Strafe & Co. Asset Allocation Fund 19.97% Record
Attn: Mutual Funds 0393 Fiduciary Class
100 E. Broad Street
Columbus, OH 43215-3607
CBC Companies Inc. Ohio Municipal Money 23.77% Beneficial
Attn: Dirk Cantrell Market Fund
250 East Town Street Class A
Columbus, OH 43215-4637
Barefoot Grass Lawn Service Inc Ohio Municipal Money 6.39% Beneficial
450 W. Wilson Bridge Road Market Fund
Worthington, OH 43085-2237 Class A
Mesa Golfland Ltd Tax Free Bond Fund 8.40% Beneficial
155 W. Hampton Class A
Mesa, AZ 85210-5258
Woody R. McGinnis Tax Free Bond Fund 5.25% Beneficial
Julia L. Waters McGinnis JT TEN Class A
3150 E. Cerrada Los
Tuscon, AZ 85718
Donaldson Lufkin Jenrette Tax Free Bond Fund 6.78% Record
Securities Corporation Inc. Class A
P.O. Box 2052
Jersey City, NJ 07303-2052
Middle Kentucky Construction Co. Kentucky Municipal 18.56% Record
J. Edwin Ruby Jr. Bond Fund
135 Tilford Drive Class A
Beaver Dam, KY 42320-9717
</TABLE>
B-104
<PAGE>
5% SHAREHOLDERS
<TABLE>
<CAPTION>
NAME AND PERCENTAGE OF TYPE OF
ADDRESS FUND/CLASS OWNERSHIP OWNERSHIP
- ------- ---------- --------- ---------
<S> <C> <C> <C>
Heartland Environmental Kentucky Municipal 8.38% Record
Thomas W. Smith Bond Fund
831 Eagle Mill Road Class A
Sonora, KY 42776-9721
Donaldson Lufkin Jenrette Kentucky Municipal 6.60% Record
Securities Corporation Inc. Bond Fund
P.O. Box 2052 Class A
Jersey City, NJ 07303-2052
440 Financial Group 401K Government Bond 10.83% Record
c/o Ann Sheputa Fund
440 Lincoln Street Class A
Worcester, MA 01653-0002
Donaldson Lufkin Jenrette Government ARM 77.48% Record
Securities Corporation Inc. Fund
P.O. Box 2052 Class A
Jersey City, NJ 07303-2052
440 Financial Group 401K Asset Allocation Fund 10.71% Record
c/o Ann Sheputa Class A
440 Lincoln Street
Worcester, MA 01653-0002
Strafe & Co. Ohio Municipal Money 72.25% Record
c/o Bank One Trust Co. Market Fund
Attn: Mutual Funds Fiduciary Class
100 E. Broad Street
Columbus, OH 43215-3607
Clark & Co. Tax Free Bond Fund 59.91% Record
101 West Broadway Fiduciary Class
Waukesha, WI 53186-4833
Strafe & Co. Tax Free Bond Fund 10.84% Record
Attn: Bank One Trust Fiduciary Class
234 West Schrock Road
Westerville, OH 43081-2873
Strafe & Co. Tax Free Bond Fund 19.51% Record
Attn: Mutual Funds 0393 Fiduciary Class
100 E. Broad Street
Columbus, OH 43215-3607
Strafe & Co. Tax Free Bond Fund 6.66% Record
Attn: Mutual Funds 0393 Fiduciary Class
100 E. Broad Street
Columbus, OH 43215-3607
</TABLE>
B-105
<PAGE>
5% SHAREHOLDERS
<TABLE>
<CAPTION>
NAME AND PERCENTAGE OF TYPE OF
ADDRESS FUND/CLASS OWNERSHIP OWNERSHIP
- ------- ---------- --------- ---------
<S> <C> <C> <C>
Loutrag Kentucky Municipal 58.90% Record
Attn: Mutual Fund Clerk Bond Fund
P.O. Box 32590 Fiduciary Class
Louisville, KY 40232-2590
Loucourt Co. Kentucky Municipal 7.07% Record
P.O. Box 32590 Bond Fund
Louisville, KY 40232-2590 Fiduciary Class
Clark & Co. Government Bond 25.33% Record
101 W. Broadway Fund
Waukesha, WI 53186-4833 Fiduciary Class
Bank One Wisconsin TR CO NA Government Bond 9.17% Record
101 W. Broadway Fund
Waukesha, WI 53186-4833 Fiduciary Class
Loutrag Government Bond 9.39% Record
Attn: Mutual Fund Clerk Fund
P.O. Box 32590 Fiduciary Class
Louisville, KY 40232-2590
Loucourt Co. Government Bond 12.11% Record
P.O. Box 32590 Fund
Louisville, KY 40232-2590 Fiduciary Class
Strafe & Co. Government Bond 26.68% Record
Attn: Mutual Funds 0393 Fund
100 E. Broad Street Fiduciary Class
Columbus, OH 43215-3607
Strafe & Co. Government Bond 11.01% Record
Attn: Mutual Funds 0393 Fund
100 E. Broad Street Fiduciary Class
Columbus, OH 43215-3607
Clark & Co. Government ARM 11.54% Record
101 West Broadway Fund
Waukesha, WI 53186-4833 Fiduciary Fund
Bank One Wisconsin TR CO NA Government ARM 15.88% Record
101 West Broadway Fund
Waukesha, WI 53186-4833 Fiduciary Fund
Strafe & Co. Government ARM 14.39% Record
Attn: Mutual Funds 0393 Fund
100 E. Broad Street Fiduciary Fund
Columbus, OH 43215-3607
</TABLE>
B-106
<PAGE>
5% SHAREHOLDERS
<TABLE>
<CAPTION>
NAME AND PERCENTAGE OF TYPE OF
ADDRESS FUND/CLASS OWNERSHIP OWNERSHIP
- ------- ---------- --------- ---------
<S> <C> <C> <C>
Strafe & Co. Government ARM 28.51% Record
Attn: Mutual Funds 0393 Fund
100 E. Broad Street Fiduciary Fund
Columbus, OH 43215-3607
Clark & Co. Intermediate Bond 31.71% Record
101 West Broadway Fund
Waukesha, WI 53186-4833 Fiduciary Fund
Bank One Wisconsin TR CO NA Intermediate Bond 5.99% Record
101 West Broadway Fund
Waukesha, WI 53186-4833 Fiduciary Fund
Loutrag Intermediate Bond 7.00% Record
Attn: Mutual Fund Clerk Fund
P.O. Box 32590 Fiduciary Fund
Louisville, KY 40232-2590
Loucourt Co. Intermediate Bond 10.56% Record
P.O. Box 32590 Fund
Louisville, KY 40232-2590 Fiduciary Fund
Strafe & Co. Intermediate Bond 27.72% Record
Attn: Mutual Funds 0393 Fund
100 E. Broad Street Fiduciary Fund
Columbus, OH 43215-3607
Strafe & Co. Intermediate Bond 11.26% Record
Attn: Mutual Funds 0393 Fund
100 E. Broad Street Fiduciary Fund
Columbus, OH 43215-3607
440 Financial Group 401K International Equity 42.53% Record
c/o Ann Sheputa Index Fund
440 Lincoln Street Class A
Worcester, MA 01653-0002
Donaldson Lufkin Jenrette Intermediate Bond 8.27% Record
Securities Corporation Inc. Fund
P.O. Box 2052 Class A
Jersey City, NJ 07303-2052
Tr U/A A.J. Hacl-ESOP Municipal Money 7.03% Beneficial
c/o Cathi Jarvis Market Fund
235 West Schrock Road
Westerville, OH 43081
</TABLE>
B-107
<PAGE>
5% SHAREHOLDERS
<TABLE>
<CAPTION>
NAME AND PERCENTAGE OF TYPE OF
ADDRESS FUND/CLASS OWNERSHIP OWNERSHIP
- ------- ---------- --------- ---------
<S> <C> <C> <C>
Wallick Properties Ohio Municipal Money 5.07% Beneficial
c/o Cathi Jarvis Market Fund
235 West Schrock Road
Westerville, OH 43081
David Mikolajczyk Ohio Municipal Money 5.09% Beneficial
c/o Cathi Jarvis Market Fund
235 West Schrock Road
Westerville, OH 43081
Wallick Construction Co. Ohio Municipal Money 5.84% Beneficial
c/o Cathi Jarvis Market Fund
235 West Schrock Road
Westerville, OH 43081
George H. Thomas Ohio Municipal Money 8.51% Beneficial
c/o Cathi Jarvis Market Fund
235 West Schrock Road
Westerville, OH 43081
City of Summit Gen Fd Treasury Only Fund 6.94% Beneficial
c/o Cathi Jarvis
235 West Schrock Road
Westerville, OH 43081
OFDA (MT 2) Asset Allocation Fund 6.06% Beneficial
c/o Cathi Jarvis
235 West Schrock Road
Westerville, OH 43081
Banc One Corp-Retirement Disciplined Value 12.78% Beneficial
c/o Cathi Jarvis Fund
235 West Schrock Road
Westerville, OH 43081
Eli Lilly fbo Christ Church Equity Index Fund 6.39% Beneficial
c/o Cathi Jarvis
235 West Schrock Road
Westerville, OH 43081
NCR Benefit Account Equity Index Fund 8.24% Beneficial
c/o Cathi Jarvis
235 West Schrock Road
Westerville, OH 43081
Banc One Securities Svgs Plan Equity Index Fund 29.88% Beneficial
c/o Cathi Jarvis
235 West Schrock Road
Westerville, OH 43081
</TABLE>
B-108
<PAGE>
5% SHAREHOLDERS
<TABLE>
<CAPTION>
NAME AND PERCENTAGE OF TYPE OF
ADDRESS FUND/CLASS OWNERSHIP OWNERSHIP
- ------- ---------- --------- ---------
<S> <C> <C> <C>
ELCA Mission Invest Government ARM 7.72% Beneficial
c/o Cathi Jarvis Fund
235 West Schrock Road
Westerville, OH 43081
Cook Children's Med Ctr Government ARM 9.15% Beneficial
c/o Cathi Jarvis Fund
235 West Schrock Road
Westerville, OH 43081
OCA OLDC Insur Mgt Government ARM 11.95% Beneficial
c/o Cathi Jarvis Fund
235 West Schrock Road
Westerville, OH 43081
Banc One Sec Svgs Plan Income Bond 7.07% Beneficial
c/o Cathi Jarvis Fund
235 West Schrock Road
Westerville, OH 43081
Banc One Corp-Retirement International Equity 12.84% Beneficial
c/o Cathi Jarvis Index Fund
235 West Schrock Road
Westerville, OH 43081
Banc One Sec Svgs Large Company 8.87% Beneficial
c/o Cathi Jarvis Growth Fund
235 West Schrock Road
Westerville, OH 43081
Banc One Corp-Retirement Large Company 10.99% Beneficial
c/o Cathi Jarvis Growth Fund
235 West Schrock Road
Westerville, OH 43081
Banc One Corp-Retirement Large Company 20.33% Beneficial
c/o Cathi Jarvis Growth Fund
235 West Schrock Road
Westerville, OH 43081
Banc One Corp-Retirement Small Company 8.94% Beneficial
c/o Cathi Jarvis Growth Fund
235 West Schrock Road
Westerville, OH 43081
</TABLE>
B-109
<PAGE>
5% SHAREHOLDERS
<TABLE>
<CAPTION>
NAME AND PERCENTAGE OF TYPE OF
ADDRESS FUND/CLASS OWNERSHIP OWNERSHIP
- ------- ---------- --------- ---------
<S> <C> <C> <C>
Charles P. Brown Kentucky Municipal 6.09% Beneficial
c/o Bank One Kentucky NA Bond Fund
Attn: Nancy Presnell
P.O. Box 32590
Louisville, KY 40239
</TABLE>
As a group, the Trustees and Officers of the Trust owned less than 1%
of the Shares of each class of the Trust.
B-110
<PAGE>
THE ONE GROUP FAMILY OF MUTUAL FUNDS
U.S. TREASURY SECURITIES MONEY MARKET FUND
- --------------------------------------------------------------------------------
SCHEDULE OF PORTFOLIO INVESTMENTS JUNE 30, 1995
(Amounts in Thousands)
<TABLE>
<CAPTION>
PRINCIPAL SECURITY AMORTIZED
AMOUNT DESCRIPTION COST
------ ----------- ----
<S> <C>
U.S. TREASURY BILLS (27.7%):
$40,000 6.06%, 7/6/95 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 39,966
30,000 6.13%, 8/17/95 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 29,760
30,000 6.20%, 8/24/95 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 29,721
30,000 6.20%, 10/19/95 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 29,432
50,000 5.18%, 11/2/95 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 49,108
30,000 6.21%, 11/16/95 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 29,286
50,000 5.21%, 12/7/95 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 48,850
50,000 5.38%, 12/21/95 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 48,708
50,000 5.37%, 1/11/96 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 48,554
----------
Total U.S. Treasury Bills 353,385
----------
Total Investments 353,385
REPURCHASE AGREEMENTS (72.7%):
60,000 Barclays de Zoete Wedd, 6.00%, due 7/5/95, dated 6/30/95 (Collateralized by $53,038 various
government securities, 0.00%-12.38%, 8/15/95-5/15/16, market value-$61,201) . . . . . . . . . . 60,000
250,000 Deutsche Bank, 6.20%, due 7/3/95, dated 6/30/95* . . . . . . . . . . . . . . . . . . . . . . . 250,000
60,000 Deutsche Bank, 6.05%, due 7/5/95, dated 6/30/95* . . . . . . . . . . . . . . . . . . . . . . . 60,000
60,000 Hong Kong Shanghai Banc Corp., 6.10%, due 7/5/95, dated 6/30/95 (Collateralized by $57,932
U.S. Treasury Notes, 6.00%-7.88%, 7/31/99-12/31/99, market value-$61,203) . . . . . . . . . . . 60,000
60,000 Lehman Brothers Holdings, Inc., 6.04%, due 7/5/95, dated 6/30/95 (Collateralized by $159,579
various government securities, 0.00%, 5/15/09-5/15/10, market value-$61,200) . . . . . . . . . 60,000
178,810 Lehman Brothers Holdings, Inc., 6.20%, due 7/3/95, dated 6/30/95 (Collateralized by $395,648
various government securities, 0.00%, 11/15/00-5/15/09, market value-$182,382) . . . . . . . . 178,810
60,000 Morgan Stanley, 6.06%, due 7/5/95, dated 6/30/95 (Collateralized by $62,105 U.S. Treasury
Notes, 4.38%-7.75%, 3/31/96-11/15/96, market value-$61,205) . . . . . . . . . . . . . . . . . . 60,000
60,000 Nomura Securities International, 6.05%, due 7/5/95, dated 6/30/95** . . . . . . . . . . . . . . 60,000
140,000 Nomura Securities International, 6.18%, due 7/3/95, dated 6/30/95** . . . . . . . . . . . . . . 140,000
----------
Total Repurchase Agreements 928,810
----------
Total (Cost--$1,282,195)(a) $1,282,195
----------
----------
</TABLE>
- --------------
Percentages indicated are based on net assets of $1,276,814.
(a) Cost for federal income tax and financial reporting purposes are the same.
* These repurchase agreements are both collateralized by $302,852 U.S.
Treasury Notes, 5.13%-8.88%, 8/31/95-2/23/00, market value-$316,200.
** These repurchase agreements are both collateralized by $188,404 various
government securities, 0.00%-12.00%, 12/28/95-2/15/15, market
value-$204,000.
See notes to financial statements.
9
B-111
<PAGE>
THE ONE GROUP FAMILY OF MUTUAL FUNDS
PRIME MONEY MARKET FUND
- --------------------------------------------------------------------------------
SCHEDULE OF PORTFOLIO INVESTMENTS JUNE 30, 1995
(Amounts in Thousands)
<TABLE>
<CAPTION>
PRINCIPAL SECURITY AMORTIZED
AMOUNT DESCRIPTION COST
------ ----------- ----
<S> <C>
COMMERCIAL PAPER (40.4%):
$36,720 ABS, Inc., 6.00%, 7/27/95 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 36,561
21,330 ABS, Inc., 6.10%, 8/1/95 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 21,218
22,500 AES Shady Point, Inc., 6.50%, 7/12/95 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 22,455
23,882 AES Shady Point, Inc., 6.58%, 7/24/95 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 23,782
45,000 American Honda Finance Corp., 6.55%, 7/5/95 . . . . . . . . . . . . . . . . . . . . . . . . . . 44,967
50,000 American Honda Finance Corp., 6.60%, 7/10/95 . . . . . . . . . . . . . . . . . . . . . . . . . 49,918
65,000 Countrywide Funding Corp., 6.00%, 7/24/95 . . . . . . . . . . . . . . . . . . . . . . . . . . . 64,751
35,000 Countrywide Funding Corp., 6.00%, 7/25/95 . . . . . . . . . . . . . . . . . . . . . . . . . . . 34,860
25,000 CSC Enterprises, 5.98%, 8/22/95 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 24,784
40,000 Dean Witter Discover & Co., 5.96%, 7/28/95 . . . . . . . . . . . . . . . . . . . . . . . . . . 39,821
36,000 DIC Americas, Inc., 5.97%, 7/24/95 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 35,863
25,000 Embarcadero Center Venture (one), 6.15%, 7/7/95 . . . . . . . . . . . . . . . . . . . . . . . . 24,974
23,750 Embarcadero Center Venture (three), 6.00%, 7/17/95 . . . . . . . . . . . . . . . . . . . . . . 23,687
25,000 Finova Capital Corp., 6.03%, 8/1/95 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 24,870
30,000 Finova Capital Corp., 6.13%, 8/4/95 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 29,826
30,000 Finova Capital Corp., 5.99%, 8/8/95 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 29,810
15,000 Finova Capital Corp., 6.13%, 8/17/95 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14,959
24,121 Freedom Asset Funding Corp., 6.05%, 7/26/95 . . . . . . . . . . . . . . . . . . . . . . . . . . 24,020
25,000 General Motors Acceptance Corp., 6.20%, 7/24/95 . . . . . . . . . . . . . . . . . . . . . . . . 24,901
25,000 General Motors Acceptance Corp., 6.00%, 8/4/95 . . . . . . . . . . . . . . . . . . . . . . . . 24,858
46,700 Madison Funding Corp., 6.00%, 7/12/95 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 46,614
29,800 Madison Funding Corp., 5.95%, 8/23/95 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 29,539
10,000 Petrolea Brasileiro S.A. Petrobas, 6.65%, 7/10/95 . . . . . . . . . . . . . . . . . . . . . . . 9,983
60,000 Public Service Electric & Gas Co., 5.97%, 8/4/95 . . . . . . . . . . . . . . . . . . . . . . . 59,662
15,000 TamBrands Corp., 5.78%, 11/20/95 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14,658
56,400 WMX Technologies, Inc., 6.97%, 10/2/95 . . . . . . . . . . . . . . . . . . . . . . . . . . . . 55,384
15,000 Yamaha Motor Finance Corp., 6.00%, 7/14/95 . . . . . . . . . . . . . . . . . . . . . . . . . . 14,968
25,000 Yamaha Motor Finance Corp., 6.00%, 7/17/95 . . . . . . . . . . . . . . . . . . . . . . . . . . 24,933
--------
Total Commercial Paper 876,626
--------
CORPORATE BONDS AND NOTES (14.1%):
Banking & Finance (12.7%):
50,000 Abbey National Treasury Services, PLC, 7.05%, 3/1/96 . . . . . . . . . . . . . . . . . . . . . 49,994
11,000 Associates Corp. of North America, 4.50%, 2/15/96 . . . . . . . . . . . . . . . . . . . . . . . 10,808
7,600 Beneficial Corp., 9.20%, 7/21/95 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7,612
50,000 CIT Group Holdings, Inc., 7.05%, 3/4/96 . . . . . . . . . . . . . . . . . . . . . . . . . . . . 50,000
50,000 Comerica Bank, 5.61%, 11/8/95* . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 49,990
59,000 Dean Witter Discover & Co., 6.27%, 12/15/95 . . . . . . . . . . . . . . . . . . . . . . . . . . 59,048
7,140 General Motors Acceptance Corp., 7.50%, 10/15/95 . . . . . . . . . . . . . . . . . . . . . . . 7,160
6,900 General Motors Acceptance Corp., 5.15%, 9/21/95 . . . . . . . . . . . . . . . . . . . . . . . . 6,880
25,150 Lehman Brothers, Inc., 6.75%, 5/17/96* . . . . . . . . . . . . . . . . . . . . . . . . . . . . 25,179
8,900 Merrill Lynch & Co., Inc., 6.00%, 10/3/95 . . . . . . . . . . . . . . . . . . . . . . . . . . . 8,895
--------
275,566
--------
Utilities (1.4%):
30,000 Waste Management, Inc. 4.88%, 7/1/95 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 30,000
--------
Total Corporate Bonds and Notes 305,566
--------
FUNDING AGREEMENTS (7.8%):
50,000 AllState, 6.29%, 10/2/95* . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 50,000
60,000 National Home Life, 6.38%, 11/1/95* . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 60,000
60,000 People's Security Life, 6.32%, 10/22/95* . . . . . . . . . . . . . . . . . . . . . . . . . . . 60,000
--------
Total Funding Agreements 170,000
--------
MEDIUM TERM NOTES (4.0%):
7,000 General Motors Acceptance Corp., 4.70%, 8/21/95 . . . . . . . . . . . . . . . . . . . . . . . . 6,988
25,000 Lehman Brothers Holdings, Inc., 6.39%, 1/23/96* . . . . . . . . . . . . . . . . . . . . . . . . 25,000
55,000 Lehman Brothers Holdings, Inc., 6.39%, 3/21/96* . . . . . . . . . . . . . . . . . . . . . . . . 55,000
--------
Total Medium Term Notes 86,988
--------
U.S. GOVERNMENT AGENCIES (3.8%):
Student Loan Marketing Assoc.:
31,440 6.08%, 7/1/96* . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 31,440
</TABLE>
Continued
10
B-112
<PAGE>
THE ONE GROUP FAMILY OF MUTUAL FUNDS
PRIME MONEY MARKET FUND
- --------------------------------------------------------------------------------
SCHEDULE OF PORTFOLIO INVESTMENTS, CONTINUED JUNE 30, 1995
(Amounts in Thousands)
<TABLE>
<CAPTION>
PRINCIPAL SECURITY AMORTIZED
AMOUNT DESCRIPTION COST
------ ----------- ----
<S> <C>
U.S. GOVERNMENT AGENCIES, CONTINUED
Student Loan Marketing Assoc.; continued;
$50,000 5.70%, 9/28/98* . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 50,000
----------
Total U.S. Government Agencies 81,440
----------
U.S. TREASURY BILLS (1.8%):
40,000 5.46%, 9/21/95 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 39,502
----------
Total U.S. Treasury Bills 39,502
----------
YANKEE CERTIFICATES OF DEPOSIT (4.6%):
100,000 Sumitomo Bank, 6.07%, 7/5/95 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 100,000
----------
Total Yankee Certificates of Deposit 100,000
----------
Total Investments 1,660,122
----------
REPURCHASE AGREEMENTS (23.5%):
50,000 Barclays de Zoete Wedd, 6.30%, due 7/3/95, dated 6/30/95 (Collateralized by $52,040 various
government securities, 4.45%-8.50%, 3/27/96-2/1/05, market value-$51,003) . . . . . . . . . . . 50,000
100,000 Prudential Securities, 6.20%, due 7/3/95, dated 6/30/95 (Collateralized by $101,249 various
government securities, 0.00%-10.50%, 7/25/95-7/21/08, market value-$102,000) . . . . . . . . . 100,000
358,847 Lehman Brothers Holdings, Inc., 6.20%, due 7/3/95, dated 6/30/95 (Collateralized by $365,228
various government securities, 0.00%-8.80%, 7/5/95-1/25/10, market value-$365,966) . . . . . . 358,847
----------
Total Repurchase Agreements 508,847
----------
Total (Cost--$2,168,969)(a) $2,168,969
----------
----------
</TABLE>
- -------------
Percentages indicated are based on net assets of $2,167,384.
(a) Cost for federal income tax and financial reporting purposes are the same.
* Floating Rate Demand Notes are securities with yields that vary with a
designated market index or market rate.
These securities are payable on the date of demand. The rate reflected on
the Schedule of Portfolio Investments is the effective rate at June 30,
1995.
See notes to financial statements.
11
B-113
<PAGE>
THE ONE GROUP FAMILY OF MUTUAL FUNDS
MUNICIPAL MONEY MARKET FUND
- --------------------------------------------------------------------------------
SCHEDULE OF PORTFOLIO INVESTMENTS JUNE 30, 1995
(Amounts in Thousands)
<TABLE>
<CAPTION>
PRINCIPAL SECURITY AMORTIZED
AMOUNT DESCRIPTION COST
------ ----------- ----
<S> <C>
MUNICIPAL SECURITIES (104.6%):
Alabama (0.5%):
$ 2,700 Alabama Private Colleges University Equipment & Capital, Series A, 4.25%, 7/1/05, Insured: FGIC* $ 2,700
--------
Arizona (3.3%):
2,000 Chandler County, Arizona Industrial Development Authority Revenue Bond, 3.60%, 12/15/09 LOC:
National Westminster Bank* . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2,000
3,000 Cochise County, Arizona Pollution Control Corp. Revenue, 4.45%, 9/1/24, CFC Backed** . . . . . 3,000
6,400 Cochise County, Arizona Pollution Control Corp. Revenue, 4.45%, 9/1/24, CFC Backed** . . . . . 6,400
3,000 Mesa, Arizona Special Municipal, 3.95%, 7/12/95, LOC: Union Bank of Switzerland . . . . . . . . 3,000
1,600 Pinal County, Arizona Industrial Development Authority Revenue Bonds, 4.15%, 9/1/08, LOC:
Bankers Trust* . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1,600
--------
16,000
--------
Arkansas (1.6%):
8,100 Clark County, Arkansas Solid Waste Disposal Revenue Bonds, 4.25%, 8/1/22, LOC: Trust Company
Bank* . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8,100
--------
California (1.5%):
2,500 California Higher Education Loan Authority, 3.90%, 6/1/01, LOC: National Westminster Bank** . . 2,500
5,000 Orange County, California, Pooled School District, TRAN, 4.50%, 7/28/95 . . . . . . . . . . . . 5,003
--------
7,503
--------
Colorado (4.4%):
3,000 Arapahoe County, Colorado, Capital Improvement Trust Fund Highway Revenue, Series D, 4.45%,
8/31/26, LOC: Union Bank of Switzerland** . . . . . . . . . . . . . . . . . . . . . . . . . . . 3,000
9,015 Arapahoe County, Colorado, Capital Improvement Trust Fund Highway Revenue, Series B, 4.40%,
8/31/26, Escrow: FNMA** . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9,015
2,500 Lakewood, Colorado Multifamily Housing, St Moritz & Diamondhead Project, 4.05%, 10/1/07, LOC:
Dai-Ichi Kangyo* . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2,500
7,500 Platte River Power Authority, Colorado Electric Revenue, 3.90%, 7/19/95, SBPA: Morgan Guaranty 7,500
--------
22,015
--------
Delaware (0.7%):
3,225 Delaware State GO Bonds, 5.25%, 12/1/95 . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3,230
--------
Florida (6.0%):
6,000 Dade County, Florida, Solid Waste IDR-Monteray-Dade Ltd. Project, 4.45%, 12/1/13, LOC: Banque
Paribas* . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6,000
2,500 Florida Housing Finance Authority Bonds, 4.45%, 12/1/08, LOC: Sumitomo Bank* . . . . . . . . . 2,500
5,000 Hillsborough, Florida - Tampa Airport, 4.30%, 7/21/95, LOC: National Westminster Bank** . . . . 5,000
3,500 Putnam County, Florida, Seminole Electric Power Revenue Bonds, 4.30%, 3/15/14, CFC Backed** . . 3,501
1,600 Putnam County, Florida, Seminole Electric Power Revenue Bonds, 3.40%, 12/15/09, CFC Backed** . 1,600
6,200 Sunshine State Finance Commission, 3.95%, 7/10/95, LOC: Union Bank of Switzerland, National
Westminster Bank and Morgan Guaranty . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6,200
5,000 Sunshine State Government Finance Authority, 3.90%, 8/8/95, LOC: Union Bank of Switzerland,
National Westminster Bank and Morgan Guaranty . . . . . . . . . . . . . . . . . . . . . . . . . 5,000
--------
29,801
--------
Georgia (7.2%):
6,500 Burke County, Georgia, PCR Oglethorpe Power - 1994A Series, 4.15%, 1/1/19, Insured by FGIC* . . 6,500
5,000 Dekalb County, Georgia, TAN, 5.00%, 12/29/95 . . . . . . . . . . . . . . . . . . . . . . . . . 5,018
10,900 Housing Authority of Cobb, Georgia, Multifamily Housing Bond, Series 1992, 4.30%, 6/1/23, LOC:
Societe Generale* . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10,900
13,200 Municipal Electric Authority of Georgia, 3.65%, 7/5/95, SBPA Credit Suisse . . . . . . . . . . 13,200
--------
35,618
--------
Hawaii (0.8%):
4,000 Hawaii State Housing Finance & Development, Rental Housing System, Series B, 4.25%, 7/1/25 LOC:
Industrial Bank of Japan* . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4,000
--------
Idaho (1.0%):
5,000 State of Idaho TAN, 4.50%, 6/27/96 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5,033
--------
</TABLE>
Continued
12
B-114
<PAGE>
THE ONE GROUP FAMILY OF MUTUAL FUNDS
MUNICIPAL MONEY MARKET FUND
- --------------------------------------------------------------------------------
SCHEDULE OF PORTFOLIO INVESTMENTS, CONTINUED JUNE 30, 1995
(Amounts in Thousands)
<TABLE>
<CAPTION>
PRINCIPAL SECURITY AMORTIZED
AMOUNT DESCRIPTION COST
------ ----------- ----
<S> <C>
MUNICIPAL SECURITIES CONTINUED:
Illinois (14.2%):
$ 3,175 Chicago Illinois Adjustable Tender Notes, Series A, 4.60%, 10/31/96, Mandatory Put 11/1/95, LOC:
Morgan Guaranty . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 3,175
16,000 Chicago O'Hare International Airport Second Lien - Series B, 4.10%, 1/1/18, LOC: Societe
General* . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16,000
5,000 City of Jacksonville, Illinois, Industrial Project Loans, 4.40%, 2/1/26, LOC: Bank of America,
Chicago* . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5,000
4,000 Decatur Illinois,Water Revenue, 4.00%, 10/19/95, LOC: Sumitomo Bank . . . . . . . . . . . . . . 4,000
2,500 Illinois Educational Facilities Authority, Northwestern University, 4.05%, 3/1/28, LOC: Northern
Trust Co.* . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2,500
2,500 Illinois Development Finance Authority, Roosevelt University Project, 4.68%, 4/1/25, LOC:
American National Bank . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2,500
6,500 Illinois Development Finance Authority Revenue Bonds, Aurora Central Catholic High School,
4.15%, 4/1/24, LOC: Northern Trust Co.* . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6,500
2,000 Illinois Development Finance Authority Revenue Bonds, Sisters Hospital, 4.25%, 2/1/19, LOC: La
Salle National Bank* . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2,000
1,625 Illinois Development Finance Authority Revenue Bonds, St. Paul's Development, 3.70%, 2/1/25,
LOC: La Salle National Bank* . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1,625
8,000 Illinois Facilities Authority, DPA Council for Jewish Elderly Center, 4.50%, 3/1/15, LOC:
LaSalle National Bank* . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8,000
1,500 Illinois Health, Chicago, LaGrange Hospital, 4.50%, 12/1/16, LOC: FNB Chicago* . . . . . . . . 1,500
2,000 Illinois Health Facilities Authority, Chicago, Little City, 4.00%, 10/1/15, LOC: FNB Chicago** 2,000
8,000 Illinois Health Facilities Authority, Franciscan Hospital, 4.35%, 1/1/18, LOC: Toronto Dominion
Bank* . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8,000
1,000 Illinois Health Facilities Authority, Pooled Series, Series C, 4.20%, 8/1/15, LOC: FNB Chicago* 1,000
3,000 Illinois Health Facilities Authority, Washington & Smith Hospital, 4.20%, 7/1/26, LOC: Comerica
Bank* . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3,000
1,400 Illinois Health Facilities Authority, Condell Hospital, 4.25%, 11/1/05, LOC: Bank of Tokyo* . . 1,400
2,000 Illinois Health Facilities Authority, Series E, 1985, Sisters Hospital, 4.00%, 12/1/14, Insured:
MBIA* . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2,000
--------
70,200
--------
Indiana (5.1%):
13,700 Gary, Indiana, Environmental Improvement, (USX Project), 3.60%, 7/15/02, LOC: Bank of Nova
Scotia* . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13,700
2,500 Indiana Hospital Equipment Finance Authority, Series A, 4.50%, 12/1/15, Insured: MBIA* . . . . 2,500
4,200 Jasper, Indiana Economic Development, 4.40%, 3/1/19, LOC: PNC Bank* . . . . . . . . . . . . . . 4,200
4,800 Terre Haute, Indiana Economic Development Revenue, First Financial Corp. Project, 4.80%, 7/6/95,
LOC: FNB Chicago . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4,800
--------
25,200
--------
Iowa (1.0%):
5,000 Iowa School Corporations, 4.25%, 7/17/95, Insured: Capital Guaranty . . . . . . . . . . . . . . 5,001
--------
Kentucky (2.0%):
4,500 County of Clark, Kentucky, PCR East Kentucky Power, 4.15%, 10/15/14, CFC Backed** . . . . . . . 4,500
2,200 Pendleton County, Kentucky Self-insurance Funding Revenue Bonds, Series 1987, 3.75%, 7/1/95,
LOC: PNC, Kentucky. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2,200
3,000 Pulaski County, Kentucky Hospital Service District, Solid Waste Disposal Revenue, Series B,
4.65%, 8/15/23, CFC Guaranty** . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3,000
--------
9,700
--------
Louisiana (2.9%):
11,190 Jefferson Parish, Louisiana Hospital Service District, 4.25%, 12/1/15, Insured by: FGIC* . . . 11,190
1,000 Parish of St. James, Louisiana, PCR for Texaco Bonds, 4.20%, 8/8/95** . . . . . . . . . . . . . 1,000
2,100 Louisiana Public Facilities Authority, Hospital Financing, Series 1985-A, 4.45%, 12/1/05, LOC:
Sumitomo Bank* . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2,100
--------
14,290
--------
Michigan (1.5%):
3,500 Grand Rapids Michigan, Water Supply Revenue Bonds, 9.50%, 1/1/16, Pre-refunded Escrowed U.S.
Government Securities** . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3,674
</TABLE>
Continued
13
B-115
<PAGE>
THE ONE GROUP FAMILY OF MUTUAL FUNDS
MUNICIPAL MONEY MARKET FUND
- --------------------------------------------------------------------------------
SCHEDULE OF PORTFOLIO INVESTMENTS, CONTINUED JUNE 30, 1995
(Amounts in Thousands)
<TABLE>
<CAPTION>
PRINCIPAL SECURITY AMORTIZED
AMOUNT DESCRIPTION COST
------ ----------- ----
<S> <C>
MUNICIPAL SECURITIES CONTINUED:
Michigan, continued:
$2,500 Michigan Municipal Bond Revenue Notes, Series 95-B, 4.50%, 7/3/96 . . . . . . . . . . . . . . . $ 2,517
1,000 Michigan Strategic Environmental, Wayne Disposal, 4.25%, 5/1/05, LOC: Comerica Bank* . . . . . 1,000
--------
7,191
--------
Missouri (1.2%):
2,000 Missouri Environment Improvement Authority, Series 85-A, 3.30%, 7/13/95, LOC: Union Bank of
Switzerland . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2,000
2,000 Missouri Environment Improvement Authority, 4.10%, 7/14/95, LOC: Union Bank of Switzerland . . 2,000
2,000 Missouri Environment Improvement Authority, Series, 4.00%, 6/1/14, LOC: Union Bank of
Switzerland** . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2,000
--------
6,000
--------
Montana (0.7%):
3,500 Montana State Board Investment, Municipal Finance Conservation Act, 4.90%, 3/1/09** . . . . . . 3,500
--------
Nevada (3.3%):
5,500 Clark County, Nevada, IDR Bonds, 4.40%, 11/1/18, LOC: Fuji Bank* . . . . . . . . . . . . . . . 5,500
4,650 Clark County, Nevada, Industrial Development Revenue Bonds, Series 1985, 4.85%, 12/1/15, LOC:
Fuji Bank* . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4,650
4,000 Clark County, Nevada Airport System Improvement Revenue Bonds, Sub Lien, Series 1995 A-1, 4.15%,
7/1/25, LOC: Toronto Dominion* . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4,000
2,000 State of Nevada Department of Commerce, Series 1985, (FMC Corp.), 4.20%, 9/15/97, LOC: Barclays
Bank** . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2,000
--------
16,150
--------
New Hampshire (1.0%):
5,000 New Hampshire State Industrial Development Authority Revenue, Series A, United Illuminating Co.,
4.50%, 9/1/15, LOC: Barclays Bank** . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5,000
--------
New York (2.0%):
2,500 New York State Energy Research PCR New York State Electric & Gas, 4.60%, 12/1/15, LOC: Union
Bank of Switzerland** . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2,500
7,500 New York State Energy Research & Development Authority PCR Bonds, Series A, 4.70%, 3/1/16, LOC:
Deutshebank A.G.** . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7,506
--------
10,006
--------
North Carolina (1.4%):
7,000 Person County, North Carolina Industrial Facilities & Pollution Control Financing Authority,
4.75%, 11/1/16, LOC: Fuji Bank* . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7,000
--------
North Dakota (0.6%):
3,100 Mercer County, North Dakota, 3.95%, 2/1/18, IDR-CFC Backed** . . . . . . . . . . . . . . . . . 3,100
--------
Ohio (6.9%):
3,000 Columbus, Ohio, GO Adjustable Rate Bonds, 3.80%, 6/1/16* . . . . . . . . . . . . . . . . . . . 3,000
2,000 Geauga County, Ohio, IDR, General Signal Co., 4.35%, 4/1/04, LOC: Wachovia Bank of Georgia* . . 2,000
2,000 Montgomery County, Ohio, Series B, Miami Valley Hospital, 4.00%, 7/21/95, LOC: Fuji Bank . . . 2,000
700 Ohio Air Quality Development Authority, Cincinnati Gas & Electric, 4.25%, 12/1/15, LOC: J.P.
Morgan** . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 700
6,800 Ohio Air Quality Development Authority, JMG Corp., 4.05%, 4/1/28, LOC: Societe Generale* . . . 6,800
3,300 Ohio State Environmental Improvement Authority, 4.30%, 5/1/11, LOC: Sanwa Bank* . . . . . . . . 3,300
7,000 Ohio State University, General Receipts, Series B, 4.15%, 12/1/12, Liquidity Agreement with Ohio
State University* . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7,000
5,500 Ohio Water Development Authority, Timken Co., Refunding Series 1993, 4.00%, 5/1/07, LOC:
Wachovia Bank* . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5,500
1,500 Student Loan Funding Corp. Series B-1 Revenue Bond, 4.35%, 1/1/07, LOC: National Westminster
Bank* . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1,500
1,000 Student Loan Funding Corp., Series 1983-A, Revenue Bond, 4.25%, 12/29/98, LOC: Fuji Bank* . . . 1,000
1,400 Toledo Lucas County, Ohio, CSX Transportation, 4.00%, 7/20/95, LOC: Bank of Nova Scotia . . . . 1,400
--------
34,200
--------
</TABLE>
Continued
14
B-116
<PAGE>
THE ONE GROUP FAMILY OF MUTUAL FUNDS
MUNICIPAL MONEY MARKET FUND
- --------------------------------------------------------------------------------
SCHEDULE OF PORTFOLIO INVESTMENTS, CONTINUED JUNE 30, 1995
(Amounts in Thousands)
<TABLE>
<CAPTION>
PRINCIPAL SECURITY AMORTIZED
AMOUNT DESCRIPTION COST
------ ----------- ----
<S> <C>
MUNICIPAL SECURITIES CONTINUED:
Pennsylvania (1.2%):
$6,000 Washington County, Pennsylvania, Pooled Equipment Lease Program, 4.25%, 11/1/05, LOC: Sanwa
Bank* . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 6,000
--------
South Carolina (3.6%):
1,700 Cherokee County, South Carolina, Industrial Revenue Bonds, 4.25%, 7/1/19, LOC: Bank of Nova
Scotia* . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1,700
1,500 South Carolina, GO, Capital Improvement, Series B, 6.80%, 3/1/96: . . . . . . . . . . . . . . . 1,533
5,000 South Carolina Public Service, 3.60%, 9/11/95, LOC: NCNB . . . . . . . . . . . . . . . . . . . 5,000
2,500 York County, South Carolina, PCR, Series 84E-2, 4.55%, 8/15/14, CFC Guaranty** . . . . . . . . 2,500
2,275 York County, South Carolina, PCR, Series 84N-4, 4.30%, 9/15/14, CFC Guaranty** . . . . . . . . 2,275
5,000 York County, South Carolina, PCR, Series 84N-5, 4.30%, 9/15/14, CFC Guaranty** . . . . . . . . 5,000
--------
18,008
--------
Tennessee (2.7%):
5,400 Hamilton County, Tennessee, Industrial Development Board, Series 1985, 4.25%, 11/1/05, LOC:
Sumitomo Bank and Industrial Bank of Japan* . . . . . . . . . . . . . . . . . . . . . . . . . . 5,400
4,040 Knox County, Tennessee, Hospital Facilities Revenue Bond, 3.85%, 12/1/15, Insured: MBIA* . . . 4,040
3,800 Oak Ridge, Tennessee, Industrial Board Economic Development Revenue Bonds, 4.20%, 5/1/09, LOC:
ABM/AMRO* . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3,800
--------
13,240
--------
Texas (15.3%):
4,590 Bexar, Texas Army Retirement, 4.25%, 7/1/11, LOC: Rabo Bank* . . . . . . . . . . . . . . . . . 4,590
8,000 Brazos River Authority Texas PCR, Electric Company-B, 4.70%, 6/1/30, LOC: Union Bank of
Switzerland* . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8,000
7,500 Capital Health Facilities Development Corp., Texas, Series 1986, 4.30%, 12/1/16, LOC: ABM/AMRO* 7,500
3,100 Capital Industrial Development Corp. of Texas, W.L. Gore Project, 3.50%, 12/5/95, LOC: Morgan
Guaranty** . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3,100
1,600 Denton, Texas, IDR, 4.20%, 12/1/09, LOC: Union Bank of Switzerland* . . . . . . . . . . . . . . 1,600
2,000 Gulf Coast, Texas, Waste Disposal Authority, Amoco Corp., 4.30%, 4/1/15** . . . . . . . . . . . 2,000
4,000 Gulf Coast, Texas, Waste Disposal Authority, Environmenal Improvement Revenue, Amoco Corp.,
4.40%, 3/1/09* . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4,000
5,000 Gulf Coast Texas, Industrial Development Authority, Amoco Corp., 3.80%, 6/1/25** . . . . . . . 5,000
4,000 Hockley County, Texas, Industrial Development Corp., PCR, Amoco Corp., 4.75%, 3/1/14* . . . . . 4,002
4,000 Houston, Texas Airport, 3.60%, 8/1/95, LOC: Morgan Guaranty & Canadian Imperial Bank of Commerce 4,000
5,000 Panhandle-Plains Texas, Higher Education Authority, Series 91-A, 4.30%, 6/1/21, LOC: SLMA* . . 5,000
5,000 Panhandle-Plains Texas, Higher Education Authority, Series A, 4.30%, 6/1/23, LOC: SLMA* . . . . 5,000
16,800 San Antonio, Texas, Health Facilities, Series 92-A, 4.45%, 6/1/08, LOC: NationsBank, Texas* . . 16,800
4,450 Texas Higher Education Authority, Series 1985-B, 4.25%, 12/1/25, Insured: FGIC* . . . . . . . . 4,450
--------
75,042
--------
Utah (0.8%):
4,100 Salt Lake, Utah, Adjustable Rate Airport Revenue Bond, Series 1994-A, 4.30%, 6/1/98, LOC: Credit
Suisse* . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4,100
--------
Washington (5.0%):
3,000 Seattle, Washington Municipal Light & Power, 4.30%, 10/5/95, LOC: Morgan Guaranty . . . . . . 3,000
700 Washington Community Economic Revitalization Board Revenue Bonds Series 1987-1, 4.35%, 7/1/98,
LOC: Industrial Bank of Japan* . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 700
725 Washington Community Economic Revitalization Board Revenue Bonds Series 1990-1, 4.35%, 7/1/05,
LOC: National Bank of Japan* . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 725
910 Washington Community Economic Revitalization Board Revenue Bonds Series 88-1, 4.35%, 7/1/08,
LOC: National Bank of Japan* . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 910
10,000 Washington Public Power System Revenue Bonds, Series 1993-A-2, 3.85%, 7/1/18, LOC: Industrial
Bank of Japan* . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10,000
</TABLE>
Continued
15
B-117
<PAGE>
THE ONE GROUP FAMILY OF MUTUAL FUNDS
MUNICIPAL MONEY MARKET FUND
- --------------------------------------------------------------------------------
SCHEDULE OF PORTFOLIO INVESTMENTS, CONTINUED JUNE 30, 1995
(Amounts in Thousands)
<TABLE>
<CAPTION>
PRINCIPAL SECURITY AMORTIZED
AMOUNT DESCRIPTION COST
------ ----------- ----
<S> <C>
MUNICIPAL SECURITIES CONTINUED:
Washington, continued:
$10,000 Washington Public Power System Revenue Bonds, Project 1 & 3, 3.80%, 7/1/18, LOC: Bank of
America* . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 10,000
--------
25,335
--------
West Viriginia (2.8%):
4,800 Marion County West Virginia, 4.15%, 10/1/17, LOC: National Westminster Bank* . . . . . . . . . 4,800
2,500 Marion County West Virginia, 4.30%, 10/1/17, LOC: National Westminster Bank* . . . . . . . . . 2,500
6,000 West Virginia Public Energy, Morgantown Project, 4.25%, 8/4/95, LOC: Swiss Bank . . . . . . . . 6,000
--------
13,300
--------
Wisconsin (2.0%):
10,000 Wisconsin GO Notes, 4.50%, 6/17/96 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10,079
--------
Wyoming (0.3%):
1,500 Gillette County, Wyoming, Pacific Corp Project 4.00%, 7/17/95, LOC: Deutsche Bank . . . . . . . 1,500
--------
Total Municipal Securities 517,142
--------
Total Investments (Cost-$517,142)(a) $517,142
--------
--------
</TABLE>
- -------------
Percentages indicated are based on net assets of $494,261.
(a) Cost for federal income tax and financial reporting purposes are the same.
* Variable rate securities having liquidity sources through bank letters of
credit and/or liquidity arrangements. The interest rate, which will change
periodically, is based upon bank prime rates or an index of market interest
rates. The rate reflected on the Schedule of Portfolio Investments is the
rate in effect on June 30, 1995.
** Put and demand features exist allowing the Fund to require the repurchase of
the investments within variable time periods of less than one year.
CFC Commodities Futures Commission
FGIC Financial Guarantee Insurance Corp.
FNMA Federal National Mortgage Association
GO General Obligation
IDR Industrial Development Revenue
LOC Collateralized by Letters of Credit issued by Foreign and Domestic
Banks
MBIA Municipal Bond Insurance Association.
PCR Pollution Control Revenue
SBPA Standby Bond Purchase Agreement
SLMA Student Loan Marketing Association
TAN Tax Anticipation Notes
TRAN Tax and Revenue Anticipation Notes
See notes to financial statements.
16
B-118
<PAGE>
THE ONE GROUP FAMILY OF MUTUAL FUNDS
OHIO MUNICIPAL MONEY MARKET FUND
- --------------------------------------------------------------------------------
SCHEDULE OF PORTFOLIO INVESTMENTS JUNE 30, 1995
(Amounts in Thousands)
<TABLE>
<CAPTION>
PRINCIPAL SECURITY AMORTIZED
AMOUNT DESCRIPTION COST
------ ----------- ----
<S> <C>
MUNICIPAL SECURITIES (100.7%):
$1,000 Berea, Ohio, GO, BAN, 4.50%, 10/25/95 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 1,001
1,000 Cincinnati, Ohio, GO, 5.63%, 12/1/95 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1,005
6,700 Columbus, Ohio, Sewerage System Revenue Bonds, 3.90%, 6/1/11* . . . . . . . . . . . . . . . . . 6,700
3,750 City of St. Mary's, Ohio, Industrial Development Authority, Setex, Inc. Project, 4.60%, 12/1/01,
LOC: Industrial Bank of Japan* . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3,750
3,105 Clermont County, Ohio, Hospital Facilities, Series B, 3.85%, 12/1/15, Insured: MBIA* . . . . . 3,105
2,000 Columbus, Ohio, GO, 3.80%, 7/6/95* . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2,000
2,500 Columbus, Ohio, GO, Sewer Improvement Bonds, 9.00%, 9/15/95 . . . . . . . . . . . . . . . . . . 2,522
1,600 Cuyahoga County, Ohio, IDR Bonds, Series 1985, 3.95%, 12/1/15, LOC: Union Bank of Switzerland* 1,600
300 Cuyahoga County, Ohio, IDR Bonds, Series 1987, 4.10%, 4/1/12, LOC: Dresdner Bank* . . . . . . . 300
1,800 Franklin County, Ohio, IDR, Inland Products, Inc. Project, 4.40%, 8/1/04, LOC: PNC Bank, Ohio* 1,800
1,500 Franklin County, Ohio, Hospital Authority, 4.15%, 5/1/15, LOC: National Bank of Detroit* . . . 1,500
1,000 Greater Cleveland Regional Transit Authority, BAN, 4.10%, 4/10/96 . . . . . . . . . . . . . . . 1,003
500 Hamilton County, Ohio, Performing Arts Center 1995, 4.10%, 6/15/05, LOC: Fifth Third Bank* . . 500
2,445 Hamilton County, Ohio Sewer System, Pre-refunded-Escrow U.S. Government securities, 9.50%,
12/1/95 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2,567
3,500 Hillsboro, Ohio, IDR, TD Manufacturing Co., 4.50%, 6/1/97, LOC: Sanwa Bank* . . . . . . . . . . 3,500
1,725 Montgomery County, Ohio, Miami Valley Hospital, 4.00%, 7/21/95, LOC: Fuji Bank . . . . . . . . 1,725
3,000 Ohio Air Quality Development Authority Bonds, Series 1992, Timken Co., 4.00%, 6/1/01, LOC:
Credit Suisse* . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3,000
1,000 Ohio Air Quality Development Authority, Cincinnati Gas & Electric, 4.25%, 7/12/95, LOC: Morgan
Guaranty . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1,000
4,500 Ohio Air Quality Development Authority, JMG Co., 4.05%, 4/1/28, LOC: Societe Generale* . . . . 4,500
1,700 Ohio Air Quality Development Authority, CEI Co., 3.70%, 8/4/95, Insured by FGIC . . . . . . . . 1,700
2,000 Ohio Air Quality Development Authority, CEI Co. 3.00%, 7/17/95, Insured by FGIC . . . . . . . . 2,000
4,400 Ohio Housing Finance Agency, Multi Family Housing Revenue Bonds, 3.90%, 12/1/15, LOC: Morgan
Guaranty Bank* . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4,400
1,000 Ohio State Court Street Center, 4.73%, 10/1/98, LOC: Provident Bank* . . . . . . . . . . . . . 1,000
1,500 Ohio State Environmental Improvement Authority, U.S. Steel Corp. Project, 4.30%, 5/1/11, LOC:
Sanwa Bank* . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1,500
2,850 Ohio State Higher Education Facilities Commission, Oberlin College Project, 4.00%, 10/1/15, LOC:
Bank of Tokyo* . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2,850
665 Ohio State University, Series B-85, 4.40%, 12/1/01, SBPA: National Westminster Bank* . . . . . 665
4,000 Ohio State University, Series 86-B, 4.40%, 12/1/06, SBPA: National Westminster Bank* . . . . . 4,000
3,000 Ohio Water Development Authority, Series 1992, Timken Co., 4.00%, 6/1/01, LOC: Credit Suisse* . 3,000
1,500 Ohio Water Development Authority, CEI Co., 4.15%, 7/13/95, LOC: Insured by FGIC . . . . . . . . 1,500
1,000 Ohio Water Development Authority, CEI Co., 4.15%, 8/4/95, Insured by FGIC . . . . . . . . . . . 1,000
1,000 Ohio Water Development Authority, CEI Co., 3.10%, 9/5/95, Insured by FGIC . . . . . . . . . . . 1,000
1,000 Ross County, Ohio Hospital Facilities, 4.15%, 12/1/20, LOC: Fifth Third Bank . . . . . . . . . 1,000
2,000 Student Loan Funding Corp., Cincinnati, Ohio, Series B-1, 4.35%, 1/1/07, LOC: National
Westminster Bank* . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2,000
1,300 Student Loan Funding Corp., Cincinnati, Ohio, Series A-3, 4.35%, 1/1/07, LOC: National
Westminster Bank* . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1,300
2,000 Student Loan Funding Corp., Cincinnati, Ohio, Series 1983-A, 4.25%, 12/29/98, LOC: Fuji Bank* . 2,000
4,000 Summit County, Ohio, GO, Series 1995A, BAN, 5.00%, 3/7/96 . . . . . . . . . . . . . . . . . . . 4,009
</TABLE>
Continued
17
B-119
<PAGE>
THE ONE GROUP FAMILY OF MUTUAL FUNDS
OHIO MUNICIPAL MONEY MARKET FUND
- --------------------------------------------------------------------------------
SCHEDULE OF PORTFOLIO INVESTMENTS, CONTINUED JUNE 30, 1995
(Amounts in Thousands)
<TABLE>
<CAPTION>
PRINCIPAL SECURITY AMORTIZED
AMOUNT DESCRIPTION COST
------ ----------- ----
<S> <C>
MUNICIPAL SECURITIES CONTINUED:
$2,000 Toledo, (Lucas County) Ohio, CSX Transportation, 4.00%, 7/20/95, LOC: Bank of Nova Scotia . . . $ 2,000
2,500 Toledo, (Lucas County) Ohio, CSX Transportation, 3.85%, 8/1/95, LOC: Bank of Nova Scotia . . . 2,500
1,000 Toledo, (Lucas County) Ohio, 4.15%, 7/5/95, LOC: Bank of Nova Scotia . . . . . . . . . . . . . 1,000
300 Twinsburg, Ohio, IDR, UTD Stationers Supply Co., 4.90%, 12/1/11, LOC: PNC Bank* . . . . . . . . 300
1,300 University of Cincinnati, Ohio, BAN - Series S1, 5.00%, 3/21/96 . . . . . . . . . . . . . . . . 1,303
1,000 University of Cincinnati, Ohio, BAN, 4.75%, 8/30/95 . . . . . . . . . . . . . . . . . . . . . . 1,001
2,100 Wooster, Ohio, IDR Allen Group, 3.95%, 12/1/10, LOC: Dresdner Bank* . . . . . . . . . . . . . . 2,100
--------
Total Municipal Securities 88,206
--------
Total Investments (Cost--$88,206)(a) $ 88,206
--------
--------
</TABLE>
- -------------
Percentages indicated are based on net assets of $87,596.
(a) Cost for federal income tax and financial reporting purposes are the same.
* Variable rate securities having liquidity sources through bank letters of
credit or other credit and/or liquidity arrangements. The interest rate,
which will change periodically, is based upon bank prime rates or an index
of market interest rates. The rate reflected on the Schedule of Portfolio
Investments is the rate in effect on June 30, 1995.
BAN Bond Anticipation Notes
FGIC Financial Guaranty Insurance Company
GO General Obligation
IDR Industrial Development Revenue
LOC Collateralized by Letters of Credit issued by Foreign and Domestic Banks
MBIA Municipal Bond Insurance Association
SBPA Standby Bond Purchase Agreement
See notes to financial statements.
18
B-120
<PAGE>
THE ONE GROUP FAMILY OF MUTUAL FUNDS
- --------------------------------------------------------------------------------
STATEMENTS OF ASSETS AND LIABILITIES JUNE 30, 1995
<TABLE>
<CAPTION>
(Amounts in Thousands
except per share amounts)
U.S. TREASURY
SECURITIES
MONEY PRIME MUNICIPAL OHIO MUNICIPAL
MARKET MONEY MARKET MONEY MARKET MONEY MARKET
FUND FUND FUND FUND
---------- ---------- -------- -------
<S> <C> <C> <C> <C>
ASSETS:
Investments, at value . . . . . . . . . . . . . . . . $ 353,385 $1,660,122 $517,142 $88,206
Repurchase agreements . . . . . . . . . . . . . . . . 928,810 508,847
---------- ---------- -------- -------
1,282,195 2,168,969 517,142 88,206
Cash . . . . . . . . . . . . . . . . . . . . . . . . 109
Interest receivable . . . . . . . . . . . . . . . . . 219 7,381 3,361 496
Receivable for capital shares issued . . . . . . . . 135
Receivable from advisor . . . . . . . . . . . . . . . 167 253 80 17
Deferred organization costs . . . . . . . . . . . . . 2
Prepaid expenses and other assets . . . . . . . . . . 36 10 116 108
---------- ---------- -------- -------
Total Assets . . . . . . . . . . . . . . . . . . . . 1,282,617 2,176,857 520,699 88,829
---------- ---------- -------- -------
LIABILITIES:
Dividends payable . . . . . . . . . . . . . . . . . . 5,248 8,340 1,293 138
Payable to brokers for investments purchased . . . . 19,630 1,000
Payable for capital shares redeemed . . . . . . . . . 39 2
Cash overdraft . . . . . . . . . . . . . . . . . . . 1 5,279 52
Accrued expenses and other payables:
Investment advisory fees . . . . . . . . . . . 357 592 148 21
Administration fees . . . . . . . . . . . . . . 171 284 71 12
12b-1 fees (Class A) . . . . . . . . . . . . . 26 55 15 10
Other . . . . . . . . . . . . . . . . . . . . . 163
---------- ---------- -------- -------
Total Liabilities . . . . . . . . . . . . . . . . . . 5,803 9,473 26,438 1,233
---------- ---------- -------- -------
NET ASSETS:
Capital . . . . . . . . . . . . . . . . . . . . . . . 1,276,812 2,167,440 494,396 87,606
Undistributed (distributions in excess of)
net investment income . . . . . . . . . . . . . . . 27 (20) (139) (10)
Accumulated undistributed net realized
gains (losses) from investment transactions . . . . (25) (36) 4
---------- ---------- -------- -------
Net Assets . . . . . . . . . . . . . . . . . . . . . $1,276,814 $2,167,384 $494,261 $87,596
---------- ---------- -------- -------
---------- ---------- -------- -------
Net Assets
Fiduciary . . . . . . . . . . . . . . . . . . . $1,178,091 $1,965,416 $437,743 $51,806
Class A . . . . . . . . . . . . . . . . . . . . 98,723 201,968 56,518 35,790
---------- ---------- -------- -------
$1,276,814 $2,167,384 $494,261 $87,596
---------- ---------- -------- -------
---------- ---------- -------- -------
Outstanding shares of beneficial interest
Fiduciary . . . . . . . . . . . . . . . . . . . 1,178,070 1,965,444 437,856 51,806
Class A . . . . . . . . . . . . . . . . . . . . 98,740 201,996 56,540 35,800
---------- ---------- -------- -------
Total . . . . . . . . . . . . . . . . . . 1,276,810 2,167,440 494,396 87,606
---------- ---------- -------- -------
---------- ---------- -------- -------
Net asset value--offering and redemption
price per share (Fiduciary and Class A Shares) . . $ 1.00 $1.00 $1.00 $1.00
---------- ---------- -------- -------
---------- ---------- -------- -------
Investments, at amortized cost . . . . . . . . . . . $1,282,195 $2,168,969 $517,142 $88,206
---------- ---------- -------- -------
---------- ---------- -------- -------
</TABLE>
See notes to financial statements.
19
B-121
<PAGE>
THE ONE GROUP FAMILY OF MUTUAL FUNDS
- --------------------------------------------------------------------------------
STATEMENT OF OPERATIONS FOR THE YEAR ENDED JUNE 30, 1995
<TABLE>
<CAPTION>
(Amounts in Thousands)
U.S.
TREASURY
SECURITIES OHIO
MONEY PRIME MUNICIPAL MUNICIPAL
MARKET MONEY MARKET MONEY MARKET MONEY MARKET
FUND FUND FUND FUND
---------- ------------ ------------ ------------
<S> <C> <C> <C> <C>
INVESTMENT INCOME:
Interest income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $64,651 $111,725 $18,689 $3,164
Dividend income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 182 94
------- -------- ------- ------
Total Income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 64,651 111,725 18,871 3,258
------- -------- ------- ------
EXPENSES:
Investment advisory fees . . . . . . . . . . . . . . . . . . . . . . . . 4,214 6,878 1,799 276
Administration fees . . . . . . . . . . . . . . . . . . . . . . . . . . . 2,030 3,313 866 155
12b-1 fees (Service) . . . . . . . . . . . . . . . . . . . . . . . . . . 2
12b-1 fees (Class A) . . . . . . . . . . . . . . . . . . . . . . . . . . 232 432 160 149
Custodian and accounting fees . . . . . . . . . . . . . . . . . . . . . . 168 230 80 16
Legal and audit fees . . . . . . . . . . . . . . . . . . . . . . . . . . 205 228 79 15
Trustees' fees and expenses . . . . . . . . . . . . . . . . . . . . . . . 13 21 7 3
Transfer agent fees . . . . . . . . . . . . . . . . . . . . . . . . . . . 49 144 46 55
Registration and filing fees . . . . . . . . . . . . . . . . . . . . . . 279 203 132 16
Printing costs . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 30 45 24 13
Other . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 70 79 22 5
------- -------- ------- ------
Total expenses before waivers/reimbursements . . . . . . . . . . . . . . 7,290 11,575 3,215 703
Less waivers/reimbursements . . . . . . . . . . . . . . . . . . . . . . . (2,145) (3,122) (973) (230)
------- -------- ------- ------
NET EXPENSES . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5,145 8,453 2,242 473
------- -------- ------- ------
Net Investment Income . . . . . . . . . . . . . . . . . . . . . . . . . . 59,506 103,272 16,629 2,785
------- -------- ------- ------
REALIZED GAINS (LOSSES) ON INVESTMENTS:
Net realized gains (losses) from investment transactions . . . . . . . . 14 (126)
------- -------- ------- ------
Change in net assets resulting from operations . . . . . . . . . . . . . $59,520 $103,272 $16,503 $2,785
------- -------- ------- ------
------- -------- ------- ------
</TABLE>
See notes to financial statements.
20
B-122
<PAGE>
THE ONE GROUP FAMILY OF MUTUAL FUNDS
- --------------------------------------------------------------------------------
STATEMENTS OF CHANGES IN NET ASSETS
<TABLE>
<CAPTION>
(Amounts in Thousands)
U.S. TREASURY
SECURITIES MONEY PRIME MUNICIPAL MONEY
MARKET FUND MONEY MARKET FUND MARKET FUND
------------------------- ------------------------- ------------------------
YEAR YEAR YEAR YEAR YEAR YEAR
ENDED ENDED ENDED ENDED ENDED ENDED
JUNE 30, JUNE 30, JUNE 30, JUNE 30, JUNE 30, JUNE 30,
1995 1994 1995 1994 1995 1994
----------- ----------- ----------- ----------- ----------- ----------
<S> <C> <C> <C> <C> <C> <C>
FROM INVESTMENT ACTIVITIES:
OPERATIONS:
Net investment income . . . . . . . . . . $ 59,506 $ 23,624 $ 103,272 $ 43,111 $ 16,629 $ 6,688
Net realized gains (losses) from investment
transactions . . . . . . . . . . . . . 14 (39) (5) (126)
----------- ----------- ----------- ----------- ----------- ----------
Change in net assets resulting from operations 59,520 23,585 103,272 43,106 16,503 6,688
----------- ----------- ----------- ----------- ----------- ----------
DISTRIBUTIONS TO FIDUCIARY SHAREHOLDERS:
From net investment income . . . . . . . (56,332) (22,524) (96,873) (41,103) (15,228) (6,091)
In excess of net investment income . . . (43) (43)
DISTRIBUTIONS TO CLASS A SHAREHOLDERS:
From net investment income . . . . . . . (3,144) (1,086) (6,244) (1,893) (1,358) (564)
In excess of net investment income . . . (30) (30) (142) (142)
DISTRIBUTIONS TO SERVICE SHAREHOLDERS (A):
From net investment income . . . . . . . (13)
----------- ----------- ----------- ----------- ----------- ----------
Change in net assets from shareholder
distributions . . . . . . . . . . . . . . . (59,506) (23,640) (103,272) (43,138) (16,629) (6,698)
----------- ----------- ----------- ----------- ----------- ----------
CAPITAL TRANSACTIONS:
Proceeds from shares issued . . . . . . . 3,158,947 2,677,540 4,749,069 3,828,384 1,502,281 1,053,067
Dividends reinvested . . . . . . . . . . 4,531 1,842 13,261 5,953 2,064 1,023
Cost of shares redeemed . . . . . . . . . (2,909,428) (2,180,198) (4,270,622) (3,199,010) (1,404,255) (853,992)
----------- ----------- ----------- ----------- ----------- ----------
Change in net assets from share
transactions . . . . . . . . . . . . . . . . . 254,050 499,184 491,708 635,327 100,090 200,098
----------- ----------- ----------- ----------- ----------- ----------
Change in Net Assets . . . . . . . . . . . . . 254,064 499,129 491,708 635,295 99,964 200,088
NET ASSETS:
Beginning of period . . . . . . . . . . . 1,022,750 523,621 1,675,676 1,040,381 394,297 194,209
----------- ----------- ----------- ----------- ----------- ----------
End of period . . . . . . . . . . . . . . $ 1,276,814 $ 1,022,750 $ 2,167,384 $ 1,675,676 $ 494,261 $ 394,297
----------- ----------- ----------- ----------- ----------- ----------
----------- ----------- ----------- ----------- ----------- ----------
SHARE TRANSACTIONS:
Issued . . . . . . . . . . . . . . . . . 3,158,947 2,677,540 4,749,069 3,828,384 1,502,281 1,053,067
Reinvested . . . . . . . . . . . . . . . 4,531 1,842 13,261 5,953 2,064 1,023
Redeemed . . . . . . . . . . . . . . . . (2,909,428) (2,180,198) (4,270,622) (3,199,010) (1,404,255) (853,992)
----------- ----------- ----------- ----------- ----------- ----------
----------- ----------- ----------- ----------- ----------- ----------
Change in shares . . . . . . . . . . . . . . . 254,050 499,184 491,708 635,327 100,090 200,098
----------- ----------- ----------- ----------- ----------- ----------
----------- ----------- ----------- ----------- ----------- ----------
Undistributed (distributions in excess of) net
investment income included in net assets:
End of Period . . . . . . . . . . . . . . $ 27 $ (16) $ (20) $ (27) $ (139) $ (10)
----------- ----------- ----------- ----------- ----------- ----------
----------- ----------- ----------- ----------- ----------- ----------
</TABLE>
<TABLE>
<CAPTION>
(Amounts in Thousands)
OHIO MUNICIPAL
MONEY MARKET
FUND
---------------------
YEAR YEAR
ENDED ENDED
JUNE 30, JUNE 30,
1995 1994
--------- ---------
<S> <C> <C>
FROM INVESTMENT ACTIVITIES:
OPERATIONS:
Net investment income . . . . . . . . . . $ 2,785 $ 1,108
Net realized gains (losses) from investment
transactions . . . . . . . . . . . . .
--------- ---------
Change in net assets resulting from operations 2,785 1,108
--------- ---------
DISTRIBUTIONS TO FIDUCIARY SHAREHOLDERS:
From net investment income . . . . . . . (1,535) (408)
In excess of net investment income . . .
DISTRIBUTIONS TO CLASS A SHAREHOLDERS:
From net investment income . . . . . . . (1,240) (700)
In excess of net investment income . . . (10) (10)
DISTRIBUTIONS TO SERVICE SHAREHOLDERS (A):
From net investment income . . . . . . .
--------- ---------
Change in net assets from shareholder
distributions . . . . . . . . . . . . . . . (2,785) (1,118)
--------- ---------
CAPITAL TRANSACTIONS:
Proceeds from shares issued . . . . . . . 376,500 210,761
Dividends reinvested . . . . . . . . . . 1,226 763
Cost of shares redeemed . . . . . . . . . (382,861) (147,408)
--------- ---------
Change in net assets from share
transactions . . . . . . . . . . . . . . . . . (5,135) 64,116
--------- ---------
Change in Net Assets . . . . . . . . . . . . . (5,135) 64,106
NET ASSETS:
Beginning of period . . . . . . . . . . . 92,731 28,625
--------- ---------
End of period . . . . . . . . . . . . . . $ 87,596 $ 92,731
--------- ---------
--------- ---------
SHARE TRANSACTIONS:
Issued . . . . . . . . . . . . . . . . . 376,500 210,761
Reinvested . . . . . . . . . . . . . . . 1,226 763
Redeemed . . . . . . . . . . . . . . . . (382,861) (147,408)
--------- ---------
--------- ---------
Change in shares . . . . . . . . . . . . . . . (5,135) 64,116
--------- ---------
--------- ---------
Undistributed (distributions in excess of) net
investment income included in net assets:
End of Period . . . . . . . . . . . . . . $ (10) $ (10)
--------- ---------
--------- ---------
</TABLE>
- -------------
(a) The Service Shares commenced offering on January 17, 1994, when they were
designated as "Retirement" Shares. On April 4, 1995, the name of the
Retirement Shares was changed to "Service" Shares. As of May 2, 1995,
Service Shares transferred to Class A Shares and as of June 30, 1995, there
were no shareholders in the Service Class.
See notes to financial statements
21
B-123
<PAGE>
THE ONE GROUP FAMILY OF MUTUAL FUNDS
- --------------------------------------------------------------------------------
NOTES TO FINANCIAL STATEMENTS JUNE 30, 1995
1. ORGANIZATION:
The One Group (the "Trust") is registered under the Investment Company Act
of 1940, as amended (the "1940 Act"), as a diversified, open-end investment
company established as a Massachusetts business trust. The Trust is
registered to offer five classes of shares: Fiduciary, Class A, Class B,
Institutional and Service. The Trust currently offers twenty-four funds. The
accompanying financial statements and financial highlights are those of the
U.S. Treasury Securities Money Market Fund, the Prime Money Market Fund, the
Municipal Money Market Fund, and the Ohio Municipal Money Market Fund
(individually, a "Fund"; collectively, the "Funds") only.
2. SIGNIFICANT ACCOUNTING POLICIES:
The following is a summary of significant accounting policies in conformity
with generally accepted accounting principles consistently followed by the
Trust in preparation of its financial statements.
SECURITY VALUATION
Securities are valued utilizing the amortized cost method permitted in
accordance with Rule 2a-7 under the 1940 Act. Under the amortized cost
method, discount or premium is amortized on a constant basis to the maturity
of the security. In addition, the Funds may not (a) purchase any instrument
with a remaining maturity greater than thirteen months unless such
instrument is subject to a demand feature, or (b) maintain a dollar-weighted
average maturity which exceeds 90 days.
REPURCHASE AGREEMENTS
The Funds may invest in repurchase agreements with institutions that the
Fund's investment advisor has determined are creditworthy. Each repurchase
agreement is recorded at cost. The Fund requires that the securities
purchased in a repurchase transaction be transferred to the custodian in a
manner sufficient to enable the Fund to obtain those securities in the event
of a counterparty default. The seller, under the repurchase agreement, is
required to maintain the value of the securities held at not less than the
repurchase price, including accrued interest.
SECURITY TRANSACTIONS AND RELATED INCOME
Security transactions are accounted for on a trade date basis. Net realized
gains or losses on sales of securities are determined on the specific
identification cost method. Interest income and expenses are recognized on
the accrual basis. Interest income, including any discount or premium, is
accrued as earned using the effective interest method.
EXPENSES
Expenses directly attributable to a Fund are charged directly to that Fund,
while the expenses which are attributable to more than one fund of the Trust
are allocated among the respective Funds. Each class of shares bears its
pro-rata portion of expenses attributable to its series, except that each
class separately bears expenses related specifically to that class, such as
distribution fees.
DIVIDENDS AND DISTRIBUTIONS TO SHAREHOLDERS
Dividends from net investment income are declared daily and paid monthly.
Net income for this purpose consists of interest accrued and discount earned
(including both original issue discount and market discount) less
amortization of any market premium and accrued expenses. Net realized
capital gains, if any, are
Continued
22
B-124
<PAGE>
THE ONE GROUP FAMILY OF MUTUAL FUNDS
- --------------------------------------------------------------------------------
NOTES TO FINANCIAL STATEMENTS, CONTINUED JUNE 30, 1995
distributed at least annually. Dividends are declared separately for each
class. No class has preferential dividend rights; differences in per share
dividend rates are generally due to differences in separate class expenses.
Net investment income and net capital gain distributions are determined in
accordance with income tax regulations which may differ from generally
accepted accounting principles. These differences are primarily due to
differing treatments of expiring capital loss carryforwards and deferrals of
certain losses.
ORGANIZATION COSTS
Costs incurred by the Trust in connection with its organization, including
the fees and expenses of registering and qualifying its shares for
distribution have been deferred and are being amortized using the
straight-line method over a period of five years beginning with the
commencement of each Fund's operations. All such costs have been allocated
among the funds of the Trust pro-rata, based on the relative net assets of
each fund. In the event that any of the initial shares are redeemed during
such period by any holder thereof, the related Fund will be reimbursed by
such holder for any unamortized organization costs in the proportion as the
number of initial shares being redeemed bears to the number of initial
shares outstanding at the time of redemption.
FEDERAL INCOME TAXES
Each Fund intends to continue to qualify as a regulated investment company
by complying with the provisions available to certain investment companies
as defined in applicable sections of the Internal Revenue Code, and to make
distributions of net investment income and net realized capital gains
sufficient to relieve it from all, or substantially all, federal income
taxes.
3. SHARES OF BENEFICIAL INTEREST:
The Trust has an unlimited number of shares of beneficial interest, with no
par value which may, without shareholder approval, be divided into an
unlimited number of series of such shares and any series may be classified
or reclassified into one or more classes. Currently, shares of the Trust are
registered to be offered through thirty series and five classes: Fiduciary,
Class A, Class B, Institutional and Service. The Service Shares commenced
offering on January 17, 1994 when they were designated as "Retirement"
Shares. On April 4, 1995, the name of the Retirement Shares was changed to
"Service" Shares. During the year ended June 30, 1995, Service Shares
transferred to Class A Shares, and as of June 30, 1995, there were no
shareholders in the Service Class. Shareholders are entitled to one vote for
each full share held and will vote in the aggregate and not by class or
series, except as otherwise expressly required by law or when the Board of
Trustees has determined that the matter to be voted on affects only the
interest of shareholders of a particular class or series. The following is a
summary of transactions in Fund shares for the fiscal years ending June 30,
1995 and 1994:
Continued
23
B-125
<PAGE>
THE ONE GROUP FAMILY OF MUTUAL FUNDS
- --------------------------------------------------------------------------------
NOTES TO FINANCIAL STATEMENTS, CONTINUED JUNE 30, 1995
(Amounts in Thousands)
<TABLE>
<CAPTION>
U.S. TREASURY SECURITIES
MONEY MARKET FUND PRIME MONEY MARKET FUND
----------------------------- ------------------------------
YEAR ENDED YEAR ENDED YEAR ENDED YEAR ENDED
JUNE 30, JUNE 30, JUNE 30, JUNE 30,
1995 1994 1995 1994
----------- ----------- ----------- -----------
<S> <C> <C> <C> <C>
CAPITAL TRANSACTIONS:
FIDUCIARY SHARES:
Proceeds from shares issued . . . . . . . . . $ 2,783,997 $ 2,116,053 $ 3,951,914 $ 3,532,386
Issued in connection with acquisition . . . . 300,662
Dividends reinvested . . . . . . . . . . . . 1,467 810 7,187 4,022
Shares redeemed . . . . . . . . . . . . . . . (2,576,713) (1,941,023) (3,594,562) (2,914,801)
----------- ----------- ----------- -----------
Change in net assets from Fiduciary Share
transactions . . . . . . . . . . . . . . . . $ 208,751 $ 476,502 $ 364,539 $ 621,607
----------- ----------- ----------- -----------
----------- ----------- ----------- -----------
CLASS A SHARES:
Proceeds from shares issued . . . . . . . . . $ 374,950 $ 260,825 $ 796,201 $ 295,958
Dividends reinvested . . . . . . . . . . . . 3,064 1,032 6,061 1,931
Shares redeemed . . . . . . . . . . . . . . . (332,715) (239,175) (675,053) (284,209)
----------- ----------- ----------- -----------
Change in net assets from Class A Share
transactions . . . . . . . . . . . . . . . . $ 45,299 $ 22,682 $ 127,209 $ 13,680
----------- ----------- ----------- -----------
----------- ----------- ----------- -----------
SERVICE SHARES:
Proceeds from shares issued . . . . . . . . . $ $ $ 954 $ 40
Dividends reinvested . . . . . . . . . . . . 13
Shares redeemed . . . . . . . . . . . . . . . (1,007)
----------- ----------- ----------- -----------
Change in net assets from
Service Share transactions . . . . . . . . . $ $ $ (40) $ 40
----------- ----------- ----------- -----------
----------- ----------- ----------- -----------
SHARE TRANSACTIONS:
FIDUCIARY SHARES:
Issued . . . . . . . . . . . . . . . . . . . 2,783,997 2,116,053 3,951,914 3,532,386
Issued in connection with acquisition . . . . 300,662
Reinvested . . . . . . . . . . . . . . . . . 1,467 810 7,187 4,022
Redeemed . . . . . . . . . . . . . . . . . . (2,576,713) (1,941,023) (3,594,562) (2,914,801)
----------- ----------- ----------- -----------
Change in Fiduciary Shares . . . . . . . . . 208,751 476,502 364,539 621,607
----------- ----------- ----------- -----------
----------- ----------- ----------- -----------
CLASS A SHARES:
Issued . . . . . . . . . . . . . . . . . . . 374,950 260,825 796,201 295,958
Reinvested . . . . . . . . . . . . . . . . . 3,064 1,032 6,061 1,931
Redeemed . . . . . . . . . . . . . . . . . . (332,715) (239,175) (675,053) (284,209)
----------- ----------- ----------- -----------
Change in Class A Shares . . . . . . . . . . 45,299 22,682 127,209 13,680
----------- ----------- ----------- -----------
----------- ----------- ----------- -----------
SERVICE SHARES:
Issued . . . . . . . . . . . . . . . . . . . 954 40
Reinvested . . . . . . . . . . . . . . . . . 13
Redeemed . . . . . . . . . . . . . . . . . . (1,007)
----------- ----------- ----------- -----------
Change in Service Shares . . . . . . . . . . (40) 40
----------- ----------- ----------- -----------
----------- ----------- ----------- -----------
</TABLE>
Continued
24
B-126
<PAGE>
THE ONE GROUP FAMILY OF MUTUAL FUNDS
- --------------------------------------------------------------------------------
NOTES TO FINANCIAL STATEMENTS, CONTINUED JUNE 30, 1995
(Amounts in Thousands)
<TABLE>
<CAPTION>
MUNICIPAL MONEY MARKET OHIO MUNICIPAL MONEY MARKET
FUND FUND
--------------------------- ---------------------------
YEAR ENDED YEAR ENDED YEAR ENDED YEAR ENDED
JUNE 30, JUNE 30, JUNE 30, JUNE 30,
1995 1994 1995 1994
----------- ---------- ----------- -----------
<S> <C> <C> <C> <C>
CAPITAL TRANSACTIONS:
FIDUCIARY SHARES:
Proceeds from shares issued . . . . . . . . . . . . . $ 1,202,916 $ 862,583 $ 182,275 $ 94,077
Dividends reinvested . . . . . . . . . . . . . . . . 738 477 41 25
Shares redeemed . . . . . . . . . . . . . . . . . . . (1,118,500) (685,634) (185,885) (42,227)
----------- --------- --------- ---------
Change in net assets from
Fiduciary Share transactions . . . . . . . . . . . . $ 85,154 $ 177,426 $ (3,569) $ 51,875
----------- --------- --------- ---------
----------- --------- --------- ---------
CLASS A SHARES:
Proceeds from shares issued . . . . . . . . . . . . . $ 299,365 $ 190,484 $ 194,225 $ 116,684
Dividends reinvested . . . . . . . . . . . . . . . . 1,326 546 1,185 738
Shares redeemed . . . . . . . . . . . . . . . . . . . (285,755) (168,358) (196,976) (105,181)
----------- --------- --------- ---------
Change in net assets from
Class A Share transactions . . . . . . . . . . . . . $ 14,936 $ 22,672 $ (1,566) $ 12,241
----------- --------- --------- ---------
----------- --------- --------- ---------
SHARE TRANSACTIONS:
FIDUCIARY SHARES:
Issued . . . . . . . . . . . . . . . . . . . . . . . 1,202,916 862,583 182,275 94,077
Reinvested . . . . . . . . . . . . . . . . . . . . . 738 477 41 25
Redeemed . . . . . . . . . . . . . . . . . . . . . . (1,118,500) (685,634) (185,885) (42,227)
----------- --------- --------- ---------
Change in Fiduciary Shares . . . . . . . . . . . . . 85,154 177,426 (3,569) 51,875
----------- --------- --------- ---------
----------- --------- --------- ---------
CLASS A SHARES:
Issued . . . . . . . . . . . . . . . . . . . . . . . 299,365 190,484 194,225 116,684
Reinvested . . . . . . . . . . . . . . . . . . . . . 1,326 546 1,185 738
Redeemed . . . . . . . . . . . . . . . . . . . . . . (285,755) (168,358) (196,976) (105,181)
----------- --------- --------- ---------
Change in Class A Shares . . . . . . . . . . . . . . 14,936 22,672 (1,566) 12,241
----------- --------- --------- ---------
----------- --------- --------- ---------
</TABLE>
4. INVESTMENT ADVISORY, ADMINISTRATIVE, AND DISTRIBUTION AGREEMENTS:
The Trust and Banc One Investment Advisors Corporation (the "Advisor"), are
parties to an investment advisory agreement under which the Advisor is
entitled to receive an annual fee, computed daily and paid monthly, equal to
0.35% of the average daily net assets of the U.S. Treasury Securities Money
Market Fund, the Prime Money Market Fund and the Municipal Money Market Fund
and 0.30% of the average daily net assets of the Ohio Municipal Money Market
Fund.
The Trust and 440 Financial Group of Worcester ("440 Financial") are parties
to an administrative agreement under which 440 Financial (the
"Administrator") provides services for a fee that is computed daily and
payable monthly, at an annual rate of 0.20% on the first $1.5 billion of the
combined average net assets of the Funds and other funds offered by the
Trust; 0.18% on the next $0.5 billion of the combined average net assets,
and 0.16% on the combined average net assets over $2 billion. Effective
April 1, 1995, The Shareholder Services Group, Inc.,
Continued
25
B-127
<PAGE>
THE ONE GROUP FAMILY OF MUTUAL FUNDS
- --------------------------------------------------------------------------------
NOTES TO FINANCIAL STATEMENTS, CONTINUED JUNE 30, 1995
d/b/a 440 Financial became the Administrator to the Trust. Also effective
April 1, 1995, the Advisor became the Sub-Administrator pursuant to an
agreement between the Administrator and the Advisor. The Advisor assumed
many of the administrative duties, for which it receives a fee paid by the
Administrator.
The Trust has adopted a distribution and shareholder services plan (the
"Plan") on behalf of the Class A, Class B and Service Class Shares pursuant
to Rule 12b-1 under the 1940 Act. 440 Financial Distributors, Inc. (the
"Distributor") acts as the distributor of the Trust's shares. The
Distributor receives a fee for its services of 0.35%, 1.00%, and 0.75% of
the average daily net assets of the Class A, Class B, and Service Class
Shares, respectively. Effective May 1, 1995, the Distributor voluntarily
agreed to limit its fees to an annual rate of 0.55% of the average daily net
assets of the Service Class Shares for distribution and shareholder
assistance for the U.S. Treasury Securities and Prime Money Market Funds.
These fees are used by the Distributor to pay banks, including affiliates of
the the Advisor, other institutions and broker/dealers, and for expenses the
Distributor incurs for providing distribution or shareholder assistance. The
Distributor has voluntarily agreed to limit its fees for the Class A Shares
to an annual rate of 0.25% of the average daily net assets.
Certain officers of the Trust are also officers of the Administrator and/or
Distributor. Such officers receive no compensation from the Funds for
serving in their respective roles.
The Advisor, Administrator, and Distributor voluntarily agreed to waive a
portion of their fees and to reimburse the Funds for certain expenses so
that total expenses of each Fund would not exceed certain annual expense
limitations. For the year ended June 30, 1995, fees in the following amounts
were waived or reimbursed to the Funds:
<TABLE>
<CAPTION>
U.S. TREASURY SECURITIES PRIME MONEY
MONEY MARKET FUND MARKET FUND
------------------------ --------------------
<S> <C> <C>
INVESTMENT ADVISOR FEES:
Waivers/reimbursements . . . . . . . . . . . . $1,956,505 $2,887,240
ADMINISTRATION FEES:
Waivers/reimbursements . . . . . . . . . . . . $ 122,233 $ 111,313
12b-1 FEES (CLASS A):
Waivers/reimbursements . . . . . . . . . . . . $ 66,222 $ 123,447
<CAPTION>
MUNICIPAL MONEY OHIO MUNICIPAL MONEY
MARKET FUND MARKET FUND
------------------------ --------------------
<S> <C> <C>
INVESTMENT ADVISOR FEES:
Waivers/reimbursements . . . . . . . . . . . . $ 834,690 $ 112,517
ADMINISTRATION FEES:
Waivers/reimbursements . . . . . . . . . . . . $ 92,641 $ 61,415
12b-1 FEES (CLASS A):
Waivers/reimbursements . . . . . . . . . . . . $ 45,681 $ 56,095
</TABLE>
5. CONCENTRATION OF CREDIT RISK:
The Ohio Municipal Money Market Fund invests primarily in debt obligations
issued by the State of Ohio and its political subdivisions, agencies and
public authorities to obtain funds for various public purposes. The Fund is
more susceptible to economic and political factors adversely affecting
issuers of Ohio's specific municipal securities than are municipal bond
funds that are not concentrated in these issuers to the same extent.
Continued
26
B-128
<PAGE>
THE ONE GROUP FAMILY OF MUTUAL FUNDS
- --------------------------------------------------------------------------------
NOTES TO FINANCIAL STATEMENTS, CONTINUED JUNE 30, 1995
6. FEDERAL TAX INFORMATION:
As of June 30, 1995, the Funds had the following capital loss carryforwards
which are available to offset future gains, if any:
<TABLE>
<CAPTION>
U.S. TREASURY OHIO MUNICIPAL
SECURITIES MONEY PRIME MONEY MONEY MARKET
MARKET FUND MARKET FUND FUND
---------------- ----------- --------------
<S> <C> <C> <C>
Expiring in 2001 . . . . . . . . . . $ 8,551
Expiring in 2002 . . . . . . . . . . 26,451
Expiring in 2003 . . . . . . . . . . $24,983 552 $315
------- ------- ----
$24,983 $35,554 $315
------- ------- ----
------- ------- ----
</TABLE>
The Municipal Money Market Fund had no capital loss carryforwards at June
30, 1995.
Of the dividends paid from net investment income by the Municipal Money
Market Fund and the Ohio Municipal Money Market Fund for the fiscal year
ended June 30, 1995, 100.0% constituted exempt interest dividends for
regular federal income tax purposes.
Continued
27
B-129
<PAGE>
THE ONE GROUP FAMILY OF MUTUAL FUNDS
- --------------------------------------------------------------------------------
FINANCIAL HIGHLIGHTS JUNE 30, 1995
<TABLE>
<CAPTION>
U.S. TREASURY SECURIITES MONEY MARKET FUND
---------------------------------------------------------------------
YEAR ENDED JUNE 30,
---------------------------------------------------------------------
1995 1994 1993
--------------------- -------------------- --------------------
FIDUCIARY CLASS A FIDUCIARY CLASS A FIDUCIARY CLASS A
--------- ------- --------- ------- --------- -------
<S> <C> <C> <C> <C> <C> <C>
NET ASSET VALUE,
BEGINNING OF PERIOD . . . . . . . . . . . . . . . $ 1.000 $ 1.000 $ 1.000 $ 1.000 $ 1.000 $ 1.000
---------- ------- -------- ------- -------- -------
Investment Activities
Net investment income . . . . . . . . . . . . . . 0.050 0.047 0.030 0.027 0.029 0.026
---------- ------- -------- ------- -------- -------
Less: Distributions
Net investment income . . . . . . . . . . . . . . (0.050) (0.047) (0.030) (0.027) (0.029) (0.026)
---------- ------- -------- ------- -------- -------
NET ASSET VALUE,
END OF PERIOD . . . . . . . . . . . . . . . . . . $ 1.000 $ 1.000 $ 1.000 $ 1.000 $ 1.000 $ 1.000
---------- ------- -------- ------- -------- -------
---------- ------- -------- ------- -------- -------
Total Return . . . . . . . . . . . . . . . . . . . 5.07% 4.81% 3.01% 2.76% 2.89% 2.63%
RATIOS/SUPPLEMENTARY DATA:
Net assets at end of period (000) . . . . . . . . $1,178,091 $98,723 $969,326 $53,423 $492,862 $30,759
Ratio of expenses to average net assets . . . . . 0.41% 0.66% 0.40% 0.63% 0.45% 0.65%
Ratio of net investment income to average
net assets . . . . . . . . . . . . . . . . . . 4.96% 4.71% 3.02% 2.81% 2.85% 2.52%
Ratio of expenses to average net assets* . . . . 0.59% 0.94% 0.58% 0.87% 0.67% 1.02%
Ratio of net investment income to average
net assets* . . . . . . . . . . . . . . . . . . 4.78% 4.43% 2.84% 2.57% 2.63% 2.15%
</TABLE>
<TABLE>
<CAPTION>
U.S. TREASURY SECURIITES
MONEY MARKET FUND
--------------------------------------
YEAR ENDED JUNE 30,
--------------------------------------
1992 1991
------------------------- ---------
FIDUCIARY CLASS A (a) FIDUCIARY
--------- ----------- ---------
<S> <C> <C> <C>
NET ASSET VALUE,
BEGINNING OF PERIOD . . . . . . . . . . . . . . . $ 1.000 $ 1.000 $ 1.000
-------- ------- --------
Investment Activities
Net investment income . . . . . . . . . . . . . . 0.043 0.012 0.062
-------- ------- --------
Less: Distributions
Net investment income . . . . . . . . . . . . . . (0.043) (0.012) (0.062)
-------- ------- --------
NET ASSET VALUE,
END OF PERIOD . . . . . . . . . . . . . . . . . . $ 1.000 $ 1.000 $ 1.000
-------- ------- --------
-------- ------- --------
Total Return . . . . . . . . . . . . . . . . . . . 4.40% 3.38%(b) 6.63%
RATIOS/SUPPLEMENTARY DATA:
Net assets at end of period (000) . . . . . . . . $410,146 $ 6 $339,987
Ratio of expenses to average net assets . . . . . 0.55% 0.59%(b) 0.60%
Ratio of net investment income to average
net assets . . . . . . . . . . . . . . . . . . 4.25% 2.51%(b) 6.20%
Ratio of expenses to average net assets* . . . . 0.77% 0.71%(b) 0.80%
Ratio of net investment income to average
net assets* . . . . . . . . . . . . . . . . . . 4.04% 2.39%(b) 6.00%
</TABLE>
- --------------
* During the period certain fees were voluntarily reduced. If such voluntary
fee reductions had not occurred, the ratios would have been as indicated.
(a) Class A Shares commenced offering on February 18, 1992.
(b) Annualized.
See notes to financial statements.
28
B-130
<PAGE>
THE ONE GROUP FAMILY OF MUTUAL FUNDS
- --------------------------------------------------------------------------------
FINANCIAL HIGHLIGHTS JUNE 30, 1995
<TABLE>
<CAPTION>
PRIME MONEY MARKET FUND
----------------------------------------------------------------------------------------------
YEAR ENDED JUNE 30,
----------------------------------------------------------------------------------------------
1995 1994 1993
----------------------------------- --------------------------------- -------------------
FIDUCIARY CLASS A SERVICE (a) FIDUCIARY CLASS A RETIREMENT FIDUCIARY CLASS A
---------- -------- ----------- ---------- ------- ---------- --------- -------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
NET ASSET VALUE,
BEGINNING OF PERIOD . . . $ 1.000 $ 1.000 $ 1.000 $ 1.000 $ 1.000 $ 1.000 $ 1.000 $ 1.000
---------- -------- ------- ---------- ------- ------- -------- -------
Investment Activities
Net investment income . . 0.052 0.050 0.041 0.031 0.027 0.008 0.030 0.030
---------- -------- ------- ---------- ------- ------- -------- -------
Less: Distributions
Net investment income . . (0.052) (0.050) (0.041) (0.031) (0.027) (0.008) (0.030) (0.030)
---------- -------- ------- ---------- ------- ------- -------- -------
NET ASSET VALUE,
END OF PERIOD . . . . . . . $ 1.000 $ 1.000 $ 1.000 $ 1.000 $ 1.000 $ 1.000 $ 1.000 $ 1.000
---------- -------- ------- ---------- ------- ------- -------- -------
---------- -------- ------- ---------- ------- ------- -------- -------
Total Return . . . . . . . 5.34% 5.08% (a) 3.19% 2.93% 0.79%(d) 3.09% 2.83%
RATIOS/SUPPLEMENTARY
DATA:
Net Assets at end of
period (000). . . . . . $1,965,416 $201,968 $1,600,876 $74,759 $ 40 $979,275 $61,106
Ratio of expenses to
average net assets . . 0.41% 0.67% 1.42%(c) 0.40% 0.65% 1.18%(c) 0.44% 0.65%
Ratio of net investment
income to average net
assets . . . . . . . . 5.27% 5.02% 4.52%(c) 3.18% 2.92% 3.03%(c) 3.05% 2.67%
Ratio of expenses to
average net assets *. . 0.57% 0.92% 1.60%(c) 0.59% 0.90% 1.36%(c) 0.62% 0.99%
Ratio of net investment
income to average net
assets * . . . . . . . 5.12% 4.77% 5.23%(c) 2.99% 2.67% 2.85%(c) 2.87% 2.33%
</TABLE>
<TABLE>
<CAPTION>
PRIME MONEY MARKET FUND
-----------------------------------------
YEAR ENDED JUNE 30,
-----------------------------------------
1992 1991
------------------------- ---------
FIDUCIARY CLASS A (b) FIDUCIARY
--------- ----------- ---------
<S> <C> <C> <C>
NET ASSET VALUE,
BEGINNING OF PERIOD . . . $ 1.000 $1.000 $ 1.000
-------- ------ --------
Investment Activities
Net investment income . . 0.045 0.013 0.069
-------- ------ --------
Less: Distributions
Net investment income . . (0.045) (0.013) (0.069)
-------- ------ --------
NET ASSET VALUE,
END OF PERIOD . . . . . . . $ 1.000 $1.000 $ 1.000
-------- ------ --------
-------- ------ --------
Total Return . . . . . . . 4.64% 3.51%(c) 7.12%
RATIOS/SUPPLEMENTARY
DATA:
Net Assets at end of
period (000). . . . . . $946,504 $ 511 $760,726
Ratio of expenses to
average net assets . . 0.59% 0.79%(c) 0.68%
Ratio of net investment
income to average net
assets . . . . . . . . 4.49% 3.40%(c) 6.86%
Ratio of expenses to
average net assets *. . 0.76% 0.94%(c) 0.83%
Ratio of net investment
income to average net
assets * . . . . . . . 4.32% 3.25%(c) 6.71%
</TABLE>
- ---------------
* During the period certain fees were voluntarily reduced. If such voluntary
fee reductions had not occurred, the ratios would have been as indicated.
(a) The Service Shares commenced offering on January 17, 1994 when they were
designated as "Retirement" Shares. On April 4, 1995, the name of the
Retirement Shares was changed to "Service" Shares. As of June 1, 1995,
Service Shares transferred to Class A Shares. As of June 30, 1995, there
were no shareholders in the Service Class. The return for the period from
July 1, 1994 to June 1, 1995 for the Service Shares was 4.11%.
(b) Class A Shares commenced offering on February 18, 1992.
(c) Annualized.
(d) Not annualized.
See notes to financial statements.
29
B-131
<PAGE>
THE ONE GROUP FAMILY OF MUTUAL FUNDS
- --------------------------------------------------------------------------------
FINANCIAL HIGHLIGHTS JUNE 30, 1995
<TABLE>
<CAPTION>
MUNICIPAL MONEY MARKET FUND
------------------------------------------------------------------------------------------------
YEAR ENDED JUNE 30,
------------------------------------------------------------------------------------------------
1995 1994 1993 1992 1991
------------------ ------------------ ------------------ ---------------------- ---------
FIDUCIARY CLASS A FIDUCIARY CLASS A FIDUCIARY CLASS A FIDUCIARY CLASS A (a) FIDUCIARY
--------- ------- --------- ------- --------- ------- --------- ----------- ---------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
NET ASSET VALUE,
BEGINNING OF PERIOD . . . $ 1.000 $ 1.000 $ 1.000 $ 1.000 $ 1.000 $ 1.000 $ 1.000 $ 1.000 $ 1.000
-------- ------- -------- ------- -------- ------- -------- ------- --------
Investment Activities
Net investment income . . 0.032 0.030 0.021 0.021 0.021 0.019 0.034 0.009 0.050
-------- ------- -------- ------- -------- ------- -------- ------- --------
Less: Distributions
Net investment income . . (0.032) (0.030) (0.021) (0.021) (0.021) (0.019) (0.034) (0.009) (0.050)
-------- ------- -------- ------- -------- ------- -------- ------- --------
NET ASSET VALUE,
END OF PERIOD . . . . . . $ 1.000 $ 1.000 $ 1.000 $ 1.000 $ 1.000 $ 1.000 $ 1.000 $ 1.000 $ 1.000
-------- ------- -------- ------- -------- ------- -------- ------- --------
-------- ------- -------- ------- -------- ------- -------- ------- --------
Total Return 3.28% 3.02% 2.16% 1.96% 2.15% 1.89% 3.47% 2.48%(b) 5.17%
RATIOS/SUPPLEMENTARY DATA:
Net Assets at end of
period (000) . . . . . $437,743 $56,518 $352,702 $41,595 $175,277 $18,932 $170,961 $ 122 $166,200
Ratio of expenses to
average net assets. . . 0.41% 0.66% 0.40% 0.65% 0.46% 0.66% 0.43% 0.84%(b) 0.32%
Ratio of net investment
income to average
net assets . . . . . . 3.26% 3.01% 2.13% 1.92% 2.12% 1.82% 3.41% 2.44%(b) 5.04%
Ratio of expenses to
average net assets *. . 0.59% 0.94% 0.60% 0.91% 0.66% 1.01% 0.80% 0.99%(b) 0.67%
Ratio of net investment
income to average net
assets * . . . . . . . 3.08% 2.73% 1.93% 1.66% 1.92% 1.47% 3.04% 2.29%(b) 4.69%
</TABLE>
- ---------------
* During the period certain fees were voluntarily reduced. If such voluntary
fee reductions had not occurred, the ratios would have been as indicated.
(a) Class A Shares commenced offering on February 18, 1992.
(b) Annualized.
See notes to financial statements.
30
B-132
<PAGE>
THE ONE GROUP FAMILY OF MUTUAL FUNDS
- --------------------------------------------------------------------------------
FINANCIAL HIGHLIGHTS JUNE 30, 1995
<TABLE>
<CAPTION>
OHIO MUNICIPAL MONEY MARKET FUND
------------------------------------------------------------------------
JUNE 9, JANUARY 26,
YEAR ENDED JUNE 30, 1993 TO 1993 TO
------------------------------------------ JUNE 30, JUNE 30,
1995 1994 1993 (a) 1993 (a)
------------------- ------------------- --------- -----------
FIDUCIARY CLASS A FIDUCIARY CLASS A FIDUCIARY CLASS A
--------- ------- --------- ------- --------- -----------
<S> <C> <C> <C> <C> <C> <C>
NET ASSET VALUE,
BEGINNING OF PERIOD . . . . . $ 1.000 $ 1.000 $ 1.000 $ 1.000 $ 1.000 $ 1.000
------- ------- ------- ------- ------- -------
Investment Activities
Net investment income . . . . . 0.032 0.029 0.022 0.021 0.013 0.009
------- ------- ------- ------- ------- -------
Less: Distributions
Net investment income . . . . . (0.032) (0.029) (0.022) (0.021) (0.013) (0.009)
------- ------- ------- ------- ------- -------
NET ASSET VALUE,
END OF PERIOD . . . . . . . . . $ 1.000 $ 1.000 $ 1.000 $ 1.000 $ 1.000 $ 1.000
------- ------- ------- ------- ------- -------
------- ------- ------- ------- ------- -------
Total Return . . . . . . . . . . 3.20% 2.98% 2.25% 2.09% 2.14%(b) 2.34%(b)
RATIOS/SUPPLEMENTARY DATA:
Net Assets at end of
period (000) . . . . . . . . $51,806 $35,790 $55,375 $37,356 $ 3,500 $25,125
Ratio of expenses to average
net assets . . . . . . . . . 0.41% 0.63% 0.34% 0.44% 0.08%(b) 0.26%(b)
Ratio of net investment income
to average net assets . . . . 3.13% 2.91% 2.29% 2.05% 2.07%(b) 2.03%(b)
Ratio of expenses to average
net assets * . . . . . . . . 0.60% 0.95% 0.57% 0.94% 0.51%(b) 0.92%(b)
Ratio of net investment income
to average net assets * . . . 2.94% 2.59% 2.06% 1.55% 1.64%(b) 1.37%(b)
</TABLE>
- ---------------
* During the period certain fees were voluntarily reduced. If such voluntary
fee reductions had not occurred, the ratios would have been as indicated.
(a) Period from commencement of operations.
(b) Annualized.
See notes to financial statements.
31
B-133
<PAGE>
REPORT OF INDEPENDENT ACCOUNTANTS
- --------------------------------------------------------------------------------
THE ONE GROUP FAMILY OF MUTUAL FUNDS JUNE 30, 1995
To the Shareholders and Board of Trustees of
The One Group:
We have audited the accompanying statements of assets and liabilities of the
U.S. Treasury Securities Money Market Fund, the Prime Money Market Fund, the
Municipal Money Market Fund and the Ohio Municipal Money Market Fund (four
series of The One Group), including the schedules of portfolio investments, as
of June 30, 1995, and the related statements of operations for the year then
ended, the statements of changes in net assets for each of the two years in the
period then ended, and financial highlights for each of the periods indicated
herein. These financial statements and financial highlights are the
responsibility of The One Group's management. Our responsibility is to express
an opinion on these financial statements and financial highlights based on our
audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements and financial
highlights are free of material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in the financial
statements. Our procedures included confirmation of securities owned as of June
30, 1995 by correspondence with the custodian and brokers. An audit also
includes assessing the accounting principles used and significant estimates made
by management, as well as evaluating the overall financial statement
presentation. We believe that our audits provide a reasonable basis for our
opinion.
In our opinion, the financial statements and financial highlights referred to
above present fairly, in all material respects, the financial position of the
U.S. Treasury Securities Money Market Fund, the Prime Money Market Fund, the
Municipal Money Market Fund and the Ohio Municipal Money Market Fund of The One
Group as of June 30, 1995, the results of their operations for the year then
ended, the changes in their net assets for each of the two years in the period
then ended, and the financial highlights for each of the periods indicated
herein, in conformity with generally accepted accounting principles.
Boston, Massachusetts Coopers & Lybrand L.L.P.
August 18, 1995
32
B-134
<PAGE>
THE ONE GROUP FAMILY OF MUTUAL FUNDS
TREASURY ONLY MONEY MARKET FUND
- --------------------------------------------------------------------------------
SCHEDULE OF PORTFOLIO INVESTMENTS JUNE 30, 1995
(Amounts in Thousands)
<TABLE>
<CAPTION>
PRINCIPAL SECURITY AMORTIZED
AMOUNT DESCRIPTION COST
- --------- ----------- ---------
<S> <C>
U.S. TREASURY BILLS (57.8%):
$25,000 6.14%, 8/10/95 . . . . . . . . . . . . . . . . . . . . . . . $ 24,829
5,191 5.66%, 8/24/95 . . . . . . . . . . . . . . . . . . . . . . . 5,147
16,017 5.68%, 8/24/95 . . . . . . . . . . . . . . . . . . . . . . . 15,880
1,800 5.72%, 8/24/95 . . . . . . . . . . . . . . . . . . . . . . . 1,785
2,806 5.51%, 9/7/95 . . . . . . . . . . . . . . . . . . . . . . . . 2,777
3,516 5.59%, 9/7/95 . . . . . . . . . . . . . . . . . . . . . . . . 3,479
12,443 5.59%, 9/7/95 . . . . . . . . . . . . . . . . . . . . . . . . 12,312
7,281 5.48%, 9/14/95 . . . . . . . . . . . . . . . . . . . . . . . 7,198
48,639 5.47%, 9/21/95 . . . . . . . . . . . . . . . . . . . . . . . 48,033
1,451 5.42%, 9/28/95 . . . . . . . . . . . . . . . . . . . . . . . 1,432
11,000 5.47%, 9/28/95 . . . . . . . . . . . . . . . . . . . . . . . 10,851
416 5.49%, 9/28/95 . . . . . . . . . . . . . . . . . . . . . . . 410
10,000 5.82%, 10/26/95 . . . . . . . . . . . . . . . . . . . . . . . 9,811
331 5.61%, 11/2/95 . . . . . . . . . . . . . . . . . . . . . . . 325
1,280 5.68%, 11/16/95 . . . . . . . . . . . . . . . . . . . . . . . 1,252
20,000 5.68%, 11/16/95 . . . . . . . . . . . . . . . . . . . . . . . 19,565
1,962 5.38%, 12/21/95 . . . . . . . . . . . . . . . . . . . . . . . 1,911
--------
Total U.S. Treasury Bills 166,997
--------
U.S. TREASURY NOTES (41.5%):
50,000 8.88%, 7/15/95 . . . . . . . . . . . . . . . . . . . . . . . 50,056
50,000 4.63%, 8/15/95 . . . . . . . . . . . . . . . . . . . . . . . 49,934
20,000 4.00%, 1/31/96 . . . . . . . . . . . . . . . . . . . . . . . 19,791
--------
Total U.S. Treasury Notes 119,781
--------
Total Investments (Cost--$286,778)(a) $286,778
--------
--------
</TABLE>
- ---------
Percentages indicated are based on net assets of $288,697.
(a) Cost for federal income tax and financial reporting purposes are the same.
See notes to financial statements.
7
B-135
<PAGE>
THE ONE GROUP FAMILY OF MUTUAL FUNDS
Government Money Market Fund
- --------------------------------------------------------------------------------
SCHEDULE OF PORTFOLIO INVESTMENTS FUNDS JUNE 30, 1995
(Amounts in Thousands)
<TABLE>
<CAPTION>
PRINCIPAL SECURITY AMORTIZED
AMOUNT DESCRIPTION COST
- --------- ----------- ---------
<S> <C>
U.S. Government Agencies (53.6%):
Federal Farm Credit Bank:
$ 23,000 6.09%, 9/8/95 . . . . . . . . . . . . . . . . . . . . . . . $ 22,732
14,000 5.99%, 9/29/95 . . . . . . . . . . . . . . . . . . . . . . 13,790
5,000 5.97%, 3/4/96 . . . . . . . . . . . . . . . . . . . . . . . 4,795
10,250 6.38%, 5/1/96 . . . . . . . . . . . . . . . . . . . . . . . 10,250
10,000 5.80%, 5/3/96 . . . . . . . . . . . . . . . . . . . . . . . 9,505
Federal Home Loan Bank:
10,000 6.18%, 12/18/95 . . . . . . . . . . . . . . . . . . . . . . 9,708
5,240 8.10%, 3/25/96 . . . . . . . . . . . . . . . . . . . . . . 5,304
6,600 6.43%, 7/17/96 . . . . . . . . . . . . . . . . . . . . . . 6,601
Federal Home Loan Mortgage Corp.:
14,000 5.95%, 3/29/96 . . . . . . . . . . . . . . . . . . . . . . 13,371
10,000 5.86%, 5/1/96 . . . . . . . . . . . . . . . . . . . . . . . 9,503
Federal National Mortgage Assoc.:
13,865 6.03%, 8/8/95 . . . . . . . . . . . . . . . . . . . . . . . 13,777
20,000 6.26%*, 8/14/95 . . . . . . . . . . . . . . . . . . . . . . 19,848
20,000 6.04%, 8/28/95 . . . . . . . . . . . . . . . . . . . . . . 19,805
18,400 6.00%, 9/21/95 . . . . . . . . . . . . . . . . . . . . . . 18,149
4,000 5.55%*, 6/2/99 . . . . . . . . . . . . . . . . . . . . . . 4,000
20,000 5.58%*, 7/26/99 . . . . . . . . . . . . . . . . . . . . . . 20,000
10,000 5.58%*, 9/22/99 . . . . . . . . . . . . . . . . . . . . . . 10,000
Student Loan Marketing Assoc:
30,000 5.68%*, 10/14/97 . . . . . . . . . . . . . . . . . . . . . 29,978
25,000 5.70%*, 11/24/97 . . . . . . . . . . . . . . . . . . . . . 25,000
25,000 5.70%*, 9/28/98 . . . . . . . . . . . . . . . . . . . . . . 25,000
40,000 5.68%*, 11/10/98 . . . . . . . . . . . . . . . . . . . . . 40,000
10,000 5.72%*, 1/13/99 . . . . . . . . . . . . . . . . . . . . . . 9,999
10,000 5.72%*, 2/8/99 . . . . . . . . . . . . . . . . . . . . . . 10,000
25,000 5.71%*, 2/22/99 . . . . . . . . . . . . . . . . . . . . . . 25,000
10,000 5.73%*, 8/2/99 . . . . . . . . . . . . . . . . . . . . . . 9,994
--------
Total U.S. Government Agencies 386,109
--------
U.S. TREASURY BILLS (1.3%):
$ 10,000 5.92%, 5/2/96 . . . . . . . . . . . . . . . . . . . . . . . 9,497
--------
Total U.S. Treasury Bills 9,497
--------
Total Investments 395,606
--------
REPURCHASE AGREEMENTS (45.1%):
85,000 Hong Kong Shanghai Banc Corp., 6.19%,
7/3/95, dated 6/30/95 (Collateralized by
$84,269 various government securities,
0.00%-9.55%, 7/5/95-3/22/05, market
value-$85,865) . . . . . . . . . . . . . . . . . . . . . 85,000
140,040 Lehman Brothers Holdings Inc., 6.20%,
7/3/95, dated 6/30/95 (Collateralized by
$143,653 various government securities,
7/3/95-5/3/96, market value-$142,841) . . . . . . . . . . 140,040
100,000 Prudential Securities, 6.20%,
7/3/95, dated 6/30/95 (Collateralized by
$143,998 various government securities,
0.00%-9.88%, 9/20/95-1/1/29, market
value-$101,314) . . . . . . . . . . . . . . . . . . . . 100,000
--------
Total Repurchase Agreements 325,040
--------
Total (Cost--$720,646)(a) $720,646
--------
--------
</TABLE>
- ----------
Percentages indicated are based on net assets of $720,699.
(a) Cost for federal income tax and financial reporting purposes are the same.
* Variable Rate Securities that have interest rates that change weekly based
on the 3 month treasury bill bond equivalent yield. The final maturity date
is stated, however, the maturity date for valuation purposes is the next
reset date. The rate shown on the Schedule of Portfolio Investments is the
reset rate in effect on 6/30/95.
See notes to financial statements.
8
B-136
<PAGE>
THE ONE GROUP FAMILY OF MUTUAL FUNDS
- --------------------------------------------------------------------------------
STATEMENTS OF ASSETS AND LIABILITIES JUNE 30, 1995
<TABLE>
<CAPTION>
(Amounts in Thousands
except per share amounts)
TREASURY ONLY GOVERNMENT
MONEY MARKET MONEY MARKET
FUND FUND
------------- ------------
<S> <C> <C>
ASSETS:
Investments, at value . . . . . . . . . . . . . . $286,778 $395,606
Repurchase agreements . . . . . . . . . . . . . . 325,040
-------- --------
286,778 720,646
Cash . . . . . . . . . . . . . . . . . . . . . . 2
Interest receivable . . . . . . . . . . . . . . . 3,232 2,505
Receivable from advisor . . . . . . . . . . . . . 3
Prepaid expenses and other assets . . . . . . . . 1 3
Deferred organization costs . . . . . . . . . . . 11 63
-------- --------
TOTAL ASSETS . . . . . . . . . . . . . . . . . . 290,024 723,220
LIABILITIES:
Dividends payable . . . . . . . . . . . . . . . . 1,200 2,218
Accrued expenses and other payables:
Investment advisory fees . . . . . . . . . . . . 19 46
Administration fees . . . . . . . . . . . . . . . 12 29
Other . . . . . . . . . . . . . . . . . . . . . . 96 228
-------- --------
TOTAL LIABILITIES . . . . . . . . . . . . . . . . 1,327 2,521
-------- --------
NET ASSETS:
Capital . . . . . . . . . . . . . . . . . . . . . 288,676 720,773
Accumulated undistributed net realized gains
(losses) from investment transactions . . . . . 21 (74)
-------- --------
NET ASSETS . . . . . . . . . . . . . . . . . . . $288,697 $720,699
-------- --------
-------- --------
Outstanding shares of beneficial interest--
Institutional Shares . . . . . . . . . . . . . . 288,676 720,773
-------- --------
-------- --------
Net asset value--offering and redemption
price per share . . . . . . . . . . . . . . . . $1.00 $1.00
-------- --------
-------- --------
Investments, at amortized cost . . . . . . . . . $286,778 $720,646
-------- --------
-------- --------
</TABLE>
See notes to financial statements.
9
B-137
<PAGE>
THE ONE GROUP FAMILY OF MUTUAL FUNDS
- --------------------------------------------------------------------------------
STATEMENTS OF OPERATIONS FOR THE YEAR ENDED JUNE 30, 1995
<TABLE>
<CAPTION>
(Amounts in Thousands)
TREASURY GOVERNMENT
ONLY MONEY MONEY
MARKET MARKET
FUND FUND
---------- ----------
<S> <C> <C>
INVESTMENT INCOME:
Interest income . . . . . . . . . . . . . . . . . . $13,252 $39,811
EXPENSES:
Investment advisory fees . . . . . . . . . . . . . 198 579
Administration fees . . . . . . . . . . . . . . . . 147 409
Custodian and accounting fees . . . . . . . . . . . 49 142
Legal and audit fees . . . . . . . . . . . . . . . 43 121
Organization costs . . . . . . . . . . . . . . . . 5 27
Trustees' fees and expenses . . . . . . . . . . . . 9 13
Transfer agent fees . . . . . . . . . . . . . . . . 19 19
Registration and filing fees . . . . . . . . . . . 25 292
Printing costs . . . . . . . . . . . . . . . . . . 14 29
Other . . . . . . . . . . . . . . . . . . . . . . . 14 41
------- -------
Total expenses before waivers/reimbursements . . . 523 1,672
Less waivers/reimbursements . . . . . . . . . . . . (17) (125)
------- -------
NET EXPENSES . . . . . . . . . . . . . . . . . . . 506 1,547
------- -------
Net Investment Income . . . . . . . . . . . . . . . 12,746 38,264
------- -------
REALIZED GAINS (LOSSES) ON INVESTMENTS:
Net realized gains (losses) from investment
transactions . . . . . . . . . . . . . . . . . . 29 (66)
------- -------
Net increase in net assets resulting from
operations . . . . . . . . . . . . . . . . . . . . $12,775 $38,198
------- -------
------- -------
</TABLE>
See notes to financial statements.
10
B-138
<PAGE>
THE ONE GROUP FAMILY OF MUTUAL FUNDS
- --------------------------------------------------------------------------------
STATEMENTS OF CHANGES IN NET ASSETS FOR THE YEAR ENDED JUNE 30, 1995
<TABLE>
<CAPTION>
(Amounts in Thousands)
TREASURY ONLY MONEY GOVERNMENT MONEY MARKET
MARKET FUND FUND
---------------------------- ----------------------------
YEAR ENDED YEAR ENDED YEAR ENDED YEAR ENDED
JUNE 30, JUNE 30, JUNE 30, JUNE 30,
1995 1994 1995 1994
----------- ----------- ----------- -----------
<S> <C> <C> <C> <C>
FROM INVESTMENT ACTIVITIES:
OPERATIONS:
Net investment income . . . . . . . . . . . . $ 12,746 $ 5,499 $ 38,264 $ 17,918
Net realized gains (losses) from investment
transactions . . . . . . . . . . . . . . . 29 (6) (66) (8)
----------- ----------- ----------- -----------
Change in net assets resulting from operations . . 12,775 5,493 38,198 17,910
----------- ----------- ----------- -----------
DISTRIBUTIONS TO SHAREHOLDERS FROM:
Net investment income . . . . . . . . . . . . (12,746) (5,499) (38,264) (17,918)
----------- ----------- ----------- -----------
CAPITAL TRANSACTIONS:
Proceeds from shares issued . . . . . . . . . 894,833 939,006 2,818,461 1,934,259
Dividends reinvested . . . . . . . . . . . . 1,574 1,095 12,982 5,040
Cost of shares redeemed . . . . . . . . . . . (825,464) (782,700) (2,802,931) (1,492,029)
----------- ----------- ----------- -----------
Change in net assets from share transactions . . . 70,943 157,401 28,512 447,270
----------- ----------- ----------- -----------
Change in Net Assets . . . . . . . . . . . . . . . 70,972 157,395 28,446 447,262
NET ASSETS:
Beginning of period . . . . . . . . . . . . . 217,725 60,330 692,253 244,991
----------- ----------- ----------- -----------
End of period . . . . . . . . . . . . . . . . $ 288,697 $ 217,725 $ 720,699 $ 692,253
----------- ----------- ----------- -----------
----------- ----------- ----------- -----------
SHARE TRANSACTIONS:
Issued . . . . . . . . . . . . . . . . . . . 894,833 939,006 2,818,461 1,934,259
Reinvested . . . . . . . . . . . . . . . . . 1,574 1,095 12,982 5,040
Redeemed . . . . . . . . . . . . . . . . . . (825,464) (782,700) (2,802,931) (1,492,029)
----------- ----------- ----------- -----------
Change in shares . . . . . . . . . . . . . . . . . 70,943 157,401 28,512 447,270
----------- ----------- ----------- -----------
----------- ----------- ----------- -----------
</TABLE>
See notes to financial statements.
11
B-139
<PAGE>
THE ONE GROUP FAMILY OF MUTUAL FUNDS
- --------------------------------------------------------------------------------
NOTES TO FINANCIAL STATEMENTS JUNE 30, 1995
1. ORGANIZATION:
The One Group (the "Trust") is registered under the Investment Company Act
of 1940, as amended (the "1940 Act"), as a diversified, open-end investment
company established as a Massachusetts business trust. The Trust is
registered to offer five classes of shares: Fiduciary, Class A, Class B,
Institutional, and Service. The Trust currently offers twenty-four funds.
The accompanying financial statements and financial highlights are those of
the Treasury Only Money Market Fund and the Government Money Market Fund
(individually, a "Fund" collectively, the "Funds") only.
2. SIGNIFICANT ACCOUNTING POLICIES:
The following is a summary of significant accounting policies in conformity
with generally accepted accounting principles consistently followed by the
Trust in preparation of its financial statements.
SECURITY VALUATION:
Securities are valued utilizing the amortized cost method permitted in
accordance with Rule 2a-7 under the 1940 Act. Under the amortized cost
method, discount or premium is amortized on a constant basis to the
maturity of the security. In addition, the Funds may not (a) purchase
any instrument with a remaining maturity greater than thirteen months
unless such instrument is subject to a demand feature, or (b) maintain a
dollar-weighted average maturity which exceeds 90 days.
REPURCHASE AGREEMENTS:
The Funds may invest in repurchase agreements with institutions that the
Fund's investment advisor has determined are creditworthy. Each
repurchase agreement is recorded at cost. The Fund requires that the
securities purchased in a repurchase transaction be transferred to the
custodian in a manner sufficient to enable the Fund to obtain those
securities in the event of a counterparty default. The seller, under the
repurchase agreement, is required to maintain the value of the
securities held at not less than the repurchase price, including accrued
interest.
SECURITY TRANSACTIONS AND RELATED INCOME:
Security transactions are accounted for on a trade date basis. Net
realized gains or losses on sales of securities are determined on the
specific identification cost method. Interest income and expenses are
recognized on the accrual basis. Interest income, including any discount
or premium, is accrued as earned using the effective interest method.
EXPENSES:
Expenses directly attributable to a Fund are charged directly to that
Fund, while the expenses which are attributable to more than one Fund of
the Trust are allocated among the respective Funds.
DIVIDENDS AND DISTRIBUTIONS TO SHAREHOLDERS:
Dividends from net investment income are declared daily and paid
monthly. Net income for this purpose consists of interest accrued and
discount earned (including both original issue discount and market
discount) less amortization of any market premium and accrued expenses.
Net realized capital gains, if any, are distributed at least annually.
Net investment income and net capital gain distributions are determined
in accordance with income tax regulations which may differ from
generally accepted accounting principles. These differences are
primarily due to differing treatments for expiring capital loss
carryforwards and deferrals of certain losses.
Continued
12
B-140
<PAGE>
THE ONE GROUP FAMILY OF MUTUAL FUNDS
- --------------------------------------------------------------------------------
NOTES TO FINANCIAL STATEMENTS, CONTINUED JUNE 30, 1995
ORGANIZATION COSTS:
Costs incurred by the Trust in connection with its organization,
including the fees and expenses of registering and qualifying its shares
for distribution have been deferred and are being amortized using the
straight-line method over a period of five years beginning with the
commencement of each Fund's operations. All such costs have been
allocated among the Funds of the Trust pro-rata, based on the relative
net assets of each Fund. In the event that any of the initial shares are
redeemed during such period by any holder thereof, the related Fund will
be reimbursed by such holder for any unamortized organization costs in
the proportion as the number of initial shares being redeemed bears to
the number of initial shares outstanding at the time of redemption.
FEDERAL INCOME TAXES:
Each Fund intends to continue to qualify as a regulated investment
company by complying with the provisions available to certain investment
companies as defined in applicable sections of the Internal Revenue
Code, and to make distributions of net investment income and net
realized capital gains sufficient to relieve it from all, or
substantially all, federal income taxes.
3. SHARES OF BENEFICIAL INTEREST:
The Trust has an unlimited number of shares of beneficial interest, with no
par value which may, without shareholder approval, be divided into an
unlimited number of series of such shares and any series may be classified
or reclassified into one or more classes. Currently, shares of the Trust
are registered to be offered through thirty series and five classes:
Fiduciary, Class A, Class B, Institutional and Service. Shareholders are
entitled to one vote for each full share held and will vote in the
aggregate and not by class or series, except as otherwise expressly
required by law or when the Board of Trustees has determined that the
matter to be voted on affects only the interest of shareholders of a
particular class or series.
4. INVESTMENT ADVISORY AND ADMINISTRATIVE AGREEMENTS:
The Trust and Banc One Investment Advisors Corporation (the "Advisor") are
parties to an investment advisory agreement under which the Advisor is
entitled to receive a fee, computed daily and paid monthly, at an annual
rate of 0.08% of the average daily net assets of each Fund.
The Trust and 440 Financial Group of Worcester ("440 Financial") are
parties to an administrative agreement under which 440 Financial (the
"Administrator") provides services for a fee that is computed daily and
payable monthly, at an annual rate of 0.05% of each Fund's average daily
net assets. Effective April 1, 1995, The Shareholder Services Group, Inc,
d/b/a 440 Financial became the Administrator to the Trust. Also effective
April 1, 1995, the Advisor became the Sub-Administrator pursuant to an
agreement between the Administrator and the Advisor. The Advisor assumed
many of the administrative duties, for which it receives a fee paid by the
Administrator.
Certain officers of the Trust are also officers of the Administrator. Such
officers receive no compensation from the Funds for serving in their
respective roles.
Continued
13
B-141
<PAGE>
THE ONE GROUP FAMILY OF MUTUAL FUNDS
- --------------------------------------------------------------------------------
NOTES TO FINANCIAL STATEMENTS, CONTINUED JUNE 30, 1995
The Advisor and Administrator have voluntarily agreed to waive a portion of
their fees and to reimburse the Funds for certain expenses so that total
expenses of each Fund would not exceed certain annual expense limitations.
For the year ended June 30, 1995, fees in the following amounts were waived
or reimbursed to the Funds:
<TABLE>
<CAPTION>
GOVERNMENT
TREASURY ONLY MONEY
MONEY MARKET
MARKET FUND FUND
------------- ----------
<S> <C> <C>
INVESTMENT ADVISOR FEES:
Waivers/reimbursements ............. $16,794 $101,302
ADMINISTRATION FEES:
Waivers/reimbursements ............. $ 23,414
</TABLE>
5. FEDERAL TAX INFORMATION:
As of June 30, 1995, the Government Money Market Fund had the following
capital loss carryforwards which are available to offset future capital
gains, if any:
<TABLE>
<S> <C>
Expiring in 2002 . . . . . . . . . . . . . . . $ 7,782
Expiring in 2003 . . . . . . . . . . . . . . . $26,184
-------
$33,966
-------
-------
</TABLE>
Under current tax law, capital losses realized after October 31 may be
deferred and treated as occurring on the first day of the fiscal year ended
June 30, 1996. Losses deferred for the Government Money Market Fund
amounted to $39,961 at June 30, 1995.
14
B-142
<PAGE>
THE ONE GROUP FAMILY OF MUTUAL FUNDS
- --------------------------------------------------------------------------------
FINANCIAL HIGHLIGHTS JUNE 30, 1995
<TABLE>
<CAPTION>
TREASURY ONLY MONEY MARKET FUND
---------------------------------------------
APRIL16,
FOR THE YEAR ENDED JUNE 30, 1993 TO
--------------------------- JUNE 30,
1995 1994 1993(A)
-------- -------- ---------
<S> <C> <C> <C>
NET ASSET VALUE, BEGINNING OF PERIOD . . . . . . . . . . . $ 1.000 $ 1.000 $ 1.000
-------- -------- -------
Investment Activities
Net investment income . . . . . . . . . . . . . . . . . . 0.051 0.032 0.006
-------- -------- -------
Distributions
Net investment income . . . . . . . . . . . . . . . . . . (0.051) (0.032) (0.006)
-------- -------- -------
NET ASSET VALUE, END OF PERIOD . . . . . . . . . . . . . . $ 1.000 $ 1.000 $ 1.000
-------- -------- -------
-------- -------- -------
Total Return . . . . . . . . . . . . . . . . . . . . . . . 5.22% 3.23% 2.96%(b)
RATIOS/SUPPLEMENTARY DATA:
Net Assets at end of period (000) . . . . . . . . . . . . $288,697 $217,725 $60,330
Ratio of expenses to average net assets . . . . . . . . . 0.20% 0.15% 0.07%(b)
Ratio of net investment income to average net assets . . 5.14% 3.23% 2.95%(b)
Ratio of expenses to average net assets* . . . . . . . . 0.21% 0.22% 0.33%(b)
Ratio of net investment income to average net assets* . . 5.13% 3.16% 2.69%(b)
</TABLE>
- ---------
* During the period, certain fees were voluntarily reduced. If such voluntary
fee reductions had not occurred, the ratios would have been as indicated.
(a) Period from commencement of operations.
(b) Annualized.
See notes to financial statements.
15
B-143
<PAGE>
THE ONE GROUP FAMILY OF MUTUAL FUNDS
- --------------------------------------------------------------------------------
FINANCIAL HIGHLIGHTS JUNE 30, 1995
<TABLE>
<CAPTION>
GOVERNMENT MONEY MARKET FUND
----------------------------------------------
JUNE 14,
FOR THE YEAR ENDED JUNE 30, 1993 TO
--------------------------- JUNE 30,
1995 1994 1993(a)
-------- -------- --------
<S> <C> <C> <C>
NET ASSET VALUE, BEGINNING OF PERIOD . . . . . . . . . . . $ 1.000 $ 1.000 $ 1.000
-------- -------- --------
Investment Activities
Net investment income . . . . . . . . . . . . . . . . . . 0.053 0.033 0.001
-------- -------- --------
Distributions
Net investment income . . . . . . . . . . . . . . . . . . (0.053) (0.033) (0.001)
-------- -------- --------
NET ASSET VALUE, END OF PERIOD . . . . . . . . . . . . . . $ 1.000 $ 1.000 $ 1.000
-------- -------- --------
-------- -------- --------
Total Return . . . . . . . . . . . . . . . . . . . . . . . 5.41% 3.40% 3.28%(b)
RATIOS/SUPPLEMENTARY DATA:
Net Assets at end of period (000) . . . . . . . . . . . . $720,699 $692,253 $244,991
Ratio of expenses to average net assets . . . . . . . . . 0.21% 0.11% 0.07%(b)
Ratio of net investment income to average net assets . . 5.28% 3.41% 3.13%(b)
Ratio of expenses to average net assets* . . . . . . . . 0.22% 0.20% 0.33%(b)
Ratio of net investment income to average net assets* . . 5.27% 3.32% 2.87%(b)
</TABLE>
- ----------
* During the period, certain fees were voluntarily reduced. If such voluntary
fee reductions had not occurred, the ratios would have been as indicated.
(a) Period from commencement of operations.
(b) Annualized.
See notes to financial statements.
16
B-144
<PAGE>
REPORT OF INDEPENDENT ACCOUNTANTS
- --------------------------------------------------------------------------------
THE ONE GROUP FAMILY OF MUTUAL FUNDS JUNE 30, 1995
To the Shareholders and Board of Trustees of
The One Group:
We have audited the accompanying statements of assets and liabilities of the
Treasury Only Money Market Fund and the Government Money Market Fund (two series
of The One Group), including the schedules of portfolio investments, as of June
30, 1995, and the related statements of operations for the year then ended, the
statements of changes in net assets for the two years in the period then ended,
and financial highlights for each of the periods indicated herein. These
financial statements and financial highlights are the responsibility of The One
Group's management. Our responsibility is to express an opinion on these
financial statements and financial highlights based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements and financial
highlights are free of material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in the financial
statements. Our procedures included confirmation of securities owned as of June
30, 1995 by correspondence with the custodian. An audit also includes assessing
the accounting principles used and significant estimates made by management, as
well as evaluating the overall financial statement presentation. We believe that
our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements and financial highlights referred to
above present fairly, in all material respects, the financial position of the
Treasury Only Money Market Fund and the Government Money Market Fund of The One
Group as of June 30, 1995, the results of their operations for the year then
ended, the changes in their net assets for the two years in the period then
ended, and the financial highlights for each of the periods indicated herein, in
conformity with generally accepted accounting principles.
Boston, Massachusetts Coopers & Lybrand L.L.P.
August 18, 1995
17
B-145
<PAGE>
THE ONE GROUP FAMILY OF MUTUAL FUNDS
Asset Allocation Fund
- --------------------------------------------------------------------------------
SCHEDULE OF PORTFOLIO INVESTMENTS JUNE 30, 1995
(Amounts in Thousands, except Shares or Principal Amount)
<TABLE>
<CAPTION>
SHARES OR
PRINCIPAL SECURITY MARKET
AMOUNT DESCRIPTION VALUE
- --------- ---------------------------------------------------- ------
<S> <C> <C>
COMMON STOCKS (39.3%):
Air Transport (0.4%):
970 AMR Corp. (b) ...................................... $ 72
1,710 Federal Express Corp. (b) .......................... 104
-----
176
-----
Aircraft (1.0%):
3,000 Boeing Co. ......................................... 188
2,000 United Technologies Corp. .......................... 156
1,980 Lockheed Martin Corp. .............................. 125
-----
469
-----
Aluminum (0.4%):
2,000 Alumax, Inc. (b) ................................... 62
1,400 Aluminum Co. of America ............................ 70
-----
132
-----
Apparel (0.6%):
1,960 Nike, Inc., Class B ................................ 165
2,110 V F Corp. .......................................... 113
-----
278
-----
Banks (1.8%):
4,320 BankAmerica Corp. .................................. 227
1,500 Barnett Banks, Inc. ................................ 77
1,500 Citicorp ........................................... 87
2,000 Comerica, Inc. ..................................... 64
1,790 Nationsbank Corp. .................................. 96
3,910 NBD Bancorp, Inc. .................................. 125
1,000 U.S. Bancorp ....................................... 24
650 Wells Fargo & Co. .................................. 117
-----
817
-----
Beverages (1.2%):
1,300 Anheuser Busch Cos., Inc. .......................... 74
4,230 Coca Cola Co. ...................................... 270
4,190 PepsiCo., Inc. ..................................... 191
-----
535
-----
Broadcasting (0.2%):
930 Capital Cities ABC, Inc. ........................... 98
-----
Business Equipment & Services (0.8%):
3,510 Browning Ferris Industries, Inc. ................... 127
2,500 Olsten Corp. ....................................... 82
3,700 Service Corp., International ....................... 117
1,700 WMX Technologies, Inc. ............................. 48
-----
374
-----
Capital Equipment (0.5%):
1,000 General Signal Corp. ............................... 40
5,000 Giddings & Lewis, Inc. ............................. 89
2,820 Harnischfeger Industries, Inc. ..................... 98
-----
227
-----
Chemicals--Inorganic & Petroleum (1.0%):
2,410 Dow Chemical Co. ................................... 173
3,170 DuPont (EI) de Nemours & Co. ....................... 218
1,830 Schulman A., Inc. .................................. 53
-----
444
-----
Chemicals--Specialty (0.1%):
4,000 Crompton & Knowles Corp. ........................... 57
-----
Computer--Main/Mini (1.8%):
2,600 Hewlett Packard Co. ................................ 194
3,850 International Business Machines Corp. .............. 370
4,300 Silicon Graphics, Inc. ............................. 171
800 Xerox Corp. ........................................ 94
-----
829
-----
Computer--Micro (0.6%):
3,490 Apple Computer, Inc. ............................... 162
2,000 Compaq Computer Corp. .............................. 91
-----
253
-----
Computers--Peripheral (0.8%):
1,500 Autodesk, Inc. ..................................... 65
2,850 Microsoft Corp. (b) ................................ 258
890 3 Com Corp. (b) .................................... 60
-----
383
-----
Construction Materials (0.2%):
2,200 PPG Industries, Inc. ............................... 95
-----
Containers (0.2%):
3,000 Ball Corp. ......................................... 105
-----
Cosmetic/Toiletry (0.1%):
3,000 Maybelline, Inc. ................................... 62
-----
Defense (0.2%):
940 Raytheon Co. ....................................... 73
-----
Electrical Equipment (1.9%):
8,480 General Electric Co. ............................... 478
1,400 Grainger W.W., Inc. ................................ 82
1,000 Johnson Controls, Inc. ............................. 57
2,200 Tyco Labs, Inc. .................................... 119
4,000 Westinghouse Electric Corp. ........................ 58
700 Dover Corp. ........................................ 51
-----
845
-----
Electronic Components (1.8%):
2,440 AMP, Inc. .......................................... 103
6,300 Intel Corp. ........................................ 399
3,980 Motorola, Inc. ..................................... 267
450 Texas Instruments, Inc. ............................ 60
-----
829
-----
</TABLE>
Continued
23
B-146
<PAGE>
THE ONE GROUP FAMILY OF MUTUAL FUNDS
Asset Allocation Fund
- --------------------------------------------------------------------------------
SCHEDULE OF PORTFOLIO INVESTMENTS, CONTINUED JUNE 30, 1995
(Amounts in Thousands, except Shares or Principal Amount)
<TABLE>
<CAPTION>
SHARES OR
PRINCIPAL SECURITY MARKET
AMOUNT DESCRIPTION VALUE
- --------- ---------------------------------------------------- ------
<S> <C> <C>
COMMON STOCKS, CONTINUED:
Farm Machinery (0.1%):
600 Deere & Co. ........................................ $ 51
------
Food & Related (0.5%):
3,730 Archer Daniels Midland Co. ......................... 69
1,000 CPC International, Inc. ............................ 62
3,170 Sara Lee Corp. ..................................... 90
------
221
------
Forest/Paper Products (1.3%):
1,100 Consolidated Papers, Inc. .......................... 63
1,970 International Paper Co. ............................ 169
1,500 Kimberly Clark Corp. ............................... 90
1,800 Mead Corp. ......................................... 107
2,650 Willamette Industries, Inc. ........................ 147
------
576
------
Furniture/Furnishings (0.2%):
4,430 Newell Co. ......................................... 109
------
Healthcare--Drugs (1.9%):
2,700 Abbott Laboratories ................................ 109
4,060 Baxter International, Inc. ......................... 148
1,220 Forest Laboratories, Class A (b) ................... 54
5,650 Merck & Co., Inc. .................................. 277
1,900 Pfizer, Inc. ....................................... 176
2,000 Schering Plough .................................... 88
------
852
------
Healthcare--General (1.6%):
1,500 American Home Products Corp. ....................... 116
5,100 Biomet, Inc. (b) ................................... 79
3,180 Bristol-Myers Squibb Co. ........................... 217
4,060 Johnson & Johnson .................................. 275
------
687
------
Hospital Supply & Management (0.8%):
4,100 Columbia/HCA Healthcare Corp. ...................... 177
3,250 Health Management Assoc., Inc., Class A (b) ........ 95
560 Medtronic, Inc. .................................... 43
900 PacifiCare Health Systems-A (b) .................... 46
------
361
------
Household--General Products (0.7%):
2,360 American Greetings Corp., Class A .................. 69
3,300 Procter & Gamble Co. ............................... 237
------
306
------
Insurance--Life (0.1%):
1,480 Providan Corp. ..................................... 54
------
Insurance--Property/Casual (0.9%):
1,680 American International Group, Inc. ................. 192
1,400 Cincinnati Financial ............................... 78
700 MBIA, Inc. ......................................... 46
2,330 St. Paul Cos., Inc. ................................ 115
------
431
------
Leisure Time Industries (0.5%):
3,130 Walt Disney Co. .................................... 174
1,000 Hasbro, Inc. ....................................... 32
------
206
------
Mining (0.2%):
3,590 Cyprus Amax Minerals ............................... 102
------
Motor Vehicle Parts (0.1%):
1,480 Dana Corp. ......................................... 42
------
Motor Vehicles (0.6%):
4,000 Ford Motor Co. ..................................... 119
2,880 General Motors Corp. ............................... 135
------
254
------
Multiple Industry (1.0%):
900 ALCO Standard Corp. ................................ 72
2,420 Allied Signal, Inc. ................................ 108
3,790 Corning, Inc. ...................................... 124
1,340 ITT Corp. .......................................... 157
------
461
------
Petroleum--Domestic (0.8%):
1,400 Amoco Corp. ........................................ 93
1,610 Atlantic Richfield Co. ............................. 177
2,400 Tenneco, Inc. ...................................... 110
------
380
------
Petroleum--International (2.8%):
1,540 Chevron Corp. ...................................... 72
6,790 Exxon Corp. ........................................ 479
2,400 Mobil Corp. ........................................ 230
3,400 Royal Dutch Petroleum .............................. 414
1,310 Texaco, Inc. ....................................... 86
------
1,281
------
Petroleum--Services (0.3%):
3,190 Halliburton Co. .................................... 114
------
Publishing (0.3%):
1,920 Tribune Co. ........................................ 118
------
Railroad (0.1%):
1,000 Norfolk Southern Corp. ............................. 67
------
Restaurants (0.9%):
4,260 Bob Evans Farms, Inc. .............................. 87
2,000 Lone Star Restaurants .............................. 61
4,100 McDonald's Corp. ................................... 160
</TABLE>
Continued
24
B-147
<PAGE>
THE ONE GROUP FAMILY OF MUTUAL FUNDS
Asset Allocation Fund
- --------------------------------------------------------------------------------
SCHEDULE OF PORTFOLIO INVESTMENTS, CONTINUED JUNE 30, 1995
(Amounts in Thousands, except Shares or Principal Amount)
<TABLE>
<CAPTION>
SHARES OR
PRINCIPAL SECURITY MARKET
AMOUNT DESCRIPTION VALUE
- --------- ---------------------------------------------------- -------
<S> <C> <C>
COMMON STOCKS, CONTINUED:
5,000 Wendy's International, Inc. ........................ $ 89
-------
397
-------
Retail--Food Stores (0.1%):
2,000 American Stores Co. ................................ 56
-------
Retail--General Merchandise (1.0%):
3,500 Sears Roebuck & Co. ................................ 210
9,340 Wal-Mart Stores, Inc. .............................. 250
-------
460
-------
Retail--Specialty (0.6%):
3,550 Circuit City Stores, Inc. .......................... 112
1,900 Home Depot, Inc. ................................... 77
3,190 Smith Food & Drug .................................. 63
-------
252
-------
Securities & Commercial Brokers (0.6%):
2,570 American Express Co. ............................... 90
900 Federal Home Loan Mortgage Corp. ................... 62
1,320 Federal National Mortgage Assoc .................... 125
-------
277
-------
Tires/Rubber Products (0.2%):
2,000 Goodyear Tire & Rubber Co. ......................... 83
-------
Tobacco (1.5%):
6,430 Philip Morris Cos., Inc. ........................... 478
3,450 RJR Nabisco Holdings Corp. ......................... 96
4,200 UST, Inc. .......................................... 125
-------
699
-------
Utilites--Electric (1.1%):
4,760 Central & South West Corp. ......................... 125
4,200 Consolidated Edison Co., Inc. ...................... 124
900 Duke Power Co. ..................................... 37
2,300 Northern States Power Co. .......................... 106
3,600 Texas Utilities Co. ................................ 124
-------
516
-------
Utilities--Gas/Pipeline (0.3%):
4,510 Enron Corp. ........................................ 158
-------
Utilities--Telephone (2.6%):
6,790 AT&T ............................................... 361
2,760 Ameritech Corp. .................................... 121
2,300 Bell Atlantic Corp. ................................ 129
1,800 Bellsouth Corp. .................................... 114
4,310 GTE Corp. .......................................... 147
1,320 Nynex Corp. ........................................ 53
2,890 SBC Communications, Inc. ........................... 138
4,120 Sprint Corp. ....................................... 139
-------
1,202
-------
Total Common Stocks ............................................ 17,854
-------
CORPORATE BONDS (12.7%):
500,000 AT&T Corp., 6.00%, 8/1/00 .......................... 486
500,000 AT&T Corp., 6.75%, 4/1/04 .......................... 513
500,000 Campbell Soup, 5.63%, 9/15/03 ...................... 471
500,000 Ford Motor Credit Corp., 8.38%, 1/15/00 ............ 534
520,204 Honda Auto 94-A-A, 4.80%, 8/15/99 .................. 514
500,000 J C Penney & Co., 5.38%, 11/15/98 .................. 482
500,000 John Deere Capital Corp., 4.63%, 9/2/96 ............ 492
250,000 Lehman Brothers Holdings, 6.38%, 6/1/98 ............ 246
500,000 Lehman Brothers, Inc., 9.88%, 10/15/00 ............. 561
435,070 The Money Store, 6.80%, 1/15/13 .................... 435
500,000 Union Pacific, 7.60%, 5/1/05 ....................... 527
500,000 Virginia Electric & Power, 6.63%, 4/1/03 ........... 501
-------
Total Corporate Bonds .......................................... 5,762
-------
MUNICIPAL BONDS (1.8%):
Ohio
800,000 Advanta Mortgage Loan Trust, 7.60%, 7/25/10 ........ 809
-------
Total Municipal Bonds .......................................... 809
-------
U.S. GOVERNMENT AGENCIES (13.4%):
Federal Home Loan Mortgage Corp.:
312,395 10.00%, 9/1/03 ..................................... 329
356,758 8.00%, 3/1/08 ...................................... 367
339,672 10.50%, 10/1/20 .................................... 369
Federal National Mortgage Assoc.:
1,000,000 4.40%, 9/8/95 ...................................... 968
1,000,000 5.53%, 2/10/99 ..................................... 977
534,542 8.00%, 6/1/24 ...................................... 545
969,189 8.00%, 6/1/24 ...................................... 988
Government National Mortgage Assoc.:
1,493,871 8.00%, 11/15/24 .................................... 1,531
-------
Total U.S. Government Agencies ................................. 6,074
-------
U.S. TREASURY BILLS (0.5%):
150,000 7/13/95 ........................................... 150
40,000 8/24/95 ........................................... 39
20,000 9/7/95 ........................................... 20
35,000 9/21/95 ........................................... 35
-------
Total U.S. Treasury Bills ...................................... 244
-------
U.S. TREASURY BONDS (3.8%):
1,500,000 8.13%, 8/15/19 ..................................... 1,747
-------
Total U.S. Treasury Bonds ...................................... 1,747
-------
U.S. TREASURY NOTES (11.7%):
500,000 5.13%, 3/31/98 ..................................... 490
1,500,000 7.00%, 4/15/99 ..................................... 1,551
</TABLE>
Continued
25
B-148
<PAGE>
THE ONE GROUP FAMILY OF MUTUAL FUNDS
Asset Allocation Fund
- --------------------------------------------------------------------------------
SCHEDULE OF PORTFOLIO INVESTMENTS, CONTINUED JUNE 30, 1995
(Amounts in Thousands, except Shares or Principal Amount)
<TABLE>
<CAPTION>
SHARES OR
PRINCIPAL SECURITY MARKET
AMOUNT DESCRIPTION VALUE
- --------- ---------------------------------------------------- -------
<S> <C> <C>
U.S. TREASURY NOTES, CONTINUED:
$1,500,000 6.38%, 1/15/00 ..................................... $ 1,521
1,750,000 6.25%, 2/15/03 ..................................... 1,755
-------
Total U.S. Treasury Notes ...................................... 5,317
-------
Total Investments, at value .................................... 37,807
-------
REPURCHASE AGREEMENT (15.9%):
7,207,000 Lehman Brothers, 6.15%, dated 6/30/95,
due 7/3/95 (Collateralized by
$7,105,000 U.S. Treasury Notes, 6.75%,
2/28/97, market value--$7,360) .................... 7,207
-------
Total Repurchase Agreement ..................................... 7,207
-------
Total (Cost--$42,377)(a) ....................................... $45,014
-------
-------
</TABLE>
- ------------
Percentages indicated are based on net assets of $45,422.
(a) Represents cost for financial reporting purposes and differs from cost
basis for federal income tax purposes by the amount of losses recognized
for financial reporting in excess of federal income tax reporting of
approximately $39. Cost for federal income tax purposes differed from value
by net unrealized appreciation of securities as follows:
<TABLE>
<S> <C>
Unrealized appreciation ................................... $ 2,866
Unrealized depreciation ................................... (268)
-------
Net unrealized appreciation ............................... $ 2,598
-------
-------
</TABLE>
(b) Represents non-income producing security.
At June 30, 1995, the Portfolio's open futures contracts were as follows:
<TABLE>
<CAPTION>
CURRENT
OPENING MARKET
# OF POSITIONS VALUE
CONTRACTS CONTRACT TYPE (000) (000)
- --------- ------------------------------------------ --------- ------
<S> <C> <C> <C>
22 S & P 500 September ...................... $5,905 $6,019
</TABLE>
See notes to financial statements.
26
B-149
<PAGE>
THE ONE GROUP FAMILY OF MUTUAL FUNDS
Income Equity Fund
- --------------------------------------------------------------------------------
SCHEDULE OF PORTFOLIO INVESTMENTS JUNE 30, 1995
(Amounts in Thousands, except Shares or Principal Amount)
<TABLE>
<CAPTION>
SHARES OR
PRINCIPAL SECURITY MARKET
AMOUNT DESCRIPTION VALUE
- --------- ---------------------------------------------------- --------
<S> <C> <C>
COMMON STOCKS (89.8%):
Aircraft (2.3%):
70,000 Boeing Co. ......................................... $ 4,384
--------
Banks (4.1%):
76,754 BankAmerica Corp. 4,039
53,000 J.P. Morgan & Co., Inc. ............................ 3,717
--------
7,756
--------
Beverages (2.2%):
65,000 Coca Cola Co. ...................................... 4,144
--------
Building & Construction (0.8%):
30,000 Corning Delaware ................................... 1,534
--------
Business Equipment & Services (5.3%):
55,000 Browning Ferris Industries, Inc. ................... 1,987
90,000 Dun & Bradstreet Corp. ............................. 4,725
115,000 National Service Industries, Inc. .................. 3,320
--------
10,032
--------
Chemicals--Petroleum & Inorganic (6.3%):
65,000 ARCO Chemical Co. .................................. 2,949
68,000 Dow Chemical Co. ................................... 4,887
65,000 Grace W. R. & Co. .................................. 3,989
--------
11,825
--------
Chemicals--Specialty (2.4%):
125,000 Nalco Chemical Co. ................................. 4,547
--------
Computers--Main/Mini (3.3%):
25,000 Salomon, Inc. ...................................... 2,400
32,000 Xerox Corp. ........................................ 3,752
--------
6,152
--------
Cosmetics/Toiletry (2.1%):
80,000 International Flavors & Fragrances, Inc. ........... 3,980
--------
Food & Related (3.5%):
90,000 Campbell Soup Co. .................................. 4,410
65,000 ConAgra, Inc. ...................................... 2,267
--------
6,677
--------
Furniture/Furnishings (0.7%):
50,000 Masco Corp. ........................................ 1,350
--------
Health Care--Drugs (2.6%):
136,000 Baxter International, Inc. ......................... 4,947
--------
Health Care--General (7.9%):
60,000 American Home Products ............................. 4,642
73,000 Bristol-Myers Squibb Co. ........................... 4,973
60,000 Warner - Lambert Co. ............................... 5,183
--------
14,798
--------
Household--General Products (1.4%):
125,000 Jostens ............................................ $ 2,656
--------
Household--Major Appliances (1.8%):
100,000 Briggs & Stratton Corp. ............................ 3,450
--------
Insurance--Life (2.5%):
80,000 Transamerica Corp. ................................. 4,660
--------
Insurance--Property/Casualty (2.8%):
120,000 Lincoln National Corp. ............................. 5,250
--------
Multiple Industry (1.4%):
80,000 Corning, Inc. ...................................... 2,620
--------
Petroleum--Domestic (4.8%):
70,000 Amoco Corp. ........................................ 4,664
40,000 Atlantic Richfield Co. ............................. 4,390
--------
9,054
--------
Petroleum--International (7.2%):
70,000 Exxon Corp. ........................................ 4,944
45,000 Mobil Corp. ........................................ 4,320
35,000 Royal Dutch Petroleum .............................. 4,266
--------
13,530
--------
Petroleum Services (1.6%):
85,000 Halliburton Co. .................................... 3,039
--------
Photography Equipment (2.4%):
75,000 Eastman Kodak Co. .................................. 4,547
--------
Publishing (2.6%):
65,000 McGraw-Hill Cos., Inc. ............................. 4,932
--------
Retail--General Merchandise (2.9%):
90,000 Sears Roebuck & Co. ................................ 5,389
--------
Securities & Commercial Broker (2.3%):
125,000 American Express Co. ............................... 4,391
--------
Tobacco (2.9%):
73,000 Philip Morris Cos., Inc. ........................... 5,429
--------
Utilities--Electric (4.6%):
133,000 Central & South West Corp. ......................... 3,491
60,000 Duke Power Co. ..................................... 2,490
90,000 WPS Resources ...................................... 2,632
--------
8,613
--------
Utilities--Telephone (5.1%):
90,000 AT&T ............................................... 4,781
100,000 SBC Communications, Inc. ........................... 4,763
--------
9,544
--------
Total Common Stocks ............................................ 169,230
--------
</TABLE>
Continued
27
B-150
<PAGE>
THE ONE GROUP FAMILY OF MUTUAL FUNDS
Income Equity Fund
- --------------------------------------------------------------------------------
SCHEDULE OF PORTFOLIO INVESTMENTS, CONTINUED JUNE 30, 1995
(Amounts in Thousands, except Shares or Principal Amount)
<TABLE>
<CAPTION>
SHARES OR
PRINCIPAL SECURITY MARKET
AMOUNT DESCRIPTION VALUE
- --------- ---------------------------------------------------- --------
<S> <C> <C>
PREFERRED STOCK (CONVERTIBLE) (6.7%):
80,000 ConAgra, Inc., Class E ............................. $ 2,830
70,000 General Motors Corp. ............................... 4,410
80,000 Sonoco Products .................................... 4,440
70,000 Westinghouse Electric .............................. 1,024
--------
Total Preferred Stock .......................................... 12,704
--------
CORPORATE BONDS (2.5%):
$2,500,000 Browning Ferris Industries, Inc., 6.25%,
8/15/12 .......................................... 2,513
2,500,000 Masco Corp., 5.25%, 2/15/12 ........................ 2,187
--------
Total Corporate Bonds .............................. 4,700
--------
Total Investments, at value ........................ 186,634
--------
REPURCHASE AGREEMENTS (0.8%):
1,416,000 Lehman Brothers, 6.15%, dated 6/30/95,
due 9/3/95 (Collateralized by
$1,400,000 U.S. Treasury Notes,
6.75%, 2/28/97, market value--$1,450) ............ 1,416
--------
Total Repurchase Agreements .................................... 1,416
--------
Total (Cost--$147,891)(a) ...................................... $188,050
--------
--------
</TABLE>
- ---------------
Percentages indicated are based on net assets of $188,180.
(a) Represents cost for financial reporting purposes and differs from cost
basis for federal income tax purposes by the amount of losses recognized
for financial reporting in excess of federal income tax reporting of
approximately $7. Cost for federal income tax purposes differs from value
by net unrealized appreciation of securities as follows:
<TABLE>
<S> <C>
Unrealized appreciation ..................... $41,700
Unrealized depreciation ..................... (1,548)
-------
Net unrealized appreciation ................. $40,152
-------
-------
</TABLE>
See notes to financial statements.
28
B-151
<PAGE>
THE ONE GROUP FAMILY OF MUTUAL FUNDS
Equity Index Fund
- --------------------------------------------------------------------------------
SCHEDULE OF PORTFOLIO INVESTMENTS JUNE 30, 1995
(Amounts in Thousands, except Shares or Principal Amount)
<TABLE>
<CAPTION>
SHARES OR
PRINCIPAL SECURITY MARKET
AMOUNT DESCRIPTION VALUE
- --------- ---------------------------------------------------- --------
<S> <C> <C>
COMMON STOCKS (94.9%):
Aircraft (1.3%):
19,349 Boeing Co. ......................................... $ 1,212
11,398 Lockheed Martin Corp. .............................. 719
6,729 McDonnell Douglas Corp. ............................ 517
2,728 Northrop Grumman Corp. ............................. 142
7,128 United Technologies Corp. .......................... 557
-------
3,147
-------
Air Transport (0.4%):
4,300 AMR Corp.(b) ....................................... 321
2,928 Delta Air Lines, Inc. .............................. 216
3,128 Federal Express Corp.(b) ........................... 190
8,200 Southwest Airlines ................................. 196
2,743 U.S. Air Group(b) .................................. 32
-------
955
-------
Aluminum (0.4%):
12,742 Alcan Aluminum Ltd. ................................ 385
10,072 Aluminum Co. of America ............................ 505
3,414 Reynolds Metals Co. ................................ 177
-------
1,067
-------
Apparel (0.4%):
971 Brown Group, Inc. .................................. 22
4,300 Fruit of the Loom(b) ............................... 91
4,586 Liz Claiborne, Inc. ................................ 97
2,850 Nike, Inc., Class B ................................ 239
4,771 Reebok International, Ltd. ......................... 162
2,357 Russell Corp. ...................................... 68
2,842 Stride Rite Corp. .................................. 30
3,614 V.F. Corp. ......................................... 194
-------
903
-------
Banks (5.6%):
22,812 Banc One Corp. ..................................... 736
6,071 Bank of Boston Corp. ............................... 228
10,600 Bank of New York Co., Inc. ......................... 428
21,424 BankAmerica Corp. .................................. 1,127
4,686 Bankers Trust New York Corp. ....................... 291
5,514 Barnett Banks, Inc. ................................ 283
6,986 Boatmens Bancshares, Inc. .......................... 246
10,428 Chase Manhattan Corp. .............................. 490
13,884 Chemical Banking Corp. ............................. 656
22,542 Citicorp ........................................... 1,305
8,156 Corestates Financial Corp. ......................... 284
4,914 First Chicago Corp. ................................ 294
4,714 First Fidelity Bancorp ............................. 278
4,514 First Interstate Bancorp ........................... 362
9,757 First Union Corp. .................................. 442
7,843 Fleet Financial Group, Inc. ........................ 291
10,843 J.P. Morgan & Co., Inc. ............................ 760
13,800 Keycorp ............................................ 433
8,350 MBNA Corp. ......................................... 282
8,092 Mellon Bank Corp. .................................. 337
8,500 National City Corp. ................................ 250
15,577 Nationsbank Corp. .................................. 835
9,164 NBD Bancorp, Inc. .................................. 293
18,356 Norwest Corp. ...................................... 528
13,242 PNC Financial Corp. ................................ 349
7,285 Shawmut National Corp. ............................. 232
6,628 Suntrust Banks, Inc. ............................... 386
5,621 U.S. Bancorp ....................................... 135
9,800 Wachovia Corp. ..................................... 350
2,778 Wells Fargo & Co. .................................. 501
-------
13,412
-------
Beverages (3.5%):
14,614 Anheuser Busch Cos., Inc. .......................... 831
2,392 Brown-Forman Corp., Class B ........................ 80
72,140 Coca Cola Co. ...................................... 4,599
2,243 Coors Adolph Co., Class B .......................... 37
44,647 PepsiCo., Inc. ..................................... 2,037
21,284 Seagram Co., Ltd. .................................. 737
-------
8,321
-------
Broadcasting (1.2%):
8,890 Capital Cities ABC, Inc. ........................... 932
3,450 CBS, Inc. .......................................... 231
11,150 Comcast Corp. Special .............................. 207
32,814 Tele Communications, Inc.(b) ....................... 769
16,407 Viacom, Class B(b) ................................. 761
-------
2,900
-------
Business Equipment & Services (1.9%):
5,956 Block, H & R, Inc. ................................. 245
12,085 Browning Ferris Industries, Inc. ................... 437
2,457 Ceridian Corp.(b) .................................. 91
4,686 Deluxe Corp. ....................................... 155
9,072 Donnelley, R.R. & Sons, Co. ........................ 327
9,691 Dun & Bradstreet. Corp. ............................ 509
11,100 First Data Corp. ................................... 631
1,828 Harland, John H. Co. ............................... 42
4,300 Interpublic Group of Cos., Inc. .................... 161
13,400 Laidlaw, Inc., Class B ............................. 129
5,671 Moore Corp., Ltd. .................................. 125
2,728 National Service Industries, Inc. .................. 79
2,443 Ogden Corp. ........................................ 53
9,072 Pitney-Bowes, Inc. ................................. 348
4,400 Ryder Systems, Inc. ................................ 105
3,271 Safety Kleen Corp. ................................. 53
5,464 Service Corp. International ........................ 173
27,428 WMX Technologies, Inc. ............................. 778
-------
4,441
-------
</TABLE>
Continued
29
B-152
<PAGE>
THE ONE GROUP FAMILY OF MUTUAL FUNDS
Equity Index Fund
- --------------------------------------------------------------------------------
SCHEDULE OF PORTFOLIO INVESTMENTS JUNE 30, 1995
(Amounts in Thousands, except Shares or Principal Amount)
<TABLE>
<CAPTION>
SHARES OR
PRINCIPAL SECURITY MARKET
AMOUNT DESCRIPTION VALUE
- --------- ---------------------------------------------------- --------
<S> <C> <C>
COMMON STOCKS, CONTINUED:
Capital Equipment (1.1%):
11,614 Caterpillar, Inc. .................................. $ 746
1,957 Cincinnati Milacron, Inc. .......................... 53
2,372 Cummins Engine, Inc. ............................... 103
4,686 Fluor Corp. ........................................ 244
2,057 Foster Wheeler Corp. ............................... 73
2,642 General Signal Corp. ............................... 105
1,984 Giddings & Lewis, Inc. ............................. 35
2,428 Harnischfeger Industries, Inc. ..................... 84
6,456 Illinois Tool Works, Inc. .......................... 355
5,942 Ingersoll Rand Co. ................................. 227
2,245 PACCAR, Inc. ....................................... 105
4,129 Parker-Hannifin Corp. .............................. 150
2,443 Snap-On, Inc. ...................................... 95
1,871 Timken Co. ......................................... 86
1,657 TRINOVA Corp. ...................................... 58
1,186 Zurn Industries, Inc. .............................. 24
------
2,543
------
Chemicals--Petroleum & Inorganic (2.1%):
15,571 Dow Chemical Co. ................................... 1,119
30,870 Dupont (E.I.) de Nemours & Co. ..................... 2,122
828 First Mississippi Corp. ............................ 28
1,471 Goodrich B.F. Co. .................................. 79
5,286 Grace W.R. & Co. ................................... 324
6,384 Hercules, Inc. ..................................... 311
6,528 Monsanto Co. ....................................... 588
3,896 Rohm & Haas Co. .................................... 214
7,828 Union Carbide Corp. ................................ 261
------
5,046
------
Chemical--Specialty (0.9%):
6,556 Air Products & Chemicals, Inc. ..................... 366
3,214 Avery Dennison Corp. ............................... 129
4,469 Eastman Chemical Co. ............................... 277
3,542 Ecolab, Inc. ....................................... 87
5,438 Engelhard Corp. .................................... 233
4,000 Great Lakes Chemical Corp. ......................... 241
8,284 Morton International, Inc. ......................... 242
3,900 Nalco Chemical Co. ................................. 142
6,608 Pall Corp. ......................................... 147
7,628 Praxair, Inc. ...................................... 191
2,600 Sigma-Aldrich ...................................... 128
------
2,183
------
Coal (0.0%):
2,343 Pittston Co. ....................................... 56
------
Communications Equipment (0.8%):
28,042 Airtouch Communications(b) ......................... 799
2,181 Andrew Corp.(b) .................................... 126
6,328 DSC Communications Corp.(b) ........................ 294
2,257 Harris Cos., Delaware .............................. 117
1,086 M.A. Com, Inc.(b) .................................. 13
14,357 Northern Telecom, Ltd. ............................. 524
4,270 Scientific-Atlanta, Inc. ........................... 94
------
1,967
------
Computer--Main/Mini (3.1%):
6,543 Amdahl Corp.(b) .................................... 73
1,471 Cray Research Inc.(b) .............................. 36
1,571 Data General Corp.(b) .............................. 15
8,377 Digital Equipment Corp.(b) ......................... 341
29,114 Hewlett Packard Co. ................................ 2,169
7,300 Honeywell, Inc. .................................... 315
33,156 International Business Machines Corp. .............. 3,183
9,100 Silicon Graphics, Inc.(b) .......................... 363
6,557 Tandem Computers, Inc.(b) .......................... 106
9,414 Unisys Corp.(b) .................................... 102
5,971 Xerox Corp. ........................................ 700
------
7,403
------
Computers--Micro (0.5%):
14,958 Compaq Computer Corp.(b) ........................... 679
6,743 Apple Computer, Inc. ............................... 313
5,300 Sun Microsystems, Inc.(b) .......................... 257
------
1,249
------
Computers--Peripheral (2.5%):
2,642 Autodesk, Inc. ..................................... 114
15,100 Cisco Systems, Inc.(b) ............................. 763
9,257 Computer Assoc., International, Inc. ............... 627
2,528 Intergraph Corp.(b) ................................ 28
2,543 Lotus Development Corp.(b) ......................... 162
33,400 Microsoft Corp.(b) ................................. 3,019
20,900 Novell, Inc.(b) .................................... 417
24,792 Oracle Corp.(b) .................................... 958
------
6,088
------
Construction Materials (0.5%):
4,714 Black & Decker Corp. ............................... 146
1,779 Crane Co. .......................................... 64
2,443 Owens Corning Fiberglass Corp.(b) .................. 90
12,014 PPG Industries, Inc. ............................... 517
4,986 Sherwin-Williams Co. ............................... 178
2,486 Stanley Works ...................................... 94
------
1,089
------
Consumer Electronics (0.0%):
2,143 Zenith Electronics Corp.(b) ........................ 16
------
Containers (0.2%):
1,643 Ball Corp. ......................................... 57
2,914 Bemis, Inc. ........................................ 76
</TABLE>
Continued
30
B-153
<PAGE>
THE ONE GROUP FAMILY OF MUTUAL FUNDS
Equity Index Fund
- --------------------------------------------------------------------------------
SCHEDULE OF PORTFOLIO INVESTMENTS JUNE 30, 1995
(Amounts in Thousands, except Shares or Principal Amount)
<TABLE>
<CAPTION>
SHARES OR
PRINCIPAL SECURITY MARKET
AMOUNT DESCRIPTION VALUE
- --------- ---------------------------------------------------- --------
<S> <C> <C>
COMMON STOCKS, CONTINUED:
Containers, continued:
4,971 Crown Cork & Seal Co., Inc.(b) ..................... $ 249
------
382
------
Cosmetics/Toiletry (0.7%):
1,471 Alberto Culver Co., Class B ........................ 45
3,900 Avon Products, Inc. ................................ 261
25,000 Gillette Co. ....................................... 1,116
6,529 International Flavors & Fragrances, Inc. ........... 325
------
1,747
------
Defense (0.7%):
3,242 EG&G, Inc. ......................................... 54
3,486 General Dynamics Corp. ............................. 155
4,714 Loral Corp. ........................................ 244
7,028 Raytheon Co. ....................................... 546
12,571 Rockwell International Corp. ....................... 575
------
1,574
------
Electrical Equipment (3.2%):
6,543 Cooper Industries, Inc. ............................ 258
3,214 Dover Corp. ........................................ 234
13,285 Emerson Electric Co. ............................... 950
96,668 General Electric Co. ............................... 5,450
2,928 Grainger W.W., Inc. ................................ 172
2,343 Johnson Controls, Inc. ............................. 132
4,328 Tyco Labs, Inc. .................................... 234
19,871 Westinghouse Electric Corp. ........................ 291
------
7,721
------
Electronic Components (3.5%):
6,078 Advanced Micro Devices, Inc. ....................... 221
11,714 AMP, Inc. .......................................... 495
4,700 Applied Materials, Inc.(b) ......................... 407
4,100 Cabletron Systems(b) ............................... 218
47,184 Intel Corp. ........................................ 2,987
11,600 Micron Technology, Inc. ............................ 637
33,556 Motorola, Inc. ..................................... 2,252
6,871 National Semiconductor Corp. ....................... 191
2,457 Raychem Corp. ...................................... 94
5,294 Texas Instruments, Inc. ............................ 709
1,071 Thomas & Betts Corp. ............................... 73
------
8,284
------
Electronic Instruments (0.1%):
2,457 Perkin-Elmer Corp. ................................. 87
1,828 Tektronix, Inc. .................................... 90
------
177
------
Farm Machinery (0.2%):
4,800 Deere & Co. ........................................ 411
4,341 Navistar International Corp.(b) .................... $ 66
2,524 Varity Corp.(b) .................................... 111
------
588
------
Finance Companies (0.2%):
2,914 Beneficial Corp. ................................... 128
5,386 Household International, Inc. ...................... 267
------
395
------
Food & Related (3.3%):
29,288 Archer Daniels Midland Co. ......................... 545
14,256 Campbell Soup Co. .................................. 699
14,135 ConAgra, Inc. ...................................... 493
8,400 CPC International, Inc. ............................ 519
2,157 Fleming Cos., Inc. ................................. 57
9,071 General Mills, Inc. ................................ 466
13,842 Heinz H.J. Co. ..................................... 614
4,171 Hershey Foods Corp. ................................ 230
12,556 Kellogg Co. ........................................ 896
5,000 Pioneer Hi-Bred International, Inc. ................ 210
7,600 Quaker Oats Co. .................................... 250
5,643 Ralston Purina Co. ................................. 288
27,170 Sara Lee Corp. ..................................... 774
4,100 Supervalu, Inc. .................................... 119
10,442 Sysco Corp. ........................................ 308
9,171 Unilever N.V. - ADR ................................ 1,193
6,629 Wrigley (Wm) Jr. Co. ............................... 307
------
7,968
------
Forest/Paper Products (1.8%):
2,685 Boise Cascade Corp. ................................ 109
5,271 Champion International Corp. ....................... 275
2,357 Federal Paper Board, Inc. .......................... 83
5,186 Georgia Pacific Corp. .............................. 450
7,043 International Paper Co. ............................ 604
4,686 James River Corp. of Virginia ...................... 129
9,172 Kimberly Clark Corp. ............................... 549
6,286 Louisiana-Pacific Corp. ............................ 165
3,314 Mead Corp. ......................................... 197
1,657 Potlatch Corp. ..................................... 69
8,600 Scott Paper Co. .................................... 426
5,000 Stone Container Corp.(b) ........................... 106
3,171 Temple-Inland, Inc. ................................ 151
3,957 Union Camp Corp. ................................... 229
3,857 Westvaco Corp. ..................................... 171
11,628 Weyerhaeuser Co. ................................... 548
------
4,261
------
</TABLE>
Continued
31
B-154
<PAGE>
THE ONE GROUP FAMILY OF MUTUAL FUNDS
Equity Index Fund
- --------------------------------------------------------------------------------
SCHEDULE OF PORTFOLIO INVESTMENTS, CONTINUED JUNE 30, 1995
(Amounts in Thousands, except Shares or Principal Amount)
<TABLE>
<CAPTION>
SHARES OR
PRINCIPAL SECURITY MARKET
AMOUNT DESCRIPTION VALUE
- --------- ---------------------------------------------------- --------
<S> <C> <C>
COMMON STOCKS, CONTINUED:
Furniture/Furnishings (0.2%):
2,157 Armstrong World Industries, Inc. ................... $ 108
848 Bassett Furniture Industries, Inc. ................. 24
8,800 Masco Corp. ........................................ 238
9,028 Newell Co. ......................................... 221
-------
591
-------
Gold/Precious Metals (0.4%):
19,900 Barrick Gold Corp. ................................. 502
6,486 Echo Bay Mines Ltd. ................................ 58
7,757 Homestake Mining Co. ............................... 128
13,516 Placer Dome, Inc. .................................. 353
-------
1,041
-------
Health Care--Drugs (4.6%):
45,680 Abbott Laboratories ................................ 1,850
3,600 Allergan, Inc. ..................................... 98
7,600 Amgen, Inc.(b) ..................................... 611
4,614 Alza Corp., Class A(b) ............................. 108
15,699 Baxter International, Inc. ......................... 571
16,699 Lilly Eli & Co. .................................... 1,311
70,168 Merck & Co., Inc. .................................. 3,438
1,400 Millipore Corp. .................................... 94
18,042 Pfizer, Inc. ....................................... 1,667
21,270 Schering Plough .................................... 939
9,957 UpJohn Co. ......................................... 377
-------
11,064
-------
Health Care--General (3.1%):
17,371 American Home Products Corp. ....................... 1,344
3,314 Bausch & Lomb, Inc. ................................ 138
3,886 Becton Dickinson & Co. ............................. 226
6,656 Biomet, Inc.(b) .................................... 103
8,500 Boston Scientific Corp.(b) ......................... 271
28,705 Bristol Myers Squibb Co. ........................... 1,956
36,784 Johnson & Johnson .................................. 2,488
4,413 Mallinckrodt Group, Inc. ........................... 157
2,628 St. Jude Medical, Inc. ............................. 132
7,714 Warner-Lambert Co. ................................. 666
-------
7,481
-------
Home Building/Mobil Home (0.1%):
1,814 Centex Corp. ....................................... 51
2,542 Fleetwood Enterprises, Inc. ........................ 50
1,866 Kaufman & Broad Home Corp. ......................... 27
1,586 Pulte Corp. ........................................ 44
586 Skyline Corp. ...................................... 11
-------
183
-------
Hospital Supply & Management (1.2%):
2,928 Bard, C.R., Inc. ................................... 88
4,643 Beverly Enterprises, Inc.(b) ....................... 57
24,937 Columbia/HCA Healthcare Corp. ...................... 1,079
2,428 Community Psychiatric Centers ...................... 27
3,492 Manor Care, Inc. ................................... 102
6,528 Medtronic, Inc. .................................... 503
1,343 Shared Medical Systems Corp. ....................... 54
11,300 Tenet Healthcare Corp.(b) .......................... 162
9,686 United Healthcare .................................. 401
9,200 U.S. Healthcare, Inc. .............................. 282
3,200 U.S. Surgical Corp. ................................ 67
-------
2,822
-------
Hotels & Gaming (0.3%):
2,585 Bally Entertainment(b) ............................. 32
2,628 Hilton Hotels Corp. ................................ 185
7,250 Marriott Corp., International ...................... 260
5,792 Promus Cos., Inc. .................................. 226
-------
703
-------
Household--General Products (1.8%):
4,314 American Greetings Corp., Class A .................. 127
3,128 Clorox Co. ......................................... 204
8,214 Colgate Palmolive Co. .............................. 601
2,543 Jostens, Inc. ...................................... 54
3,514 Premark International, Inc. ........................ 182
39,240 Procter & Gamble Co. ............................... 2,820
9,072 Rubbermaid, Inc. ................................... 252
-------
4,240
-------
Household--Major Appliances (0.2%):
1,572 Briggs & Stratton Corp. ............................ 54
6,057 Maytag Corp. ....................................... 97
4,300 Whirlpool Corp. .................................... 237
-------
388
-------
Insurance--Life (0.6%):
11,856 American General Corp. ............................. 400
2,750 Jefferson Pilot Corp. .............................. 151
5,686 Providan Corp. ..................................... 206
4,100 Transamerica Corp. ................................. 239
4,242 Torchmark Corp. .................................... 160
4,500 Unum Corp. ......................................... 211
1,335 U.S. Life Corp. .................................... 54
-------
1,421
-------
Insurance--Property/Casualty (1.9%):
6,443 Aetna Life & Casualty Co. .......................... 405
18,032 American International Group, Inc. ................. 2,056
4,200 CIGNA Corp. ........................................ 326
4,986 Chubb Corp. ........................................ 399
4,586 General Re Corp. ................................... 614
5,386 Lincoln National Corp. ............................. 236
3,514 SAFECO, Corp. ...................................... 202
4,820 St. Paul Cos., Inc. ................................ 237
</TABLE>
Continued
32
B-155
<PAGE>
THE ONE GROUP FAMILY OF MUTUAL FUNDS
Equity Index Fund
- --------------------------------------------------------------------------------
SCHEDULE OF PORTFOLIO INVESTMENTS, CONTINUED JUNE 30, 1995
(Amounts in Thousands, except Shares or Principal Amount)
<TABLE>
<CAPTION>
SHARES OR
PRINCIPAL SECURITY MARKET
AMOUNT DESCRIPTION VALUE
- --------- ---------------------------------------------------- --------
<S> <C> <C>
COMMON STOCKS, CONTINUED:
6,328 USF&G Corp. $ 103
................................................................. -------
4,578
-------
Leisure Time Industries (1.1%):
5,386 Brunswick Corp. .................................... 92
6,500 CUC International, Inc.(b) ......................... 273
1,993 Handleman Co. ...................................... 19
4,992 Hasbro, Inc. ....................................... 159
12,638 Mattel, Inc. ....................................... 329
1,057 Outboard Marine Corp. .............................. 21
29,556 Walt Disney Co. .................................... 1,644
-------
2,537
-------
Mining (0.5%):
2,342 Asarco, Inc. ....................................... 71
5,207 Cyprus Amax Minerals ............................... 148
6,657 Inco Ltd. .......................................... 188
386 Nacco Industries ................................... 23
4,866 Newmont Mining Corp. ............................... 204
4,014 Phelps Dodge Corp. ................................. 237
8,464 Santa Fe Pacific Corp. ............................. 216
-------
1,087
-------
Motion Pictures (0.0%):
2,157 King World Productions, Inc.(b) .................... 87
-------
Motor Vehicle Parts (0.3%):
5,586 Dana Corp. ......................................... 160
4,214 Eaton Corp. ........................................ 245
3,328 Echlin, Inc. ....................................... 116
7,164 Genuine Parts Co. .................................. 271
571 SPX, Inc. .......................................... 7
-------
799
-------
Motor Vehicles (2.0%):
20,859 Chrysler Corp. ..................................... 999
58,162 Ford Motor Co. ..................................... 1,730
42,570 General Motors Corp. ............................... 1,995
-------
4,724
-------
Multiple Industry (2.1%):
3,143 ALCO Standard Corp. ................................ 251
16,028 Allied Signal, Inc. ................................ 713
13,042 Corning, Inc. ...................................... 427
5,386 Dial Corp. ......................................... 133
2,057 FMC Corp.(b) ....................................... 138
4,435 Harcourt General, Inc. ............................. 187
5,943 ITT Corp. .......................................... 698
3,400 Loews Corp. ........................................ 411
23,700 Minnesota Mining & Manufacturing Co. ............... 1,357
3,107 Teledyne, Inc. ..................................... 76
4,986 Textron, Inc. ...................................... 290
3,614 TRW, Inc. .......................................... 289
6,057 Whitman Corp. ...................................... 117
-------
5,087
-------
Non-Residential Construction (0.0%):
1,842 Morrison Knudsen Corp. ............................. 12
-------
Petroleum--Domestic (2.6%):
5,386 Amerada Hess Corp. ................................. 263
28,199 Amoco Corp. ........................................ 1,879
3,414 Ashland, Inc. ...................................... 120
9,071 Atlantic Richfield Co. ............................. 996
5,000 Burlington Northern, Inc. .......................... 317
2,928 Kerr McGee Corp. ................................... 157
1,971 Louisiana Land & Exploration Co. ................... 79
18,185 Occidental Petroleum Corp. ......................... 416
5,486 Oryx Energy Co.(b) ................................. 75
2,543 Pennzoil Co. ....................................... 120
14,842 Phillips Petroleum Co. ............................. 495
5,044 Santa Fe Energy Resources, Inc.(b) ................. 48
5,957 Sun Co., Inc. ...................................... 163
10,328 Tenneco, Inc. ...................................... 475
13,771 Unocal Corp. ....................................... 380
16,414 USX-Marathon Group, Inc. ........................... 324
-------
6,307
-------
Petroleum--International (5.7%):
36,928 Chevron Corp. ...................................... 1,722
70,869 Exxon Corp. ........................................ 5,005
22,542 Mobil Corp. ........................................ 2,164
30,656 Royal Dutch Petroleum .............................. 3,736
14,742 Texaco, Inc. ....................................... 967
-------
13,594
-------
Petroleum--Services (0.7%):
7,948 Baker Hughes, Inc. ................................. 163
10,014 Dresser Industries, Inc. ........................... 223
6,557 Halliburton Co. .................................... 234
1,471 Helmerich & Payne, Inc. ............................ 43
3,043 McDermott International, Inc. ...................... 73
4,714 Rowan Cos., Inc.(b) ................................ 38
13,871 Schlumberger, Ltd. ................................. 862
3,300 Western Atlas(b) ................................... 146
-------
1,782
-------
Photography Equipment (0.5%):
19,299 Eastman Kodak Co. .................................. 1,170
2,595 Polaroid Corp. ..................................... 106
-------
1,276
-------
Publishing (1.0%):
5,614 Dow Jones & Co., Inc. .............................. 207
</TABLE>
Continued
33
B-156
<PAGE>
THE ONE GROUP FAMILY OF MUTUAL FUNDS
Equity Index Fund
- --------------------------------------------------------------------------------
SCHEDULE OF PORTFOLIO INVESTMENTS, CONTINUED JUNE 30, 1995
(Amounts in Thousands, except Shares or Principal Amount)
<TABLE>
<CAPTION>
SHARES OR
PRINCIPAL SECURITY MARKET
AMOUNT DESCRIPTION VALUE
- --------- ---------------------------------------------------- --------
<S> <C> <C>
COMMON STOCKS, CONTINUED:
Publishing, continued:
7,871 Gannett, Inc. ...................................... $ 427
3,028 Knight-Ridder, Inc. ................................ 172
2,728 McGraw-Hill Cos., Inc. ............................. 207
1,614 Meredith Corp. ..................................... 41
5,900 New York Times Co., Class A ........................ 139
21,456 Time Warner, Inc. .................................. 882
6,428 Times Mirror Co., Class A .......................... 153
3,814 Tribune Co. ........................................ 234
------
2,462
------
Railroad (0.9%):
7,400 Burlington ......................................... 273
4,586 Conrail, Inc. ...................................... 255
5,857 CSX Corp. .......................................... 440
7,585 Norfolk Southern Corp. ............................. 511
7,299 Santa Fe Pacific Gold Corp. ........................ 89
11,714 Union Pacific Corp. ................................ 649
------
2,217
------
Restaurants (0.7%):
1,493 Luby's Cafeterias, Inc. ............................ 30
39,612 McDonald's Corp. ................................... 1,550
3,043 Ryan's Family Steak House, Inc.(b) ................. 24
2,336 Shoney's, Inc.(b) .................................. 27
5,843 Wendy's International, Inc. ........................ 104
------
1,735
------
Retail--Food Stores (0.8%):
14,428 Albertsons, Inc. ................................... 429
8,028 American Stores Co. ................................ 226
4,486 Brunos, Inc. ....................................... 52
3,314 Giant Food, Inc., Class A .......................... 94
2,243 Great Atlantic & Pacific Tea, Inc. ................. 59
6,186 Kroger Co.(b) ...................................... 166
1,171 Longs Drug Stores, Inc. ............................ 44
4,886 Rite Aid Corp. ..................................... 125
7,028 Walgreen Co. ....................................... 352
4,286 Winn Dixie Stores, Inc. ............................ 248
------
1,795
------
Retail--General Merchandise (3.1%):
4,100 Dayton Hudson Corp. ................................ 294
6,429 Dilliard Department Stores, Inc., Class A .......... 189
12,986 J.C. Penney Co., Inc. .............................. 623
25,542 K Mart Corp. ....................................... 374
14,160 May Department Stores, Co. ......................... 589
2,143 Mercantile Stores Co., Inc. ........................ 100
4,686 Nordstrom, Inc. .................................... 194
11,000 Price/Costco, Inc.(b) .............................. 179
22,028 Sears Roebuck & Co. ................................ 1,319
4,200 TJX Cos, Inc. ...................................... 56
130,452 Wal-Mart Stores, Inc. .............................. 3,490
7,514 Woolworth Corp. .................................... 114
------
7,521
------
Retail--Specialty (1.3%):
5,800 Charming Shoppes, Inc. ............................. 30
5,486 Circuit City Stores, Inc. .......................... 173
8,200 Gap, Inc. .......................................... 286
25,553 Home Depot, Inc. ................................... 1,038
20,599 Limited, Inc. ...................................... 453
8,772 Lowes Cos., Inc. ................................... 262
5,957 Melville Corp. ..................................... 204
3,414 Pep Boys-Manny, Moe & Jack ......................... 91
3,786 Tandy Corp. ........................................ 196
16,257 Toys R Us, Inc.(b) ................................. 476
------
3,209
------
Savings & Loans (0.2%):
6,743 Ahmanson H.F. & Co. ................................ 148
3,614 Golden West Financial Corp. ........................ 170
7,528 Great Western Financial Corp. ...................... 155
------
473
------
Securities & Commercial Broker (2.3%):
2,428 Alexander & Alexander Services, Inc. ............... 58
28,506 American Express Co. ............................... 1,001
9,696 Dean Witter Discover & Co. ......................... 456
10,200 Federal Home Loan Mortgage Corp. ................... 701
15,514 Federal National Mortgage Assoc .................... 1,464
4,300 Marsh & McLennan Cos., Inc. ........................ 349
10,014 Merrill Lynch & Co., Inc. .......................... 526
6,243 Salomon, Inc. ...................................... 251
18,213 Travelers Group, Inc. .............................. 797
------
5,603
------
Steel (0.3%):
5,871 Armco, Inc.(b) ..................................... 40
6,100 Bethlehem Steel Corp.(b) ........................... 99
2,257 Inland Steel Industries ............................ 69
4,956 Nucor Corp. ........................................ 265
4,311 USX-U.S. Steel Group, Inc. ......................... 148
5,138 Worthington Industries, Inc. ....................... 105
------
726
------
Textile (0.0%):
957 Springs Industries, Inc., Class A .................. 36
------
Timeshare & Software (0.3%):
8,214 Automatic Data Processing, Inc. .................... 516
2,900 Computer Sciences Corp.(b) ......................... 165
------
681
------
</TABLE>
Continued
34
<PAGE>
THE ONE GROUP FAMILY OF MUTUAL FUNDS
Equity Index Fund
- --------------------------------------------------------------------------------
SCHEDULE OF PORTFOLIO INVESTMENTS, CONTINUED JUNE 30, 1995
(Amounts in Thousands, except Shares or Principal Amount)
<TABLE>
<CAPTION>
SHARES OR
PRINCIPAL SECURITY MARKET
AMOUNT DESCRIPTION VALUE
- --------- ---------------------------------------------------- --------
<S> <C> <C>
COMMON STOCKS, CONTINUED:
Tires/Rubber Products (0.2%):
4,786 Cooper Tire & Rubber Co. ........................... $ 117
8,528 Goodyear Tire & Rubber Co. ......................... 352
--------
469
--------
Tobacco (1.8%):
10,845 American Brands, Inc. .............................. 431
48,213 Philip Morris Cos., Inc. ........................... 3,586
11,614 UST, Inc. .......................................... 346
--------
4,363
--------
Trucking (0.1%):
2,014 Consolidated Freightways, Inc. ..................... 45
2,343 Roadway Services, Inc. ............................. 111
1,643 Yellow Corp. ....................................... 30
--------
186
--------
Utilities--Electric (3.7%):
10,443 American Electric Power, Inc. ...................... 367
8,229 Baltimore Gas & Electric Co. ....................... 206
9,172 Carolina Power & Light Co. ......................... 277
10,742 Central & South West Corp. ......................... 282
8,478 Cinergy Corp. ...................................... 223
13,285 Consolidated Edison Co., Inc. ...................... 392
8,300 Detroit Edison Co. ................................. 243
9,585 Dominion Resources, Inc. of Virginia ............... 350
11,614 Duke Power Co. ..................................... 482
13,043 Entergy Corp. ...................................... 315
10,685 FPL Group, Inc. .................................... 413
6,300 General Public Utilities Corp. ..................... 187
7,428 Houston Industries, Inc. ........................... 313
8,014 Niagara Mohawk Power Corp. ......................... 118
3,814 Northern States Power Co. .......................... 176
8,685 Ohio Edison Co. .................................... 196
24,613 Pacific Gas & Electric Co. ......................... 714
15,857 Pacificorp ......................................... 297
12,600 Peco Energy Corp. .................................. 348
13,800 Public Service Enterprise Group, Inc. .............. 383
25,400 SCE Corp. .......................................... 435
37,714 Southern Co. ....................................... 844
12,714 Texas Utilities Co. ................................ 437
12,200 Unicom Corp. ....................................... 325
5,800 Union Electric Co. ................................. 216
--------
8,539
--------
Utilities--Gas/Pipeline (0.8%):
5,857 Coastal Corp. ...................................... 178
2,928 Columbia Gas System, Inc. .......................... 93
5,286 Consolidated Natural Gas Co. ....................... 200
971 Eastern Enterprises ................................ 29
14,212 Enron Corp. ........................................ 499
3,814 Enserch Corp. ...................................... 65
3,114 NICOR, Inc. ........................................ 84
6,943 Noram Energy Corp. ................................. 45
1,514 ONEOK, Inc. ........................................ 32
4,783 Pacific Enterprises ................................ 117
8,086 Panhandle Eastern Corp. ............................ 197
2,057 People's Energy Corp. .............................. 53
4,886 Sonat, Inc. ........................................ 149
6,186 Williams Cos., Inc. ................................ 216
--------
1,957
--------
Utilities--Telephone (7.4%):
10,900 Alltel Corp. ....................................... 277
31,656 Ameritech Corp. .................................... 1,393
90,527 AT&T ............................................... 4,809
24,856 Bell Atlantic Corp. ................................ 1,392
28,228 Bellsouth Corp. .................................... 1,792
54,998 GTE Corp. .......................................... 1,877
38,484 MCI Communications Corp. ........................... 847
24,156 Nynex Corp. ........................................ 972
24,042 Pacific Telesis Group .............................. 643
34,670 SBC Communications, Inc. ........................... 1,651
19,500 Sprint Corp. ....................................... 656
26,356 U.S. West, Inc. .................................... 1,097
--------
17,406
--------
Total Common Stocks 227,065
--------
PARTICIPATING UNITS (0.0%):
9,071 Darden Restaurants, Inc.(b) ........................ 99
--------
Total Participating Units 99
--------
U.S. TREASURY BILLS (0.5%):
$ 10,000 8/17/95 ............................................ 10
125,000 9/7/95 ............................................. 123
1,035,000 9/14/95 ............................................ 1,023
25,000 9/21/95 ............................................ 25
--------
Total U.S. Treasury Bills 1,181
--------
Total Investments, at value 228,345
--------
</TABLE>
Continued
35
<PAGE>
THE ONE GROUP FAMILY OF MUTUAL FUNDS
Equity Index Fund
- --------------------------------------------------------------------------------
SCHEDULE OF PORTFOLIO INVESTMENTS, CONTINUED JUNE 30, 1995
(Amounts in Thousands, except Shares or Principal Amount)
<TABLE>
<CAPTION>
SHARES OR
PRINCIPAL SECURITY MARKET
AMOUNT DESCRIPTION VALUE
- --------- ---------------------------------------------------- --------
<S> <C> <C>
REPURCHASE AGREEMENTS (4.1%):
$9,781,000 Lehman Brothers, 6.15%, dated 6/30/95,
due 7/3/95 (Collateralized by
$9,640,000 U.S. Treasury Notes, 6.75%,
2/28/97, market value--$9,986) $ 9,781
--------
Total Repurchase Agreements 9,781
--------
Total (Cost--$199,635)(a) $238,126
--------
--------
</TABLE>
- ------------
Percentages indicated are based on net assets of $239,306.
(a) Represents cost for financial reporting purposes and differs from cost
basis for federal income tax purposes by the amount of losses recognized
for financial reporting in excess of federal income tax reporting of
approximately $381. Cost for federal income tax purposes differs from value
by net unrealized appreciation of securities as follows:
<TABLE>
<S> <C>
Unrealized appreciation ....................... $ 43,114
Unrealized depreciation ....................... (5,004)
--------
Net unrealized appreciation ................... $ 38,110
--------
--------
</TABLE>
(b) Represents non-income producing security.
ADR--American Depository Receipt
At June 30, 1995, the Portfolio's open futures contracts were as follows:
<TABLE>
<CAPTION>
CURRENT
OPENING MARKET
# OF POSITIONS VALUE
CONTRACTS CONTRACT TYPE (000) (000)
--------- ----------------------------------------- --------- -------
<S> <C> <C> <C>
36 S & P 500 September ....................... $9,691 $9,849
</TABLE>
See notes to financial statements.
36
B-157
<PAGE>
THE ONE GROUP FAMILY OF MUTUAL FUNDS
Large Company Value Fund
- --------------------------------------------------------------------------------
SCHEDULE OF PORTFOLIO INVESTMENTS JUNE 30, 1995
(Amounts in Thousands, except Shares or Principal Amount)
<TABLE>
<CAPTION>
SHARES OR
PRINCIPAL SECURITY MARKET
AMOUNT DESCRIPTION VALUE
- --------- ---------------------------------------------------- --------
<S> <C> <C>
COMMON STOCKS (86.7%):
Banks (3.3%):
91,100 Keycorp ............................................... $ 2,858
40,000 NationsBank Corp. ..................................... 2,145
300,000 U.S. Bancorp .......................................... 7,219
-------
12,222
-------
Business Equipment & Services (3.0%):
100,000 Dun & Bradstreet Corp. ................................ 5,250
200,000 WMX Technologies, Inc. ................................ 5,675
-------
10,925
-------
Chemicals--Petroleum & Inorganics (3.0%):
85,000 Dow Chemical Co. ...................................... 6,109
100,000 Imperial Chemical Industries-ADR ...................... 4,875
-------
10,984
-------
Chemicals--Specialty (1.5%):
126,000 Betz Laboratories, Inc. ............................... 5,702
-------
Computers--Main/Mini (1.6%):
550,000 Unisys Corp.(b) ....................................... 5,981
-------
Computers--Micro (0.8%):
62,500 Apple Computer, Inc. .................................. 2,902
-------
Construction Materials (1.0%):
100,000 Stanley Works ......................................... 3,787
-------
Defense (1.2%):
121,200 Litton Industries, Inc.(b) ............................ 4,469
-------
Electrical Equipment (2.0%):
500,000 Westinghouse Electric Corp. ........................... 7,313
-------
Financial (1.2%):
320,000 Horsham Corp. ......................................... 4,320
-------
Forest/Paper Products (3.0%):
150,000 Louisiana-Pacific Corp. ............................... 3,937
75,000 Temple-Inland, Inc. ................................... 3,572
79,700 Weyerhaeuser Co. ...................................... 3,756
-------
11,265
-------
Gold/Precious Metals (1.7%):
150,000 ASA Ltd. .............................................. 6,450
-------
Health Care--Drugs (1.9%):
175,000 Marion Merrell Dow .................................... 4,463
64,300 UpJohn Co. ............................................ 2,435
-------
6,898
-------
Health Care--General (1.1%):
130,000 Hillenbrand Industries ................................ 4,046
-------
Hospital Supply & Management (0.6%):
67,000 U.S. Healthcare, Inc. ................................. 2,052
-------
Household--General Products (2.1%):
150,000 American Greetings Corp., Class A ..................... 4,406
123,000 Rubbermaid ............................................ 3,413
-------
7,819
-------
Household--Major Appliances (2.4%):
270,000 Singer Sew Co. ........................................ 6,986
150,000 Sunbeam Corp. ......................................... 2,081
-------
9,067
-------
Insurance--Life (2.0%):
160,000 Kemper Corp. .......................................... 7,460
-------
Insurance--Property/Casualty (1.0%):
97,500 AON Corp. ............................................. 3,632
-------
Leisure Time Industries (1.5%):
325,000 Brunswick Corp. ....................................... 5,525
-------
Mining (6.3%):
291,700 Asarco, Inc. .......................................... 8,897
371,000 Cyprus AMAX Minerals .................................. 10,573
88,900 Newmont Mining Corp. .................................. 3,723
-------
23,193
-------
Motor Vehicles (1.0%):
75,000 Chrysler Corp. ........................................ 3,591
-------
Multiple Industry (3.5%):
185,000 Corning, Inc. ......................................... 6,059
400,000 Hanson ................................................ 7,050
-------
13,109
-------
Petroleum--Domestic (14.4%):
160,000 Ashland, Inc. ......................................... 5,620
100,000 Atlantic Richfield Co. ................................ 10,975
150,000 Murphy Oil Corp. ...................................... 6,150
200,000 Occidental Petroleum Corp. ............................ 4,575
125,000 Pennzoil Co. .......................................... 5,890
42,300 Phillips Petroleum .................................... 1,412
200,000 Sun Co., Inc. ......................................... 5,475
160,000 Tenneco, Inc. ......................................... 7,360
300,000 USX-Marathon Group, Inc. .............................. 5,925
-------
53,382
-------
Petroleum--International (3.3%):
50,000 Repsol S.A.-ADR ....................................... 1,581
60,000 Texaco, Inc. .......................................... 3,938
350,000 YPF S.A.-Sponsored ADR ................................ 6,606
-------
12,125
-------
Publishing (2.2%):
350,000 New York Times Co., Class A ........................... 8,225
-------
Railroad (0.7%):
50,000 Conrail, Inc. ......................................... 2,781
-------
</TABLE>
Continued
37
B-158
<PAGE>
THE ONE GROUP FAMILY OF MUTUAL FUNDS
Large Company Value Fund
- --------------------------------------------------------------------------------
SCHEDULE OF PORTFOLIO INVESTMENTS, CONTINUED JUNE 30, 1995
(Amounts in Thousands, except Shares or Principal Amount)
<TABLE>
<CAPTION>
SHARES OR
PRINCIPAL SECURITY MARKET
AMOUNT DESCRIPTION VALUE
- --------- ---------------------------------------------------- --------
<S> <C> <C>
COMMON STOCKS (86.7%):
Retail--Food Stores (1.5%):
200,000 American Stores Co. ................................ $ 5,625
--------
Retail--General Merchants (2.8%):
150,000 Dillard Department Stores, Inc., Class A ........... 4,406
400,000 K Mart Corp. ....................................... 5,850
--------
10,256
--------
Retail--Specialty (1.6%):
200,000 Toys R Us, Inc.(b) ................................. 5,850
--------
Securities & Commissions Broker (1.4%):
125,000 Salomon, Inc. ...................................... 5,016
--------
Steel (1.3%):
200,000 Bethlehem Steel(b) ................................. 3,250
50,000 USX-U.S. Steel Group, Inc. ......................... 1,719
--------
4,969
--------
Tires/Rubber Production (2.1%):
250,000 Cooper Tire & Rubber Co. ........................... 6,094
37,600 Goodyear Tire & Rubber Co. ......................... 1,551
--------
7,645
--------
Tobacco (1.7%):
1,000,000 RJR Preferred Series ............................... 6,125
--------
Utilities--Electric (2.8%):
100,000 American Electric Power, Inc. ...................... 3,512
75,000 Dominion Resources, Inc. of Virginia ............... 2,738
50,000 Entergy Corp. ...................................... 1,206
122,200 Southern Co. ....................................... 2,734
--------
10,190
--------
Utilities--Gas/Pipeline (1.0%):
226,600 ENSERCH Corp. ...................................... 3,881
--------
Utilities--Telephone (3.2%):
150,000 AT&T ............................................... 7,969
150,000 Pacific Telesis Group .............................. 4,013
--------
11,982
--------
Total Common Stocks 320,764
--------
U.S. TREASURY BILLS (0.1%):
$430,000 9/21/95 ............................................ 420
--------
Total U.S. Treasury Bills 420
--------
Total Investments, at value 321,184
--------
REPURCHASE AGREEMENTS (15.3%):
56,533,000 Lehman Brothers, 6.10%, 7/3/95
(Collateralized by $57,475,000 various
U.S. Government Securities,
0.00%-8.38%, 10/12/95-4/19/05,
market value--$57,649 ............................ 56,533
--------
Total Repurchase Agreements 56,533
--------
Total (Cost--$364,832)(a) $377,717
--------
--------
</TABLE>
- ---------------
Percentages indicated are based on net assets of $369,717.
(a) Represents cost for financial reporting purposes and differs from cost
basis for federal income tax purposes by the amount of losses recognized
for financial reporting in excess of federal income tax reporting of
approximately $571. Cost for federal income tax purposes differs from value
by net unrealized appreciation of securities as follows:
<TABLE>
<S> <C>
Unrealized appreciation ............................. $ 16,416
Unrealized depreciation ............................. (4,102)
--------
Net unrealized appreciation ......................... $ 12,314
--------
--------
</TABLE>
<PAGE>
(b) Represents non-income producing security.
ADR--American Depository Receipt
At June 30, 1995, the Portfolio's open futures contracts were as follows:
<TABLE>
<CAPTION>
CURRENT
OPENING MARKET
# OF POSITIONS VALUE
CONTRACTS CONTRACT TYPE (000) (000)
--------- ------------------------------------ --------- -------
<S> <C> <C> <C>
40 S & P 500 September ................ $10,976 $10,943
</TABLE>
See notes to financial statements.
38
B-159
<PAGE>
THE ONE GROUP FAMILY OF MUTUAL FUNDS
Blue Chip Equity Fund
- --------------------------------------------------------------------------------
SCHEDULE OF PORTFOLIO INVESTMENTS JUNE 30, 1995
(Amounts in Thousands, except Shares or Principal Amount)
<TABLE>
<CAPTION>
SHARES OR
PRINCIPAL SECURITY MARKET
AMOUNT DESCRIPTION VALUE
- --------- ---------------------------------------------------- --------
<S> <C> <C>
COMMON STOCKS (99.1%):
Banks (7.9%):
30,000 BankAmerica Corp. ..................................... $ 1,579
25,000 J.P. Morgan & Co., Inc. ............................... 1,753
-------
3,332
-------
Beverages (3.7%):
35,000 PepsiCo., Inc. ........................................ 1,597
-------
Business Equipment & Services (7.1%):
27,000 Dun & Bradstreet Corp. ................................ 1,417
57,000 WMX Technologies, Inc. ................................ 1,617
-------
3,034
-------
Capital Equipment (3.6%):
30,000 Fluor Corp. ........................................... 1,560
-------
Consumer Durables (3.5%):
35,000 General Motors Corp., Class E ......................... 1,522
-------
Electrical Equipment (7.0%):
22,500 Emerson Electric Co. .................................. 1,609
25,000 General Electric Co. 1,409
-------
3,018
-------
Electronic Components (7.9%):
40,000 AMP, Inc. ............................................. 1,690
25,000 Motorola, Inc. ........................................ 1,678
-------
3,368
-------
Forest/Paper Products (3.8%):
27,500 Kimberly Clark Corp. .................................. 1,647
-------
Health Care--Drugs (7.9%):
40,000 Merck & Co., Inc. ..................................... 1,960
15,000 Pfizer, Inc. .......................................... 1,386
-------
3,346
-------
Household General Products (5.9%):
20,000 Procter & Gamble Co. .................................. 1,438
40,000 Rubbermaid, Inc. ...................................... 1,110
-------
2,548
-------
Insurance--Property/Casualty (2.7%):
10,000 American International Group, Inc. .................... 1,140
-------
Leisure Time Industry (3.2%):
25,000 Walt Disney Co. ....................................... 1,391
-------
Metals & Mining (4.0%):
60,000 Cyprus Amax Minerals .................................. 1,710
-------
Motor Vehicles (3.3%):
30,000 General Motors Corp. .................................. 1,406
-------
Multiple Industry (3.3%):
25,000 Minnesota Mining & Manufacturing Co. .................. 1,431
-------
Petroleum--Domestic (3.8%):
15,000 Atlantic Richfield Co. ................................ 1,646
-------
Petroleum--International (6.6%):
20,000 Exxon Corp. ........................................... 1,412
15,000 Mobil Corp. ........................................... 1,440
-------
2,852
-------
Petroleum Services (3.6%):
25,000 Schlumberger, Ltd. .................................... 1,553
-------
Restaurants (4.1%):
45,000 McDonald's Corp. ...................................... 1,761
-------
Retail General Merchandise (2.5%):
40,000 Wal-Mart Stores, Inc. ................................. 1,070
-------
Utilities--Telephone (3.7%):
30,000 AT&T .................................................. 1,594
-------
Total Common Stocks 42,526
-------
Total Investments, at value 42,526
-------
REPURCHASE AGREEMENTS (1.0%):
$426,000 Lehman Brothers, 6.15%, dated 6/30/95,
due 7/3/95 (Collateralized by
$320,000 U.S. Treasury Bonds, 11.88%,
11/15/03, market value--$440) ....................... 426
-------
Total Repurchase Agreements 426
-------
Total (Cost--$36,014)(a) $42,952
--------
--------
</TABLE>
- -------------
Percentages indicated are based on net assets of $42,920.
(a) Represents cost for federal income tax purposes and differs from unrealized
appreciation of securities as follows:
<TABLE>
<S> <C>
Unrealized appreciation ............................... $ 7,577
Unrealized depreciation ............................... (639)
-------
Net unrealized appreciation ........................... $ 6,938
-------
-------
</TABLE>
See notes to financial statements.
39
B-160
<PAGE>
THE ONE GROUP FAMILY OF MUTUAL FUNDS
Large Company Growth Fund
- -------------------------------------------------------------------------------
SCHEDULE OF PORTFOLIO INVESTMENTS, CONTINUED JUNE 30, 1995
(Amounts in Thousands, except Shares or Principal Amount)
<TABLE>
<CAPTION>
SHARES OR
PRINCIPAL SECURITY MARKET
AMOUNT DESCRIPTION VALUE
- -------- --------------------------------------------------------------------------- -----------
<S> <C> <C>
COMMON STOCKS (94.4%):
Aerospace--Aircraft (1.4%):
100,000 TRW, Inc. .................................................................. $ 7,987
-------
Banks (4.0%):
100,000 BankAmerica Corp. .......................................................... 5,263
125,000 First Union Corp. .......................................................... 5,656
100,000 J.P. Morgan & Co., Inc. .................................................... 7,013
190,000 U.S. Bancorp ............................................................... 4,572
-------
22,504
-------
Beverages (1.0%):
125,000 PepsiCo., Inc. ............................................................. 5,703
-------
Broadcasting (1.5%):
130,000 CBS, Inc. .................................................................. 8,710
-------
Business Equipment & Services (3.5%):
190,000 Browning Ferris Industries, Inc. ........................................... 6,864
140,000 Dun & Bradstreet Corp. ..................................................... 7,350
240,000 Ryder Systems, Inc. ........................................................ 5,730
-------
19,944
-------
Capital Equipment (3.3%):
180,000 Fluor Corp. ................................................................ 9,360
90,800 Illinois Tool Works, Inc. .................................................. 4,994
120,000 Ingersoll Rand Co. ......................................................... 4,590
-------
18,944
-------
Chemicals--Petroleum & Inorganics (1.7%):
135,000 Dow Chemical Co. ........................................................... 9,703
-------
Chemicals--Specialty (5.5%):
175,000 Air Products & Chemicals, Inc. ............................................. 9,756
200,000 Lubrizol Corp. ............................................................. 7,075
215,000 Nalco Chemical ............................................................. 7,821
290,000 Pall Corp. ................................................................. 6,453
-------
31,105
-------
Computer--Main/Mini (2.8%):
90,000 Hewlett Packard Co. ......................................................... 6,705
95,000 International Business Machines Corp. ....................................... 9,120
-------
15,825
-------
Cosmetic/Toiletry (1.1%):
120,000 International Flavors & Fragrances, Inc. 5,970
-------
Electrical Equipment (1.6%):
125,000 Emerson Electric Co. ....................................................... 8,938
-------
Electronic Component (6.8%):
255,000 AMP, Inc. .................................................................. 10,774
150,000 Motorola, Inc. ............................................................. 10,069
75,000 Texas Instruments, Inc. .................................................... 10,040
150,000 Avnet, Inc. ................................................................ 7,256
-------
38,139
-------
Food & Related (4.3%):
350,000 Archer Daniels Midland Co. ................................................. $6,519
90,000 CPC International, Inc. .................................................... 5,558
105,000 Hershey Foods Corp. ........................................................ 5,801
150,000 Pioneer Hi-Bred International, Inc. ........................................ 6,300
-------
24,178
-------
Forest/Paper Products (3.6%):
90,000 Consolidated Papers, Inc. .................................................. 5,186
95,000 International Paper Co. .................................................... 8,146
120,000 Kimberly Clark Corp. ....................................................... 7,185
-------
20,517
-------
Furniture/Furnishings (1.7%):
350,000 Masco Corp. ................................................................ 9,450
-------
Health Care--Drugs (5.2%):
250,000 Abbott Laboratories ........................................................ 10,125
240,000 Alza Corp., Class A (b) .................................................... 5,610
130,000 Elan Corp., PLC ADR (b) .................................................... 5,298
170,000 Merck & Co., Inc. .......................................................... 8,330
-------
29,363
-------
Health Care--General (1.6%):
130,000 Johnson & Johnson .......................................................... 8,791
-------
Hospital Supply & Management (2.2%)
245,000 Bard C.R., Inc. ............................................................ 7,350
65,000 Medtronic, Inc. ............................................................ 5,013
-------
12,363
-------
Household--General Products (2.3%):
100,000 Procter & Gamble Co. ....................................................... 7,187
200,000 Rubbermaid, Inc. ........................................................... 5,550
-------
12,737
-------
Insurance--Property/Casualty (3.1%):
90,000 American International Group, Inc. ......................................... 10,260
150,000 St. Paul Cos., Inc. ........................................................ 7,388
-------
17,648
Leisure Time Industries (0.9%):
90,000 Walt Disney Co. ............................................................ 5,006
-------
Mining (1.6%):
310,000 Cyprus Amax Minerals ....................................................... 8,835
-------
Motor Vehicles (1.2%):
235,000 Ford Motor Co. ............................................................. 6,991
-------
Motor Vehicle Parts (1.3%):
210,000 Echlin, Inc. ............................................................... 7,297
-------
Multiple Industry (3.3%):
270,000 Corning, Inc. .............................................................. 8,842
</TABLE>
Continued
40
B-161
<PAGE>
THE ONE GROUP FAMILY OF MUTUAL FUNDS
Large Company Growth Fund
- -------------------------------------------------------------------------------
SCHEDULE OF PORTFOLIO INVESTMENTS, CONTINUED JUNE 30, 1995
(Amounts in Thousands, except Shares or Principal Amount)
<TABLE>
<CAPTION>
SHARES OR
PRINCIPAL SECURITY MARKET
AMOUNT DESCRIPTION VALUE
------ ---------------------------------------------------------------------- -----
<S> <C> <C>
COMMON STOCKS, CONTINUED
175,000 Minnesota Mining & Manufacturing Co $ 10,019
--------
18,861
--------
Petroleum--Domestic (3.6%):
140,000 Amerada Hess Corp. ......................................................... 6,843
110,000 Kerr McGee Corp. ........................................................... 5,898
275,000 UNOCAL Corp. ............................................................... 7,597
--------
20,338
--------
Petroleum--International (2.4%):
150,000 Chevron Corp. .............................................................. 6,994
70,000 Mobil Corp. ................................................................ 6,720
--------
13,714
--------
Petroleum--Services (3.0%):
180,000 Halliburton Co. ............................................................ 6,435
167,700 Schlumberger, Ltd. ......................................................... 10,418
--------
16,853
--------
Photo Equipment (1.0%):
90,000 Eastman Kodak Co. .......................................................... 5,456
--------
Publishing (3.4%):
200,000 Gannett, Inc. .............................................................. 10,850
110,000 McGraw-Hill Cos., Inc. ..................................................... 8,346
--------
19,196
--------
Railroad (2.5%):
100,000 Norfolk Southern Corp. ..................................................... 6,738
135,000 Union Pacific Corp. ........................................................ 7,476
--------
14,214
--------
Restaurants (1.2%):
180,000 McDonald's Corp. ........................................................... 7,042
--------
Retail--Food Stores (1.3%):
150,000 Walgreen Co. ............................................................... 7,519
--------
Retail--General Merchant (1.2%):
260,000 Wal-Mart Stores, Inc. ...................................................... $ 6,955
--------
Retail--Specialty (1.4%):
265,000 Toys R Us (b)............................................................... 7,751
--------
Securities & Commissions Broker (1.1%):
80,000 Marsh & McLennan Cos., Inc. ................................................ 6,490
--------
Timeshare & Software (2.2%):
110,000 Automatic Data Processing, Inc. ............................................ 6,916
130,000 General Motors Corp., Class E .............................................. 5,655
--------
12,571
--------
Utilities--Gas/Pipeline (0.7%):
100,000 Consolidated Natural Gas Co. ............................................... 3,775
--------
Utilities--Telephone (2.9%):
160,000 AT&T ....................................................................... 8,500
175,000 GTE Corp. .................................................................. 5,972
50,000 Nynex Corp. ................................................................ 2,013
--------
16,485
--------
Total Common Stocks .................................................................. 533,868
--------
Total Investments, at value .......................................................... 533,868
--------
REPURCHASE AGREEMENTS (5.5%):
$ 31,322,000 Lehman Brothers, 6.15%, dated
6/30/95, due 7/3/95 (Collateralized
by $31,075,000 U.S. Treasury Notes,
6.63%, 3/31/97, market
value--31,970) ........................................................ 31,322
--------
Total Repurchase Agreements 31,322
--------
Total (Cost--$491,144)(a) $565,190
========
</TABLE>
- -------------
Percentages indicated are based on net assets of $565,941.
(a) Represents cost for financial reporting purposes and differs from cost
basis for federal income tax purposes by the amount of losses recognized
for financial reporting in excess of federal income tax reporting of
approximately $90. Cost for federal income tax purposes differs from value
by net unrealized appreciation of securities as follows:
<TABLE>
<S> <C>
Unrealized appreciation .......................... $79,316
Unrealized depreciation .......................... (5,360)
Net unrealized appreciation ...................... $73,956
</TABLE>
(b) Represents non-income producing security.
ADR--American Depository Receipt
See notes to financial statements.
41
B-162
<PAGE>
THE ONE GROUP FAMILY OF MUTUAL FUNDS
Disciplined Value Fund
- -------------------------------------------------------------------------------
SCHEDULE OF PORTFOLIO INVESTMENTS, CONTINUED JUNE 30, 1995
(Amounts in Thousands, except Shares or Principal Amount)
<TABLE>
<CAPTION>
SHARES OR
PRINCIPAL SECURITY MARKET
AMOUNT DESCRIPTION VALUE
------ -------------------------------------------------------------------------- -----
<S> <C> <C>
COMMON STOCKS (91.5%):
Aircraft (0.9%):
57,000 United Technologies Corp. ................................................. $ 4,453
--------
Air Transport (0.9%):
60,000 British Airways PLC ........................................................ 4,035
--------
Apparel (2.2%):
310,000 Liz Claiborne, Inc. ....................................................... 6,587
70,000 V F Corp. ................................................................. 3,762
--------
10,349
--------
Banks (4.2%):
77,500 Central Fidelity Banks .................................................... 2,364
120,000 First Union Corp. ......................................................... 5,430
190,000 Keycorp ................................................................... 5,961
195,000 NBD Bancorp, Inc. ......................................................... 6,240
--------
19,995
--------
Beverages (2.6%):
25,250 Coors Adolph Co., Class B ................................................ 4,503
225,000 Seagram Co., Ltd. ........................................................ 7,791
--------
12,294
--------
Business Equipment & Services (2.2%):
60,000 Browning Ferris Industries, Inc. ......................................... 2,168
60,000 Flight Safety International .............................................. 2,925
200,000 Kelly Service ............................................................ 5,150
--------
10,243
--------
Chemicals--Petroleum & Inorganic (2.1%):
100,000 Olin Corp. ............................................................... 5,150
150,000 Shanghai Petrochemical: Integrated Petroleum ............................. 4,706
--------
9,856
--------
Chemicals--Specialty (1.0%):
170,000 Wellman, Inc. ............................................................ 4,654
--------
Communications Equipment (1.1%):
100,000 Harris Corp., Delaware ................................................... 5,163
--------
Computers--Micro (1.1%):
110,000 Apple Computer, Inc. ..................................................... 5,108
--------
Containers (1.1%):
150,000 Ball Corp. ............................................................... 5,231
--------
Cosmetics/Toiletry (0.8%):
135,000 Helene Curtis Industries, Inc., .......................................... 3,848
--------
Defense (2.0%):
85,000 Loral Corp. .............................................................. 4,399
30,000 Raytheon Co. ............................................................. 2,329
60,000 Rockwell International Corp. ............................................. 2,745
--------
9,473
--------
Electrical Equipment (0.7%):
60,000 Johnson Controls, Inc. .................................................... $ 3,390
--------
Electronic Components (1.8%):
90,000 Avnet, Inc. ............................................................... 4,354
210,000 Dallas Semiconductors Co. ................................................. 4,305
--------
8,659
--------
Food & Related (0.3%):
70,000 International Multifoods Corp. ............................................ 1,575
--------
Forest/Paper Products (5.3%):
60,000 International Paper Co. ................................................... 5,145
100,000 Pentair, Inc. ............................................................. 4,350
140,000 Rayonier, Inc. ............................................................ 4,970
100,000 Temple-Inland, Inc. ....................................................... 4,762
100,000 Union Camp Corp. .......................................................... 5,787
--------
25,014
--------
Health Care--Drugs (2.8%):
70,000 Baxter International, Inc. ................................................ 2,546
250,000 Marion Merrell Dow ........................................................ 6,375
120,000 UpJohn Co. ................................................................ 4,545
--------
13,466
--------
Health Care--General (2.5%):
50,000 Becton Dickinson & Co. .................................................... 2,913
165,000 Bergen Brunswick Corp. .................................................... 3,774
225,000 Emphesys Financial Group .................................................. 5,316
--------
12,003
--------
Hospital Supply & Management (2.4%):
500,000 Community Psychiatric Centers ............................................. 5,625
276,100 United Wisconsin Services ................................................. 5,522
--------
11,147
--------
Household--Major Appliances (1.1%):
150,000 Briggs & Stratton Corp. ................................................... 5,175
--------
Insurance--Life (2.5%):
120,000 Jefferson Pilot Corp. ..................................................... 6,570
160,000 Ohio Casualty Corp. ....................................................... 5,040
--------
11,610
--------
Insurance--Property/Casualty (4.8%):
105,000 Ace Limited ............................................................... 3,045
10,000 Berkshire Hathaway, Inc.(b) ............................................... 235
65,000 CIGNA Corp. ............................................................... 5,046
40,000 MBIA, Inc. ................................................................ 2,660
160,000 Partnerre Holdings Ltd. ................................................... 4,180
100,000 St. Paul Cos., Inc. ....................................................... 4,925
40,000 Transatlantic Holding, Inc. ............................................... 2,600
--------
22,691
--------
</TABLE>
Continued
42
B-163
<PAGE>
THE ONE GROUP FAMILY OF MUTUAL FUNDS
Disciplined Value Fund
- -------------------------------------------------------------------------------
SCHEDULE OF PORTFOLIO INVESTMENTS, CONTINUED JUNE 30, 1995
(Amounts in Thousands, except Shares or Principal Amount)
Disciplined Value Fund
<TABLE>
<CAPTION>
SHARES OR
PRINCIPAL SECURITY MARKET
AMOUNT DESCRIPTION VALUE
------ ---------------------------------------------------------------------- -----
<S> <C> <C>
COMMON STOCKS, CONTINUED
Metals & Mining (2.9%):
160,000 Asarco, Inc. .............................................................. $ 4,880
320,000 Kloff Gold Mines .......................................................... 3,480
90,000 Phelps Dodge Corp. ........................................................ 5,310
--------
13,670
--------
Multiple Industry (2.9%):
220,000 American Financial Group .................................................. 5,720
270,000 Hanson PLC ................................................................ 4,759
235,000 U.S. Industries, Inc. ..................................................... 3,202
--------
13,681
--------
Non-Residual Construction (1.0%):
205,000 Granite Construction, Inc. ................................................ 4,561
--------
Petroleum--Domestic (3.1%):
150,000 Ashland, Inc. ............................................................. 5,269
110,000 Murphy Oil Corp. .......................................................... 4,510
185,000 Sun Co., Inc. ............................................................. 5,064
--------
14,843
--------
Petroleum--International (4.2%):
110,000 Exxon Corp. ............................................................... 7,769
210,000 Repsol S.A.-ADR ........................................................... 6,641
180,000 Total S.A.-ADR ............................................................ 5,445
--------
19,855
--------
Publishing (2.2%):
80,000 Knight-Rider, Inc. ........................................................ 4,550
240,000 New York Times Co., Class A ............................................... 5,640
--------
10,190
--------
Railroad (1.5%):
125,000 Conrail, Inc. ............................................................. 6,953
--------
Retail--Food Stores (1.2%):
500,000 Brunos Inc. ............................................................... 5,812
--------
Retail--General Merchandise (0.6%):
200,000 TJX Cos., Inc. ............................................................ 2,650
--------
Retail--Specialty (4.4%):
300,000 Charming Shoppes, Inc. .................................................... 1,575
700,000 Hechinger Co., Class A .................................................... 5,031
260,000 Ross Stores ............................................................... 3,055
300,000 Smith Food & Drug ......................................................... 5,925
105,000 Tandy Corp. ............................................................... 5,447
--------
21,033
--------
Savings & Loans (0.4%):
68,900 ONBANCorp, Inc. ........................................................... $ 1,955
--------
Textile (0.8%):
105,000 Spring Industries, Inc., Class A .......................................... 3,911
--------
Tobacco (0.9%):
110,000 American Brands, Inc. ..................................................... 4,373
--------
Trucking (1.2%):
125,000 Roadway Services, Inc.(b) ................................................. 5,906
--------
Utilities--Electric (12.1%):
200,000 Central & South West Corp. ................................................ 5,250
150,000 Consolidated Edison Co., Inc. ............................................. 4,425
200,000 Florida Progress Corp. .................................................... 6,250
150,000 General Public Utilities Corp. ............................................ 4,462
100,400 LG&E Energy Corp. ......................................................... 3,916
186,100 New York State Electric & Gas ............................................. 4,350
142,400 Northern States Power Co. ................................................. 6,568
160,000 Oklahoma Gas & Electric ................................................... 5,620
200,000 SCE Corp. ................................................................. 3,425
170,000 Union Electric Co. ........................................................ 6,332
235,000 Wisconsin Energy Corp. .................................................... 6,580
--------
57,178
--------
Utilities--Telephone (5.7%):
90,000 Ameritech Corp. ........................................................... 3,960
70,000 Bellsouth Corp. ........................................................... 4,445
150,000 Southern New England Telecommunications ................................... 5,288
150,000 Tele Danmark A/S-ADR ...................................................... 4,200
120,000 Telefonica de Espana ...................................................... 4,650
155,000 Telefonos de Mexico--CL-L ADR ............................................. 4,592
--------
27,135
--------
Total Common Stocks .................................................................. 433,138
--------
Total Investments, at value .......................................................... 433,138
--------
REPURCHASE AGREEMENTS (7.7%):
$36,243,000 Lehman Brothers, 6.10%, dated
6/30/95, due 7/3/95 (Collateralized
by $38,395,000 various
Federal National Mortgage Assoc., 0.00%,
1/22/96-3/1/96, market
value--$36,968)......................................................... 36,243
--------
Total Repurchase Agreements .......................................................... 36,243
--------
Total (Cost--$441,020)(a) ............................................................ $469,381
--------
--------
</TABLE>
- --------------
Percentages indicated are based on net assets of $473,312.
(a) Represents cost for financial reporting purposes and differs from
cost basis for federal income tax purposes by the amount of losses
recognized for financial reporting in excess of federal income tax
reporting of approximately $72. Cost for federal income tax purposes
differs from value by net unrealized appreciation of securities as
follows:
<TABLE>
<S> <C>
Unrealized appreciation ......................... $37,097
Unrealized depreciation ........................ (8,808)
Net unrealized appreciation .................... $28,289
</TABLE>
(b) Represents non-income producing security.
See notes to financial statements.
43
B-164
<PAGE>
THE ONE GROUP FAMILY OF MUTUAL FUNDS
Small Company Growth Fund
- -------------------------------------------------------------------------------
SCHEDULE OF PORTFOLIO INVESTMENTS, JUNE 30, 1995
(Amounts in Thousands, except Shares or Principal Amount)
<TABLE>
<CAPTION>
SHARES OR
PRINCIPAL SECURITY MARKET
AMOUNT DESCRIPTION VALUE
- ---------- ------------------------------------------------------------------ --------
<S> <C> <C>
COMMON STOCK (95.3%):
Air Transport (0.3%):
114,400 American West(b) ................................................... $1,387
--------
Aluminum (0.7%):
100,000 Alumax, Inc.(b) .................................................... 3,113
--------
Apparel (2.1%):
100,000 Jones Apparel Group(b) ............................................. 2,987
105,000 Nautica Enterprises, Inc.(b) ....................................... 3,806
80,000 Tommy Hilfiger(b) .................................................. 2,240
--------
9,033
--------
Banks (4.1%):
30,000 Amsouth Bancorp .................................................... 979
60,000 BayBanks, Inc. ..................................................... 4,755
35,000 First American Corp. -- Tennessee .................................. 1,256
30,000 First Commerce Corp. ............................................... 885
10,000 First Tennessee National Corp. ..................................... 464
60,000 Integra Financial Corp. ............................................ 2,918
50,000 Midatlantic Corp., Inc. ............................................ 2,000
30,000 Southtrust Corp.(b) ................................................ 694
20,000 UJB Financial Corp. ................................................ 607
30,000 Union Planters Corp. ............................................... 802
100,000 Washington Mutual, Inc. ............................................ 2,344
--------
17,704
--------
Beverages (0.8%):
75,000 Canadiagua Wine(b) ................................................. 3,356
--------
Business Equipment & Services (4.0%):
132,000 Barefoot, Inc. ..................................................... 1,831
50,000 Cintas Corp. ....................................................... 1,775
80,000 Franklin Quest(b) .................................................. 1,920
30,000 Olsten Corp. ....................................................... 982
190,200 Pyxis Corp.(b) ..................................................... 4,303
80,000 Service Corp., Inc. ................................................ 2,530
100,000 United Waste Systems, Inc.(b) ...................................... 3,600
--------
16,941
--------
Capital Equipment (4.7%):
49,500 Diebold, Inc. ...................................................... 2,153
222,000 Gasonics International(b) .......................................... 6,327
99,800 Giddings & Lewis, Inc. ............................................. 1,784
160,000 Harnischfeger Industries, Inc. ..................................... 5,540
53,000 Teleflex, Inc. ..................................................... 2,279
70,000 Wabash National Corp. .............................................. 2,179
--------
20,262
--------
Chemical--Petroleum & Inorganic (0.0%):
5,800 Schulman, Inc. ..................................................... 167
--------
Chemical--Specialty (1.2%):
90,400 Air Gas Industry(b) ................................................ 2,430
50,000 Minerals Technologies, Inc. ........................................ 1,800
91,000 Uniroyal Chemical(b) ............................................... 1,035
--------
5,265
--------
Coal (0.4%):
70,000 Pittston Co. ....................................................... 1,680
--------
Communications Equipment (0.9%):
60,000 Antec Corp.(b) ..................................................... 990
55,000 StrataCom, Inc.(b) ................................................. 2,681
--------
3,671
--------
Computers--Peripherals (7.2%):
120,000 American Power(b) .................................................. 2,745
90,000 Cadence Designs(b) ................................................. 2,914
5,000 Chipcom Corp.(b) ................................................... 119
130,000 Danka Business Systems ADR ......................................... 3,144
140,700 Global Village Communication(b) .................................... 2,198
21,200 Informix Corp.(b) .................................................. 538
130,000 Keane, Inc.(b) ..................................................... 3,234
30,000 Landmark Graphics(b) ............................................... 765
20,000 Parametric Technology(b) ........................................... 995
150,500 Quantum Corp.(b) ................................................... 3,443
54,500 Read-Rite Corp.(b) ................................................. 1,458
140,000 Softkey International(b) ........................................... 4,462
40,000 Sterling Software(b) ............................................... 1,540
50,000 Synopsis, Inc.(b) .................................................. 3,131
5,000 System Software Assoc., Inc. ....................................... 100
--------
30,786
--------
Construction Materials (0.7%):
34,200 Crane Co. .......................................................... 1,240
70,000 Fastenal Corp. ..................................................... 1,912
--------
3,152
--------
Consumer Electronics (0.9%):
90,500 Harman International ............................................... 3,665
--------
Cosmetic Toiletry (0.4%):
50,000 Alberto Culver Co. ................................................. 1,513
--------
Electrical Equipment (1.0%):
83,500 Federal Signal Corp. ............................................... 1,806
61,920 Mark IV ............................................................ 1,331
60,000 Whittaker Corp.(b) ................................................. 1,320
--------
4,457
--------
Electronic Components (11.8%):
50,000 Altera Corp.(b) .................................................... 2,162
60,000 Amphenol Corp(b) ................................................... 1,748
125,000 Analog Devices, Inc.(b) ............................................ 4,250
74,000 Applied Materials, Inc.(b) ......................................... 6,410
53,700 Cabletron Systems(b) ............................................... 2,860
66,500 Cypress Semiconductors(b) .......................................... 2,693
159,700 FSI International, Inc.(b) ......................................... 3,724
</TABLE>
Continued
44
B-165
<PAGE>
THE ONE GROUP FAMILY OF MUTUAL FUNDS
Small Company Growth Fund
- --------------------------------------------------------------------------------
SCHEDULE OF PORTFOLIO INVESTMENTS, CONTINUED JUNE 30, 1995
(Amounts in Thousands, except Shares or Principal Amount)
<TABLE>
<CAPTION>
SHARES OR
PRINCIPAL SECURITY MARKET
AMOUNT DESCRIPTION VALUE
------ ------------------------------------------------------- ------
<S> <C> <C>
COMMON STOCK, CONTINUED:
Electronic Components, continued:
225,000 Genus, Inc.(b).......................................... $ 3,051
70,000 Komag, Inc.(b).......................................... 3,640
180,000 Lattice Semiconductor Corp.(b) ......................... 6,188
80,000 Micro Chip Technology(b) ............................... 2,910
150,000 National Semiconductor Corp.(b) ........................ 4,163
10,500 Nexgen(b)............................................... 248
5,000 Paradigm Technology, Inc.(b) ........................... 70
10,000 Store Media(b).......................................... 315
90,800 VLSI Technology, Inc.(b) ............................... 2,735
15,000 Xilinx, Inc.(b)......................................... 1,410
35,000 Zilog, Inc.(b).......................................... 1,746
--------
50,323
--------
Electronic Instruments (4.9%):
900 Asyst Technologies, Inc.(b) ............................. 33
28,000 KLA Instruments Corp.(b) ................................ 2,163
145,500 LTX Corp................................................. 1,291
110,000 Silicon Valley Group, Inc.(b) ........................... 3,988
65,000 Tektronix, Inc........................................... 3,201
75,000 Teradyne, Inc.(b)........................................ 4,903
155,000 Ultratech Stepper, Inc.(b) .............................. 5,463
--------
21,042
--------
Finance Companies (3.2%):
127,000 Aames Financial Corp. ................................... 2,302
50,000 Advanta Corp............................................. 1,888
75,000 Capital One Financial Corp. ............................. 1,463
159,300 Olympic Financial Ltd.(b) ............................... 2,658
20,000 Regional Acceptance Corp.(b) ............................ 355
59,000 Robert Half International, Inc.(b) ...................... 1,512
100,000 The Money Store, Inc. ................................... 3,581
--------
13,759
--------
Food & Related (0.8%):
100,000 General Nutrition Co.(b) ............................... 3,513
--------
Forest/Paper Products (2.6%):
80,000 Bowater, Inc............................................ 3,590
55,000 Chesapeake Corp......................................... 1,712
70,000 Federal Paper Board, Inc. .............................. 2,476
60,000 Rayonier, Inc........................................... 2,130
30,000 Sealed Air Corp.(b)..................................... 1,320
--------
11,228
--------
Gold/Precious Metals (0.5%):
45,300 ASA Ltd................................................ 1,947
--------
Health Care--Drugs (6.3%):
91,000 Cardinal Health, Inc.................................... 4,300
150,000 Elan Corp. ADS(b)....................................... 6,113
56,500 Forest Laboratories(b).................................. 2,507
55,150 Genzyme Corp............................................ 2,206
57,500 Mycogen Corp.(b)........................................ 474
130,000 Sunrise Medical, Inc.(b) ............................... 4,046
105,000 Teva Pharmaceutical..................................... 3,937
80,000 Watson Pharmaceutical(b) ............................... 3,120
--------
26,703
--------
Health Care--General (1.8%):
54,000 Amerisource(b).......................................... 1,232
65,700 APPS Dental(b).......................................... 750
70,000 Horizon Health(b)....................................... 1,251
2,500 Sun Healthcare(b)....................................... 39
100,000 Value Health, Inc.(b)................................... 3,225
60,000 Ventritex, Inc.(b)...................................... 1,013
--------
7,510
--------
Homebuilding, Mobil Homes (0.8%):
85,000 Oakwood Homes........................................... 2,178
50,000 Webb Corp............................................... 1,163
--------
3,341
--------
Hospital Supply & Management (2.4%):
45,000 HBO & Co.(b)............................................ 2,453
60,000 Health Management Assoc., Inc.(b) ...................... 1,755
60,000 Healthcare Compare Corp.(b) ............................ 1,800
40,000 Healthcare & Retirement(b) ............................. 1,170
5,300 Medaphis Corp.(b)....................................... 115
60,000 Mid Atlantic Medical Services(b) ....................... 1,110
145,100 Physicians Resource Group, Inc.(b) ..................... 1,941
--------
10,344
--------
Hotels & Gaming (0.5%):
65,000 Hospitality Franchise Systems(b) ....................... 2,251
--------
Household--Major Appliances (0.1%):
30,000 Juno Lighting, Inc...................................... 480
--------
Insurance--Life (0.4%):
15,000 Equitable of Iowa....................................... 493
40,000 Protective Life Corp.................................... 1,090
--------
1,583
--------
Insurance--Property/Casualty (2.4%):
60,000 Allied Group, Inc....................................... 1,710
70,000 MGIC Investment Corp.................................... 3,281
70,000 Mid Ocean Ltd........................................... 2,214
90,000 Midland Financial....................................... 1,665
29,300 PMI Group, Inc.......................................... 1,271
--------
10,141
--------
Leisure Time Industries (1.2%):
100,000 Loewen Group, Inc....................................... 3,563
40,000 Stewart Enterprises..................................... 1,340
--------
4,903
--------
</TABLE>
Continued
45
B-166
<PAGE>
THE ONE GROUP FAMILY OF MUTUAL FUNDS
Small Company Growth Fund
- --------------------------------------------------------------------------------
SCHEDULE OF PORTFOLIO INVESTMENTS, CONTINUED JUNE 30, 1995
(Amounts in Thousands, except Shares or Principal Amount)
<TABLE>
<CAPTION>
SHARES OR
PRINCIPAL SECURITY MARKET
AMOUNT DESCRIPTION VALUE
------ --------------------------------------------------- -----
<S> <C> <C>
COMMON STOCK, CONTINUED:
Mining (0.6%):
90,500 Asarco, Inc......................................... $ 2,760
--------
Motor Vehicle Parts (2.0%):
109,600 Allen Group.......................................... 3,247
118,800 Copart, Inc.(b)...................................... 2,703
9,100 Exide Corp........................................... 391
10,000 Gentex Corp.(b)...................................... 198
83,500 Titan Wheel International, Inc. ..................... 2,150
--------
8,689
--------
Motor Vehicles (0.5%):
200,000 AmeriCredit Corp.(b)................................. 2,225
--------
Multiple Industry (2.2%):
15,400 ACT Networks, Inc.(b)................................. 266
56,000 American Radio(b)..................................... 1,274
2,000 HNC Software(b)....................................... 42
144,400 Mobil Media(b)........................................ 2,960
100,000 Numerex Corp.......................................... 1,125
15,500 Oak Technologies(b)................................... 570
116,800 Studio Plus Hotels, Inc. ............................. 1,956
60,000 Whitman Corp.......................................... 1,163
--------
9,356
--------
Non-Residential Construction (0.4%):
89,900 CDI Co.p.(b) ......................................... 1,843
--------
Petroleum--Domestic (2.6%):
115,000 Apache Corp........................................... 3,148
100,100 Noble Affiliates, Inc................................. 2,552
50,000 Quaker State Corp. .............................. 750
200,000 Union Texas Petroleum Holdings ....................... 4,225
20,000 Valero Energy......................................... 405
--------
11,080
--------
Petroleum--Services (1.3%):
109,000 NL Industries, Inc.(b)................................ 1,458
128,200 Seitel, Inc.(b)....................................... 3,974
--------
5,432
--------
Photography Equipment (0.2%):
49,100 X-Rite, Inc........................................... 908
--------
Publishing (0.9%):
90,900 Meredith Corp......................................... 2,306
29,000 Scholastic Corp.(b)................................... 1,573
--------
3,879
--------
Restaurants (2.3%):
161,700 Apple South........................................... 3,153
150,600 Bob Evans Farms, Inc.................................. 3,068
99,000 Lone Star Restaurants(b) ............................. 3,001
15,200 Starbucks Corp.(b).................................... 541
--------
9,763
--------
Retail--Food Stores (0.7%):
100,000 Eckerd Corp.(b)....................................... 3,200
--------
Retail--Specialty Stores (5.0%):
40,000 Bed & Bath & Beyond(b)................................ 970
300,000 Borders Group, Inc.(b)................................ 4,312
173,600 Global Directmail Corp.(b) ........................... 3,429
40,000 Gymboree Corp.(b)..................................... 1,162
30,300 Just For Feet, Inc.................................... 1,208
15,000 Michael's Stores(b)................................... 319
140,000 Officemax, Inc.(b).................................... 3,903
36,000 Revco D.S., Inc.(b)................................... 864
65,000 Sunglass Hut Intl., Inc.(b) .......................... 2,275
90,000 Tiffany & Co.......................................... 3,060
--------
21,502
--------
Savings & Loans (1.7%):
20,000 Astoria Financial Corp.(b) ........................... 715
25,000 California Federal Bank(b) ........................... 328
40,000 Commercial Federal Corp.(b) .......................... 1,090
25,000 FirstFed Michigan Corp. .............................. 700
30,500 First Financial Corp. Wisconsin ...................... 534
80,000 Great Western Financial Corp. ........................ 1,650
65,500 Standard Federal Bancorp ............................. 2,202
--------
7,219
--------
Securities & Commercial Brokers (1.6%):
60,000 First USA, Inc........................................ 2,663
60,000 Insurance Auto Auctions, Inc.(b) ..................... 1,755
67,000 Mutual Risk Management, Ltd. ......................... 2,245
--------
6,663
--------
Textile (0.5%):
100,000 G & K Services........................................ 1,950
--------
Timeshare & Software (0.9%):
70,000 Fiserv, Inc.(b)....................................... 1,969
64,400 Uunet Technologies, Inc.(b) .......................... 1,771
--------
3,740
--------
Trucking (0.8%):
80,000 American Freightways Corp.(b) ........................ 1,640
90,000 TNT Freightways Corp.................................. 1,789
--------
3,429
--------
Utilities--Electric (1.2%):
215,000 California Energy, Inc.(b) ........................... 3,521
52,000 Enron Global Power & Pipeline ........................ 1,235
</TABLE>
Continued
46
B-167
<PAGE>
THE ONE GROUP FAMILY OF MUTUAL FUNDS
Small Company Growth Fund
- --------------------------------------------------------------------------------
SCHEDULE OF PORTFOLIO INVESTMENTS, CONTINUED JUNE 30, 1995
(Amounts in Thousands, except Shares or Principal Amount)
<TABLE>
<CAPTION>
SHARES OR
PRINCIPAL SECURITY MARKET
AMOUNT DESCRIPTION VALUE
------ ---------------------------------------------------------------------- -----
<S> <C> <C>
COMMON STOCK, CONTINUED:
Utilities--Electric, continued:
5,500 Lincoln Electric ......................................................... $ 165
--------
4,921
--------
Utilities--Gas & Pipeline (0.2%):
60,000 Westcoast, Inc. .......................................................... 885
--------
Utilities--Telephone (0.6%):
72,000 Telephone & Data Systems, Inc. ........................................... 2,619
--------
Total Common Stocks ................................................................. 407,283
PARTICIPATING UNITS (0.0%):
3,040 Apria Healthcare Group, Inc................................................ 86
--------
Total Participating Units ........................................................... 86
--------
Total Investments, at value ......................................................... 407,369
--------
REPURCHASE AGREEMENTS (2.9%):
$12,390,000 Lehman Brothers, 6.10%, dated
6/30/95, due 7/3/95
(Collateralized by $12,925,000
various U.S Government
Securities, 0.00%, 7/5/95-5/31/96,
market value--$12,639) ......................................... $ 12,390
--------
Total Repurchase Agreements ......................................................... 12,390
--------
Total (Cost--$362,501)(a) ........................................................... $419,759
--------
--------
</TABLE>
- -------------
Percentages indicated are based on net assets of $427,483.
(a) Represents cost for financial reporting purposes and differs from
cost basis for federal income tax purposes by the amount of losses
recognized for financial reporting in excess of federal income tax
reporting of approximately $1,410. Cost for federal income tax
purposes differs from value by net unrealized appreciation of
securities as follows:
<TABLE>
<S> <C>
Unrealized appreciation ........ $ 64,660
Unrealized depreciation ........ (8,812)
--------
Net unrealized appreciation..... $ 55,848
--------
--------
</TABLE>
(b) Represents non-income producing security.
ADR--American Depository Receipt
See notes to financial statements.
47
B-168
<PAGE>
THE ONE GROUP FAMILY OF MUTUAL FUNDS
INTERNATIONAL EQUITY INDEX FUND
- --------------------------------------------------------------------------------
SCHEDULE OF PORTFOLIO INVESTMENTS JUNE 30, 1995
(Amounts in Thousands, except Shares or Principal Amount)
<TABLE>
<CAPTION>
SHARES OR
PRINCIPAL SECURITY MARKET
AMOUNT DESCRIPTION VALUE
------ ----------- ------
<S> <C> <C>
COMMON STOCKS (97.6%):
Argentina (0.8%):
53 Ba Embotllodora ........................................................... $ 67
60,475 Cia Bavuera Oerez Companc SA .............................................. 254
4,954 Ciadea SA ................................................................. 24
89,920 Telecom Argentina SA--Class B ............................................. 409
258,880 Telefonica de Argentina--Class B .......................................... 650
17,801 Yacimentos Petroliferos Fiscades SA ....................................... 339
------
1,743
------
Australia (2.3%):
220,700 Boral Ltd. ................................................................ 551
69,520 Broken Hill Proprietary Co. ............................................... 854
25,225 Coles Myer Ltd. ........................................................... 79
55,500 CSR Ltd. .................................................................. 173
41,900 Email Ltd. ................................................................ 102
51,900 Fai Insurances Ltd. ....................................................... 21
138,000 General Property Trust .................................................... 233
80,000 M.I.M. Holdings Ltd. ...................................................... 99
119,800 National Australian Bank Ltd. ............................................. 945
20,250 News Corp. Ltd. ........................................................... 100
20,800 Newcrest Mining Ltd. ...................................................... 88
126,700 Pioneer International Ltd. ................................................ 315
40,400 Southcorp Holdings Ltd. ................................................... 81
104,800 Stockland Group ........................................................... 244
88,900 News Corp. Ltd. ........................................................... 496
54,600 TNT Ltd.(b) ............................................................... 72
47,200 Western Mining Corp., Holding Ltd. ........................................ 259
81,100 Westfield Trust Units ..................................................... 142
93,900 Westpac Banking Corp.(b) .................................................. 339
------
5,193
------
Austria (1.5%):
950 Austrian Airlines(b) ....................................................... 161
13,650 Bank of Austria ............................................................ 1,136
1,950 Bank of Austria, Participating Certificates ................................ 69
250 BWT AG ..................................................................... 30
1,848 Constantia Industries Holding(b) ........................................... 124
2,450 Creditanstalt Bankverein ................................................... 144
1,100 EA Generali AG ............................................................. 324
1,000 Lenzing AG ................................................................. 93
3,450 OEMV AG .................................................................... 398
850 Osterreichische Brau-Beteiligungs AG ....................................... 45
5,350 Osterreichische Elekrizitaitswirts AG(b) ................................... 392
6,500 Steyr-Daimler-Puch AG(b) ................................................... 117
1,300 Veitsch-Radex AG(b) ........................................................ 31
750 Wienerberger Baustoffindustrie AG .......................................... 288
------
3,352
------
Belgium (1.9%):
17,580 Delhaize Le Lion--PS ....................................................... 792
5,597 Electrabel NPV ............................................................. 1,184
1,592 Fortis AG .................................................................. 169
1,116 GBL Bruxelles Lambert--PS .................................................. 150
1,017 Generale de Banque SA ...................................................... 327
346 Kredietbank ................................................................ 82
1,302 Kredietbank AFVL ........................................................... 309
2,990 NV Union Miniere SA(b) ..................................................... 196
2,236 Petrofina SA NPV ........................................................... 676
699 Royal Belge SA ............................................................. 132
343 Solvay SA .................................................................. 190
------
4,207
------
Brazil (0.9%):
378,000 Centrais Eletrobras ........................................................ 104
1,133,000 Cia Vale Do Rio Doce ....................................................... 332
1,211,000 Eletrobras Cent El ......................................................... 329
355,000 Light Servicos de El ....................................................... 112
886,000 Petrol Brasil .............................................................. 77
141,000 Sadia Concordia SA ......................................................... 131
3,589,000 Sid Nacional ............................................................... 81
13,000 Souza Cruz ................................................................. 99
10,660,819 Telec Brasileiras TE ....................................................... 337
828,000 Telesp Tel S Paulo ......................................................... 105
1,458,000 Vale Rio Doce .............................................................. 224
------
1,931
------
Denmark (1.3%):
3,550 Carlsberg AG ............................................................... 165
2,650 Carlsberg AS-B ............................................................. 124
4,900 Den Danske Bank ............................................................ 308
13 D/S 1912--B ................................................................ 248
9 D/S Svendborg--B ........................................................... 247
300 FLS Industries A/S B ....................................................... 30
2,850 ISS--International Service System--Class B ................................. 74
300 J Lauritzen Holdings A/S ................................................... 59
250 Korn-Og Foderstof .......................................................... 10
150 NKT Holdings AS ............................................................ 9
3,100 Novo Nordisk A/S B ......................................................... 331
3,072 Royal Copenhagen A/S Class A ............................................... 273
600 Superfos AS ................................................................ 49
12,650 Tele Danmark AS Class B .................................................... 704
3,750 Unidanmark A/S A ........................................................... 184
------
2,815
------
Finland (0.8%):
135,320 Kansallis Banking Group(b) ................................................. 147
16,400 Kymmene OY ................................................................. 511
14,500 Nokia AB ................................................................... 860
8,200 Repola OY SI ............................................................... 173
1,200 Sampo Insurance Co. A Free ................................................. 60
40,400 Unitas Bank Ltd. A(b) ...................................................... 131
------
1,882
------
France (9.4%):
2,200 Accor SA ................................................................... 293
11,800 Alcatel Alsthom ............................................................ 1,063
12,450 Axa SA ..................................................................... 673
</TABLE>
Continued
48
B-169
<PAGE>
THE ONE GROUP FAMILY OF MUTUAL FUNDS
INTERNATIONAL EQUITY INDEX FUND
- --------------------------------------------------------------------------------
SCHEDULE OF PORTFOLIO INVESTMENTS, CONTINUED JUNE 30, 1995
(Amounts in Thousands, except Shares or Principal Amount)
<TABLE>
<CAPTION>
SHARES OR
PRINCIPAL SECURITY MARKET
AMOUNT DESCRIPTION VALUE
------ ----------- ------
<S> <C> <C>
COMMON STOCKS, CONTINUED:
France, continued:
12,200 Banque National de Paris ............................................... $ 589
3,000 BIC .................................................................... 495
1,050 Bouygues ............................................................... 126
8,200 Carnaud Metal Box--SA .................................................. 367
1,680 Carrefour .............................................................. 861
440 Chargeurs .............................................................. 86
7,300 Cie Financiere de Paribas .............................................. 439
4,950 Compagnie de St. Gobain(b) ............................................. 599
9,600 Compagnie de Suez ...................................................... 535
17,850 Compagnie Francaise de Petroleum Total(b) .............................. 1,075
750 Compagnie Francaise de Petroleum Total Certificates Petroliers(b) ...... 34
7,150 Compagnie Generale des Eaux ............................................ 797
650 Credit Foncier de France ............................................... 72
5,250 Danone Group ........................................................... 884
1,150 Dollfus-Mieg & Cie ..................................................... 65
1,650 Ecco SA ................................................................ 259
21,350 Elf Aquitaine .......................................................... 1,579
6,600 Elf Sanofi ............................................................. 366
4,450 Eridania Beghin Say .................................................... 687
3,250 Havas .................................................................. 258
1,300 Imetal ................................................................. 153
5,455 L'Air Liquide .......................................................... 872
6,235 Lafarge Coppee ......................................................... 485
7,750 Lagardere Group ........................................................ 161
7,750 Lagardere Group Warrants ............................................... 5
2,000 Legrand(b) ............................................................. 318
4,450 L'Oreal ................................................................ 1,117
8,140 LVMH Moet Hennessy Louis Vuitton ....................................... 1,466
3,700 Lyonnaise des Eaux Dumez ............................................... 350
7,550 Michelin B ............................................................. 335
8,120 Pernod Ricard .......................................................... 534
1,500 Pinault-Printemps Redoute(b) ........................................... 322
1,200 Promodes ............................................................... 274
4,350 PSA Peugeot Citroen(b) ................................................. 604
26,850 Rhone-Poulenc--A ....................................................... 606
5,450 Schneider SA ........................................................... 431
450 Societe d'Applications Generales D'electricite et de Mecanique(b) ...... 259
5,273 Societe Generale de Paris .............................................. 617
8,350 Thomson CSF(b) ......................................................... 187
-------
21,298
-------
Germany (14.4%):
600 AGIV AG--Fuer Industrie und Verkehrswesen .............................. 194
2,474 Allianz AG Holdings .................................................... 4,429
1,924 Allianz AG Holdings Rights(b) .......................................... 143
440 AMB--AAchener und Muenchener-Beteiligungs AG ........................... 305
110 AMB--AAchener und Muenchener-Beteiligungs AG, Registered ............... 81
280 Asko deutsche kaufhaus AG .............................................. 175
4,780 BASF AG ................................................................ 1,019
5,530 Bayer AG ............................................................... 1,373
1,310 Bayer Hypotheken--und Wechsel-Bank AG .................................. 357
1,730 Bayerische Vereinsbank(b) .............................................. 524
430 Beiersdorf ............................................................. 341
220 Bilfinger & Berger Bau AG .............................................. 102
17 CKAG Colonia Knozern ................................................... 15
230 Colonia konzern AG-R ................................................... 207
4,540 Daimler Benz AG ........................................................ 2,087
730 Degussa ................................................................ 228
46,900 Deutsche Bank AG ....................................................... 2,280
3,680 Deutsche Lufthansa AG(b) ............................................... 532
310 Douglas Holdings AG .................................................... 117
28,800 Dresdner Bank AG ....................................................... 832
150 Escada AG .............................................................. 33
900 Fag Kuglefischer George Schaefer Kommanditgesellschaft Auf Aktien(b) ... 123
490 Heidelberger Zement AG ................................................. 419
900 Hochtief AG ............................................................ 504
500 Karstadt AG ............................................................ 219
1,170 Kaufhof AG ............................................................. 420
2,270 Kloeckner, Humbolt-Deutz AG(b) ......................................... 75
490 Linde AG(b) ............................................................ 290
490 Linotype-Hell AG(b) .................................................... 109
1,060 Man AG ................................................................. 272
3,880 Mannesmann AG .......................................................... 1,184
70 Muenshener Ruechver-Sicherungs Gesellschaft ............................ 132
785 Muenshener Ruechver-Richerung Gesellschaft--Vink ....................... 1,718
2,780 Preussag AG ............................................................ 831
3,177 RWE--Rheinisch-Westfaelisches Elektrizitaetswerk AG .................... 1,103
220 Salamander AG .......................................................... 46
690 SAP AG ................................................................. 916
470 SAP AG--Vorzug ......................................................... 595
4,500 Schering AG ............................................................ 314
6,370 Siemens AG ............................................................. 3,153
3,265 Thyssen AG(b) .......................................................... 608
6,230 Veba AG ................................................................ 2,443
1,550 Viag AG ................................................................ 608
3,670 Volkswagen AG .......................................................... 1,056
580 Volkswagen AG Vorzugsaktien ............................................ 128
-------
32,640
-------
Greece (1.1%):
6,700 Alpha Credit Bank ...................................................... 372
9,931 Commercial Bank of Greece .............................................. 424
6,650 Ergo Bank .............................................................. 306
11,050 Hellenic Bottling ...................................................... 328
8,650 Hellenic Sugar ......................................................... 131
26,960 Heracles General Cement Co. ............................................ 264
</TABLE>
Continued
49
B-170
<PAGE>
THE ONE GROUP FAMILY OF MUTUAL FUNDS
INTERNATIONAL EQUITY INDEX FUND
- --------------------------------------------------------------------------------
SCHEDULE OF PORTFOLIO INVESTMENTS, CONTINUED JUNE 30, 1995
(Amounts in Thousands, except Shares or Principal Amount)
<TABLE>
<CAPTION>
SHARES OR
PRINCIPAL SECURITY MARKET
AMOUNT DESCRIPTION VALUE
------ ----------- ------
<S> <C> <C>
COMMON STOCKS, CONTINUED:
Greece, continued:
2,900 Intracom SA ........................................... $ 80
7,090 Intracom GRD 700 BR Bonus Issue(b) .................... 166
5,900 National Bank of Greece ............................... 322
-------
2,393
-------
Hong Kong (0.8%):
158,400 Applied International Holdings(b) ..................... 16
30,700 Bank of East Asia ..................................... 92
95,000 Cathay Pacific Airways ................................ 139
106,000 Hong Kong Telecommunications .......................... 210
145,000 Hutchison Whampoa ..................................... 701
215,000 Oriental Press Group .................................. 87
68,000 Swire Pacific Ltd. A .................................. 519
13,000 Television Broadcasts ................................. 46
13,440 Wing Lung Bank ........................................ 76
-------
1,886
-------
Indonesia (1.3%):
167,000 Astra International PT--Foreign Registry .............. 296
25,000 Bank International Indonesia PT ....................... 77
136,000 Bank International Indonesia PT--Foreign Registry ..... 318
203,000 Barito Pacific Tim .................................... 292
41,500 Gudang Garam .......................................... 319
69,000 Indocement Tunggal Prakarsa PT--Foreign Registry ...... 271
45,000 Indosat PT ............................................ 171
40,500 Init Indorayon ........................................ 88
1,246,000 Polysindo Eka Perkasa PT(b) ........................... 700
36,000 Sampoerna HS .......................................... 283
86,000 Smart(b) .............................................. 91
53,000 Smart Valorin(b) ...................................... 56
-------
2,962
-------
Ireland (0.2%):
55,400 Allied Irish Banks .................................... 261
27,400 James Crean PLC ....................................... 96
-------
357
-------
Italy (6.6%):
19,800 Acciaerie e Ferriere Lombarde Falck SPA(b) ............ 28
206,000 Alitalia SPA .......................................... 98
103,480 Assicorazioni Generali SPA ............................ 2,432
207,000 Banca Commerciale Italiana ............................ 468
28,200 Banca Nazionale Dell'agricoltura SPA .................. 22
82,800 Banco Ambrosiano Veneto SPA ........................... 274
27,800 Benetton Group SPA .................................... 275
25,500 Burgo ................................................. 168
344,000 Credito Italiano ...................................... 399
69,500 Edison SPA ............................................ 310
506,800 Fiat SPA .............................................. 1,787
149,400 Fiat SPA Privileged(b) ................................ 325
106,100 Fiat SPA di Risp non convertible(b) ................... 229
133,000 Fidis-finanziaria di sviluppo SPA ..................... 284
67,800 Impregilo SPA(b) ...................................... 65
202,300 Ing C Olivetti & C SPA(b) ............................. 198
112,600 Istituto Bancario san Paolo di Torina ................. 610
28,000 Italcementi SPA(b) .................................... 193
106,900 Italgas ............................................... 278
22,600 La Previdenta Assicurazoni SPA ........................ 163
35,600 La Rinascente SPA ..................................... 202
68,720 Mediobanca SPA ........................................ 499
636,000 Montedison SPA ........................................ 455
166,100 Parmalat finanziaria SPA .............................. 148
240,900 Pirelli SPA(b) ........................................ 320
51,300 Ras--Riuniune Adriatici de Sicurta SPA ................ 543
15,200 Ras RNC ............................................... 97
13,600 Riunione Adruatica di Sicurt SPA di Risp .............. 87
18,000 Sai--Societa Assicuratrice Industriale SPA ............ 192
55,700 Saipem ................................................ 112
55,700 Sirti SPA ............................................. 412
87,500 SME Meridionale SPA ................................... 218
994,600 Telecom Italia SPA .................................... 2,696
214,400 Telecom Italia--di Risp ............................... 454
-------
15,041
-------
Japan (30.1%):
13,000 Ajinomoto Co. ......................................... 134
9,000 Amano Corp. ........................................... 106
32,000 Aoki Corp.(b) ......................................... 116
2,000 Arabian Oil Co. ....................................... 85
74,000 Asahi Bank, Ltd. ...................................... 790
3,000 Asahi Breweries Ltd. .................................. 35
72,000 Asahi Chemical Industry ............................... 473
20,000 Asahi Glass Co. Ltd. .................................. 221
27,000 Asahi Optical(b) ...................................... 90
63,000 Asics Corp. ........................................... 175
56,000 Bank of Tokyo ......................................... 898
78,000 Bank of Yokohama ...................................... 662
19,000 Bridgestone Corp. ..................................... 280
27,000 Canon, Inc. ........................................... 439
22,000 Chiba Bank ............................................ 200
9,000 Chugai Pharmaceutical ................................. 91
40,000 Citizen Watch ......................................... 248
26,000 Cosmo Oil Co., Ltd. ................................... 147
18,000 Dai Nippon Printing Co., Ltd. ......................... 287
53,000 Daido Steel Co. ....................................... 250
9,000 Daifuku Co. ........................................... 101
96,000 Dai-Ichi Kangyo Bank .................................. 1,732
15,000 Daikin Industries, Ltd. ............................... 121
9,000 Daishowa Paper Manufacturing Co., Ltd.(b) ............. 40
9,000 Daito Trust ........................................... 84
17,000 Daiwa House Industries................................. 261
</TABLE>
Continued
50
B-171
<PAGE>
THE ONE GROUP FAMILY OF MUTUAL FUNDS
INTERNATIONAL EQUITY INDEX FUND
- --------------------------------------------------------------------------------
SCHEDULE OF PORTFOLIO INVESTMENTS, CONTINUED JUNE 30, 1995
(Amounts in Thousands, except Shares or Principal Amount)
<TABLE>
<CAPTION>
SHARES OR
PRINCIPAL SECURITY MARKET
AMOUNT DESCRIPTION VALUE
------ ----------- ------
<S> <C> <C>
COMMON STOCK, CONTINUED:
Japan, continued:
65,000 Daiwa Securities Co., Ltd. ............................... $ 685
97,000 Denki Kagaku Kogyo(b) .................................... 323
7,000 Ebara Corp. .............................................. 85
8,000 Fanuc Co. ................................................ 345
110,000 Fuji Bank Ltd. ........................................... 2,218
13,000 Fuji Photo Film Ord ...................................... 308
6,000 Fujikura ................................................. 35
22,000 Fujita Corp.(b) .......................................... 104
5,000 Fujita Kanko, Inc. ....................................... 110
65,000 Fujitsu, Ltd. ............................................ 648
32,000 Furukawa Electric Co. .................................... 151
23,000 Gunma Bank ............................................... 274
48,000 Hankyu Corp. ............................................. 288
10,000 Hankyu Department Store .................................. 119
10,000 Haseko ................................................... 76
33,000 Hazama-gumi(b) ........................................... 137
3,000 Hirose Electric .......................................... 186
94,000 Hitachi, Ltd. ............................................ 937
31,000 Honda Motor Co. .......................................... 475
22,000 Honshu Paper Co., Ltd. ................................... 129
4,000 House Food Industry ...................................... 84
78,000 Industrial Bank of Japan ................................. 1,958
6,000 Isetan ................................................... 81
11,000 Ito Yokado Co., Ltd. ..................................... 580
72,000 Itochu Corp. ............................................. 420
10,000 Iwatani & Co. ............................................ 47
119,000 Japan Air Lines(b) ....................................... 764
44,000 Japan Energy Corp. ....................................... 143
66,000 Japan Steel Works ........................................ 147
20,000 Joyo Bank ................................................ 170
14,000 Jusco Co., Ltd. .......................................... 291
33,000 Kajima Corp. ............................................. 328
8,000 Kamigumi Co., Ltd. ....................................... 80
32,000 Kaneka Corp. ............................................. 206
28,000 Kansai Electric Power .................................... 753
14,000 Kao Corp. ................................................ 169
10,000 Kawasaki Kisen(b) ........................................ 26
154,000 Kawasaki Steel Corp.(b) .................................. 512
29,000 Keihin Railway ........................................... 192
9,000 Kinden Corp. ............................................. 168
137,000 Kinki Nippon Railway(b) .................................. 1,202
49,000 Kirin Brewery Co. ........................................ 520
161,000 Kobe Steel, Ltd.(b) ...................................... 384
4,000 Kokuyo Co., Ltd. ......................................... 90
10,000 Komatsu, Ltd. ............................................ 76
53,000 Konica Corp. ............................................. 324
40,000 Koyo Sieko ............................................... 297
26,000 Kubota Corp. ............................................. 166
56,000 Kumagai Gumi Co. ......................................... 234
15,000 Kurabo Industries ........................................ 54
13,000 Kuraray Co., Ltd. ........................................ 141
26,000 Kureha Chemical Industry ................................. 104
8,000 Kyocera Corp. ............................................ 658
20,000 Kyowa Hakko Kogyo ........................................ 194
21,000 Lion Corp. ............................................... 121
4,000 Makita Corp. ............................................. 55
123,000 Marubeni Corp. ........................................... 625
10,000 Marui Co., Ltd. .......................................... 159
67,000 Matsushita Electric Industrial Co. ....................... 1,043
12,000 Meiji Seika .............................................. 70
32,000 Menebea Co., Ltd. ........................................ 205
9,000 Misawa ................................................... 75
48,000 Mitsubishi Corp. ......................................... 546
40,000 Mitsubishi Electric Corp. ................................ 281
51,000 Mitsubishi Estate Co., Ltd. .............................. 574
74,000 Mitsubishi Heavy Industries .............................. 503
36,000 Mitsubishi Kasei Corp. ................................... 154
67,000 Mitsubishi Materials Corp. ............................... 300
17,000 Mitsubishi Oil Co. ....................................... 163
12,000 Mitsubishi Steel Manufacturing(b) ........................ 58
59,000 Mitsubishi Trust & Banking ............................... 835
33,000 Mitsui Engineering & Shipbuilding Co.(b) ................. 72
29,000 Mitsui Fudosan ........................................... 332
14,000 Mitsui Marine & Fire ..................................... 92
30,000 Mitsui Mining & Smelting(b) .............................. 89
18,000 Mitsui O.S.K. Lines, Ltd.(b) ............................. 50
51,000 Mitsui Taotsu Chemical ................................... 188
50,000 Mitsui Trust & Banking Co. ............................... 460
59,000 Mitsui & Co. ............................................. 461
34,000 Mitsui-soko .............................................. 247
4,000 Mori Seiki(b) ............................................ 71
7,000 Murata Manufacturing Co., Ltd. ........................... 265
68,000 NEC Corp. ................................................ 745
28,000 New Oji Paper Co., Ltd. .................................. 269
14,000 NGK Insulators ........................................... 127
33,000 Nichii Co., Ltd. ......................................... 358
58,000 Niigata Engineering(b) ................................... 171
15,000 Nippon Beer Sugar Manufacturing .......................... 59
33,000 Nippon Express Co., Ltd. ................................. 304
11,000 Nippon Fire & Marine ..................................... 69
10,000 Nippon Light Metal Co. ................................... 46
10,000 Nippon Meat Packers ...................................... 146
50,000 Nippon Oil Co. ........................................... 314
44,000 Nippon Paper Industries Co. .............................. 285
31,000 Nippon Sheet Glass ....................................... 139
11,000 Nippon Shinpan Co. ....................................... 71
12,000 Nippon Shokubai K.K. Co. ................................. 106
280,000 Nippon Steel Co. ......................................... 911
27,000 Nippon Yusen Kabushiki Kaisha ............................ 151
24,000 Nippondenso Co., Ltd. .................................... 436
19,000 Nishimatsu ............................................... 226
134,000 Nissan Motors Co., Ltd. .................................. 856
13,000 Nisshinbo Industries ..................................... 103
4,000 Nissin Food Products ..................................... 98
199,000 NKK Corp.(b) ............................................. 467
83,000 Nomura Securities Co., Ltd. .............................. 1,449
22,000 Noritake Co., Ltd. ....................................... 147
</TABLE>
Continued
51
B-172
<PAGE>
THE ONE GROUP FAMILY OF MUTUAL FUNDS
INTERNATIONAL EQUITY INDEX FUND
- --------------------------------------------------------------------------------
SCHEDULE OF PORTFOLIO INVESTMENTS, CONTINUED JUNE 30, 1995
(Amounts in Thousands, except Shares or Principal Amount)
<TABLE>
<CAPTION>
SHARES OR
PRINCIPAL SECURITY MARKET
AMOUNT DESCRIPTION VALUE
------ ----------- ------
<S> <C> <C>
COMMON STOCK, CONTINUED:
Japan, continued:
25,000 NSK, Ltd. ............................................. $ 144
37,000 NTN Corp. ............................................. 218
43,000 Obayashi Corp. ........................................ 331
34,000 Odakyu Electric Railway ............................... 247
18,000 Okumura Corp. ......................................... 171
17,000 Omron Corp. ........................................... 325
6,000 Orix Corp. ............................................ 200
82,000 Osaka Gas Corp. ....................................... 303
20,000 Penta Ocean ........................................... 127
11,000 Pioneer Electronics Corp. ............................. 187
49,000 Ricoh Corp., Ltd. ..................................... 421
5,000 Rohm .................................................. 257
114,000 Sakura Bank Ltd. ...................................... 1,190
14,000 Sankyo Co., Ltd. ...................................... 325
56,000 Sanyo Electric Co., Ltd. .............................. 275
6,000 Secom ................................................. 377
4,000 Sega Enterprises, Ltd. ................................ 142
9,000 Seino Transportation .................................. 152
32,000 Sekisui Chemical ...................................... 379
24,000 Sekisui House, Ltd. ................................... 297
12,000 Seven Eleven Japan .................................... 859
52,000 Sharp Corp. ........................................... 687
25,000 Shimizu Corp. ......................................... 242
8,000 Shin-Etsu Chemical .................................... 141
13,000 Shionogi & Co. ........................................ 115
30,000 Shizuoka Bank ......................................... 375
59,000 Showa Denko K.K.(b) ................................... 174
8,000 Skylark ............................................... 125
11,000 Sony Corp. ............................................ 528
109,000 Sumitomo Bank ......................................... 1,890
33,000 Sumitomo Chemical Co. ................................. 129
31,000 Sumitomo Corp. ........................................ 282
15,000 Sumitomo Electric Industries(b) ....................... 179
22,000 Sumitomo Marine & Fire Insurance ...................... 175
125,000 Sumitomo Metal Industries ............................. 326
14,000 Sumitomo Metal & Mining(b) ............................ 103
43,000 Taisei Corp. .......................................... 254
18,000 Taisho Pharmaceutical ................................. 348
26,000 Takashimaya Co. ....................................... 350
27,000 Takeda Chemical Industries ............................ 357
12,000 Teijin Ltd. ........................................... 57
14,000 Teikoku Oil ........................................... 83
24,000 The Daiei, Inc. ....................................... 292
13,000 The Nichido Fire & Marine Insurance Co., Ltd. ......... 105
18,000 Tobu Railway .......................................... 112
16,000 Tohoku Electric Power ................................. 443
67,000 Tokai Bank ............................................ 743
43,000 Tokio Marine & Fire Insurance ......................... 493
8,000 Tokyo Dome Corp. ...................................... 123
54,000 Tokyo Electric Power .................................. 1,656
6,000 Tokyo Electron, Ltd. .................................. 205
92,000 Tokyo Gas, Ltd. ....................................... 362
34,000 Tokyu Corp. ........................................... 218
35,000 Toppan Printing Co., Ltd. ............................. 458
22,000 Topy Industries ....................................... 96
75,000 Toray Industries, Inc. ................................ 466
72,000 Tosoh ................................................. 271
8,000 Tostem Corp. .......................................... 246
45,000 Toto .................................................. 642
7,000 Toyo Seikan Kaisha .................................... 205
27,000 Toyobo Ltd. ........................................... 89
14,000 Toyoda Auto Loom Works ................................ 253
108,000 Toyota Motor Co. ...................................... 2,140
74,000 UBE Industries(b) ..................................... 258
48,000 Unitika, Ltd.(b) ...................................... 122
18,000 Yamaha Corp. .......................................... 196
10,000 Yamanouchi Pharmaceutical ............................. 225
28,000 Yamato Transport Co., Ltd. ............................ 298
43,000 Yasuda Trust & Banking ................................ 281
23,000 Yokogawa Electric Corp. ............................... 161
-------
68,415
-------
Malaysia (0.4%):
147,500 Faber Group(b) ........................................ 142
8,000 Highlands & Lowlands Berhad ........................... 15
5,000 Idris Hydraulic Berhad(b) ............................. 7
146,000 Industrial Oxygen, Inc. Berhad ........................ 192
20,500 Land & General Holdings ............................... 69
37,000 Nestle Berhad ......................................... 284
18,000 Pan Malaysia Cement Works ............................. 65
2,000 Promet Berhad(b) ...................................... 2
41,000 Rashid Hussain Berhad ................................. 131
16,000 Tenaga Nasional Berhad ................................ 65
-------
972
-------
Mexico (0.4%):
21,330 Cementos de Mexico, Class A ........................... 74
16,200 Cementos de Mexico, Class B(b) ........................ 58
51,000 Cifra S.A. de C.V., Series C .......................... 67
33,500 Grupo Carso S.A., Series A1(b) ........................ 183
29,000 Kimberly-Clark de Mexico Class A ...................... 333
103,000 Telefonos de Mexico S.A., Class L ..................... 152
9,960 Tolmex S.A., Series B2(b) ............................. 39
29,880 Vitro S.A ............................................. 85
-------
991
-------
Netherlands (2.5%):
20,150 ABN Amro Holdings NV .................................. 778
5,500 Akzo Nobel NV ......................................... 657
21,000 Elsevier NV NTFL1 ..................................... 248
1,625 Heineken NV ........................................... 246
7,600 Internationale Nederlanden Group ...................... 420
11,100 Philips Electronics ................................... 470
19,850 Koninklijke Nederlande Petroleum(b) ................... 2,424
3,700 Unilever NV ........................................... 481
-------
5,724
-------
</TABLE>
Continued
52
B-173
<PAGE>
THE ONE GROUP FAMILY OF MUTUAL FUNDS
INTERNATIONAL EQUITY INDEX FUND
- --------------------------------------------------------------------------------
SCHEDULE OF PORTFOLIO INVESTMENTS, CONTINUED JUNE 30, 1995
(Amounts in Thousands, except Shares or Principal Amount)
<TABLE>
<CAPTION>
SHARES OR
PRINCIPAL SECURITY MARKET
AMOUNT DESCRIPTION VALUE
------ ----------- ------
<S> <C> <C>
COMMON STOCK, CONTINUED:
New Zealand (0.4%):
52,200 Fisher & Paykel Industries ............................ $ 153
78,200 Lion Nathan, Ltd. ..................................... 155
115,800 Telecom Corp. of New Zealand .......................... 433
34,837 Wilson & Horton, Ltd. ................................. 199
------
940
------
Norway (0.7%):
5,880 Aker A/S Series B ..................................... 74
8,400 Aker A/S, Series A .................................... 113
12,800 Hafslund Nycomed A/S Series A ......................... 296
6,090 Kvaerner A/S, Series A ................................ 277
16,080 Norsk Hydro A/S ....................................... 675
2,560 Norske SkogsindustrierA/S Series B .................... 85
12,880 Vard A Ord(b) ......................................... 23
------
1,543
------
Phillipines (0.8%):
162,960 Ayala Corp., Class B .................................. 182
278,750 Ayala Land, Inc., Class B ............................. 323
21,450 Manila Electric Co., Class B .......................... 172
7,300 Metropolitan Bank ..................................... 159
357,500 Petron Corp. .......................................... 235
7,400 Philippine Long Distance Telephone Co. ................ 530
15,390 Philippine National Bank(b) ........................... 180
34,970 San Miguel Corp., Class B ............................. 145
------
1,926
------
Portugal (0.9%):
25,070 Banco Commercial Portugues--Registered ................ 332
18,270 Banco Espirito Santo e Commerical de Lisboa ........... 305
10,930 Banco Portuguese de Investimento-Registered ........... 191
3,800 Jeronimo Martins ...................................... 192
2,250 Modelo Contin SGPS .................................... 208
2,900 Modelo SGPS ........................................... 103
13,800 Sonae Industria e Investimentos ....................... 331
5,450 Soporcel(b) ........................................... 141
15,740 Unicer-Unioa Cervejeira ............................... 266
------
2,069
------
Singapore (0.3%):
82,000 Chuan Hup Holdings .................................... 67
243,000 Hotel Properties, Ltd ................................. 430
229,000 Neptune Orient Lines .................................. 269
12,000 Promet Berhad(b) ...................................... 11
------
777
------
Spain (3.2%):
800 Acerinox SA ........................................... 98
15,200 Banco Bilbao Vizcaya .................................. 438
11,300 Banco Central Hispanoamericano ........................ 239
12,900 Banco de Santander .................................... 509
12,300 Corporacion Bancaria de Espana SA(b) .................. 454
5,600 Corporacion Financiera Alba ........................... 289
2,300 Corporacion Mapfre cia International d SA ............. 113
9,600 Ebro Agricolas, Compania de Alimentacion SA ........... 100
4,700 El Aguila SA(b) ....................................... 35
2,000 Empresa Nacional de Celulosa .......................... 51
25,400 Empresa Nacional de Electricidad SA ................... 1,254
23,200 Ercros SA(b) .......................................... 26
2,800 Fabricacion Automovile Renault de Espanola ............ 84
1,500 Fomento de Construcciones y Contrates SA .............. 128
3,000 Gas Natural SDG ....................................... 358
69,600 Iberdrola ............................................. 524
5,400 Inmobiliaria Metropolitana Vasco Central SA ........... 160
20,100 Repsol SA ............................................. 632
16,800 Sarrio SA(b) .......................................... 85
6,000 Tabacalera SA--A ...................................... 224
82,600 Telefonica de Espana .................................. 1,064
48,310 Union Electric Penosa SA .............................. 226
10,800 Uralita SA(b) ......................................... 130
4,200 Vallehermoso SA ....................................... 72
4,000 Viscofan Industria Navarra de Envolturas Celulosica ... 59
------
7,352
------
Sweden (1.7%):
2,350 Asea AB A Free ........................................ 202
800 Asea AB B Free ........................................ 68
19,500 Astra AB A Free ....................................... 601
6,800 Astra AB B Free ....................................... 205
13,300 Atlas Copco AB A Free ................................. 186
1,000 Atlas Copco AB B Free ................................. 14
4,450 Electrolux AB, Class B Free ........................... 202
29,800 Ericsson .............................................. 594
4,600 Esselte AB B Free ..................................... 57
6,400 Hennes & Mauritz AB B Free ............................ 375
4,200 Skandia Forsakrings AB ................................ 81
20,200 Skandiaviska Enskilda Banken Series A Free ............ 105
4,150 Skanska AB Series B ................................... 96
5,750 Stora Kopparberg B .................................... 78
14,000 Stora Kopparbergs ..................................... 188
15,500 Svenska Cellulosa ..................................... 288
800 Svenska Handlesbank B ................................. 11
11,150 Svenska Handlespanken A ............................... 166
1,750 S.K.F. AB Series B Free ............................... 35
7,150 Trelleborg AB B Free .................................. 84
</TABLE>
Continued
53
B-174
<PAGE>
THE ONE GROUP FAMILY OF MUTUAL FUNDS
INTERNATIONAL EQUITY INDEX FUND
- --------------------------------------------------------------------------------
SCHEDULE OF PORTFOLIO INVESTMENTS, CONTINUED JUNE 30, 1995
(Amounts in Thousands, except Shares or Principal Amount)
<TABLE>
<CAPTION>
SHARES OR
PRINCIPAL SECURITY MARKET
AMOUNT DESCRIPTION VALUE
------ ----------- ------
<S> <C> <C>
COMMON STOCKS, CONTINUED:
Sweden, continued:
14,500 Volvo AB B Free.............................................. $ 276
------
3,912
------
Switzerland (2.0%):
150 Alusuisse-Lonza Holding AG .................................. 94
260 BBC Brown Boveri AG ......................................... 269
600 Ciba Geigy AG ............................................... 439
2,250 CS Holdings ................................................. 206
100 Danzas Holding AG--registered(b) ............................ 86
570 Nestle SA--registered ....................................... 593
40 Roche Holdings .............................................. 444
130 Roche Holdings AG Genusscheine .............................. 837
1,000 Sandoz AG--registered ....................................... 689
230 Schweizerischer Bankgesellsacht ............................. 238
320 Schweizerischer Bankverein .................................. 113
390 Schweizerischer Rueckversicherungsgesel ..................... 300
1,150 Societe Suisse pour la Microeletronique et l'Horlogerie ..... 155
------
4,463
------
Thailand (1.1%):
30,000 Advanced Information Systems PLC Foreign Registered Shares .. 443
41,800 Bangkok Bank ................................................ 461
136,290 Krung Thai Bank, Ltd. (Foreign) ............................. 552
235,500 Padaeng Industries .......................................... 313
7,700 Shinawatra Corp. & Co. ...................................... 191
76,700 Telecomasia(b) .............................................. 284
95,200 Thai Airways International .................................. 212
41,000 Thai Airways International Foreign Registered Shares(b) ..... 82
------
2,538
------
Turkey (1.2%):
294,000 Akbank TRL .................................................. 75
102,000 Aksa TRL .................................................... 90
371,100 Arcelik AS TRL Ord(b) ....................................... 113
399,000 Eczacibasi Yatirim(b) ....................................... 199
25,800 Ege Biracilik ve Mal ........................................ 30
1,807,450 Eregli Demir ve Celik Fabrik ................................ 233
100,640 Ericiyas Biracilik .......................................... 87
2,270,500 Izmir Demir Celik(b) ........................................ 87
253,300 Koc Holdings AS ............................................. 250
175,200 Netas Telekomunik TR ........................................ 61
390,000 Petrokimya as TRL ........................................... 349
356,600 Petrol Ofisi TRL ............................................ 105
546,000 Raks Electronik ............................................. 213
220,080 T Garanti Bankasi AS(b) ..................................... 30
171,200 Tofas Turk Otomobil Fabrikas(b) ............................. 151
1,949,865 Tupras Turkiye Petrol Rafinerileri AS ....................... 463
649,800 Turk Hava Yollari AS(b) ..................................... 116
------
2,652
------
United Kingdom (7.2%):
50,900 Abbey National PLC .......................................... 379
37,500 Allied Irish Banks PLC ...................................... 178
42,900 Argyll Group PLC Ord ........................................ 229
24,700 Barclays Bank ............................................... 265
24,700 Barratt Developments PLC .................................... 72
70,400 B.A.T. Industries ........................................... 538
21,900 Bicc PLC .................................................... 103
21,700 The Boots Co. PLC ........................................... 176
28,300 Bowthorpe PLC ............................................... 167
7,400 British Aerospace PLC ....................................... 66
28,200 British Airways PLC ......................................... 185
77,300 British Gas PLC ............................................. 356
18,720 British Land Co., PLC ....................................... 119
135,700 British Petroleum Co., PLC .................................. 972
67,600 British Steel PLC ........................................... 185
148,900 British Telecom PLC ......................................... 928
100,700 BTR PLC ..................................................... 511
56,300 Cable & Wireless PLC ........................................ 385
42,285 Cadbury Schweppes PLC ....................................... 308
67,300 Camas ....................................................... 76
7,500 Commercial Union PLC ........................................ 70
6,960 Costain Group PLC ........................................... 12
24,900 Electrocomponents Ord ....................................... 237
48,900 English China Clays PLC ..................................... 302
47,300 The General Electric Co., PLC ............................... 231
64,000 Glaxo Wellcome PLC .......................................... 785
22,800 Great Universal Stores PLC .................................. 213
31,000 Guinness PLC ................................................ 233
200,900 Hanson PLC .................................................. 702
61,200 Harrison & Crossfield PLC ................................... 138
56,800 HSBC Holdings PLC ........................................... 732
15,700 Imperial Chemical Inds ...................................... 192
48,600 Land Securities PLC ......................................... 470
53,500 Lonrho PLC .................................................. 126
89,900 Marks & Spencer PLC ......................................... 578
33,800 National Power PLC .......................................... 239
22,700 Next PLC .................................................... 123
22,300 Oxford Instruments PLC ...................................... 140
18,600 Peninsular & Oriental Steam Navigation Co. .................. 171
17,600 Pilkington Bros ............................................. 49
33,300 Pilkington PLC .............................................. 92
42,600 Reuters Holdings PLC ........................................ 355
40,900 Rexam PLC ................................................... 314
33,200 Rolls-Royce PLC ............................................. 92
23,500 The Royal Bank of Scotland PLC .............................. 160
19,100 Royal Insurance PLC ......................................... 94
22,500 RTZ Corp. ................................................... 293
54,900 Sainsbury PLC ............................................... 386
12,000 Scottish & Newcastle PLC .................................... 105
35,400 Smithkline Beecham - Class A ................................ 320
36,300 Smithkline Beecham Units .................................... 322
36,700 St. James's Place Capital PLC ............................... 64
41,800 Tarmac PLC .................................................. 75
31,800 Taylor Woodrow PLC .......................................... 58
</TABLE>
Continued
54
B-175
<PAGE>
THE ONE GROUP FAMILY OF MUTUAL FUNDS
INTERNATIONAL EQUITY INDEX FUND
- --------------------------------------------------------------------------------
SCHEDULE OF PORTFOLIO INVESTMENTS, CONTINUED JUNE 30, 1995
(Amounts in Thousands, except Shares or Principal Amount)
<TABLE>
<CAPTION>
SHARES OR
PRINCIPAL SECURITY MARKET
AMOUNT DESCRIPTION VALUE
------ ----------- ------
<S> <C> <C>
COMMON STOCKS, CONTINUED:
United Kingdom, continued:
117,000 Tesco PLC ..................................... $ 539
13,600 Thorn EMI PLC ................................. 282
18,700 Unilever PLC .................................. 378
26,500 Zeneca Group PLC .............................. 447
--------
16,317
--------
U.S. Dollar Denominated (1.5%):
5,883 Banco O'Higgins ADR ........................... 135
6,712 Cervezas ...................................... 179
4,662 Chilectra Metro ............................... 237
11,891 Chilgener ADR ................................. 376
8,500 Cristalerias de Chile ADR ..................... 210
4,066 Embotella Andina ADR .......................... 143
19,962 Endesa ADR .................................... 529
10,028 Enersis ....................................... 296
4,711 Labchile ADR .................................. 89
7,615 Madeco ........................................ 219
11,887 Mader y Sint .................................. 223
6,409 Sociedad Quimic ............................... 303
3,796 Telefonos de ci ............................... 309
1,615 U.S. Industries, Inc. ......................... 22
2,500 Vina Concho ADR ............................... 48
--------
3,318
--------
Total Common Stocks ................................ 221,609
PREFERRED STOCKS (0.3%):
Germany (0.3%):
140 Escada AG - ................................... 27
2,810 RWE -- Rheinisch -- Westfaelisches
Elektrizitaetswerk AG - ..................... 772
--------
Total Preferred Stocks................................. 799
--------
U.S. TREASURY BILLS (0.1%):
$15,000 9/14/95........................................ 15
240,000 9/14/95........................................ 237
25,000 9/14/95........................................ 25
--------
Total U.S. Treasury Bills.............................. 277
--------
Total Investments, at value............................ 222,685
--------
REPURCHASE AGREEMENTS (3.4%):
7,750,000 State Street Bank, 5.50%, dated 6/30/95,
due 7/3/95 (Collateralized by
$7,940,000 U.S. Treasury Notes,
4.75%, 9/20/95, market
value--$7,818)............................... 7,750
--------
Total Repurchase Agreements 7,750
--------
Total (Cost--$217,827)(a $230,435
--------
--------
</TABLE>
- ------------------------
Percentages indicated are based on net assets of $227,014.
(a) Represents cost for financial reporting purposes and differs from cost
basis for federal income tax purposes by the amount of losses
recognized for financial reporting purposes in excess of federal income
tax reporting of approximately $53 and by the tax cost basis
adjustments of $723 for certain securities. Cost for federal income tax
purposes differs from value by net unrealized appreciation of
securities as follows:
<TABLE>
<S> <C>
Unrealized appreciation ....................... $ 23,914
Unrealized depreciation ....................... (12,082)
--------
Net unrealized appreciation ................... $ 11,832
--------
--------
</TABLE>
(b) Represents non-income producing security.
ADR--American Depositary Receipt
At June 30, 1995, the Portfolio's open futures contracts were as follows:
<TABLE>
<CAPTION>
CURRENT
OPENING MARKET
# OF CONTRACT POSITIONS VALUE
CONTRACTS TYPE (000) (000)
--------- ------------------------------------------------- --------- -------
<S> <C> <C> <C>
9 Eurotop 100 ..................................... $1,124 $1,103
11 Nikkei .......................................... 821 798
</TABLE>
See notes to financial statements.
55
B-176
<PAGE>
THE ONE GROUP FAMILY OF MUTUAL FUNDS
- --------------------------------------------------------------------------------
STATEMENTS OF ASSETS AND LIABILITIES JUNE 30, 1995
<TABLE>
<CAPTION>
(Amounts in Thousands except per share amounts)
LARGE
ASSET INCOME EQUITY COMPANY BLUE CHIP
ALLOCATION EQUITY INDEX VALUE EQUITY
FUND FUND FUND FUND FUND
---------- -------- -------- -------- ---------
<S> <C> <C> <C> <C> <C>
ASSETS:
Investments, at value ............................................... $37,807 $186,634 $228,345 $321,184 $42,526
Repurchase agreements ............................................... 7,207 1,416 9,781 56,533 426
------- -------- -------- -------- -------
45,014 188,050 238,126 377,717 42,952
Interest and dividend receivable .................................... 358 675 483 555 97
Receivable from brokers for investments sold ........................ 75 6,653
Receivable for capital shares issued ................................ 279 404 841 1,848 34
Receivable from advisor ............................................. 7 66 5 8
Organization costs .................................................. 6 2 8 10 15
Prepaid expenses and other assets ................................... 66 1 1 1
------- -------- -------- -------- -------
TOTAL ASSETS ........................................................ 45,664 189,197 239,600 386,789 43,107
------- -------- -------- -------- -------
LIABILITIES:
Cash overdraft ...................................................... 25 30 24 411 9
Dividends payable ................................................... 13 198 99 264 20
Payable to brokers for investments purchased ........................ 15,462
Payable for capital shares redeemed ................................. 154 643 44 336 102
Net payable for variation margin on futures contracts ............... 14 23 6
Options written, at value (premiums received $242) 323
Accrued expenses and other payables:
Investment advisory fees ......................................... 24 115 57 219 27
Administration fees .............................................. 6 26 32 50 6
12b-1 fees (Class A) ............................................. 1 3 1 1 1
12b-1 fees (Class B) ............................................. 2 2 1
Other ............................................................ 3 13 22
------- -------- -------- -------- -------
TOTAL LIABILITIES ................................................... 242 1,017 294 17,072 187
------- -------- -------- -------- -------
NET ASSETS:
Capital ............................................................. 42,867 141,600 199,824 329,025 33,142
Undistributed (distributions in excess of) net investment income .... 8 41 (232) 7 26
Net unrealized appreciation from investments and futures contracts .. 2,751 40,159 38,649 12,852 6,938
Undistributed net realized gains (losses) from investment
transactions ........................................................ (204) 6,380 1,065 27,833 2,814
------- -------- -------- -------- -------
NET ASSETS .......................................................... $45,422 $188,180 $239,306 $369,717 $42,920
------- -------- -------- -------- -------
------- -------- -------- -------- -------
Net Assets
Fiduciary ........................................................ $37,658 $170,919 $234,895 $365,375 $38,915
Class A .......................................................... 4,745 13,793 3,003 3,481 3,621
Class B .......................................................... 3,019 3,468 1,408 861 384
------- -------- -------- -------- -------
Total ......................................................... $45,422 $188,180 $239,306 $369,717 $42,920
------- -------- -------- -------- -------
------- -------- -------- -------- -------
Outstanding shares of beneficial interest
Fiduciary ....................................................... 3,509 11,297 16,747 28,396 2,715
Class A ......................................................... 442 913 214 270 253
Class B ......................................................... 281 229 100 66 27
------- -------- -------- -------- -------
Total ......................................................... 4,232 12,439 17,061 28,732 2,995
------- -------- -------- -------- -------
------- -------- -------- -------- -------
Net asset value
Fiduciary--offering and redemption price per share ............... $10.73 $15.13 $14.03 $12.87 $14.33
------- -------- -------- -------- -------
------- -------- -------- -------- -------
Class A--redemption price per share .............................. $10.74 $15.11 $14.02 $12.89 $14.32
------- -------- -------- -------- -------
------- -------- -------- -------- -------
Class B--offering price per share* ............................... $10.76 $15.14 $14.05 $12.96 $14.40
------- -------- -------- -------- -------
------- -------- -------- -------- -------
Maximum Sales Charge (Class A) ...................................... 4.50% 4.50% 4.50% 4.50% 4.50%
------- -------- -------- -------- -------
------- -------- -------- -------- -------
Maximum Offering Price (100%/(100%--Maximum Sales Charge) of
net asset value adjusted to nearest cent per share (Class A) ........ $11.25 $15.82 $14.68 $13.50 $14.99
------- -------- -------- -------- -------
------- -------- -------- -------- -------
Investments, at cost ................................................ $42,377 $147,891 $199,635 $364,832 $36,014
------- -------- -------- -------- -------
------- -------- -------- -------- -------
</TABLE>
- ----------------
* Redemption price per share varies based on length of time shares are held.
See notes to financial statements.
56
B-177
<PAGE>
THE ONE GROUP FAMILY OF MUTUAL FUNDS
- --------------------------------------------------------------------------------
STATEMENTS OF ASSETS AND LIABILITIES JUNE 30, 1995
<TABLE>
<CAPTION>
(Amounts in Thousands except per share amounts)
INTERNATIONAL
LARGE SMALL EQUITY
COMPANY DISCIPLINED COMPANY INDEX
GROWTH FUND VALUE FUND GROWTH FUND FUND
----------- ----------- ----------- -------------
<S> <C> <C> <C> <C>
ASSETS:
Investments, at value ..................................................... $533,868 $433,138 $407,369 $222,685
Repurchase agreements ..................................................... 31,322 36,243 12,390 7,750
-------- -------- -------- --------
565,190 469,381 419,759 230,435
Interest and dividends receivable ......................................... 1,230 1,268 215 1,362
Foreign currency, at value (Cost $80) ..................................... 81
Receivable for short forward foreign currency contracts ................... 5,605
Long forward foreign currency contracts, at value ......................... 12,477
Receivable from brokers for investments sold .............................. 15,695 22,569 8,533
Receivable for capital shares issued ...................................... 2,276 6,221 923 921
Tax reclaim receivable .................................................... 321
Organization costs ........................................................ 1 8
Prepaid expenses and other assets ......................................... 34 77 14 61
-------- -------- -------- --------
TOTAL ASSETS .............................................................. 568,731 492,642 443,480 259,804
-------- -------- -------- --------
LIABILITIES:
Cash overdraft ............................................................ 387 5,071 94 175
Dividends payable ......................................................... 305 444 38
Short forward foreign currency contracts, at value ........................ 5,603
Payable for long forward foreign currency contracts ....................... 12,498
Payable to brokers for investments purchased .............................. 1,405 13,072 15,259 13,951
Payable for capital shares redeemed ....................................... 268 386 288 265
Payable for variation margin on futures ................................... 5
Accrued expenses and other payables:
Investment advisory fees ............................................. 338 281 256 102
Administration fees .................................................. 77 64 58 31
12b-1 fees (Class A) ................................................. 5 3 2
12b-1 fees (Class B) ................................................. 5 9 2 3
Other ................................................................ 157
-------- -------- -------- --------
TOTAL LIABILITIES ......................................................... 2,790 19,330 15,997 32,790
-------- -------- -------- --------
NET ASSETS:
Capital ................................................................... 488,658 434,987 357,764 209,788
Undistributed (distributions in excess of) net investment income (10) 43 (11) 2,643
Net unrealized appreciation from investments .............................. 74,046 28,361 57,258 12,564
Net unrealized appreciation from translation of assets and
liabilities in foreign currencies ....................................... 16
Undistributed net realized gains from investment and foreign
currency transactions 3,247 9,921 12,472 2,003
-------- -------- -------- --------
NET ASSETS ................................................................ $565,941 $473,312 $427,483 $227,014
======== ======== ======== ========
Net Assets
Fiduciary ............................................................ $531,595 $448,530 $413,518 $218,299
Class A .............................................................. 27,428 13,560 11,178 5,028
Class B .............................................................. 6,918 11,222 2,787 3,687
-------- -------- -------- --------
Total ........................................................... $565,941 $473,312 $427,483 $227,014
======== ======== ======== ========
Outstanding shares of beneficial interest
Fiduciary ............................................................ 39,480 33,982 22,469 15,680
Class A .............................................................. 1,983 1,026 609 361
Class B .............................................................. 507 851 154 269
-------- -------- -------- --------
Total ........................................................... 41,970 35,859 23,232 16,310
-------- -------- -------- --------
-------- -------- -------- --------
Net asset value
Fiduciary--offering and redemption price per share ................... $13.47 $13.20 $18.40 $13.93
-------- -------- -------- --------
-------- -------- -------- --------
Class A--redemption price per share .................................. $13.83 $13.22 $18.36 $13.92
-------- -------- -------- --------
-------- -------- -------- --------
Class B--offering price per share* ................................... $13.63 $13.19 $18.14 $13.73
-------- -------- -------- --------
-------- -------- -------- --------
Maximum Sales Charge (Class A) ............................................ 4.50% 4.50% 4.50% 4.50%
-------- -------- -------- --------
-------- -------- -------- --------
Maximum Offering Price (100%/(100%--Maximum Sales Charge)of net asset
value adjusted to nearest cent per share (Class A) .. $14.48 $13.84 $19.23 $14.58
-------- -------- -------- --------
-------- -------- -------- --------
Investments, at cost ...................................................... $491,144 $441,020 $362,501 $217,827
-------- -------- -------- --------
-------- -------- -------- --------
</TABLE>
- ---------------
* Redemption price per share varies based on length of time shares are held.
See notes to financial statements.
57
B-178
<PAGE>
THE ONE GROUP FAMILY OF MUTUAL FUNDS
- --------------------------------------------------------------------------------
STATEMENTS OF OPERATIONS FOR THE YEAR ENDED JUNE 30, 1995
<TABLE>
<CAPTION>
(Amounts in Thousands)
LARGE BLUE
ASSET INCOME EQUITY COMPANY CHIP
ALLOCATION EQUITY INDEX VALUE EQUITY
FUND FUND FUND FUND FUND
---------- ------ ------- ------- ------
<S> <C> <C> <C> <C> <C>
INVESTMENT INCOME:
Interest income ............................................ $1,687 $ 397 $ 534 $ 1,826 $ 114
Dividend income ............................................ 397 7,297 4,924 6,928 1,423
------ ------- ------- ------- ------
TOTAL INCOME ............................................... 2,084 7,694 5,458 8,754 1,537
------ ------- ------- ------- ------
EXPENSES:
Investment advisory fees ................................... 283 1,474 563 1,731 440
Administration fees ........................................ 73 336 317 394 100
12b-1 fees (Class A) ....................................... 10 43 7 5 13
12b-1 fees (Class B) ....................................... 25 23 6 4 2
Custodian and accounting fees .............................. 53 24 68 57 21
Legal and audit fees ....................................... 14 52 62 37 41
Organization costs ......................................... 3 5 36 9 4
Trustees' fees and expenses ................................ 4 4 5 7 4
Transfer agent fees ........................................ 56 60 54 62 54
Registration and filing fees ............................... 31 37 55 41 27
Printing costs ............................................. 16 18 45 20 17
Other ...................................................... 39 5 41 8 61
------ ------- ------- ------- ------
TOTAL EXPENSES BEFORE WAIVERS/REIMBURSEMENTS ............... 607 2,081 1,259 2,375 784
Less Waivers/Reimbursements ................................ (112) (19) (626) (29) (161)
------ ------- ------- ------- ------
NET EXPENSES ............................................... 495 2,062 633 2,346 623
------ ------- ------- ------- ------
Net Investment Income ...................................... 1,589 5,632 4,825 6,408 914
------ ------- ------- ------- ------
REALIZED/UNREALIZED GAINS (LOSSES) FROM INVESTMENTS:
Net realized gains (losses) from investment transactions.... (178) 11,040 2,042 28,406 5,053
Change in unrealized appreciation from investments ......... 4,764 20,447 37,018 20,089 2,533
------ ------- ------- ------- ------
Net realized/unrealized gains from investments ............. 4,586 31,487 39,060 48,495 7,586
------ ------- ------- ------- ------
Change in net assets resulting from operations ............. $6,175 $37,119 $43,885 $54,903 $8,500
------ ------- ------- ------- ------
------ ------- ------- ------- ------
</TABLE>
See notes to financial statements.
58
B-179
<PAGE>
THE ONE GROUP FAMILY OF MUTUAL FUNDS
- --------------------------------------------------------------------------------
STATEMENTS OF OPERATIONS FOR THE YEAR ENDED JUNE 30, 1995
<TABLE>
<CAPTION>
(Amounts in Thousands)
LARGE SMALL INTERNATIONAL
COMPANY DISCIPLINED COMPANY EQUITY
GROWTH VALUE GROWTH INDEX
FUND FUND FUND FUND
------- ----------- ------- ------------
<S> <C> <C> <C> <C>
INVESTMENT INCOME:
Interest income ................................................ $ 1,563 $ 1,679 $ 2,665 $ 273
Dividend income ................................................ 7,674 12,663 2,882 4,904
Less foreign withholding taxes ................................. (853)
------- ------- ------- ------
TOTAL INCOME ................................................... 9,237 14,342 5,547 4,324
------- ------- ------- ------
EXPENSES:
Investment advisory fees ....................................... 2,516 3,306 3,031 1,035
Administration fees ............................................ 572 753 691 318
12b-1 fees (Class A) ........................................... 32 40 31 11
12b-1 fees (Class B) ........................................... 23 86 18 31
12b-1 fees (Service) ........................................... 2 1 2 2
Custodian and accounting fees .................................. 54 80 78 364
Legal and audit fees ........................................... 50 49 38 50
Organization costs ............................................. 3
Trustees' fees and expenses .................................... 6 6 7 6
Transfer agent fees ............................................ 76 117 91 88
Registration and filing fees ................................... 61 101 34 58
Printing costs ................................................. 42 37 21 26
Other .......................................................... 21 39 13 9
------- ------- ------- ------
TOTAL EXPENSES BEFORE WAIVERS/REIMBURSEMENTS ................... 3,455 4,615 4,055 2,001
Less Waivers/Reimbursements .................................... (9) (40) (16) (3)
------- ------- ------- ------
NET EXPENSES ................................................... 3,446 4,575 4,039 1,998
------- ------- ------- ------
Net Investment Income .......................................... 5,791 9,767 1,508 2,326
------- ------- ------- ------
REALIZED/UNREALIZED GAINS (LOSSES) FROM INVESTMENTS AND FOREIGN
CURRENCY TRANSACTIONS:
Net realized gains from investment transactions ................ 4,792 9,989 18,881 3,368
Net realized gains from foreign currency transactions .......... 5
Change in unrealized appreciation from investments and
translation of assets and liabilities in foreign currencies .. 70,757 46,373 53,633 2,455
------- ------- ------- ------
Net realized/unrealized gains from investments and foreign
currency ..................................................... 75,549 56,362 72,514 5,828
------- ------- ------- ------
Change in net assets resulting from operations ................. $81,340 $66,129 $74,022 $8,154
------- ------- ------- ------
------- ------- ------- ------
</TABLE>
See notes to financial statements.
59
B-180
<PAGE>
THE ONE GROUP FAMILY OF MUTUAL FUNDS
- -------------------------------------------------------------------------------
STATEMENTS OF CHANGES IN NET ASSETS
<TABLE>
<CAPTION>
(Amounts in Thousands)
ASSET
ALLOCATION FUND INCOME EQUITY FUND EQUITY INDEX FUND
------------------- ------------------- ---------------------
YEAR YEAR YEAR YEAR YEAR YEAR
ENDED ENDED ENDED ENDED ENDED ENDED
JUNE 30, JUNE 30, JUNE 30, JUNE 30, JUNE 30, JUNE 30,
1995 1994 1995 1994 1995 1994
-------- -------- -------- -------- -------- ---------
<S> <C> <C> <C> <C> <C> <C>
FROM INVESTMENT ACTIVITIES:
OPERATIONS:
Net investment income ......................... $ 1,589 $ 1,171 $ 5,632 $ 6,752 $ 4,825 $ 3,287
Net realized gains (losses) from investment
transactions ................................ (178) 398 11,040 7,053 2,042 2,030
Net change in unrealized appreciation
(depreciation) from investments ............. 4,764 (2,296) 20,447 (9,083) 37,018 (7,445)
-------- -------- -------- -------- -------- ---------
Change in net assets resulting from operations ..... 6,175 (727) 37,119 4,722 43,885 (2,128)
-------- -------- -------- -------- -------- ---------
DISTRIBUTIONS TO FIDUCIARY SHAREHOLDERS:
From net investment income .................... (1,408) (1,129) (5,247) (6,384) (4,390) (3,267)
In excess of net investment income ............ (231) (381)
From net realized gains from investment
transactions ................................ (151) (4,994) (2,449) (1,009)
In excess of net realized gains from investment
transactions ................................ (175)
DISTRIBUTIONS TO CLASS A SHAREHOLDERS:
From net investment income .................... (97) (34) (261) (333) (43) (20)
In excess of net investment income ............ (2) (1) (67) (15) (2)
From net realized gains from investment
transactions ................................ (12) (5) (329) (25) (6)
DISTRIBUTIONS TO CLASS B SHAREHOLDERS:
From net investment income .................... (69) (9) (43) (12) (1) (1)
In excess of net investment income ............ (2) (3) (8)
From net realized gains from investment
transactions ................................ (1) (61) (6)
In excess of net realized gains from investment
transactions ................................ (12)
DISTRIBUTIONS TO SERVICE SHAREHOLDERS:
From net investment income .................... (2) (1)
From net realized gains from investment
transactions .................................. (1)
-------- -------- -------- -------- -------- ---------
Change in net assets from shareholder distributions (1,779) (1,330) (11,005) (6,744) (7,155) (4,686)
-------- -------- -------- -------- -------- ---------
CAPITAL TRANSACTIONS:
Proceeds from shares issued ................... 19,304 38,988 39,566 144,396 81,505 118,354
Dividends reinvested .......................... 1,579 1,254 5,343 3,318 5,467 3,627
Cost of shares redeemed ....................... (26,161) (22,893) (95,398) (95,794) (51,442) (45,079)
-------- -------- -------- -------- -------- ---------
Change in net assets from share transactions ....... (5,278) 17,349 (50,489) 51,920 35,530 76,902
-------- -------- -------- -------- -------- ---------
Change in net assets ............................... (882) 15,292 (24,375) 49,898 72,260 70,088
NET ASSETS:
Beginning of period ........................... 46,304 31,012 212,555 162,657 167,046 96,958
-------- -------- -------- -------- -------- ---------
End of period ................................. $ 45,422 $ 46,304 $188,180 $212,555 $239,306 $ 167,046
-------- -------- -------- -------- -------- ---------
-------- -------- -------- -------- -------- ---------
SHARE TRANSACTIONS:
Issued ........................................ 1,931 3,869 2,823 10,640 6,330 9,794
Reinvested .................................... 158 124 398 244 445 300
Redeemed ...................................... (2,658) (2,276) (6,867) (7,113) (4,129) (3,811)
-------- -------- -------- -------- -------- ---------
Change in shares ................................... (569) 1,717 (3,646) 3,771 2,646 6,283
-------- -------- -------- -------- -------- ---------
-------- -------- -------- -------- -------- ---------
Undistributed (distributions in excess of net
investment income included in net assets:
End of period .................................... $ 8 $ (1) $ 41 $ 30 $ (232) $ (383)
-------- -------- -------- -------- -------- ---------
-------- -------- -------- -------- -------- ---------
</TABLE>
See notes to financial statements.
60
B-181
<PAGE>
THE ONE GROUP FAMILY OF MUTUAL FUNDS
- -------------------------------------------------------------------------------
STATEMENTS OF CHANGES IN NET ASSETS
<TABLE>
<CAPTION>
(Amounts in Thousands)
LARGE COMPANY BLUE CHIP LARGE COMPANY
VALUE FUND EQUITY FUND GROWTH FUND
-------------------- -------------------- --------------------
YEAR YEAR YEAR YEAR YEAR YEAR
ENDED ENDED ENDED ENDED ENDED ENDED
JUNE 30, JUNE 30, JUNE 30, JUNE 30, JUNE 30, JUNE 30,
1995 1994 1995 1994 1995 1994
-------- -------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C> <C>
FROM INVESTMENT ACTIVITIES:
OPERATIONS:
Net investment income ................................... $ 6,408 $ 2,512 $ 914 $ 1,841 $ 5,791 $ 1,231
Net realized gains from investment transactions ......... 28,406 12,637 5,053 200 4,792 1,213
Change in unrealized appreciation (depreciation) from
investments ............................................ 20,089 (13,847) 2,533 (2,841) 70,757 594
-------- -------- -------- -------- -------- --------
Change in net assets resulting from operations ............. 54,903 1,302 8,500 (800) 81,340 3,038
-------- -------- -------- -------- -------- --------
DISTRIBUTIONS TO FIDUCIARY SHAREHOLDERS:
From net investment income .............................. (6,371) (2,395) (848) (1,752) (5,634) (1,247)
In excess of net investment income ...................... (3) (4)
From net realized gains from investment transactions .... (10,281) (3,372) (313) (1,852) (1,094)
In excess of net realized gains from investment
transactions ........................................... (9)
DISTRIBUTIONS TO CLASS A SHAREHOLDERS:
From net investment income .............................. (39) (9) (45) (63) (135) (1)
In excess of net investment income ...................... (2) (9) (5) (4)
From net realized gains from investment transactions .... (85) (13) (21) (16)
DISTRIBUTIONS TO CLASS B SHAREHOLDERS:
From net investment income .............................. (7) (1) (17) (1)
In excess of net investment income ...................... (1) (1)
From net realized gains from investment transactions .... (20) (1) (13)
DISTRIBUTIONS TO SERVICE SHAREHOLDERS:
From net investment income .............................. (2)
From net realized gains from investment transactions .... (2)
-------- -------- -------- -------- -------- --------
Change in net assets from shareholder distributions ........ (16,805) (5,789) (1,239) (1,820) (7,688) (2,347)
-------- -------- -------- -------- -------- --------
CAPITAL TRANSACTIONS:
Proceeds from shares issued ............................. 212,431 109,753 7,650 61,078 286,721 115,011
Proceeds from shares issued in connection with
acquisition ........................................... 131,599
Dividends reinvested .................................... 10,331 4,038 663 1,329 4,561 2,015
Cost of shares redeemed ................................. (61,136) (72,594) (56,072) (88,528) (81,352) (8,274)
-------- -------- -------- -------- -------- --------
Change in net assets from share transactions ............... 161,626 41,197 (47,759) (26,121) 341,529 108,752
-------- -------- -------- -------- -------- --------
Change in net assets ....................................... 199,724 36,710 (40,498) (28,741) 415,181 109,443
NET ASSETS:
Beginning of period .................................... 169,994 133,284 83,418 112,159 150,760 41,317
-------- -------- -------- -------- -------- --------
End of period .......................................... $369,718 $169,994 $ 42,920 $ 83,418 $565,941 $150,760
-------- -------- -------- -------- -------- --------
-------- -------- -------- -------- -------- --------
SHARE TRANSACTIONS:
Issued .................................................. 17,984 9,506 585 4,743 23,461 10,078
Issued in connection with acquisition ................... 11,070
Reinvested .............................................. 924 352 52 103 371 177
Redeemed ................................................ (5,160) (6,322) (4,303) (6,872) (6,247) (724)
-------- -------- -------- -------- -------- --------
Change in shares ........................................... 13,748 3,536 (3,666) (2,026) 28,655 9,531
-------- -------- -------- -------- -------- --------
-------- -------- -------- -------- -------- --------
Undistributed (distributions in excess of) net investment
income included in net assets:
End of period ............................................ $ 7 $ 18 $ 31 $ 21 $ (9) $ (4)
-------- -------- -------- -------- -------- --------
-------- -------- -------- -------- -------- --------
</TABLE>
See notes to financial statements.
61
B-182
<PAGE>
THE ONE GROUP FAMILY OF MUTUAL FUNDS
- --------------------------------------------------------------------------------
STATEMENTS OF CHANGES IN NET ASSETS
<TABLE>
<CAPTION>
(Amounts in Thousands)
DISCIPLINED SMALL COMPANY INTERNATIONAL
VALUE FUND GROWTH FUND EQUITY INDEX FUND
------------------- ------------------- ------------------
YEAR YEAR YEAR YEAR YEAR YEAR
ENDED ENDED ENDED ENDED ENDED ENDED
JUNE 30, JUNE 30, JUNE 30, JUNE 30, JUNE 30, JUNE 30,
1995 1994 1995 1994 1995 1994
--------- -------- --------- -------- -------- --------
<S> <C> <C> <C> <C> <C> <C>
FROM INVESTMENT ACTIVITIES:
OPERATIONS:
Net investment income ........................................ $ 9,767 $ 7,264 $ 1,508 $ 1,409 $ 2,326 $ 1,170
Net realized gains (losses) from investment and
foreign currency transactions .............................. 9,989 17,202 18,881 15,467 3,373 (47)
Net change in unrealized
appreciation (depreciation) from investments and translation
of assets and liabilities in foreign currencies ............ 46,373 (21,756) 53,633 (26,137) 2,455 7,846
--------- -------- --------- -------- -------- --------
Change in net assets resulting from operations .................. 66,129 2,710 74,022 (9,261) 8,154 8,969
--------- -------- --------- -------- -------- --------
DISTRIBUTIONS TO FIDUCIARY SHAREHOLDERS:
From net investment income ................................... (9,376) (7,105) (1,520) (1,327) (1,053) (754)
From net realized gains from investment
transactions ............................................... (9,434) (27,343) (12,826) (17,239) (537) (69)
In excess of net realized gains from investment
transactions ............................................... (54)
DISTRIBUTIONS TO CLASS A SHAREHOLDERS:
From net investment income ................................... (225) (142) (8) (25) (18) (7)
In excess of net investment income ........................... (3) (3) (9) (6)
From net realized gains from investment
transactions ............................................... (246) (534) (287) (406) (10) (1)
In excess of net realized gains .............................. (18) (22)
DISTRIBUTIONS TO CLASS B SHAREHOLDERS:
From net investment income ................................... (107) (4) (17)
In excess of net investment income ........................... (11) (1)
From net realized gains from investment
transactions ............................................... (194) (17) (59) (10)
DISTRIBUTIONS TO SERVICE SHAREHOLDERS:
From net investment income ................................... (3) (1)
From net realized gains from investment
transactions ............................................... (3) (8) (1)
--------- -------- --------- -------- -------- --------
Change in net assets from shareholder distributions ............. (19,620) (35,171) (14,717) (19,003) (1,647) (885)
--------- -------- --------- -------- -------- --------
CAPITAL TRANSACTIONS:
Proceeds from shares issued .................................. 129,890 297,230 138,252 244,555 111,465 128,540
Dividends reinvested ......................................... 11,866 24,127 9,304 13,115 845 150
Cost of shares redeemed ...................................... (149,012) (70,057) (178,208) (69,231) (41,784) (22,330)
--------- -------- --------- -------- -------- --------
Change in net assets from share transactions .................... (7,256) 251,300 (30,652) 188,439 70,526 106,360
--------- -------- --------- -------- -------- --------
Change in net assets ............................................ 39,253 218,839 28,653 160,175 77,033 114,444
NET ASSETS:
Beginning of period .......................................... 434,059 215,220 398,830 238,655 149,981 35,537
--------- -------- --------- -------- -------- --------
End of period ................................................ $ 473,312 $434,059 $ 427,483 $398,830 $227,014 $149,981
--------- -------- --------- -------- -------- --------
--------- -------- --------- -------- -------- --------
SHARE TRANSACTIONS:
Issued ....................................................... 10,433 23,203 8,268 14,235 8,193 9,792
Reinvested ................................................... 980 1,946 595 783 63 11
Redeemed ..................................................... (12,030) (5,536) (10,620) (4,096) (3,090) (1,672)
--------- -------- --------- -------- -------- --------
Change in shares ................................................ (617) 19,613 (1,757) 10,922 5,166 8,131
--------- -------- --------- -------- -------- --------
--------- -------- --------- -------- -------- --------
Undistributed (distributions in excess of) net
investment income included in net assets:
End of period ................................................. $ 51 $ 9 $ (5) $ 24 $ 2,060 $ 822
--------- -------- --------- -------- -------- --------
--------- -------- --------- -------- -------- --------
</TABLE>
See notes to financial statements.
62
B-183
<PAGE>
THE ONE GROUP FAMILY OF MUTUAL FUNDS
- --------------------------------------------------------------------------------
NOTES TO FINANCIAL STATEMENTS JUNE 30, 1995
1. ORGANIZATION:
The One Group (the "Trust") is registered under the Investment Company Act
of 1940, as amended (the "1940 Act"), as a diversified, open-end investment
company established as a Massachusetts business trust. The Trust is
registered to offer five classes of shares: Fiduciary, Class A, Class B,
Institutional and Service. The Trust currently offers twenty-four funds.
The accompanying financial statements and financial highlights are those of
the Asset Allocation Fund, the Income Equity Fund, the Equity Index Fund,
the Large Company Value Fund, the Blue Chip Equity Fund, the Large Company
Growth Fund, the Disciplined Value Fund, the Small Company Growth Fund and
the International Equity Index Fund (individually, a "Fund"; collectively,
the "Funds") only.
2. SIGNIFICANT ACCOUNTING POLICIES:
The following is a summary of significant accounting policies in conformity
with generally accepted accounting principles consistently followed by the
Trust in preparation of its financial statements.
SECURITY VALUATION
Listed securities are valued at the last sales price on the principal
exchange where such securities are traded. Unlisted securities or listed
securities for which last sales prices are not available are valued at
the mean of the latest bid and asked priced in the principal market where
such securities are traded. Short-term investments maturing in 60 days
or less are valued at amortized cost, which approximates market value.
Investments for which there are no such quotations or valuations are
carried at fair value as determined in good faith by or at the direction
of the Board of Trustees. Futures contracts are valued at the settlement
price established each day by the board of trade or exchange on which
they are traded. Options traded on an exchange are valued using the last
sale price or, in the absence of a sale, the last offering price. Options
traded over-the-counter are valued using dealer-supplied valuations.
FOREIGN CURRENCY TRANSLATION
Investment valuations, other assets and liabilities initially expressed
in foreign currencies are converted each business day into U.S. dollars
based upon current exchange rates. Purchases and sales of foreign
investments and income and expenses are converted into U.S. dollars based
upon exchange rates prevailing on the respective dates of such
transactions. That portion of unrealized gains or losses in investments
due to fluctuations in foreign currency exchange rates is not separately
disclosed.
FORWARD FOREIGN CURRENCY CONTRACTS
Forward foreign currency contracts are valued by the daily exchange rate
of the underlying currency. Purchases and sales of forward foreign
currency contracts having the same settlement date and broker are
presented net on the Statements of Assets and Liabilities. Gains or
losses on the purchase or sale of forward foreign currency contracts
having the same settlement date and broker are recognized on the date of
offset; otherwise gains or losses are recognized on settlement date.
REPURCHASE AGREEMENTS
The Funds may invest in repurchase agreements with institutions that the
Fund's investment advisor has determined are creditworthy. Each
repurchase agreement is recorded at cost. The Fund requires that the
securities purchased in a repurchase transaction be transferred to the
custodian in a manner sufficient to enable the Fund to obtain those
securities in the event of a counterparty default. The seller, under the
repurchase agreement, is required to maintain the value of the securities
held at not less than the repurchase price, including accrued interest.
Continued
63
B-184
<PAGE>
THE ONE GROUP FAMILY OF MUTUAL FUNDS
- --------------------------------------------------------------------------------
NOTES TO FINANCIAL STATEMENTS, CONTINUED JUNE 30, 1995
WRITTEN OPTIONS
The Funds may write covered call or put options for which premiums
received are recorded as liabilities and are subsequently adjusted to the
current value of the options written. Premiums received from writing
options which expire are treated as realized gains. Premiums received
from writing options which are exercised or are closed are offset against
the proceeds received or amount paid on the transaction to determine
realized gain or loss.
FUTURES CONTRACTS
The Funds may enter into futures contracts for the delayed delivery of
securities at a fixed price at some future date or the change in the
value of a specified financial index over a predetermined time period.
Cash or securities are deposited with brokers in order to maintain a
position. Subsequent payments made or received by the fund based on the
daily change in the market value of the position are recorded as
unrealized gain or loss until the contract is closed out, at which time
the gain or loss is realized.
INDEXED SECURITIES
The Funds may invest in indexed securities whose value is linked either
directly or inversely to changes in foreign currencies, interest rates,
commodities, indices or other reference instruments. Indexed securities
may be more volatile than the referenced instrument itself, but any loss
is limited to the amount of the original investment.
SECURITY TRANSACTIONS AND RELATED INCOME
Security transactions are accounted for on a trade date basis. Net
realized gains or losses on sales of securities are determined on the
specific identification cost method. Interest income and expenses are
recognized on the accrual basis. Dividends are recorded on the
ex-dividend date. Interest income, including any discount or premium, is
accrued as earned using the effective interest method.
EXPENSES
Expenses directly attributable to a Fund are charged directly to that
Fund, while the expenses which are attributable to more than one fund of
the Trust are allocated among the respective Funds. Each class of shares
bears its pro-rata portion of expenses attributable to its series, except
that each class separately bears expenses related specifically to that
class, such as distribution fees.
DIVIDENDS AND DISTRIBUTIONS TO SHAREHOLDERS
Dividends from net investment income are declared and paid monthly for
all Funds, except the International Equity Index Fund, which declares and
distributes net investment income annually. Net realized capital gains,
if any, are distributed at least annually. Dividends are declared
separately for each class. No class has preferential dividend rights;
differences in per share dividend rates are generally due to differences
in separate class expenses.
Net investment income and net capital gain distributions are determined
in accordance with income tax regulations which may differ from generally
accepted accounting principles. These differences are primarily due to
differing treatments for expiring capital loss carryforwards, foreign
currency transactions, and deferrals of certain losses.
Continued
64
B-185
<PAGE>
THE ONE GROUP FAMILY OF MUTUAL FUNDS
- --------------------------------------------------------------------------------
NOTES TO FINANCIAL STATEMENTS, CONTINUED JUNE 30, 1995
ORGANIZATION COSTS
Costs incurred by the Trust in connection with its organization,
including the fees and expenses of registering and qualifying its shares
for distribution have been deferred and are being amortized using the
straight-line method over a period of five years beginning with the
commencement of each Fund's operations. All such costs have been
allocated among the funds of the Trust pro-rata, based on the relative
net assets of each fund. In the event that any of the initial shares are
redeemed during such period by any holder thereof, the related fund will
be reimbursed by such holder for any unamortized organization costs in
the proportion as the number of initial shares being redeemed bears to
the number of initial shares outstanding at the time of redemption.
FEDERAL INCOME TAXES
Each Fund intends to continue to qualify as a regulated investment
company by complying with the provisions available to certain investment
companies as defined in applicable sections of the Internal Revenue Code,
and to make distributions of net investment income and net realized
capital gains sufficient to relieve it from all, or substantially all,
federal income taxes. Withholding taxes on foreign dividends have been
paid or provided for in accordance with the applicable country's tax
rules and rates.
RECLASSIFICATIONS:
Certain reclassifications have been made to the 1994 financial statements
and financial highlights in order to conform to the 1995 presentation.
3. SHARES OF BENEFICIAL INTEREST:
The Trust is authorized to issue an unlimited number of shares of
beneficial interest, with no par value which may, without shareholder
approval, be divided into an unlimited number of series of such shares and
any series may be classified or reclassified into one or more classes.
Currently, shares of the Trust are registered to be offered through thirty
series and five classes: Fiduciary, Class A, Class B, Institutional and
Service. The Service Shares commenced offering on January 17, 1994 when
they were designated as "Retirement" Shares. On April 4, 1995, the name of
the Retirement Shares was changed to "Service" Shares. During the year
ended June 30, 1995, Service Shares transferred to Class A Shares, and as
of June 30, 1995, there were no shareholders in the Service Class.
Shareholders are entitled to one vote for each full share held and will
vote in the aggregate and not by class or series, except as otherwise
expressly required by law or when the Board of Trustees has determined that
the matter to be voted on affects only the interest of shareholders of a
particular class or series. The following is a summary of transactions in
Fund shares for the fiscal years ending June 30, 1995 and 1994:
Continued
65
B-186
<PAGE>
THE ONE GROUP FAMILY OF MUTUAL FUNDS
- --------------------------------------------------------------------------------
NOTES TO FINANCIAL STATEMENTS, CONTINUED JUNE 30, 1995
Transactions in capital shares for the Group were as follows:
<TABLE>
<CAPTION>
(Amounts in Thousands)
ASSET ALLOCATION FUND INCOME EQUITY FUND EQUITY INDEX FUND
------------------------ ------------------------ ------------------------
YEAR YEAR YEAR YEAR YEAR YEAR
ENDED ENDED ENDED ENDED ENDED ENDED
JUNE 30, JUNE 30, JUNE 30, JUNE 30, JUNE 30, JUNE 30,
1995 1994 1995 1994 1995 1994
------------------------ ------------------------ ------------------------
<S> <C> <C> <C> <C> <C> <C>
CAPITAL TRANSACTIONS:
FIDUCIARY SHARES:
Proceeds from shares issued ...... $ 14,294 $ 35,322 $ 32,862 $138,221 $71,441 $116,441
Dividends reinvested ............. 1,386 1,183 4,624 2,965 5,401 3,602
Shares redeemed .................. (24,526) (22,264) (89,484) (93,619) (43,482) (44,372)
-------- -------- -------- -------- -------- --------
Change in net assets from
Fiduciary Share transactions ... $ (8,846) $ 14,241 $(51,998) $ 47,567 $33,360 $ 75,671
-------- -------- -------- -------- -------- --------
-------- -------- -------- -------- -------- --------
CLASS A SHARES:
Proceeds from shares issued ...... $ 3,680 $ 1,738 $ 5,144 $ 4,413 $ 8,926 $ 1,649
Dividends reinvested ............. 111 61 614 341 49 24
Shares redeemed .................. (1,101) (624) (5,677) (2,149) (7,817) (706)
-------- -------- -------- -------- -------- --------
Change in net assets from
Class A Share transactions ..... $ 2,690 $ 1,175 $ 81 $ 2,605 $ 1,158 $ 967
-------- -------- -------- -------- -------- --------
-------- -------- -------- -------- -------- --------
CLASS B SHARES:
Proceeds from shares issued .. ... $ 1,238 $ 1,928 $ 1,560 $ 1,762 $ 1,047 $ 251
Dividends reinvested ......... ... 80 10 105 12 15 1
Shares redeemed .................. (432) (5) (237) (26) (27)
-------- -------- -------- -------- -------- --------
Change in net assets from
Class B Share transactions ..... $ 886 $ 1,933 $ 1,428 $ 1,748 $ 1,035 $ 252
-------- -------- -------- -------- -------- --------
-------- -------- -------- -------- -------- --------
SERVICE SHARES:
Proceeds from shares issued ...... $ 92 $ 91 $ 13
Dividends reinvested ............. 2 2
Shares redeemed .................. (102) (116) (1)
-------- -------- --------
Change in net assets from
Service Share transactions ..... $ (8) $ (23) $ 12
-------- -------- --------
-------- -------- --------
SHARE TRANSACTIONS:
FIDUCIARY SHARES:
Issued ........................... 1,433 3,503 2,362 10,186 5,555 9,633
Reinvested ....................... 139 117 343 218 440 298
Redeemed ......................... (2,496) (2,214) (6,450) (6,955) (3,519) (3,749)
-------- -------- -------- -------- -------- --------
Change in Fiduciary Shares ....... (924) 1,406 (3,745) 3,449 2,476 6,182
-------- -------- -------- -------- -------- --------
-------- -------- -------- -------- -------- --------
CLASS A SHARES:
Issued ........................... 364 174 353 323 688 139
Reinvested ....................... 11 6 47 25 4 2
Redeemed ......................... (108) (62) (400) (156) (600) (62)
-------- -------- -------- -------- -------- --------
Change in Class A Shares ......... 267 118 0 192 92 79
-------- -------- -------- -------- -------- --------
-------- -------- -------- -------- -------- --------
CLASS B SHARES:
Issued ........................... 124 192 108 131 80 21
Reinvested ....................... 8 1 8 1 1
Redeemed ......................... (44) (17) (2) (2)
-------- -------- -------- -------- -------- --------
Change in Class B Shares ......... 88 193 99 130 79 21
-------- -------- -------- -------- -------- --------
-------- -------- -------- -------- -------- --------
SERVICE SHARES:
Issued ........................... 10 7 1
Reinvested .......................
Redeemed ......................... (10) (8)
-------- -------- --------
Change in Service Shares ......... 0 (1) 1
-------- -------- --------
-------- -------- --------
</TABLE>
Continued
66
B-187
<PAGE>
THE ONE GROUP FAMILY OF MUTUAL FUNDS
- --------------------------------------------------------------------------------
NOTES TO FINANCIAL STATEMENTS, CONTINUED JUNE 30, 1995
<TABLE>
<CAPTION>
(Amounts in Thousands)
LARGE COMPANY BLUE CHIP EQUITY LARGE COMPANY
VALUE FUND FUND GROWTH FUND
--------------------- --------------------- ---------------------
YEAR YEAR YEAR YEAR YEAR YEAR
ENDED ENDED ENDED ENDED ENDED ENDED
JUNE 30, JUNE 30, JUNE 30, JUNE 30, JUNE 30, JUNE 30,
1995 1994 1995 1994 1995 1994
--------------------- --------------------- ---------------------
<S> <C> <C> <C> <C> <C> <C>
CAPITAL TRANSACTIONS:
FIDUCIARY SHARES:
Proceeds from shares issued................ $ 201,943 $109,238 $ 7,015 $ 60,337 $264,563 $114,284
Proceeds from shares issued in
connection with acquisition.............. 119,883
Dividends reinvested....................... 10,183 4,015 589 1,252 4,370 2,013
Shares redeemed............................ (53,653) (72,500) (54,774) (86,345) (77,903) (8,273)
--------- -------- -------- --------- -------- --------
Change in net assets from
Fiduciary Share transactions........... $ 158,473 $ 40,753 $(47,170) $ (24,756) $310,913 $108,024
--------- -------- -------- --------- -------- --------
--------- -------- -------- --------- -------- --------
CLASS A SHARES:
Proceeds from shares issued................ $ 9,809 $ 324 $ 391 $ 626 $ 15,491 $ 368
Proceeds from shares issued in
connection with acquisition.............. 11,716
Dividends reinvested....................... 121 22 71 77 154 1
Shares redeemed............................ (7,394) (89) (1,289) (2,183) (2,767)
--------- -------- -------- --------- -------- --------
Change in net assets from
Class A Share transactions............... $ 2,536 $ 257 $ (827) $ (1,480) $ 24,594 $ 369
--------- -------- -------- --------- -------- --------
--------- -------- -------- --------- -------- --------
CLASS B SHARES:
Proceeds from shares issued................ $ 679 $ 191 $ 244 $ 115 $ 6,304 $ 335
Dividends reinvested....................... 27 1 3 32 1
Shares redeemed............................ (89) (5) (9) (247) (1)
--------- -------- -------- --------- -------- --------
Change in net assets from
Class B Share transactions............... $ 617 $ 187 $ 238 $ 115 $ 6,089 $ 335
--------- -------- -------- --------- -------- --------
--------- -------- -------- --------- -------- --------
SERVICE SHARES:
Proceeds from shares issued................ $ 363 $ 24
Dividends reinvested....................... 5
Shares redeemed............................ (435)
-------- --------
Change in net assets from
Service Share transactions............... $ (67) $ 24
-------- --------
-------- --------
SHARE TRANSACTIONS:
FIDUCIARY SHARES:
Issued..................................... 17,128 9,463 537 4,689 21,755 10,015
Issued in connection with acquisition...... 10,108
Reinvested................................. 911 350 46 97 357 177
Redeemed................................... (4,551) (6,314) (4,204) (6,707) (5,992) (724)
--------- -------- -------- --------- -------- --------
Change in Fiduciary Shares................. 13,488 3,499 (3,621) (1,921) 26,228 9,468
--------- -------- -------- --------- -------- --------
--------- -------- -------- --------- -------- --------
CLASS A SHARES:
Issued..................................... 800 27 29 45 1,182 32
Issued in connection with acquisition...... 962
Reinvested................................. 11 2 6 6 12
Redeemed................................... (601) (8) (98) (165) (205)
--------- -------- -------- --------- -------- --------
Change in Class A Shares................... 210 21 (63) (114) 1,951 32
--------- -------- -------- --------- -------- --------
--------- -------- -------- --------- -------- --------
CLASS B SHARES:
Issued..................................... 56 16 19 9 494 29
Reinvested................................. 2 2
Redeemed................................... (8) (1) (18)
--------- -------- -------- --------- -------- --------
Change in Class B Shares................... 50 16 18 9 478 29
--------- -------- -------- --------- -------- --------
--------- -------- -------- --------- -------- --------
SERVICE SHARES:
Issued..................................... 30 2
Reinvested.................................
Redeemed................................... (32)
-------- --------
Change in Service Shares .................. (2) 2
-------- --------
-------- --------
</TABLE>
Continued
67
B-188
<PAGE>
THE ONE GROUP FAMILY OF MUTUAL FUNDS
- --------------------------------------------------------------------------------
NOTES TO FINANCIAL STATEMENTS, CONTINUED JUNE 30, 1995
<TABLE>
<CAPTION>
(Amounts in Thousands)
INTERNATIONAL
DISCIPLINED VALUE SMALL COMPANY EQUITY INDEX
VALUE FUND GROWH FUND FUND
----------------------- ------------------------ ------------------------
YEAR YEAR YEAR YEAR YEAR YEAR
ENDED ENDED ENDED ENDED ENDED ENDED
JUNE 30, JUNE 30, JUNE 30, JUNE 30, JUNE 30, JUNE 30,
1995 1994 1995 1994 1995 1994
----------------------- ------------------------ ------------------------
<S> <C> <C> <C> <C> <C> <C>
CAPITAL TRANSACTIONS:
FIDUCIARY SHARES:
Proceeds from shares issued ...... $ 117,175 $ 283,462 $ 120,166 $ 238,831 $ 104,876 $ 124,128
Dividends reinvested ............. 11,069 23,408 8,942 12,686 788 147
Shares redeemed .................. (142,398) (68,767) (162,832) (67,230) (39,348) (21,984)
--------- --------- --------- --------- --------- ---------
Change in net assets from
Fiduciary Share transactions ... $ (14,154) $ 238,103 $ (33,724) $ 184,287 $ 66,316 $ 102,291
--------- --------- --------- --------- --------- ---------
--------- --------- --------- --------- --------- ---------
CLASS A SHARES:
Proceeds from shares issued ...... $ 6,626 $ 8,097 $ 16,237 $ 4,402 $ 3,817 $ 1,905
Dividends reinvested ............. 482 696 296 429 28
Shares redeemed .................. (5,134) (1,257) (14,784) (1,917) (1,301) (31)
--------- --------- --------- --------- --------- ---------
Change in net assets from
Class A Share transactions ..... $ 1,974 $ 7,536 $ 1,749 $ 2,914 $ 2,544 $ 1,874
--------- --------- --------- --------- --------- ---------
--------- --------- --------- --------- --------- ---------
CLASS B SHARES:
Proceeds from shares issued ...... $ 5,594 $ 5,622 $ 1,368 $ 1,284 $ 2,243 $ 2,433
Dividends reinvested ............. 309 23 58 27 3
Shares redeemed .................. (903) (33) (45) (83) (506) (315)
--------- --------- --------- --------- --------- ---------
Change in net assets from
Class B Share transactions ..... $ 5,000 $ 5,612 $ 1,381 $ 1,201 $ 1,764 $ 2,121
--------- --------- --------- --------- --------- ---------
--------- --------- --------- --------- --------- ---------
SERVICE SHARES:
Proceeds from shares issued ...... $ 495 $ 49 $ 481 $ 38 $ 529 $ 74
Dividends reinvested ............. 6 8 2
Shares redeemed .................. (577) (547) (1) (629)
--------- --------- --------- --------- --------- ---------
Change in net assets from
Service Share transactions ..... $ (76) $ 49 $ (58) $ 37 $ (98) $ 74
--------- --------- --------- --------- --------- ---------
--------- --------- --------- --------- --------- ---------
SHARE TRANSACTIONS:
FIDUCIARY SHARES:
Issued ........................... 9,425 22,092 7,209 13,900 7,711 9,457
Reinvested ....................... 913 1,888 571 757 59 11
Redeemed ......................... (11,504) (5,429) (9,719) (3,977) (2,910) (1,646)
--------- --------- --------- --------- --------- ---------
Change in Fiduciary Shares ....... (1,166) 18,551 (1,939) 10,680 4,860 7,822
--------- --------- --------- --------- --------- ---------
--------- --------- --------- --------- --------- ---------
CLASS A SHARES:
Issued ........................... 521 656 949 257 277 187
Reinvested ....................... 40 56 19 26 2
Redeemed ......................... (409) (104) (867) (114) (96) (24)
--------- --------- --------- --------- --------- ---------
Change in Class A Shares ......... 152 608 101 169 183 163
--------- --------- --------- --------- --------- ---------
--------- --------- --------- --------- --------- ---------
CLASS B SHARES:
Issued ........................... 447 451 82 76 165 142
Reinvested ....................... 26 2 4 2
Redeemed ......................... (72) (3) (3) (5) (38) (2)
--------- --------- --------- --------- --------- ---------
Change in Class B Shares ......... 401 450 83 71 129 140
--------- --------- --------- --------- --------- ---------
--------- --------- --------- --------- --------- ---------
SERVICE SHARES:
Issued ........................... 40 4 28 2 40 6
Reinvested ....................... 1 1
Redeemed ......................... (45) (31) (46)
--------- --------- --------- --------- --------- ---------
Change in Service Shares ....... (4) 4 (2) 2 (6) 6
--------- --------- --------- --------- --------- ---------
--------- --------- --------- --------- --------- ---------
</TABLE>
Continued
68
B-189
<PAGE>
THE ONE GROUP FAMILY OF MUTUAL FUNDS
- --------------------------------------------------------------------------------
NOTES TO FINANCIAL STATEMENTS, CONTINUED JUNE 30, 1995
4. INVESTMENT ADVISORY, ADMINISTRATIVE, AND DISTRIBUTION AGREEMENTS:
The Trust and Banc One Investment Advisors Corporation (the "Advisor") are
parties to an investment advisory agreement under which the Advisor is
entitled to a fee, computed daily and paid monthly, at the annual rate of
0.74% of the average net assets of the Income Equity Fund, the Disciplined
Value Fund, the Small Company Growth Fund, the Blue Chip Equity Fund, the
Large Company Value Fund, and the Large Company Growth Fund; 0.65% of the
average daily net assets of the Asset Allocation Fund; 0.55% of the average
daily net assets of the International Equity Index Fund; and 0.30% of the
average daily net assets of the Equity Index Fund.
The Trust and 440 Financial Group of Worcester ("440 Financial") are
parties to an administrative agreement under which 440 Financial (the
"Administrator") provides services for a fee that is computed daily and
payable monthly, at an annual rate of 0.20% on the first $1.5 billion of
the combined average net assets of the Funds and other funds offered by the
Trust; 0.18% on the next $0.5 billion of the combined average net assets
and 0.16% on the combined average net assets over $2 billion. Effective
April 1, 1995, The Shareholder Services Group, Inc, d/b/a 440 Financial
became the Administrator to the Trust. Also effective April 1, 1995, the
Advisor became the Sub-Administrator pursuant to an agreement between the
Administrator and the Advisor. The Advisor assumed many of the
administrative duties, for which it receives a fee paid by the
Administrator.
The Trust has adopted a distribution and shareholder services plan (the
"Plan") on behalf of the Class A, Class B and Service Class Shares pursuant
to Rule 12b-1 under the 1940 Act. 440 Financial Distributors, Inc. (the
"Distributor") acts as the distributor of the Trust's shares. The
Distributor receives an annual fee for its services of 0.35%, 1.00%, and
0.75% of the average daily net assets of the Class A, Class B, and Service
Class Shares, respectively. These fees are used by the Distributor to pay
banks, including affiliates of the Advisor, other institutions and
broker/dealers, or to reimburse the Distributor for expenses incurred for
providing distribution or shareholder assistance. The Distributor has
voluntarily agreed to limit its fees for the Class A Shares to an annual
rate of 0.25% of the average daily net assets of the Class A Shares of each
Fund.
Certain officers of the Trust are also officers of the Administrator and/or
Distributor. Such officers receive no compensation from the Funds for
serving in their respective roles.
The Advisor, Administrator, and Distributor voluntarily agreed to waive a
portion of their fees and to reimburse the Funds for certain expenses so
that total expenses of each Fund would not exceed certain annual expense
limitations. For the year ended June 30, 1995, fees is the following
amounts were waived or reimbursed to the Funds:
<TABLE>
<CAPTION>
(AMOUNTS IN THOUSANDS)
-------------------------------------
ASSET INCOME
ALLOCATION EQUITY EQUITY INDEX
FUND FUND FUND
---------- ------- -------------
<S> <C> <C> <C>
INVESTMENT ADVISORY FEES:
Waivers/reimbursements ......... $104 $ 7 $428
ADMINISTRATION FEES:
Waivers/reimbursements ......... $ 5 $196
12b-1 FEES (CLASS A):
Waivers/reimbursements ......... $ 3 $12 $ 2
</TABLE>
Continued
69
B-190
<PAGE>
THE ONE GROUP FAMILY OF MUTUAL FUNDS
- --------------------------------------------------------------------------------
NOTES TO FINANCIAL STATEMENTS, CONTINUED JUNE 30, 1995
<TABLE>
<CAPTION>
LARGE LARGE
COMPANY BLUE CHIP COMPANY
VALUE EQUITY GROWTH
FUND FUND FUND
------- --------- -------
<S> <C> <C> <C>
INVESTMENT ADVISORY FEES:
Waivers/reimbursements ............. $158
ADMINISTRATION FEES:
Waivers/reimbursements ............. $ 27
12b-1 FEES (CLASS A):
Waivers/reimbursements ............. $ 2 $ 3 $ 9
<CAPTION>
SMALL
DISCIPLINED COMPANY INTERNATIONAL
VALUE GROWTH EQUITY INDEX
FUND FUND FUND
----------- ------- -------------
<S> <C> <C> <C>
INVESTMENT ADVISORY FEES:
Waivers/reimbursements ............. $ 29 $ 7
12b-1 FEES (CLASS A):
Waivers/reimbursements ............. $ 11 $ 9 $ 3
</TABLE>
5. SECURITIES TRANSACTIONS:
The cost of security purchases and the proceeds from the sale of securities
(excluding short-term securities and purchased options) during the year
ended June 30, 1995 were as follows (amounts in thousands):
<TABLE>
<CAPTION>
U.S. GOVERNMENT
SECURITIES OTHER SECURITIES
--------------------- ---------------------
PURCHASES SALES PURCHASES SALES
--------- ------- --------- -------
<S> <C> <C> <C> <C>
Asset Allocation Fund .............. $11,983 $17,908 $28,959 $33,031
Income Equity Fund ................. 7,902 62,561
Equity Index Fund .................. 35,702 4,867
Large Company Value Fund ........... 532,400 422,145
Blue Chip Equity Fund .............. 1,502 45,874
Large Company Growth Fund .......... 361,714 45,549
Disciplined Value Fund ............. 742,291 777,887
Small Company Growth Fund .......... 484,291 504,311
International Equity Index Fund .... 99,661 22,646
</TABLE>
6. FINANCIAL INSTRUMENTS:
Investing in financial instruments such as written options, futures and
sales of forward foreign currency contracts involves risk in excess of the
amounts reflected in the Statements of Assets and Liabilities. The face or
contract amounts reflect the extent of the involvement the Funds have in
the particular class of instrument. Risks associated with these instruments
include an imperfect correlation between the movements in the price of the
instruments and the price of the underlying securities and interest rates,
an illiquid secondary market for the instruments or inability of
counterparties to perform under the terms of the contract, and changes in
the value of currency relative to the U.S. dollar. The Funds enter into
these contracts primarily as a means to hedge against adverse fluctuation
in securities.
Continued
70
B-191
<PAGE>
THE ONE GROUP FAMILY OF MUTUAL FUNDS
- --------------------------------------------------------------------------------
NOTES TO FINANCIAL STATEMENTS, CONTINUED JUNE 30, 1995
The following is a summary of written option activity for the year ended
June 30, 1995 by the Large Company Value Fund (amounts in thousands):
<TABLE>
<CAPTION>
PRINCIPAL AMOUNTS
OF CONTRACTS PREMIUMS
----------------- --------
<S> <C> <C>
Balance at beginning of year ...................... 50 $ 77
Options written ................................... 1,399 2,199
Options closed .................................... (1,111) (1,678)
Options exercised ................................. (233) (356)
------ -------
Options outstanding at end of period .............. 105 $ 242
------ -------
------ -------
<CAPTION>
PRINCIPAL AMOUNTS
OF CONTRACTS VALUE
----------------- --------
<S> <C> <C>
Options outstanding at end of period consist of:
Apple Computer, $45, 7/24/95 .................. 25 $ 63
Apple Computer, $40, 7/24/95 .................. 25 165
ASA LTD, $45, 7/24/95 ......................... 25 6
Chrysler Corp, $45, 7/24/95 ................... 25 75
Temple Inland, $45, 7/24/95 ................... 5 14
------ -------
Total ...................................... 105 $ 323
------ -------
------ -------
</TABLE>
7. CONCENTRATION OF CREDIT RISK:
The International Equity Index Fund has a relatively large concentration of
securities invested in companies domiciled in Japan. The Fund may be more
susceptible to the political, social and economic events adversely
affecting the Japanese companies than funds not so concentrated.
8. FEDERAL TAX INFORMATION:
The accompanying table below details distributions from long-term capital
gains for the following funds for the fiscal year ended June 30, 1995
(amounts in thousands):
<TABLE>
<S> <C>
Asset Allocation Fund ..................................................... $ 111
Income Equity Fund ........................................................ 5,384
Equity Index Fund ......................................................... 2,456
Large Company Value Fund .................................................. 5,759
Blue Chip Equity Fund ..................................................... 335
Large Company Growth Fund ................................................. 999
Disciplined Value Fund .................................................... 2,079
Small Company Growth Fund ................................................. 13,180
International Equity Index Fund ........................................... 395
</TABLE>
Under current tax law, capital losses realized after October 31 may be
deferred and treated as occurring on the first day of the following fiscal
year. The Asset Allocation Fund had approximately $247,000 deferred losses
that will be treated as arising on the first day of the fiscal year ended
June 30, 1996.
Continued
71
B-192
<PAGE>
THE ONE GROUP FAMILY OF MUTUAL FUNDS
- --------------------------------------------------------------------------------
NOTES TO FINANCIAL STATEMENTS, CONTINUED JUNE 30, 1995
9. REORGANIZATION:
On October 7, 1994, the Board of Trustees approved an agreement and plan of
reorganization for the acquisition of the Trademark Funds by the Trust.
Under the agreement and plan of reorganization, all assets and liabilities
of the Trademark Equity Fund (the "Acquired Fund") were acquired by the
Large Company Growth Fund in exchange for shares of the Large Company
Growth Fund. The reorganization, which qualified as a tax-free exchange for
federal income tax purposes, was completed following approval by the
shareholders of the Trademark Equity Fund. The following is a summary of
Shares Outstanding, Net Assets, Unrealized Appreciation and Net Asset Value
per share immediately before and after the reorganization (amounts in
thousands except net asset value):
<TABLE>
<CAPTION>
AFTER
BEFORE REORGANIZATION REORGANIZATION
-------------------------------- --------------
LARGE LARGE
TRADEMARK EQUITY COMPANY COMPANY
FUND GROWTH FUND GROWTH FUND
---------------- ----------- --------------
<S> <C> <C> <C>
Shares: ................ * 12,666 23,627 34,697
Net Assets: ............ *$ 131,599 $ 280,424 $ 412,023
Net Asset Value:
Fiduciary ............ *$ 10.39 $ 11.87 $ 11.87
Class A .............. 12.18 12.18
Unrealized Appreciation: $ 3,072 $ 11,501 $ 14,573
</TABLE>
- --------
* Before the reorganization, the Acquired Fund offered only one class of shares.
On May 22, 1995, the Board of Trustees approved a Plan of Reorganization
pursuant to which the Blue Chip Equity Fund would be merged with and into the
Large Company Growth Fund on or about September 1, 1995. On the exchange date,
the Blue Chip Equity Fund will transfer all of its assets and liabilities to the
Large Company Growth Fund in exchange for shares of the Large Company Growth
Fund. The reorganization, which qualifies as a tax-free exchange for federal
income tax purposes, must be approved by the shareholders of the Blue Chip
Equity Fund, at a shareholders' meeting on August 28, 1995.
Continued
72
B-193
<PAGE>
THE ONE GROUP FAMILY OF MUTUAL FUNDS
- --------------------------------------------------------------------------------
NOTES TO FINANCIAL STATEMENTS, CONTINUED JUNE 30, 1995
10. ELIGIBLE DISTRIBUTIONS (UNAUDITED):
The Trust designates the following eligible distributions for the dividends
received deductions for corporations:
<TABLE>
<CAPTION>
ASSET INCOME
ALLOCATION EQUITY EQUITY
FUND FUND INDEX FUND
----------- ----------- -----------
<S> <C> <C> <C>
Dividend Income ........................ $ 396,726 $ 7,296,582 $ 4,924,307
Dividend Income Per Share--Fiduciary ... 0.070 0.379 0.280
Dividend Income Per Share--Class A ..... 0.063 0.038 0.253
Dividend Income Per Share--Class B ..... 0.053 0.256 0.171
<CAPTION>
LARGE
LARGE BLUE CHIP COMPANY
COMPANY EQUITY GROWTH
VALUE FUND FUND FUND
----------- ----------- -----------
<S> <C> <C> <C>
Dividend Income ........................ $ 6,927,555 $ 1,422,529 $ 7,673,650
Dividend Income Per Share--Fiduciary ... 0.253 0.194 0.166
Dividend Income Per Share--Class A ..... 0.230 0.176 0.141
Dividend Income Per Share--Class B ..... 0.135 0.120 0.075
<CAPTION>
SMALL
COMPANY
DISCIPLINED GROWTH
VALUE FUND FUND
----------- -----------
<S> <C> <C>
Dividend Income ........................................... $12,662,513 $ 2,881,817
Dividend Income Per Share--Fiduciary ...................... 0.238 0.031
Dividend Income Per Share--Class A ........................ 0.212 0.016
Dividend Income Per Share--Class B ........................ 0.141 0.000
</TABLE>
The International Equity Index Fund elects to pass on the benefits of the
foreign tax credit to its shareholders for the year ended June 30, 1995. The
following information is provided with respect to the election:
<TABLE>
<S> <C>
Gross Income From Foreign Countries ................................................. $ 4,904,720
Gross Income From Foreign Countries Per Share ....................................... $ 0.30
Income Taxes Paid To Foreign Countries .............................................. $ 853,438
Income Taxes Paid To Foreign Countries Per Share .................................... $ 0.05
</TABLE>
73
B-194
<PAGE>
THE ONE GROUP FAMILY OF MUTUAL FUNDS
- --------------------------------------------------------------------------------
FINANCIAL HIGHLIGHTS
<TABLE>
<CAPTION>
ASSET ALLOCATION FUND
------------------------------------------------------------------------------------
YEAR ENDED JUNE 30,
------------------------------------------------------------------------------------
1995 1994
--------------------------------------------------- ----------------------------
FIDUCIARY CLASS A CLASS B SERVICE (f) FIDUCIARY CLASS A
--------- ------- ------- ----------- --------- -------
<S> <C> <C> <C> <C> <C> <C>
NET ASSET VALUE,
BEGINNING OF PERIOD ......................... $ 9.64 $ 9.65 $ 9.67 $ 9.62 $10.06 $ 10.06
------- ------- ------- ------- ------- -------
Investment Activities
Net investment income ....................... 0.38 0.35 0.27 0.22 0.29 0.27
Net realized and unrealized gains(losses)
from investments ......................... 1.12 1.13 1.14 1.05 (0.38) (0.38)
------- ------- ------- ------- ------- -------
Total from Investment Activities .............. 1.50 1.48 1.41 1.27 (0.09) (0.11)
------- ------- ------- ------- ------- -------
Distributions
Net investment income ....................... (0.37) (0.34) (0.27) (0.22) (0.29) (0.26)
In excess of net investment income .......... (0.01) (0.01) (0.02)
Net realized gains .......................... (0.04) (0.04) (0.04)
In excess of net realized gains ............. (0.04) (0.04) (0.04)
------- ------- ------- ------- ------- -------
Total Distributions ........................... (0.41) (0.39) (0.32) (0.28) (0.33) (0.30)
------- ------- ------- ------- ------- -------
NET ASSET VALUE,
END OF PERIOD ............................... $ 10.73 $ 10.74 $ 10.76 $ 10.61 $ 9.64 $ 9.65
------- ------- ------- ------- ------- -------
------- ------- ------- ------- ------- -------
Total Return (excludes sales charge) .......... 16.06% 15.76% 14.90% (f) (1.01)% (1.19)%
RATIOS/SUPPLEMENTARY DATA:
Net Assets at end of period (000) ........... $37,658 $ 4,745 $ 3,019 $42,751 $ 1,691
Ratio of expenses to average net assets ..... 1.06% 1.31% 2.07% 1.72%(b) 1.06% 1.33%
Ratio of net investment income to average net
assets ................................... 3.72% 3.57% 2.77% 3.06%(b) 2.91% 2.68%
Ratio of expenses to average net assets* .... 1.31% 1.66% 2.31% 1.98%(b) 1.33% 1.67%
Ratio of net investment income to average net
assets* .................................. 3.47% 3.23% 2.52% 2.79%(b) 2.64% 2.34%
Portfolio turnover .......................... 115.36% 115.36% 115.36% 115.36% 56.55% 56.55%
</TABLE>
<TABLE>
<CAPTION>
ASSET ALLOCATION FUND
-------------------------------------------
YEAR ENDED JUNE 30,
-------------------------------------------
1994 1993
-------------------------------------------
CLASS B(d) FIDUCIARY (a) CLASS A (c)
---------- ------------- -----------
<S> <C> <C> <C>
NET ASSET VALUE,
BEGINNING OF PERIOD ......................... $ 10.37 $ 10.00 $ 10.00
------- ------- -------
Investment Activities
Net investment income ....................... 0.08 0.07 0.05
Net realized and unrealized gains(losses)
from investments ......................... (0.70) 0.06 0.07
------- ------- -------
Total from Investment Activities .............. (0.62) 0.13 0.12
------- ------- -------
Distributions
Net investment income ....................... (0.08) (0.07) (0.06)
In excess of net investment income ..........
Net realized gains ..........................
In excess of net realized gains .............
------- ------- -------
Total Distributions ........................... (0.08) (0.07) (0.06)
------- ------- -------
NET ASSET VALUE,
END OF PERIOD ............................... $ 9.67 $ 10.06 $ 10.06
------- ------- -------
------- ------- -------
Total Return (excludes sales charge) .......... (5.98)%(e) 5.45%(b) 5.23%(b)
RATIOS/SUPPLEMENTARY DATA:
Net Assets at end of period (000) ........... $ 1,862 $30,441 $ 571
Ratio of expenses to average net assets ..... 2.40%(b) 0.90%(b) 1.15%(b)
Ratio of net investment income to average net
assets ................................... 1.99%(b) 3.03%(b) 2.84%(b)
Ratio of expenses to average net assets* .... 2.40%(b) 1.34%(b) 1.62%(b)
Ratio of net investment income to average net
assets* .................................. 1.99%(b) 2.59%(b) 2.37%(b)
Portfolio turnover .......................... 56.55% 4.05% 4.05%
</TABLE>
- ----------
* During the period certain fees were voluntarily reduced. If such voluntary
fee reductions had not occurred, the ratios would have been as indicated.
(a) Fiduciary Shares commenced offering on April 5, 1993.
(b) Annualized.
(c) Class A Shares commenced offering on April 2, 1993.
(d) Class B Shares commenced offering on January 14, 1994.
(e) Not Annualized
(f) The Service Shares commenced offering on January 17, 1994 when they were
designated as "Retirement" Shares. On April 4, 1995, the name of the
Retirement Shares was changed to "Service" Shares. As of June 1, 1995,
Service Shares transferred to Class A Shares, and as of June 30, 1995,
there were no shareholders in the Service Class. The return for the period
from July 1, 1994 to June 1, 1995 for the Service Shares was 13.25%.
See notes to financial statements.
74
B-195
<PAGE>
THE ONE GROUP FAMILY OF MUTUAL FUNDS
- --------------------------------------------------------------------------------
FINANCIAL HIGHLIGHTS
<TABLE>
<CAPTION>
INCOME EQUITY FUND
----------------------------------------------------------------------------------
YEAR ENDED JUNE 30,
----------------------------------------------------------------------------------
1995 1994
------------------------------------- -------------------------------------
FIDUCIARY CLASS A CLASS B FIDUCIARY CLASS A CLASS B(c)
--------- ------- ------- --------- ------- ----------
<S> <C> <C> <C> <C> <C> <C>
NET ASSET VALUE,
BEGINNING OF PERIOD ......................... $ 13.22 $ 13.20 $ 13.23 $ 13.21 $ 13.20 $ 13.83
-------- -------- -------- -------- -------- --------
Investment Activities
Net investment income ....................... 0.40 0.03 0.26 0.39 0.36 0.11
Net realized and unrealized gains(losses)
from investments ......................... 2.28 2.29 2.29 0.01 (0.60)
-------- -------- -------- -------- -------- --------
Total from Investment Activities .............. 2.68 2.32 2.55 0.40 0.36 (0.49)
-------- -------- -------- -------- -------- --------
Distributions
Net investment income ....................... (0.40) (0.03) (0.25) (0.39) (0.34) (0.11)
In excess of net investment income .......... (0.01) (0.02) (0.02)
Net realized gains .......................... (0.37) (0.37) (0.37)
-------- -------- -------- -------- -------- --------
Total Distributions ........................... (0.77) (0.41) (0.64) (0.39) (0.36) (0.11)
-------- -------- -------- -------- -------- --------
NET ASSET VALUE,
END OF PERIOD ............................... $ 15.13 $ 15.11 $ 15.14 $ 13.22 $ 13.20 $ 13.23
-------- -------- -------- -------- -------- --------
-------- -------- -------- -------- -------- --------
Total Return (excludes sales charge) .......... 21.04% 20.79% 19.91% 3.27% 2.95% (3.37)%(d)
RATIOS/SUPPLEMENTARY DATA:
Net Assets at end of period (000) ........... $170,919 $ 13,793 $ 3,468 $198,787 $12,054 $ 1,714
Ratio of expenses to average net assets ..... 1.01% 1.26% 2.01% 0.98% 1.23% 1.95%(b)
Ratio of net investment income to average net
assets ................................... 2.85% 2.61% 1.88% 3.18% 3.01% 2.70%(b)
Ratio of expenses to average net assets* .... 1.01% 1.36% 2.02% 1.05% 1.40% 1.95%(b)
Ratio of net investment income to average net
assets* .................................. 2.85% 2.51% 1.87% 3.11% 2.84% 2.70%(b)
Portfolio turnover .......................... 4.03% 4.03% 4.03% 22.69% 22.69% 22.69%
</TABLE>
<TABLE>
<CAPTION>
INCOME EQUITY FUND
--------------------------------------------------------------------
YEAR ENDED JUNE 30,
--------------------------------------------------------------------
1993 1992 1991
------------------------ ------------------------ ---------
FIDUCIARY CLASS A FIDUCIARY CLASS A(a) FIDUCIARY
--------- ------- --------- ---------- ---------
<S> <C> <C> <C> <C> <C>
NET ASSET VALUE,
BEGINNING OF PERIOD ......................... $ 12.24 $ 12.23 $ 11.35 $ 12.34 $ 11.06
-------- -------- -------- ------- ----------
Investment Activities
Net investment income ....................... 0.43 0.40 0.49 0.20 0.54
Net realized and unrealized gains(losses)
from investments ......................... 0.97 0.98 0.90 (0.10) 0.26
-------- -------- -------- ------- ----------
Total from Investment Activities .............. 1.40 1.38 1.39 0.10 0.80
-------- -------- -------- ------- ----------
Distributions
Net investment income ....................... (0.43) (0.41) (0.50) (0.21) (0.51)
In excess of net investment income ..........
Net realized gains ..........................
-------- -------- -------- ------- ----------
Total Distributions ........................... (0.43) (0.41) (0.50) (0.21) (0.51)
-------- -------- -------- ------- ----------
NET ASSET VALUE,
END OF PERIOD ............................... $ 13.21 $ 13.20 $ 12.24 $ 12.23 $ 11.35
-------- -------- -------- ------- ----------
-------- -------- -------- ------- ----------
Total Return (excludes sales charge) .......... 11.56% 11.38% 12.36% 2.16%(b) 7.48%
RATIOS/SUPPLEMENTARY DATA:
Net Assets at end of period (000) ........... $153,144 $ 9,513 $125,050 $ 118 $ 73,552
Ratio of expenses to average net assets ..... 0.90% 1.11% 0.70% 1.29%(b) 0.42%
Ratio of net investment income to average net
assets ................................... 3.37% 3.32% 4.12% 3.97%(b) 4.80%
Ratio of expenses to average net assets* .... 1.07% 1.43% 1.23% 1.49%(b) 1.16%
Ratio of net investment income to average net
assets* .................................. 3.20% 3.00% 3.59% 3.77%(b) 4.06%
Portfolio turnover .......................... 7.53% 7.53% 5.99% 5.99% 9.36%
</TABLE>
- ----------
* During the period certain fees were voluntarily reduced. If such voluntary
fee reductions had not occurred, the ratios would have been as indicated.
(a) Class A Shares commenced offering on February 18, 1992.
(b) Annualized.
(c) Class B Shares commenced offering on January 14, 1994.
(d) Not Annualized.
See notes to financial statements.
75
B-196
<PAGE>
THE ONE GROUP FAMILY OF MUTUAL FUNDS
- ------------------------------------------------------------------------------
FINANCIAL HIGHLIGHTS
<TABLE>
<CAPTION>
EQUITY INDEX FUND
-----------------------------------------------------------------------------------
YEAR ENDED JUNE 30,
-----------------------------------------------------------------------------------
1995 1994
----------------------------------------- ------------------------------------
FIDUCIARY CLASS A CLASS B SERVICE(f) FIDUCIARY CLASS A CLASS B(d)
--------- ------- ------- ---------- --------- ------- ----------
<S> <C> <C> <C> <C> <C> <C> <C>
NET ASSET VALUE,
BEGINNING OF PERIOD ...................... $ 11.59 $11.59 $11.61 $11.51 $ 11.92 $11.91 $12.39
-------- ------ ------ ------ -------- ------ ------
Investment Activities
Net investment income .................... 0.32 0.29 0.18 0.13 0.29 0.28 0.09
Net realized and unrealized gains (losses)
from investments ...................... 2.59 2.58 2.61 2.36 (0.20) (0.20) (0.78)
-------- ------ ------ ------ -------- ------ ------
Total from Investment Activities ........... 2.91 2.87 2.79 2.49 0.09 0.08 (0.69)
-------- ------ ------ ------ -------- ------ ------
Distributions
Net investment income .................... (0.29) (0.28) (0.19) (0.19) (0.29) (0.27) (0.09)
In excess of net investment income ....... (0.02) (0.01) (0.04) (0.04)
Net realized gains ....................... (0.16) (0.16) (0.16) (0.10) (0.09) (0.09)
In excess of net realized gains .......... (0.06)
-------- ------ ------ ------ -------- ------ ------
Total Distributions ........................ (0.47) (0.44) (0.35) (0.36) (0.42) (0.40) (0.09)
-------- ------ ------ ------ -------- ------ ------
NET ASSET VALUE,
END OF PERIOD ............................ $ 14.03 $14.02 $14.05 $13.64 $ 11.59 $11.59 $11.61
-------- ------ ------ ------ -------- ------ ------
-------- ------ ------ ------ -------- ------ ------
Total Return (excludes sales charge) ....... 25.79% 25.43% 24.58% (f) 0.63% 0.56% (5.57)%(e)
RATIOS/SUPPLEMENTARY DATA:
Net Assets at end of period (000) ........ $234,895 $3,003 $1,408 $165,370 $1,416 $ 248
Ratio of expenses to average
net assets ............................ 0.33% 0.56% 1.34% 1.01%(b) 0.46% 0.62% 1.10%(b)
Ratio of net investment income to average
net assets ............................ 2.57% 2.38% 1.60% 2.18%(b) 2.44% 2.37% 2.08%(b)
Ratio of expenses to average net assets* 0.66% 1.01% 1.67% 1.37%(b) 0.59% 0.94% 1.15%(b)
Ratio of net investment income to average
net assets* ........................... 2.24% 1.94% 1.27% 1.82%(b) 2.31% 2.05% 2.03%(b)
Portfolio turnover ....................... 2.71% 2.71% 2.71% 2.71% 11.81% 11.81% 11.81%
</TABLE>
<TABLE>
<CAPTION>
EQUITY INDEX FUND
--------------------------------------------------------------------
YEAR ENDED JUNE 30,
--------------------------------------------------------------------
1994 1993 1992
----------- --------------------- -------------------------
RETIREMENT FIDUCIARY CLASS A FIDUCIARY(a) CLASS A(c)
---------- --------- ------- ------------- ---------
<S> <C> <C> <C> <C> <C>
NET ASSET VALUE,
BEGINNING OF PERIOD ...................... $12.36 $ 10.92 $10.92 $ 10.00 $10.94
------ ------- ------ ------- ------
Investment Activities
Net investment income .................... 0.05 0.30 0.30 0.26 0.08
Net realized and unrealized gains (losses)
from investments ...................... (0.85) 1.13 1.10 0.95
------ ------- ------ ------- ------
Total from Investment Activities ........... (0.80) 1.43 1.40 1.21 0.08
------ ------- ------ ------- ------
Distributions
Net investment income .................... (0.05) (0.30) (0.28) (0.26) (0.10)
In excess of net investment income .......
Net realized gains ....................... (0.13) (0.13) (0.03)
In excess of net realized gains ..........
------ ------- ------ ------- ------
Total Distributions ........................ (0.05) (0.43) (0.41) (0.29) (0.10)
------ ------- ------ ------- ------
NET ASSET VALUE,
END OF PERIOD ............................ $11.51 $ 11.92 $11.91 $ 10.92 $10.92
------ ------- ------ ------- ------
------ ------- ------ ------- ------
Total Return (excludes sales charge) ....... (6.52)%(e) 13.04% 12.75% 12.14%(b) 1.32%(b)
RATIOS/SUPPLEMENTARY DATA:
Net Assets at end of period (000) ........ $ 11 $96,446 $ 512 $62,150 $ 5
Ratio of expenses to average
net assets ............................ 1.42%(b) 0.50% 0.52% 0.73%(b) 1.09%(b)
Ratio of net investment income to average
net assets ............................ 1.83%(b) 2.46% 2.51% 2.43%(b) 1.97%(b)
Ratio of expenses to average net assets* 1.69%(b) 0.87% 0.99% 1.16%(b) 1.27%(b)
Ratio of net investment income to average
net assets* ........................... 1.56%(b) 2.09% 2.04% 2.00%(b) 1.79%(b)
Portfolio turnover ....................... 11.81% 2.71% 2.71% 21.90% 21.90%
</TABLE>
- ------------
* During the period certain fees were voluntarily reduced. If such
voluntary fee reductions had not occurred, the ratios would have been
as indicated.
(a) The Fund commenced operations on July 2, 1991.
(b) Annualized.
(c) Class A Shares commenced offering on February 18, 1992.
(d) Class B Shares commenced offering on January 14, 1994.
(e) Not Annualized
(f) The Service Shares commenced offering on January 17, 1994 when they
were designated as "Retirement" Shares. On April 4, 1995, the name of
the Retirement Shares was changed to "Service" Shares. As of June 1,
1995, Service Shares transferred to Class A Shares, and as of June 30,
1995, there were no Shareholders in the Service class. The return for
the period from July 1, 1994 to June 1, 1995 for the Service Shares was
22.83%.
See notes to financial statements.
76
B-197
<PAGE>
THE ONE GROUP FAMILY OF MUTUAL FUNDS
- --------------------------------------------------------------------------------
FINANCIAL HIGHLIGHTS
<TABLE>
<CAPTION>
LARGE COMPANY VALUE FUND
------------------------------------------------------------------------------------
YEAR ENDED JUNE 30,
------------------------------------------------------------------------------------
1995 1994 1993
---------------------------- -------------------------------- ------------------
FIDUCIARY CLASS A CLASS B FIDUCIARY CLASS A CLASS B(d) FIDUCIARY CLASS A
--------- ------- ------- --------- ------- ---------- --------- -------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
NET ASSET VALUE,
BEGINNING OF PERIOD ...... $ 11.34 $ 11.34 $ 11.41 $ 11.64 $ 11.64 $ 11.87 $ 11.34 $11.33
-------- ------- ------- -------- ------- ------- -------- ------
Investment Activities
Net investment income .... 0.31 0.28 0.17 0.20 0.17 0.05 0.18 0.16
Net realized and
unrealized gains
(losses) from
investments ........... 2.18 2.20 2.19 (0.01) (0.01) (0.46) 0.58 0.59
-------- ------- ------- -------- ------- ------- -------- ------
Total from Investment
Activities ............... 2.49 2.48 2.36 0.19 0.16 (0.41) 0.76 0.75
-------- ------- ------- -------- ------- ------- -------- ------
Distributions
Net investment income .... (0.32) (0.27) (0.17) (0.19) (0.16) (0.05) (0.18) (0.16)
In excess of net
investment income ...... (0.02)
Net realized gains ....... (0.64) (0.64) (0.64) (0.30) (0.30) (0.28) (0.28)
-------- ------- ------- -------- ------- ------- -------- ------
Total Distributions ........ (0.96) (0.93) (0.81) (0.49) (0.46) (0.05) (0.46) (0.44)
-------- ------- ------- -------- ------- ------- -------- ------
NET ASSET VALUE,
END OF PERIOD ............ $ 12.87 $ 12.89 $ 12.96 $ 11.34 $ 11.34 $ 11.41 $ 11.64 $11.64
-------- ------- ------- -------- ------- ------- -------- ------
-------- ------- ------- -------- ------- ------- -------- ------
Total Return (excludes sales
charge) .................. 23.42% 22.64% 22.28% (1.59)% 1.35% 3.48%(e) 6.73% 6.64%
RATIOS/SUPPLEMENTARY
DATA:
Net Assets at end of
period (000) ........... $365,375 $ 3,481 $ 861 $169,127 $ 698 $ 182 $132,833 $ 451
Ratio of expenses to
average net assets .... 1.00% 1.25% 2.00% 0.95% 1.20% 2.00%(b) 0.86% 1.10%
Ratio of net investment
income to average net
assets ................ 2.74% 2.52% 1.74% 1.72% 1.57% 1.06%(b) 1.62% 1.41%
Ratio of expenses to
average net assets* ... 1.01% 1.37% 2.01% 1.02% 1.37% 2.00%(b) 1.12% 1.50%
Ratio of net investment
income to average net
assets* ............... 2.73% 2.41% 1.72% 1.65% 1.40% 1.06%(b) 1.36% 1.01%
Portfolio turnover ....... 203.13% 203.37% 203.13% 111.72% 111.72% 111.72% 51.75% 51.75%
</TABLE>
<TABLE>
<CAPTION>
LARGE COMPANY VALUE FUND
-------------------------------------
YEAR ENDED JUNE 30,
-------------------------------------
1992 1991
---------------------- ------------
FIDUCIARY CLASS A(c) FIDUCIARY(a)
--------- ---------- ------------
<S> <C> <C> <C>
NET ASSET VALUE,
BEGINNING OF PERIOD ...... $ 10.07 $11.42 $ 10.00
-------- ------ --------
Investment Activities
Net investment income .... 0.21 0.07 0.08
Net realized and
unrealized gains
(losses) from
investments ........... 1.34 (0.08) 0.07
-------- ------ --------
Total from Investment
Activities ............... 1.55 (0.01) 0.15
-------- ------ --------
Distributions
Net investment income .... (0.21) (0.08) (0.08)
In excess of net
investment income ......
Net realized gains ....... (0.07)
-------- ------ --------
Total Distributions ........ (0.28) (0.08) (0.08)
-------- ------ --------
NET ASSET VALUE,
END OF PERIOD ............ $ 11.34 $11.33 $ 10.07
-------- ------ --------
-------- ------ --------
Total Return (excludes sales
charge) .................. 15.53% (0.33)%(b) 4.47%(b)
RATIOS/SUPPLEMENTARY
DATA:
Net Assets at end of
period (000) ........... $ 62,075 $ 12 $ 36,237
Ratio of expenses to
average net assets .... 0.82% 1.02%(b) 0.52%(b)
Ratio of net investment
income to average net
assets ................ 1.91% 2.12%(b) 2.48%(b)
Ratio of expenses to
average net assets* ... 1.34% 1.22%(b) 1.26%(b)
Ratio of net investment
income to average net
assets* ............... 1.39% 1.92%(b) 1.74%(b)
Portfolio turnover ....... 55.90% 55.90% 19.87%
</TABLE>
- -------------
* During the period certain fees were voluntarily reduced. If such voluntary
fee reductions had not occurred, the ratios would have been as indicated.
(a) The Fund commenced operations on March 1, 1991.
(b) Annualized.
(c) Class A Shares commenced offering on February 18, 1992.
(d) Class B Shares commenced offering on January 14, 1994.
(e) Not Annualized.
See notes to financial statements.
77
B-198
<PAGE>
THE ONE GROUP FAMILY OF MUTUAL FUNDS
- --------------------------------------------------------------------------------
FINANCIAL HIGHLIGHTS
<TABLE>
<CAPTION>
BLUE CHIP EQUITY FUND
-----------------------------------------------------------------------------------
YEAR ENDED JUNE 30,
-----------------------------------------------------------------------------------
1995 1994 1993
---------------------------- --------------------------------- ------------------
FIDUCIARY CLASS A CLASS B FIDUCIARY CLASS A CLASS B(d) FIDUCIARY CLASS A
--------- ------- ------- --------- ------- ---------- --------- -------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
NET ASSET VALUE,
BEGINNING OF PERIOD............... $ 12.53 $12.52 $12.62 $ 12.91 $12.91 $13.50 $ 12.95 $12.95
------- ------ ------ ------- ------ ------ -------- ------
Investment Activities
Net investment income............. 0.23 0.17 0.10 0.22 0.18 0.03 0.23 0.21
Net realized and unrealized gains
(losses) from investments....... 1.85 1.89 1.88 (0.38) (0.38) (0.87) (0.04) (0.04)
------- ------ ------ ------- ------ ------ -------- ------
Total from Investment Activities.... 2.08 2.06 1.98 (0.16) (0.20) (0.84) 0.19 0.17
------- ------ ------ ------- ------ ------ -------- ------
Distributions
Net investment income............. (0.21) (0.16) (0.08) (0.22) (0.19) (0.04) (0.23) (0.21)
In excess of net investment income (0.03) (0.05)
Net realized gains................ (0.07) (0.07) (0.07)
------- ------ ------ ------- ------ ------ -------- ------
Total Distributions................. (0.28) (0.26) (0.20) (0.22) (0.19) (0.04) (0.23) (0.21)
------- ------ ------ ------- ------ ------ -------- ------
NET ASSET VALUE,
END OF PERIOD..................... $ 14.33 $14.32 $14.40 $ 12.53 $12.52 $12.62 $ 12.91 $12.91
------- ------ ------ ------- ------ ------ -------- ------
------- ------ ------ ------- ------ ------ -------- ------
Total Return (excludes sales charge) 16.90% 16.71% 15.86% (1.30)% (1.61)% (6.24)%(e) 1.42% 1.23%
RATIOS/SUPPLEMENTARY DATA:
Net Assets at end of
period (000).................... $38,915 $3,621 $ 384 $79,357 $3,950 $ 111 $106,619 $5,540
Ratio of expenses to average net
assets.......................... 1.03% 1.28% 2.05% 0.95% 1.20% 2.04%(b) 0.89% 1.11%
Ratio of net investment income
to average net assets........... 1.56% 1.34% 0.65% 1.64% 1.50% 0.95%(b) 1.74% 1.57%
Ratio of expenses to average net
assets*........................ 1.29% 1.65% 2.31% 1.05% 1.40% 2.08%(b) 1.11% 1.45%
Ratio of net investment income to
average net assets*............. 1.30% 0.98% 0.39% 1.54% 1.30% 0.91%(b) 1.52% 1.23%
Portfolio turnover................ 2.66% 2.66% 2.66% 25.31% 25.31% 25.31% 32.91% 32.91%
</TABLE>
<TABLE>
<CAPTION>
BLUE CHIP EQUITY FUND
-------------------------------------
YEAR ENDED JUNE 30,
-------------------------------------
1992 1991
----------------------- ------------
FIDUCIARY CLASS A(c) FIDUCIARY(a)
--------- ----------- ------------
<S> <C> <C> <C>
NET ASSET VALUE,
BEGINNING OF PERIOD............... $ 11.69 $13.08 $ 10.00
------- ------ -------
Investment Activities
Net investment income............. 0.26 0.09 0.23
Net realized and unrealized gains
(losses) from invest ments...... 1.30 (0.12) 1.68
------- ------ -------
Total from Investment Activities.... 1.56 (0.03) 1.91
------- ------ -------
Distributions
Net investment income............. (0.27) (0.10) (0.22)
In excess of net investment income
Net realized gains................ (0.03)
------- ------ -------
Total Distributions................. (0.30) (0.10) (0.22)
------- ------ -------
NET ASSET VALUE,
END OF PERIOD..................... $ 12.95 $12.95 $ 11.69
------- ------ -------
------- ------ -------
Total Return (excludes sales charge) 13.36% (0.64)%(b) 25.72%(b)
RATIOS/SUPPLEMENTARY DATA:
Net Assets at end of
period (000).................... $88,618 $ 50 $32,509
Ratio of expenses to average net
assets.......................... 0.78% 1.30%(b) 0.64%(b)
Ratio of net investment income
to average net assets........... 2.12% 1.87%(b) 2.80%(b)
Ratio of expenses to average net
assets*........................ 1.26% 1.50%(b) 1.38%(b)
Ratio of net investment income to
average net assets*............. 1.64% 1.67%(b) 2.06%(b)
Portfolio turnover................ 5.33% 5.33% 1.76%
</TABLE>
- -------------
* During the period certain fees were voluntarily reduced. If such voluntary
fee reductions had not occurred, the ratios would have been as indicated.
(a) The Fund commenced operations on October 1, 1990.
(b) Annualized.
(c) Class A Shares commenced offering on February 18, 1992.
(d) Class B Shares commenced offering on January 14, 1994.
(e) Not Annualized.
See notes to financial statements.
78
B-199
<PAGE>
THE ONE GROUP FAMILY OF MUTUAL FUNDS
- --------------------------------------------------------------------------------
FINANCIAL HIGHLIGHTS
<TABLE>
<CAPTION>
LARGE COMPANY GROWTH FUND
--------------------------------------------------------------------------------
YEAR ENDED JUNE 30,
--------------------------------------------------------------------------------
1995 1994
--------------------------------------------------------------------------------
FIDUCIARY CLASS A CLASS B SERVICE (f) FIDUCIARY CLASS A (b) CLASS B (c)
--------- ------- ------- ----------- --------- ----------- -----------
<S> <C> <C> <C> <C> <C> <C> <C>
NET ASSET VALUE,
BEGINNING OF PERIOD................. $ 11.32 $ 11.62 $11.47 $11.42 $ 10.92 $11.78 $11.57
-------- ------- ------ ------ -------- ------ ------
Investment Activities
Net investment income............... 0.20 0.17 0.09 0.11 0.20 0.04 0.03
Net realized and unrealized gains
(losses) from investments......... 3.04 3.10 3.06 2.85 0.67 (0.16) (0.10)
-------- ------- ------ ------ -------- ------ ------
Total from Investment Activities...... 3.24 3.27 3.15 2.96 0.87 (0.12) (0.07)
-------- ------- ------ ------ -------- ------ ------
Distributions
Net investment income............... (0.20) (0.16) (0.09) (0.11) (0.20) (0.04) (0.03)
In excess of net investment income.. (0.01) (0.01)
Net realized gains.................. (0.89) (0.89) (0.89) (0.89) (0.27)
-------- ------- ------ ------ -------- ------ ------
Total Distributions................... (1.09) (1.06) (0.99) (1.00) (0.47) (0.04) (0.03)
-------- ------- ------ ------ -------- ------ ------
NET ASSET VALUE,
END OF PERIOD....................... $ 13.47 $ 13.83 $13.63 $13.38 $ 11.32 $11.62 $11.47
-------- ------- ------ ------ -------- ------ ------
-------- ------- ------ ------ -------- ------ ------
Total Return (excludes sales charge).. 21.85% 21.52% 20.65% (f) 8.04% (1.02)%(d) (0.66)%(d)
RATIOS/SUPPLEMENTARY DATA:
Net Assets at end of period (000)... $531,595 $27,428 $6,918 $150,035 $ 368 $ 334
Ratio of expenses to average net
assets............................ 1.00% 1.26% 2.01% 1.90%(e) 0.78% 1.25% (e) 1.99% (e)
Ratio of net investment income to
average net assets................ 1.72% 1.49% 0.74% 1.05%(e) 1.78%(e) 0.96% (e) 1.02% (e)
Ratio of expenses to average net
assets*........................... 1.00% 1.36% 2.01% 1.90%(e) 1.13% 1.35% (e) 1.99% (e)
Ratio of net investment income to
average net assets*............... 1.72% 1.39% 0.74% 1.05%(e) 1.52% 1.68% (e) 0.96% (e)
Portfolio turnover.................. 14.22% 14.22% 14.22% 14.22% 9.04% 9.04% 9.04%
</TABLE>
<TABLE>
<CAPTION>
LARGE COMPANY GROWTH FUND
-------------------------------------
YEAR ENDED JUNE 30,
-------------------------------------
1994 1993 1992
-------------------------------------
RETIREMENT FIDUCIARY FIDUCIARY (a)
---------- --------- -------------
<S> <C> <C> <C>
NET ASSET VALUE,
BEGINNING OF PERIOD................. $11.58 $ 9.85 $ 10.00
------ ------- -------
Investment Activities
Net investment income............... 0.03 0.23 0.08
Net realized and unrealized gains
(losses) from investments......... (0.16) 1.12 (0.16)
------ ------- -------
Total from Investment Activities...... (0.13) 1.35 (0.08)
------ ------- -------
Distributions
Net investment income............... (0.03) (0.23) (0.07)
In excess of net investment income..
Net realized gains.................. (0.05)
------ ------- -------
Total Distributions................... (0.03) (0.28) (0.07)
------ ------- -------
NET ASSET VALUE,
END OF PERIOD....................... $11.42 $ 10.92 $ 9.85
------ ------- -------
------ ------- -------
Total Return (excludes sales charge).. (1.13)%(d) 13.92% (0.80)%
RATIOS/SUPPLEMENTARY DATA:
Net Assets at end of period (000)... $ 24 $41,317 $25,019
Ratio of expenses to average net
assets............................ 1.75% (e) 0.39% 0.30%
Ratio of net investment income to
average net assets................ 2.24% 2.37%
Ratio of expenses to average net
assets*........................... 1.75% (e) 1.43% 1.49%
Ratio of net investment income to
average net assets*............... 1.02% (e) 1.21% 1.12%
Portfolio turnover.................. 9.04% 10.61% 3.09%
</TABLE>
- --------------
* During the period certain fees were voluntarily reduced. If such voluntary
fee reductions had not occurred, the ratios would have been as indicated.
(a) The Fund commenced operations on February 28, 1992.
(b) Class A Shares commenced offering on January 1, 1994.
(c) Class B Shares commenced offering on January 14, 1994.
(d) Not Annualized.
(e) Annualized.
(f) The Service Shares commenced offering on January 17, 1994 when they were
designated as "Retirement" Shares. On April 4, 1995, the name of the
Retirement Shares was changed to "Service" Shares. As of June 1, 1995,
Service Shares transferred to Class A Shares, and as of June 30, 1995,
there were no shareholders in the Service Class. The return for the period
from July 1, 1994 to June 1, 1995 for the Service Shares was 19.19%.
See notes to financial statements.
79
B-200
<PAGE>
THE ONE GROUP FAMILY OF MUTUAL FUNDS
- --------------------------------------------------------------------------------
FINANCIAL HIGHLIGHTS
<TABLE>
<CAPTION>
DISCIPLINED VALUE FUND
----------------------------------------------------------------------------------------
YEAR ENDED JUNE 30,
----------------------------------------------------------------------------------------
1995 1994
----------------------------------------------------------------------------------------
FIDUCIARY CLASS A CLASS B SERVICE (e) FIDUCIARY CLASS A CLASS B (c) RETIREMENT
--------- ------- ------- ----------- --------- ------- ----------- ----------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
NET ASSET VALUE,
BEGINNING OF PERIOD................. $ 11.90 $ 11.91 $ 11.90 $ 11.90 $ 12.76 $ 12.75 $12.60 $12.59
-------- ------- ------- ------- -------- ------- ------ ------
Investment Activities
Net investment income............... 0.28 0.24 0.15 0.17 0.26 0.24 0.07 0.06
Net realized and unrealized gains
(losses) from investments......... 1.57 1.59 1.58 1.37 0.29 0.30 (0.70) (0.69)
-------- ------- ------- ------- -------- ------- ------ ------
Total from Investment Activities...... 1.85 1.83 1.73 1.54 0.55 0.54 (0.63) (0.63)
-------- ------- ------- ------- -------- ------- ------ ------
Distributions
Net investment income............... (0.27) (0.24) (0.15) (0.16) (0.26) (0.23) (0.06) (0.06)
In excess of net investment income.. (0.01) (0.01) (0.01)
Net realized gains.................. (0.28) (0.26) (0.28) (0.28) (1.15) (1.10)
In excess of net realized gains..... (0.02) (0.05)
-------- ------- ------- ------- -------- ------- ------ ------
Total Distributions................... (0.55) (0.52) (0.44) (0.45) (1.41) (1.38) (0.07) (0.06)
-------- ------- ------- ------- -------- ------- ------ ------
NET ASSET VALUE,
END OF PERIOD....................... $ 13.20 $ 13.22 $ 13.19 $ 12.99 $ 11.90 $ 11.91 $11.90 $11.90
-------- ------- ------- ------- -------- ------- ------ ------
-------- ------- ------- ------- -------- ------- ------ ------
Total Return (excludes sales charge).. 16.03% 15.43% 14.92% (e) 4.04% 3.95% (5.00)%(d) (5.03)%(d)
RATIOS/SUPPLEMENTARY DATA:
Net Assets at end of period (000)... $448,530 $13,560 $11,222 $418,238 $10,448 $5,356 $ 47
Ratio of expenses to average net
assets............................ 1.00% 1.26% 2.00% 1.90%(b) 0.93% 1.18% 1.96%(b) 1.84% (b)
Ratio of net investment income to
average net assets................ 2.21% 1.99% 1.26% 1.89%(b) 2.14% 2.00% 1.80%(b) 1.83% (b)
Ratio of expenses to average net
assets*........................... 1.10% 1.36% 2.01% 1.90%(b) 0.98% 1.33% 1.96%(b) 1.84% (b)
Ratio of net investment income to
average net assets*............... 2.11% 1.89% 1.25% 1.89%(b) 2.09% 1.85% 1.80%(b) 1.83% (b)
Portfolio turnover.................. 176.66% 176.66% 176.66% 176.66% 56.33% 56.33% 56.33% 56.33%
</TABLE>
<TABLE>
<CAPTION>
DISCIPLINED VALUE FUND
---------------------------------------------------------
YEAR ENDED JUNE 30,
---------------------------------------------------------
1993 1992 1991
---------------------------------------------------------
FIDUCIARY CLASS A FIDUCIARY CLASS A (a) FIDUCIARY
--------- ------- --------- ----------- ---------
<S> <C> <C> <C> <C> <C>
NET ASSET VALUE,
BEGINNING OF PERIOD................. $ 11.49 $ 11.49 $ 10.20 $11.45 $ 10.42
-------- ------- -------- ------ -------
Investment Activities
Net investment income............... 0.28 0.25 0.34 0.12 0.39
Net realized and unrealized gains
(losses) from investments......... 1.27 1.26 1.29 0.06 (0.23)
-------- ------- -------- ------ -------
Total from Investment Activities...... 1.55 1.51 1.63 0.18 0.16
-------- ------- -------- ------ -------
Distributions
Net investment income............... (0.28) (0.25) (0.34) (0.14) (0.38)
In excess of net investment income..
Net realized gains..................
In excess of net realized gains.....
-------- ------- -------- ------ -------
Total Distributions................... (0.28) (0.25) (0.34) (0.14) (0.38)
-------- ------- -------- ------ -------
NET ASSET VALUE,
END OF PERIOD....................... $ 12.76 $ 12.75 $ 11.49 $11.49 $ 10.20
-------- ------- -------- ------ -------
-------- ------- -------- ------ -------
Total Return (excludes sales charge).. 13.58% 13.27% 16.24% 1.56%(b) 1.75%
RATIOS/SUPPLEMENTARY DATA:
Net Assets at end of period (000)... $211,785 $ 3,435 $115,234 $ 35 $74,481
Ratio of expenses to average net
assets............................ 0.89% 1.12% 0.69% 1.29%(b) 0.41%
Ratio of net investment income to
average net assets................ 2.30% 2.06% 3.17% 2.43%(b) 3.92%
Ratio of expenses to average net
assets*........................... 1.08% 1.46% 1.23% 1.49%(b) 1.15%
Ratio of net investment income to
average net assets*............... 2.11% 1.72% 2.63% 2.23%(b) 3.18%
Portfolio turnover.................. 108.79% 108.79% 25.32% 25.32% 49.62%
</TABLE>
- ------------
* During the period certain fees were voluntarily reduced. If such voluntary
fee reductions had not occurred, the ratios would have been as indicated.
(a) Class A Shares commenced offering on February 18, 1992.
(b) Annualized.
(c) Class B Shares commenced offering on January 14, 1994.
(d) Not Annualized.
(e) The Service Shares commenced offering on January 17, 1994 when they were
designated as "Retirement" Shares. On April 4, 1995, the name of the
Retirement Shares was changed to "Service" Shares. As of June 1, 1995,
Service Shares transferred to Class A Shares, and as of June 30, 1995,
there were no shareholders in the Service Class. The return for the period
from July 1, 1994 to June 1, 1995 for the Service Shares was 13.14%.
See notes to financial statements.
80
B-201
<PAGE>
THE ONE GROUP FAMILY OF MUTUAL FUNDS
- --------------------------------------------------------------------------------
FINANCIAL HIGHLIGHTS
<TABLE>
<CAPTION>
SMALL COMPANY GROWTH FUND
------------------------------------------------------------------------------------------
YEAR ENDED JUNE 30,
------------------------------------------------------------------------------------------
1995 1994
------------------------------------------------------------------------------------------
FIDUCIARY CLASS A CLASS B SERVICE (e) FIDUCIARY CLASS A CLASS B (c) RETIREMENT
--------- ------- ------- ----------- --------- ------- ----------- ----------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
NET ASSET VALUE,
BEGINNING OF PERIOD................. $ 15.96 $ 15.93 $ 15.85 $ 15.95 $ 16.96 $16.96 $17.44 $17.47
-------- ------- ------- ------- -------- ------ ------ ------
Investment Activities
Net investment income............... 0.06 0.02 (0.07) (0.03) 0.07 0.04 (0.02) (0.01)
Net realized and unrealized gains
(losses) from investments......... 2.98 2.98 2.90 2.14 (0.05) (0.08) (1.56) (1.50)
-------- ------- ------- ------- -------- ------ ------ ------
Total from Investment Activities...... 3.04 3.00 2.83 2.11 0.02 (0.04) (1.58) (1.51)
-------- ------- ------- ------- -------- ------ ------ ------
Distributions
Net investment income............... (0.06) (0.01) (0.07) (0.03) (0.01) (0.01)
In excess of net investment income.. (0.02) (0.01)
Net realized gains.................. (0.54) (0.54) (0.54) (0.54) (0.95) (0.95)
-------- ------- ------- ------- -------- ------ ------ ------
Total Distributions................... (0.60) (0.57) (0.54) (0.54) (1.02) (0.99) (0.01) (0.01)
-------- ------- ------- ------- -------- ------ ------ ------
NET ASSET VALUE,
END OF PERIOD....................... $ 18.40 $ 18.36 $ 18.14 $ 17.52 $ 15.96 $15.93 $15.85 $15.95
-------- ------- ------- ------- -------- ------ ------ ------
-------- ------- ------- ------- -------- ------ ------ ------
Total Return (excludes sales charge).. 19.75% 19.50% 18.47% (e) (0.16)% (0.52)% (9.07)%(d) (8.64)%(d)
RATIOS/SUPPLEMENTARY DATA:
Net Assets at end of period (000)... $413,518 $11,178 $ 2,787 $389,567 $8,097 $1,131 $ 35
Ratio of expenses to average net
assets............................ 0.98% 1.23% 1.98% 1.87% (b) 0.98% 1.22% 2.12% (b) 1.91% (b)
Ratio of net investment income to
average net assets................ 0.38% 0.12% (0.63)% (0.39)%(b) 0.42% 0.27% (0.55)%(b) (0.36)%(b)
Ratio of expenses to average net
assets*........................... 0.98% 1.33% 1.98% 1.87% (b) 1.03% 1.38% 2.12% (b) 1.91% (b)
Ratio of net investment income to
average net assets*............... 0.38% 0.02% (0.63)% (0.39)%(b) 0.37% 0.11% (0.55)%(b) (0.36)%(b)
Portfolio turnover.................. 132.63% 132.63% 132.63% 132.63% 70.67% 70.67% 70.67% 70.67%
</TABLE>
<TABLE>
<CAPTION>
SMALL COMPANY GROWTH FUND
---------------------------------------------------------
YEAR ENDED JUNE 30,
---------------------------------------------------------
1993 1992 1991
---------------------------------------------------------
FIDUCIARY CLASS A FIDUCIARY CLASS A (a) FIDUCIARY
--------- ------- --------- ----------- ---------
<S> <C> <C> <C> <C> <C>
NET ASSET VALUE,
BEGINNING OF PERIOD................. $ 14.54 $14.54 $ 12.92 $ 16.53 $ 12.14
-------- ------ -------- ------- -------
Investment Activities
Net investment income............... 0.06 0.03 0.09 0.01 0.21
Net realized and unrealized gains
(losses) from investments......... 2.99 3.00 1.87 (1.99) 0.92
-------- ------ -------- ------- -------
Total from Investment Activities...... 3.05 3.03 1.96 (1.98) 1.13
-------- ------ -------- ------- -------
Distributions
Net investment income............... (0.06) (0.04) (0.08) (0.01) (0.21)
In excess of net investment income..
Net realized gains.................. (0.57) (0.57) (0.26) (0.14)
-------- ------ -------- ------- -------
Total Distributions................... (0.63) (0.61) (0.34) (0.01) (0.35)
-------- ------ -------- ------- -------
NET ASSET VALUE,
END OF PERIOD....................... $ 16.96 $16.96 $ 14.54 $ 14.54 $ 12.92
-------- ------ -------- ------- -------
-------- ------ -------- ------- -------
Total Return (excludes sales charge).. 21.36% 21.70% 15.15% (34.00)%(b) 9.85%
RATIOS/SUPPLEMENTARY DATA:
Net Assets at end of period (000)... $232,898 $5,757 $131,533 $ 84 $53,831
Ratio of expenses to average net
assets............................ 0.89% 1.11% 0.75% 1.31% (b) 0.45%
Ratio of net investment income to
average net assets................ 0.41% 0.25% 0.51% 0.12% (b) 1.75%
Ratio of expenses to average net
assets*........................... 1.11% 1.48% 1.23% 1.50% (b) 1.19%
Ratio of net investment income to
average net assets*............... 0.19% (0.12)% 0.03% (0.07)%(b) 1.01%
Portfolio turnover.................. 64.64% 64.64% 42.77% 42.77% 68.83%
</TABLE>
- ------------
* During the period certain fees were voluntarily reduced. If such voluntary
fee reductions had not occurred, the ratios would have been as indicated.
(a) Class A Shares commenced offering on February 18, 1992.
(b) Annualized.
(c) Class B Shares commenced offering on January 14, 1994.
(d) Not Annualized.
(e) The Service Shares commenced offering on January 17, 1994 when they were
designated as "Retirement" Shares. On April 4, 1995, the name of the
Retirement Shares was changed to "Service" Shares. As of June 1, 1995,
Service Shares transferred to Class A Shares, and as of June 30, 1995,
there were no shareholders in the Service Class. The return for the period
from July 1, 1994 to June 1, 1995 for the Service Shares was 13.12%.
See notes to financial statements.
81
B-202
<PAGE>
THE ONE GROUP FAMILY OF MUTUAL FUNDS
- --------------------------------------------------------------------------------
FINANCIAL HIGHLIGHTS
<TABLE>
<CAPTION>
INTERNATIONAL EQUITY INDEX FUND
------------------------------------------------------------------------------------
YEAR ENDED JUNE 30,
------------------------------------------------------------------------------------
1995 1994
------------------------------------------------------------------------------------
FIDUCIARY CLASS A CLASS B SERVICE (f) FIDUCIARY CLASS A CLASS B (d) RETIREMENT
--------- ------- ------- ----------- --------- ------- ----------- ----------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
NET ASSET VALUE,
BEGINNING OF PERIOD................. $ 13.46 $13.49 $13.40 $13.44 $ 11.80 $11.80 $13.00 $12.98
-------- ------ ------ ------ -------- ------ ------ ------
Investment Activities
Net investment income............... 0.13 0.12 0.03 0.11 0.11 0.09 0.06 (0.25)
Net realized and unrealized gains
(losses) from investments......... 0.46 0.43 0.41 0.50 1.68 1.67 0.34 0.71
-------- ------ ------ ------ -------- ------ ------ ------
Total from Investment Activities...... 0.59 0.55 0.44 0.61 1.79 1.76 0.40 0.46
-------- ------ ------ ------ -------- ------ ------ ------
Distributions
Net investment income............... (0.08) (0.08) (0.07) (0.07) (0.11) (0.05)
Net realized gains.................. (0.04) (0.04) (0.04) (0.04) (0.01) (0.02)
In excess of net realized gains..... (0.01)
-------- ------ ------ ------ -------- ------ ------ ------
Total Distributions................... (0.12) (0.12) (0.11) (0.11) (0.13) (0.07)
-------- ------ ------ ------ -------- ------ ------ ------
NET ASSET VALUE,
END OF PERIOD....................... $ 13.93 $13.92 $13.73 $13.94 $ 13.46 $13.49 $13.40 $13.44
-------- ------ ------ ------ -------- ------ ------ ------
-------- ------ ------ ------ -------- ------ ------ ------
Total Return (excludes sales charge).. 4.20% 3.87% 3.17% (f) 15.44% 15.18% 3.23% 3.78%(e)
RATIOS/SUPPLEMENTARY DATA:
Net Assets at end of period (000)... $218,299 $5,028 $3,687 $145,640 $2,395 $1,872 $ 74
Ratio of expenses to average net
assets............................ 1.04% 1.28% 2.04% 1.90%(c) 1.02% 1.26% 2.00% 10.85%(c)
Ratio of net investment income to
average net assets................ 1.25% 1.09% 0.25% 0.92%(c) 1.27% 1.15% 1.37% 1.97%(c)
Ratio of expenses to average net
assets*........................... 1.04% 1.38% 2.04% 1.90%(c) 1.02% 1.36% 2.00% 1.85%(c)
Ratio of net investment income to
average net assets*............... 1.25% 0.99% 0.25% 0.92%(c) 1.27% 1.05% 1.37% 1.97%(c)
Portfolio turnover.................. 4.67% 4.67% 4.67% 4.67% 7.74% 7.74% 7.74% 7.74%
</TABLE>
<TABLE>
<CAPTION>
INTERNATIONAL EQUITY INDEX FUND
-------------------------------
YEAR ENDED JUNE 30,
-------------------------------
1993
--------------------------
FIDUCIARY (a) CLASS A (b)
------------- -----------
<S> <C> <C>
NET ASSET VALUE,
BEGINNING OF PERIOD................. $ 10.00 $11.74
------- ------
Investment Activities
Net investment income............... 0.06 0.02
Net realized and unrealized gains
(losses) from investments......... 1.75 0.04
------- ------
Total from Investment Activities...... 1.81 0.06
------- ------
Distributions
Net investment income............... (0.01)
Net realized gains..................
In excess of net realized gains.....
------- ------
Total Distributions................... (0.01)
------- ------
NET ASSET VALUE,
END OF PERIOD....................... $ 11.80 $11.80
------- ------
------- ------
Total Return (excludes sales charge).. 26.96%(c) 2.87%(c)
RATIOS/SUPPLEMENTARY DATA:
Net Assets at end of period (000)... $35,384 $ 153
Ratio of expenses to average net
assets............................ 1.22%(c) 1.47%(c)
Ratio of net investment income to
average net assets................ 1.37%(c) 2.10%(c)
Ratio of expenses to average net
assets*........................... 2.34%(c) 2.35%(c)
Ratio of net investment income to
average net assets*............... 0.25%(c) 1.22%(c)
Portfolio turnover.................. 3.10% 3.10%
</TABLE>
- ------------
* During the period certain fees were voluntarily reduced. If such voluntary
fee reductions had not occurred, the ratios would have been as indicated.
(a) The Fund commenced operations on October 28, 1992.
(b) Class A Shares commenced offering on April 23, 1993.
(c) Annualized.
(d) Class B Shares commenced offering on January 14, 1994.
(e) Not Annualized.
(f) The Service Shares commenced offering on January 17, 1994 when they were
designated as "Retirement" Shares. On April 4, 1995, the name of the
Retirement Shares was changed to "Service" Shares. As of June 1, 1995,
Service Shares transferred to Class A Shares, and as of June 30, 1995,
there were no Shareholders in the Service Class. The return for the period
from July 1, 1994 to June 1, 1995 for the Service Shares was 4.22%.
See notes to financial statements.
82
B-203
<PAGE>
REPORT OF INDEPENDENT ACCOUNTANTS
- --------------------------------------------------------------------------------
THE ONE GROUP FAMILY OF MUTUAL FUNDS JUNE 30, 1995
To the Shareholders and Board of Trustees
of The One Group:
We have audited the accompanying statements of assets and liabilities of the
Asset Allocation Fund, the Income Equity Fund, the Equity Index Fund, the Large
Company Value Fund, the Blue Chip Equity Fund, the Large Company Growth Fund,
the Disciplined Value Fund, the Small Company Growth Fund, and the International
Equity Index Fund (nine series of The One Group), including the schedule of
portfolio investments, as of June 30, 1995, and the related statements of
operations for the year then ended, the statements of changes in net assets and
financial highlights for each of the periods indicated herein. These financial
statements and financial highlights are the responsibility of The One Group's
management. Our responsibility is to express an opinion on these financial
statements and financial highlights based on our audits. The financial
highlights for the year ended June 30, 1993 and for the period from February 28,
1992 (commencement of operations) to June 30, 1992 for the Large Company Growth
Fund were audited by other auditors whose report dated August 25, 1993 expressed
an unqualified opinion on the financial highlights.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements and financial
highlights are free of material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in the financial
statements. Our procedures included confirmation of securities owned as of June
30, 1995 by correspondence with the custodian and brokers. An audit also
includes assessing the accounting principles used and significant estimates made
by management, as well as evaluating the overall financial statement
presentation. We believe that our audits provide a reasonable basis for our
opinion.
In our opinion, the financial statements and financial highlights referred to
above present fairly, in all material respects, the financial position of the
Asset Allocation Fund, the Income Equity Fund, the Equity Index Fund, the Large
Company Value Fund, the Blue Chip Equity Fund, the Large Company Growth Fund,
the Disciplined Value Fund, the Small Company Growth Fund, and the International
Equity Index Fund of The One Group as of June 30, 1995, the results of their
operations for the year then ended, the changes in their net assets and the
financial highlights for each of the periods indicated herein, in conformity
with generally accepted accounting principles.
Boston, Massachusetts Coopers & Lybrand L.L.P.
August 18, 1995
83
B-204
<PAGE>
THE ONE GROUP FAMILY OF MUTUAL FUNDS
GOVERNMENT ARM FUND
- --------------------------------------------------------------------------------
SCHEDULE OF PORTFOLIO INVESTMENTS JUNE 30, 1995
(Amounts in Thousands)
<TABLE>
<CAPTION>
PRINCIPAL SECURITY MARKET
AMOUNT DESCRIPTION VALUE
--------- ----------- -------
<S> <C>
U.S. GOVERNMENT AGENCIES (97.6%):
Federal Home Loan Mortgage Corp.:
$ 7,878 7.03%*, 11/15/20 . . . . . . . . . . . . . . . . . . . . . . . . . $ 7,954
1,150 7.22%*, 8/15/08 Pool # 1561 CMO . . . . . . . . . . . . . . . . . . 1,152
3,497 7.54%*, 5/1/18 Pool # 840160 . . . . . . . . . . . . . . . . . . . 3,614
Federal National Mortgage Assoc.:
2,312 7.47%*, 9/1/21 Pool # 124289 . . . . . . . . . . . . . . . . . . . 2,377
4,760 6.63%*, 12/25/20 . . . . . . . . . . . . . . . . . . . . . . . . . 4,735
686 8.50%*, 5/25/20 . . . . . . . . . . . . . . . . . . . . . . . . . . 692
11,023 7.75%*, 1/1/31 Pool # 124945 . . . . . . . . . . . . . . . . . . . 11,361
2,271 7.43%*, 11/1/21 Pool # 124510 . . . . . . . . . . . . . . . . . . . 2,318
1,418 7.32%*, 12/1/18 Pool # 70169 . . . . . . . . . . . . . . . . . . . 1,449
2,569 7.20%*, 4/1/21 Pool # 70983 . . . . . . . . . . . . . . . . . . . . 2,621
9,160 7.50%*, 7/1/20 Pool # 133558 . . . . . . . . . . . . . . . . . . . 9,365
6,726 7.31%*, 7/1/27 Pool # 70179 . . . . . . . . . . . . . . . . . . . . 6,862
-------
Total U.S. Government Agencies 54,500
-------
Total Investments, at value 54,500
-------
REPURCHASE AGREEMENTS (1.9%):
$ 1,061 J.P. Morgan, 6.18%, dated 6/30/95, due 7/3/95
(Collateralized by $1,295 Federal Home Loan Mortgage
Corp., 5.28%, 10/7/23, market value-$1,270) . . . . . . . . . . . 1,061
-------
Total Repurchase Agreements 1,061
-------
Total (Cost--$56,256)(a) $55,561
-------
-------
</TABLE>
- ---------------
Percentages indicated are based on net assets of $55,841.
(a) Represents cost for federal income tax purposes and differs from value by
net unrealized depreciation of securities as follows:
<TABLE>
<CAPTION>
<S> <C>
Unrealized appreciation . . . . . . . . . . . $ 61
Unrealized depreciation . . . . . . . . . . . (756)
-----
Net unrealized depreciation . . . . . . . . . $(695)
------
------
</TABLE>
* Variable rate securities having liquidity sources through bank letters of
credit and/or liquidity arrangements. The interest rate, which will change
periodically, is based upon bank prime rates or an index of market interest
rates. The rate reflected on the Schedule of Portfolio Investments is the
rate in effect on June 30, 1995.
CMO -- Collateralized Mortgage Obligations
As of June 30, 1995, the Portfolio's open futures contracts were as follows:
<TABLE>
<CAPTION>
OPENING CURRENT
# OF POSITIONS MARKET
CONTRACTS FUTURES CONTRACT TYPE (000) VALUE (000)
--------- --------------------- --------- -----------
<S> <C> <C> <C>
LONG CONTRACTS
23 US 2-year Note . . . . . . . . . . . . . . $ 4,772 $ 4,770
13 90-day Eurodollar . . . . . . . . . . . . . 3,042 3,066
20 90-day Eurodollar . . . . . . . . . . . . . 4,715 4,717
15 90-day Eurodollar . . . . . . . . . . . . . 3,538 3,538
SHORT CONTRACTS
1 September 1995, U.S. Long Bond . . . . . . (115) (114)
23 5-year U.S. Treasury Note, September 1995 . (2,459) (2,470)
</TABLE>
See notes to financial statements.
23
B-205
<PAGE>
THE ONE GROUP FAMILY OF MUTUAL FUNDS
Limited Volatility Bond Fund
- --------------------------------------------------------------------------------
SCHEDULE OF PORTFOLIO INVESTMENTS JUNE 30, 1995
(Amounts in Thousands)
<TABLE>
<CAPTION>
PRINCIPAL SECURITY MARKET
AMOUNT DESCRIPTION VALUE
--------- ----------- --------
<S> <C>
ASSET BACKED SECURITIES (14.0%):
$ 4,620 CIT Group Securitization Corp., Class A1 7.70%, 8/15/20 . . . . . . . . . . . . . . . . . . . . $ 4,728
5,000 Green Tree Home Improvement Loan Trust 6.20%, 7/15/20 . . . . . . . . . . . . . . . . . . . . . 4,987
2,665 Merrill Lynch Corp., Pool #1992-A A 5.50%, 5/15/98 . . . . . . . . . . . . . . . . . . . . . . 2,654
5,000 National Premier Funding 7.00%, 6/1/99 . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5,026
700 Premier Auto Trust, Pool #1992-2A 6.38%, 9/15/97 . . . . . . . . . . . . . . . . . . . . . . . 702
959 Premier Auto Trust, Pool #1992-3A 5.90%, 11/15/97 . . . . . . . . . . . . . . . . . . . . . . . 955
533 Shawmut National Bank, Grantor Trust, Pool #1992-A A 5.55%, 11/15/97 . . . . . . . . . . . . . 533
7,000 Standard Credit Card, Class A 8.63%, 1/7/02 . . . . . . . . . . . . . . . . . . . . . . . . . . 7,303
10,000 Standard Credit Card Master Trust, Pool #1991-1A 8.50%, 6/7/96 . . . . . . . . . . . . . . . . 10,226
5,712 UCFC, 1995-A, Tranche A-1 7.55%, 7/10/04 . . . . . . . . . . . . . . . . . . . . . . . . . . . 5,770
7,000 UCFC Home Equity Loan 8.38%, 3/10/07 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7,210
5,466 Union Federal Savings Bank, Grantor Trust, Pool #1993-C, 4.88%, 2/15/00 . . . . . . . . . . . . 5,331
785 Union Federal Savings Bank, Grantor Trust, Pool #1992-A A, 6.70%, 11/15/97 . . . . . . . . . . 785
3,638 Union Federal Savings Bank, Grantor Trust, Pool #1993-A, 4.53%, 5/15/99 . . . . . . . . . . . . 3,554
-------
Total Asset Backed Securities 59,764
-------
CORPORATE BONDS (16.9%):
Automotive (0.8%):
3,179 Chrysler Corp. 10.40%, 8/1/99 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3,394
-------
Finance (7.9%):
7,000 Ford Motor Credit 1/15/00 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7,481
5,000 GMAC Financial 7.00%, 3/1/00 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5,050
5,200 International Lease Finance 6.63%, 6/1/96 . . . . . . . . . . . . . . . . . . . . . . . . . . . 5,227
10,000 International Lease Finance 5.54%, 5/5/97 . . . . . . . . . . . . . . . . . . . . . . . . . . . 9,888
6,000 Paccar Financial 6.45%, 3/25/96 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6,018
-------
33,664
-------
Foreign (1.9%):
10,000 Westpac Banking Perpetual Note A2/A, 6.65%* . . . . . . . . . . . . . . . . . . . . . . . . . . 8,100
-------
Pharmaceutical (1.2%):
5,000 American Home Products, 7.70%, 2/15/00 . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5,225
-------
Retail (0.4%):
1,500 Dayton Hudson Corp., 6.06%, 12/15/96 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1,500
-------
Securities Brokers and Dealers (4.7%):
7,000 Lehman Brothers, Inc., 7.00%, 5/15/97 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7,053
3,000 Lehman Brothers, Inc. 10.00%, 5/15/99 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3,285
4,500 Lehman Brothers Holding, 8.88%, 11/1/98 . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4,748
5,000 Smith Barney, 6.00%, 3/15/97 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4,969
-------
20,055
-------
Total Corporate Bonds 71,938
-------
U.S. GOVERNMENT AND AGENCY OBLIGATIONS (29.6%):
Federal Home Loan Bank:
7,500 6.55%, 4/17/96 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7,515
5,000 7.35%, 5/24/00 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5,009
10,000 7.78%, 10/19/01 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10,724
Federal Home Loan Mortgage Corp.:
636 9.00%, 1/1/05 Pool #E00012 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 663
626 9.00%, 12/1/05 Pool #E00005 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 653
1,155 8.00%, 10/1/06 Pool #E00052 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1,187
3,318 7.00%, 3/1/07, Pool #E34594, Gold . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3,326
3,024 7.00%, 4/1/07 Pool #E00087, Gold . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3,032
4,234 7.50%, 4/1/07 Pool #E00084 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4,304
5,087 7.50%, 11/1/07 Pool #E00165 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5,172
9,169 8.50%, 2/1/08 Pool #G10133, Gold . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9,495
4,890 8.00%, 1/1/10 Pool #E00355 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5,026
12,735 8.00%, 2/1/10 Pool #G10382 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13,089
7,550 5.50%, 10/15/13 Class C Pool, #1546-C REMIC . . . . . . . . . . . . . . . . . . . . . . . . . . 7,384
10,000 5.25%, 9/15/15 Pool #1638 BC, REMIC . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9,641
10,000 8.25%, 12/15/16 Pool #1770 PD, REMIC . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10,459
10,000 7.25%, 4/15/18 Pool #1254 F, REMIC . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10,036
Federal National Mortgage Assoc.:
3,000 8.20%, 3/10/98 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3,151
373 9.00%, 9/1/05 Pool #50340 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 389
420 9.00%, 11/1/05 Pool #50361 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 438
421 8.50%, 4/1/06 Pool #116875 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 436
6,000 7.00%, 6/1/10 Pool #315928 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6,011
1,679 6.00%, 9/25/18 Pool #1989-94E, REMIC . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1,666
Government National Mortgage Assoc.:
6 8.00%, 2/15/02 Pool #192917 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6
43 8.00%, 3/15/02 Pool #209172 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 44
16 9.00%, 6/15/02 Pool #229311 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17
127 9.00%, 10/15/02 Pool #229569 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 133
29 8.00%, 6/15/05 Pool #288827 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 30
17 9.00%, 9/15/05 Pool #292569 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18
129 9.00%, 10/15/05 Pool #292589 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 135
39 8.00%, 5/15/06 Pool #303851 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 41
11 8.00%, 7/15/06 Pool #307231 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11
59 8.00%, 8/15/06 Pool #311166 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 61
415 8.00%, 10/15/06 Pool #316915 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 429
76 8.00%, 11/15/06 Pool #311131 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 79
766 8.00%, 11/15/06 Pool #312210 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 791
440 8.00%, 11/15/06 Pool #313528 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 454
196 8.00%, 11/15/06 Pool #315078 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 202
204 8.00%, 11/15/06 Pool #316671 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 210
58 8.00%, 12/15/06 Pool #311301 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 60
382 8.00%, 12/15/06 Pool #311384 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 393
314 8.00%, 1/15/07 Pool #317663 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 323
669 8.00%, 2/15/07, Pool #316086 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 690
</TABLE>
Continued
24
B-206
<PAGE>
THE ONE GROUP FAMILY OF MUTUAL FUNDS
Limited Volatility Bond Fund
- --------------------------------------------------------------------------------
SCHEDULE OF PORTFOLIO INVESTMENTS, CONTINUED JUNE 30, 1995
(Amounts in Thousands)
<TABLE>
<CAPTION>
PRINCIPAL SECURITY MARKET
AMOUNT DESCRIPTION VALUE
--------- ----------- --------
<S> <C>
U.S. GOVERNMENT AND AGENCY OBLIGATIONS, CONTINUED
Government National Mortgage Assoc., continued:
$ 291 8.00%, 3/15/07 Pool #318825 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 300
122 8.00%, 3/15/07 Pool #178684 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 126
254 8.00%, 4/15/07 Pool #316441 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 262
U.S. Government Backed Bonds:
552 Resolution Trust Corporation, Series 1992 5.90%, 7/25/23 . . . . . . . . . . . . . . . . . . . 550
2,018 U.S. Government Guaranteed Overseas Private Investment Corp.:
5.55%, 1/13/97 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2,005
--------
Total U.S. Government and Agency Obligations 126,176
--------
U.S. TREASURY NOTES (35.7%):
5,000 7.50%, 1/31/96 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5,050
10,000 6.25%, 8/31/96 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10,047
15,000 7.25%, 8/31/96 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15,238
15,000 6.88%, 10/31/96 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15,200
10,000 6.50%, 11/30/96 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10,091
20,000 6.50%, 5/15/97 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20,225
4,000 6.75%, 5/31/97 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4,063
10,000 8.25%, 7/15/98 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10,635
7,000 7.13%, 10/15/98 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $7,245
10,000 6.33%, 7/15/99 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10,133
10,000 6.38%, 1/15/99 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10,133
5,000 7.75%, 11/30/99 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5,331
1,000 8.88%, 5/15/00 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1,121
3,000 8.50%, 11/15/00 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3,336
6,000 7.50%, 11/15/01 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6,440
10,000 7.50%, 5/15/02 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10,774
7,000 6.33%, 2/15/03 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7,020
--------
Total U.S. Treasury Notes 152,082
--------
Total Investments, at value 409,960
--------
REPURCHASE AGREEMENTS (3.6%):
15,252 Lehman Brothers, 6.15%, dated 6/30/95, due 7/3/95, (Collateralized by $15,030 U.S. Treasury
Notes, 6.75%, 2/28/97, market value--$15,570) . . . . . . . . . . . . . . . . . . . . . . . . . 15,252
--------
Total Repurchase Agreements 15,252
--------
Total (Cost--$418,851)(a) $425,212
--------
--------
</TABLE>
- --------
Percentages indicated are based on net assets of $426,168.
(a) Represents cost for federal income tax purposes and differs from value by
net unrealized appreciation of securities as follows:
Unrealized appreciation . . . . . . . . . . . . . . . . . $ 7,376
Unrealized depreciation . . . . . . . . . . . . . . . . . (1,015)
-------
Net unrealized appreciation . . . . . . . . . . . . . . . $ 6,361
-------
-------
* Variable rate securities having liquidity sources through bank letters of
credit and/or liquidity arrangements. The interest rate, which will change
periodically, is based upon bank prime rates or an index of market interest
rates. The rate reflected on the Schedule of Portfolio Investments is the
rate in effect on June 30, 1995.
REMIC--Real Estate Mortgage Investment Conduit
See notes to financial statements.
25
B-207
<PAGE>
THE ONE GROUP FAMILY OF MUTUAL FUNDS
Intermediate Bond Fund
- --------------------------------------------------------------------------------
SCHEDULE OF PORTFOLIO INVESTMENTS, CONTINUED JUNE 30, 1995
(Amounts in Thousands)
<TABLE>
<CAPTION>
PRINCIPAL SECURITY MARKET
AMOUNT DESCRIPTION VALUE
--------- ----------- ------
<S> <C>
ASSET-BACKED SECURITIES (7.6%):
$1,123 Union Federal Savings 1992-BA, 4.90%, 4/15/98 . . . . . . . . . . . . . . . . . . . . . . . . . $ 1,106
3,000 UCFC, Home Equity Loan 1994-A AZ 5.48%, 8/10/06 . . . . . . . . . . . . . . . . . . . . . . . . 2,912
2,810 Advanta Mortgage Loan Trust 1994-4 A1, 8.55%, 11/25/12 . . . . . . . . . . . . . . . . . . . . 2,891
4,442 Aircraft Lease Portfolio Securitization 1994-1 AZ, 7.15%, 9/15/04 . . . . . . . . . . . . . . . 4,484
3,000 Green Tree Home Improvement Loan Trust 1995-C A1, 6.20%, 7/15/20 . . . . . . . . . . . . . . . 2,992
73 Collateralized Mortgage Obligation Trust 47A, 9.00%, 7/1/14 . . . . . . . . . . . . . . . . . . 73
538 Morgan Stanley Mortgage Trust Y3, 8.95%, 3/1/16 . . . . . . . . . . . . . . . . . . . . . . . . 551
-------
Total Asset-Backed Securities 15,009
-------
CORPORATE BONDS (15.0%):
Automotive (1.0%):
2,000 General Motors, 7.63%, 2/15/97 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2,038
-------
Banking (1.6%):
3,000 Fleet/Norstar, 8.13%, 7/1/04 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3,188
-------
Finance (3.9%):
500 Associates Corp. North America 8.38%, 6/1/96 . . . . . . . . . . . . . . . . . . . . . . . . . 510
4,000 Liberty Mutual, 8.20%, 5/4/07 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4,240
3,000 Metropolitan Life Surplus, 6.30%, 11/1/03 . . . . . . . . . . . . . . . . . . . . . . . . . . . 2,831
-------
7,581
-------
Industrial (0.8%):
1,430 DuPont, 8.50%, 2/15/03 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1,550
-------
Oil & Gas Production (1.1%):
2,000 Occidental Petroleum, 11.75%, 3/15/11 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2,160
-------
Securities Brokers and Dealers (5.3%):
4,000 Goldman Sachs Group L.P., 6.38%, 3,895
6/15/00 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
3,000 Lehman Brothers Holdings, 8.80%, 3,240
3/1/02 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
3,000 Lehman Brothers, Inc. 9.88%, 10/15/00 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3,364
-------
10,499
-------
Tobacco (1.3%):
2,500 Philip Morris 7.50%, 3/15/97 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2,541
-------
Total Corporate Bonds 29,557
-------
Foreign Bonds (6.4%):
4,000 Midland Bank 6.78%*, Perpetual . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4,100
5,000 Quebec Province 7.50%, 7/15/02 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5,163
-------
Total Foreign Bonds 12,493
-------
U.S. GOVERNMENT AGENCIES (35.2%):
Government National Mortgage Assoc.:
3 10.50%, 4/15/98, Pool #66627 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3
27 10.50%, 7/15/98, Pool #69629 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 29
5 10.50%, 9/15/98, Pool #10357 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5
22 11.00%, 6/15/99, Pool #11094 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 24
10 10.00%, 12/15/00, Pool #13621 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10
13 11.00%, 3/15/00, Pool #12375 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14
85 10.00%, 1/15/01, Pool #14516 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 90
85 10.00%, 1/15/01, Pool #14532 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 90
11 8.50%, 6/15/01, Pool #16244 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11
96 8.50%, 6/15/01, Pool #13705 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 99
5 9.00%, 6/15/01, Pool #16443 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5
10 9.00%, 6/15/01, Pool #16144 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11
36 9.00%, 6/15/01, Pool #16698 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 37
24 9.00%, 7/15/01, Pool #15582 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 25
83 9.00%, 8/15/01, Pool #17346 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 86
66 8.50%, 8/15/01, Pool #16420 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 173
18 9.00%, 9/15/01, Pool #17712 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19
9 9.00%, 10/15/01, Pool #17763 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10
20 9.00%, 10/15/01, Pool #18559 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 21
73 9.00%, 10/15/01, Pool #17985 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 182
7 8.50%, 11/15/01, Pool #18346 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7
34 9.00%, 11/15/01, Pool #17436 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 35
61 9.00%, 11/15/01, Pool #19181 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 169
42 8.50%, 12/15/01, Pool #19918 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 148
24 9.00%, 1/15/02, Pool #20500 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 25
20 8.00%, 3/15/02, Pool #21006 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 124
42 8.00%, 3/15/02, Pool #20593 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 147
86 8.00%, 5/15/02, Pool #20304 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 89
28 8.50%, 5/15/02, Pool #21377 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 133
29 8.00%, 5/15/02, Pool #18029 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 133
83 9.00%, 8/15/02, Pool #23242 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 87
53 9.00%, 10/15/02, Pool #24630 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 160
26 9.50%, 11/15/02, Pool #23555 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 27
14 9.00%, 6/15/03, Pool #24786 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15
96 8.50%, 10/15/04, Pool #27746 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 100
42 9.00%, 10/15/04, Pool #28165 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 149
45 8.50%, 11/15/04, Pool #25347 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 150
29 9.00%, 10/15/05, Pool #29258 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 30
80 9.00%, 5/15/05, Pool #28877 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 189
107 9.00%, 8/15/05, Pool #29703 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 216
17 9.00%, 11/15/05, Pool #29261 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 123
84 9.00%, 11/15/05, Pool #29916 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 88
99 9.00%, 12/15/05, Pool #29956 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 103
68 8.50%, 4/15/06, Pool #30748 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 174
128 8.00%, 5/15/09, Pool #385676 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 132
32 8.00%, 8/15/09, Pool #37214 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 33
313 7.50%, 5/15/07, Pool #329528 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 319
812 8.00%, 10/15/09, Pool #380639 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 838
3,891 8.50%, 11/15/17, Pool #780086, Platinum . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4,057
5,981 9.00%, 4/15/25, Pool #405444 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6,286
</TABLE>
Continued
26
B-208
<PAGE>
THE ONE GROUP FAMILY OF MUTUAL FUNDS
Intermediate Bond Fund
- --------------------------------------------------------------------------------
SCHEDULE OF PORTFOLIO INVESTMENTS, CONTINUED JUNE 30, 1995
(Amounts in Thousands)
<TABLE>
<CAPTION>
PRINCIPAL SECURITY MARKET
AMOUNT DESCRIPTION VALUE
--------- ----------- --------
<S> <C>
FEDERAL NATIONAL MORTGAGE ASSOC.:
$2,923 8.50%, 7/1/04, Pool #250103 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 3,018
4,000 7.00%, 6/1/10, Pool #312903 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4,008
2,869 8.00%, 5/1/24, Pool #250066 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2,925
3,412 7.50%, 10/1/24, Pool #303031 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3,426
510 7.50%, 5/1/25, Pool #293928 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 512
1,062 7.50%, 5/1/25, Pool #311810 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1,066
Federal National Mortgage Assoc. REMIC:
1,000 6.75%, 12/15/04, Pool #1994-6C . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1,004
500 8.00%, 9/25/04, Pool #1991-155G . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 523
2,846 8.09%*, 10/25/23, Pool #1994-6F CMO . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2,419
Federal Home Loan Mortgage Assoc.:
1,461 7.50%, 8/1/08, Pool #250103, Gold . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1,485
3,898 8.50%, 1/1/10, Pool #E00356, Gold . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4,037
989 8.00%, 7/1/20, Pool #A01047, Gold . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1,008
3,973 8.00%, 11/1/24, Pool #C00376, Gold . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4,051
4,991 8.50%, 5/1/25, Pool #00399, Gold . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5,154
Federal Home Loan Mortgage Assoc.--REMIC:
2,000 7.25%, 4/15/18, Pool #1254-F . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2,007
4,000 8.00%, 2/15/20, Pool #1770-PE . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4,207
3,000 6.50%, 10/15/21, Pool #1590-GA . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2,893
2,000 6.50%, 1/15/22, Pool #1573-PI . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1,926
1,000 7.00%, 6/15/06, Pool #1457-PH . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 999
Federal Home Loan Bank:
3,000 6.65% through 7/17/95, 7.05% through 10/17/95, 7.65% through 1/17/96, 4/17/96 . . . . . . . . . 3,006
4,210 7.35%, 5/24/00 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4,218
--------
Total U.S. Government Agencies 69,122
--------
U.S. TREASURY BONDS (4.7%):
$8,000 8.13%, 8/15/19 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9,316
--------
Total U.S. Treasury Bonds 9,316
--------
U.S. TREASURY NOTES (26.7%):
1,000 6.75%, 2/28/97 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1,015
4,000 5.50%, 9/30/97 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3,970
3,500 5.13%, 3/31/98 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3,433
5,000 8.25%, 7/15/98 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5,318
1,700 7.13%, 10/15/98 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1,761
3,500 7.13%, 10/15/98 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3,623
3,000 8.88%, 11/15/98 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3,263
2,000 6.00%, 10/15/99 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2,001
4,500 6.00%, 10/15/99 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4,502
5,000 5.50%, 4/15/00 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4,900
3,000 8.50%, 11/15/00 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3,336
8,000 7.50%, 11/15/01 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8,586
3,000 7.25%, 5/15/04 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3,204
3,000 8.75%, 11/15/08 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3,453
--------
Total U.S. Treasury Notes 52,365
--------
Total Investments, at Value 187,862
--------
REPURCHASE AGREEMENTS (3.5%):
6,785 Lehman Brothers 6.15%, dated 6/30/95, due 7/3/95 (Collateralized by $6,685 U.S. Treasury Notes,
6.75%, 2/28/97, market value-$6,925) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6,785
--------
Total Repurchase Agreements 6,785
--------
Total (Cost--$191,699)(a) $194,647
--------
--------
</TABLE>
- ----------
Percentages indicated are based on net assets of $196,423.
(a) Represents cost for federal income tax purposes and differs from value by
net unrealized appreciation of securities as follows:
Unrealized appreciation . . . . . . . . . . . . . . . . $ 4,997
Unrealized depreciation . . . . . . . . . . . . . . . . (2,049)
------
Net unrealized appreciation . . . . . . . . . . . . . . $ 2,948
------
------
* Variable rate securities having liquidity sources through bank letters of
credit and/or liquidity arrangements. The interest rate, which will change
periodically, is based on bank prime rates or an index of market interest
rates. The rate reflected on the Schedule of Portfolio Investments is the rate
in effect June 30, 1995.
CMO--Collateralized Mortgage Obligation
REMIC--Real Estate Mortgage Investment Conduit
See notes to financial statements.
27
B-209
<PAGE>
THE ONE GROUP FAMILY OF MUTUAL FUNDS
GOVERNMENT BOND FUND
- --------------------------------------------------------------------------------
SCHEDULE OF PORTFOLIO INVESTMENTS JUNE 30, 1995
(Amounts in Thousands)
<TABLE>
<CAPTION>
PRINCIPAL SECURITY MARKET
AMOUNT DESCRIPTION VALUE
--------- ----------- ------
<S> <C> <C>
CORPORATE BONDS (0.4%):
Finance (0.2%):
$ 400 International Bank for Reconstruction and
Development Medium Term Note
COLTS, 7.65%, 2/28/97 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 409
400 Transamerica Financial Corp., 7.88%,
2/15/97 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 412
---------
821
---------
Pharmaceuticals (0.1%):
350 Becton Dickinson and Co., 8.38%, 6/1/96 . . . . . . . . . . . . . . . . . . . . . . . . . . . . 357
---------
Utilities (0.1%):
300 Southern Railway Co., 8.25%, 6/1/96 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 304
---------
Total Corporate Bonds 1,482
---------
U.S. GOVERNMENT AGENCIES (68.7%):
Federal Home Loan Bank:
5,000 0.00%*, 3/18/96, Accrual Note . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4,789
7,000 6.55%, through 7/17/95, 7.05% through
10/17/95, 7.65% through 1/17/96,
4/17/96 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7,014
3,923 6.05%, 6/24/97 IAN . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3,923
550 8.25%, 6/25/96 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 560
Federal Home Loan Mortgage Corp.:
5,000 7.35%, 3/9/98 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5,027
7,756 7.50%, 4/1/09 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7,885
7,729 8.50%, 12/1/09 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8,004
492 9.00%, 10/1/17 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 514
370 9.00%, 4/1/18 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 386
8,000 7.25%, 4/15/18, REMIC . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8,029
175 9.00%, 6/1/20 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 182
67 9.00%, 8/1/20 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 70
95 9.00%, 10/1/20 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 99
102 9.00%, 1/1/21 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 107
10,000 7.00%, 3/15/21, REMIC, CMO . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9,708
93 9.00%, 4/1/21 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 97
190 9.00%, 7/1/21 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 198
268 9.00%, 9/1/21 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 280
179 9.00%, 11/1/21 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 186
54 9.00%, 11/1/21 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 56
167 9.00%, 11/1/21 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 175
251 9.00%, 5/1/22 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 262
319 9.00%, 5/1/22 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 333
10,000 7.50%, 9/15/22, CMO . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10,186
8,012 10.00%, 10/15/23, REMIC . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8,973
7,089 8.50%, 5/1/24 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7,319
6,705 8.50%, 7/1/24 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6,923
9,833 7.50%, 9/1/24 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9,873
9,933 8.00%, 11/1/24 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10,128
3,405 7.50%, 5/1/25 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3,419
6,595 7.50%, 6/1/25 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6,622
10,000 8.00%, 6/1/25 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10,197
Federal National Mortgage Assoc.:
9,094 6.35%, 12/25/23, REMIC . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8,546
5,000 4.85%, 6/23/98 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4,931
4,500 6.45% through 5/10/95, 6.60% through
5/10/96, 6.90% through 5/10/97,
5/10/99 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4,484
8,000 6.00%, 6/25/09, REMIC . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7,347
10,000 6.25%, 2/25/13, REMIC . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9,891
5,430 7.50%, 6/1/14 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5,452
4,244 7.50%, 7/1/14 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4,261
249 10.00%, 10/1/16 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 270
771 10.00%, 10/1/19 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 836
10,000 7.00%, 5/25/20, REMIC . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9,937
436 10.00%, 7/1/20 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 473
1,043 10.00%, 11/1/21 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1,132
852 10.00%, 11/1/21 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 925
5,000 6.55%, 12/25/21 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4,874
5,042 7.00%, 1/25/24, REMIC . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5,024
6,343 7.84%*, 2/25/24, REMIC . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5,455
Government National Mortgage Assoc.:
17 10.50%, 4/15/98 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18
55 10.00%, 9/15/00 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 58
13 10.00%, 12/15/00 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14
20 10.00%, 1/15/01 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 21
135 8.50%, 6/15/01 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 141
10 8.50%, 7/15/01 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11
135 9.00%, 9/15/01 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 141
14 9.00%, 9/15/01 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14
111 9.50%, 9/15/01 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 116
116 8.50%, 11/15/01 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 121
86 9.50%, 11/15/01 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 91
159 9.00%, 12/15/01 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 166
107 8.50%, 12/15/01 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 112
142 8.00%, 3/15/02 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 147
302 9.00%, 5/15/03 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 316
257 9.00%, 6/15/05 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 269
97 9.00%, 8/15/05 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 101
102 9.00%, 9/15/05 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 107
53 9.00%, 9/15/05 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 56
99 8.00%, 7/15/06 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 102
47 7.50%, 7/15/07 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 48
125 8.00%, 8/15/07 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 128
116 8.00%, 8/15/07 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 119
489 7.50%, 12/15/07 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 499
74 9.00%, 11/15/08 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 78
127 9.00%, 4/15/09 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 133
32 9.00%, 5/15/09 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 34
16 9.50%, 7/15/09 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17
199 9.50%, 9/15/09 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 211
54 9.50%, 10/15/09 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 57
51 11.00%, 11/15/09 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 57
24 12.00%, 8/15/13 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 28
2 12.00%, 4/15/15 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
13 11.00%, 6/15/15 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15
</TABLE>
Continued
28
B-210
<PAGE>
THE ONE GROUP FAMILY OF MUTUAL FUNDS
GOVERNMENT BOND FUND
- --------------------------------------------------------------------------------
SCHEDULE OF PORTFOLIO INVESTMENTS, CONTINUED JUNE 30, 1995
(Amounts in Thousands)
<TABLE>
<CAPTION>
PRINCIPAL SECURITY MARKET
AMOUNT DESCRIPTION VALUE
--------- ----------- ------
<S> <C>
U.S.GOVERNMENT AGENCIES, CONTINUED:
Government National Mortgage Assoc., continued:
$ 113 9.00%, 5/15/16 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 118
171 9.00%, 6/15/16 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 180
19 9.50%, 7/15/16 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20
149 9.00%, 7/15/16 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 157
103 9.50%, 8/15/16 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 109
192 9.00%, 9/15/16 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 201
37 9.50%, 1/15/17 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 39
357 9.00%, 2/15/17 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 376
313 9.00%, 6/15/17 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 329
84 9.50%, 8/15/17 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 89
33 9.00%, 8/15/17 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 34
47 9.50%, 8/15/17 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 50
121 9.00%, 6/15/18 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 127
126 9.50%, 8/15/18 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 134
34 9.00%, 10/15/18 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 36
242 9.50%, 12/15/18 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 257
6 9.00%, 10/15/19 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6
76 9.00%, 11/15/19 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 80
87 9.00%, 1/15/20 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 92
105 9.00%, 2/15/20 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 111
127 9.00%, 3/15/20 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 134
124 9.50%, 9/15/20 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 131
122 9.50%, 12/15/20 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 130
416 9.00%, 6/15/21 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 437
45 7.50%, 2/15/22 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 45
752 8.00%, 7/15/22 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 770
838 7.50%, 8/15/22 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 844
47 7.00%, 10/15/22 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 47
253 7.00%, 11/15/22 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 249
48 7.00%, 12/15/22 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 47
45 7.00%, 1/15/23 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 44
566 7.00%, 1/15/23 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 558
428 7.00%, 1/15/23 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 422
599 7.00%, 1/15/23 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 590
273 7.00%, 1/15/23 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 269
55 7.00%, 3/15/23 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 54
730 7.00%, 5/15/23 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 719
70 7.00%, 5/15/23 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 69
922 7.00%, 5/15/23 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 909
374 6.50%, 5/15/23 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 360
942 7.00%, 5/15/23 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 928
857 7.00%, 5/15/23 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 844
101 6.50%, 6/15/23 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 97
498 6.50%, 6/15/23 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 479
64 6.50%, 6/15/23 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 61
69 6.50%, 6/15/23 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 66
276 6.50%, 7/15/23 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 266
293 7.00%, 7/15/23 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 288
954 7.00%, 7/15/23 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 940
28 7.00%, 7/15/23 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 28
373 7.00%, 7/15/23 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 367
42 7.00%, 7/15/23 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 41
250 7.00%, 7/15/23 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 246
564 7.00%, 7/15/23 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 556
691 7.00%, 7/15/23 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 681
591 7.00%, 7/15/23 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 582
921 7.00%, 7/15/23 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 907
348 6.50%, 8/15/23 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 334
500 6.50%, 8/15/23 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 481
731 6.50%, 8/15/23 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 703
263 6.50%, 8/15/23 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 253
187 6.50%, 8/15/23 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 180
323 6.50%, 8/15/23 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 311
65 6.50%, 9/15/23 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 62
809 6.50%, 9/15/23 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 778
239 6.50%, 10/15/23 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 230
452 6.00%, 10/15/23 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 424
35 6.00%, 10/15/23 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 33
472 6.00%, 10/15/23 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 443
5,054 8.00%, 10/15/23 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5,178
739 6.50%, 11/15/23 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 711
24 6.50%, 11/15/23 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 23
158 6.50%, 12/15/23 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 152
1,003 6.50%, 12/15/23 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 965
162 6.50%, 12/15/23 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 156
753 6.50%, 12/15/23 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 724
39 6.50%, 12/15/23 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 37
942 6.50%, 1/15/24 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 906
415 6.50%, 2/15/24 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 399
192 6.50%, 2/15/24 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 184
1,331 6.50%, 2/15/24 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1,281
361 6.50%, 2/15/24 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 347
419 6.50%, 2/15/24 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 403
891 7.50%, 6/15/24 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 897
106 7.50%, 6/15/24 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 106
1,103 8.50%, 8/15/24 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1,146
5,364 8.50%, 8/15/24 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5,574
1,186 8.50%, 8/15/24 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1,233
4,946 8.00%, 9/15/24 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5,068
487 8.00%, 9/15/24 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 499
2,002 8.50%, 11/15/24 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2,080
10,000 8.50%, 4/15/25 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10,391
--------
Total U.S. Government Agencies 268,352
--------
U.S. TREASURY BONDS (8.3%):
5,000 7.25%, 5/15/16 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5,309
1,500 8.88%, 8/15/17 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1,868
15,000 8.13%, 8/15/19 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17,468
700 7.88%, 2/15/21 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 796
7,500 6.25%, 8/15/23 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7,088
--------
Total U.S. Treasury Bonds 32,529
--------
U.S. TREASURY NOTES (17.6%):
1,800 8.88%, 11/15/94 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1,958
</TABLE>
Continued
29
B-211
<PAGE>
THE ONE GROUP FAMILY OF MUTUAL FUNDS
GOVERNMENT BOND FUND
- --------------------------------------------------------------------------------
SCHEDULE OF PORTFOLIO INVESTMENTS, CONTINUED JUNE 30, 1995
(Amounts in Thousands)
<TABLE>
<CAPTION>
PRINCIPAL SECURITY MARKET
AMOUNT DESCRIPTION VALUE
--------- ----------- ------
<S> <C>
U.S. TREASURY NOTES, CONTINUED:
$ 7,000 6.00%, 11/30/97 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 7,018
8,000 8.25%, 7/15/98 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8,508
2,200 8.88%, 2/15/99 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2,406
3,000 6.38%, 7/15/99 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3,040
5,000 7.50%, 10/31/99 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5,279
2,000 7.88%, 11/15/99 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2,141
2,000 5.50%, 4/15/00 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1,960
5,500 7.50%, 11/15/01 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5,903
14,500 7.50%, 5/15/02 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15,623
1,000 6.38%, 8/15/02 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1,012
5,600 6.25%, 2/15/03 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5,616
8,500 5.88%, 2/15/04 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8,295
--------
Total U.S. Treasury Notes $ 68,759
--------
Total Investments, at value 371,122
--------
REPURCHASE AGREEMENTS (4.3%):
$ 16,852 Lehman Brothers 6.15%, dated 6/30/95,
due 7/3/95 (Collateralized by $16,720
U.S. Treasury Notes, 6.63%, 3/31/97,
market value--$17,201). . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16,852
--------
Total Repurchase Agreements 16,852
--------
Total (Cost--$380,326)(a) $387,974
--------
--------
</TABLE>
_________________
Percentages indicated are based on net assets of $390,469.
(a) Represents cost for federal income tax purposes and differs from value by
net unrealized appreciation of securities as follows:
Unrealized appreciation . . . . . . . . . . . . . . . . . . . $11,069
Unrealized depreciation . . . . . . . . . . . . . . . . . . . (3,421)
-------
Net unrealized appreciation . . . . . . . . . . . . . . . . . $ 7,648
-------
-------
* Variable rate securities having liquidity sources through bank letters of
credit and/or liquidity arrangements. The interest rate, which will change
periodically, is based upon bank prime rates or an index of market interest
rates. The rate reflected on the Schedule of Portfolio Investments is the
rate in effect on June 30, 1995.
CMO--Collateralized Mortgage Obligation
COLTS--Continuously Offered Long-Term Securities
IAN--Indexed Amortization Note
REMIC--Real Estate Mortgage Investment Conduit
See notes to financial statements.
30
B-212
<PAGE>
THE ONE GROUP FAMILY OF MUTUAL FUNDS
Income Bond Fund
- -------------------------------------------------------------------------------
SCHEDULE OF PORTFOLIO INVESTMENTS JUNE 30, 1995
(Amounts in Thousands)
<TABLE>
<CAPTION>
PRINCIPAL SECURITY MARKET
AMOUNT DESCRIPTION VALUE
------ ----------- -----
<S> <C>
CORPORATE BONDS (57.1%):
Automotive (2.3%):
$ 10,000 General Motors Corp. 9.13%, 7/15/01 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 11,125
--------
Banking & Finance (23.9%):
7,500 Advanta Mortgage Trust 8.32%, 8/25/19 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7,862
7,108 Aircraft Lease Portfolio Securitization 1994-1 AZ, 7.15%, 9/15/04 . . . . . . . . . . . . . . . 7,174
6,000 Associates Corp. N.A. 8.15%, 8/1/09 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6,690
5,000 Associates Corp. Medium Term Note 8.34%, 11/25/99 . . . . . . . . . . . . . . . . . . . . . . . 5,344
5,000 BankAmerica Corp. 9.50%, 4/1/01 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5,650
5,000 Banco Central Hispano 7.5%, 6/15/05 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4,988
5,000 BBV International 6.88%, 7/1/05 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4,966
7,000 Fleet/Norstar 8.13%, 7/1/04 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7,437
8,000 General Motors Acceptance Corp. 7.00%, 3/1/00 . . . . . . . . . . . . . . . . . . . . . . . . . 8,080
2,609 Green Tree Acceptance 6.35%, 12/15/19 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2,607
5,000 Nationwide 7.50%, 2/15/24 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4,663
5,000 Scotland International 8.80%, 1/27/04 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5,481
5,000 Security Pacific Corp. 11.00%, 3/1/01 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5,987
17,000 Standard Credit Card Trust 9.50%, 5/10/97 . . . . . . . . . . . . . . . . . . . . . . . . . . . 17,974
15,000 Sears Credit Account Trust 8.65%, 7/15/98 . . . . . . . . . . . . . . . . . . . . . . . . . . . 15,369
5,000 Wharf Capital 8.88%, 11/1/04 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5,212
--------
115,484
--------
Equipment (1.1%):
5,000 Tenneco, Inc. 10.00%, 8/1/98 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5,462
--------
Industrial (11.9%):
5,000 Carnival Corp. 7.05%, 5/15/05 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5,019
9,440 Grand Metro Investment 7.45%, 4/15/05 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9,971
5,000 Hertz-Penske Truck Leasing 8.25%, 11/1/99 . . . . . . . . . . . . . . . . . . . . . . . . . . . 5,244
5,000 Lockheed Corp. 5.65%, 4/1/97 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4,950
6,300 McDonnell Douglas 8.63%, 4/1/97 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6,505
5,000 Occidental Petroleum 7.00%, 4/15/11 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4,638
8,500 RJR Nabisco, Inc. 8.63%, 12/1/02 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8,914
6,000 Sun Co., Inc. 8.13%, 11/1/99 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6,308
5,000 Valassis Communication 9.55%, 12/1/03 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5,544
--------
57,093
--------
Insurance (1.2%):
6,000 Massachusetts Mutual Life 7.50%, 3/1/24 . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5,730
--------
Oil & Gas (2.0%):
9,500 Centra Gas 10.65%, 9/30/04 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9,809
--------
Processed Foods (0.4%):
2,000 Nabisco, Inc. 6.70%, 6/15/02 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1,975
--------
Securities Brokers & Dealers (8.0%):
5,000 Bear Stearns Co. 9.13%, 4/15/98 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5,325
5,000 Bear Stearns Co. 8.25%, 2/2/02 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5,325
10,00 Lehman Brothers Holdings 8.88%, 3/1/02 . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10,750
5,000 Lehman Brothers Holdings 8.80%, 3/1/02 . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5,400
5,000 Lehman Brothers Holdings 11.63%, 5/15/05 . . . . . . . . . . . . . . . . . . . . . . . . . . . 6,350
6,000 Morgan Stanley 6.13%, 10/1/03 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5,640
--------
38,790
--------
Tobacco (1.0%):
5,000 Philip Morris 7.25%, 1/15/03 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5,069
--------
Transportation (4.2%):
5,000 Canadian National Railway 7.00%, 3/15/04 . . . . . . . . . . . . . . . . . . . . . . . . . . . 5,000
6,140 Daimler-Benz Vehicle 5.95%, 12/15/00 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6,137
7,902 Northwest Air 9.25%, 6/21/14 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8,958
--------
20,095
--------
Utilities (1.1%):
5,000 Tenega Nasional Berhad 7.88%, 6/15/04 . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5,238
--------
Total Corporate Bonds 275,870
--------
U.S. GOVERNMENT AGENCIES (21.8%):
Federal Home Loan Bank:
15,000 7.10%, 3/16/98 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15,370
Federal Home Loan Mortgage Assoc.:
5,707 7.00%, 6/1/09 Pool # L00313 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5,721
28,778 8.00%, 12/1/09 Pool # 250168 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 29,578
12,700 7.00%, 4/15/17 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12,762
18,649 7.00%, 10/1/24 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18,358
8,450 7.50%, 10/1/24 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8,484
1,445 7.50%, 10/1/24 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1,451
Federal National Mortgage Assoc.:
3,000 8.63%, 9/10/96 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3,089
7,750 4.82%, 10/21/98, Medium Term Note . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7,408
Tennessee Valley Authority:
3,000 8.25%, 11/15/96 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3,086
--------
Total U.S. Government Agencies 105,307
--------
U.S. TREASURY BONDS (4.0%):
5,000 6.75%, 4/30/00 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5,149
2,000 10.75%, 2/15/03 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2,548
10,000 8.13%, 5/15/21 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11,673
--------
Total U.S. Treasury Bonds 19,370
--------
U.S. TREASURY NOTES (9.7%):
10,000 7.50%, 1/31/97 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10,248
29,000 9.00%, 11/15/18 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 36,676
--------
Total U.S. Treasury Notes 46,924
--------
Total Investments, at value 447,471
--------
</TABLE>
Continued
31
B-213
<PAGE>
THE ONE GROUP FAMILY OF MUTUAL FUNDS
Income Bond Fund
- -------------------------------------------------------------------------------
SCHEDULE OF PORTFOLIO INVESTMENTS JUNE 30, 1995
(Amounts in Thousands)
<TABLE>
<CAPTION>
PRINCIPAL SECURITY MARKET
AMOUNT DESCRIPTION VALUE
------ ----------- -----
<S> <C>
REPURCHASE AGREEMENTS (7.3%):
$ 35,061 Hong Kong Shanghai Bank Corp. 6.17%, dated 6/30/95, due 7/3/95 (Collateralized by $35,818 various
Federal National Mortgage Assoc., 0.00%, 7/3/95 to 7/31/95, market value--$35,765) . . . . . . $ 35,061
--------
Total Repurchase Agreements 35,061
--------
Total (Cost--$458,047)(a) $482,532
--------
--------
</TABLE>
_____________
Percentages indicated are based on net assets of $482,807.
(a) Represents cost for federal income tax purposes and differs from value by
net unrealized appreciation of securities as follows
<TABLE>
<CAPTION>
<S> <C>
Unrealized appreciation . . . . . . . . . . . . . . . . . . $24,720
Unrealized depreciation . . . . . . . . . . . . . . . . . . (235)
-------
Net unrealized appreciation . . . . . . . . . . . . . . . . $24,485
-------
-------
</TABLE>
See notes to financial statements.
32
B-214
<PAGE>
THE ONE GROUP FAMILY OF MUTUAL FUNDS
Intermediate Tax-Free Bond Fund
- --------------------------------------------------------------------------------
SCHEDULE OF PORTFOLIO INVESTMENTS JUNE 30, 1995
(Amounts in Thousands)
<TABLE>
<CAPTION>
PRINCIPAL SECURITY MARKET
AMOUNT DESCRIPTION VALUE
-------- ----------- ------
<S> <C>
MUNICIPAL BONDS (95.0%):
Alaska (0.5%):
$ 1,000 Anchorage, Alaska, General Purpose, Series 1995-A, 6.00%, 2/1/11, FGIC . . . . . . . . . . . . $ 1,004
--------
Arizona (0.7%):
1,500 Phoenix Arizona Airport Revenue, 6.00%, 7/1/06, MBIA . . . . . . . . . . . . . . . . . . . . . 1,568
--------
California (7.6%):
2,500 Alameda, California United School District, 6.10%, 7/1/13, Series A, AMBAC . . . . . . . . . . 2,519
2,000 California, Series 1991-A, 7.15%, 2/1/11 . . . . . . . . . . . . . . . . . . . . . . . . . . . 2,143
3,060 California Public Works Board Community Series 1992-A, 6.05%, 12/1/12, AMBAC . . . . . . . . . 3,060
1,000 California State University Fresno, 6.00%, 2/1/09, MBIA . . . . . . . . . . . . . . . . . . . . 1,016
1,597 Costa California Crescent Park Apartments, 7.80%, 12/20/09 . . . . . . . . . . . . . . . . . . 1,746
1,000 San Francisco, California, 6.30%, 5/1/11, AMBAC . . . . . . . . . . . . . . . . . . . . . . . . 1,026
5,000 Sacramento, California Municipal Utility District, 5.26%, 11/1/06, FSA . . . . . . . . . . . . 4,944
--------
16,454
--------
Colorado (4.8%):
2,000 Adams County, Colorado School District, Series B, 6.25%, 12/15/06, MBIA . . . . . . . . . . . . 2,150
1,000 Adams County, Colorado School District, Series A, No. 12 Thornton, 6.75%, 12/15/07, MBIA . . . 1,105
1,600 Aurora Community College, 6.00%, 10/15/11 . . . . . . . . . . . . . . . . . . . . . . . . . . . 1,607
3,325 Colorado, Series 1994-A, 6.40%, 8/1/06, MBIA . . . . . . . . . . . . . . . . . . . . . . . . . 3,454
2,210 Fort Collins, Colorado Revenue, 5.25%, 12/1/07, FGIC . . . . . . . . . . . . . . . . . . . . . 2,177
--------
10,493
--------
Delaware (1.8%):
3,750 Delaware State Health Facilities Authority, 6.50%, 10/1/13, MBIA . . . . . . . . . . . . . . . 3,994
--------
District of Columbia (1.0%):
1,350 District of Columbia 4.05%, 7/1/01 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1,350
875 District of Columbia, GO, Series B, 5.40%, 6/1/02 . . . . . . . . . . . . . . . . . . . . . . . 873
--------
2,223
--------
Florida (6.5%):
1,590 Brevard County, Florida, 5.80%, 9/1/04 . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1,592
1,500 Cape Coral, Florida, 6.38%, 6/1/09, FSA . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1,573
1,000 Dade County, Florida, 6.00%, 10/1/08, AMBAC . . . . . . . . . . . . . . . . . . . . . . . . . . 1,040
2,000 Escambia, Florida, 5.75%, 10/1/04 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2,003
1,000 Florida State Division Bond Financial Department, Series A, 5.13%, 7/1/07, FSA . . . . . . . . 974
2,555 Palm Beach County, Florida, Series 1994, 6.38%, 10/1/06 . . . . . . . . . . . . . . . . . . . . 2,654
2,300 Pinellas County, Florida, Series 1994, 5.75%, 8/1/01 . . . . . . . . . . . . . . . . . . . . . 2,296
2,000 Port St. Lucie, Florida, 6.00%, 9/1/14, FGIC . . . . . . . . . . . . . . . . . . . . . . . . . 2,005
--------
14,137
--------
Georgia (3.4%):
1,000 Atlanta, Georgia Airport Facilities, Series A, 6.50%, 1/1/07, AMBAC . . . . . . . . . . . . . . 1,095
1,215 Columbus, Georgia Water & Sewer, 6.30%, 5/1/06, FGIC . . . . . . . . . . . . . . . . . . . . . 1,305
2,000 Georgia State Municipal Electric Authority, Series B, 6.20%, 1/1/10 . . . . . . . . . . . . . . 2,063
2,000 Metro Atlanta Rapid Transit Authority Revenue, Series P, 6.10%, 7/1/06, AMBAC . . . . . . . . . 2,128
1,000 Monroe County, Georgia, Revenue, 2nd Series, 3.65%, 9/1/24 . . . . . . . . . . . . . . . . . . 1,000
--------
7,591
--------
Hawaii (0.5%):
1,000 Honolulu, Hawaii, 5.60%, 4/1/07, FSA . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1,003
--------
Idaho (1.1%):
1,000 Idaho Student Loan, Revenue, 6.25%, 4/1/98 . . . . . . . . . . . . . . . . . . . . . . . . . . 1,000
1,380 Idaho Student Loan, 6.40%, 10/1/99, Callable 4/1/95 @ 100 . . . . . . . . . . . . . . . . . . . 1,380
--------
2,380
--------
Illinois (13.4%):
5,675 Chicago, Illinois, Metro Water Reclamation, 6.25%, 12/1/14 . . . . . . . . . . . . . . . . . . 5,810
1,000 Chicago, Illinois, Metro Water Reclamation, 7.25%, 12/1/12 . . . . . . . . . . . . . . . . . . 1,149
3,045 Chicago, Illinois Park District, 6.35%, 11/15/08, MBIA . . . . . . . . . . . . . . . . . . . . 3,228
1,450 Chicago, Illinois, Revenue, Series 95, 0.00%, 10/1/09, Callable 10/1/05 @ 103, MBIA . . . . . . 556
1,240 Evanston, Illinois, Series 92, 6.38%, 1/1/09, Callable 7/1/02 @ 102 AMBAC . . . . . . . . . . . 1,347
2,325 Harvey, Illinois, GO 6.70%, 2/1/09, . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2,372
2,095 Harvey, Illinois Roadway Improvement Revenue, 6.40%, 11/1/12, FGIC . . . . . . . . . . . . . . 2,160
</TABLE>
33
B-215
<PAGE>
THE ONE GROUP FAMILY OF MUTUAL FUNDS
Intermediate Tax-Free Bond Fund
- --------------------------------------------------------------------------------
SCHEDULE OF PORTFOLIO INVESTMENTS, CONTINUED JUNE 30, 1995
(Amounts in Thousands)
<TABLE>
<CAPTION>
PRINCIPAL SECURITY MARKET
AMOUNT DESCRIPTION VALUE
-------- ----------- ------
MUNICIPAL BONDS, CONTINUED:
Illinois, continued:
<S> <C>
$ 1,645 Illinois Health Facilities Authority Revenue, 6.13%, 11/15/07, MBIA . . . . . . . . . . . . . . $ 1,711
620 Illinois State, Revenue, 7.90%, 8/15/03, MBIA . . . . . . . . . . . . . . . . . . . . . . . . . 634
220 Illinois State, 7.90%, 8/15/03, MBIA . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 246
6,200 Illinois State Toll Highway Priority Revenue, Series A, 6.30%, 1/1/12 . . . . . . . . . . . . . 6,464
4 Illinois Health Facility Revenue (Prerefunded 8/15/95), Community-A, 7.90%, 8/15/03, MBIA . . . 4
2,000 Kane County, Illinois, 6.25%, 6/1/09, FGIC . . . . . . . . . . . . . . . . . . . . . . . . . . 2,095
1,485 Northlake, Illinois, 5.40%, 12/1/08, MBIA . . . . . . . . . . . . . . . . . . . . . . . . . . . 1,450
--------
29,226
--------
Indiana (3.9%):
1,000 Ft. Wayne, Indiana, Revenue, 7.50%, 12/15/11, FGIC . . . . . . . . . . . . . . . . . . . . . . 1,080
1,000 Greater Clark, Indiana, 6.70%, 1/1/03, AMBAC . . . . . . . . . . . . . . . . . . . . . . . . . 1,083
1,000 Indiana State Vocational Technical, 6.50%, 7/1/07, AMBAC . . . . . . . . . . . . . . . . . . . 1,079
2,910 Indianapolis, Indiana, Knob in the Woods, 6.38%, 12/1/24 . . . . . . . . . . . . . . . . . . . 3,099
2,035 Whitley County, Indiana Middle School Building Corp., 6.25%, 7/15/10 . . . . . . . . . . . . . 2,081
--------
8,422
--------
Iowa (1.8%):
600 Des Moines, Iowa, Hospital Facilities Revenue, 4.50%,* 8/1/15, LOC Fuji Bank Ltd. . . . . . . . 600
1,650 Iowa, Revenue Bonds, Series F, 6.15%, 7/1/04 . . . . . . . . . . . . . . . . . . . . . . . . . 1,751
1,500 Iowa State, Student Loan Liquidity Revenue, 6.50%, 12/1/99, AMBAC . . . . . . . . . . . . . . . 1,571
--------
3,922
--------
Kansas (0.8%):
1,750 Wichita, Kansas Hospital Revenue, St. Francis-III-A-3, 6.25%, 10/1/10, MBIA . . . . . . . . . . 1,800
--------
Louisiana (1.6%):
267 Louisiana Housing Finance Agency, 7.80%, 12/1/09 . . . . . . . . . . . . . . . . . . . . . . . 294
3,250 Louisiana, Series 94-A, 6.00%, 5/1/13, AMBAC . . . . . . . . . . . . . . . . . . . . . . . . . 3,258
--------
3,552
--------
Maryland (0.6%):
1,150 Anne Arundel County, Maryland-B, Second Issue, 7.70%, 3/15/06 . . . . . . . . . . . . . . . . . 1,266
--------
Massachusetts (2.8%):
1,550 Chelsea, Massachusetts, GO 6.00%, 6/15/14 . . . . . . . . . . . . . . . . . . . . . . . . . . . 1,540
1,070 Lowell, Massachusetts, Limited GO, 5.90%, 4/1/09 . . . . . . . . . . . . . . . . . . . . . . . 1,077
2,000 Massachusetts State, Series B, 5.38%, 7/1/07, MBIA . . . . . . . . . . . . . . . . . . . . . . 1,995
1,465 Worcester, Series 95-A, 6.15%, 5/1/08, MBIA . . . . . . . . . . . . . . . . . . . . . . . . . . 1,509
--------
6,121
--------
Minnesota (1.4%):
1,500 Detroit Lakes, Minnesota Health Care Facilities, 6.00%, 2/15/12 . . . . . . . . . . . . . . . . 1,506
1,500 Northern Municipal Power Agency Minnesota Electric, Series A, 5.90%, 1/1/07, AMBAC . . . . . . 1,539
--------
3,045
--------
Missouri (2.2%):
1,500 Missouri State Health & Educational Facilities Authority, Series AA, 6.25% 6/1/16 . . . . . . 1,528
2,250 Kansas City Missouri, Metro Community Colleges Building Corporation, Series A, 5.10%, 7/1/06,
FGIC. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2,185
1,150 Warrensburg, Missouri Public Facilities Authority, 6.00%, 3/1/09, FGIC . . . . . . . . . . . . 1,172
--------
4,885
--------
Nevada (2.0%):
1,000 Nevada State, Limited Tax General Obligation, 7.00%, 7/1/01 . . . . . . . . . . . . . . . . . . 1,116
3,010 Washoe County, Nevada School District, 6.13%, 8/1/07, MBIA . . . . . . . . . . . . . . . . . . 3,108
--------
4,224
--------
New Hampshire (0.6%):
1,225 New Hampshire, St. Joseph Hospital, 6.25%, 1/1/06 . . . . . . . . . . . . . . . . . . . . . . . 1,272
--------
New Mexico (3.1%):
1,405 New Mexico Educational Assistance, Student Loan Revenue, 6.45%, 4/1/99, AMBAC . . . . . . . . . 1,459
5,040 New Mexico Educational Assistance, Series, 1992-A, 6.85%, 4/1/05, AMBAC . . . . . . . . . . . . 5,298
--------
6,757
--------
New York (1.6%):
1,000 New York City, 4.55%,* 10/1/23, LOC Norinchukin Bank . . . . . . . . . . . . . . . . . . . . . 1,000
</TABLE>
34
B-216
<PAGE>
THE ONE GROUP FAMILY OF MUTUAL FUNDS
Intermediate Tax-Free Bond Fund
- --------------------------------------------------------------------------------
SCHEDULE OF PORTFOLIO INVESTMENTS, CONTINUED JUNE 30, 1995
(Amounts in Thousands)
<TABLE>
<CAPTION>
PRINCIPAL SECURITY MARKET
AMOUNT DESCRIPTION VALUE
-------- ----------- ------
MUNICIPAL BONDS, CONTINUED:
New York, continued:
<S> <C>
$ 800 New York, New York City Revenue, Series A, 4.50%,* 6/15/25 . . . . . . . . . . . . . . . . . . $ 800
200 New York, New York City Revenue, 4.05%,* 10/1/21 . . . . . . . . . . . . . . . . . . . . . . . 200
1,350 Triborough Bridge & Tunnel Authority, 9.00%, 1/1/11 (Prerefunded 7/1/95) . . . . . . . . . . . 1,377
--------
3,377
--------
North Carolina (0.3%):
600 Person County, North Carolina, 4.75*, 11/1/16, LOC Fuji Bank . . . . . . . . . . . . . . . . . 600
--------
Ohio (1.4%):
1,790 Fairfield, Ohio, City School District, 7.20%, 12/1/10, Callable 12/1/05 @ 103 . . . . . . . . . 2,005
1,000 Montgomery County, Ohio, Various Purpose Limited Tax, 6.65%, 9/1/08 . . . . . . . . . . . . . . 1,100
--------
3,105
--------
Oregon (1.7%):
1,435 Portland, Oregon, Airport, 6.75%, 7/1/09, MBIA . . . . . . . . . . . . . . . . . . . . . . . . 1,544
2,075 Washington County, Oregon, GO Unlimited, 6.10%, 6/1/05 . . . . . . . . . . . . . . . . . . . . 2,228
--------
3,772
--------
Pennsylvania (0.7%):
1,600 Dauphincty, Pennsylvania, Revenue, 6.00%, 1/1/08, MBIA . . . . . . . . . . . . . . . . . . . . 1,602
--------
Puerto Rico (0.5%):
1,000 Puerto Rico Commonwealth 5.65%, 7/1/15 . . . . . . . . . . . . . . . . . . . . . . . . . . . . 982
--------
Rhode Island (1.0%):
1,000 Rhode Island, Revenue Bond, 6.10%, 10/1/05, MBIA . . . . . . . . . . . . . . . . . . . . . . . 1,021
1,000 Rhode Island, Revenue Bond, 6.20%, 10/1/06, MBIA . . . . . . . . . . . . . . . . . . . . . . . 1,048
--------
2,069
--------
South Carolina (0.7%):
1,455 Richland County, South Carolina, Unlimited Tax GO, 6.60%, 3/1/04 . . . . . . . . . . . . . . . 1,595
--------
South Dakota (0.2%):
500 South Dakota State, Housing Development Authority, 6.50%, 5/1/96 . . . . . . . . . . . . . . . 506
--------
Tennessee (0.7%):
550 Metropolitan Government, Nashville & Davidson County, Series A, 6.80%, 7/1/95 . . . . . . . . . 550
1,000 Shelby County, Tennessee, 7.50%, 6/1/07, MBIA . . . . . . . . . . . . . . . . . . . . . . . . . 1,084
--------
1,634
--------
Texas (9.0%):
2,800 Austin, Texas Housing Finance Corp., 0.00%, 12/1/11, MBIA . . . . . . . . . . . . . . . . . . . 1,029
1,000 Bexar County, Revenue, 6.63%, 8/15/04, Callable 8/15/14 @ 102 . . . . . . . . . . . . . . . . . 1,059
5,000 Coastal Bend Health Facilities Development, Texas, Series C, 5.93%, 11/15/13, AMBAC . . . . . . 4,906
2,000 Grand Prairie, Texas Health Facilities, 6.50%, 11/1/04, AMBAC . . . . . . . . . . . . . . . . . 2,113
1,740 Houston, Texas, Housing Finance Corporation, Series A, 5.35%, 6/1/02, FSA . . . . . . . . . . . 1,747
1,200 Lubbock, Texas, 4.20%,* 7/1/13 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1,200
1,000 San Antonio, Texas, 7.00%, 8/1/09, FSA . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1,049
4,955 Texas Health Facilities Development Corp. , 6.25%, 8/15/12, MBIA . . . . . . . . . . . . . . . 5,054
1,285 Texas, Revenue, 8.40%, 1/1/21 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1,360
--------
19,517
--------
Utah (2.8%):
800 Carbon, County, Utah Pollution Control, 4.20%*, 11/1/24 , AMBAC . . . . . . . . . . . . . . . . 800
2,000 Intermountain Power Agency, Utah, 6.50%, 7/1/09, MBIA . . . . . . . . . . . . . . . . . . . . . 2,105
1,250 Utah State, Revenue, 7.05%, 3/1/05, FSA . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1,353
1,900 Utah State Housing Finance Agency, 6.35%, 7/1/12 . . . . . . . . . . . . . . . . . . . . . . . 1,902
--------
6,160
--------
Virginia (2.5%):
1,750 Virginia Public School Building, 6.13%, 8/1/09, FSA . . . . . . . . . . . . . . . . . . . . . . 1,811
2,000 Virginia State Housing Development Authority, Series 95-A, Sub Series A-1, 6.80%, 7/1/06,
AMBAC . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2,133
1,340 Virginia State Housing Development Authority, Series J, Sub Series J-1, 6.65%, 7/1/10 . . . . . 1,390
--------
5,334
--------
Washington (6.1%):
4,160 King County, Washington, 6.13%, 12/1/13, FSA . . . . . . . . . . . . . . . . . . . . . . . . . 4,170
2,000 Kitsap County Washington School District, 6.13%, 12/1/08, MBIA . . . . . . . . . . . . . . . . 2,110
5,000 Shohomish County, Washington Public Utility, 6.00%, 1/1/13, FGIC . . . . . . . . . . . . . . . 5,038
</TABLE>
35
B-217
<PAGE>
THE ONE GROUP FAMILY OF MUTUAL FUNDS
Intermediate Tax-Free Bond Fund
- --------------------------------------------------------------------------------
SCHEDULE OF PORTFOLIO INVESTMENTS, CONTINUED JUNE 30, 1995
(Amounts in Thousands)
<TABLE>
<CAPTION>
PRINCIPAL SECURITY MARKET
AMOUNT DESCRIPTION VALUE
-------- ----------- ------
<S> <C>
MUNICIPAL BONDS, CONTINUED:
Washington, continued:
$ 2,000 Spokane, Washington, Revenue, 5.50%, 12/1/10, AMBAC . . . . . . . . . . . . . . . . . . . . . . $ 1,920
--------
13,238
--------
Wyoming (3.8%):
600 Big Horn County, Wyoming School District No. 3, 6.05%, 6/1/14 . . . . . . . . . . . . . . . . . 599
4,765 Natrona County, Wyoming Hospital Revenue, 6.00%, 9/15/15, AMBAC . . . . . . . . . . . . . . . . 4,717
1,395 Sweetwater, Wyoming Greenriver, 7.00%, 6/1/04, MBIA . . . . . . . . . . . . . . . . . . . . . . 1,562
1,300 Wyoming Student Loan Corporation, 4.62%,* 12/1/05 . . . . . . . . . . . . . . . . . . . . . . . 1,300
--------
8,178
--------
Total Municipal Bonds 207,008
--------
Total (Cost--$203,934)(a) $207,008
--------
--------
</TABLE>
- -----------
Percentages indicated based on net assets of $217,959.
(a) Represents cost for federal income tax purposes and differs from value by
net unrealized appreciation of securities as follows:
<TABLE>
<CAPTION>
<S> <C>
Unrealized appreciation . . . . . . . . . . . . . . . . . $3,613
Unrealized depreciaton . . . . . . . . . . . . . . . . . (539)
------
Net unrealized appreciation . . . . . . . . . . . . . . . $3,074
------
------
</TABLE>
* Floating Rate Demand Notes are securities with yields that vary with a
designated market index or market rate. These securities are payable on the
date of demand. The rate reflected on the Schedule of Portfolio Investments
is the effective rate at June 30, 1995.
AMBAC--American Municipal Bond Assurance Corp.
FGIC--Financial Guaranty Insurance Corp.
FSA--Financial Security Assurance
GO--General Obligation
LOC--Letter of Credit
MBIA--Municipal Bond Insurance Association
See notes to financial statements.
36
B-218
<PAGE>
THE ONE GROUP FAMILY OF MUTUAL FUNDS
Tax-Free Bond Fund
- --------------------------------------------------------------------------------
SCHEDULE OF PORTFOLIO INVESTMENTS JUNE 30, 1995
(Amounts in Thousands)
<TABLE>
<CAPTION>
PRINCIPAL SECURITY MARKET
AMOUNT DESCRIPTION VALUE
-------- ----------- ------
<S> <C>
MUNICIPAL BONDS (98.6%):
Alaska (1.2%)
$ 500 Alaska Muni Bond 6.75%, 7/1/95 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 500
68 Alaska State Housing Finance 8.20%, 12/1/97 . . . . . . . . . . . . . . . . . . . . . . . . . . 70
1,750 Alaska State Housing Finance Single Family Mortgage Backed Securities Program 8.00%, 3/1/09 . . 1,868
60 Alaska State Housing Finance Corp. 8.25%, 12/1/98 . . . . . . . . . . . . . . . . . . . . . . . 61
60 Alaska State Housing Finance Corp. 8.25%, 12/1/00 . . . . . . . . . . . . . . . . . . . . . . . 62
--------
2,561
--------
Arizona (2.0%):
4,000 Phoenix, Arizona Single Family Mortgage Revenue 6.10%, 12/1/17 . . . . . . . . . . . . . . . . 4,015
--------
Arkansas (4.2%):
105 Arkansas 8.00%, 8/15/11 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 113
980 Arkansas Development Finance Authority Single Family Mortgage Revenue, Series 89-A 7.75%,
4/1/21, Callable 12/1/98 @ 102 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1,034
3,650 Arkansas State Development Finance Authority, Series 1 0.00%, 12/1/11 . . . . . . . . . . . . . 1,173
140 Arkansas State Development Finance Authority Single Family Mortgage Revenue, Series B 7.70%,
12/1/14 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 145
497 Drew County Public Facilities Board Single Family Mortgage Revenue, Series A-2
7.90%, 8/1/11 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 533
209 Drew County Public Facilities Board Single Family Mortgage Revenue, Series 1993-B
7.75%, 8/1/11 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 216
744 Jacksonville Residential Housing Facilities Board Single Family Mortgage Revenue, Series 93A-2
7.90%, 1/1/11 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 808
347 Jacksonville Residential Housing Facilities Board Single Family Mortgage Revenue, Series B
7.75%, 1/1/11 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 369
834 Lonoke County Residential Housing Facilities Board Single Family Mortgage Revenue, Series A-2
7.90%, 4/1/11 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 905
406 Lonoke County Residential Housing Facilities Board Single Family Mortgage Revenue, Series 1993B
7.38%, 4/1/11 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 417
1,803 Pope County Residential Housing Facilities Board Single Family Mortgage Revenue, Series B
7.75%, 9/1/11 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1,920
714 Stuttgart Public Facilities Board Single Family Mortgage Revenue, Series A, Class A-2 7.90%,
9/1/11 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 751
334 Stuttgart Public Facilities Board Single Family Mortgage Revenue, Series B 7.75%, 9/1/11 . . . 348
--------
8,732
--------
California (4.2%):
810 California, Series 85-B 8.63%, 8/1/15 Insured: MBIA . . . . . . . . . . . . . . . . . . . . . . 828
1,250 California Multi-Family Mortgage, Series 84-A 9.00%, 10/1/96 . . . . . . . . . . . . . . . . . 1,289
75 California Housing Finance Agency Home Mortgage Revenue, Series 91-C 7.45%, 8/1/11 . . . . . . 78
2,000 California, PCR Waste Management, Inc., Series 91-A 7.15%, 2/1/11 . . . . . . . . . . . . . . . 2,143
350 California Rural Home 7.25%, 12/1/24 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 375
1,115 California State Housing Finance Agency Home Mortgage Revenue, Series F 7.88%, 8/1/19 . . . . . 1,151
2,000 Northern California Transmission Revenue, 5.50%, 4/29/24 . . . . . . . . . . . . . . . . . . . 1,830
1,040 Redondo Beach Redevelopment Agency Residential Mortgage Revenue, Series B 6.25%, 6/1/11 . . . . 1,044
--------
8,738
--------
Colorado (16.9%):
80 Adams County Single Family Mortgage Revenue, Series C 8.25%, 11/1/07 . . . . . . . . . . . . . 84
650 Arapahoe County Single Family Mortgage Revenue, Series 83A 0.00%, 12/1/09 . . . . . . . . . . . 137
5,225 Aurora Single Family Mortgage Revenue, Series 93A 7.30%, 5/1/10 . . . . . . . . . . . . . . . . 5,408
1,000 Aurora, 0.00% 9/1/15 Prerefunded 3/1/13 @ 75 . . . . . . . . . . . . . . . . . . . . . . . . . 269
1,985 Aurora Single Family Mortgage Revenue, Series 93B 7.50%, 5/1/11 . . . . . . . . . . . . . . . . 2,079
2,520 Brush Creek Co. 6.70%, 11/15/09 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2,555
1,410 Central City 7.40%, 12/1/07 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1,477
655 Central City 7.50%, 12/1/12 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 670
400 Central City 8.63%, 9/15/11 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 426
1,000 Colorado Housing Finance Authority Single Family Mortgage Revenue 6.25%, 12/1/09 . . . . . . . 1,010
</TABLE>
37
B-219
<PAGE>
THE ONE GROUP FAMILY OF MUTUAL FUNDS
Tax-Free Bond Fund
- --------------------------------------------------------------------------------
SCHEDULE OF PORTFOLIO INVESTMENTS, CONTINUED JUNE 30, 1995
(Amounts in Thousands)
<TABLE>
<CAPTION>
PRINCIPAL SECURITY MARKET
AMOUNT DESCRIPTION VALUE
--------- ----------- ------
<S> <C>
MUNICIPAL BONDS, CONTINUED
Colorado, continued:
$410 Colorado Housing Finance Authority, Series 91 6.90%, 5/1/01 . . . . . . . . . . . . . . . . . .. . $ 430
1,000 Colorado Housing Finance Authority 7.50%, 11/1/24, Callable 11/1/04 @ 105 . . . . . . . . . . .. . 1,076
1,090 Colorado Housing Finance Authority Single Family Mortgage Revenue, Series 94-B 6.13%, 11/1/13 .. . 1,100
1,750 Colorado Housing Finance Authority 6.80%, 8/1/14 . . . . . . . . . . . . . . . . . . . . . . .. . 1,785
210 Colorado Housing Finance Authority Single Family Mortgage Revenue, Series 91B-2 7.25%, 8/1/11 .. . 219
330 Colorado Housing Finance Authority Single Family Mortgage Revenue, Series 91B-2 6.90%, 8/1/17 .. . 337
600 Colorado Housing Finance Authority Single Family Mortgage Revenue, 1985 Series A 0.00%, 9/1/14 . . 77
190 Colorado Housing Finance Authority Single Family Mortgage Revenue, Series C 8.75%, 9/1/17 . . .. . 200
1,250 Colorado Housing Finance Authority, Series 95-B 7.50%, 12/1/16 . . . . . . . . . . . . . . . .. . 1,366
500 Colorado Housing Finance Authority Single Family, Series A 6.50%, 12/1/02 . . . . . . . . . . .. . 503
2,605 Colorado State Housing Finance Authority Multi-Family Mortgage Revenue 6.00%, 10/1/25 . . . . .. . 1,882
965 Colorado State Housing Finance Authority Multi-Family Mortgage Revenue 9.00%, 10/1/25 . . . . .. . 885
585 Colorado State Housing Finance Authority Single Family Mortgage Revenue,
Series 91D-1 6.60%, 8/1/17 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .. . 589
935 Colorado State Post-Secondary Educational Facilities Authority National Technological
University Project 7.75%, 12/1/10 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .. . 943
1,250 Eagles Nest, GO 6.50%, 11/15/17 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .. . 1,200
410 El Paso County Home Mortgage Revenue, Series C 8.30%, 9/20/18 . . . . . . . . . . . . . . . . .. . 449
1,475 Englewood Co., Series 85-B 6.00%, 12/15/18, Callable 11/15/09 @ 100 . . . . . . . . . . . . . .. . 1,386
1,000 Interstate 8.00%, 12/1/09 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .. . 1,011
1,290 Jefferson County Single Family Mortgage Revenue, Series A 8.88%, 10/1/13 . . . . . . . . . . .. . 1,393
1,500 Mesa County 0.00%, 12/1/11 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .. . 551
980 Mountain Village Metropolitan District, San Miguel County 8.10%, 12/1/11 . . . . . . . . . . .. . 1,035
165 Telluride Multi-Family Housing Revenue, Shandoka Apartments 7.25%, 6/1/08 . . . . . . . . . . .. . 172
500 Telluride Housing Authority Shandoka Apartments Project 7.50%, 6/1/12 . . . . . . . . . . . . .. . 506
1,500 Telluride Housing Authority Shandoka Apartments Project, Series 93 7.50%, 6/1/23 . . . . . . .. . 1,506
-------
34,716
-------
Delaware (0.1%):
275 Delaware Housing Finance Authority Single Family Mortgage Revenue, Series 89-A 7.60%, 12/1/19,
Callable 12/1/99 @ 102 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .. . 286
-------
Florida (3.1%):
1,250 Brevard County Housing Authority Single Family Mortgage Revenue 6.13%, 9/1/09 . . . . . . . . .. . 1,253
90 Duval County Single Family Mortgage Revenue, Series 90-C 7.30%, 9/15/15 . . . . . . . . . . . .. . 94
615 Florida State Housing Finance Agency Home Ownership Revenue, Series G-2 7.50%, 9/1/14 . . . . .. . 653
1,000 Leon County Housing Finance Authority 7.30%, 1/1/28 . . . . . . . . . . . . . . . . . . . . . .. . 1,069
940 Manatee County 8.38%, 5/1/25 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .. . 1,028
1,000 Pinellas County Housing Authority 6.35%, 2/1/17 . . . . . . . . . . . . . . . . . . . . . . . .. . 1,010
1,205 Pinellas County Housing Authority 6.25%, 8/1/12 . . . . . . . . . . . . . . . . . . . . . . . .. . 1,217
-------
6,324
-------
Georgia (1.3%):
2,500 Cobb County 9.00%, 10/1/10 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .. . 2,637
-------
Idaho (0.0%):
65 Idaho 6.35%, 7/1/11 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .. . 65
-------
Illinois (5.4%):
5,890 Addison Alton, Granite County, 0.00% 7/1/10 . . . . . . . . . . . . . . . . . . . . . . . . . .. . 2,135
1,750 Aurora Kane County 7.95%, 10/1/25 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .. . 1,914
355 Aurora Kane County 8.05%, 9/1/25 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .. . 390
5,250 Bolingbrook Mortgage Revenue, Series 1 0.00%, 1/1/11 . . . . . . . . . . . . . . . . . . . . .. . 1,785
1,100 Danville Single Family Mortgage Revenue 7.30%, 11/1/10 . . . . . . . . . . . . . . . . . . . .. . 1,150
3,530 Freeport 0.00%, 8/1/10 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .. . 1,041
</TABLE>
Continued
38
B-220
<PAGE>
THE ONE GROUP FAMILY OF MUTUAL FUNDS
Tax-Free Bond Fund
- --------------------------------------------------------------------------------
SCHEDULE OF PORTFOLIO INVESTMENTS, CONTINUED JUNE 30, 1995
(Amounts in Thousands)
<TABLE>
<CAPTION>
PRINCIPAL SECURITY MARKET
AMOUNT DESCRIPTION VALUE
--------- ----------- ------
<S> <C>
MUNICIPAL BONDS, CONTINUED
Illinois, continued:
$ 245 Illinois Housing Development Authority, Series 91-A 7.35%, 8/1/10 . . . . . . . . . . . . . . . $259
95 Illinois Housing Development Authority Residential Mortgage Revenue, Series
83-B 0.00%, 2/1/15 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13
4,685 Moline Single Family Mortgage Revenue, 92 Sub-Series 1 0.00%, 9/1/08 . . . . . . . . . . . . . 1,640
700 Quincy Single Family Mortgage Revenue, Series 94-A 6.88%, 3/1/10, Callable 3/1/04 @ 102 . . . . 718
130 Rock Island Residential Mortgage Revenue 7.70%, 9/1/08 . . . . . . . . . . . . . . . . . . . . 138
-------
11,183
-------
Indiana (1.5%):
375 Anderson Multi-Family Housing Revenue, Parker Housing Corp., Series B 9.00%, 6/1/07 . . . . . . 365
1,585 Indiana State Housing Finance Authority, 7.95%, 7/1/10 . . . . . . . . . . . . . . . . . . . . 1,702
1,000 Indianapolis Multi-Family Revenue, Sunrise Apartments Project, Series 93-A 6.80%, 6/1/19 . . . 989
-------
3,056
-------
Iowa (2.0%):
650 Davenport 7.90%, 3/1/10 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 727
100 Des Moines Hospital Facilities Revenue 4.50%*, 8/1/15 . . . . . . . . . . . . . . . . . . . . . 100
2,535 Iowa Finance Authority Single Family Mortgage Revenue 6.40%, 7/1/19 . . . . . . . . . . . . . . 2,526
785 Iowa Finance Authority Single Family Mortgage Revenue 7.90%, 11/1/22 . . . . . . . . . . . . . 830
-------
4,183
-------
Kansas (4.5%):
955 Ford City Single Family Mortgage Revenue 7.90%, 8/1/10 . . . . . . . . . . . . . . . . . . . . 1,008
2,250 Johnson City 7.10%, 5/1/12, Callable 5/1/04 @ 103 . . . . . . . . . . . . . . . . . . . . . . . 2,377
815 Labette County Single Family Mortgage Revenue, Series A 8.40%, 12/1/11 . . . . . . . . . . . . 872
2,400 Reno and Labette Counties Capital Accumulation, 0.00%, 12/1/15 Series A . . . . . . . . . . . . 690
760 Reno County Single Family Refunding Revenue 8.70%, 9/1/11 . . . . . . . . . . . . . . . . . . . 818
470 Sedgwick Shawnee County 7.80%, 11/1/24, Callable 11/1/04 @ 105 . . . . . . . . . . . . . . . . 512
465 Sedgwick Shawnee County 7.80%, 5/1/14, Callable 11/1/04 @ 103 . . . . . . . . . . . . . . . . . 504
970 Sedgwick Single Family Mortgage Revenue 8.20%, 5/1/14 . . . . . . . . . . . . . . . . . . . . . 1,057
460 Sedgwick Shawnee County Single Family Mortgage Revenue 8.05%, 5/1/14 . . . . . . . . . . . . . 513
885 Wichita Single Family Mortgage Revenue 7.10%, 9/1/09 . . . . . . . . . . . . . . . . . . . . . 910
-------
9,261
-------
Louisiana (3.3%):
1,690 Bossier Public Trust Finance Authority Single Family Mortgage Revenue, Series
93 8.50%, 11/1/11 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1,804
900 Calcasieu Parish Public Transportation Authority, Series B 0.00%, 5/1/13 . . . . . . . . . . . 254
895 Iberia Single Family Mortgage Revenue, Series 1993 7.38%, 1/1/11 . . . . . . . . . . . . . . . 952
122 Lafayette Public Facilities Authority Single Family Mortgage Revenue, Series 1992 7.50%,
10/1/15 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 129
960 Lousiana Housing Finance Authority Single Family Mortgage Revenue, Series 85-A
9.38%, 2/1/15 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 990
1,180 Louisiana Housing Authority7.00% through 3/1/95, 7.10% through 9/1/04 . . . . . . . . . . . . . 1,199
167 Louisiana Public Facilities Authority Single Family Mortgage Revenue, Series C 8.45%,
12/1/12 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 178
365 Shreveport Housing Authority Multi-Family Housing Revenue, U.S. Goodman--Section 8 6.13%,
8/1/07 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 350
635 Shreveport Housing Authority Multi-Family Housing Revenue, U.S. Goodman--Section 8 6.13%,
8/1/10 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 604
364 St. Mary Public Finance Authority Single Family Mortgage Revenue, Series A 7.63%, 3/25/12 . . . 388
-------
6,848
-------
Maine (0.2%):
300 Maine Housing Authority Single Family Mortgage Revenue 6.90%, 11/15/01 . . . . . . . . . . . . 320
-------
Massachusetts (0.8%):
985 Massachussetts Housing Finance Agency, Series 21 7.13%, 6/1/25 . . . . . . . . . . . . . . . . 1,017
250 Massachusetts State Housing Finance Agency Multi-Family Housing Revenue, Series 88-B 8.10%,
8/1/23 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 260
455 Massachussetts 7.00%, 12/1/23 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 466
-------
1,743
-------
</TABLE>
Continued
39
B-221
<PAGE>
THE ONE GROUP FAMILY OF MUTUAL FUNDS
Tax-Free Bond Fund
- --------------------------------------------------------------------------------
SCHEDULE OF PORTFOLIO INVESTMENTS, CONTINUED JUNE 30, 1995
(Amounts in Thousands)
<TABLE>
<CAPTION>
PRINCIPAL SECURITY MARKET
AMOUNT DESCRIPTION VALUE
--------- ----------- ------
<S> <C>
MUNICIPAL BONDS, CONTINUED
Michigan (1.0%):
$ 645 Michigan Housing Development Authority 7.65%, 12/1/12 . . . . . . . . . . . . . . . . . . . . .. . $ 667
1,395 Michigan State Housing Development Authority Single Family Mortgage Revenue, Series 90-A 7.50%,
6/1/15 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .. . 1,449
-------
2,116
-------
Minnesota (1.1%):
1,000 Coon Rapids Multi-Family Housing Revenue, Epiphany Pines Project 7.20%, 9/1/16 . . . . . . . .. . 974
850 Minnesota Housing Finance Agency Single Family Mortgage Revenue, Series 94-D 4.55%, 7/1/25, . .. . 771
560 Minnesota State Housing Finance Authority 7.10%, 2/1/21 . . . . . . . . . . . . . . . . . . . .. . 569
-------
2,314
-------
Mississippi (2.1%):
1,000 Mississippi, Series 93-C 6.05%, 9/1/07 . . . . . . . . . . . . . . . . . . . . . . . . . . . .. . 991
2,000 Mississippi Home Corp., Series 94-B 7.90%, 3/1/25, Callable 3/1/05 @ 106 . . . . . . . . . . .. . 2,197
1,100 Mississippi Home Corp., Series 94-F 7.10%, 12/1/10 . . . . . . . . . . . . . . . . . . . . . .. . 1,172
-------
4,360
-------
Missouri (1.6%):
670 Grandview Multi-Family Housing Revenue 9.25%, 5/15/08 . . . . . . . . . . . . . . . . . . . . .. . 692
2,295 Jackson County 10.00%, 3/1/10 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .. . 2,295
205 Missouri State Housing Development Single Family Mortgage Revenue, Series 91-A 6.80%, 8/1/15 .. . 213
-------
3,200
-------
Montana (1.4%):
1,576 Greenwood Plaza Housing, Inc. Montana Project Financial Housing Authority, Section - B 10.43%,
1/1/22 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .. . 1,702
135 Montana State Housing Authority Board Single Family Mortgage Program, Series 91A-1 7.00%,
10/1/17 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .. . 140
1,000 Montana State Housing Authority Board Single Family Mortgage Program, Series 92AR 6.40%,
12/1/12 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .. . 1,000
-------
2,842
-------
Nebraska (0.7%):
6,700 Nebraska State Investment Finance Authority Single Family Mortgage Revenue 0.00%, 12/15/13 . .. . 1,072
275 Nebraska 6.35%, 3/15/06 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .. . 280
-------
1,352
-------
Nevada (0.8%):
905 Nevada Housing Development Authority 7.90%, 10/1/21, Callable 4/1/02 @ 100 . . . . . . . . . .. . 943
435 Nevada Housing Development Authority Single Family Mortgage Revenue, Series B-1 6.20%, 10/1/15 . . 427
250 West Wendover Recreation District 6.50%, 12/1/09 . . . . . . . . . . . . . . . . . . . . . . .. . 242
-------
1,612
-------
New Hampshire (0.1%):
300 New Hampshire State Housing Finance Authority Single Family Residential, Series A 6.85%, 1/1/25. . 308
-------
New Jersey (1.2%):
935 New Jersey State Housing and Mortgage Finance Agency Series C 7.38%, 10/1/17 . . . . . . . . .. . 973
710 New Jersey State Housing 8.38%, 4/1/17 . . . . . . . . . . . . . . . . . . . . . . . . . . . .. . 757
705 New Jersey State Higher Education Authority 7.00%, 7/1/05, Callable 7/1/01 @ 102, 7/1/03 @ 100 . . 739
-------
2,469
-------
New Mexico (3.0%):
715 Bernalillo County La Resolana Apartments, Sub A-2 7.00%, 11/1/08 . . . . . . . . . . . . . . .. . 700
1,295 Bernalillo County Multi-Family Mortgage Revenue, La Resolana Apartments, Series A-1 7.50%,
11/1/08 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .. . 1,269
525 Hobbs Single Family Mortgage Revenue 8.75%, 7/1/11 . . . . . . . . . . . . . . . . . . . . . .. . 567
190 Las Cruces Housing Development Corp. Multi-Family Housing Revenue, Series B 9.00%, 10/1/03 . .. . 191
1,140 Las Cruces Housing Development Corp. Multi-Family Housing Revenue, Series A 6.40%, 10/1/19 . .. . 1,099
360 New Mexico Mortgage Finance Authority Federal National Mortgage Association, Series 93-C 5.35%,
1/1/10 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .. . 335
220 New Mexico Mortgage Finance Authority Single Family Mortgage Revenue, Series 82-A 12.00%,
7/1/11 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .. . 223
470 New Mexico Mortgage Finance Authority Single Family Mortgage Revenue, Series A-2 6.85%, 7/1/12 . . 484
</TABLE>
Continued
40
B-222
<PAGE>
THE ONE GROUP FAMILY OF MUTUAL FUNDS
Tax-Free Bond Fund
- --------------------------------------------------------------------------------
SCHEDULE OF PORTFOLIO INVESTMENTS, CONTINUED JUNE 30, 1995
(Amounts in Thousands)
<TABLE>
<CAPTION>
PRINCIPAL SECURITY MARKET
AMOUNT DESCRIPTION VALUE
--------- ----------- ------
<S> <C>
MUNICIPAL BONDS, CONTINUED
New Mexico, continued:
$ 350 New Mexico Mortgage Finance Authority Single Family Mortgage Revenue, Series A 7.80%, 3/1/21 .. . $ 355
45 New Mexico Mortgage Finance Authority Single Family Mortgage Revenue, Series A-2 7.80%, 9/1/21 . . 46
1,000 New Mexico 6.45%, 7/1/25 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .. . 986
-------
6,255
-------
New York (5.0%):
1,820 Clay County 6.20%, 9/1/11 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .. . 1,816
1,100 New York City, GO 4.55%*, 9/1/95 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .. . 1,100
1,400 New York State, Series 91-UU 7.75%, 10/1/23, . . . . . . . . . . . . . . . . . . . . . . . . .. . 1,496
500 New York Energy, Series 1985-A 4.55%*, 7/1/15 . . . . . . . . . . . . . . . . . . . . . . . . .. . 500
5,400 New York City Municipal Water Financial Authority Water and Sewer System Revenue, Series A
4.50%*, 6/15/25 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .. . 5,400
-------
10,312
-------
North Dakota (1.2%):
760 North Dakota Housing Finance Authority 8.38%, 7/1/19 . . . . . . . . . . . . . . . . . . . . .. . 784
1,595 North Dakota State 8.38%, 7/1/21, . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .. . 1,649
-------
2,433
-------
Ohio (2.4%):
1,200 Ohio Housing Finance Agency Single Family Mortgage Revenue 7.65%, 3/1/29, . . . . . . . . . . .. . 1,276
2,230 Ohio Housing Finance Agency Single Family Mortgage Revenue, Series 84-A 0.00%, 8/1/15 . . . . .. . 220
290 Ohio Housing Finance Agency Single Family Mortgage Revenue, Series A 7.15%, 3/1/01 . . . . . .. . 301
1,125 Ohio Housing Finance Authority Single Family Mortgage Revenue, Series 91-D 7.05%, 9/1/16 . . .. . 1,152
985 Ohio Housing Finance Authority Single Family Mortgage Revenue 7.00%, 9/1/11 . . . . . . . . . .. . 1,015
1,000 West Clermont Local Schools 7.13%, 12/1/19 . . . . . . . . . . . . . . . . . . . . . . . . . .. . 1,056
-------
5,020
-------
Oklahoma (0.3%):
610 Oklahoma City Finance Authority Suboro Timberwoods Apartments 9.00%, 6/1/09 . . . . . . . . . .. . 619
-------
Pennsylvania (3.9%):
4,275 Cambia 5.65%, 12/1/16 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .. . 4,275
2,805 Pittsburgh Urban Redevelopment Authority Mortgage Revenue, Series A 8.35%, 10/1/14 . . . . . .. . 2,910
815 Pittsburgh Urban Redevelopment Authority Single Family Mortgage Revenue, Series 88-C 6.13%,
12/1/16 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .. . 787
-------
7,972
-------
Rhode Island (1.7%):
2,425 Rhode Island Housing and Mortgage Finance 8.25%, 10/1/22, . . . . . . . . . . . . . . . . . . .. . 2,562
835 Rhode Island 6.80%, 10/1/23, Callable 10/1/01 @ 102, 10/1/03 @ 100 . . . . . . . . . . . . . .. . 843
-------
3,405
-------
South Carolina (1.0%):
2,000 South Carolina Housing Finance Authority 7.00%, 7/11/11, Amortized to 7/1/02 @ 100 . . . . . . .. 2,045
-------
South Dakota (0.9%):
400 South Dakota Housing Development Authority Single Family Mortgage Revenue 6.80%, 5/1/12,
Callable 5/1/03 @ 105 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .. 410
440 South Dakota Housing Development Authority 7.05%, 5/1/11 . . . . . . . . . . . . . . . . . . . .. 454
1,000 South Dakota Student Loan 7.63%, 8/1/06 . . . . . . . . . . . . . . . . . . . . . . . . . . . . .. 1,061
-------
1,925
-------
Tennessee (1.9%):
1,305 Memphis Health, Educational and Housing Facilities Board Multi-Family Mortgage Revenue,
Edgewater Terrace 7.38%, 1/20/27 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .. . 1,365
1,150 Tennessee Housing Development Agency 7.70%, 7/1/16 . . . . . . . . . . . . . . . . . . . . . .. . 1,188
1,370 Tennessee Housing Development Agency Single Family Mortgage Revenue, Series 91-V 7.65%, 7/1/22,
Callable 7/1/01 @ 102 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .. . 1,428
-------
3,981
-------
Texas (10.3%):
215 Baytown Single Family Mortgage Revenue, Series 92 8.50%, 9/1/11 . . . . . . . . . . . . . . . .. . 235
1,610 Beaumont Housing Finance Corp. Single Family Mortgage Revenue 9.20%, 3/1/12 . . . . . . . . . .. . 1,785
</TABLE>
Continued
45
B-223
<PAGE>
THE ONE GROUP FAMILY OF MUTUAL FUNDS
Tax-Free Bond Fund
- --------------------------------------------------------------------------------
SCHEDULE OF PORTFOLIO INVESTMENTS, CONTINUED JUNE 30, 1995
(Amounts in Thousands)
<TABLE>
<CAPTION>
PRINCIPAL SECURITY MARKET
AMOUNT DESCRIPTION VALUE
--------- ----------- ------
<S> <C>
MUNICIPAL BONDS, CONTINUED
Texas continued:
$ 1,765 Bexar County Housing Finance Corp. Residential Revenue 0.00%, 3/1/15 . . . . . . . . . . . . . $ 488
2,500 Central Texas 0.00%, 9/1/16 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 666
1,260 El Paso Housing Finance Corp. Single Family Mortgage Revenue 7.75%, 9/1/19 . . . . . . . . . . 1,320
810 El Paso Housing Finance Corp. Single Family Mortgage Revenue, Series A 8.75%, 10/1/11 . . . . . 876
1,260 Fort Worth Housing Finance Corp. 8.50%, 10/1/11 . . . . . . . . . . . . . . . . . . . . . . . . 1,377
1,000 Laredo Housing Finance Corp. 6.20%, 10/1/19 . . . . . . . . . . . . . . . . . . . . . . . . . . 1,001
800 Red River, PCR Southwestern Public Service 6.63%, 3/1/09 . . . . . . . . . . . . . . . . . . . 803
495 San Antonio Housing Finance Corp. Park Ridge Apartments 9.55%, 12/1/02 . . . . . . . . . . . . 523
970 San Antonio Housing Finance Corp. Britt Oak Ltd. Project, Series 94 9.75%, 1/1/10 . . . . . . . 978
285 San Antonio, Series 94-A 7.88%, 4/1/12 . . . . . . . . . . . . . . . . . . . . . . . . . . . . 288
345 San Antonio, Series 94-B 9.00%, 4/1/09 . . . . . . . . . . . . . . . . . . . . . . . . . . . . 351
1,555 Southeast Texas 0.00%, 11/1/14 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 451
17,635 Texas Housing Finance Corp., 0.00%, 3/1/15 Series 94-A . . . . . . . . . . . . . . . . . . . . 4,563
1,950 Travis City, Series 94-A 6.25%, 10/1/19 . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1,952
255 Travis County Housing Finance Corp. Residential Mortgage Revenue, Series A 7.00%, 12/1/11 . . . 268
600 Texas Higher Education, Series 91-D 6.88%, 4/1/02 . . . . . . . . . . . . . . . . . . . . . . . 634
1,485 Victoria Housing Finance Corp. Single Family Mortgage Revenue, Series A 8.50%, 1/1/11 . . . . . 1,591
1,000 Winter Garden 6.20%, 10/1/19 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1,014
-------
21,164
-------
Utah (0.3%):
130 Utah State Housing Finance Agency Single Family Mortgage Revenue 8.50%, 7/1/04 . . . . . . . . 135
80 Utah State Housing Finance Agency Single Family Mortgage Revenue, Issue D-2 7.00%, 1/1/16 . . . 82
345 Utah State Housing Finance Agency Single Family Mortgage Revenue, Series A-1 6.00%, 7/1/12 . . 356
120 Utah State Housing Finance Agency Single Family Mortgage Revenue, Series C-2 8.00%, 7/1/21 . . 126
-------
699
-------
Vermont (0.1%):
195 Vermont Housing Finance Agency Single Family Mortgage Revenue 6.88%, 5/1/25 . . . . . . . . . . 195
-------
Virginia (0.4%):
780 Virginia Beach Development Authority Multi-Family Housing Revenue, Wesleyan Courts Apartments
Project 8.75%, 1/15/09 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 758
-------
Washington (3.6%):
500 Pierce County Housing Authority Multi-Family Housing Revenue, Chateau Ranier Project 6.50%,
9/1/23 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 463
403 Skagit County Housing Authority Low Income Housing Assistance Revenue, Sea Mar Project 7.00%,
6/20/03 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 416
6,760 Washington State Public Power, Series 91-A 6.00%, 7/1/12 . . . . . . . . . . . . . . . . . . . 6,557
-------
7,436
-------
West Virginia (1.0%):
2,000 Pleasant County 6.15%, 5/1/15 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1,992
-------
</TABLE>
Continued
42
B-224
<PAGE>
THE ONE GROUP FAMILY OF MUTUAL FUNDS
Tax-Free Bond Fund
- --------------------------------------------------------------------------------
SCHEDULE OF PORTFOLIO INVESTMENTS, CONTINUED JUNE 30, 1995
(Amounts in Thousands)
<TABLE>
<CAPTION>
PRINCIPAL SECURITY MARKET
AMOUNT DESCRIPTION VALUE
--------- ----------- ------
<S> <C>
MUNICIPAL BONDS, CONTINUED:
Wisconsin (0.3%):
$ 500 Wisconsin Housing and Economic Development Authority Home Ownership Revenue, Series A 7.00%,
9/1/09 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .. . . $525
--------
Wyoming (0.4%):
250 Wyoming Community Development Authority Single Family Mortgage Revenue, Series E 7.75%, 6/1/09. . . 261
290 Wyoming Community Development Authority Single Family Mortgage Revenue, Series A 7.88%, 6/1/18. . . 302
315 Wyoming Community Development Authority Single Family Mortgage Revenue, Series A 6.88%, 6/1/14. . . 325
--------
888
--------
Total Municipal Bonds 202,865
--------
INVESTMENT COMPANIES (0.0%):
0 Provident Tax-Free Money Market Fund (a) . . . . . . . . . . . . . . . . . . . . . . . . . . .. . . 0
--------
Total Investment Companies 0
--------
Total (Cost--$203,754)(b) $202,865
--------
--------
</TABLE>
- ---------
Percentages indicated are based on net assets of $205,704.
(a) Amount is less than one thousand.
(b) Represents cost for financial reporting purposes and differs from cost basis
for federal income tax purposes by the amount of losses recognized for
financial reporting in excess of federal income tax reporting of
approximately $25. Cost for federal income tax purposes differs from value
by net unrealized depreciation of securities as follows:
<TABLE>
<S> <C>
Unrealized appreciation . . . . . . . . . . . . . . . . . . . . $ 1,746
Unrealized depreciation . . . . . . . . . . . . . . . . . . . . (2,660)
-------
Net unrealized depreciation . . . . . . . . . . . . . . . . . . $ (914)
-------
-------
</TABLE>
* Variable rate securities having liquidity sources through bank letters of
credit and/or liquidity arrangements. The interest rate, which will change
periodically, is based upon bank prime rates or an index of market interest
rates. The rate reflected on the Schedule of Portfolio Investments is the
rate in effect on June 30, 1995.
GO--General Obligation
PCR--Pollution Control Revenue
MBIA--Municipal Bond Insurance Association
See notes to financial statements.
43
B-225
<PAGE>
THE ONE GROUP FAMILY OF MUTUAL FUNDS
KENTUCKY MUNICIPAL BOND FUND
- --------------------------------------------------------------------------------
SCHEDULE OF PORTFOLIO INVESTMENTS JUNE 30, 1995
(Amounts in Thousands)
<TABLE>
<CAPTION>
PRINCIPAL SECURITY MARKET
AMOUNT DESCRIPTION VALUE
------ ----------- -----
<S> <C>
MUNICIPAL BONDS (97.1%):
Kentucky (91.9%):
$ 510 Clinton County, Kentucky, School District Finance 6.10%, 6/1/12 . . . . . . . . . . . . . . . .. $ 512
585 Eastern Kentucky University, Revenues 5.38%, 5/1/04 . . . . . . . . . . . . . . . . . . . . . .. 587
500 Eastern Kentucky University, Revenues 6.20%, 5/1/04 . . . . . . . . . . . . . . . . . . . . . .. 537
500 Fayette County, Kentucky, School District Finance 6.00%, 5/1/03 . . . . . . . . . . . . . . . .. 518
560 Hardin County, Kentucky, Hospital Revenue 4.50%, 10/1/02 . . . . . . . . . . . . . . . . . . .. 542
295 Hardin County, Kentucky, Hospital Revenue 4.50%, 10/1/02 . . . . . . . . . . . . . . . . . . .. 285
510 Hardin County, Kentucky, Hospital Revenue 4.75%, 10/1/04 . . . . . . . . . . . . . . . . . . .. 492
250 Hardin County, Kentucky, Hospital Revenue 4.75%, 10/1/04 . . . . . . . . . . . . . . . . . . .. 241
445 Hardin County, Kentucky, Hospital Revenue 5.00%, 10/1/06 . . . . . . . . . . . . . . . . . . .. 429
725 Jefferson County, Kentucky, Capital Projects 6.10%, 8/15/07 . . . . . . . . . . . . . . . . . .. 741
400 Jefferson County, Kentucky, Health Facility Revenue 6.00%, 5/1/01 . . . . . . . . . . . . . . .. 425
500 Jefferson County, Kentucky, Health Facility Revenue 6.38%, 5/1/08 . . . . . . . . . . . . . . .. 525
500 Jefferson County, Kentucky, Hospital Revenue 6.20%, 10/1/04 . . . . . . . . . . . . . . . . . .. 528
635 Jefferson County, Kentucky, School District Financial 4.70%, 1/1/01 . . . . . . . . . . . . . .. 623
500 Kenton County, Kentucky, Airport Board Revenue 6.10%, 3/1/04 . . . . . . . . . . . . . . . . .. 522
400 Kenton County, Kentucky, Airport Board Revenue 6.20%, 3/1/05 . . . . . . . . . . . . . . . . .. 418
500 Kenton County, Kentucky, Airport Board Revenue 5.75%, 3/1/08 . . . . . . . . . . . . . . . . .. 500
500 Kenton County, Kentucky, Airport Board Revenue 5.75%, 7/1/99 . . . . . . . . . . . . . . . . .. 497
750 Kenton County, Kentucky, School District Financial 4.50%, 7/1/07 . . . . . . . . . . . . . . .. 738
325 Kenton County, Kentucky, School District Financial 5.25%, 7/1/99 . . . . . . . . . . . . . . .. 312
500 Kentucky Higher Education Student Loan 6.50%, 6/1/02 . . . . . . . . . . . . . . . . . . . . .. 521
500 Kentucky Higher Education Student Loan 4.70%, 6/1/00 . . . . . . . . . . . . . . . . . . . . .. 493
400 Kentucky, Housing Corp., Housing Revenue 5.85%, 7/1/00 . . . . . . . . . . . . . . . . . . . .. 407
275 Kentucky, Housing Corp., Housing Revenue 6.20%, 7/1/03 . . . . . . . . . . . . . . . . . . . .. 285
500 Kentucky, Housing Corp., Housing Revenue 5.10%, 1/1/02 . . . . . . . . . . . . . . . . . . . .. 505
500 Kentucky, Housing Corp., Housing Revenue 5.60%, 1/1/07 . . . . . . . . . . . . . . . . . . . .. 508
500 Kentucky, Housing Corp., Housing Revenue 5.50%, 1/1/06 . . . . . . . . . . . . . . . . . . . .. 508
1,450 Kentucky, Housing Corp., Housing Revenue 5.05%, 7/1/06 . . . . . . . . . . . . . . . . . . . .. 1,428
500 Kentucky, Infrastructure Authority 6.50%, 6/1/05 . . . . . . . . . . . . . . . . . . . . . . .. 535
250 Kentucky, Infrastructure Authority 6.10%, 6/1/02 . . . . . . . . . . . . . . . . . . . . . . .. 265
390 Kentucky, Infrastructure Authority 5.60%, 6/1/13 . . . . . . . . . . . . . . . . . . . . . . .. 368
200 Kentucky, Infrastructure Authority 4.50%, 2/1/01 . . . . . . . . . . . . . . . . . . . . . . .. 193
205 Kentucky, Infrastructure Authority 4.60%, 2/1/02 . . . . . . . . . . . . . . . . . . . . . . .. 196
1,000 Kentucky State Properties & Building Commission 5.10%, 9/1/00 . . . . . . . . . . . . . . . . .. 1,010
750 Kentucky State, Turnpike Authority, Economic Development 5.70%, 1/1/03 . . . . . . . . . . . .. 778
750 Kentucky State, Turnpike Authority, Economic Development 5.50%, 7/1/08 . . . . . . . . . . . .. 745
500 Kentucky State, Turnpike Authority, Recovery 6.63%, 7/1/08 . . . . . . . . . . . . . . . . . .. 561
250 Kentucky State, Turnpike Authority, Toll Road 5.80%, 7/1/99 . . . . . . . . . . . . . . . . . .. 259
500 Kentucky State, University Revenue 6.25%, 5/1/02 . . . . . . . . . . . . . . . . . . . . . . .. 537
1,000 Kentucky State Turnpike 5.63%, 7/1/10 . . . . . . . . . . . . . . . . . . . . . . . . . . . .. 989
500 Kentucky State Turnpike 5.75%, 7/1/11 . . . . . . . . . . . . . . . . . . . . . . . . . . . . .. 498
500 Lexington, Fayette Urban County, Government 6.35%, 7/1/07 . . . . . . . . . . . . . . . . . . .. 533
200 Louisville & Jefferson County, Kentucky 4.80%, 5/15/98 . . . . . . . . . . . . . . . . . . . .. 201
500 Louisville & Jefferson County, Kentucky 5.00%, 5/15/06 . . . . . . . . . . . . . . . . . . . .. 486
200 Louisville, Kentucky, Public Properties Corp. 6.40%, 12/01/07 . . . . . . . . . . . . . . . . .. 210
310 Louisville, Kentucky, Water Revenue 6.38%, 11/1/97 . . . . . . . . . . . . . . . . . . . . . .. 323
500 Louisville, Kentucky, Water Works Board, Water 5.40%, 11/15/04 . . . . . . . . . . . . . . . .. 507
500 Louisville, Kentucky, Water Works Board, Water 5.63%, 11/15/07 . . . . . . . . . . . . . . . .. 503
1,040 Louisville, Kentucky, Water Works Board, Water 5.75%, 11/15/09 . . . . . . . . . . . . . . . .. 1,039
200 Morehead State University, Kentucky University Revenue 6.30%, 11/1/08 . . . . . . . . . . . . .. 209
500 Muhlenberg County, Kentucky, School District 5.85%, 8/1/10 . . . . . . . . . . . . . . . . . .. 494
250 Murray State University, Kentucky University Revenues 5.60%, 5/1/07 . . . . . . . . . . . . . .. 248
530 Northern Kentucky University, Revenue 6.10%, 5/1/06 . . . . . . . . . . . . . . . . . . . . . .. 562
</TABLE>
Continued
44
B-226
<PAGE>
THE ONE GROUP FAMILY OF MUTUAL FUNDS
KENTUCKY MUNICIPAL BOND FUND
- --------------------------------------------------------------------------------
SCHEDULE OF PORTFOLIO INVESTMENTS, CONTINUED JUNE 30, 1995
(Amounts in Thousands)
<TABLE>
<CAPTION>
PRINCIPAL SECURITY MARKET
AMOUNT DESCRIPTION VALUE
------ ----------- -----
<S> <C>
$ 500 Northern Kentucky University, Revenue 4.70%, 5/1/05 . . . . . . . . . . . . . . . . . . . . . .. $ 464
600 Perry County, Kentucky, School District Financial 6.25%, 7/1/09 . . . . . . . . . . . . . . . .. 620
250 Richmond, Kentucky, Water, Gas & Sewer Revenue 6.50%, 6/1/99 . . . . . . . . . . . . . . . . .. 267
100 Shelby County, Kentucky, School District Financial 6.25%, 9/1/03 . . . . . . . . . . . . . . .. 108
500 Shelby County, Kentucky, School District Financial 6.50%, 9/1/05 . . . . . . . . . . . . . . .. 542
500 University of Kentucky, University Revenues 5.75%, 5/1/97 . . . . . . . . . . . . . . . . . . .. 510
500 University of Kentucky, University Revenues 6.25%, 5/1/07 . . . . . . . . . . . . . . . . . . .. 527
500 University of Kentucky, University Revenues 4.15%, 5/1/04 . . . . . . . . . . . . . . . . . . .. 449
500 University of Louisville, Kentucky Revenues 5.40%, 5/1/07 . . . . . . . . . . . . . . . . . . .. 488
500 University of Louisville, Kentucky Revenues 5.40%, 5/1/08 . . . . . . . . . . . . . . . . . . .. 485
500 University of Louisville, Kentucky Revenues 5.40%, 5/1/09 . . . . . . . . . . . . . . . . . . .. 483
310 Western Kentucky University, Revenue 5.85%, 5/1/96 . . . . . . . . . . . . . . . . . . . . . .. 314
985 Western Kentucky University, Revenue 5.00%, 5/1/09 . . . . . . . . . . . . . . . . . . . . . .. 910
950 Winchester Kentucky, Utilities Revenue 5.30%, 7/1/09 . . . . . . . . . . . . . . . . . . . . .. 903
2,000 Kentucky, St. Elizabeth Medical 6.00%, 11/1/10 . . . . . . . . . . . . . . . . . . . . . . . .. 2,015
2,000 Kentucky State, Property & Building Commission 6.00%, 2/1/10 . . . . . . . . . . . . . . . . .. 2,120
-------
38,081
-------
Tennessee (5.2%):
1,000 McCracken City Hospital 6.20%, 11/1/05 . . . . . . . . . . . . . . . . . . . . . . . . . . . .. 1,065
1,000 McCracken City Hospital 6.40%, 11/1/07 . . . . . . . . . . . . . . . . . . . . . . . . . . . .. 1,069
-------
2,134
-------
Total Municipal Bonds 40,215
-------
INVESTMENT COMPANIES (1.8%):
SHARES
- ------
739 The One Group Municipal Money Market Fund, Class A . . . . . . . . . . . . . . . . . . . . . .. 739
-------
Total Investment Companies 739
-------
Total (Cost--$41,155)(a) $40,954
-------
-------
</TABLE>
________________
Percentages indicated are based on net assets of $41,417.
(a) Represents cost for federal income tax purposes and differs from value by
net unrealized depreciation of securities as follows:
<TABLE>
<S> <C>
Unrealized appreciation . . . . . . . . . . . . . . . . . . $238
Unrealized depreciation . . . . . . . . . . . . . . . . . . (439)
-----
Net unrealized depreciation . . . . . . . . . . . . . . . . $(201)
------
------
</TABLE>
See notes to financial statements.
45
B-227
<PAGE>
THE ONE GROUP FAMILY OF MUTUAL FUNDS
OHIO MUNICIPAL BOND FUND
- --------------------------------------------------------------------------------
SCHEDULE OF PORTFOLIO INVESTMENTS JUNE 30, 1995
(Amounts in Thousands)
<TABLE>
<CAPTION>
PRINCIPAL SECURITY MARKET
AMOUNT DESCRIPTION VALUE
------ ----------- ------
<S> <C>
MUNICIPAL BONDS (93.6%):
Massachusetts (1.1%):
$ 1,000 Massachusetts, GO, 6.75%, 8/1/09, Callable 8/1/01 @ 102 . . . . . . . . . . . . . . . . . . . . $ 1,071
--------
Missouri (1.1%):
1,000 Missouri State Health and Educational Facilities Authority, GO, 6.40%, 6/1/10 . . . . . . . . . 1,072
--------
Ohio (90.3%):
2,000 Bexley, Ohio, City School District, 6.50%, 12/1/16 . . . . . . . . . . . . . . . . . . . . . . 2,220
1,000 Butler County, Middletown Regional Hospital, 6.75%, 11/15/10 . . . . . . . . . . . . . . . . . 1,070
1,000 Cincinnati, University of Cincinnati, Series I1, 7.10%, 6/1/10 . . . . . . . . . . . . . . . . 1,109
1,000 Cincinnati, University of Cincinnati, Series R2, 6.25%, 6/1/09 . . . . . . . . . . . . . . . . 1,038
2,775 Clermont City, Waterworks, 6.63%, 12/1/15 . . . . . . . . . . . . . . . . . . . . . . . . . . . 3,108
1,000 Cleveland Waterworks Revenue, 5.50%, 1/1/13 . . . . . . . . . . . . . . . . . . . . . . . . . . 968
985 Cleveland Airport, 6.00%, 1/1/14, Callable 1/1/04 @ 102 . . . . . . . . . . . . . . . . . . . 992
1,850 Cleveland Waterworks Revenue, 6.25%, 1/1/06 AMBAC . . . . . . . . . . . . . . . . . . . . . . . 1,963
1,000 Cleveland, Ohio, 7/15/89, 6.88%, 7/1/09 . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1,103
2,800 Cleveland Waterworks Revenue, Series F-92B, 6.50%, 1/1/11 . . . . . . . . . . . . . . . . . . . 2,937
2,500 Cleveland Public Power System, 6.40%, 11/15/06, Callable 11/15/04 @ 102 . . . . . . . . . . . . 2,684
1,000 Cleveland, Ohio, 6.38%, 7/1/12, Callable 7/1/02 @ 102 . . . . . . . . . . . . . . . . . . . . . 1,031
3,600 Columbus, Ohio Water System, 6.38%, 11/1/10 . . . . . . . . . . . . . . . . . . . . . . . . . . 3,740
1,285 Columbus, Ohio Waterworks, 6.00%, 5/1/11 Callable 5/1/03 @ 102 . . . . . . . . . . . . . . . . 1,306
2,250 Columbus, Ohio Waterworks, GO, 6.00%, 5/1/12 . . . . . . . . . . . . . . . . . . . . . . . . . 2,287
1,225 Columbus, Ohio, Municipal Airport, 6.20%, 4/15/04 . . . . . . . . . . . . . . . . . . . . . . . 1,292
1,000 Columbus, Ohio Sewer Improvement Bonds, GO, 6.75%, 9/15/06 . . . . . . . . . . . . . . . . . . 1,144
1,500 Cuyahoga County, Ohio, Public Improvements, 6.70%, 10/1/99 . . . . . . . . . . . . . . . . . . 1,648
1,000 Delaware County, Ohio, GO, 5.60%, 12/1/10, Callable 12/1/05 @ 101 . . . . . . . . . . . . . . . 973
1,000 Delaware County, Ohio, Library District, 7.25%, 11/1/10 . . . . . . . . . . . . . . . . . . . . 1,148
1,000 Fairfield County, Ohio, Lancaster-Fairfield Community Hospital, 7.10%, 6/15/21 . . . . . . . . 1,139
1,000 Franklin County, Ohio, Hospital Revenue, Children's Hospital Project, Series A,
6.60%, 11/1/11 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1,044
1,000 Franklin County, Ohio, Hospital Revenue, Riverside Hospital, Series B, 7.60%, 5/15/20 . . . . . 1,145
1,000 Franklin County, Ohio, Hospital Revenue, Children's Hospital Project, Series A,
6.50%, 5/1/07 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1,066
1,000 Greene County Water Systems, 6.85%, 12/1/11, Callable 12/1/01 @ 102 . . . . . . . . . . . . . . 1,069
1,265 Hamilton County Hospital, 6.63%, 1/1/06, Callable 1/1/01 @ 100 . . . . . . . . . . . . . . . . 1,338
1,500 Hamilton County Hospital, 6.25%, 1/1/12, Callable 1/1/03 @ 102 . . . . . . . . . . . . . . . . 1,483
1,500 Hamilton County, Ohio, Building Improvements & Refunding Museum Center, 6.50%, 12/1/09 . . . . 1,573
1,000 Hamilton County, Ohio, Sewer System Improvement, Series A, 6.30%, 12/1/01 . . . . . . . . . . . 1,084
1,500 Hamilton County, Ohio, Electric System Revenue, 6.13%, 12/15/08, Callable 10/15/02 @ 102 . . . 1,560
1,000 Hamilton County, Ohio Water System Revenue, 6.40%, 10/15/07 . . . . . . . . . . . . . . . . . . 1,065
1,000 Kent State University, Ohio, 6.45%, 5/1/12 . . . . . . . . . . . . . . . . . . . . . . . . . . 1,045
2,000 Lakewood, Ohio, Sanitation Sewer System, 6.40%, 12/1/11 . . . . . . . . . . . . . . . . . . . . 2,093
2,000 Montgomery County, Ohio, Sisters of Charity, 6.50%, 5/15/08 . . . . . . . . . . . . . . . . . . 2,095
1,000 North Royalton, Ohio, 7.50%, 12/1/11 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1,097
1,000 Northeast Ohio, Regional Sewer District, 6.50%, 11/15/08 . . . . . . . . . . . . . . . . . . . 1,052
1,250 Ohio Housing Agency, 6.20%, 9/1/14, Callable 3/1/05 @ 102 . . . . . . . . . . . . . . . . . . . 1,258
1,000 Ohio State Water Development Pollution Control, 5.50%, 12/1/09, Callable 6/1/05 @ 101 . . . . . 975
1,000 Ohio State Liquor Profits, 6.85%, 9/1/00 . . . . . . . . . . . . . . . . . . . . . . . . . . . 1,095
1,165 Ohio State Building Authority, 6.50%, 9/1/09, Callable 9/1/04 @ 102 . . . . . . . . . . . . . . 1,242
1,000 Ohio State Building Authority, 6.50%, 10/1/01 . . . . . . . . . . . . . . . . . . . . . . . . . 1,081
2,000 Ohio State Building Authority, Adult Correctional Building, Series A, 6.13%, 10/1/09 . . . . . 2,060
1,000 Ohio State Building Authority, Local Jails, Series A, 7.35%, 4/1/09 . . . . . . . . . . . . . . 1,131
2,000 Ohio State Building Authority, State Facilities, Series A, 6.38%, 6/1/07 . . . . . . . . . . . 2,102
</TABLE>
Continued
46
B-228
<PAGE>
THE ONE GROUP FAMILY OF MUTUAL FUNDS
OHIO MUNICIPAL BOND FUND
- -------------------------------------------------------------------------------
SCHEDULE OF PORTFOLIO INVESTMENTS JUNE 30, 1995
(Amounts in Thousands)
<TABLE>
<CAPTION>
PRINCIPAL SECURITY MARKET
AMOUNT DESCRIPTION VALUE
------ ----------- ------
<S> <C>
MUNICIPAL BONDS, CONTINUED:
$ 1,000 Ottawa County, Ohio, 7.00%, 9/1/11, Callable 9/1/01 @ 102 . . . . . . . . . . . . . . . . . . . $ 1,080
1,000 Pickerington, Ohio, Local School Districts, 7.00%, 12/1/13 . . . . . . . . . . . . . . . . . . 1,129
2,220 Rocky River, Ohio, 6.90%, 12/1/11, Callable 12/1/00 @ 102 . . . . . . . . . . . . . . . . . . . 2,375
1,000 Saint Mary's, Ohio, Electric System Mortgage, 7.15%, 12/1/10 . . . . . . . . . . . . . . . . . 1,094
1,000 Sandusky County, Ohio, City School District, 7.30%, 12/1/10 . . . . . . . . . . . . . . . . . . 1,076
1,000 Shaker Heights, Ohio, 7.10%, 12/15/10 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1,149
1,000 Springfield, Ohio, 6.88%, 9/1/06, Callable 9/1/01 @ 102 . . . . . . . . . . . . . . . . . . . . 1,089
1,750 Toledo, Ohio, GO, 6.10%, 12/1/14 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1,778
1,000 Toledo, Ohio, Sewer System, 7.38%, 11/15/10 . . . . . . . . . . . . . . . . . . . . . . . . . . 1,086
1,000 Tuscarawas Valley, Ohio, 6.60%, 12/1/15, Callable 12/1/05 @ 102 . . . . . . . . . . . . . . . . 1,052
1,000 University of Cincinnati, 7.00%, 6/1/11, Callable 6/1/01 @ 102 . . . . . . . . . . . . . . . . 1,080
1,000 University of Cincinnati, 6.75%, 12/1/09, Callable 12/1/01 @ 102 . . . . . . . . . . . . . . . 1,079
1,000 Westerville, Ohio, Minerva Park and Blendon Joint Township, 6.80%, 9/15/06 . . . . . . . . . . 1,094
2,750 Westerville, Ohio, Minerva Park and Blendon Joint Township, 7.00%, 9/15/12 . . . . . . . . . . 2,991
1,000 Worthington, Ohio, City School District, 7.45%, 12/1/12 . . . . . . . . . . . . . . . . . . . . 1,132
-------
85,937
-------
Washington (1.1%):
1,000 Washington State, Non-Callable, 6.25%, 2/1/11 . . . . . . . . . . . . . . . . . . . . . . . . . 1,045
-------
Total Municipal Bonds 89,125
-------
INVESTMENT COMPANIES (5.5%):
SHARES
- ------
325 Fidelity Tax-Free Money Market Fund . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 325
4,931 The One Group Ohio Municipal Money Market Fund, Class A . . . . . . . . . . . . . . . . . . . . 4,931
-------
Total Investment Companies 5,256
-------
Total (Cost--$90,584)(a) $94,381
-------
-------
</TABLE>
_________
Percentages indicated are based on net assets of $95,208.
(a) Represents cost for federal income tax purposes and differs from value by
net unrealized appreciation of securities as follows:
Unrealized appreciation . . . . . . . . . . . . . . . . . . . $3,952
Unrealized depreciation . . . . . . . . . . . . . . . . . . . (155)
------
Net unrealized appreciation . . . . . . . . . . . . . . . . . $3,797
------
------
AMBAC--American Municipal Bond Assurance Corp.
GO--General Obligation
See notes to financial statements.
47
B-229
<PAGE>
THE ONE GROUP FAMILY OF MUTUAL FUNDS
- -------------------------------------------------------------------------------
STATEMENTS OF ASSETS AND LIABILITIES JUNE 30, 1995
<TABLE>
<CAPTION>
(Amounts in Thousands except per share amounts)
LIMITED
GOVERNMENT VOLATILITY INTERMEDIATE GOVERNMENT INCOME
ARM BOND BOND BOND BOND
FUND FUND FUND FUND FUND
---------- ---------- ------------ ---------- --------
<S> <C> <C> <C> <C> <C>
ASSETS:
Investments, at value . . . . . . . . . . . . . . . . . . . . . . . $54,500 $409,960 $187,862 $371,122 $447,471
Repurchase agreements . . . . . . . . . . . . . . . . . . . . . . . 1,061 15,252 6,785 16,852 35,061
------- -------- -------- -------- --------
55,561 425,212 194,647 387,974 482,532
Interest receivable . . . . . . . . . . . . . . . . . . . . . . . . 308 5,461 2,422 3,676 6,987
Receivable from brokers for investments sold . . . . . . . . . . . 88 12,506
Receivable for capital shares issued . . . . . . . . . . . . . . . 63 1,469 432 1,484 1,471
Receivable from advisor . . . . . . . . . . . . . . . . . . . . . . 24 111 59 6 99
Net variation margin on open futures contracts . . . . . . . . . . 37
Deferred organization costs . . . . . . . . . . . . . . . . . . . . 13 3 1 9
Prepaid expenses and other assets . . . . . . . . . . . . . . . . . 23 2 1 35 181
------- -------- -------- -------- --------
TOTAL ASSETS . . . . . . . . . . . . . . . . . . . . . . . . . . . 56,117 432,258 197,562 393,184 503,776
------- -------- -------- -------- --------
LIABILITIES:
Dividends payable . . . . . . . . . . . . . . . . . . . . . . . . . 177 1,318 714 1,191 1,536
Payable to brokers for investments purchased . . . . . . . . . . . 3,346 16,748
Payable for capital shares redeemed . . . . . . . . . . . . . . . . 23 364 72 898 2,224
Cash overdraft . . . . . . . . . . . . . . . . . . . . . . . . . . 29 741 165 425 19
Accrued expenses and other payables:
Investment advisory fees . . . . . . . . . . . . . . . . . . 26 209 95 143 239
Administration fees . . . . . . . . . . . . . . . . . . . . . 8 58 27 53 67
12b-1 fees (Class A) . . . . . . . . . . . . . . . . . . . . 1 3 1 2 1
12b-1 fees (Class B) . . . . . . . . . . . . . . . . . . . . 0 2 0 2 1
Other . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12 49 65 1 134
------- -------- -------- -------- --------
TOTAL LIABILITIES . . . . . . . . . . . . . . . . . . . . . . . . . 276 6,090 1,139 2,715 20,969
------- -------- -------- -------- --------
NET ASSETS:
Capital . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 60,089 427,533 199,171 396,664 511,098
Undistributed (distribution in excess of) net investment income . . (236) (122) 116 (302) 357
Accumulated undistributed net realized losses from investment
transactions . . . . . . . . . . . . . . . . . . . . . . . . . . (3,358) (7,604) (5,812) (13,541) (53,133)
Net unrealized appreciation (depreciation) from investments . . . . (654) 6,361 2,948 7,648 24,485
------- -------- -------- -------- --------
NET ASSETS . . . . . . . . . . . . . . . . . . . . . . . . . . . . $55,841 $426,168 $196,423 $390,469 $482,807
======= ======== ======== ======== ========
Net assets
Fiduciary . . . . . . . . . . . . . . . . . . . . . . . . . . $51,050 $410,746 $191,216 $379,826 $474,124
Class A . . . . . . . . . . . . . . . . . . . . . . . . . . . 4,631 12,516 4,941 8,130 6,796
Class B . . . . . . . . . . . . . . . . . . . . . . . . . . . 160 2,906 266 2,513 1,887
------- -------- -------- -------- --------
Total . . . . . . . . . . . . . . . . . . . . . . . . . $55,841 $426,168 $196,423 $390,469 $482,807
======= ======== ======== ======== ========
Outstanding units of beneficial interest (shares)
Fiduciary . . . . . . . . . . . . . . . . . . . . . . . . . . 5,188 38,999 19,095 38,720 49,683
Class A . . . . . . . . . . . . . . . . . . . . . . . . . . . 471 1,189 492 828 713
Class B . . . . . . . . . . . . . . . . . . . . . . . . . . . 16 274 27 256 196
------- -------- -------- -------- --------
Total . . . . . . . . . . . . . . . . . . . . . . . . . 5,675 40,462 19,614 39,804 50,592
======= ======== ======== ======== ========
Net asset value
Fiduciary--offering and redemption price per share . . . . . $ 9.84 $ 10.53 $ 10.01 $ 9.81 $ 9.54
======= ======== ======== ======== ========
Class A--redemption price per share . . . . . . . . . . . . . $ 9.83 $ 10.52 $ 10.04 $ 9.81 $ 9.54
======= ======== ======== ======== ========
Class B--offering price per share (a) . . . . . . . . . . . . $ 9.84 $ 10.60 $ 10.01 $ 9.81 $ 9.62
======= ======== ======== ======== ========
Maximum Sales Charge (Class A) . . . . . . . . . . . . . . . . . . 4.50% 4.50% 4.50% 4.50% 4.50%
Maximum Offering Price (100%/(100%--Maximum Sales Charge) of
net asset value adjusted to nearest cent) per share (Class A) . . $ 10.29 $ 11.02 $ 10.51 $ 10.27 $ 9.99
======= ======== ======== ======== ========
Investments, at Cost . . . . . . . . . . . . . . . . . . . . . . . $56,256 $418,851 $191,699 $380,326 $458,047
======= ======== ======== ======== ========
</TABLE>
__________
(a) Redemption price per Class B share varies based on length of time shares are
held.
See notes to financial statements.
48
B-230
<PAGE>
THE ONE GROUP FAMILY OF MUTUAL FUNDS
- -------------------------------------------------------------------------------
STATEMENTS OF ASSETS AND LIABILITIES JUNE 30, 1995
<TABLE>
<CAPTION>
(Amounts in Thousands
except per share amounts)
INTERMEDIATE KENTUCKY OHIO
TAX-FREE TAX-FREE MUNICIPAL MUNICIPAL
BOND BOND BOND BOND
FUND FUND FUND FUND
------------ -------- --------- ---------
<S> <C> <C> <C> <C>
ASSETS:
Investments, at value . . . . . . . . . . . . . . . . . . . . . $207,008 $202,865 $40,954 $94,381
Cash . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 202 2
Interest and dividends receivable . . . . . . . . . . . . . . . 3,782 3,366 630 1,145
Receivable from brokers for investments sold . . . . . . . . . 8,912
Receivable for capital shares issued . . . . . . . . . . . . . 1,023 617 16 160
Receivable from advisor . . . . . . . . . . . . . . . . . . . . 63 31 12 25
Deferred organization costs . . . . . . . . . . . . . . . . . . 1 9 6
Prepaid expenses and other assets . . . . . . . . . . . . . . . 1 92 29
-------- -------- ------- -------
TOTAL ASSETS . . . . . . . . . . . . . . . . . . . . . . . . . 220,992 206,980 41,614 95,746
-------- -------- ------- -------
LIABILITIES:
Dividends payable . . . . . . . . . . . . . . . . . . . . . . . 806 858 134 336
Payable to brokers for investments purchased . . . . . . . . . 2,073
Payable for capital shares redeemed . . . . . . . . . . . . . . 7 90 51
Cash overdraft . . . . . . . . . . . . . . . . . . . . . . . . 217 87
Accrued expenses and other payables:
Investment advisory fees . . . . . . . . . . . . . . . . 107 75 20 46
Administration fees . . . . . . . . . . . . . . . . . . . 30 28 6 13
12b-1 fees (Class A) . . . . . . . . . . . . . . . . . . 1 2 2 2
12b-1 fees (Class B) . . . . . . . . . . . . . . . . . . 1 6 2
Other . . . . . . . . . . . . . . . . . . . . . . . . . . 8 35 1
-------- -------- ------- -------
TOTAL LIABILITIES . . . . . . . . . . . . . . . . . . . . . . . 3,033 1,276 197 538
-------- -------- ------- -------
NET ASSETS:
Capital . . . . . . . . . . . . . . . . . . . . . . . . . . . . 215,408 212,148 43,397 95,116
Undistributed net investment income . . . . . . . . . . . . . . 11 19 8
Accumulated undistributed net realized losses
from investment transactions . . . . . . . . . . . . . . . . (534) (5,574) (1,779) (3,713)
Net unrealized appreciation (depreciation) from investments . . 3,074 (889) (201) 3,797
-------- -------- ------- -------
NET ASSETS . . . . . . . . . . . . . . . . . . . . . . . . . . $217,959 $205,704 $41,417 $95,208
======== ======== ======= =======
Net assets
Fiduciary . . . . . . . . . . . . . . . . . . . . . . . . $211,229 $185,916 $32,520 $79,993
Class A . . . . . . . . . . . . . . . . . . . . . . . . . 5,614 11,462 8,818 12,006
Class B . . . . . . . . . . . . . . . . . . . . . . . . . 1,116 8,326 79 3,209
-------- -------- ------- -------
Total . . . . . . . . . . . . . . . . . . . . . . . $217,959 $205,704 $41,417 $95,208
======== ======== ======= =======
Outstanding units of beneficial interest (shares)
Fiduciary . . . . . . . . . . . . . . . . . . . . . . . . 19,861 19,189 3,277 7,512
Class A . . . . . . . . . . . . . . . . . . . . . . . . . 528 1,179 888 1,124
Class B . . . . . . . . . . . . . . . . . . . . . . . . . 105 859 8 298
======== ======== ======= =======
Total . . . . . . . . . . . . . . . . . . . . . . . 20,494 21,227 4,173 8,934
======== ======== ======= =======
Net asset value
Fiduciary--offering and redemption price per share . . . $ 10.64 $ 9.69 $ 9.92 $ 10.65
======== ======== ======= =======
Class A--redemption price per share . . . . . . . . . . . $ 10.63 $ 9.72 $ 9.93 $ 10.68
======== ======== ======= =======
Class B--offering price per share (a) . . . . . . . . . . $ 10.65 $ 9.69 $ 9.87 $ 10.75
======== ======== ======= =======
Maximum Sales Charge (Class A) . . . . . . . . . . . . . . . . 4.50% 4.50% 4.50% 4.50%
Maximum Offering Price (100%/(100%--Maximum Sales Charge)
of net asset value adjusted to nearest cent)
per share (Class A) . . . . . . . . . . . . . . . . . . . . . $ 11.13 $ 10.18 $ 10.40 $ 11.18
======== ======== ======= =======
Investments, at Cost . . . . . . . . . . . . . . . . . . . . . $203,934 $203,754 $41,155 $90,584
======== ======== ======= =======
</TABLE>
_____________
(a) Redemption price per Class B share varies based on length of time shares are
held.
See notes to financial statements.
49
B-231
<PAGE>
THE ONE GROUP FAMILY OF MUTUAL FUNDS
- --------------------------------------------------------------------------------
STATEMENTS OF OPERATIONS FOR THE YEAR ENDED JUNE 30, 1995
<TABLE>
<CAPTION>
(Amounts in Thousands)
GOVERNMENT LIMITED VOLATILITY INTERMEDIATE GOVERNMENT INCOME
ARM BOND BOND BOND BOND
FUND FUND FUND FUND FUND
--------- ------------------ ------------ ---------- ------
<S> <C> <C> <C> <C> <C>
INVESTMENT INCOME:
Interest income . . . . . . . . . . . . . . . . . . . $5,104 $26,927 $10,292 $21,138 $37,375
------ ------- ------- ------- -------
TOTAL INCOME . . . . . . . . . . . . . . . . . . . . 5,104 26,927 10,292 21,138 37,375
------ ------- ------- ------- -------
EXPENSES:
Investment advisory fees . . . . . . . . . . . . . . 486 2,548 837 1,291 2,979
Administration fees . . . . . . . . . . . . . . . . . 149 716 235 483 837
12b-1 fees (Class A) . . . . . . . . . . . . . . . . 42 47 7 14 18
12b-1 fees (Class B) . . . . . . . . . . . . . . . . 1 24 13 12
12b-1 fees (Service) . . . . . . . . . . . . . . . . 1 2
Custodian and accounting fees . . . . . . . . . . . . 25 77 66 65 96
Legal and audit fees . . . . . . . . . . . . . . . . 27 54 52 42 70
Organization costs . . . . . . . . . . . . . . . . . 3 14 1 3
Trustees' fees and expenses . . . . . . . . . . . . . 3 8 7 6 10
Transfer agent fees . . . . . . . . . . . . . . . . . 40 93 49 71 97
Registration and filing fees . . . . . . . . . . . . 24 44 79 84 59
Printing costs . . . . . . . . . . . . . . . . . . . 17 31 32 36 55
Other . . . . . . . . . . . . . . . . . . . . . . . . 118 36 17 22 60
------ ------- ------- ------- -------
Total expenses before waivers/reimbursements . . . . 935 3,693 1,382 2,130 4,295
Less waivers/reimbursements . . . . . . . . . . . . . (369) (1,415) (599) (59) (1,331)
------ ------- ------- ------- -------
NET EXPENSES . . . . . . . . . . . . . . . . . . . . 566 2,278 783 2,071 2,964
------ ------- ------- ------- -------
Net Investment Income . . . . . . . . . . . . . . . . 4,538 24,649 9,509 19,067 34,411
------ ------- ------- ------- -------
REALIZED/UNREALIZED GAINS FROM INVESTMENTS:
Net realized losses from investment
transactions . . . . . . . . . . . . . . . . . . . (2,023) (7,605) (4,330) (7,094) (53,134)
Net change in unrealized appreciation from
investments . . . . . . . . . . . . . . . . . . . . 1,410 14,800 7,307 16,133 68,445
------ ------- ------- ------- -------
Net realized/unrealized gains (losses) from
investments . . . . . . . . . . . . . . . . . . . . (613) 7,195 2,977 9,039 15,311
------ ------- ------- ------- -------
Change in net assets resulting from operations . . . $3,925 $31,844 $12,486 $28,106 $49,722
====== ======= ======= ======= =======
</TABLE>
See notes to financial statements.
50
B-232
<PAGE>
THE ONE GROUP FAMILY OF MUTUAL FUNDS
- --------------------------------------------------------------------------------
STATEMENTS OF OPERATIONS
<TABLE>
<CAPTION>
(Amounts in Thousands)
INTERMEDIATE TAX-FREE OHIO MUNCIPAL
TAX-FREE BOND BOND KENTUCKY MUNCIPAL BOND
FUND FUND BOND FUND FUND
------------- --------- ---------------------- -------------
YEAR YEAR PERIOD PERIOD YEAR
ENDED ENDED ENDED ENDED ENDED
JUNE 30, JUNE 30, JUNE 30, JANUARY 19, JUNE 30,
1995 1995 1995(a) 1995(b) 1995
------------- --------- -------- ---------- -------------
<S> <C> <C> <C> <C> <C>
INVESTMENT INCOME:
Interest income . . . . . . . . . . . . . . . . . . . . $11,299 $11,882 $1,007 $2,876 $ 5,920
Dividend income . . . . . . . . . . . . . . . . . . . . 89 91 13
------- ------- ------ ------- -------
TOTAL INCOME . . . . . . . . . . . . . . . . . . . . . 11,388 11,973 1,020 2,876 5,920
------- ------- ------ ------- -------
EXPENSES:
Investment advisory fees . . . . . . . . . . . . . . . 1,198 819 112 272 602
Administration fees . . . . . . . . . . . . . . . . . . 337 307 32 78 171
12b-1 fees (Class A) . . . . . . . . . . . . . . . . . 18 36 14 45
12b-1 fees (Class B) . . . . . . . . . . . . . . . . . 8 67 26
Custodian and accounting fees . . . . . . . . . . . . . 53 52 7 85 21
Legal and audit fees . . . . . . . . . . . . . . . . . 33 25 13 31 18
Organization costs . . . . . . . . . . . . . . . . . . 5 3 5
Trustees' fees and expenses . . . . . . . . . . . . . . 6 5 1 4 4
Transfer agent fees . . . . . . . . . . . . . . . . . . 54 51 6 40 48
Registration and filing fees . . . . . . . . . . . . . 36 55 5 40 23
Printing costs . . . . . . . . . . . . . . . . . . . . 23 25 1 8 21
Other . . . . . . . . . . . . . . . . . . . . . . . . . 12 5 8 9 8
------- ------- ------ ------- -------
Total expenses before waivers/reimbursements . . . . . 1,783 1,450 199 567 992
Less waivers/reimbursements . . . . . . . . . . . . . . (705) (342) (65) (9) (354)
------- ------- ------ ------- -------
NET EXPENSES . . . . . . . . . . . . . . . . . . . . . 1,078 1,108 134 558 638
------- ------- ------ ------- -------
Net Investment Income . . . . . . . . . . . . . . . . . 10,310 10,865 886 2,318 5,282
------- ------- ------ ------- -------
REALIZED/UNREALIZED GAINS (LOSSES) FROM
INVESTMENTS:
Net realized gains (losses) from investment
transactions . . . . . . . . . . . . . . . . . . . . 1,387 (3,212) (447) (1,331) (3,290)
Net change in unrealized appreciation (depreciation)
from investments . . . . . . . . . . . . . . . . . . 1,623 3,441 2,403 (4,798) 3,601
------- ------- ------ ------- -------
Net realized/unrealized gains (losses) from
investments . . . . . . . . . . . . . . . . . . . . . 3,010 229 1,956 (6,129) 311
------- ------- ------ ------- -------
Change in net assets resulting from operations . . . . $13,320 $11,094 $2,842 $(3,811) $ 5,593
======= ======= ====== ======= =======
</TABLE>
__________
(a) For the period from January 20, 1995 (date merged) to June 30, 1995.
(b) For the period from February 1, 1994 to January 19, 1995. Audited by other
auditors.
See notes to financial statements.
51
B-233
<PAGE>
THE ONE GROUP FAMILY OF MUTUAL FUNDS
- -------------------------------------------------------------------------------
STATEMENTS OF CHANGES IN NET ASSETS
<TABLE>
<CAPTION>
(Amounts in Thousands)
GOVERNMENT LIMITED INTERMEDIATE
ARM FUND VOLATILITY FUND BOND FUND
---------------------- ---------------------- -------------------
YEAR YEAR YEAR YEAR YEAR YEAR
ENDED ENDED ENDED ENDED ENDED ENDED
JUNE 30, JUNE 30, JUNE 30, JUNE 30, JUNE 30, JUNE 30,
1995 1994 1995 1994 1995 1994
-------- -------- --------- -------- -------- --------
<S> <C> <C> <C> <C> <C> <C>
FROM INVESTMENT ACTIVITIES:
OPERATIONS:
Net investment income . . . . . . . . . . . . $ 4,538 $ 7,719 $ 24,649 $ 22,966 $ 9,509 $ 4,128
Net realized gains (losses) from
investment transactions . . . . . . . . . . (2,023) (1,333) (7,605) 1,112 (4,330) 114
Net change in unrealized appreciation
(depreciation) from investments . . . . . . . 1,410 (2,124) 14,800 (21,743) 7,307 (5,861)
--------- --------- --------- --------- -------- --------
Change in net assets resulting from operations . . 3,925 4,262 31,844 2,335 12,486 (1,619)
--------- --------- --------- --------- -------- --------
DISTRIBUTIONS TO FIDUCIARY SHAREHOLDERS:
From net investment income . . . . . . . . . (3,574) (7,330) (23,512) (22,114) (9,373) (4,074)
In excess of net investment income . . . . . (222) (370) (107) (258)
From net realized gains from investment
transactions . . . . . . . . . . . . . . . (3,186) (110)
In excess of net realized gains from
investment transactions . . . . . . . . . . (48)
(515)
DISTRIBUTIONS TO CLASS A SHAREHOLDERS:
From net investment income . . . . . . . . . (554) (430) (732) (866) (136)
In excess of net investment income . . . . . (12) (37) (16) (21)
From net realized gains from investment
transactions . . . . . . . . . . . . . . . (61)
In excess of net realized gains from
investment transactions . . . . . . . . . . (3) (65)
DISTRIBUTIONS TO CLASS B SHAREHOLDERS:
From net investment income . . . . . . . . . (5) (121) (17) (1)
(1)
In excess of net investment income . . . . . (1)
From net realized gains from investment
transactions . . . . . . . . . . . . . . . . (3)
DISTRIBUTIONS TO SERVICE SHAREHOLDERS:
From net investment income . . . . . . . . . (3)
--------- --------- --------- --------- -------- --------
Change in net assets from shareholder
distributions . . . . . . . . . . . . . . . . . . (4,367) (8,218) (24,491) (26,592) (9,510) (4,699)
--------- --------- --------- --------- -------- --------
CAPITAL TRANSACTIONS:
Proceeds from shares issued . . . . . . . . . 35,084 277,604 157,468 231,080 126,318 91,042
Proceeds from shares issued in connection
with acquisition . . . . . . . . . . . . . 39,916
Dividends reinvested . . . . . . . . . . . . 1,806 4,985 8,292 12,026 2,748 3,185
Cost of shares redeemed . . . . . . . . . . . (139,268) (277,491) (211,545) (167,788) (74,018) (33,678)
--------- --------- --------- --------- -------- --------
Change in net assets from share transactions . . . (102,378) 5,098 (45,785) 75,318 94,964 60,549
--------- --------- --------- --------- -------- --------
Change in net assets . . . . . . . . . . . . . . . (102,820) 1,142 (38,432) 51,061 97,940 54,231
NET ASSETS:
Beginning of period . . . . . . . . . . . . . 158,661 157,519 464,600 413,539 98,483 44,252
--------- --------- --------- --------- -------- --------
End of period . . . . . . . . . . . . . . . . $ 55,841 $ 158,661 $ 426,168 $ 464,600 $196,423 $ 98,483
========= ========= ========= ========= ======== ========
SHARE TRANSACTIONS:
Issued . . . . . . . . . . . . . . . . . . . 3,568 27,779 15,271 22,219 12,678 8,975
Issued in connection with acquisition . . . . 4,204
Reinvested . . . . . . . . . . . . . . . . . 183 500 803 1,126 282 311
Redeemed . . . . . . . . . . . . . . . . . . (14,185) (27,871) (20,592) (16,425) (7,677) (3,370)
========= ========= ========= ========= ======== ========
Change in shares . . . . . . . . . . . . . . . . . (10,434) 408 (4,518) 6,920 9,487 5,916
========= ========= ========= ========= ======== ========
Undistributed (distributions in excess of) net
investment income included in net assets:
End of period . . . . . . . . . . . . . . . . $ (236) $ (407) $ (122) $ (280) $ 116 $ 117
========= ========= ========= ========= ======== ========
</TABLE>
See notes to financial statements.
52
B-234
<PAGE>
THE ONE GROUP FAMILY OF MUTUAL FUNDS
- -------------------------------------------------------------------------------
STATEMENTS OF CHANGES IN NET ASSETS
<TABLE>
<CAPTION>
(Amounts in Thousands)
GOVERNMENT INCOME INTERMEDIATE TAX-
BOND FUND BOND FUND FREE BOND FUND
---------------------- ----------------------- ------------------
YEAR YEAR YEAR YEAR YEAR YEAR
ENDED ENDED ENDED ENDED ENDED ENDED
JUNE 30, JUNE 30, JUNE 30, JUNE 30, JUNE 30, JUNE 30,
1995 1994 1995 1994 1995 1994
------- ------- ------- ------- ------- -------
<S> <C> <C> <C> <C> <C> <C>
FROM INVESTMENT ACTIVITIES:
OPERATIONS:
Net investment income . . . . . . . . . . . . $ 19,067 $ 7,246 $ 34,411 $ 29,584 $ 10,310 $ 8,948
Net realized gains (losses) from investment
transactions . . . . . . . . . . . . . . . . (7,094) (5,368) (53,134) 21,041 1,387 (921)
Net change in unrealized appreciation
(depreciation) from investments . . . . . . 16,133 (8,621) 68,445 (65,174) 1,623 (8,701)
--------- -------- --------- --------- -------- --------
Change in net assets resulting from operations . . 28,106 (6,743) 49,722 (14,549) 13,320 (674)
--------- -------- --------- --------- -------- --------
DISTRIBUTIONS TO FIDUCIARY SHAREHOLDERS:
From net investment income . . . . . . . . . (18,433) (7,169) (33,925) (29,231) (9,992) (8,904)
In excess of net investment income . . . . . (300) (305) (61) (12)
From net realized gains from investment
transactions . . . . . . . . . . . . . . . (25,188) (117)
In excess of net realized gains from
investment transactions . . . . . . . . . . (219) (2,306) (1,862)
DISTRIBUTIONS TO CLASS A SHAREHOLDERS:
From net investment income . . . . . . . . . (247) (70) (338) (339) (237) (276)
In excess of net investment income . . . . . (4) (3) (11) (11) (12)
From net realized gains from investment
transactions . . . . . . . . . . . . . . . (293)
In excess of net realized gains from
investment transactions . . . . . . . . . . (2) (24) (71)
DISTRIBUTIONS TO CLASS B SHAREHOLDERS:
From net investment income . . . . . . . . . (76) (8) (73) (4) (35) (6)
In excess of net realized gains from
investment transactions . . . . . . . . . . (5) (3) (5)
DISTRIBUTIONS TO SERVICE SHAREHOLDERS:
From net investment income . . . . . . . . . (11) (1)
In excess of net realized gains from
investment transactions . . . . . . . . . . (1)
--------- -------- --------- --------- -------- --------
Change in net assets from shareholder
distributions . . . . . . . . . . . . . . . . . . (19,060) (7,776) (36,755) (55,059) (10,275) (11,265)
--------- -------- --------- --------- -------- --------
CAPITAL TRANSACTIONS:
Proceeds from shares issued . . . . . . . . . 175,681 215,599 147,583 282,007 76,973 82,075
Proceeds from shares issued in connection
with acquisition . . . . . . . . . . . . . 96,760
Dividends reinvested . . . . . . . . . . . . 7,435 3,267 17,360 29,656 1,337 2,283
Cost of shares redeemed . . . . . . . . . . . (110,491) (45,301) (261,301) (166,212) (52,112) (55,672)
--------- -------- --------- --------- -------- --------
Change in net assets from share transactions . . . 169,385 173,565 (96,358) 145,451 26,198 28,686
--------- -------- --------- --------- -------- --------
Change in net assets . . . . . . . . . . . . . . . 178,431 159,046 (83,391) 75,843 29,243 16,747
NET ASSETS:
Beginning of period . . . . . . . . . . . . . 212,038 52,992 566,198 490,355 188,716 171,969
--------- -------- --------- --------- -------- --------
End of period . . . . . . . . . . . . . . . . $ 390,469 $212,038 $ 482,807 $ 566,198 $217,959 $188,716
========= ======== ========= ========= ======== ========
SHARE TRANSACTIONS:
Issued . . . . . . . . . . . . . . . . . . . 17,640 21,771 16,030 27,809 7,387 7,387
Issued in connection with acquisition . . . . 10,564
Reinvested . . . . . . . . . . . . . . . . . 789 334 1,893 3,250 128 207
Redeemed . . . . . . . . . . . . . . . . . . (11,871) (4,642) (28,705) (16,706) (5,012) (5,033)
========= ======== ========= ========= ======== ========
Change in shares . . . . . . . . . . . . . . . . . 17,122 17,463 (10,782) 14,353 2,503 2,561
========= ======== ========= ========= ======== ========
Undistributed (distributions in excess of)
net investment income included in net assets:
End of period . . . . . . . . . . . . . . . . $ (302) $ (309) $ (71) $ (63) $ 11 $ (24)
========= ======== ========= ========= ======== ========
</TABLE>
See notes to financial statements.
53
B-235
<PAGE>
THE ONE GROUP FAMILY OF MUTUAL FUNDS
- -------------------------------------------------------------------------------
STATEMENTS OF CHANGES IN NET ASSETS
<TABLE>
<CAPTION>
(Amounts in Thousands)
TAX-FREE
BOND FUND KENTUCKY MUNICIPAL BOND FUND
------------------- --------------------------------------
YEAR YEAR PERIOD PERIOD PERIOD
ENDED ENDED ENDED ENDED ENDED
JUNE 30, JUNE 30, JUNE 30, JANUARY 19, JANUARY 31,
1995 1994 1995 (a) 1995 (b)(d) 1994 (c)(d)
-------- ------- ------- ---------- -----------
<S> <C> <C> <C> <C> <C>
FROM INVESTMENT ACTIVITIES:
OPERATIONS:
Net investment income . . . . . . . . . . . . . . . . $ 10,865 $ 6,633 $ 886 $ 2,318 $ 1,806
Net realized gains (losses) from investment
transactions . . . . . . . . . . . . . . . . . . . . (3,212) (2,122) (447) (1,331) (1)
Net change in unrealized appreciation
(depreciation) from investments . . . . . . . . . . 3,441 (4,463) 2,403 (4,798) 2,194
-------- -------- -------- -------- --------
Change in net assets resulting from operations . . . . . . 11,094 48 2,842 (3,811) 3,999
-------- -------- -------- -------- --------
DISTRIBUTIONS TO FIDUCIARY SHAREHOLDERS:
From net investment income . . . . . . . . . . . . . (9,899) (6,155) (704) (2,409) (1,715)
In excess of net investment income . . . . . . . . . (11)
In excess of net realized gains from investment
transactions . . . . . . . . . . . . . . . . . . . . (344)
DISTRIBUTIONS TO CLASS A SHAREHOLDERS:
From net investment income . . . . . . . . . . . . . (593) (441) (182)
In excess of net investment income . . . . . . . . .
In excess of net realized gains from investment
transactions . . . . . . . . . . . . . . . . . . . . (25)
DISTRIBUTIONS TO CLASS B SHAREHOLDERS:
From net investment income . . . . . . . . . . . . . (343) (42)
In excess of net investment income . . . . . . . . .
In excess of net realized gains from investment
transactions . . . . . . . . . . . . . . . . . . . . (2)
-------- -------- -------- -------- --------
Change in net assets from shareholder distributions . . . . (10,835) (7,020) (886) (2,409) (1,715)
-------- -------- -------- -------- --------
CAPITAL TRANSACTIONS:
Proceeds from shares issued . . . . . . . . . . . . . 92,292 158,490 13,688 12,790 71,308
Dividends reinvested . . . . . . . . . . . . . . . . 1,490 1,301 117 340 152
Cost of shares redeemed . . . . . . . . . . . . . . . (56,680) (29,359) (16,297) (29,620) (9,081)
-------- -------- -------- -------- --------
Change in net assets from share transactions . . . . . . . 37,102 130,432 (2,492) (16,490) 62,379
-------- -------- -------- -------- --------
Change in net assets . . . . . . . . . . . . . . . . . . . 37,361 123,460 (536) (22,710) 64,663
NET ASSETS:
Beginning of period . . . . . . . . . . . . . . . . . 168,343 44,883 41,953 64,663
-------- -------- -------- -------- --------
End of period . . . . . . . . . . . . . . . . . . . . $205,704 $168,343 $ 41,417 $ 41,953 $ 64,663
======== ======== ======== ======== ========
SHARE TRANSACTIONS:
Issued . . . . . . . . . . . . . . . . . . . . . . . 9,619 15,823 1,341 1,300 7,061
Reinvested . . . . . . . . . . . . . . . . . . . . . 155 131 12 35 15
Redeemed . . . . . . . . . . . . . . . . . . . . . . (5,967) (2,973) (1,602) (3,103) (886)
======== ======== ======== ======== ========
Change in shares . . . . . . . . . . . . . . . . . . . . . 3,807 12,981 (249) (1,768) 6,190
======== ======== ======== ======== ========
Undistributed (distributions in excess of) net
investment income included in net assets:
End of period . . . . . . . . . . . . . . . . . . . . $ 19 $ (11) $ $ $ 91
======== ======== ======== ======== ========
<CAPTION>
(Amounts in Thousands)
OHIO MUNICIPAL
BOND FUND
---------------------
YEAR YEAR
ENDED ENDED
JUNE 30, JUNE 30,
1995 1994
-------- --------
<S> <C> <C>
FROM INVESTMENT ACTIVITIES:
OPERATIONS:
Net investment income . . . . . . . . . . . . . . . . $ 5,282 $ 5,084
Net realized gains (losses) from investment
transactions . . . . . . . . . . . . . . . . . . . (3,290) (337)
Net change in unrealized appreciation
(depreciation from investments . . . . . . . . . . . 3,601 (5,278)
-------- --------
Change in net assets resulting from operations . . . . . . 5,593 (531)
-------- --------
DISTRIBUTIONS TO FIDUCIARY SHAREHOLDERS:
From net investment income . . . . . . . . . . . . . (4,520) (4,378)
In excess of net investment income . . . . . . . . .
In excess of net realized gains from investment
transactions . . . . . . . . . . . . . . . . . . . (170)
DISTRIBUTIONS TO CLASS A SHAREHOLDERS:
From net investment income . . . . . . . . . . . . . (627) (722)
In excess of net investment income . . . . . . . . . (22) (22)
In excess of net realized gains from investment
transactions . . . . . . . . . . . . . . . . . . . (28)
DISTRIBUTIONS TO CLASS B SHAREHOLDERS:
From net investment income . . . . . . . . . . . . . (112) (17)
In excess of net investment income . . . . . . . . . (1) (1)
In excess of net realized gains from investment
transactions . . . . . . . . . . . . . . . . . . . (1)
-------- --------
Change in net assets from shareholder distributions . . . . (5,282) (5,339)
-------- --------
CAPITAL TRANSACTIONS:
Proceeds from shares issued . . . . . . . . . . . . . 12,266 45,878
Dividends reinvested . . . . . . . . . . . . . . . . 870 942
Cost of shares redeemed . . . . . . . . . . . . . . . (28,426) (18,647)
-------- --------
Change in net assets from share transactions . . . . . . . (15,290) 28,173
-------- --------
Change in net assets . . . . . . . . . . . . . . . . . . . (14,979) 22,303
NET ASSETS:
Beginning of period . . . . . . . . . . . . . . . . . 110,187 87,884
-------- --------
End of period . . . . . . . . . . . . . . . . . . . . $ 95,208 $110,187
======== ========
SHARE TRANSACTIONS:
Issued . . . . . . . . . . . . . . . . . . . . . . . 1,160 4,108
Reinvested . . . . . . . . . . . . . . . . . . . . . 82 86
Redeemed . . . . . . . . . . . . . . . . . . . . . . (2,717) (1,691)
======== ========
Change in shares . . . . . . . . . . . . . . . . . . . . . (1,475) 2,503
======== ========
Undistributed (distributions in excess of) net
investment income included in net assets:
End of period . . . . . . . . . . . . . . . . . . . . $ 8 $ 8
======== ========
</TABLE>
_______________
(a) For the period from January 20, 1995 (date merged) to June 30, 1995.
(b) For the period from February 1, 1994 to January 19, 1995.
(c) For the period from March 12, 1993 (date of initial public investment) to
January 31, 1994.
(d) Audited by other auditors. Prior to January 20, 1995, the Kentucky Municipal
Bond Fund Shares were unclassified.
See notes to financial statements.
54
B-236
<PAGE>
THE ONE GROUP FAMILY OF MUTUAL FUNDS
- -------------------------------------------------------------------------------
NOTES TO FINANCIAL STATEMENTS JUNE 30, 1995
1. ORGANIZATION:
The One Group (the "Trust") is registered under the Investment Company
Act of 1940, as amended (the "1940 Act"), as a diversified, open-end
investment company established as a Massachusetts business trust. The
Trust is registered to offer five classes of shares: Fiduciary, Class A,
Class B, Institutional, and Service. The Trust currently offers
twenty-four funds. The accompanying financial statements and financial
highlights are those of the Government ARM Fund, the Limited Volatility
Bond Fund, the Intermediate Bond Fund, the Government Bond Fund, the
Income Bond Fund, the Intermediate Tax-Free Bond Fund, the Tax-Free Bond
Fund, the Kentucky Municipal Bond Fund, and the Ohio Municipal Bond Fund
(individually, a "Fund"; collectively, the "Funds") only. During the
year ended June 30, 1995, The One Group Short-Term Global Bond Fund
ceased operations.
2. SIGNIFICANT ACCOUNTING POLICIES:
The following is a summary of significant accounting policies in
conformity with generally accepted accounting principles consistently
followed by the Trust in the preparation of its financial statements.
SECURITY VALUATION
Corporate debt securities and debt securities of U.S. issuers (other
than short-term investments maturing in 60 days or less), including
municipal securities, are valued on the basis of valuations provided
by dealers or by an independent pricing service approved by the
Board of Trustees. Short-term investments maturing in 60 days or
less are valued at amortized cost, which approximates market value.
Investments for which there are no such quotations or valuations are
valued at fair value as determined in good faith by the investment
advisor under the direction of the Board of Trustees. Futures
contracts are valued at the settlement price established each day by
the board of trade or an exchange on which they are traded. Options
traded on an exchange are valued using the last sale price or, in
the absence of a sale, the last offering price. Options traded
over-the-counter are valued using dealer-supplied valuations.
REPURCHASE AGREEMENTS
Each Fund may invest in repurchase agreements with institutions that
the Fund's investment advisor has determined are creditworthy. Each
repurchase agreement is recorded at cost. The Fund requires that the
securities purchased in a repurchase transaction be transferred to
the custodian in a manner sufficient to enable the Fund to obtain
those securities in the event of a counterparty default. The seller,
under the repurchase agreement, is required to maintain the value of
the securities held at not less than the repurchase price, including
accrued interest.
WRITTEN OPTIONS
The Funds may write covered call or put options for which premiums
received are recorded as liabilities and are subsequently adjusted
to the current value of the options written. Premiums received from
writing options which expire are treated as realized gains. Premiums
received from writing options which are exercised or are closed are
offset against the proceeds received or amount paid on the
transaction to determine realized gain or loss.
FUTURES CONTRACTS
The Funds may enter into futures contracts for the delayed delivery
of securities at a fixed price at some future date or the change in
the value of a specified financial index over a predetermined time
period. Cash or
Continued
55
B-237
<PAGE>
THE ONE GROUP FAMILY OF MUTUAL FUNDS
- -------------------------------------------------------------------------------
NOTES TO FINANCIAL STATEMENTS, CONTINUED JUNE 30, 1995
securities are deposited with brokers in order to maintain a
position. Subsequent payments made or received by the fund based on
the daily change in the market value of the position are recorded as
unrealized gain or loss until the contract is closed out, at which
time the gain or loss is realized.
INDEXED SECURITIES
The Funds may invest in indexed securities whose value is linked
either directly or inversely to changes in foreign currencies,
interest rates, commodities, indices or other reference instruments.
Indexed securities may be more volatile than the referenced
instrument itself, but any loss is limited to the amount of the
original investment.
MORTGAGE ROLLS
The Funds may enter into mortgage "dollar rolls" in which the Fund
sells mortgage-backed securities for delivery in the current month
and simultaneously contracts to repurchase substantially similar
securities on a specified future date. During the roll period, the
Fund forgoes principal and interest paid on the mortgage-backed
securities. The Fund is compensated by fee income, for the
difference between the current sales price and the lower forward
price for the future purchase.
SECURITY TRANSACTIONS AND RELATED INCOME
Security transactions are accounted for on a trade date basis. Net
realized gains or losses on sales of securities are determined on
the specific identification cost method. Interest income and
expenses are recognized on the accrual basis. Interest income,
including any discount or premium, is accrued as earned using the
effective interest method.
EXPENSES
Expenses directly attributable to a Fund are charged directly to
that Fund, while the expenses which are attributable to more than
one fund of the Trust are allocated among the respective Funds. Each
class of shares bears its pro-rata portion of expenses attributable
to its series, except that each class separately bears expenses
related specifically to that class such as distribution fees.
DIVIDENDS AND DISTRIBUTIONS TO SHAREHOLDERS
Dividends from net investment income are declared daily and paid
monthly for each Fund. Net realized capital gains, if any, are
distributed at least annually. Dividends are declared separately for
each class. No class has preferential dividend rights; differences
in per share dividend rates are generally due to differences in
separate class expenses.
Net investment income and net capital gain distributions are
determined in accordance with income tax regulations which may
differ from generally accepted accounting principles. These
differences are due primarily to differing treatments for
mortgage-backed securities, expiring capital loss carryforwards, and
deferrals of certain losses.
ORGANIZATION COSTS
Costs incurred by the Trust in connection with its organization,
including the fees and expenses of registering and qualifying its
shares for distribution have been deferred and are being amortized
using the straight-line method over a period of five years beginning
with the commencement of each Fund's operations. All such costs have
been allocated among the funds of the Trust pro-rata, based on the
relative net assets of each fund. In the event that any of the
initial shares are redeemed during such period by any holder
thereof, the related
Continued
56
B-238
<PAGE>
THE ONE GROUP FAMILY OF MUTUAL FUNDS
- -------------------------------------------------------------------------------
NOTES TO FINANCIAL STATEMENTS, CONTINUED JUNE 30, 1995
fund will be reimbursed by such holder for any unamortized
organization costs in the proportion as the number of initial shares
being redeemed bears to the number of initial shares outstanding at
the time of redemption.
FEDERAL INCOME TAXES
The Trust treats each Fund as a separate entity for Federal income
tax purposes. Each Fund intends to qualify or to continue to qualify
as a regulated investment company by complying with the provisions
available to certain investment companies as defined in applicable
sections of the Internal Revenue Code, and to make distributions of
net investment income and net realized capital gains sufficient to
relieve it from all, or substantially all, federal income taxes.
RECLASSIFICATIONS:
Certain reclassifications have been made to the 1994 financial
statements and financial highlights in order to conform to the 1995
presentation.
3. SHARES OF BENEFICIAL INTEREST:
The Trust is authorized to issue an unlimited number of shares of
beneficial interest, with no par value which may, without shareholder
approval, be divided into an unlimited number of series of such shares
and any series may be classified or reclassified into one or more
classes. Currently, shares of the Trust are registered to be offered
through thirty series and five classes: Fiduciary, Class A, Class B,
Institutional and Service. The Service Shares commenced offering on
January 17, 1994 when they were designated as "Retirement" Shares. On
April 4, 1995, the name of the Retirement Shares was changed to
"Service" Shares. During the year ended June 30, 1995, Service Shares
transferred to Class A Shares, and as of June 30, 1995, there were no
shareholders in the Service Class. Shareholders are entitled to one vote
for each full share held and will vote in the aggregate and not by class
or series, except as otherwise expressly required by law or when the
Board of Trustees has determined that the matter to be voted on affects
only the interest of shareholders of a particular class or series. The
following is a summary of transactions in Fund shares for the fiscal
years ending June 30, 1995 and 1994:
Continued
57
B-239
<PAGE>
THE ONE GROUP FAMILY OF MUTUAL FUNDS
- --------------------------------------------------------------------------------
NOTES TO FINANCIAL STATEMENTS, CONTINUED JUNE 30, 1995
<TABLE>
<CAPTION>
(Amounts in Thousands)
GOVERNMENT ARM LIMITED VOLATILITY BOND INTERMEDIATE BOND
FUND FUND FUND
---------------------- ---------------------- ---------------------
YEAR YEAR YEAR YEAR YEAR YEAR
ENDED ENDED ENDED ENDED ENDED ENDED
JUNE 30, JUNE 30, JUNE 30, JUNE 30, JUNE 30, JUNE 30,
1995 1994 1995 1994 1995 1994
--------- --------- --------- --------- --------- --------
<S> <C> <C> <C> <C> <C> <C>
CAPITAL TRANSACTIONS:
FIDUCIARY SHARES:
Proceeds from shares issued . . . . . . . . . $ 34,868 $ 259,931 $ 152,849 $ 220,728 $ 125,119 $ 91,042
Proceeds from shares issued in
connection with acquisition . . . . . . . . 35,113
Dividends reinvested . . . . . . . . . . . . 1,732 4,833 7,661 11,169 2,663 3,185
Shares redeemed . . . . . . . . . . . . . . . (124,793) (275,937) (204,209) (158,990) (73,001) (33,678)
--------- --------- --------- --------- --------- --------
Change in net assets from Fiduciary
share transactions . . . . . . . . . . . . . $ (88,193) $ (11,173) $ (43,699) $ 72,907 $ 89,894 $ 60,549
========= ========= ========= ========= ========= ========
CLASS A SHARES:
Proceeds from shares issued . . . . . . . . $ 70 $ 17,658 $ 3,343 $ 8,316 $ 934
Proceeds from shares issued in
connection with acquisition . . . . . . . 4,803
Dividends reinvested . . . . . . . . . . . 70 152 518 836 84
Shares redeemed . . . . . . . . . . . . . . (14,471) (1,554) (6,811) (8,761) (1,016)
--------- --------- --------- --------- --------- --------
Change in net assets from
Class A share transactions . . . . . . . . $(14,331) $ 16,256 $ (2,950) $ 391 $ 4,805
======== ========= ========= ========= ========= ========
CLASS B SHARES:
Proceeds from shares issued . . . . . . . . $ 146 $ 15 $ 1,164 $ 2,020 $ 265
Dividends reinvested . . . . . . . . . . . 4 110 21 1
Shares redeemed . . . . . . . . . . . . . . (4) (391) (37) (1)
--------- --------- --------- --------- --------- --------
Change in net assets from
Class B share transactions . . . . . . . . $ 146 15 $ 883 $ 2,004 $ 265
========= ========= ========= ========= ========= ========
SERVICE SHARES:
Proceeds from shares issued . . . . . . . . $ 112 $ 16
Dividends reinvested . . . . . . . . . . . 3
Shares redeemed . . . . . . . . . . . . . . (134)
--------- --------- --------- --------- --------- --------
Change in net assets from
Service share transactions . . . . . . . . $ (19) $ 16
========= ========= ========= ========= ========= ========
SHARE TRANSACTIONS:
FIDUCIARY SHARES:
Issued . . . . . . . . . . . . . . . . . . 3,545 26,011 14,826 21,244 12,567 8,975
Issued in connection with acquisition . . . 3,700
Reinvested . . . . . . . . . . . . . . . . 176 485 742 1,046 274 311
Redeemed . . . . . . . . . . . . . . . . . (12,706) (27,715) (19,884) (15,589) (7,573) (3,370)
--------- --------- --------- --------- --------- --------
Change in Fiduciary Shares . . . . . . . . (8,985) (1,219) (4,316) 6,701 8,968 5,916
========= ========= ========= ========= ========= ========
CLASS A SHARES:
Issued . . . . . . . . . . . . . . . . . . 8 1,767 323 783 84
Issued in connection with acquisition . . . 504
Reinvested . . . . . . . . . . . . . . . . 7 15 50 78 8
Redeemed . . . . . . . . . . . . . . . . . (1,479) (156) (658) (834) (104)
--------- --------- --------- --------- --------- --------
Change in Class A Shares . . . . . . . . . (1,464) 1,626 (285) 27 492
========= ========= ========= ========= ========= ========
CLASS B SHARES:
Issued . . . . . . . . . . . . . . . . . . 15 1 111 191 27
Reinvested . . . . . . . . . . . . . . . . 11 2
Redeemed . . . . . . . . . . . . . . . . . (38) (2)
--------- --------- --------- --------- --------- --------
Change in Class B Shares . . . . . . . . . 15 1 84 191 27
========= ========= ========= ========= ========= ========
SERVICE SHARES:
Issued . . . . . . . . . . . . . . . . . . 11 1
Reinvested . . . . . . . . . . . . . . . .
Redeemed . . . . . . . . . . . . . . . . . (12)
--------- --------- --------- --------- --------- --------
Change in Service Shares . . . . . . . . . (1) 1
========= ========= ========= ========= ========= ========
</TABLE>
Continued
58
B-240
<PAGE>
THE ONE GROUP FAMILY OF MUTUAL FUNDS
- --------------------------------------------------------------------------------
NOTES TO FINANCIAL STATEMENTS, CONTINUED JUNE 30, 1995
<TABLE>
<CAPTION>
(Amounts in Thousands)
INTERMEDIATE TAX-
GOVERNMENT BOND FUND INCOME BOND FUND FREE BOND FUND
---------------------- ---------------------- --------------------
YEAR YEAR YEAR YEAR YEAR YEAR
ENDED ENDED ENDED ENDED ENDED ENDED
JUNE 30, JUNE 30, JUNE 30, JUNE 30, JUNE 30, JUNE 30,
1995 1994 1995 1994 1995 1994
--------- --------- --------- --------- -------- --------
<S> <C> <C> <C> <C> <C> <C>
CAPITAL TRANSACTIONS:
FIDUCIARY SHARES:
Proceeds from shares issued . . . . . . . . $ 170,196 $ 213,545 $ 142,061 $ 279,907 $ 74,654 $ 78,806
Proceeds from shares issued in
connection with acquisition . . . . . . . 92,808
Dividends reinvested . . . . . . . . . . . 7,203 3,207 17,045 29,164 1,137 2,020
Shares redeemed . . . . . . . . . . . . . . (108,841) (44,860) (257,754) (163,478) (50,142) (53,168)
--------- --------- --------- --------- -------- --------
Change in net assets from
Fiduciary share transactions . . . . . . . $ 161,366 $ 171,892 $ (98,648) $ 145,593 $ 25,649 $ 27,658
========= ========= ========= ========= ======== ========
CLASS A SHARES:
Proceeds from shares issued . . . . . . . . $ 3,603 $ 1,320 $ 3,989 $ 1,263 $ 1,577 $ 2,657
Proceeds from shares issued in
connection with acquisition . . . . . . . 3,952
Dividends reinvested . . . . . . . . . . . 178 54 260 484 176 258
Shares redeemed . . . . . . . . . . . . . . (1,509) (389) (2,993) (2,695) (1,755) (2,457)
--------- --------- --------- --------- -------- --------
Change in net assets from
Class A share transactions . . . . . . . . $ 6,224 $ 985 $ 1,256 $ (948) $ (2) $ 458
========= ========= ========= ========= ======== ========
CLASS B SHARES:
Proceeds from shares issued . . . . . . . . $ 1,870 $734 $ 1,213 $ 778 $ 742 $ 612
Dividends reinvested . . . . . . . . . . . 54 6 43 7 24 5
Shares redeemed . . . . . . . . . . . . . . (129) (52) (151) (39) (215) (47)
--------- --------- --------- --------- -------- --------
Change in net assets from
Class B share transactions . . . . . . . . $ 1,795 $688 $ 1,105 $ 746 $ 551 $ 570
========= ========= ========= ========= ======== ========
SERVICE SHARES:
Proceeds from shares issued . . . . . . . . $ 12 $ 320 $ 59
Dividends reinvested . . . . . . . . . . . 12 1
Shares redeemed . . . . . . . . . . . . . . (12) (403)
--------- --------- --------- --------- -------- --------
Change in net assets from
Service share transactions . . . . . . . . $ 0 $ (71) $ 60
========= ========= ========= ========= ======== ========
SHARE TRANSACTIONS:
FIDUCIARY SHARES:
Issued . . . . . . . . . . . . . . . . . . 17,086 21,565 15,438 27,595 7,168 7,094
Issued in connection with acquisition . . . 10,133
Reinvested . . . . . . . . . . . . . . . . 764 328 1,859 3,200 109 183
Redeemed . . . . . . . . . . . . . . . . . (11,695) (4,598) (28,323) (16,429) (4,824) (4,806)
--------- --------- --------- --------- -------- --------
Change in Fiduciary Shares . . . . . . . . 16,288 17,295 (11,026) 14,366 2,453 2,471
========= ========= ========= ========= ======== ========
CLASS A SHARES:
Issued . . . . . . . . . . . . . . . . . . 359 131 427 127 148 238
Issued in connection with acquisition . . . 431
Reinvested . . . . . . . . . . . . . . . . 19 5 28 49 17 23
Redeemed . . . . . . . . . . . . . . . . . (161) (38) (323) (273) (167) (223)
--------- --------- --------- --------- ------- --------
Change in Class A Shares . . . . . . . . . 648 98 132 (97) (2) 38
========= ========= ========= ========= ======== ========
CLASS B SHARES:
Issued . . . . . . . . . . . . . . . . . . 194 75 130 81 71 55
Reinvested . . . . . . . . . . . . . . . . 6 1 5 1 2 1
Redeemed . . . . . . . . . . . . . . . . . (14) (6) (17) (4) (21) (4)
--------- --------- --------- --------- -------- --------
Change in Class B Shares . . . . . . . . . 186 70 118 78 52 52
========= ========= ========= ========= ======== ========
SERVICE SHARES:
Issued . . . . . . . . . . . . . . . . . . 1 35 6
Reinvested . . . . . . . . . . . . . . . . 1
Redeemed . . . . . . . . . . . . . . . . . (1) (42)
-------- --------- --------- --------- -------- --------
Change in Service Shares . . . . . . . . . 0 (6) 6
========= ========= ========= ========= ======== ========
</TABLE>
Continued
59
B-241
<PAGE>
THE ONE GROUP FAMILY OF MUTUAL FUNDS
- --------------------------------------------------------------------------------
NOTES TO FINANCIAL STATEMENTS, CONTINUED JUNE 30, 1995
<TABLE>
<CAPTION>
(Amounts in Thousands)
OHIO MUNICIPAL
TAX-FREE BOND FUND KENTUCKY MUNICIPAL BOND FUND BOND FUND
--------------------- ----------------------------------- --------------------
YEAR YEAR PERIOD PERIOD PERIOD YEAR YEAR
ENDED ENDED ENDED ENDED ENDED ENDED ENDED
JUNE 30, JUNE 30, JUNE 30, JANUARY 19, JANUARY 31, JUNE 30, JUNE 30,
1995 1994 1995(a) 1995(b)(d) 1994(c)(d) 1995 1994
-------- --------- -------- ----------- ----------- -------- --------
<S> <C> <C> <C> <C> <C> <C> <C>
CAPITAL TRANSACTIONS:
FIDUCIARY SHARES:
Proceeds from shares issued . . . . $ 84,681 $ 145,401 $ 2,966 $ 12,790 $ 71,308 $ 9,413 $ 35,922
Dividends reinvested . . . . . . . 805 890 6 340 152 298 314
Shares redeemed . . . . . . . . . . (52,518) (27,883) (14,827) (29,620) (9,081) (23,281) (12,702)
-------- --------- -------- -------- -------- -------- --------
Change in net assets from
Fiduciary share transactions . . . $ 32,968 $ 118,408 $(11,855) $(16,490) $ 62,379 $(13,570) $ 23,534
======== ========= ======== ======== ======== ======== ========
CLASS A SHARES:
Proceeds from shares issued . . . . $ 2,951 $ 8,112 $ 10,642 $ 1,338 $ 7,830
Dividends reinvested . . . . . . . 470 384 111 486 612
Shares redeemed . . . . . . . . . . (2,721) (1,396) (1,470) (4,694) (5,885)
-------- --------- -------- -------- -------- -------- --------
Change in net assets from
Class A share transactions . . . . $ 700 $ 7,100 $ 9,283 $(2,870) $ 2,557
======== ========= ======== ======== ======== ======== ========
CLASS B SHARES:
Proceeds from shares issued . . . . $ 4,660 $ 4,977 $ 80 $ 1,515 $ 2,126
Dividends reinvested . . . . . . . 215 27 86 16
Shares redeemed . . . . . . . . . . (1,441) (80) (451) (60)
-------- --------- -------- -------- -------- -------- --------
Change in net assets from
Class B share transactions . . . . $ 3,434 $ 4,924 $ 80 $ 1,150 $ 2,082
======== ========= ======== ======== ======== ======== ========
SHARE TRANSACTIONS:
FIDUCIARY SHARES:
Issued . . . . . . . . . . . . . . 8,830 14,505 307 1,300 7,061 892 3,213
Reinvested . . . . . . . . . . . . 84 89 1 35 15 28 28
Redeemed . . . . . . . . . . . . . (5,532) (2,821) (1,453) (3,103) (886) (2,223) (1,155)
-------- --------- -------- -------- -------- -------- --------
Change in Fiduciary Shares . . . . 3,382 11,773 (1,145) (1,768) 6,190 (1,303) 2,086
======== ========= ======== ======== ======== ======== ========
CLASS A SHARES:
Issued . . . . . . . . . . . . . . 304 809 1,026 126 700
Reinvested . . . . . . . . . . . . 49 39 11 46 56
Redeemed . . . . . . . . . . . . . (283) (144) (149) (451) (530)
-------- --------- -------- -------- -------- -------- --------
Change in Class A Shares . . . . . 70 704 888 (279) 226
======== ========= ======== ======== ======== ======== ========
CLASS B SHARES:
Issued . . . . . . . . . . . . . . 485 509 8 142 195
Reinvested . . . . . . . . . . . . 22 3 8 2
Redeemed . . . . . . . . . . . . . (152) (8) (43) (6)
-------- --------- -------- -------- -------- -------- --------
Change in Class B Shares . . . . . 355 504 8 107 191
======== ========= ======== ======== ======== ======== ========
</TABLE>
- -------
(a) For the period from January 20, 1995 (date merged) to June 30, 1995.
(b) For the period from February 1, 1994 to January 19, 1995
(c) For the period from March 12, 1993 (date of initial public investment) to
January 31, 1994.
(d) Audited by other auditors. Prior to January 20, 1995, the Kentucky
Municipal Bond Fund shares were unclassified.
Continued
60
B-242
<PAGE>
THE ONE GROUP FAMILY OF MUTUAL FUNDS
- --------------------------------------------------------------------------------
NOTES TO FINANCIAL STATEMENTS, CONTINUED JUNE 30, 1995
4. INVESTMENT ADVISORY, ADMINISTRATIVE, AND DISTRIBUTION AGREEMENTS:
The Trust and Banc One Investment Advisors Corporation (the "Advisor")
are parties to an investment advisory agreement under which the Advisor
is entitled to receive an annual fee, computed daily and paid monthly,
equal to the following percentages of the Funds' average daily net
assets: 0.60% of the Income Bond, the Intermediate Bond, Limited
Volatility Bond, Ohio Municipal Bond, Kentucky Municipal Bond, and
Intermediate Tax-Free Bond Funds; 0.55% of the Government ARM Fund, and
0.45% of the Government Bond and Tax-Free Bond Funds.
The Trust and 440 Financial Group of Worcester ("440 Financial") are
parties to an administrative agreement under which 440 Financial (the
"Administrator") provides services for a fee that is computed daily and
payable monthly, at an annual rate of 0.20% on the first $1.5 billion of
the combined average net assets of the Funds and other funds offered by
the Trust; 0.18% on the next $0.5 billion of the combined average net
assets, and 0.16% on the combined average net assets over $2 billion.
Effective April 1, 1995, The Shareholder Services Group, Inc, d/b/a 440
Financial became the Administrator to the Trust. Also effective April
1, 1995, the Advisor became the Sub-Administrator pursuant to an
agreement between the Administrator and the Advisor. The Advisor
assumed many of the administrative duties, for which it receives a fee
paid by the Administrator.
The Trust has adopted a distribution and shareholder services plan (the
"Plan") on behalf of the Class A, Class B and Service Class shares
pursuant to Rule 12b-1 under the 1940 Act. 440 Financial Distributors,
Inc. (the Distributor) acts as the distributor of the Trust's shares.
The Distributor receives an annual fee for its services of 0.35%, 1.00%,
and 0.75% of the average daily net assets of the Class A, Class B, and
Service Class shares, respectively. These fees are used by the
Distributor to pay banks, including affiliates of the Advisor, other
institutions and broker/dealers, or to reimburse the Distributor for
expenses incurred for providing distribution or shareholder assistance.
The Distributor has voluntarily agreed to limit its fees for the Class A
Shares to an annual rate of 0.25% of the average daily net assets of the
Class A Shares of each Fund.
Certain officers of the Trust are also officers of the Administrator
and/or Distributor. Such officers receive no compensation from the
Funds for serving in their respective roles.
The Advisor, Administrator, and Distributor voluntarily agreed to waive
a portion of their fees and to reimburse the Funds for certain expenses
so that total expenses of each Fund would not exceed certain annual
expense limitations. For the year ended June 30, 1995, fees in the
following amounts were waived or reimbursed to the Funds:
<TABLE>
<CAPTION>
(AMOUNTS IN THOUSANDS)
LIMITED
VOLATILITY
GOVERNMENT FUND INTERMEDIATE
ARM FUND BOND BOND FUND
---------- ---------- ------------
<S> <C> <C> <C>
INVESTMENT ADVISORY FEES:
Waivers/reimbursements . . . . . . . . . . $285 $1,393 $597
ADMINISTRATION FEES:
Waivers/reimbursements . . . . . . . . . . 72 2
12B-1 FEES (CLASS A):
Waivers/reimbursements . . . . . . . . . . 12 14 2
12B-1 FEES (CLASS B):
Waivers/reimbursements . . . . . . . . . . 6
</TABLE>
Continued
61
B-243
<PAGE>
THE ONE GROUP FAMILY OF MUTUAL FUNDS
- --------------------------------------------------------------------------------
NOTES TO FINANCIAL STATEMENTS, CONTINUED June 30, 1995
<TABLE>
<CAPTION>
INTERMEDIATE
GOVERNMENT INCOME BOND TAX-FREE BOND
BOND FUND FUND FUND
---------- ----------- -------------
<S> <C> <C> <C>
INVESTMENT ADVISORY FEES:
Waivers/reimbursements . . . . . . . . . . $39 $1,317 $699
ADMINISTRATION FEES:
Waivers/reimbursements . . . . . . . . . . 15 7
12B-1 FEES (CLASS A):
Waivers/reimbursements . . . . . . . . . . 4 5 5
12B-1 FEES (CLASS B):
Waivers/reimbursements . . . . . . . . . . 1 2 1
</TABLE>
<TABLE>
<CAPTION>
KENTUCKY KENTUCKY OHIO
TAX-FREE MUNICIPAL MUNICIPAL MUNICIPAL
BOND FUND BOND FUND (a) BOND FUND (b) BOND FUND
--------- ------------- ------------- ---------
<S> <C> <C> <C> <C>
Investment Advisory Fees:
Waivers/reimbursements . . . . . . . . . . $246 $59 $ 9 $307
Administration Fees:
Waivers/reimbursements . . . . . . . . . . 79 2 32
12b-1 Fees (Class A):
Waivers/reimbursements . . . . . . . . . . 10 4 13
12b-1 Fees (Class B):
Waivers/reimbursements . . . . . . . . . . 7 2
</TABLE>
- -------
(a) For the period January 20, 1995 (date merged) through June 30, 1995.
(b) For the period February 1, 1994 through January 19, 1995.
5. SECURITIES TRANSACTIONS:
The cost of security purchases and the proceeds from the sale of
securities (excluding short-term securities and purchased options)
during the year ended June 30, 1995 were as follows: (amounts in
thousands)
<TABLE>
<CAPTION>
U.S. GOVERNMENT
SECURITIES OTHER SECURITIES
--------------------- ---------------------
PURCHASES SALES PURCHASES SALES
--------- ----- --------- -----
<S> <C> <C> <C> <C>
Government ARM Fund . . . . . . . . . . . . . . $ 2,483 $ 86,025 $ 0 $ 11,314
Limited Volatility Bond Fund . . . . . . . . . 220,678 262,031 87,639 78,969
Intermediate Bond Fund . . . . . . . . . . . . 150,552 89,390 74,061 43,297
Government Bond Fund . . . . . . . . . . . . . 425,725 277,655 31,748 18,117
Income Bond Fund . . . . . . . . . . . . . . . 575,280 647,586 657,119 686,737
Intermediate Tax-Free Bond Fund . . . . . . . . . . . . . . . . . . . . . . 405,664 388,097
Tax-Free Bond Fund . . . . . . . . . . . . . . . . . . . . . . . . . . . . 150,088 119,675
Kentucky Municipal Bond Fund (January 20, 1995 through June 30, 1995) . . . 8,203 10,888
Kentucky Municipal Bond Fund (February 1, 1994 through January 19, 1995) . 5,221 15,894
Ohio Municipal Bond Fund . . . . . . . . . . . . . . . . . . . . . . . . . 75,774 91,286
</TABLE>
Continued
62
B-244
<PAGE>
THE ONE GROUP FAMILY OF MUTUAL FUNDS
- --------------------------------------------------------------------------------
NOTES TO FINANCIAL STATEMENTS, CONTINUED JUNE 30, 1995
6. FINANCIAL INSTRUMENTS:
Investing in financial instruments such as written options, futures,
structured notes and indexed securities involves risk in excess of the
amounts reflected in the Statements of Assets and Liabilities. The face
or contract amounts reflect the extent of the involvement the funds have
in the particular class of instrument. Risks associated with these
instruments include an imperfect correlation between the movements in
the price of the instruments and the price of the underlying securities
and interest rates, an illiquid secondary market for the instruments or
inability of counterparties to perform under the terms of the contract.
The Funds enter into these contracts primarily as a means to hedge
against adverse fluctuations in securities.
7. FEDERAL TAX INFORMATION:
At June 30, 1995 the following Funds have capital loss carryforwards
which are available to offset future gains, if any:
<TABLE>
<CAPTION>
CAPITAL LOSS
CARRYFORWARD (000) EXPIRES
------------------ -------
<S> <C> <C>
Government ARM Fund . . . . . . . . . . . . . . . . . . . . . . $ 2,283 2003
Limited Volatility Bond Fund . . . . . . . . . . . . . . . . . 2,420 2003
Intermediate Bond Fund . . . . . . . . . . . . . . . . . . . . 1,321 2003
845 2002
222 2001
Government Bond Fund . . . . . . . . . . . . . . . . . . . . . 10,380 2003
733 2002
307 2001
Income Bond Fund . . . . . . . . . . . . . . . . . . . . . . . 52,042 2003
Intermediate Tax-Free Bond Fund . . . . . . . . . . . . . . . . 534 2003
Tax-Free Bond Fund . . . . . . . . . . . . . . . . . . . . . . 3,799 2003
Kentucky Municipal Bond Fund . . . . . . . . . . . . . . . . . 1,331 2002
1 2001
Ohio Municipal Bond Fund . . . . . . . . . . . . . . . . . . . 2,319 2003
</TABLE>
Under current tax law, capital losses realized after October 31 may be
deferred and treated as occurring on the first day of the following
fiscal year. The following deferred losses will be treated as arising
on the first day of the fiscal year ended June 30, 1996.
<TABLE>
<CAPTION>
POST-OCTOBER
CAPITAL LOSSES (000)
--------------------
<S> <C>
Government ARM Fund . . . . . . . . . . . . . . . . . . . . . . . . . . $1,064
Limited Volatility Fund . . . . . . . . . . . . . . . . . . . . . . . . 5,185
Intermediate Bond Fund . . . . . . . . . . . . . . . . . . . . . . . . 3,424
Government Bond Fund . . . . . . . . . . . . . . . . . . . . . . . . . 2,121
Income Bond Fund . . . . . . . . . . . . . . . . . . . . . . . . . . . 1,093
Intermediate Tax-Free Bond Fund . . . . . . . . . . . . . . . . . . . . none
Tax-Free Bond Fund . . . . . . . . . . . . . . . . . . . . . . . . . . 1,750
Kentucky Municipal Bond Fund . . . . . . . . . . . . . . . . . . . . . 447
Ohio Municipal Bond Fund . . . . . . . . . . . . . . . . . . . . . . . 1,394
</TABLE>
Continued
63
B-245
<PAGE>
THE ONE GROUP FAMILY OF MUTUAL FUNDS
- --------------------------------------------------------------------------------
NOTES TO FINANCIAL STATEMENTS, CONTINUED JUNE 30, 1995
The Income Bond Fund distributed approximately $4,206,000 as a long-term
capital gain dividend for the purposes of the dividends-paid deduction
for the fiscal year ended June 30, 1995. Of the dividends paid from net
investment income by the Intermediate Tax-Free Bond Fund, the Tax-Free
Bond Fund, the Kentucky Municipal Bond Fund, and the Ohio Municipal Bond
Fund for the fiscal year ended June 30, 1995, 100% constituted exempt
interest dividends for regular federal income tax purposes.
8. CONCENTRATION OF CREDIT RISK:
The Ohio and Kentucky Municipal Bond Funds invest primarily in debt
obligations issued by the respective States and their political
subdivisions, agencies and public authorities to obtain funds for
various public purposes. The Funds are more susceptible to economic and
political factors adversely affecting issuers of the States' specific
municipal securities than are municipal bond funds that are not
concentrated in these issuers to the same extent.
9. REORGANIZATION:
On October 7, 1994, the Board of Trustees approved an agreement and plan
of reorganization for the acquisition of the Trademark Funds by the
Trust. Under the agreement and plan of reorganization, all assets and
liabilities of the Trademark Government Income Fund, the Trademark
Short-Intermediate Government Fund and the Trademark Kentucky Municipal
Bond Fund (the "Acquired Funds") were acquired by the Government Bond
Fund, the Intermediate Bond Fund, and the Kentucky Municipal Bond Fund,
respectively (the "Acquiring Funds"), in exchange for shares of the each
Acquiring Fund. The reorganization, which qualified as a tax-free
exchange for federal income tax purposes, was completed following
approval by the shareholders of the Acquired Funds. The following is a
summary of Shares Outstanding, Net Assets, Unrealized Depreciation and
Net Asset Value per share immediately before and after the
reorganization (amounts in thousands except net asset value):
Continued
64
B-246
<PAGE>
THE ONE GROUP FAMILY OF MUTUAL FUNDS
- -------------------------------------------------------------------------------
NOTES TO FINANCIAL STATEMENTS, CONTINUED JUNE 30, 1995
<TABLE>
<CAPTION>
AFTER
BEFORE REORGANIZATION REORGANIZATION
--------------------------------------------- --------------
TRADEMARK SHORT-INTERMEDIATE INTERMEDIATE INTERMEDIATE
GOVERNMENT FUND BOND FUND BOND FUND
---------------------------- ------------ --------------
<S> <C> <C> <C>
Shares: *4,378 14,387 18,592
Net Assets: *$39,916 $136,529 $176,445
Net Asset Value:
Fiduciary . . . . . . . . . . . . . . . . . *$ 9.12 $ 9.49 $ 9.49
Class A . . . . . . . . . . . . . . . . . . $ 9.52 $ 9.52
Unrealized Depreciation: . . . . . . . . . . . $(3,636) $ (5,186) $ (8,822)
</TABLE>
<TABLE>
<CAPTION>
TRADEMARK GOVERNMENT GOVERNMENT GOVERNMENT
INCOME FUND BOND FUND BOND FUND
-------------------- --------- ----------
<S> <C> <C> <C>
Shares: *10,770 25,385 35,949
Net Assets: *$ 96,760 $232,446 $329,206
Net Asset Value:
Fiduciary . . . . . . . . . . . . . . . . . *$ 8.98 $ 9.16 $ 9.16
Class A . . . . . . . . . . . . . . . . . . $ 9.16 $ 9.16
Unrealized Depreciation: . . . . . . . . . . . $(10,216) $ (7,028) $(17,244)
</TABLE>
<TABLE>
<CAPTION>
TRADEMARK KENTUCKY KENTUCKY
KENTUCKY MUNICIPAL MUNICIPAL MUNICIPAL
BOND FUND BOND FUND BOND FUND
------------------ --------- ---------
<S> <C> <C> <C>
Shares: *4,422 4,422
Net Assets:
Fiduciary . . . . . . . . . . . . . . . . . *$41,953 $41,953
Net Asset Value:
Fiduciary . . . . . . . . . . . . . . . . . *$ 9.49 $ 9.49
Unrealized Depreciation . . . . . . . . . . . . $(2,604) $(2,604)
</TABLE>
- -------------------------
* Before the reorganization, the Acquired Funds offered only one class of
shares.
Additionally, the Government Bond Fund and the Intermediate Bond Fund had
capital loss carryforwards from the Acquired Funds of approximately $1,040,000
and $971,000, respectively.
Continued
65
B-247
<PAGE>
THE ONE GROUP FAMILY OF MUTUAL FUNDS
- --------------------------------------------------------------------------------
FINANCIAL HIGHLIGHTS
<TABLE>
<CAPTION>
GOVERNMENT ARM FUND
---------------------------------------------------------------
YEAR ENDED JUNE 30,
---------------------------------------------------------------
1995 1994
---------------------------- ---------------------------------
FIDUCIARY CLASS A CLASS B FIDUCIARY CLASS A CLASS B (a)
--------- ------- ------- --------- ------- -----------
<S> <C> <C> <C> <C> <C> <C>
NET ASSET VALUE,
BEGINNING OF PERIOD . . . . . . . . . . . . . . . . . . . . . $ 9.85 $ 9.84 $ 9.86 $ 10.03 $10.03 $ 9.98
------- ------- ------ -------- ------- --------
Investment Activities
Net investment income . . . . . . . . . . . . . . . . . . . . 0.55 0.52 0.47 0.36 0.36 0.12
Net realized and unrealized gains (losses) from
investments . . . . . . . . . . . . . . . . . . . . . . . . (0.05) (0.06) (0.04) (0.15) (0.17) (0.11)
------- ------- ------ -------- ------- --------
Total from Investment Activities . . . . . . . . . . . . . . . 0.50 0.46 0.43 0.21 0.19 0.01
------- ------- ------ -------- ------- --------
Distributions
Net investment income . . . . . . . . . . . . . . . . . . . . (0.48) (0.46) (0.45) (0.37) (0.34) (0.12)
In excess of net investment income . . . . . . . . . . . . . (0.03) (0.01) (0.02) (0.04) (0.01)
------- ------- ------ -------- ------- --------
Total Distributions . . . . . . . . . . . . . . . . . . . . . . (0.51) (0.47) (0.45) (0.39) (0.38) (0.13)
------- ------- ------ -------- ------- --------
NET ASSET VALUE,
END OF PERIOD . . . . . . . . . . . . . . . . . . . . . . . . $ 9.84 $ 9.83 $ 9.84 $ 9.85 $ 9.84 $ 9.86
======= ======= ====== ======== ======= ========
Total Return (Excludes Sales Charge). . . . . . . . . . . . . . 5.14% 4.84% 4.77% 2.16% 1.95% (0.09)%(e)
RATIOS/SUPPLEMENTARY DATA:
Net Assets at end of period (000) . . . . . . . . . . . . . . $51,050 $ 4,631 $ 160 $139,593 $19,053 $ 15
Ratio of expenses to average net assets . . . . . . . . . . 0.61% 0.86% 1.31% 0.65% 0.89% 1.41%(d)
Ratio of net investment income to average net assets . . . . 5.18% 4.88% 4.91% 3.70% 3.54% 3.49%(d)
Ratio of expenses to average net assets * . . . . . . . . . 1.01% 1.36% 1.96% 0.81% 1.14% 1.83%(d)
Ratio of net investment income to average net assets * . . . 4.78% 4.38% 4.26% 3.54% 3.29% 3.07%(d)
Portfolio Turnover . . . . . . . . . . . . . . . . . . . . . 2.91% 2.91% 2.91% 242.20% 242.20% 242.20%
<CAPTION>
GOVERNMENT ARM FUND
----------------------------
YEAR ENDED JUNE 30,
1993
----------------------------
FIDUCIARY (b) CLASS A (c)
------------- -----------
<S> <C> <C>
NET ASSET VALUE,
BEGINNING OF PERIOD . . . . . . . . . . . . . . . . . . . . . . $ 10.00 $ 10.00
--------- --------
Investment Activities
Net investment income . . . . . . . . . . . . . . . . . . . . 0.17 0.14
Net realized and unrealized gains (losses) from investments 0.03 0.03
--------- --------
Total from Investment Activities. . . . . . . . . . . . . . . . 0.20 0.17
--------- --------
Distributions
Net investment income . . . . . . . . . . . . . . . . . . . . (0.17) (0.14)
In excess of net investment income . . . . . . . . . . . . .
--------- --------
Total Distributions . . . . . . . . . . . . . . . . . . . . . . (0.17) (0.14)
--------- --------
NET ASSET VALUE,
END OF PERIOD . . . . . . . . . . . . . . . . . . . . . . . . . $ 10.03 $ 10.03
========= ========
Total Return (Excludes Sales Charge). . . . . . . . . . . . . . 4.93%(d) 4.78%(d)
RATIOS/SUPPLEMENTARY DATA:
Net Assets at end of period (000) . . . . . . . . . . . . . . $154,413 $ 3,106
Ratio of expenses to average net assets . . . . . . . . . . 0.58%(d) 0.81%(d)
Ratio of net investment income to average net assets . . . . 4.71%(d) 4.47%(d)
Ratio of expenses to average net assets * . . . . . . . . . 1.03%(d) 1.34%(d)
Ratio of net investment income to average net assets * . . . 4.26%(d) 3.95%(d)
Portfolio Turnover. . . . . . . . . . . . . . . . . . . . . . 109.96% 109.96%
</TABLE>
- -------------------------
* During the period the investment advisory, 12b-1, and administration fees
were voluntarily reduced. If such voluntary fee reductions had not occurred,
the ratios would have been as indicated.
(a) Class B Shares commenced offering on January 14, 1994.
(b) The Fund commenced operations on February 2, 1993.
(c) Class A Shares commenced offering on March 10, 1993.
(d) Annualized.
(e) Not Annualized.
See notes to financial statements.
66
B-248
<PAGE>
THE ONE GROUP FAMILY OF MUTUAL FUNDS
- --------------------------------------------------------------------------------
FINANCIAL HIGHLIGHTS
<TABLE>
<CAPTION>
LIMITED VOLATILITY BOND FUND
----------------------------------------------
YEAR ENDED JUNE 30,
----------------------------------------------
1995
----------------------------------------------
FIDUCIARY CLASS A CLASS B SERVICE (b)
--------- ------- ------- -----------
<S> <C> <C> <C> <C>
NET ASSET VALUE,
BEGINNING OF PERIOD . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 10.33 $ 10.32 $10.40 $10.38
-------- ------- ------ ------
Investment Activities
Net investment income . . . . . . . . . . . . . . . . . . . . . . . . . . . 0.60 0.56 0.53 0.51
Net realized and unrealized gains (losses) from investments . . . . . . . . . 0.19 0.21 0.19 0.19
-------- ------- ------ ------
Total from Investment Activities . . . . . . . . . . . . . . . . . . . . . . . 0.79 0.77 0.72 0.70
-------- ------- ------ ------
Distributions
Net investment income . . . . . . . . . . . . . . . . . . . . . . . . . . . (0.59) (0.56) (0.52) (0.49)
In excess of net investment income . . . . . . . . . . . . . . . . . . . . . (0.01)
Net realized gains . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
In excess of net realized gains . . . . . . . . . . . . . . . . . . . . . .
-------- ------- ------ ------
Total Distributions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (0.59) (0.57) (0.52) (0.49)
-------- ------ ------ ------
NET ASSET VALUE,
END OF PERIOD . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 10.53 $ 10.52 $10.60 $10.59
======== ======= ====== ======
Total Return (Excludes Sales Charge) . . . . . . . . . . . . . . . . . . . . . 7.96% 7.67% 7.18% (b)
RATIOS/SUPPLEMENTARY DATA:
Net Assets at end of period (000) . . . . . . . . . . . . . . . . . . . . . $410,746 $12,516 $2,906
Ratio of expenses to average net assets . . . . . . . . . . . . . . . . . . 0.52% 0.77% 1.28% 1.32%(e)
Ratio of net investment income to average net assets . . . . . . . . . . . . 5.82% 5.57% 5.10% 5.55%(e)
Ratio of expenses to average net assets * . . . . . . . . . . . . . . . . . 0.85% 1.20% 1.86% 1.68%(e)
Ratio of net investment income to average net assets * . . . . . . . . . . . 5.49% 5.14% 4.52% 5.20%(c)
Portfolio Turnover . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 76.43% 76.43% 76.43% 76.43%
<CAPTION>
LIMITED VOLATILITY BOND FUND
-----------------------------------------------
YEAR ENDED JUNE 30,
-----------------------------------------------
1994
-----------------------------------------------
FIDUCIARY CLASS A CLASS B (a) RETIREMENT
--------- ------- ----------- -----------
<S> <C> <C> <C> <C>
NET ASSET VALUE,
BEGINNING OF PERIOD . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 10.87 $ 10.87 $10.78 $10.78
-------- ------- ------ ------
Investment Activities
Net investment income . . . . . . . . . . . . . . . . . . . . . . . . . . . 0.54 0.52 0.17 0.10
Net realized and unrealized gains (losses) from investments . . . . . . . . (0.45) (0.46) (0.37) (0.38)
-------- ------- ------ ------
Total from Investment Activities . . . . . . . . . . . . . . . . . . . . . . . 0.09 0.06 (0.20) (0.28)
-------- ------- ------ ------
Distributions
Net investment income . . . . . . . . . . . . . . . . . . . . . . . . . . . (0.55) (0.51) (0.15) (0.08)
In excess of net investment income . . . . . . . . . . . . . . . . . . . . . (0.02) (0.04) (0.04)
Net realized gains . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (0.06) (0.06)
In excess of net realized gains . . . . . . . . . . . . . . . . . . . . . . (0.03)
-------- ------- ------ ------
Total Distributions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (0.63) (0.61) (0.18) (0.12)
-------- ------- ------ ------
NET ASSET VALUE,
END OF PERIOD . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10.33 $ 10.32 $10.40 $10.38
======== ======= ====== ======
Total Return (Excludes Sales Charge) . . . . . . . . . . . . . . . . . . . . . 0.79% 0.49% (1.81)%(f) (2.59)%(f)
RATIOS/SUPPLEMENTARY DATA:
Net Assets at end of period (000) . . . . . . . . . . . . . . . . . . . . . $447,394 $15,216 $1,974 $ 16
Ratio of expenses to average net assets . . . . . . . . . . . . . . . . . . 0.50% 0.75% 1.26%(e) 1.26%(e)
Ratio of net investment income to average net assets . . . . . . . . . . . . 5.10% 4.92% 4.39%(e) 4.37%(c)
Ratio of expenses to average net assets * . . . . . . . . . . . . . . . . . 0.85% 1.20% 1.86%(e) 1.60%(e)
Ratio of net investment income to average net assets * . . . . . . . . . . . 4.75% 4.47% 3.79%(e) 4.03%(e)
Portfolio Turnover . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 30.61% 30.61% 30.61% 30.61%
</TABLE>
<TABLE>
<CAPTION>
LIMITED VOLATILITY BOND FUND
------------------------------------------------------------
YEAR ENDED JUNE 30,
------------------------------------------------------------
1993 1992 1991
------------------ ----------------------- -------------
FIDUCIARY CLASS A FIDUCIARY CLASS A (c) FIDUCIARY (d)
--------- ------- --------- ----------- -------------
<S> <C> <C> <C> <C> <C>
NET ASSET VALUE,
BEGINNING OF PERIOD . . . . . . . . . . . . . . . . . . . . . . . . $ 10.72 $ 10.72 $ 10.26 $ 10.61 $ 10.00
-------- ------- -------- -------- --------
Investment Activities
Net investment income . . . . . . . . . . . . . . . . . . . . . . 0.61 0.59 0.70 0.24 0.58
Net realized and unrealized gains (losses) from investments . . . . 0.25 0.24 0.47 0.13 0.25
-------- ------- -------- -------- --------
Total from Investment Activities . . . . . . . . . . . . . . . . . . 0.86 0.83 1.17 0.37 0.83
-------- ------- -------- -------- --------
Distributions
Net investment income . . . . . . . . . . . . . . . . . . . . . . (0.62) (0.59) (0.70) (0.26) (0.57)
In excess of net investment income . . . . . . . . . . . . . . . .
Net realized gains . . . . . . . . . . . . . . . . . . . . . . . . (0.09) (0.09) (0.01)
In excess of net realized gains . . . . . . . . . . . . . . . . .
-------- ------- -------- -------- --------
Total Distributions . . . . . . . . . . . . . . . . . . . . . . . . . (0.71) (0.68) (0.71) (0.26) (0.57)
-------- ------- -------- -------- --------
NET ASSET VALUE,
END OF PERIOD . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 10.87 $ 10.87 $ 10.72 $ 10.72 $ 10.26
======== ======= ======== ======== ========
Total Return (Excludes Sales Charge) . . . . . . . . . . . . . . . . 8.27% 8.04% 11.75% 9.84%(e) 9.76%(e)
RATIOS/SUPPLEMENTARY DATA:
Net Assets at end of period (000) . . . . . . . . . . . . . . . . $397,820 $15,719 $301,907 $ 161 $154,991
Ratio of expenses to average net assets . . . . . . . . . . . . . 0.56% 0.76% 0.52% 0.99%(e) 0.32%(e)
Ratio of net investment income to average net assets . . . . . . . 5.70% 5.35% 6.63% 5.95%(c) 7.49%(e)
Ratio of expenses to average net assets * . . . . . . . . . . . . 0.90% 1.27% 1.04% 1.29%(e) 0.92%(e)
Ratio of net investment income to average net assets * . . . . . . 5.36% 4.84% 6.11% 5.65%(e) 6.89%(e)
Portfolio Turnover . . . . . . . . . . . . . . . . . . . . . . . . 40.28% 40.28% 43.87% 43.87% 24.69%
</TABLE>
- -------------------------
* During the period the investment advisory, 12b-1, and administration fees
were voluntarily reduced. If such voluntary fee reductions had not occurred,
the ratios would have been as indicated.
(a) Class B Shares commenced offering on January 14, 1994.
(b) The Service Class Shares commenced offering on January 17, 1994 when they
were designated as"Retirement" Shares. On April 4, 1995, the name of the
Retirement Shares was changed to "Service" Shares. As of June 1, 1995,
Service Shares transferred to Class A Shares; and as of June 30, 1995, there
were no shareholders in the Service Class. The return for the period from
July 1, 1994 to June 1, 1995 for the Service Shares was 6.90%.
(c) Class A Shares commenced offering on February 18, 1992.
(d) The Fund commenced operations on September 4, 1990.
(e) Annualized.
(f) Not Annualized.
See notes to financial statements.
67
B-249
<PAGE>
THE ONE GROUP FAMILY OF MUTUAL FUNDS
- --------------------------------------------------------------------------------
FINANCIAL HIGHLIGHTS
<TABLE>
<CAPTION>
INTERMEDIATE BOND FUND
------------------------------------------------------------------------------------------
YEAR ENDED JUNE 30,
------------------------------------------------------------------------------------------
1995 1994 1993 1992
--------------------------------------------- --------- ------------- ----------------
FIDUCIARY CLASS A (e) CLASS B (e) FIDUCIARY FIDUCIARY (d) FIDUCIARY (a)(d)
--------- ----------- ----------- --------- ------------- ----------------
<S> <C> <C> <C> <C> <C> <C>
NET ASSET VALUE,
BEGINNING OF PERIOD . . . . . . . . $ 9.72 $ 9.45 $ 9.45 $ 10.51 $ 10.09 $ 10.00
-------- -------- ------- ------- ------- -------
Investment Activities
Net investment income . . . . . . . 0.66 0.37 0.23 0.60 0.63 0.22
Net realized and unrealized gains
(losses) from investments . . . . . 0.29 0.59 0.56 (0.67) 0.42 0.08
-------- -------- ------- ------- ------- -------
Total from Investment Activities . . . 0.95 0.96 0.79 (0.07) 1.05 0.30
-------- -------- ------- ------- ------- -------
Distributions
Net investment income . . . . . . . (0.66) (0.37) (0.23) (0.60) (0.63) (0.21)
Net realized gains . . . . . . . . . (0.02)
In excess of net realized gains . . (0.10)
-------- -------- ------- ------- ------- -------
Total Distributions . . . . . . . . . . (0.66) (0.37) (0.23) (0.72) (0.63) (0.21)
-------- -------- ------- ------- ------- -------
NET ASSET VALUE, END OF PERIOD . . . . $ 10.01 $ 10.04 $ 10.01 $9.72 $ 10.51 $ 10.09
======== ======== ======= ======= ======= =======
Total Return (Excludes Sales Charge) . 10.15% 10.29%(b) 8.22%(b) (0.74)% 10.67% 3.00%(c)
RATIOS/SUPPLEMENTARY DATA:
Net Assets at end of period (000) . $191,216 $ 4,941 $ 266 $98,483 $44,252 $23,457
Ratio of expenses to average net
assets . . . . . . . . . . . . . . 0.56% 0.83%(b) 1.51%(b) 0.32% 0.39% 0.36%(b)
Ratio of net investment income to
average net assets . . . . . . . . 6.88% 6.64%(b) 6.15%(b) 6.04% 6.14% 6.99%(b)
Ratio of expenses to average net
assets * . . . . . . . . . . . . . 0.99% 1.66%(b) 2.34%(b) 0.87% 1.17% 1.33%(b)
Ratio of net investment income to
average net assets * . . . . . . . 6.45% 5.81%(b) 5.31%(b) 5.49% 5.36% 6.02%(b)
Portfolio Turnover . . . . . . . . . 99.71% 99.71% 99.71% 85.62% 21.51% 11.74%
</TABLE>
- ------------
* During the period the investment advisory, 12b-1, and administration fees
were voluntarily reduced. If such voluntary fee reductions had not
occurred, the ratios would have been as indicated.
(a) The Fund commenced operations on February 28, 1992.
(b) Annualized.
(c) Not Annualized.
(d) Audited by other auditors.
(e) Class A and Class B Shares commenced operations November 30, 1994.
See notes to financial statements.
68
B-250
<PAGE>
THE ONE GROUP FAMILY OF MUTUAL FUNDS
- --------------------------------------------------------------------------------
FINANCIAL HIGHLIGHTS
<TABLE>
<CAPTION>
GOVERNMENT BOND FUND
-----------------------------------------------------------------------------
YEAR ENDED JUNE 30,
-----------------------------------------------------------------------------
1995 1994
--------------------------------------------------- ----------------------
FIDUCIARY CLASS A CLASS B SERVICE(f) FIDUCIARY CLASS A
--------- ------- ------- ----------- --------- -------
<S> <C> <C> <C> <C> <C> <C>
NET ASSET VALUE,
BEGINNING OF PERIOD . . . . . . . . . . . $ 9.35 $ 9.35 $ 9.35 $ 9.32 $ 10.15 $ 10.17
-------- ------- ------- ------ --------- -------
Investment Activities
Net investment income . . . . . . . . . . 0.62 0.61 0.55 0.44 0.51 0.48
Net realized and unrealized gains (losses)
from investments . . . . . . . . . . . 0.46 0.45 0.46 0.46 (0.77) (0.79)
-------- ------- ------- ------ --------- -------
Total from Investment Activities . . . . . . 1.08 1.06 1.01 0.90 (0.26) (0.31)
-------- ------- ------- ------ --------- -------
Distributions
Net investment income . . . . . . . . . . (0.61) (0.59) (0.55) (0.44) (0.50) (0.47)
In excess of net investment income . . . . (0.01) (0.01) (0.02) (0.02)
In excess of net realized gains . . . . . (0.02) (0.02)
-------- ------- ------- ------ --------- -------
Total Distributions . . . . . . . . . . . . . (0.62) (0.60) (0.55) (0.44) (0.54) (0.51)
-------- ------- ------- ------ --------- -------
NET ASSET VALUE,
END OF PERIOD . . . . . . . . . . . . . . . . $ 9.81 $ 9.81 9.81 9.78 $ 9.35 $ 9.35
======== ======= ======= ====== ========= =======
Total Return (Excludes Sales Charge) . . . . 12.04% 11.84% 11.20% (f) (2.73)% (3.16)%
RATIOS/SUPPLEMENTARY DATA:
Net Assets at end of period (000) . . . . $379,826 $8,130 $ 2,513 $209,692 $ 1,690
Ratio of expenses to average net
assets . . . . . . . . . . . . . . . . . 0.71% 0.97% 1.62% 1.64%(d) 0.68% 0.92%
Ratio of net investment income to
average net assets . . . . . . . . . . . 6.65% 6.46% 5.76% 6.65%(d) 5.13% 4.84%
Ratio of expenses to average net
assets * . . . . . . . . . . . . . . . . 0.73% 1.09% 1.74% 1.66%(d) 0.71% 1.05%
Ratio of net investment income to
average net assets * . . . . . . . . . . 6.63% 6.34% 5.64% 6.62%(d) 5.10% 4.71%
Portfolio Turnover . . . . . . . . . . . . 106.14% 106.14% 106.14% 106.14% 377.78% 377.78%
</TABLE>
<TABLE>
<CAPTION>
GOVERNMENT BOND FUND
-----------------------------------------
YEAR ENDED JUNE 30,
-----------------------------------------
1994 1993
----------- ---------------------------
CLASS B(a) FIDUCIARY(b) CLASS A(c)
----------- ------------- -----------
<S> <C> <C> <C>
NET ASSET VALUE,
BEGINNING OF PERIOD . . . . . . . . . . . $ 10.04 $ 10.00 $ 10.22
------- ------- -------
Investment Activities
Net investment income . . . . . . . . . . 0.18 0.20 0.17
Net realized and unrealized gains (losses)
from investments . . . . . . . . . . . (0.69) 0.15 (0.05)
------- ------- -------
Total from Investment Activities . . . . . . (0.51) 0.35 0.12
------- ------- -------
Distributions
Net investment income . . . . . . . . . . (0.16) (0.20) (0.17)
In excess of net investment income . . . . (0.02)
In excess of net realized gains . . . . .
------- ------- -------
Total Distributions . . . . . . . . . . . . . (0.18) (0.20) (0.17)
------- ------- -------
NET ASSET VALUE,
END OF PERIOD . . . . . . . . . . . . . . . . $ 9.35 $ 10.15 $ 10.17
======= ======= =======
Total Return (Excludes Sales Charge) . . . . (4.99)%(e) 9.03%(d) 5.35%(d)
RATIOS/SUPPLEMENTARY DATA:
Net Assets at end of period (000) . . . . $ 656 $52,152 $ 840
Ratio of expenses to average net
assets . . . . . . . . . . . . . . . . . 1.52%(d) 0.69%(d) 0.95%(d)
Ratio of net investment income to
average net assets . . . . . . . . . . . 4.60%(d) 5.43%(d) 5.56%(d)
Ratio of expenses to average net
assets * . . . . . . . . . . . . . . . . 1.63%(d) 1.05%(d) 1.44%(d)
Ratio of net investment income to
average net assets * . . . . . . . . . . 4.49%(d) 5.07%(d) 5.07%(d)
Portfolio Turnover . . . . . . . . . . . . 377.78% 139.24% 139.24%
</TABLE>
- -------------
* During the period the investment advisory, 12b-1, and administration fees
were voluntarily reduced. If such voluntary fee reductions had not
occurred, the ratios would have been as indicated.
(a) Class B Shares commenced offering on January 14, 1994.
(b) The Fund commenced operations on February 8, 1993.
(c) Class A Shares commenced offering on March 5, 1993.
(d) Annualized.
(e) Not Annualized.
(f) The Service Class Shares commenced offering on July 15, 1994 when they were
designated as "Retirement" shares. On April 4, 1995, the name of the
Retirement shares was changed to "Service" shares. As of June 1, 1995,
Service Shares transferred to Class A shares, and as of June 30, 1995,
there were no shareholders in the Service Class. The return for the period
from July 15, 1994 to June 1, 1995 for the Service Shares was 9.59%.
See notes to financial statements.
69
B-251
<PAGE>
THE ONE GROUP FAMILY OF MUTUAL FUNDS
- --------------------------------------------------------------------------------
FINANCIAL HIGHLIGHTS
<TABLE>
<CAPTION>
INCOME BOND FUND
--------------------------------------------------------------
YEAR ENDED JUNE 30,
--------------------------------------------------------------
1995 1994
-------------------------------------------------- ---------
FIDUCIARY CLASS A CLASS B SERVICE (b) FIDUCIARY
--------- ------- ------- ----------- ---------
<S> <C> <C> <C> <C> <C>
NET ASSET VALUE,
BEGINNING OF PERIOD . . . . . . . . . . . . $ 9.23 $ 9.22 $ 9.29 9.05 $ 10.43
--------- ------- ------- -------- --------
Investment Activities
Net investment income . . . . . . . . . . 0.64 0.61 0.56 0.49 0.54
Net realized and unrealized gains
(losses) from investments . . . . . . . . 0.35 0.36 0.38 0.40 (0.74)
--------- ------- ------- -------- --------
Total from Investment Activities . . . . . . 0.99 0.97 0.94 0.89 (0.20)
--------- ------- ------- -------- --------
Distributions
Net investment income . . . . . . . . . . (0.64) (0.60) (0.57) (0.51) (0.57)
In excess of net investment income . . . . (0.01)
In excess of net realized gains . . . . . (0.04) (0.04) (0.04) (0.04) (0.43)
--------- ------- ------- -------- --------
Total Distributions . . . . . . . . . . . . . (0.68) (0.65) (0.61) (0.55) (1.00)
--------- ------- ------- -------- --------
NET ASSET VALUE,
END OF PERIOD . . . . . . . . . . . . . . . $ 9.54 $ 9.54 $ 9.62 $ 9.39 $ 9.23
========= ======= ======= ======== ========
Total Return (Excludes Sales Charge) . . . . 11.29% 10.90% 10.63% (b) (2.54)%
RATIOS/SUPPLEMENTARY DATA:
Net Assets at end of period (000) . . . . $474,124 $6,796 $ 1,887 $560,071
Ratio of expenses to average net assets . 0.59% 1.01% 1.49% 1.24%(d) 0.53%
Ratio of net investment income to
average net assets . . . . . . . . . . . 6.94% 6.57% 6.16% 5.85%(d) 5.35%
Ratio of expenses to average net assets * 0.86% 1.38% 1.86% 1.53%(d) 0.85%
Ratio of net investment income to
average net assets * . . . . . . . . . . 6.67% 6.20% 5.80% 5.57%(d) 5.03%
Portfolio Turnover . . . . . . . . . . . . 262.25% 262.25% 262.25% 262.25% 131.04%
</TABLE>
<TABLE>
<CAPTION>
INCOME BOND FUND
-----------------------------------------
YEAR ENDED JUNE 30,
-----------------------------------------
1994
-----------------------------------------
CLASS A CLASS B (a) RETIREMENT
------- ----------- ----------
<S> <C> <C> <C>
NET ASSET VALUE,
BEGINNING OF PERIOD . . . . . . . . . . . . . $ 10.43 $ 9.97 $ 9.97
-------- --------- --------
Investment Activities
Net investment income . . . . . . . . . . 0.52 0.17 0.12
Net realized and unrealized gains
(losses) from investments . . . . . . . . (0.75) (0.70) (0.94)
-------- --------- --------
Total from Investment Activities . . . . . . (0.23) (0.53) (0.82)
-------- --------- --------
Distributions
Net investment income . . . . . . . . . . (0.55) (0.15) (0.10)
In excess of net investment income . . . .
In excess of net realized gains . . . . . (0.43)
-------- --------- --------
Total Distributions . . . . . . . . . . . . . (0.98) (0.15) (0.10)
-------- --------- --------
NET ASSET VALUE,
END OF PERIOD . . . . . . . . . . . . . . . . $ 9.22 $ 9.29 $ 9.05
======== ========= ========
Total Return (Excludes Sales Charge) . . . . (2.33)% (5.29)%(e) (8.24)%(e)
RATIOS/SUPPLEMENTARY DATA:
Net Assets at end of period (000) . . . . $ 5,347 $ 723 $ 57
Ratio of expenses to average net assets . 0.78% 1.45%(d) 1.30%(d)
Ratio of net investment income to
average net assets . . . . . . . . . . . 5.25% 5.20%(d) 5.28%(d)
Ratio of expenses to average net assets * 1.20% 1.84%(d) 1.59%(d)
Ratio of net investment income to
average net assets * . . . . . . . . . . 4.83% 4.81%(d) 4.99%(d)
Portfolio Turnover . . . . . . . . . . . . 131.04% 131.04% 131.04%
</TABLE>
<TABLE>
<CAPTION>
INCOME BOND FUND
--------------------------------------------------------------------------------
YEAR ENDED JUNE 30,
--------------------------------------------------------------------------------
1993 1992 1991
------------------------ ----------------------------- ---------
FIDUCIARY CLASS A FIDUCIARY CLASS A(c) FIDUCIARY
--------- ------- --------- ----------- ---------
<S> <C> <C> <C> <C> <C>
NET ASSET VALUE,
BEGINNING OF PERIOD . . . . . . . . . . . . . $ 10.18 $ 10.16 $ 9.59 $ 10.06 $ 9.49
-------- ------- -------- --------- --------
Investment Activities
Net investment income . . . . . . . . . . . 0.66 0.63 0.71 0.26 0.79
Net realized and unrealized gains (losses)
from investments . . . . . . . . . . . . . 0.38 0.41 0.59 0.11 0.06
-------- ------- -------- --------- --------
Total from Investment Activities . . . . . . . 1.04 1.04 1.30 0.37 0.85
-------- ------- -------- --------- --------
Distributions
Net investment income . . . . . . . . . . . (0.66) (0.64) (0.71) (0.27) (0.75)
Net realized gains . . . . . . . . . . . . . (0.13) (0.13)
-------- ------- -------- --------- --------
Total Distributions . . . . . . . . . . . . . . (0.79) (0.77) (0.71) (0.27) (0.75)
-------- ------- -------- --------- --------
NET ASSET VALUE,
END OF PERIOD . . . . . . . . . . . . . . . . $ 10.43 $ 10.43 $ 10.18 $ 10.16 $ 9.59
======== ======= ======== ========= ========
Total Return (Excludes Sales Charge) . . . . . 10.62% 10.58% 13.85% 10.16%(d) 9.20%
RATIOS/SUPPLEMENTARY DATA:
Net Assets at end of period (000) . . . . . $483,291 $ 7,064 $376,898 $ 188 $269,856
Ratio of expenses to average net assets . . 0.56% 0.77% 0.49% 0.97%(d) 0.29%
Ratio of net investment income to average
net assets . . . . . . . . . . . . . . . . 6.44% 6.12% 7.18% 6.58%(d) 7.88%
Ratio of expenses to average net assets * . 0.90% 1.26% 1.04% 1.27%(d) 0.89%
Ratio of net investment income to average
net assets * . . . . . . . . . . . . . . . 6.10% 5.63% 6.63% 6.28%(d) 7.28%
Portfolio Turnover . . . . . . . . . . . . . 143.52% 143.52% 32.50% 32.50% 39.63%
</TABLE>
____________
* During the period the investment advisory, 12b-1, and administration fees
were voluntarily reduced. If such voluntary fee reductions had not
occurred, the ratios would have been as indicated.
(a) Class B shares commenced offering on January 14, 1994.
(b) The Service Class shares commenced offering on January 17, 1994 when they
were designated as "Retirement" shares. On April 4, 1995, the name of the
Retirement shares was changed to "Service" shares. As of June 1, 1995,
Service shares transferred to Class A shares, and as of June 30, 1995,
there were no shareholders in the Service Class. The return for the period
from July 1, 1994 to June 1, 1995 for the Service Shares was 9.93%.
(c) Class A commenced offering on February 18, 1992.
(d) Annualized.
(e) Not Annualized.
See notes to financial statements.
70
B-252
<PAGE>
THE ONE GROUP FAMILY OF MUTUAL FUNDS
- --------------------------------------------------------------------------------
FINANCIAL HIGHLIGHTS
<TABLE>
<CAPTION>
INTERMEDIATE TAX-FREE BOND FUND
--------------------------------------------------------------------
YEAR ENDED JUNE 30,
--------------------------------------------------------------------
1995 1994
----------------------------- -----------------------------------
FIDUCIARY CLASS A CLASS B FIDUCIARY CLASS A CLASS B (a)
--------- ------- ------- --------- ------- -----------
<S> <C> <C> <C> <C> <C> <C>
NET ASSET VALUE,
BEGINNING OF PERIOD . . . . . . . . $ 10.49 $ 10.48 $10.50 $ 11.15 $ 11.14 $ 11.18
-------- ------- ------- -------- ------- -------
Investment Activities
Net investment income . . . . . . 0.54 0.51 0.46 0.52 0.50 0.17
Net realized and unrealized gains
(losses) from investments . . . 0.15 0.15 0.14 (0.52) (0.52) (0.67)
-------- ------- ------- -------- ------- -------
Total from Investment Activities . . 0.69 0.66 0.60 0.00 (0.02) (0.50)
-------- ------- ------- -------- ------- -------
Distributions
Net investment income . . . . . . (0.54) (0.49) (0.45) (0.53) (0.52) (0.17)
In excess of net investment
income . . . . . . . . . . . . (0.02) (0.01) (0.01)
Net realized gains . . . . . . . . (0.01)
In excess of net realized gains . . (0.11) (0.11) (0.01)
-------- ------- ------- -------- ------- -------
Total Distributions . . . . . . . . . (0.54) (0.51) (0.45) (0.66) (0.64) (0.18)
-------- ------- ------- -------- ------- -------
NET ASSET VALUE,
END OF PERIOD . . . . . . . . . . . $ 10.64 $ 10.63 $10.65 $ 10.49 $ 10.48 $ 10.50
======== ======= ======= ======== ======= =======
Total Return (Excludes Sales Charge). 6.75% 6.49% 5.89% (0.11)% (0.33)% (4.48%)(e)
RATIOS/SUPPLEMENTARY DATA:
Net Assets at end of period (000) . $211,229 $ 5,614 $1,116 $182,611 $ 5,556 $ 549
Ratio of expenses to average net
assets . . . . . . . . . . . . 0.53% 0.78% 1.43% 0.48% 0.73% 1.40%(d)
Ratio of net investment income to
average net assets . . . . . . 5.17% 4.91% 4.29% 4.78% 4.57% 4.08%(d)
Ratio of expenses to average net
assets * . . . . . . . . . . . 0.88% 1.23% 1.88% 0.84% 1.19% 1.85%(d)
Ratio of net investment income to
average net assets * . . . . . . 4.82% 4.46% 3.84% 4.42% 4.11% 3.63%(d)
Portfolio Turnover . . . . . . . . 199.76% 199.76% 199.76% 105.98% 105.98% 105.98%
<CAPTION>
INTERMEDIATE TAX-FREE BOND FUND
----------------------------------------------------------------
YEAR ENDED JUNE 30,
----------------------------------------------------------------
1993 1992 1991
-------------------- --------- ----------- -------------
FIDUCIARY CLASS A FIDUCIARY CLASS A (b) FIDUCIARY (c)
--------- ------- --------- ----------- -------------
<S> <C> <C> <C> <C> <C>
NET ASSET VALUE,
BEGINNING OF PERIOD . . . . . . . . $10.69 $10.69 $ 10.28 $10.57 $10.00
------ ------ -------- ------ ------
Investment Activities
Net investment income . . . . . . 0.53 0.55 0.55 0.15 0.49
Net realized and unrealized gains
(losses) from investments . . . 0.49 0.44 0.42 0.18 0.27
------ ------ -------- ------ ------
Total from Investment Activities . . 1.02 0.99 0.97 0.33 0.76
------ ------ -------- ------ ------
Distributions
Net investment income . . . . . . (0.52) (0.50) (0.55) (0.21) (0.48)
In excess of net investment
income . . . . . . . . . . . .
Net realized gains . . . . . . . . (0.04) (0.04) (0.01)
In excess of net realized gains . .
------ ------ -------- ------ ------
Total Distributions . . . . . . . . . (0.56) (0.54) (0.56) (0.21) (0.48)
------ ------ -------- ------ ------
NET ASSET VALUE,
END OF PERIOD . . . . . . . . . . . $11.15 $11.14 $ 10.69 $10.69 $ 10.28
====== ====== ======== ====== =======
Total Return (Excludes Sales Charge). 9.79% 9.47% 9.54% 8.68%(d) 9.49%(d)
RATIOS/SUPPLEMENTARY DATA:
Net Assets at end of period (000) . $166,489 $5,480 $142,672 $ 5 $82,192
Ratio of expenses to average net
assets . . . . . . . . . . . . 0.54% 0.71% .55% 1.02%(d) .30%(d)
Ratio of net investment income to
average net assets . . . . . . 4.93% 4.77% 5.28% 4.91%(d) 6.04%(d)
Ratio of expenses to average net
assets * . . . . . . . . . . . 0.94% 1.27% 1.07% 1.32%(d) 0.90%(d)
Ratio of net investment income to
average net assets * . . . . . . 4.53% 4.21% 4.77% 4.61%(d) 5.44%(d)
Portfolio Turnover . . . . . . . . 31.99% 31.99% 11.50% 11.50% 35.15%
</TABLE>
- --------
* During the period the investment advisory, 12b-1, and administration fees
were voluntarily reduced. If such voluntary fee reductions had not occurred,
the ratios would have been as indicated.
(a) Class B Shares commenced offering on January 14, 1994.
(b) Class A Shares commenced offering on February 18, 1992.
(c) The Fund commenced operations on September 4, 1990.
(d) Annualized.
(e) Not Annualized.
See notes to financial statements.
71
B-253
<PAGE>
THE ONE GROUP FAMILY OF MUTUAL FUNDS
- --------------------------------------------------------------------------------
FINANCIAL HIGHLIGHTS
<TABLE>
<CAPTION>
TAX-FREE BOND FUND
--------------------------------------------------------------
YEAR ENDED JUNE 30,
--------------------------------------------------------------
1995 1994
---------------------------- --------------------------------
FIDUCIARY CLASS A CLASS B FIDUCIARY CLASS A CLASS B (a)
--------- ------- ------- --------- ------- -----------
<S> <C> <C> <C> <C> <C> <C>
NET ASSET VALUE,
BEGINNING OF PERIOD . . . . . . . . . . . . . . . . . . . $ 9.66 $ 9.67 $9.62 $10.11 $ 10.12 $ 10.10
-------- ------- ----- ------ ------- -------
Investment Activities
Net investment income . . . . . . . . . . . . . . . . . 0.57 0.55 0.49 0.56 0.55 0.24
Net realized and unrealized gains (losses) from
investments . . . . . . . . . . . . . . . . . . . . . 0.03 0.05 0.07 (0.42) (0.43) (0.48)
-------- ------- ----- ------ ------- -------
Total from Investment Activities . . . . . . . . . . . . . 0.60 0.60 0.56 0.14 0.12 (0.24)
-------- ------- ----- ------ ------- -------
Distributions
Net investment income . . . . . . . . . . . . . . . . . (0.57) (0.55) (0.49) (0.56) (0.54) (0.24)
In excess of net realized gains . . . . . . . . . . . . . (0.03) (0.03)
-------- ------- ----- ------ ------- -------
Total Distributions . . . . . . . . . . . . . . . . . . . . (0.57) (0.55) (0.49) (0.59) (0.57) (0.24)
-------- ------- ----- ------ ------- -------
NET ASSET VALUE,
END OF PERIOD . . . . . . . . . . . . . . . . . . . . . . $ 9.69 $ 9.72 $9.69 $9.66 $9.67 $ 9.62
======== ======= ===== ===== ===== =======
Total Return (Excludes Sales Charge). . . . . . . . . . . . 6.46% 6.21% 5.58% 1.36% 1.34% (1.98)%(e)
RATIOS/SUPPLEMENTARY DATA:
Net Assets at end of period (000) . . . . . . . . . . . . $185,916 $11,462 $8,326 $152,763 $10,725 $ 4,855
Ratio of expenses to average net assets . . . . . . . . 0.56% 0.81% 1.46% 0.54% 0.79% 1.41%(d)
Ratio of net investment income to average net assets . . 6.02% 5.76% 5.14% 5.61% 5.44% 4.95%(d)
Ratio of expenses to average net assets * . . . . . . . 0.74% 1.09% 1.74% 0.71% 1.06% 1.62%(d)
Ratio of net investment income to average net assets * . 5.84% 5.48% 4.86% 5.44% 5.17% 4.74%(d)
Portfolio Turnover . . . . . . . . . . . . . . . . . . . 66.02% 66.02% 66.02% 101.48% 101.48% 101.48%
<CAPTION>
TAX-FREE BOND FUND
--------------------------
YEAR ENDED JUNE 30,
--------------------------
1993
--------------------------
FIDUCIARY (b) CLASS A (c)
------------- -----------
<S> <C> <C>
NET ASSET VALUE,
BEGINNING OF PERIOD . . . . . . . . . . . . . . . . . . . $10.00 $10.06
------- ------
Investment Activities
Net investment income . . . . . . . . . . . . . . . . . 0.19 0.19
Net realized and unrealized gains (losses) from
investments . . . . . . . . . . . . . . . . . . . . . 0.11 0.05
------- ------
Total from Investment Activities . . . . . . . . . . . . . 0.30 0.24
------- ------
Distributions
Net investment income . . . . . . . . . . . . . . . . . (0.19) (0.18)
In excess of net realized gains . . . . . . . . . . . . .
------- ------
Total Distributions . . . . . . . . . . . . . . . . . . . . (0.19) (0.18)
------- ------
NET ASSET VALUE,
END OF PERIOD . . . . . . . . . . . . . . . . . . . . . . $10.11 $10.12
======= ======
Total Return (Excludes Sales Charge). . . . . . . . . . . . 5.18%(d) 6.86%(d)
RATIOS/SUPPLEMENTARY DATA:
Net Assets at end of period (000) . . . . . . . . . . . . $40,777 $4,106
Ratio of expenses to average net assets . . . . . . . . 0.54%(d) 0.80%(d)
Ratio of net investment income to average net assets . . 5.66%(d) 5.71%(d)
Ratio of expenses to average net assets * . . . . . . . 1.01%(d) 1.36%(d)
Ratio of net investment income to average net assets * . 5.19%(d) 5.15%(d)
Portfolio Turnover . . . . . . . . . . . . . . . . . . . 66.12% 66.12%
</TABLE>
- -------------
* During the period the investment advisory, 12b-1, and administration fees
were voluntarily reduced. If such voluntary fee reductions had not occurred,
the ratios would have been as indicated.
(a) Class B Shares commenced offering on January 14, 1994.
(b) The Fund commenced operations on February 9, 1993.
(c) Class A Shares commenced offering on February 23, 1993.
(d) Annualized.
(e) Not Annualized.
See notes to financial statements.
72
B-254
<PAGE>
THE ONE GROUP FAMILY OF MUTUAL FUNDS
- -----------------------------------------------------------------
FINANCIAL HIGHLIGHTS
<TABLE>
<CAPTION>
KENTUCKY MUNICIPAL BOND FUND
--------------------------------------------------------------------
MARCH 16,
JANUARY 20, 1995 TO 1995 TO FEBRUARY 1, MARCH 12,
JUNE 30, 1995(a) JUNE 30, 1995 1994, TO 1993, TO
-------------------- ------------- JANUARY 19, JANUARY 31,
FIDUCIARY CLASS A CLASS B(f) 1995(d) 1994(d)(e)
--------- ------- ------------- ----------- ------------
<S> <C> <C> <C> <C> <C>
NET ASSET VALUE,
BEGINNING OF PERIOD . . . . . . . . $ 9.49 $ 9.49 $ 9.75 $ 10.45 $ 10.00
------- ------ ------ ------- -------
Investment Activities
Net investment income . . . . . . 0.20 0.19 0.14 0.41 0.36
Net realized and unrealized gains
(losses) from investments . . . 0.43 0.44 0.12 (0.95) 0.43
------- ------ ------ ------- -------
Total from Investment Activities . . 0.63 0.63 0.26 (0.54) 0.79
------- ------ ------ ------- -------
Distributions
Net investment income . . . . . . (0.20) (0.19) (0.14) (0.42) (0.34)
------- ------ ------ ------- -------
Total Distributions . . . . . . . . . (0.20) (0.19) (0.14) (0.42) (0.34)
------- ------ ------ ------- -------
NET ASSET VALUE,
END OF PERIOD . . . . . . . . . . . $ 9.92 $ 9.93 $ 9.87 $ 9.49 $ 10.45
======= ====== ====== ======= =======
Total Return (Excludes Sales Charge). 6.56%(b) 5.66%(b) 2.63%(b) -5.17%(b) 8.05%(b)
RATIOS/SUPPLEMENTARY DATA:
Net Assets at end of period (000) . $32,520 $8,818 $ 79 $41,953 $64,663
Ratio of expenses to average net
assets . . . . . . . . . . . . 0.65%(c) 0.90%(c) 1.58%(c) 1.03%(c) 0.70%(c)
Ratio of net investment income to
average net assets . . . . . . 4.70%(c) 4.44%(c) 3.89%(c) 4.27%(c) 4.19%(c)
Ratio of expenses to average net
assets * . . . . . . . . . . . 0.97%(c) 1.33%(c) 2.21%(c) 1.05%(c) 0.91%(c)
Ratio of net investment income to
average net assets * . . . . . 4.38%(c) 4.01%(c) 3.25%(c) 4.25%(c) 3.98%(c)
Portfolio Turnover . . . . . . . . 19.75% 19.75% 19.75% 10.00% 5.00%
</TABLE>
- -------------
* During the period the investment advisory, 12b-1, and administration fees
were voluntarily reduced. If such voluntary fee reductions
had not occurred, the ratios would have been as indicated.
(a) Period from date merged.
(b) Not Annualized.
(c) Annualized.
(d) Audited by other auditors.
(e) Period from initial public investment.
(f) Class B Shares commenced offering on March 16, 1995.
See notes to financial statements.
73
B-255
<PAGE>
THE ONE GROUP FAMILY OF MUTUAL FUNDS
- -----------------------------------------------------------------
FINANCIAL HIGHLIGHTS
<TABLE>
<CAPTION>
OHIO MUNICIPAL BOND FUND
--------------------------------------------------------------------------
YEAR ENDED JUNE 30,
--------------------------------------------------------------------------
1995 1994
------------------------------- ------------------------------------
FIDUCIARY CLASS A CLASS B FIDUCIARY CLASS A CLASS B (a)
--------- ------- ------- --------- ------- -----------
<S> <C> <C> <C> <C> <C> <C>
NET ASSET VALUE,
BEGINNING OF PERIOD . . . . $ 10.58 $10.61 $10.68 $ 11.11 $ 11.13 $11.31
------- ------- ------ ------- ------- ------
Investment Activities
Net investment income . . . 0.55 0.53 0.43 0.51 0.50 0.17
Net realized and unrealized
gains (losses) from
investments . . . . . . 0.07 0.07 0.07 (0.50) (0.48) (0.62)
------- ------- ------ ------- ------- -----
Total from Investment
Activities . . . . . . . . 0.62 0.60 0.50 0.01 0.02 (0.45)
------- ------- ------ ------- ------- -----
Distributions
Net investment income . . . (0.55) (0.51) (0.43) (0.52) (0.50) (0.17)
In excess of net investment
income . . . . . . . . (0.02) (0.02) (0.01)
In excess of net realized
gains . . . . . . . . . (0.02) (0.02)
------- ------- ------ ------- ------- ------
Total Distributions . . . . . (0.55) (0.53) (0.43) (0.54) (0.54) (0.18)
------- ------- ------ ------- ------- ------
NET ASSET VALUE,
END OF PERIOD . . . . . . . $ 10.65 $10.68 $10.75 $ 10.58 $ 10.61 $10.68
======= ======= ====== ======= ======= ======
Total Return (Excludes
Sales Charge) . . . . . . . 6.07% 5.79% 5.17% 0.07% (0.05)% (4.02)%(e)
RATIOS/SUPPLEMENTARY DATA:
Net Assets at end of
period (000) . . . . . $79,993 $12,006 $3,209 $93,261 $14,883 $2,043
Ratio of expenses to
average net assets . . . 0.58% 0.82% 1.48% 0.53% 0.78% 1.28%(d)
Ratio of net investment
income to average net
assets . . . . . . . . 5.29% 5.01% 4.40% 4.76% 4.63% 4.23%(d)
Ratio of expenses to average
net assets * . . . . . . 0.91% 1.25% 1.91% 0.86% 1.21% 1.68%(d)
Ratio of net investment income
to average net assets *. 4.96% 4.58% 3.97% 4.43% 4.20% 3.83%(d)
Portfolio Turnover . . . . 77.69% 77.69% 77.69% 16.77% 16.77% 16.77%
<CAPTION>
OHIO MUNICIPAL BOND FUND
-------------------------------------------------
YEAR ENDED JUNE 30,
-------------------------------------------------
1993 1992
-------------------- --------------------------
FIDUCIARY CLASS A FIDUCIARY (b) CLASS A (c)
--------- ------- ------------- -----------
<S> <C> <C> <C> <C>
NET ASSET VALUE,
BEGINNING OF PERIOD . . . . $ 10.48 $ 10.48 $ 10.00 $10.29
------- ------- ------- ------
Investment Activities
Net investment income . . . 0.54 0.52 0.56 0.20
Net realized and unrealized
gains (losses) from
investments . . . . . . 0.62 0.64 0.47 0.21
------- ------- ------- ------
Total from Investment
Activities . . . . . . 1.16 1.16 1.03 0.41
------- ------- ------- ------
Distributions
Net investment income . . . (0.53) (0.51) (0.55) (0.22)
In excess of net investment
income . . . . . . . . .
In excess of net realized
gains . . . . . . . . .
------- ------- ------- ------
Total Distributions . . . . . (0.53) (0.51) (0.55) (0.22)
------- ------- ------- ------
NET ASSET VALUE,
END OF PERIOD . . . . . . . $ 11.11 $ 11.13 $10.48 $10.48
======= ======= ======= ======
Total Return (Excludes Sales
Charge) . . . . . . . . . . 11.43% 11.40% 10.64%(d) 10.85%(d)
RATIOS/SUPPLEMENTARY DATA:
Net Assets at end of
period (000) . . . . . . $74,792 $13,092 $45,199 $ 41
Ratio of expenses to average
net assets . . . . . . . 0.55% 0.77% 0.63%(d) 1.01%(d)
Ratio of net investment
income to average net
assets . . . . . . . . . 5.14% 4.85% 5.61%(d) 5.16%(d)
Ratio of expenses to average
net assets * . . . . . . 0.94% 1.25% 1.21%(d) 1.40%(d)
Ratio of net investment
income to average net
assets * . . . . . . . . 4.75% 4.37% 5.03%(d) 4.77%(d)
Portfolio Turnover . . . . 26.67% 26.67% 9.78% 9.78%
</TABLE>
- -----------------------
* During the period the investment advisory, 12b-1, and administration fees
were voluntarily reduced. If such voluntary fee reductions had not
occurred, the ratios would have been as indicated.
(a) Class B Shares commenced offering on January 14, 1994.
(b) The Fund commenced operations on July 2, 1991.
(c) Class A Shares commenced offering on February 18, 1992.
(d) Annualized.
(e) Not Annualized.
See notes to financial statements.
74
B-256
<PAGE>
REPORT OF INDEPENDENT ACCOUNTANTS
- -----------------------------------------------------------------
THE ONE GROUP FAMILY OF MUTUAL FUNDS JUNE 30, 1995
To the Shareholders and Board of
Trustees of The One Group:
We have audited the accompanying statements of assets and liabilities of the
Government ARM Fund, the Limited Volatility Bond Fund, the Intermediate Bond
Fund, the Government Bond Fund, the Income Bond Fund, the Intermediate
Tax-Free Bond Fund, the Tax-Free Bond Fund, the Kentucky Municipal Bond Fund,
and the Ohio Municipal Bond Fund (nine series of The One Group), including
the schedule of portfolio investments, as of June 30, 1995, and the related
statements of operations, the statements of changes in net assets and
financial highlights for each of the periods indicated herein. These
financial statements and financial highlights are the responsibility of The
One Group's management. Our responsibility is to express an opinion on these
financial statements and financial highlights based on our audits. The
financial highlights for the year ended June 30, 1993 and for the period from
February 28, 1992 (commencement of operations) to June 30, 1992 for the
Intermediate Bond Fund were audited by other auditors whose report dated
August 25, 1993 expressed an unqualified opinion on the financial highlights.
The statement of operations for the period from February 1, 1994 to January
19, 1995 and the statement of changes in net assets and the financial
highlights for the period from February 1, 1994 to January 19, 1995 and the
period from March 12, 1993 (commencement of operations) to January 31, 1994
for the Kentucky Municipal Bond Fund were audited by other auditors whose
report dated April 6, 1995 expressed an unqualified opinion on these
statements and the financial highlights.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to
obtain reasonable assurance about whether the financial statements and
financial highlights are free of material misstatement. An audit includes
examining, on a test basis, evidence supporting the amounts and disclosures
in the financial statements. Our procedures included confirmation of
securities owned as of June 30, 1995 by correspondence with the custodian and
brokers. An audit also includes assessing the accounting principles used and
significant estimates made by management, as well as evaluating the overall
financial statement presentation. We believe that our audits provide a
reasonable basis for our opinion.
In our opinion, the financial statements and financial highlights referred to
above present fairly, in all material respects, the financial position of the
Government ARM Fund, the Limited Volatility Bond Fund, the Intermediate Bond
Fund, the Government Bond Fund, the Income Bond Fund, the Intermediate
Tax-Free Bond Fund, the Tax-Free Bond Fund, the Kentucky Municipal Bond Fund,
and the Ohio Municipal Bond Fund of The One Group as of June 30, 1995, the
results of their operations, the changes in their net assets, and the
financial highlights for each of the periods indicated herein, in conformity
with generally accepted accounting principles.
Coopers & Lybrand L.L.P.
Boston, Massachusetts
August 18, 1995
75
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APPENDIX
The nationally recognized statistical rating organizations (individually, an
"NRSRO") that may be utilized by the Advisers or the Sub-Advisers with regard
to portfolio investments for the Funds include Moody's Investors Service,
Inc. ("Moody's"), Standard & Poor's Corporation ("S&P"), Duff & Phelps, Inc.
("Duff"), Fitch Investors Service, Inc. ("Fitch"), IBCA Limited and its
affiliate, IBCA Inc. (collectively, "IBCA"), and Thomson BankWatch, Inc.
("Thomson"). Set forth below is a description of the relevant ratings of
each such NRSRO. The NRSROs that may be utilized by the Advisers or the
Sub-Advisers and the description of each NRSRO's ratings is as of the date of
this Statement of Additional Information, and may subsequently change.
Long-Term Debt Ratings (may be assigned, for example, to corporate and
municipal bonds)
Description of the four highest long-term debt ratings by Moody's (Moody's
applies numerical modifiers (1, 2, and 3) in each rating category to indicate
the security's ranking within the category):
Aaa Bonds which are rated Aaa are judged to be of the best
quality. They carry the smallest degree of investment risk
and are generally referred to as "gilt edged." Interest
payments are protected by a large or by an exceptionally
stable margin and principal is secure. While the various
protective elements are likely to change, such changes as can
be visualized are most unlikely to impair the fundamentally
strong position of such issues.
Aa Bonds which are rated Aa are judged to be of high quality by
all standards. Together with the Aaa group they comprise what
are generally known as high grade bonds. They are rated lower
than the best bonds because margins of protection may not be
as large as in Aaa securities or fluctuation of protective
elements may be of greater amplitude or there may be other
elements present which make the long-term risk appear somewhat
larger than in Aaa securities.
A Bonds which are rated A possess many favorable investment
attributes and are to be considered as upper-medium-grade
obligations. Factors giving security to principal and
interest are considered adequate, but elements may be present
which suggest a susceptibility to impairment some time in the
future.
Baa Bonds which are rated Baa are considered as medium grade
obligations, i.e., they are neither highly protected nor
poorly secured. Interest payments and principal security
appear adequate for the present but certain protective
elements may be lacking or may be characteristically
unreliable over any great length of
B-258
<PAGE>
time. Such bonds lack outstanding investment characteristics
and in fact have speculative characteristics as well.
Description of the four highest long-term debt ratings by S&P (S&P may apply
a plus (+) or minus (-) to a particular rating classification to show
relative standing within that classification):
AAA Debt rated AAA has the highest rating assigned by S&P.
Capacity to pay interest and repay principal is extremely
strong.
AA Debt rated AA has a very strong capacity to pay interest and
repay principal and differs from the higher rated issues only
in small degree.
A Debt rated A has a strong capacity to pay interest and repay
principal although it is somewhat more susceptible to the
adverse effects of changes in circumstances and economic
conditions than debt in higher rated categories.
BBB Debt rated BBB is regarded as having an adequate capacity to
pay interest and repay principal. Whereas it normally
exhibits adequate protection parameters, adverse economic
conditions or changing circumstances are more likely to lead
to a weakened capacity to pay interest and repay principal for
debt in this category than in higher rated categories.
Description of the three highest long-term debt ratings by Duff:
AAA Highest credit quality. The risk factors are negligible being
only slightly more than for risk-free U.S. Treasury debt.
AA+ High credit quality Protection factors are strong.
AA Risk is modest but may vary slightly from time to time because
of economic conditions.
A+ Protection factors are average but adequate. However, risk
factors are more variable and greater in periods of economic
stress.
Description of the three highest long-term debt ratings by Fitch (plus or
minus signs are used with a rating symbol to indicate the relative position
of the credit within the rating category):
AAA Bonds considered to be investment grade and of the highest
credit quality. The obligor has an exceptionally strong
ability to pay interest and repay principal, which is unlikely
to be affected by reasonably foreseeable events.
B-259
<PAGE>
AA Bonds considered to be investment grade and of very high
credit quality. The obligor's ability to pay interest and
repay principal is very strong, although not quite as strong
as bonds rated "AAA." Because bonds rated in the "AAA" and
"AA" categories are not significantly vulnerable to
foreseeable future developments, short-term debt of these
issues is generally rated "[-]+."
A Bonds considered to be investment grade and of high credit
quality. The obligor's ability to pay interest and repay
principal is considered to be strong, but may be more
vulnerable to adverse changes in economic conditions and
circumstances than bonds with higher ratings.
IBCA's description of its three highest long-term debt ratings:
AAA Obligations for which there is the lowest expectation of
investment risk. Capacity for timely repayment of principal
and interest is substantial such that adverse changes in
business, economic or financial conditions are unlikely to
increase investment risk significantly.
AA Obligations for which there is a very low expectation of
investment risk. Capacity for timely repayment of principal
and interest is substantial. Adverse changes in business,
economic, or financial conditions may increase investment risk
albeit not very significantly.
A Obligations for which there is a low expectation of investment
risk. Capacity for timely repayment of principal and interest
is strong, although adverse changes in business, economic or
financial conditions may lead to increased investment risk.
Short-Term Debt Ratings (may be assigned, for example, to commercial paper,
master demand notes, bank instruments, and letters of credit)
Moody's description of its three highest short-term debt ratings:
Prime-1 Issuers rated Prime-1 (or supporting institutions) have a
superior capacity for repayment of senior short-term
promissory obligations. Prime-1 repayment capacity will
normally be evidenced by many of the following
characteristics:
-Leading market positions in well-established
industries.
-High rates of return on funds employed.
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<PAGE>
-Conservative capitalization structures with
moderate reliance on debt and ample asset
protection.
-Broad margins in earnings coverage of fixed
financial charges and high internal cash
generation.
-Well-established access to a range of financial
markets and assured sources of alternate liquidity.
Prime-2 Issuers rated Prime-2 (or supporting institutions) have a
strong capacity for repayment of senior short-term debt
obligations. This will normally be evidenced by many of
the characteristics cited above but to a lesser degree.
Earnings trends and coverage ratios, while sound, may be
more subject to variation. Capitalization characteristics,
while still appropriate, may be more affected by external
conditions. Ample alternate liquidity is maintained.
Prime-3 Issuers rated Prime-3 (or supporting institutions) have
an acceptable ability for repayment of senior short-term
obligations. The effect of industry characteristics and
market compositions may be more pronounced. Variability in
earnings and profitability may result in changes in the
level of debt protection measurements and may require
relatively high financial leverage. Adequate alternate
liquidity is maintained.
S&P's description of its three highest short-term debt ratings:
A-1 This designation indicates that the degree of safety regarding
timely payment is strong. Those issues determined to have
extremely strong safety characteristics are denoted with a
plus sign (+).
A-2 Capacity for timely payment on issues with this designation is
satisfactory. However, the relative degree of safety is not
as high as for issues designated "A-1."
A-3 Issues carrying this designation have adequate capacity for
timely payment. They are, however, more vulnerable to the
adverse effects of changes in circumstances than obligations
carrying the higher designations.
B-261
<PAGE>
Duff's description of its three highest short-term debt ratings (Duff
incorporates gradations of "1+" (one plus) and "1-" (one minus) to assist
investors in recognizing quality differences within the highest rating
category):
Duff 1+ Highest certainty of timely payment. Short-term liquidity,
including internal operating factors and/or access to
alternative sources of funds, is outstanding, and safety is
just below risk-free U.S. Treasury short-term obligations.
Duff 1 Very high certainty of timely payment. Liquidity factors are
excellent and supported by good fundamental protection
factors. Risk factors are minor.
Duff 1- High certainty of timely payment. Liquidity factors are
strong and supported by good fundamental protection factors.
Risk factors are very small.
Duff 2 Good certainty of timely payment. Liquidity factors and
company fundamentals are sound. Although ongoing funding
needs may enlarge total financing requirements, access to
capital markets is good. Risk factors are small.
Duff 3 Satisfactory liquidity and other protection factors qualify
issue as to investment grade. Risk factors are larger and
subject to more variation. Nevertheless, timely payment is
expected.
Fitch's description of its three highest short-term debt ratings:
F-1+ Exceptionally Strong Credit Quality. Issues assigned this
rating are regarded as having the strongest degree of
assurance for timely payment.
F-1 Very Strong Credit Quality. Issues assigned this rating
reflect an assurance of timely payment only slightly less in
degree than issues rated F-1+.
F-2 Good Credit Quality. Issues assigned this rating have a
satisfactory degree of assurance for timely payment, but the
margin of safety is not as great as for issues assigned F-1+
or F-1 ratings.
F-3 Fair Credit Quality. Issues assigned this rating have
characteristics suggesting that the degree of assurance for
timely payment is adequate, however, near-term adverse changes
could cause these securities to be rated below investment
grade.
B-262
<PAGE>
IBCA's description of its three highest short-term debt ratings:
A+ Obligations supported by the highest capacity for timely
repayment.
A1 Obligations supported by a very strong capacity for timely
repayment.
A2 Obligations supported by a strong capacity for timely
repayment, although such capacity may be susceptible to
adverse changes in business, economic or financial conditions.
Short-Term Loan/Municipal Note Ratings
Moody's description of its two highest short-term loan/municipal
note ratings:
MIG-1/VMIG-1 This designation denotes best quality. There is present
strong protection by established cash flows, superior
liquidity support or demonstrated broad-based access to
the market for refinancing.
MIG-2/VMIG-2 This designation denotes high quality. Margins of
protection are ample although not so large as in the
preceding group.
S&P's description of its two highest municipal note ratings:
SP-1 Very strong or strong capacity to pay principal and
interest. Those issues determined to possess overwhelming
safety characteristics will be given a plus (+)
designation.
SP-2 Satisfactory capacity to pay principal and interest.
Short-Term Debt Ratings
Thomson BankWatch, Inc. ("TBW") ratings are based upon a qualitative and
quantitative analysis of all segments of the organization including, where
applicable, holding company and operating subsidiaries.
BankWatch(TM) Ratings do not constitute a recommendation to buy or sell
securities of any of these companies. Further, BankWatch does not suggest
specific investment criteria for individual clients.
The TBW Short-Term Ratings apply to commercial paper, other senior short-term
obligations and deposit obligations of the entities to which the rating has
been assigned.
B-263
<PAGE>
The TBW Short-Term Ratings apply only to unsecured instruments that have a
maturity of one year or less.
The TBW Short-Term Ratings specifically assess the likelihood of an untimely
payment of principal or interest.
TBW-1 The highest category; indicates a very high degree of
likelihood that principal and interest will be paid on a
timely basis.
TBW-2 The second highest category; while the degree of safety
regarding timely repayment of principal and interest is
strong, the relative degree of safety is not as high as for
issues rated "TBW-1."
TBW-3 The lowest investment grade category; indicates that while
more susceptible to adverse developments (both internal and
external) than obligations with higher ratings, capacity to
service principal and interest in a timely fashion is
considered adequate.
TBW-4 The lowest rating category; this rating is regarded as
non-investment grade and therefore speculative.
*As of June 30, 1995, the Fund had not commenced operations.
B-264
<PAGE>
PARAGON PORTFOLIO
4900 Sears Tower
Chicago, Illinois 60606
------------------------
STATEMENT OF ADDITIONAL INFORMATION -- MARCH 30, 1995
CLASS A AND CLASS B SHARES
---------------------
Paragon Portfolio (the "Trust") is an open-end, management investment
company (a mutual fund) consisting of eleven portfolios, including the following
funds included in this Statement of Additional Information (the "Funds"):
Paragon Treasury Money Market Fund;
Paragon Short-Term Government Fund;
Paragon Intermediate-Term Bond Fund;
Paragon Louisiana Tax-Free Fund;
Paragon Value Growth Fund;
Paragon Value Equity Income Fund;
Paragon Gulf South Growth Fund.
Paragon Gulf South Growth Fund is a non-diversified portfolio; the
portfolios of the other Funds are diversified.
Premier Investment Advisors, L.L.C. ("Premier") serves as the investment
adviser to Paragon Short-Term Government Fund, Paragon Intermediate-Term Bond
Fund, Paragon Louisiana Tax-Free Fund, Paragon Value Growth Fund, Paragon Value
Equity Income Fund and Paragon Gulf South Growth Fund and as subadviser to
Paragon Treasury Money Market Fund. Goldman Sachs Asset Management ("GSAM"), a
separate operating division of Goldman, Sachs & Co. ("Goldman Sachs"), serves as
the investment adviser to Paragon Treasury Money Market Fund. Premier and GSAM
are sometimes each referred to as an "Adviser" or jointly as the "Advisers".
Goldman Sachs serves as the Trust's distributor and transfer agent.
This Statement of Additional Information is not a prospectus and should be
read in conjunction with the Prospectus of Paragon Portfolio dated March 30,
1995, as amended and supplemented from time to time, a copy of which may be
obtained without charge by calling toll-free at 800-525-7907 or by writing
Goldman Sachs, 4900 Sears Tower, Chicago, Illinois 60606.
<PAGE>
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE IN
STATEMENT OF
ADDITIONAL
INFORMATION
------------
<S> <C>
Investment Policies and Practices of the Funds...................................................... B-3
Investment Restrictions............................................................................. B-13
Management.......................................................................................... B-16
The Advisers, Administrator, Distributor and Transfer Agent......................................... B-18
Class B Distribution Plan........................................................................... B-21
Portfolio Transactions.............................................................................. B-22
Net Asset Value..................................................................................... B-25
Shareholder Investment Account...................................................................... B-26
Redemptions......................................................................................... B-26
Calculation of Performance Quotations............................................................... B-26
Tax Information..................................................................................... B-33
Organization and Capitalization..................................................................... B-37
Shareholder and Trustee Liability................................................................... B-38
Custodian........................................................................................... B-38
Independent Accountants............................................................................. B-39
Financial Statements................................................................................ B-39
Appendix............................................................................................ 40
</TABLE>
B-2
<PAGE>
INVESTMENT POLICIES AND PRACTICES OF THE FUNDS
The following discussion elaborates on the description of each Fund's
investment policies and practices contained in the Prospectus:
CORPORATE DEBT SECURITIES
Included in the corporate debt securities in which certain Funds may invest
are preferred, preference and convertible stocks. Preference stocks are stocks
that have many characteristics of preferred stocks, but are typically junior to
an existing class of preferred stocks.
When and if available, corporate debt securities may be purchased at a
discount from face value.
U.S. GOVERNMENT SECURITIES
A Fund may also invest in separately traded principal and interest
components of securities issued or guaranteed by the U.S. Treasury. The
principal and interest components of selected securities are traded
independently under the Separate Trading of Registered Interest and Principal of
Securities program ("STRIPS"). Under the STRIPS program, the principal and
interest components are individually numbered and separately issued by the U.S.
Treasury at the request of depository financial institutions, which then trade
the component parts independently.
CUSTODIAL RECEIPTS
A Fund, other than Paragon Treasury Money Market Fund, may also acquire
securities which, although not considered U.S. Government securities for certain
purposes, are issued or guaranteed as to principal and interest by the U.S.
Government, its agencies, authorities and instrumentalities in the form of
custodial receipts that evidence ownership of future interest payments,
principal payments or both on certain U.S. Treasury notes or bonds. Such notes
and bonds are held in custody by a bank on behalf of the owners. These custodial
receipts are known by various names, including "Treasury Receipts," "Treasury
Investment Growth Receipts" ("TIGRs"), and "Certificates of Accrual on Treasury
Securities" ("CATS").
FOREIGN SECURITIES
Paragon Intermediate-Term Bond Fund may invest in securities of foreign
issuers denominated in U.S. dollars. Paragon Value Growth Fund and Paragon Value
Equity Fund may invest in securities of foreign issuers in the form of American
Depository Receipts ("ADRs"). Investment in foreign issuers involves certain
special considerations, including those set forth below, which are not typically
associated with investment in U.S. issuers. Since foreign companies are not
generally subject to uniform accounting, auditing and financial reporting
standards, practices and requirements comparable to those applicable to U.S.
companies, there may be less publicly available information about a foreign
company than about a domestic company. Volume and liquidity in most foreign bond
markets are less than in the United States and, at times, volatility of price
can be greater than in the United States.
There is generally less government supervision and regulation of securities
exchanges, brokers and listed companies in foreign countries than in the United
States. Mail service between the United States and foreign countries may be
slower or less reliable than within the United States, thus increasing the risk
on some transactions of delayed settlements of portfolio transactions or loss of
certificates for portfolio securities. In addition, with respect to certain
foreign countries, there is the possibility of expropriation or confiscatory
taxation, political or social instability, or diplomatic developments which
could affect a Fund's investments in those countries. Moreover, individual
foreign economies may differ favorably or unfavorably from the U.S. economy in
such respects as growth of gross national product, rate of inflation, capital
reinvestment, resource self-sufficiency and balance of payments position. A Fund
will limit its equity investments in "passive foreign investment companies,"
which could in certain circumstances subject the Fund to disadvantageous U.S.
tax treatment on such investments.
B-3
<PAGE>
ADRs are receipts issued by a U.S. bank or trust company which evidence
ownership of underlying securities of foreign corporations. ADRs are traded on
domestic exchanges or in the U.S. over-the-counter market and, are in registered
form. To the extent that a Fund acquires ADRs through banks which do not have a
contractual relationship with the issuer of the underlying security to issue and
service such ADRs, there may be an increased possibility that the Fund would not
become aware of and be able to respond in a timely manner to corporate actions
such as stock splits or rights offerings involving the foreign issuer. In
addition, the lack of information may result in inefficiencies in the valuation
of such instruments.
MORTGAGE-RELATED SECURITIES
MORTGAGE PASS-THROUGH SECURITIES. Interests in pools of mortgage-related
securities differ from other forms of debt securities, which normally provide
for periodic payment of interest in fixed amounts with principal payments at
maturity or specified call dates. Instead, these securities generally provide a
monthly payment which consists of both interest and principal payments. In
effect, these payments are a "pass-through" of the monthly payments made by the
individual borrowers on their residential mortgage loans, net of any fees paid
to the issuer or guarantor of such securities. Additional payments are caused by
prepayments of principal resulting from the sale, refinancing or foreclosure of
the underlying residential property, net of fees or costs which may be incurred.
Some mortgage-related securities (such as securities issued by the Government
National Mortgage Association) are described as "modified pass-through." These
securities entitle the holder to receive all interest and principal payments
owed on the mortgages in the mortgage pool, net of certain fees, at the
scheduled payment dates regardless of whether the mortgagor actually makes the
payment.
The principal governmental guarantor of mortgage-related securities is the
Government National Mortgage Association ("GNMA"). GNMA is a wholly-owned U.S.
Government corporation within the Department of Housing and Urban Development.
GNMA is authorized to guarantee, with the full faith and credit of the U.S.
Government, the timely payment of principal and interest on securities issued by
institutions approved by GNMA (such as savings and loan institutions, commercial
banks and mortgage bankers) and backed by pools of FHA-insured or VA-guaranteed
mortgages.
Government-related guarantors (i.e., whose guarantees are not backed by the
full faith and credit of the U.S. Government) include the Federal National
Mortgage Association ("FNMA") and the Federal Home Loan Mortgage Corporation
("FHLMC"). FNMA is a government-sponsored corporation owned entirely by private
stockholders. It is subject to general regulation by the Secretary of Housing
and Urban Development. FNMA purchases conventional residential mortgages (i.e.,
mortgages not insured or guaranteed by any governmental agency) from a list of
approved seller/servicers which include state and federally-chartered savings
and loan associations, mutual savings banks, commercial banks and credit unions
and mortgage bankers. Pass-through securities issued by FNMA are guaranteed as
to timely payment by FNMA of principal and interest but are not backed by the
full faith and credit of the U.S. Government.
FHLMC is a corporate instrumentality of the U.S. Government and was created
by Congress in 1970 for the purpose of increasing the availability of mortgage
credit for residential housing. FHLMC issues Participation Certificates ("PCs")
which represent interests in conventional mortgages from FHLMC's national
portfolio. FHLMC guarantees timely payment of interest, ultimate collection of
principal and, in some cases, timely collection of principal, but FHLMC PCs are
not backed by the full faith and credit of the U.S. Government.
Commercial banks, savings and loan institutions, private mortgage insurance
companies, mortgage bankers and other secondary market issuers also create
pass-through pools of conventional residential mortgage loans. Such issuers may
also be the originators and/or servicers of the underlying mortgage loans as
well as the guarantors of the mortgage-related securities. Pools created by such
non-governmental issuers generally offer a higher rate of interest than
government and government-related pools because there are no direct or indirect
government or agency guarantees of payments in the former pools. However, timely
payment of interest and principal of mortgage loans in these pools
B-4
<PAGE>
may be supported by various forms of insurance or guarantees, including
individual loan, title, pool and hazard insurance and letters of credit. The
insurance and guarantees are issued by governmental entities, private insurers
and the mortgage poolers. Such insurance and guarantees and the creditworthiness
of the issuers thereof will be considered in determining whether a
mortgage-related security meets a Fund's investment quality standards. There can
be no assurance that the private insurers or guarantors can meet their
obligations under the insurance policies or guarantee arrangements.
Mortgage-related securities without insurance or guarantees may be purchased by
a Fund if the Adviser, after an examination of the loan experience and practices
of the originator/servicers and poolers, determines that the securities meet the
Fund's quality standards. Although the market for such securities is becoming
increasingly liquid, mortgage-related securities issued by certain private
organizations may not be readily marketable. A Fund will not purchase
mortgage-related securities or any other assets which in the Adviser's opinion
are illiquid if, as a result, more than 15% of the value of a Fund's net assets
will be illiquid.
COLLATERALIZED MORTGAGE OBLIGATIONS (CMOS). A CMO is a hybrid security,
having characteristics of both a mortgage-backed bond and a mortgage
pass-through security. As with a bond, interest and prepaid principal on CMOs
are paid, in most cases, semiannually. CMOs may be collateralized by whole
mortgage loans or private mortgage pass-through securities but are more
typically collateralized by portfolios of mortgage pass-through securities
guaranteed by GNMA, FHLMC, or FNMA, and the income streams on such securities.
CMOs are only the obligation of their issuers, and in the event of default there
is no assurance that the collateral, which is typically the issuer's only asset,
will be sufficient to pay principal and interest.
CMOs are structured into multiple classes, each bearing a different stated
maturity. Actual maturity and average life will depend upon the prepayment
experience of the collateral. Many CMOs provide for a modified form of call
protection through a de facto breakdown of the underlying pool of mortgages
according to how quickly the loans are repaid. Under a common structure, monthly
payments of principal received from the pool of underlying mortgages, including
prepayments, are first returned to investors holding the shortest maturity
class. Investors holding the longer maturity class receive principal only after
the first class has been retired. An investor is partially protected against an
earlier than desired return of principal because of the sequential payments.
In a typical CMO transaction, a corporation ("issuer") issues multiple
series, (e.g., A, B, C, Z) of CMO bonds ("Bonds"). Proceeds of the Bond offering
are used to purchase mortgages or mortgage pass-through certificates
("Collateral"). The Collateral is pledged to a third party trustee as security
for the Bonds. Principal and interest payments from the collateral are used to
pay principal on the Bonds in the order A, B, C, Z. The Series A, B, and C Bonds
all bear current interest. Interest on the Series Z Bond is accrued and added to
principal and a like amount is paid as principal on the Series A, B, or C Bond
currently being paid off. When the Series A, B, and C Bonds are paid in full,
interest and principal on the Series Z Bond begins to be paid currently. Other
types of CMO structures may provide for principal payments to two or more
classes concurrently on a proportionate or disproportionate basis. With some
CMOs, the issuer serves as a conduit to allow loan originators (primarily
builders or savings and loan associations) to borrow against their loan
portfolios.
FHLMC COLLATERALIZED MORTGAGE OBLIGATIONS. FHLMC CMOs are debt obligations
of FHLMC issued in multiple classes having different maturity dates which are
secured by the pledge of a pool of conventional mortgage loans purchased by
FHLMC. Unlike FHLMC pass-through securities, payments of principal and interest
on the CMOs are made semiannually, as opposed to monthly. The amount of
principal payable on each semiannual payment date is determined in accordance
with FHLMC's mandatory sinking fund schedule, which, in turn, is equal to
approximately 100% of the FHA prepayment experience applied to the mortgage
collateral pool. All sinking fund payments in the CMOs are allocated to the
retirement of the individual classes of bonds in the order of their stated
maturities. Payments of principal on the mortgage loans in the collateral pool
in excess of the amount of FHLMC's minimum sinking fund obligation for any
payment date are paid to the holders of the CMOs as additional sinking fund
payments. Because of the "pass-through" nature of all principal
B-5
<PAGE>
payments received on the collateral pool in excess of FHLMC's minimum sinking
fund requirement, the rate at which principal of the CMOs is actually repaid is
likely to be such that each class of bonds will be retired in advance of its
scheduled maturity date.
If collection of principal (including prepayments) on the mortgage loans
during any semiannual payment period is not sufficient to meet FHLMC's minimum
sinking fund obligation on the next sinking fund payment date, FHLMC agrees to
make up the deficiency from its general funds. Criteria for the mortgage loans
in the pool backing the CMOs are identical to those of FHLMC pass-through
securities. FHLMC has the right to substitute collateral in the event of
delinquencies and/or defaults.
REAL ESTATE MORTGAGE INVESTMENT CONDUITS. A CMO vehicle that qualifies as a
"real estate mortgage investment conduit" ("REMIC") under the Internal Revenue
Code of 1986, as amended (the "Code") invests in certain mortgages principally
secured by interests in real property and other permitted investments. Investors
may purchase beneficial interests in REMICs, which are known as "regular"
interests or "residual" interests. Such beneficial interests in REMICs may offer
a higher yield than U.S. Government securities, but they may also be subject to
greater price fluctuations and credit risk. In addition, interests in REMICs
typically will be issued in a variety of classes or series, which may have
different maturities and may be retired in sequence. Under the Code, CMOs
created after 1991 will generally be required to qualify as REMICs in order for
the issuing entity to avoid being subject to federal income tax as a "taxable
mortgage pool."
Some REMIC interests are not government securities and are not supported in
any way by any governmental agency or instrumentality. In the event of a default
by an issuer of the assets of such a REMIC, there is no assurance that the
assets of the REMIC will be sufficient to pay principal and interest. It is
possible that there will be limited opportunities for trading REMIC interests in
the over-the-counter market, the depth and liquidity of which will vary from
issue to issue and from time to time. Due to possible unfavorable tax
consequences, no Fund will purchase residual interests in REMICs under present
tax law.
OTHER MORTGAGE-RELATED SECURITIES. The Advisers expect that governmental,
government-related or private entities may create mortgage loan pools and other
mortgage-related securities offering mortgage pass-through and
mortgage-collateralized investments in addition to those described above. The
mortgages underlying these securities may include alternative mortgage
instruments, that is, mortgage instruments whose principal or interest payments
may vary or whose terms to maturity may differ from customary long-term fixed
rate mortgages. As new types of mortgage-related securities are developed and
offered to investors, the Advisers will, consistent with a Fund's investment
objectives, policies and quality standards and, subject to the review and
approval of the Trust's Board of Trustees, consider making investments in such
new types of mortgage-related securities.
OTHER ASSET-BACKED SECURITIES. A Fund may invest in asset-backed
securities. Such securities are often subject to more rapid repayment than their
stated maturity date would indicate as a result of the pass-through of
prepayments of principal on the underlying loans. During periods of declining
interest rates, prepayment of loans underlying asset-backed securities can be
expected to accelerate. Accordingly, a Fund's ability to maintain positions in
such securities will be affected by reductions in the principal amount of such
securities resulting from prepayments, and its ability to reinvest the returns
of principal at comparable yields is subject to generally prevailing interest
rates at that time.
Credit card receivables are generally unsecured and the debtors on such
receivables are entitled to the protection of a number of state and federal
consumer credit laws, many of which give such debtors the right to set-off
certain amounts owed on the credit cards, thereby reducing the balance due.
Automobile receivables generally are secured, but by automobiles rather than
residential real property. Most issuers of automobile receivables permit the
loan servicers to retain possession of the underlying obligations. If the
servicer were to sell these obligations to another party, there is a risk that
the purchaser would acquire an interest superior to that of the holders of the
asset-backed securities. In addition, because of the large number of vehicles
involved in a typical issuance and technical requirements under state laws, the
trustee for the holders of the automobile receivables may
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not have a proper security interest in the underlying automobiles. Therefore,
there is the possibility that, in some cases, recoveries on repossessed
collateral may not be available to support payments on these securities.
Consistent with each Fund's investment objectives and policies and, subject
to the review and approval of the Trust's Board of Trustees, the Funds also may
invest in other types of asset-backed securities.
MUNICIPAL OBLIGATIONS
Municipal Bonds are issued by or on behalf of states, territories and
possessions of the United States and their political subdivisions, agencies and
instrumentalities and the District of Columbia. Paragon Louisiana Tax-Free Fund
will invest primarily in Louisiana Municipal Bonds. The two principal
classifications of Municipal Bonds are "General Obligation" and "Revenue Bonds."
General Obligation Bonds are used to fund a wide range of public projects
including the construction or improvement of schools, highways and roads, water
and sewer systems and a variety of other public purposes. The basic security of
General Obligation Bonds is the issuer's pledge of its faith, credit, and taxing
power for the payment of principal and interest. The taxes that can be levied
for the payment of debt service may be limited or unlimited as to rate or amount
or special assessments.
Revenue Bonds have also been issued to fund a wide variety of capital
projects including: electric, gas, water and sewer systems; highways, bridges
and tunnels; port and airport facilities; colleges and universities; and
hospitals. The principal security for a Revenue Bond is generally the net
revenues derived from a particular facility or group of facilities or, in some
cases, from the proceeds of a special excise tax or other specific revenue
source.
Although the principal security behind Revenue Bonds varies widely, many
provide additional security in the form of a debt service reserve fund. Payments
from such fund may be used to make principal and interest payments on the
issuer's obligations. Lease rental revenue bonds issued by a state or local
authority for capital projects are secured by annual lease rental payments from
the state or locality to the authority sufficient to cover debt service on the
authority's obligations. Housing finance authority issues have a wide range of
security including partially or fully insured, rent subsidized and/or
collateralized mortgages, and/or the net revenues from housing or other public
projects. In addition to a debt service reserve fund, some authorities provide
further security in the form of a state's ability (without obligation) to make
up deficiencies in the debt service reserve fund.
In addition to General Obligation and Revenue Bonds, there are a variety of
hybrid and special types of municipal obligations. There are also numerous
differences in the security of Municipal Bonds both within and between the two
principal classifications described above.
For the purpose of a Fund's investment restrictions, the identification of
the "issuer" of Municipal Bonds which are not General Obligation Bonds is made
by Premier on the basis of the characteristics of the Municipal Bond, the most
significant of which is the source of funds for the payment of principal of, and
interest on such bonds. Although applicable tax law is not entirely clear under
all circumstances, each Fund intends to take the position that it is the tax
owner of a municipal obligation acquired subject to a put option or standby
commitment or acquired or held with certain other types of put rights.
An entire issue of Municipal Bonds may be purchased by one or a small number
of institutional investors such as a Fund. Thus, the issue may not be said to be
publicly offered. Unlike some securities which are not publicly offered,
Municipal Bonds which are not publicly offered may be readily marketable. A
secondary market exists for Municipal Bonds which were not publicly offered
initially.
LOUISIANA
Louisiana's general obligation bonds are currently rated Baa1 by Moody's
Investors Service, Inc. ("Moody's") and A by Standard and Poor's Ratings Group
("S&P"). S&P upgraded Louisiana from BBB+ in December 1990. Both S&P and Moody's
affirmed their ratings for the State in March, 1995.
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Louisiana's ratings reflect an ongoing recovery process from the severe
financial problems which developed after oil prices declined in the mid-to-late
1980s. Also, both rating agencies have commended the State for enacting
constitutional reforms in the fall of 1993 that curb borrowing and require that
non-recurring revenues be applied to debt reduction. However, Louisiana remains
one of the weakest states in terms of its credit fundamentals. While ratings of
individual cities, parishes, agencies and special districts vary, most Louisiana
issuers have been affected to some degree by Louisiana's economy.
Through the oil boom of the late 1970s and early 1980s, Louisiana's labor
force and employment grew steadily, as did its financial position. By June 30,
1981, the General Fund had run several years of operating surpluses, bringing
the ending fund balance to $839.5 million, a sizeable 16% of operating
expenditures. When the oil industry weakened, economic growth slowed and
operating deficits occurred, Louisiana's undesignated General Fund deficit
reached $512 million in fiscal 1988 (ended June 30) and the fund balance was a
negative $377 million.
To address its deficits, Louisiana created the Louisiana Recovery District
in 1988, which sold $979 million revenue bonds secured by (i) the revenues
derived from the Recovery District's 1% statewide sales and use tax, and (ii)
all funds and accounts held under the Recovery District's general bond
resolution and all investment earnings on such funds and accounts. As of
December 31, 1994, the principal amount of all these bonds (including bonds
issued to defease certain portions of the original bond issue) was $486,795
million. Article VI, Section 30.1 of the State Constitution, effective November
3, 1994, prohibits the Recovery District from issuing additional bonds except to
refund bonds at a lower effective interest rate. All bonds of the Recovery
District shall be retired no later than the end of the fiscal year 1998-1999.
During the period from fiscal year 1987-1988 through fiscal year 1993-1994,
Louisiana experienced operating budget deficits in three of the seven fiscal
years. The operating deficit problem was exacerbated by the highly dependent
nature of Louisiana's budget on mineral revenues and the dramatic fluctuations
in oil prices over the last decade.
Louisiana began fiscal year 1988-1989 with a balance of $271 million in the
General Fund and ended the year with an operating surplus which, when combined
with prior year adjustments of $384 million, provided the state with an ended
balance in the General Fund of $655 million. Fiscal year ended 1989-1990 ended
with a small operating surplus of $47 million which, when added to the $655
million balance from the prior fiscal year, resulted in an accumulated surplus
of $702 million as of June 30, 1990.
In fiscal year 1990-1991, Louisiana ended the fiscal year with an
accumulated surplus in the General Fund of $417.98 million. In fiscal year
1991-1992, state operations resulted in a $487 million deficit which, after
adjustment, resulted in an undesignated fund balance deficit of $83 million.
This shortfall was eliminated by utilizing a set aside against the total balance
available for appropriations.
Louisiana ended fiscal year 1992-1993 with a positive undesignated balance
in its General Fund of $101 million. At the end of fiscal year 1993-1994, there
was an operating surplus of $129 million which, after including the prior year's
fund balance and reserve changes, resulted in a positive undesignated unreserved
General Fund balance of $212.9 million.
It should be noted that the General Fund could be impacted by certain
pending Medicaid issues. Currently, Louisiana is eligible to receive up to
$1.217 billion in Medicaid disproportionate share payments for hospitals. In the
past, Louisiana has used a portion of the amounts paid to the public hospitals
in the State to return to the Medicaid program to help finance this health care.
The 1993 amendments to the federal disproportionate share law severely
restrict the State's ability to continue to help finance health care in this
manner. It is estimated that a total of approximately $940 million in
disproportionate share funding will be paid out in State fiscal year 1995,
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compared to the total capped amount available to Louisiana of $1.271 billion.
Thus, the 1993 amendments reduced Louisiana's disproportionate share fund by
over $300 million. In fiscal year 1996, the estimated loss of disproportionate
share funding is over $270 million.
On December 31, 1994, Louisiana submitted a proposed "Section 1115 Waiver"
to the federal government to significantly change its Medicaid program to allow
more flexibility and to address the potential financing problem. Preliminary
meetings with Health and Human Services indicate that the federal government is
interested in developing a joint solution to Louisiana's health care funding
crisis and is working with the State on the waiver. The waiver proposal provides
for a phase-in of a managed care program with emphasis on primary and preventive
services through a capitated payment system which should provide for more
stability and controlled growth in the Medicaid program. The State has received
a letter from U.S. Secretary of Health and Human Services, Donna Shalala,
advising that they hope to reach a final agreement within 120 days.
The Health Care Financing Administration ("HCFA") has recently notified
Louisiana that it has questions concerning the provider fee legislation enacted
in 1993. If HCFA disallows the provider fee, there could be a negative $112
million effect as of June 30, 1994. The State is expected to aggressively object
to any disallowance by HCFA.
Economically, Louisiana will continue to be affected by world energy
markets. Approximately 15% of the nation's crude oil and approximately 28% of
its natural gas are produced in Louisiana. In the past the state has estimated
that up to 25% of its economy is directly or indirectly related to energy. This
is despite the fact that only 5.5% of employment is in oil and gas extraction,
chemicals and allied products and petroleum refining. Oil and oil related jobs
also tend to be at relatively high wages, magnifying their economic effect.
Similarly, although severance taxes and royalties accounted for almost 4.3% of
operating revenues for fiscal year 1993-1994, compared with almost 25% ten years
ago, energy related activity affects individual and corporate taxes, which
together with sales taxes account for 21.3% of general revenues. Unemployment
declined in Louisiana from 12% in 1987 to 6.2% in 1990. This was due in part to
increased employment but also to out-migration of population and a decline in
labor force. Louisiana's jobless rate has since risen to 7.4% as of December 31,
1994. The comparable national unemployment rate was 6.8%. In addition to oil and
gas, major contributors to Louisiana's economy include chemical production,
shipping, agriculture and tourism.
Louisiana's debt burden is well above that of other states, while wealth and
income indicators are below the national average. In 1993, for example, the most
recent year for which data is available, Louisiana's per capita personal income
was 80% of the United States average. According to Moody's, Louisiana's
state-level tax supported debt is the sixth highest in the nation as a
percentage of property value, sixth highest as a percentage of personal income
and eighth highest on a per-capita basis.
Municipal obligations are subject to the provisions of bankruptcy,
insolvency and other laws affecting the rights and remedies of creditors, such
as the Federal Bankruptcy Code, and laws, if any, which may be enacted by
Congress or state legislatures extending the time for payment of principal or
interest, or both, or imposing other constraints upon enforcement of such
obligations or upon municipalities to levy taxes. There is also the possibility
that as a result of litigation or other conditions the power or ability of any
one or more issuers to pay when due principal or interest on its or their
municipal obligations may be materially affected.
REPURCHASE AGREEMENTS
Each Fund may enter into repurchase agreements with selected broker-dealers,
banks or other financial institutions. In addition, each Fund may enter into
repurchase agreements with any foreign bank whose creditworthiness has been
determined by the relevant Adviser to be at least equal to that of issuers of
commercial paper rated within the two highest grades assigned by Moody's or S&P.
A repurchase agreement is an arrangement under which the purchaser (i.e.,
the Fund) purchases a U.S. Government or other high quality short-term debt
obligation (the "Obligation") and the seller agrees, at the time of sale, to
repurchase the Obligation at a specified time and price.
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Custody of the Obligation will be maintained by the Trust's custodian or
subcustodian. The repurchase price may be higher than the purchase price, the
difference being income to the Fund, or the purchase and repurchase prices may
be the same, with interest at a stated rate due to the Fund together with the
repurchase price on repurchase. In either case, the income to the Fund is
unrelated to the interest rate on the Obligation subject to the repurchase
agreement.
Repurchase agreements pose certain risks for all entities, including the
Funds, that utilize them. Such risks are not unique to the Funds but are
inherent in repurchase agreements. The Funds seek to minimize such risks by,
among others, the means indicated below, but because of the inherent legal
uncertainties involved in repurchase agreements, such risks cannot be
eliminated.
For purposes of the Investment Company Act of 1940 (the "Investment Company
Act") and for federal income tax purposes, a repurchase agreement is deemed to
be a loan from the Fund to the seller of the Obligation. It is not clear whether
for other purposes a court would consider the Obligation purchased by the Fund
subject to a repurchase agreement as being owned by the Fund or as being
collateral for a loan by the Fund to the seller.
If, in the event of bankruptcy or insolvency proceedings against the seller
of the Obligation, a court holds that the Fund does not have a perfected
security interest in the Obligation, the Fund may be required to return the
Obligation to the seller's estate and be treated as an unsecured creditor of the
seller. As an unsecured creditor, a Fund would be at risk of losing some or all
of the principal and income involved in the transaction. To minimize this risk,
the Funds utilize custodians and subcustodians that the Adviser believes follow
customary securities industry practice with respect to repurchase agreements,
and the Adviser analyzes the creditworthiness of the obligor, in this case the
seller of the Obligation. But because of the legal uncertainties, this risk,
like others associated with repurchase agreements, cannot be eliminated.
Also, in the event of commencement of bankruptcy or insolvency proceedings
with respect to the seller of the Obligation before repurchase of the Obligation
under a repurchase agreement, the Fund may encounter delay and incur costs
before being able to sell the security. Such a delay may involve loss of
interest or decline in price of the Obligation.
Apart from risks associated with bankruptcy or insolvency proceedings, there
is also the risk that the seller may fail to repurchase the security. However,
if the market value of the Obligation subject to the repurchase agreement
becomes less than the repurchase price (including accrued interest), the Fund
will direct the seller of the Obligation to deliver additional securities so
that the market value of all securities subject to the repurchase agreement
equals or exceeds the repurchase price.
Certain repurchase agreements which have a stated maturity of more than
seven days can be liquidated before the nominal fixed term on seven days or less
notice. These repurchase agreements will be treated by the Funds as liquid
investments for purposes of the Trust's limitation on investment in illiquid
securities.
In addition, Paragon Treasury Money Market Fund, together with other
registered investment companies having advisory agreements with GSAM or its
affiliates, may transfer uninvested cash balances into a single joint account,
the daily aggregate balance of which will be invested in one or more repurchase
agreements.
CASH EQUIVALENTS
Commercial paper represents short-term unsecured promissory notes issued in
bearer form by banks or bank holding companies, corporations, and finance
companies. The commercial paper purchased by the Funds consists of direct
obligations of domestic or foreign issuers. Bank obligations in which the Funds
may invest include certificates of deposit, bankers' acceptances, and fixed time
deposits. Certificates of deposit are negotiable certificates issued against
funds deposited in a commercial bank for a definite period of time and earning a
specified return.
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Bankers' acceptances are negotiable drafts or bills of exchange, normally
drawn by an importer or exporter to pay for specific merchandise, which are
"accepted" by a bank, meaning, in effect, that the bank unconditionally agrees
to pay the face value of the instrument on maturity. Fixed time deposits are
bank obligations payable at a stated maturity date and bearing interest at a
fixed rate. Fixed time deposits may be withdrawn on demand by the investor, but
may be subject to early withdrawal penalties which vary depending upon market
conditions and the remaining maturity of the obligation. There are no
contractual restrictions on the right to transfer a beneficial interest in a
fixed time deposit to a third party, although there is no market for such
deposits.
SPECIAL RISKS ASSOCIATED WITH OPTIONS ON SECURITIES
There is no assurance that a liquid secondary market on an exchange will
exist for any particular option, or at any particular time. For some options no
secondary market on an exchange may exist. In such event, it might not be
possible to effect closing transactions in particular options, with the result
that a Fund would have to exercise options it has purchased in order to realize
any profit and may incur transaction costs upon the purchase or sale of
underlying securities. If a Fund is unable to effect a closing purchase
transaction with respect to covered options it has written, it will not be able
to sell the underlying security or dispose of assets held in a segregated
account until the option expires or is exercised.
Reasons for the absence of a liquid secondary market on an exchange include
the following: (i) there may be insufficient trading interest in certain
options; (ii) restrictions may be imposed by an exchange on opening transactions
or closing transactions or both; (iii) trading halts, suspensions or other
restrictions may be imposed with respect to particular classes or series of
options or underlying securities; (iv) unusual or unforeseen circumstances may
interrupt normal operations on an exchange; (v) the facilities of an exchange or
the Options Clearing Corporation may not at all times be adequate to handle
current trading volume; or (vi) one or more exchanges could, for economic or
other reasons, decide or be compelled at some future date to discontinue the
trading of options (or a particular class or series of options), in which event
the secondary market on that exchange (or in that class or series of options)
would cease to exist, although outstanding options on that exchange that had
been issued by the Options Clearing Corporation as a result of trades on that
exchange would continue to be exercisable in accordance with their terms. There
is no assurance that higher than anticipated trading activity or other
unforeseen events might not, at times, render certain of the facilities of the
Options Clearing Corporation inadequate, and thereby result in the institution
by an exchange of special procedures which may interfere with the timely
execution of customers' orders.
The amount of the premiums which a Fund may pay or receive may be adversely
affected as new or existing institutions, including other investment companies,
engage in or increase their option purchasing and writing activities.
FORWARD COMMITMENTS AND WHEN-ISSUED SECURITIES
Each Fund may purchase securities on a when-issued basis or purchase or sell
securities on a forward commitment basis. These transactions involve a
commitment by the Fund to purchase or sell securities at a future date
(ordinarily one or two months later). The price of the underlying securities
(usually expressed in terms of yield) and the date when the securities will be
delivered and paid for (the settlement date) are fixed at the time the
transaction is negotiated. When-issued purchases and forward commitment
transactions are negotiated directly with the other party. Such commitments are
not traded on exchanges, but may be traded over-the-counter.
When-issued purchases and forward commitment transactions enable a Fund to
lock in what is believed to be an attractive price or yield on a particular
security for a period of time, regardless of future changes in interest rates.
For instance, in periods of rising interest rates and falling prices, the Fund
might sell securities it owns on a forward commitment basis to limit its
exposure to falling prices. In periods of falling interest rates and rising
prices, the Fund might sell securities it owns and purchase the same or a
similar security on a when-issued or forward commitment basis, thereby obtaining
the benefit of currently higher yield.
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The value of securities purchased on a when-issued or forward commitment
basis and any subsequent fluctuations in their value are reflected in the
computation of a Fund's net asset value starting on the date of the agreement to
purchase the securities. A Fund does not earn interest on the securities it has
committed to purchase until they are paid for and delivered on the settlement
date. When a Fund makes a forward commitment to sell securities that it owns,
the proceeds to be received upon settlement are included in the Fund's assets.
Fluctuations in the market value of the underlying securities are not reflected
in the Fund's net asset value as long as the commitment to sell remains in
effect. Settlement of when-issued purchases and forward commitment transactions
generally takes place within two months after the date of the transaction, but
the Fund may agree to a longer settlement period.
A Fund will purchase securities on a when-issued basis or purchase or sell
securities on a forward commitment basis only with the intention of completing
the transaction and actually purchasing or selling the securities. If deemed
advisable as a matter of investment strategy, however, a Fund may dispose of or
negotiate a commitment after entering into it. A Fund also may sell securities
it has committed to purchase before those securities are delivered to the Fund
on the settlement date. The Fund may realize a capital gain or loss in
connection with these transactions.
When a Fund purchases securities on a when-issued or forward commitment
basis, the Trust's custodian will maintain in a segregated account liquid high
grade debt securities having a value (determined daily) at least equal to the
amount of the Fund's purchase commitments. These procedures are designed to
ensure that the Fund will maintain sufficient assets at all times to cover its
obligations under when-issued and forward commitment purchases.
LENDING OF PORTFOLIO SECURITIES
Each Fund may seek to increase its income by lending portfolio securities.
Under present regulatory policies, such loans may be made to institutions, such
as broker-dealers, and would be required to be secured continuously by
collateral in cash, cash equivalents or high quality debt securities maintained
on a current basis at an amount at least equal to the market value of the
securities loaned. Cash collateral will be invested in cash equivalents and
other debt securities. A Fund would have the right to call a loan and obtain the
securities loaned at any time on five days' notice.
For the duration of a loan, the Fund would continue to receive the
equivalent of the interest or dividends paid by the issuer on the securities
loaned and would also receive compensation from investment of the collateral.
The Fund would not, however, have the right to vote any securities having voting
rights during the existence of the loan, but the Fund would call the loan in
anticipation of an important vote to be taken among holders of the securities or
of the giving or withholding of their consent on a material matter affecting the
investment.
As with other extensions of credit there are risks of delay in recovering or
even loss of rights in the collateral should the borrower of the securities fail
financially. However, the loans would be made only to firms deemed by the
relevant Adviser to be of good standing, and when, in the judgment of the
Adviser, the consideration which can be earned currently from securities loans
of this type justifies the attendant risk. If an Adviser determines to make
securities loans, it is intended that the value of the securities loaned would
not exceed 33 1/3% of the value of the total assets of the lending Fund.
SPECIAL RESTRICTIONS ON INVESTMENTS BY PARAGON TREASURY MONEY MARKET FUND
Paragon Treasury Money Market Fund seeks to maintain a stable net asset
value of $1.00 per share. To facilitate this goal, the Fund's portfolio
securities are valued by the amortized cost method as permitted by a rule of the
Securities and Exchange Commission ("SEC"). The SEC rule requires that all
portfolio securities have at the time of purchase a maximum remaining maturity
of thirteen months and that the Fund maintain a dollar-weighted average
portfolio maturity of not more than ninety (90) days. Investments by the Fund
must present minimal credit risk and be rated within one of the two highest
rating categories for short-term debt obligations by at least two nationally
recognized statistical rating organizations ("NRSROs") assigning a rating to the
security or issuer, or if
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only one NRSRO has assigned a rating, by that NRSRO. Purchases of securities
which are unrated or rated by only one NRSRO must be approved or ratified by the
Trustees. Securities which are rated (or that have been issued by an issuer that
is rated with respect to a class of short-term debt obligations, or any security
within that class, comparable in priority and quality with such securities) in
the highest short-term rating category by a least two NRSROs are designated
"First Tier Securities." Securities rated in the top two short-term rating
categories by at least two NRSROs, but which are not rated in the highest
short-term rating category by two or more NRSROs, are designated "Second Tier
Securities." Securities which are unrated may be purchased only if they are
deemed to be of comparable quality to First Tier or Second Tier rated
securities. NRSROs include S&P, Moody's, Fitch Investors Service, Inc., Duff and
Phelps, Inc., IBCA Limited and its affiliate IBCA Inc., and Thomson BankWatch,
Inc. Immediately after the acquisition of any put, not more than 5% of the
Fund's total assets may be invested in securities issued by or subject to puts
from the same institution.
INVESTMENT RESTRICTIONS
The following restrictions may not be changed with respect to any Fund
without the approval of the majority of outstanding voting securities of that
Fund (which, under the Investment Company Act and the rules thereunder and as
used in the Prospectus and this Statement of Additional Information, means the
lesser of (1) 67% of the shares of that Fund present at a meeting if the holders
of more than 50% of the outstanding shares of that Fund are present in person or
by proxy, or (2) more than 50% of the outstanding shares of that Fund).
Investment restrictions that involve a maximum percentage of securities or
assets shall not be considered to be violated unless an excess over the
percentage occurs immediately after, and is caused by, an acquisition or
encumbrance of securities or assets of, or borrowings by or on behalf of, a
Fund, with the exception of borrowings permitted by Investment Restriction (3).
The Trust may not, on behalf of any Fund:
(1) with respect to 75% (50% in the case of Paragon Gulf South Growth
Fund) of a Fund's total assets taken at market value, invest more than 5% of
the value of the total assets of that Fund in the securities of any one
issuer, except U.S. Government securities;
(2) with respect to 75% (50% in the case of Paragon Gulf South Growth
Fund) of a Fund's total assets taken at market value, purchase the
securities of any issuer if such purchase would cause more than 10% of the
voting securities of such issuer to be held by that Fund;
(3) borrow money, except from banks on a temporary basis for
extraordinary or emergency purposes, provided that a Fund is required to
maintain asset coverage of 300% for all borrowings and that no purchases of
securities will be made if such borrowings exceed 5% of the value of the
Fund's assets. This restriction does not apply to cash collateral received
as a result of portfolio securities lending;
(4) pledge, mortgage or hypothecate its assets, except that, to secure
permitted borrowings, it may pledge securities having a market value at the
time of pledge not exceeding 15% of the cost of a Fund's total assets and
except in connection with permitted transactions in options, futures
contracts and options on futures contracts;
(5) act as underwriter of the securities issued by others, except to the
extent that the purchase of securities in accordance with a Fund's
investment objective and policies directly from the issuer thereof and the
later disposition thereof may be deemed to be underwriting;
(6) purchase securities if such purchase would cause more than 25% in
the aggregate of the market value of the total assets of a Fund to be
invested in the securities of one or more issuers having their principal
business activities in the same industry, other than U.S. Government
securities (for the purposes of this restriction, telephone companies are
considered to be a separate industry from gas or electric utilities, and
wholly-owned finance companies are considered to be in the industry of their
parents if their activities are primarily related to financing the
activities of their parents);
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(7) issue senior securities, except as appropriate to evidence
indebtedness that a Fund is permitted to incur and except for shares of
existing or additional series of the Trust;
(8) purchase or sell real estate (including limited partnership
interests but excluding securities secured by real estate or interests
therein), interests in oil, gas or mineral leases, commodities or
commodities contracts (except futures contracts, including but not limited
to contracts for the future delivery of securities or currency and futures
contracts based on securities indexes or related options thereon), the Trust
reserving the freedom to hold and to sell real estate acquired for any Fund
as a result of the ownership of securities. Foreign currency, forward
foreign currency exchange contracts and options on currency are not deemed
to be prohibited commodities or commodities contracts for the purpose of
this restriction; or
(9) make loans to other persons, except loans of portfolio securities
and except to the extent that the purchase of debt obligations and entry
into repurchase agreements in accordance with such Fund's investment
objectives and policies may be deemed to be loans.
In addition to the investment restrictions mentioned above, the Trustees of the
Trust have voluntarily adopted the following policies and restrictions which are
observed in the conduct of the affairs of the Funds. These represent intentions
of the Trustees based upon current circumstances. They differ from fundamental
investment policies in that they may be changed or amended by action of the
Trustees without prior notice to or approval of shareholders. Accordingly, the
Trust may not, on behalf of any Fund:
(a) purchase securities of any issuer with a record of less than three
years' continuous operation, including predecessors, except U.S. Government
securities, securities of such issuers which are rated by at least one
NRSRO, municipal obligations, and obligations issued or guaranteed by any
foreign government or its agencies or instrumentalities, if such purchase
would cause the investments of a Fund in all such issuers to exceed 5% of
the value of the total assets of that Fund;
(b) purchase from or sell portfolio securities of a Fund to any of the
officers or Trustees of the Trust, its adviser(s), its principal underwriter
or the members, officers or directors of its adviser(s) or principal
underwriter;
(c) invest in other companies for the purpose of exercising control or
management;
(d) purchase warrants of any issuer, except on a limited basis if, as a
result of such purchases by a Fund, no more than 2% of the value of its
total assets would be invested in warrants which are not listed on the New
York Stock Exchange or the American Stock Exchange and no more than 5% of
the value of the total assets of a Fund would be invested in warrants,
whether or not so listed, such warrants in each case to be valued at the
lesser of cost or market, but assigning no value to warrants acquired by a
Fund in units with or attached to debt securities;
(e) knowingly purchase or retain securities of an issuer any of whose
officers, partners, directors, trustees or securities holders is an officer
or Trustee of the Trust or a member, officer or director of an investment
adviser of the Trust if one or more of such individuals owns beneficially
more than one-half of one percent (1/2 of 1%) of the securities (taken at
market value) of such issuer and such individuals owning more than one half
of one percent (1/2 of 1%) of such securities together own beneficially more
than 5% of such securities;
(f) purchase securities on margin or make short sales, except in
connection with arbitrage transactions or unless, by virtue of its ownership
of other securities, a Fund has the right to obtain securities equivalent in
kind and amount to the securities sold and, if the right is conditional, the
sale is made upon the same conditions, except that a Fund may obtain such
short-term credits as may be necessary for the clearance of purchases and
sales of securities and in connection with transactions involving forward
foreign currency exchange contracts;
B-14
<PAGE>
(g) invest in repurchase agreements maturing in more than seven days and
securities which are not readily marketable if, as a result thereof, more
than 15% (10% in the case of Paragon Treasury Money Market Fund) of the net
assets of a Fund (taken at market value) would be invested in such
investments; or
(h) purchase puts, calls, straddles, spreads and any combination thereof
if the value of the Fund's aggregate investment in such securities exceeds
5% of its total assets.
"Value" for the purposes of all investment restrictions shall mean the value
used in determining a Fund's net asset value. "U.S. Government securities" shall
mean securities issued or guaranteed by the U.S. Government or any of its
agencies, authorities or instrumentalities.
B-15
<PAGE>
MANAGEMENT
Information pertaining to the Trustees and officers of the Trust is set
forth below. Trustees and officers deemed to be "interested persons" of the
Trust for purposes of the Investment Company Act are indicated by an asterisk.
<TABLE>
<CAPTION>
POSITIONS
NAME AND ADDRESS WITH COMPANY PRINCIPAL OCCUPATION(S) DURING PAST 5 YEARS
- ----------------------------------- -------------- -------------------------------------------------------------
<S> <C> <C>
Paul C. Nagel, Jr. Trustee Retired (since January 1976); Director and Chairman of the
19223 Riverside Dr Age 72 Finance and Audit Committees, Great Atlantic & Pacific Tea
Tequesta, FL 33469 Co., Inc.; Director, United Conveyor Corporation
Ernest E. Howard III Trustee President and Chief Executive Officer (since May 1993);
FM Properties, Inc. Age 51 Senior Vice-President & Chief Investment Officer of
1615 Poydras Street Freeport-McMoRan Inc. (since 1984).
Orleans, LA 70112
Bruce C. Gottwald, Jr. Trustee Chairman and CEO, First Colony Corporation (since 1992);
First Colony Corp. Age 37 Director, Vice President (since 1992) and Treasurer of Ethyl
West Tower, Ste. 1350 Corporation (from 1989-1991) President of First Colony
Riverfront Plaza (since 1991); Assistant Treasurer, Ethyl Corporation (1988)
Richmond, VA 23219
*Paul Klug President Vice President, Goldman Sachs; Director of Proprietary Mutual
One New York Plaza Age 43 Funds of GSAM (since February 1994); Chief Operating
New York, NY 10004 Officer, Vista Capital Management, Chase Manhattan Bank
(from January 1990 to February 1994); Vice President, JP
Morgan (February 1984 to January 1990).
*Marcia L. Beck Vice President Director, Institutional Funds Group of GSAM (since September,
One New York Plaza Age 39 1992); Vice President and Senior Portfolio Manager (from
New York, NY 10004 June 1988 to Present)
*Nancy L. Mucker Vice President Vice President, Goldman Sachs; Co-manager, Shareholder
4900 Sears Tower Age 45 Services of GSAM.
Chicago, IL 60606
*John W. Mosior Vice President Vice President, Goldman Sachs; Co-manager, Shareholder
4900 Sears Tower Age 56 Services of GSAM.
Chicago, IL 60606
*Pauline Taylor Vice President Vice President, Goldman Sachs since June, 1992; Consultant
4900 Sears Tower Age 48 since 1989 and Senior Vice President, Fidelity Investments
Chicago, IL 60606 prior to 1989.
*Scott M. Gilman Treasurer Director, Mutual Funds Administration (since April, 1994);
One New York Plaza Age 35 Assistant Treasurer of Goldman Sachs Funds Management, Inc.
New York, NY 10004 (since March 1993); Vice President Goldman Sachs (since
March 1990); Assistant Treasurer of the Trust (from April
1990 until October 1991); formerly Manager, Arthur Andersen
LLP.
</TABLE>
B-16
<PAGE>
<TABLE>
<CAPTION>
POSITIONS
NAME AND ADDRESS WITH COMPANY PRINCIPAL OCCUPATION(S) DURING PAST 5 YEARS
- ----------------------------------- -------------- -------------------------------------------------------------
<S> <C> <C>
*Michael J. Richman Secretary Associate General Counsel, GSAM (since February 1994); Vice
85 Broad Street Age 34 President and Assistant General Counsel, Goldman Sachs
New York, NY 10004 (since June 1992); Counsel to the Funds Group, GSAM (since
June 1992); formerly partner of Hale and Dorr.
*Howard B. Surloff Assistant Vice President and Counsel, Goldman Sachs since November 1993
85 Broad Street Secretary and May 1993, respectively; Assistant Counsel to the Funds
New York, NY 10004 Age 29 Group, GSAM since November 1993. Formerly, Associate,
Shereff, Friedman, Hoffman & Goodman.
Kaysie Uniacke Assistant Vice President and Portfolio Manager, GSAM (since 1988).
One New York Plaza Secretary
New York, NY 10004 Age 34
Elizabeth Alexander Assistant Funds Trading Assistant, GSAM (since 1993). Formerly,
One New York Plaza Secretary Compliance Analyst, Prudential Insurance (1991-1993).
New York, NY 10004 Age 25
Steven Hartstein Assistant Legal Products Analyst, Goldman Sachs since June 1993; Funds
85 Broad Street Secretary Compliance Officer, Citibank Global Asset Management (August
New York, NY 10004 Age 31 1991 to June 1993); Legal Assistant, Brown & Wood (prior
thereto).
Gail Shanley Assistant Legal Products Analyst, Goldman Sachs since June 1994.
85 Broad Street Secretary Formerly Blue Sky Legal Assistant at Smith Barney Shearson.
New York, NY 10004 Age 26
</TABLE>
As of February 17, 1995 the Trustees and officers of the Trust, as a group,
owned in the aggregate less than 1% of the outstanding shares of the Trust. Each
interested Trustee and officer holds comparable positions with certain other
investment companies of which Goldman Sachs, GSAM or an affiliate thereof is the
investment adviser and/or distributor.
The following table sets forth certain information with respect to the
compensation of each Trustee of the Trust for the one-year period ended November
30, 1994:
<TABLE>
<CAPTION>
PENSION OR
AGGREGATE TOTAL
COMPENSATION RETIREMENT BENEFITS COMPENSATION
FROM THE ACCRUED AS OF PART OF FROM THE
NAME OF TRUSTEES TRUST TRUST'S EXPENSES TRUST)
- -------------------------------------------------------- ------------- --------------------- -------------
<S> <C> <C> <C>
Paul C. Nagel, Jr....................................... $ 10,750 $ 0 $ 10,750
Ernest E. Howard, III................................... $ 10,750 $ 0 $ 10,750
Bruce C. Gottwald, Jr................................... $ 10,750 $ 0 $ 10,750
</TABLE>
B-17
<PAGE>
THE ADVISERS, ADMINISTRATOR, DISTRIBUTOR AND TRANSFER AGENT
THE ADVISERS
Premier serves as the investment adviser to Paragon Short-Term Government
Fund, Paragon Intermediate-Term Bond Fund, Paragon Louisiana Tax-Free Fund,
Paragon Value Growth Fund, Paragon Value Equity Income Fund and Paragon Gulf
South Growth Fund and as subadviser to Paragon Treasury Money Market Fund. GSAM,
a separate operating division of Goldman Sachs, serves as the investment adviser
to Paragon Treasury Money Market Fund. The Advisers are responsible for the
management of each Fund's assets in accordance with such Fund's investment
objectives and policies. In fulfilling their day-to-day responsibilities, the
investment personnel of each Adviser are committed to the pursuit of excellence.
Under each of the separate Investment Advisory Agreements between the
relevant Adviser and the Trust on behalf of each Fund, the Adviser, subject to
the supervision of the Trustees of the Trust and in conformity with the stated
policies of each Fund, acts as investment adviser and directs the investments of
the Fund.
Premier and GSAM are entitled to receive investment advisory fees from each
Fund for which they act as adviser equal to an annual rate, as a percentage of
the Fund's average daily net assets, as follows:
<TABLE>
<S> <C>
Paragon Treasury Money Market Fund........................................... .20%
Paragon Short-Term Government Fund........................................... .50%
Paragon Intermediate-Term Bond Fund.......................................... .50%
Paragon Louisiana Tax-Free Fund.............................................. .50%
Paragon Value Growth Fund.................................................... .65%
Paragon Value Equity Income Fund............................................. .65%
Paragon Gulf South Growth Fund............................................... .65%
</TABLE>
Premier has advised the Trust that, with respect to Paragon Louisiana
Tax-Free Fund, it has voluntarily elected to reduce its advisory fee from .50%
to .40% of the Fund's average daily net assets until further notice.
Pursuant to the Subadvisory Agreement among Paragon Treasury Money Market
Fund, GSAM and Premier, Premier will review on a quarterly basis the portfolio
and investment strategy of Paragon Treasury Money Market Fund and will consult
with GSAM as needed regarding that Fund's investments. As compensation, GSAM
will pay to Premier quarterly a subadvisory fee equal, on an annual basis, to
.10% of that Fund's average daily net assets. The Fund pays only the .20%
advisory fee to GSAM and is not responsible for the payment of the .10%
subadvisory fee to Premier.
Premier became the Funds' investment adviser or subadviser on December 31,
1993, as the result of the transfer to it of each Fund's Investment Advisory or
Subadvisory Agreement with Premier Investment Advisors, Inc. ("PIA Inc."), the
Funds' previous investment adviser or subadviser. The transfer resulted in no
actual change of control of the Funds' investment adviser or subadviser since
both Premier and PIA Inc. are under the control of Premier Bancorp, Inc. All
employees, services and resources previously utilized by PIA Inc. in managing
the Funds' investments will continue to be available through Premier.
B-18
<PAGE>
For the fiscal years ended November 30, 1994, November 30, 1993 and November
30, 1992 the amount of the advisory fees accrued by each Fund then in existence
was as follows:
<TABLE>
<CAPTION>
1994 1993 1992
------------- ------------- -------------
<S> <C> <C> <C>
Paragon Treasury
Money Market Fund......................................... $ 564,345 $ 605,590 $ 634,544
Paragon Short-Term
Government Fund........................................... 802,652 750,847 482,720
Paragon Intermediate-Term
Bond Fund................................................. 1,615,908 1,607,655 1,266,900
Paragon Louisiana
Tax-Free Fund............................................. 808,333 668,762 339,266
Paragon Value
Growth Fund............................................... 1,154,672 1,010,838 753,419
Paragon Value
Equity Income Fund........................................ 683,343 611,678 471,150
Paragon Gulf
South Growth Fund......................................... 523,002 432,924 286,268
</TABLE>
For the fiscal years ended November 30, 1994, November 30, 1993 and November
30, 1992 with respect to Paragon Treasury Money Market Fund, the amount of the
subadvisory fee payable by GSAM to Premier was $282,173, $302,795 and $317,272,
respectively. As set forth above, Premier agreed to reduce the level of advisory
fees payable by Paragon Louisiana Tax-Free Fund. For the periods ended November
30, 1994, November 30, 1993 and November 30, 1992, had the full amount of such
fee been imposed, $1,010,416, $850,733 and $563,518 would have been accrued by
that Fund, respectively.
The Investment Advisory Agreements and the Subadvisory Agreement entered
into on behalf of each of the Funds were each most recently approved by the
Trustees, including the "non-interested" Trustees, on February 2, 1995, by the
shareholders of each Fund (other than Paragon Gulf South Growth Fund) on April
19, 1991 and by the shareholders of Paragon Gulf South Growth Fund on October
30, 1992. The Investment Advisory Agreements and the Subadvisory Agreement will
remain in effect until April 30, 1996 and will continue in effect thereafter
only if such continuance is specifically approved at least annually by the
Trustees or by a vote of a majority of the outstanding voting securities of the
particular Fund (as defined in the Investment Company Act) and, in either case,
by a majority of the "non-interested" Trustees.
THE ADMINISTRATOR
GSAM administers the Trust's business affairs, and, in connection therewith,
furnishes each Fund with office facilities and is responsible for clerical,
recordkeeping and bookkeeping services, to the extent not provided pursuant to
the Trust's Custodian and Transfer Agency Agreements, and for the financial and
accounting records required to be maintained by each Fund, other than those
maintained pursuant to the Trust's Custodian and Transfer Agency Agreements.
For its services under the Administration Agreement GSAM receives a monthly
administration fee at the annual rate of .15% of the average daily net assets of
each Fund. GSAM has advised the Trust that, with respect to Paragon Louisiana
Tax-Free Fund, it has voluntarily elected to reduce its
B-19
<PAGE>
administration fee from .15% to .10% of the Fund's average daily net assets
until further notice. For the fiscal years ended November 30, 1994, November 30,
1993 and November 30, 1992 the amount of the administration fees paid by each
Fund then in existence was as follows:
<TABLE>
<CAPTION>
1994 1993 1992
----------- ----------- -----------
<S> <C> <C> <C>
Paragon Treasury
Money Market Fund............................................... $ 423,259 $ 454,195 $ 475,143
Paragon Short-Term
Government Fund................................................. 240,815 225,254 144,816
Paragon Intermediate-Term
Bond Fund....................................................... 484,772 482,296 380,070
Paragon Louisiana
Tax-Free Fund................................................... 202,083 170,115 113,089
Paragon Value
Growth Fund..................................................... 266,463 233,270 173,866
Paragon Value
Equity Income Fund.............................................. 157,695 141,156 108,727
Paragon Gulf
South Growth Fund............................................... 120,693 99,905 66,062
</TABLE>
As set forth above, GSAM agreed to reduce the level of administration fees
payable by Paragon Louisiana Tax-Free Fund, had the full amount of such fees
been imposed, $303,125, $225,220 and $169,152 would have been accrued for the
fiscal years ended November 30, 1994, November 30, 1993 and November 30, 1992,
respectively.
THE DISTRIBUTOR
Goldman Sachs acts as distributor of each Fund's shares. The Distribution
Agreement between Goldman Sachs and the Trust was most recently approved by the
Trustees on February 2, 1995.
Goldman Sachs is one of the largest international investment banking firms
in the United States. Founded in 1869, Goldman Sachs is a leader in developing
strategies and in many fields of investing and financing, participating in
financial markets worldwide and serving individuals, institutions, corporations
and governments. In 1981, Goldman Sachs was registered with the SEC as an
investment adviser. As of January 31, 1995, GSAM, together with its advisory
affiliates, acted as investment adviser, administrator or distributor for
approximately $48.7 billion in assets.
The Distributor may reallow up to 100% of the sales load that is imposed on
shares of certain of the Funds to authorized dealers. The staff of the SEC takes
the position that dealers who receive 90% or more of the sales load may be
deemed underwriters for purposes of assessing liability under the Securities Act
of 1933, as amended. Goldman Sachs received a portion of the sales load imposed
on the Class A shares and has advised the Trust that it retained approximately
$185,000, $227,000 and $103,000 during the fiscal years ended November 30, 1992,
November 30, 1993 and November 30, 1994 respectively. Goldman Sachs recovered
distribution expenses with respect to the Class B shares through the receipt of
contingent deferred sales charges imposed for redemptions of Class B Shares.
Goldman Sachs has advised the Trust that it retained approximately $700 in
contingent deferred sales charges imposed for redemptions of Class B shares
during the period ended November 30, 1994.
Banking laws and regulations currently prohibit a bank holding company
registered under the Federal Bank Holding Company Act of 1956 or any bank or
non-bank affiliate thereof from sponsoring, organizing, controlling or
distributing the shares of a registered open-end investment company continuously
engaged in the issuance of its shares, but such banking laws and regulations do
not prohibit such a holding company or affiliate or banks generally from acting
as investment adviser to such an investment company or from purchasing shares of
such a company as agent for and upon the order of customers. Premier believes
that it may perform the services contemplated by its agreements with the Trust
without violation of such banking laws or regulations, which are applicable to
it. It should be noted, however, that future changes in either Federal or state
statutes and regulations
B-20
<PAGE>
relating to the permissible activities of banks and their subsidiaries or
affiliates, as well as future judicial or administrative decisions or
interpretations of current and future statutes and regulations, could prevent
Premier from continuing to perform such services for the Trust.
Should future legislative, judicial or administrative action prohibit or
restrict the activities of Premier in connection with the provision of services
on behalf of the Trust, the Trust might be required to alter materially or
discontinue its arrangements with Premier and change its method of operations.
It is not anticipated, however, that any change in the Trust's method of
operations would affect the net asset value per share of any Fund or result in a
financial loss to any shareholder. Moreover, if current restrictions preventing
a bank from legally sponsoring, organizing, controlling or distributing shares
of an open-end investment company were relaxed, the Trust expects that Premier
would consider the possibility of offering to perform some or all of the
services now provided by Goldman Sachs. It is not possible, of course, to
predict whether or in what form such restrictions might be relaxed or the terms
upon which Premier might offer to provide services for consideration by the
Trustees.
THE TRANSFER AGENT
Goldman Sachs serves as the Trust's transfer agent. Goldman Sachs provides
customary transfer agency services to the Funds, including the handling of
shareholder communications, the processing of shareholder transactions, the
maintenance of shareholder account records, payment of dividends and
distributions and related functions. For these services, Goldman Sachs is
entitled to an annual fee with respect to each Fund equal to $19,200 per year
plus $5.00 per account for daily dividend funds and $7.00 per account for
non-daily dividend funds, together with out-of-pocket expenses (including those
out-of-pocket expenses payable to servicing agents). For the fiscal years ended
November 30, 1992, 1993 and 1994 the Fund incurred $369,350, $516,577 and
$570,964, respectively, in transfer agency fees.
CLASS B DISTRIBUTION PLAN
As described in the Prospectus, the Trust has adopted on behalf of each
Fund, a distribution plan (the "Class B Plan") pursuant to Rule 12b-1 under the
Investment Company Act with respect to Class B shares. See "Class B Distribution
Plan" in the Prospectus.
The Class B Plan was approved most recently on February 2, 1995 on behalf of
each Fund by a majority vote of the Trust's Board of Trustees, including a
majority of the Trustees who are not interested persons of the Trust and have no
direct or indirect financial interest in the Class B Plan (the "non-interested
Trustees"), cast in person at a meeting called for the purpose of approving the
Class B Plan. The Class B Plan was approved by the sole initial share holder of
the Class B shares of each Fund on August 23, 1994.
With respect to each Fund, the compensation payable under the Class B Plan
is equal to 0.75% per annum of the average daily net assets attributable to
Class B shares of that Fund. For the period ended November 30, 1994, the Trust
paid to Goldman Sachs distribution fees of $976. The fees received by Goldman
Sachs under Class B Plan and contingent deferred sales charge on Class B shares
may be sold by Goldman Sachs as distributor to entities which provide financing
for payments to Authorized Dealers in respect of sales of Class B shares. To the
extent such fee is not paid to such dealers, Goldman Sachs may retain such fee
as compensation for its services and expenses of distributing the Funds' Class B
shares. If such fee exceeds its expenses, Goldman Sachs may realize a profit
from these arrangements.
The Class B Plan is a compensation plan which provides for the payment of a
specified distribution fee without regard to the distribution expenses actually
incurred by Goldman Sachs. If the Class B Plan were terminated by the Trust's
Board of Trustees and no successor plan were adopted, the Funds would cease to
make distribution payments to Goldman Sachs and Goldman Sachs would be unable to
recover the amount of any of its unreimbursed distribution expenditures.
B-21
<PAGE>
Under the Class B Plan, Goldman Sachs, as distributor of the Funds' shares,
will provide to the Board of Trustees for its review, and the Board will review
at least quarterly, a written report of the services provided and amounts
expended by Goldman Sachs under the Class B Plan and the purposes for which such
services were performed and expenditures were made.
The Class B Plan will remain in effect with respect to each Fund from year
to year, provided such continuance is approved annually by a majority vote of
the Board of Trustees, including a majority of the non-interested Trustees. The
Class B Plan may not be amended to increase materially the amount to be spent
for the services described therein as to any Fund without approval of a majority
of the outstanding Class B shares of that Fund. All material amendments of the
Class B Plan must also be approved by the Board of Trustees of the Trust in the
manner described above. With respect to any Fund, the Class B Plan may be
terminated at any time without payment of any penalty by a vote of the majority
of the non-interested Trustees or by vote of a majority of the outstanding
voting securities of the Class B shares of that Fund. So long as the Class B
Plan is in effect, the selection and nomination of non-interested Trustees shall
be committed to the discretion of the non-interested Trustees. The Trustees have
determined that in their judgment there is a reasonable likelihood that the
Class B Plan will benefit each Fund and its Class B shareholders.
PORTFOLIO TRANSACTIONS
Purchases and sales of securities on a securities exchange are effected by
brokers, and the Funds pay a brokerage commission for this service. In
transactions on stock exchanges in the United States, these commissions are
negotiated, whereas on many foreign stock exchanges the commissions are fixed.
In the over-the-counter market, securities are normally traded on a "net" basis
with dealers acting as principal for their own accounts without a stated
commission, although the price of the securities usually includes a profit to
the dealer. In underwritten offerings, securities are purchased at a fixed price
which includes an amount of compensation to the underwriter, generally referred
to as the underwriter's concession or discount. On occasion, certain money
market instruments may be purchased directly from an issuer, in which case no
commissions or discounts are paid.
The primary consideration in placing portfolio security transactions with
broker-dealers for execution is to obtain and maintain the availability of
execution at the most favorable prices and in the most effective manner
possible. Each Adviser attempts to achieve this result by selecting broker-
dealers to execute portfolio transactions on behalf of each Fund and its other
clients on the basis of the broker-dealers' professional capability, the value
and quality of their brokerage services and the level of their brokerage
commissions. Consistent with the foregoing primary considerations, the Rules of
Fair Practice of the National Association of Securities Dealers, Inc. and such
other policies as the Trustees may determine, the Advisers may consider sales of
shares of the Funds as a factor in the selection of broker-dealers to execute
the Funds' portfolio transactions.
Goldman Sachs and Premier Securities Corporation may act as a broker for the
Funds. In order for Goldman Sachs and Premier Securities Corporation to effect
any portfolio transactions for the Funds, the commissions, fees or other
remuneration received by Goldman Sachs and Premier Securities Corporation must
be reasonable and fair compared to the commissions, fees or other remuneration
paid to other brokers in connection with comparable transactions involving
similar securities being purchased or sold on an exchange during a comparable
period of time. This standard would allow Goldman Sachs and Premier Securities
Corporation to receive no more than the remuneration which would be expected to
be received by an unaffiliated broker in a commensurate arms-length transaction.
The Trustees of the Trust regularly review the commissions paid by the Funds to
Goldman Sachs and Premier Securities Corporation. Except as described below, the
Funds will not deal with Goldman Sachs or Premier Securities Corporation in any
portfolio transaction in which Goldman Sachs or Premier Securities Corporation
acts as principal. Under an exemptive order issued by the SEC, Paragon Treasury
Money Market Fund is permitted to purchase certain taxable money market
securities in principal transactions directly from Goldman Sachs and to enter
into fully collateralized repurchase agreements with Goldman Sachs. The ability
of the Fund and Goldman
B-22
<PAGE>
Sachs to engage in these transactions is subject to their compliance with
various conditions imposed by the SEC and described in written procedures
adopted by the Trustees. The Trust may apply in the future for an exemption
authorizing principal transactions with Goldman Sachs in fixed-income
securities. There can be no assurance that such exemptions will be granted.
Under each Investment Advisory Agreement and as permitted by Section 28(e)
of the Securities Exchange Act of 1934 (the "Exchange Act"), an Adviser may
cause a Fund to pay to a broker (except Goldman Sachs or Premier Securities
Corporation), which provides brokerage and research services to the Adviser, a
commission for effecting a securities transaction for a Fund which exceeds the
amount other brokers would have charged for the transaction, if such Adviser
determines in good faith that the greater commission is reasonable in relation
to the value of the brokerage and research services provided by the executing
broker viewed in terms of either a particular transaction or the Adviser's
overall responsibilities to the Funds or to its other clients. The term
"brokerage and research services" includes advice as to the value of securities,
the advisability of investing in, purchasing or selling securities, and the
availability of securities or of purchasers or sellers of securities, furnishing
analyses and reports concerning issuers, industries, securities, economic
factors and trends, portfolio strategy and the performance of accounts, and
effecting securities transactions and performing functions incidental thereto
such as clearance and settlement.
Although commissions paid on every transaction will, in the judgment of the
relevant Adviser, be reasonable in relation to the value of the brokerage
services provided, commissions exceeding those which another broker might charge
may be paid to brokers (except Goldman Sachs or Premier Securities Corporation)
who were selected to execute transactions on behalf of the Funds and such
Adviser's other clients in part for providing advice as to the availability of
securities or of purchasers or sellers of securities and services in effecting
securities transactions and performing functions incidental thereto such as
clearance and settlement. Research provided by brokers is used for the benefit
of all of each Adviser's clients and not solely or necessarily for the benefit
of the Funds. Each Adviser's investment management personnel attempt to evaluate
the quality of research provided by brokers. Results of this effort are
sometimes used by an Adviser as a consideration in the selection of brokers to
execute portfolio transactions.
In certain instances there may be securities which are suitable for a Fund's
portfolio as well as for that of another Fund or one or more of the relevant
Adviser's other clients. Investment decisions for each Fund and for an Adviser's
other clients are made with a view to achieving their respective investment
objectives. It may develop that a particular security is bought or sold for only
one client even though it might be held by, or bought or sold for, other
clients. Likewise, a particular security may be bought for one or more clients
when one or more other clients are selling that same security. Some simultaneous
transactions are inevitable when several clients receive investment advice from
the same investment adviser, particularly when the same security is suitable for
the investment objectives of more than one client. When two or more clients are
simultaneously engaged in the purchase or sale of the same security, the
securities are allocated among clients in a manner believed to be equitable to
each. It is recognized that in some cases this system could have a detrimental
effect on the price or volume of the security in a particular transaction as far
as a Fund is concerned. The Trust believes that over time its ability to
participate in volume transactions will produce better executions for the Funds.
The investment advisory fee that the Funds pay to each Adviser will not be
reduced as a consequence of such Adviser's receipt of brokerage and research
services. To the extent a Fund's portfolio transactions are used to obtain such
services, the brokerage commissions paid by the Fund will exceed those that
might otherwise be paid by an amount which cannot be presently determined. Such
services would be useful and of value to the Advisers in serving both the Funds
and other clients and, conversely, such services obtained by the placement of
brokerage business of other clients would be useful to the Advisers in carrying
out their obligations to the Funds.
B-23
<PAGE>
During the fiscal year ended November 30, 1994, the Trust bought securities,
including repurchase agreements, issued by the following ten entities which
transacted the largest amount of principal business with the Trust during that
period. Those entities were Bear Stearns Companies, Inc., First Boston Corp.,
Merrill Lynch & Co., Inc. Lehman Government Securities, Morgan Stanley Inc.,
Morgan Guarantee Trust Co., Daiwa Securities America, Inc., Citicorp, Kidder
Peabody and Co., State Street Bank and Trust Company and Swiss Bank.
At November 30, 1994 the Paragon Treasury Money Market Fund held repurchase
agreements with the following regular brokers or dealers (in the following
amounts):
<TABLE>
<S> <C>
Merrill Lynch Government Securities................................... $48,947,060
Bear Stearns Companies................................................ 44,360,000
First Boston Corporation.............................................. 38,347,000
Morgan Stanley & Company.............................................. 36,937,000
Lehman Government Securities.......................................... 30,000,000
J.P. Morgan Securities, Inc........................................... 29,327,500
Daiwa Securities American, Inc........................................ 23,622,500
Bankers Trust Securities Corp......................................... 17,180,000
Smith Barney, Inc..................................................... 8,590,000
</TABLE>
At November 30, 1994, Paragon Intermediate-Term Bond Fund and Paragon Value
Equity Fund Income Fund held securities with the following regular brokers or
dealers (in the following amounts):
<TABLE>
<CAPTION>
INTERMEDIATE-TERM VALUE EQUITY
BROKER/DEALER BOND FUND INCOME FUND
- ---------------------------------------------------------------------- ----------------- -------------
<S> <C> <C>
Bear Stearns Companies, Inc........................................... $ 4,837,750 $ 656,250
Merrill Lynch & Co., Inc.............................................. 3,944,250 1,140,000
Morgan Stanley Group, Inc............................................. 2,052,060 1,606,250
</TABLE>
For the fiscal years ended November 30, 1994, November 30, 1993 and November
30, 1992, each of the following Funds paid brokerage commissions as follows:
<TABLE>
<CAPTION>
TOTAL
TOTAL BROKERAGE
BROKERAGE COMMISSIONS
TOTAL COMMISSIONS PAID TO
BROKERAGE PAID TO TOTAL AMOUNT OF BROKERS WHO
COMMISSIONS AFFILIATED TRANSACTIONS ON WHICH PROVIDED
PAID PERSONS COMMISSIONS PAID RESEARCH
------------ ------------- ---------------------- ------------
<S> <C> <C> <C> <C> <C>
Fiscal Year Ended November 30, 1994:
Paragon Value Growth Fund+.............. $232,059 $-0-(0%)* $151,349,263 $171,479
Paragon Value Equity Income Fund+....... $117,597 $-0-(0%)* $ 72,375,548 $ 93,822
Paragon Gulf South Growth Fund++........ $ 60,992 $-0-(0%)* $ 25,726,579 $ 34,135
Fiscal Year Ended November 30, 1993:
Paragon Value Growth Fund+.............. $274,709 $-0-(0%)* $217,306,660 N/A
Paragon Value Equity Income Fund+....... $147,011 $-0-(0%)* $101,092,286 N/A
Paragon Gulf South Growth Fund++........ $ 69,248 $-0-(0%)* $228,740,832 N/A
Fiscal Year Ended November 30, 1992:
Paragon Value Growth Fund+.............. $174,539 $-0-(0%)* $113,593,929 (0%)* N/A
Paragon Value Equity Income Fund+....... $106,161 $1,330(1.3%)* $ 59,262,357 (1.2%)** N/A
Paragon Gulf South Growth Fund++........ $ 36,826 $-0-(0%)* $ 37,702,670 (0%)** N/A
</TABLE>
- ------------------------
* Percent of total commissions paid.
** Percent of total amount of transactions involving the payment of commissions
effected through affiliated persons.
+ Commenced operations December 29, 1989.
++ Commenced operations July 1, 1991.
B-24
<PAGE>
NET ASSET VALUE
The net asset value per share of each class of each Fund is determined by
the Trust's custodian as of the close of regular trading on the New York Stock
Exchange (normally 3:00 p.m. Louisiana time, 4:00 p.m. New York time) on each
Business Day. A Business Day means any day on which the New York Stock Exchange
is open except, in the case of Paragon Treasury Money Market Fund, for days on
which Chicago, Boston or New York banks are closed for local holidays. Holidays
include: New Year's Day, Presidents' Day, Good Friday, Memorial Day,
Independence Day, Labor Day, Thanksgiving Day, Christmas Day, and, in the case
of Paragon Treasury Money Market Fund, also Martin Luther King, Jr. Day,
Columbus Day and Veteran's Day.
Portfolio securities of each Fund (other than Paragon Treasury Money Market
Fund) are valued as follows: (a) stocks which are traded on any U.S. stock
exchange or the Nasdaq National Market ("NASDAQ") are valued at the last sale
price on the principal exchange on which they are traded or NASDAQ (if NASDAQ is
the principal market for such securities) on the valuation day or, if no sale
occurs, at the mean between the closing bid and closing asked price; (b)
over-the-counter stocks not quoted on NASDAQ are valued at the last sale price
on the valuation day or, if no sale occurs, at the mean between the last bid and
asked price; (c) securities listed or traded on foreign exchanges (including
foreign exchanges whose operations are similar to the U.S. over-the-counter
market) are valued at the last sale price on the exchange where they are
principally traded on the valuation day or, if no sale occurs, at the official
bid price (both the last sale price and the official bid price are determined as
of the close of the London Foreign Exchange); (d) debt securities are valued at
prices supplied by a pricing agent selected by the Trustees, which prices
reflect broker/dealer-supplied valuations and electronic data processing
techniques, if those prices are deemed by the relevant Adviser to be
representative of market values at the close of business of the New York Stock
Exchange; (e) options contracts are valued at the last sale price on the market
where any such options contract is principally traded; and (f) all other
securities and other assets, including debt securities, for which prices are
supplied by a pricing agent but are not deemed by the relevant Adviser to be
representative of market values, but excluding money market instruments with a
remaining maturity of sixty days or less and including restricted securities and
securities for which no market quotation is available, are valued at fair value
under procedures established by the Trustees or the Valuation Committee, if any,
although the actual calculation may be done by others. Money market instruments
held by the Funds with a remaining maturity of sixty days or less will be valued
by the amortized cost method. Portfolio securities traded on more than one
United States national securities exchange or foreign securities exchange are
valued at the last sale price on each Business Day at the close of the exchange
representing the principal market for such securities.
Portfolio securities of Paragon Treasury Money Market Fund are valued at
their amortized cost, which does not take into account unrealized securities
gains or losses in an effort to maintain a constant net asset value of $1.00 per
share, which the Board of Trustees has determined to be in the best interest of
Paragon Treasury Money Market Fund and its shareholders. During periods of
declining interest rates, the quoted yield on shares of Paragon Treasury Money
Market Fund may tend to be higher than a like computation made by a fund with
identical investments utilizing a method of valuation based upon market prices
and estimates of market prices for all of its portfolio instruments. Thus, if
the use of amortized cost by Paragon Treasury Money Market Fund resulted in a
lower aggregate portfolio value on a particular day, a prospective investor in
Paragon Treasury Money Market Fund would be able to obtain a somewhat higher
yield, if he or she purchased shares of Paragon Treasury Money Market Fund on
that day, than would result from investment in a fund utilizing solely market
values, and existing investors in Paragon Treasury Money Market Fund would
receive less investment income. The converse would apply in a period of rising
interest rates.
Trading in securities on European and Far Eastern securities exchanges and
over-the-counter markets is normally completed well before the close of business
on each Business Day. In addition, European or Far Eastern securities trading
generally or in a particular country or countries may not take place on all
Business Days. Furthermore, trading takes place in Japanese markets on certain
B-25
<PAGE>
Saturdays and in various foreign markets on days which are not Business Days and
days on which the Funds' net asset values are not calculated. Such calculation
does not take place contemporaneously with the determination of the prices of
the majority of the portfolio securities used in such calculation. Events
affecting the values of portfolio securities that occur between the time their
prices are determined and the close of the New York Stock Exchange will not be
reflected in the Funds' calculation of net asset values unless the relevant
Adviser deems that the particular event would materially affect net asset value,
in which case an adjustment will be made.
The net asset value per share of each class of a Fund is computed by taking
the value of all of that Fund's assets attributable to a class, less that Fund's
liabilities attributable to a class, and dividing it by the number of
outstanding shares of that class.
The proceeds received by each Fund for each issue or sale of its shares, and
all net investment income, realized and unrealized gain and proceeds thereof,
subject only to the rights of creditors, will be specifically allocated to such
Fund and constitute the underlying assets of that Fund. The underlying assets of
each Fund will be segregated on the books of account, and will be charged with
the liabilities in respect to such Fund and with a share of the general
liabilities of the Trust. Expenses with respect to the Funds are to be allocated
in proportion to the net asset values of the respective Funds except where
allocations of direct expenses can otherwise be fairly made.
SHAREHOLDER INVESTMENT ACCOUNT
A Shareholder Investment Account is established for each investor in the
Funds, under which a record of the shares of each Fund held is maintained by
Goldman Sachs as transfer agent. Whenever a transaction takes place in the
Shareholder Investment Account, other than transactions relating to Paragon
Treasury Money Market Fund, the shareholder will be mailed a statement showing
the transaction and the status of the Account.
REDEMPTIONS
The Trust may suspend the right of redemption of shares of either class of
any Fund and may postpone payment for any period: (i) during which the New York
Stock Exchange is closed other than customary weekend and holiday closings or
during which trading on the New York Stock Exchange is restricted, (ii) when the
SEC determines that a state of emergency exists which may make payment or
transfer not reasonably practicable, (iii) as the SEC may by order permit for
the protection of the shareholders of the Trust or (iv) at any other time when
the Trust may, under applicable laws and regulations, suspend payment on the
redemption of its shares.
REDEMPTIONS IN KIND
The Trust agrees to redeem shares of each Fund solely in cash up to the
lesser of $250,000 or 1% of the net asset value of the Fund during any 90-day
period for any one shareholder. The Trust reserves the right to pay redemptions
exceeding $250,000 or 1% of the net asset value of the redeeming Fund, either
totally or partially, by a distribution in kind of securities (instead of cash)
from the applicable Fund's portfolio. The securities distributed in kind would
be valued for this purpose using the same method employed in calculating the
Fund's net asset value per share. If a shareholder receives a distribution in
kind, the shareholder should expect to incur transaction costs upon the
disposition of the securities received in the distribution.
CALCULATION OF PERFORMANCE QUOTATIONS
The average annual total return of each class of each Fund is determined for
a particular period by calculating the actual dollar amount of the investment
return on a $1,000 investment. Total return for a period of one year is equal to
the actual return of the Fund during that period. This calculation
B-26
<PAGE>
assumes a complete redemption of the investment. It also assumes that all
dividends and distributions are reinvested at net asset value on the
reinvestment dates during the period. In addition, for Class A shares of a Fund
(except Paragon Treasury Money Market Fund), the calculation assumes the
deduction of the maximum initial sales charge of 4.5%; for Class B shares the
calculation reflects the deduction of any applicable contingent deferred sales
charge ("CDSC") imposed on a redemption of shares held for the applicable
period.
Year-by-year total return and cumulative total return for a specified period
are each derived by calculating the percentage rate required to make a $1,000
investment made at the maximum public offering price, with all distributions
reinvested, at the beginning of such period equal to the actual total value of
such investment at the end of such period. The following table indicates the
total return (capital changes plus reinvestment of all distributions) on a
hypothetical investment of $1,000 in Class A shares of each Fund, except Paragon
Treasury Money Market Fund, for the periods indicated (Class B shares are a new
class of shares and no historical performance data exists):
VALUE OF $1,000 INVESTMENT
(TOTAL RETURN)
CLASS A SHARES
<TABLE>
<CAPTION>
ENDING REDEEMABLE
INVESTMENT INVESTMENT VALUE OF INVESTMENT
DATE DATE AT PERIOD END
---------- ---------- ----------------------
<S> <C> <C> <C> <C> <C>
Paragon Short-Term -Assumes 4.5% sales charge 12/1/93 11/30/94 $ 956.18
Government Fund -Assumes no sales charge one year ended 1,001.24
Paragon Short-Term -Assumes 4.5% sales charge 12/29/89* 11/30/94 $1,285.38
Government Fund -Assumes no sales charge 1,345.86
<CAPTION>
AVERAGE ANNUAL
TOTAL RETURN
----------------------
<S> <C> <C> <C> <C> <C>
Paragon Short-Term -Assumes 4.5% sales charge 12/1/93 11/30/94 (4.38)%
Government Fund -Assumes no sales charge one year ended 0.12 %
Paragon Short-Term -Assumes 4.5% sales charge 12/29/89* 11/30/94 5.23 %
Government Fund -Assumes no sales charge 6.22 %
<CAPTION>
CUMULATIVE
TOTAL RETURN
----------------------
<S> <C> <C> <C> <C> <C>
Paragon Short-Term -Assumes 4.5% sales charge 12/1/93 11/30/94 (4.38)%
Government Fund -Assumes no sales charge one year ended 0.12 %
Paragon Short-Term -Assumes 4.5% sales charge 12/29/89* 11/30/94 28.54 %
Government Fund -Assumes no slaes charge 34.59 %
<CAPTION>
ENDING REDEEMABLE
VALUE OF INVESTMENT
AT PERIOD END
----------------------
<S> <C> <C> <C> <C> <C>
Paragon Intermediate-Term -Assumes 4.5% sales charge 12/1/93 11/30/94 $ 909.40
Bond Fund -Assumes no sales charge one year ended 952.25
Paragon Intermediate-Term -Assumes 4.5% sales charge 12/29/89* 11/30/94 1,317.56
Bond Fund -Assumes no sales charge 1,379.64
<CAPTION>
AVERAGE ANNUAL
TOTAL RETURN
----------------------
<S> <C> <C> <C> <C> <C>
Paragon Intermediate-Term -Assumes 4.5% sales charge 12/1/93 11/30/94 (9.06)%
Bond Fund -Assumes no sales charge one year ended (4.77)%
Paragon Intermediate-Term -Assumes 4.5% sales charge 12/29/89* 11/30/94 5.76 %
Bond Fund -Assumes no sales charge 6.75 %
</TABLE>
B-27
<PAGE>
<TABLE>
<CAPTION>
INVESTMENT INVESTMENT CUMULATIVE
DATE DATE TOTAL RETURN
---------- ---------- ----------------------
<S> <C> <C> <C> <C> <C>
Paragon Intermediate-Term -Assumes 4.5% sales charge 12/1/93 11/30/94 (9.06)%
Bond Fund -Assumes no sales charge one year ended (4.77)%
Paragon Term-Intermediate -Assumes 4.5% sales charge 12/29/89* 11/30/94 31.76 %
Bond Fund -Assumes no sales charge 37.96 %
<CAPTION>
ENDING REDEEMABLE
VALUE OF INVESTMENT
AT PERIOD END
----------------------
WITHOUT
WITH FEE FEE
REDUCTIONS REDUCTIONS
---------- ----------
<S> <C> <C> <C> <C> <C>
Paragon Louisiana Tax -Assumes 4.5% sales charge 12/1/93 11/30/94 $ 926.60 $ 910.15
Free Fund -Assumes no sales charge 970.26 948.80
one year ended
Paragon Louisiana Tax -Assumes 4.5% sales charge 12/29/89* 11/30/94 $ 1,286.67 $ 1,277.20
Free Fund -Assumes no sales charge 1,347.27 1,337.38
<CAPTION>
AVERAGE ANNUAL
TOTAL RETURN
----------------------
WITHOUT
WITH FEE FEE
REDUCTIONS REDUCTIONS
---------- ----------
<S> <C> <C> <C> <C> <C>
Paragon Louisiana Tax -Assumes 4.5% sales charge 12/1/93 11/30/94 (7.34)% (8.98)%
Free Fund -Assumes no sales charge (2.97)% (5.12)%
one year ended
Paragon Louisiana Tax -Assumes 4.5% sales charge 12/29/89* 11/30/94 5.25% 5.09%
Free Fund -Assumes no sales charge 6.24% 6.08%
<CAPTION>
CUMULATIVE
TOTAL RETURN
----------------------
WITHOUT
WITH FEE FEE
REDUCTIONS REDUCTIONS
---------- ----------
<S> <C> <C> <C> <C> <C>
Paragon Louisiana Tax -Assumes 4.5% sales charge 12/1/93 11/30/94 (7.34)% (8.98)%
Free Fund -Assumes no sales charge one year ended (2.97)% (5.12)%
Paragon Louisiana Tax -Assumes 4.5% sales charge 12/29/89* 11/30/94 28.67% 27.72%
Free Fund -Assumes no sales charge 34.73% 33.74%
<CAPTION>
ENDING REDEEMABLE
VALUE OF INVESTMENT
AT PERIOD END
----------------------
<S> <C> <C> <C> <C> <C>
Paragon Value Growth -Assumes 4.5% sales charge 12/1/93 11/30/94 $913.79
Fund -Assumes no sales charge one year ended 956.85
<CAPTION>
WITHOUT
WITH FEE FEE
REDUCTIONS REDUCTIONS
---------- ----------
<S> <C> <C> <C> <C> <C>
Paragon Value Growth -Assumes 4.5% sales charge 12/29/89* 11/30/94 $ 1,556.64 $ 1,555.78
Fund -Assumes no sales charge 1,629.98 1,629.01
<CAPTION>
AVERAGE ANNUAL
TOTAL RETURN
----------------------
<S> <C> <C> <C> <C> <C>
Paragon Value Growth -Assumes 4.5% sales charge 12/1/93 11/30/94 (8.62)%
Fund -Assumes no sales charge one year ended (4.32)%
<CAPTION>
WITHOUT
WITH FEE FEE
REDUCTIONS REDUCTIONS
---------- ----------
<S> <C> <C> <C> <C> <C>
Paragon Value Growth -Assumes 4.5% sales charge 12/29/89* 11/30/94 9.40% 9.39%
Fund -Assumes no sales charge 10.43% 10.41%
</TABLE>
B-28
<PAGE>
<TABLE>
<CAPTION>
INVESTMENT INVESTMENT CUMULATIVE
DATE DATE TOTAL RETURN
---------- ---------- ----------------------
<S> <C> <C> <C> <C> <C>
Paragon Value Growth -Assumes 4.5% sales charge 12/1/93 11/30/94 (8.62)%
Fund -Assumes no sales charge one year ended (4.32)%
<CAPTION>
WITHOUT
WITH FEE FEE
REDUCTIONS REDUCTIONS
---------- ----------
<S> <C> <C> <C> <C> <C>
Paragon Value Growth -Assumes 4.5% sales charge 12/29/89* 11/30/94 55.66% 55.58%
Fund -Assumes no sales charge 63.00% 62.90%
<CAPTION>
ENDING REDEEMABLE
VALUE OF INVESTMENT
AT PERIOD END
----------------------
<S> <C> <C> <C> <C> <C>
Paragon Value Equity -Assumes 4.5% sales charge 12/1/93 11/30/94 $938.85
Income Fund -Assumes no sales charge one year ended 983.09
<CAPTION>
WITHOUT
WITH FEE FEE
REDUCTIONS REDUCTIONS
---------- ----------
<S> <C> <C> <C> <C> <C>
Paragon Value Equity -Assumes 4.5% sales charge 12/29/89* 11/30/94 $ 1,376.44 $ 1,375.65
Income Fund -Assumes no sales charge 1,441.25 1,440.43
<CAPTION>
AVERAGE ANNUAL
TOTAL RETURN
----------------------
<S> <C> <C> <C> <C> <C>
Paragon Value Equity -Assumes 4.5% sales charge 12/1/93 11/30/94 (6.12)%
Income Fund -Assumes no sales charge one year ended (1.69)%
<CAPTION>
WITHOUT
WITH FEE FEE
REDUCTIONS REDUCTIONS
---------- ----------
<S> <C> <C> <C> <C> <C>
Paragon Value Equity -Assumes 4.5% sales charge 12/29/89* 11/30/94 6.70% 6.69%
Income Fund -Assumes no sales charge 7.70% 7.69%
<CAPTION>
CUMULATIVE
TOTAL RETURN
----------------------
<S> <C> <C> <C> <C> <C>
Paragon Value Equity -Assumes 4.5% sales charge 12/1/93 11/30/94 (6.12)%
Income Fund -Assumes no sales charge one year ended (1.69)%
<CAPTION>
WITHOUT
WITH FEE FEE
REDUCTIONS REDUCTIONS
---------- ----------
<S> <C> <C> <C> <C> <C>
Paragon Value Equity -Assumes 4.5% sales charge 12/29/89* 11/30/94 37.64% 37.56%
Income Fund -Assumes no sales charge 44.13% 44.04%
<CAPTION>
ENDING REDEEMABLE
VALUE OF INVESTMENT
AT PERIOD END
----------------------
<S> <C> <C> <C> <C> <C>
Paragon Gulf South -Assumes 4.5% sales charge 12/31/93 11/30/94 $ 891.40
Growth Fund -Assumes no sales charge one year ended 933.40
Paragon Gulf South -Assumes 4.5% sales charge 7/1/91* 11/30/94 1,452.23
Growth Fund -Assumes no sales charge 1,520.69
<CAPTION>
AVERAGE ANNUAL
TOTAL RETURN
----------------------
<S> <C> <C> <C> <C> <C>
Paragon Gulf South -Assumes 4.5% sales charge 12/31/93 11/30/94 (10.86)%
Growth Fund -Assumes no sales charge one year ended (6.66)%
Paragon Gulf South -Assumes 4.5% sales charge 7/1/91* 11/30/94 11.52%
Growth Fund -Assumes no sales charge 13.03%
</TABLE>
B-29
<PAGE>
<TABLE>
<CAPTION>
INVESTMENT INVESTMENT CUMULATIVE
DATE DATE TOTAL RETURN
---------- ---------- ----------------------
<S> <C> <C> <C> <C> <C>
Paragon Gulf South -Assumes 4.5% sales charge 12/31/93 11/30/94 (10.86)%
Growth Fund -Assumes no sales charge (6.66)%
Paragon Gulf South -Assumes 4.5% sales charge 7/1/91* 11/30/94 45.22%
Growth Fund -Assumes no sales charge 57.02%
</TABLE>
- ------------------------
*Commencement of investment operations.
The above table should not be considered a representation of future
performance.
VALUE OF $1,000 INVESTMENT
(TOTAL RETURN)
CLASS B SHARES
<TABLE>
<CAPTION>
ENDING REDEEMABLE
INVESTMENT INVESTMENT VALUE OF INVESTMENT
DATE DATE AT PERIOD END
---------- ---------- -----------------------
<S> <C> <C> <C> <C> <C>
Paragon Short-Term -Assumes no Contingent 10/19/94* 11/30/94 $996.09
Government Fund Deferred Sales Charge
("CDSC")
-Assumes CDSC 946.59
<CAPTION>
CUMULATIVE
TOTAL RETURN
-----------------------
<S> <C> <C> <C> <C> <C>
Paragon Short-Term -Assumes no CDSC (0.39)%
Government Fund -Assumes CDSC (5.35)%
<CAPTION>
ENDING REDEEMABLE
VALUE OF INVESTMENT
AT PERIOD END
-----------------------
<S> <C> <C> <C> <C> <C>
Paragon Intermediate-Term -Assumes no CDSC 9/28/94* 11/30/94 $992.38
Bond Fund -Assumes CDSC 943.02
<CAPTION>
CUMULATIVE
TOTAL RETURN
-----------------------
<S> <C> <C> <C> <C> <C>
Paragon Intermediate -Assumes no CDSC (0.76)%
Term Bond Fund -Assumes CDSC (5.70)%
<CAPTION>
ENDING REDEEMABLE
VALUE OF INVESTMENT
AT PERIOD END
-----------------------
WITH WITHOUT
INVESTMENT INVESTMENT FEE FEE
DATE DATE REDUCTIONS REDUCTIONS
---------- ---------- ---------- ----------
<S> <C> <C> <C> <C> <C>
Paragon Louisiana Tax -Assumes no CDSC 9/16/94* 11/30/94 $970.58 $970.28
Free Fund -Assumes CDSC 922.22 921.90
<CAPTION>
CUMULATIVE
TOTAL RETURN
-----------------------
WITH WITHOUT
FEE FEE
REDUCTIONS REDUCTIONS
---------- ----------
<S> <C> <C> <C> <C> <C>
Paragon Louisiana Tax -Assumes no CDSC (2.94)% (2.97)%
Free Fund -Assumes CDSC (7.78)% (7.81)%
<CAPTION>
ENDING REDEEMABLE
VALUE OF INVESTMENT
AT PERIOD END
-----------------------
<S> <C> <C> <C> <C> <C>
Paragon Value Growth -Assumes no CDSC 9/9/94* 11/30/94 $916.92
Fund -Assumes no sales charge 871.16
</TABLE>
B-30
<PAGE>
<TABLE>
<CAPTION>
INVESTMENT INVESTMENT CUMULATIVE
DATE DATE TOTAL RETURN
---------- ---------- -----------------------
<S> <C> <C> <C> <C> <C>
Paragon Value Growth -Assumes no CDSC (8.31)%
Fund -Assumes CDSC (12.88)%
<CAPTION>
ENDING REDEEMABLE
VALUE OF INVESTMENT
AT PERIOD END
-----------------------
<S> <C> <C> <C> <C> <C>
Paragon Value Equity -Assumes no CDSC 10/3/94* 11/30/94 $965.96
Income Fund -Assumes CDSC 917.77
<CAPTION>
CUMULATIVE
TOTAL RETURN
-----------------------
<S> <C> <C> <C> <C> <C>
Paragon Value Equity -Assumes no CDSC (3.40)%
Income Fund -Assumes CDSC (8.22)%
<CAPTION>
ENDING REDEEMABLE
VALUE OF INVESTMENT
AT PERIOD END
-----------------------
<S> <C> <C> <C> <C> <C>
Paragon Gulf South -Assumes no CDSC 9/12/94* 11/30/94 $909.21
Growth Fund -Assumes CDSC 863.76
<CAPTION>
CUMULATIVE
TOTAL RETURN
-----------------------
<S> <C> <C> <C> <C> <C>
Paragon Gulf South -Assumes no CDSC (9.08)%
Growth Fund -Assumes CDSC (13.62)%
</TABLE>
- ------------------------
*Commencement of investment operations.
The above table should not be considered a representation of future
performance.
The Funds may from time to time quote or otherwise use total return
information and/or yield information in advertisements, shareholder reports or
sales literature. Average annual total return values and yields are computed
pursuant to formulas specified by the SEC.
Performance data quoted will represent historical performance and the
investment return and principal value of an investment will fluctuate so that an
investor's shares, when redeemed, may be worth more or less than original cost.
The yield of each class of each Fund, other than Paragon Treasury Money
Market Fund, is computed by dividing its net investment income earned
attributable to a class during a recent thirty-day period by the product of the
average daily number of shares outstanding and entitled to receive dividends
during the period and maximum offering price per share of that class on the last
day of the period. The results are compounded on a bond equivalent (semi-annual)
basis and then annualized. Net investment income per share of a class is equal
to the Fund's dividends and interest earned attributable to a class during the
period, reduced by accrued expenses attributable to that class for the period.
For the thirty-day period ended November 30, 1994, the yield of the Class A
shares and Class B shares of each of the following Funds was:
<TABLE>
<CAPTION>
FUND
- --------------------------------------------------------------------------- 30 DAY 30 DAY
PERIOD ENDED PERIOD ENDED
NOVEMBER 30, NOVEMBER 30,
1994 1994
------------- -------------
CLASS A CLASS B
<S> <C> <C>
Paragon Short-Term Government Fund......................................... 5.73% 5.24%
Paragon Intermediate-Term Bond Fund........................................ 7.02% 6.60%
Paragon Louisiana Tax-Free Fund............................................ 5.25% 4.75%
</TABLE>
B-31
<PAGE>
Had there been no waiver of fees, the yield of the Class A shares and Class
B shares of Paragon Louisiana Tax-Free Fund would have been 5.10% and 4.60%,
respectively, for the thirty-day period ended November 30, 1994.
Paragon Louisiana Tax-Free Fund may also publish its tax-equivalent yield,
which is the net annualized taxable yield needed to produce a specified
tax-exempt yield at a given tax rate based on a specified thirty-day period
assuming semiannual compounding of income. Tax-equivalent yield is calculated by
dividing that portion of the Fund's yield which is tax-exempt by one minus a
stated income tax rate and adding that quotient to the remaining portion, if
any, of the yield of the Fund which is not tax-exempt. Assuming a Federal income
tax rate of 39.6% and a Louisiana tax rate of 6% for the thirty day period ended
November 30, 1994, the tax equivalent yield for the Class A shares and Class B
shares of Paragon Louisiana Tax-Free Fund was 9.24% and 8.36%, respectively. Had
there been no waiver of fees, the tax equivalent yield of Class A shares and
Class B shares of Paragon Louisiana Tax-Free Fund would have been 8.98% and
8.09%, respectively for the thirty day period ended November 30, 1994. For the
fiscal year ended November 30, 1994, approximately 99.43% of the Fund's income
was exempt from Louisiana income tax. As a result, the tax equivalent yield
actually realized by shareholders was lower than that stated above.
From time to time, quotations of Paragon Treasury Money Market Fund's
"yield" and "effective yield" may be included in advertisements and
communications to shareholders. These performance figures are calculated in the
following manner:
A. Yield -- the net annualized yield based on a specified 7-calendar day
period calculated at simple interest rates. Yield is calculated by
determining the net change, exclusive of capital changes, in the value of
a hypothetical preexisting account having a balance of one share at the
beginning of the period, subtracting a hypothetical charge reflecting
deductions from shareholder accounts, and dividing the difference by the
value of the account at the beginning of the base period to obtain the
base period return. The yield is annualized by multiplying the base
period return by 365/7. The yield figure is stated to the nearest
hundredth of one percent. The yield of Paragon Treasury Money Market Fund
for the seven-day period ended November 30, 1994 was 5.15%.
B. Effective Yield -- the net annualized yield for a specified 7-calendar
day period assuming a reinvestment of dividends (compounding). Effective
yield is calculated by the same method as yield except that the base
return is compounded by adding 1, raising the sum to a power equal to 365
divided by 7, and subtracting 1 from the result, according to the
following formula: Effective Yield = [(Base Period Return+1) (365/7)] -
1. The effective yield of Paragon Treasury Money Market Fund for the
seven-day period ended November 30, 1994, was 5.29%.
As described above, yield and effective yield are based on historical
earnings and are not intended to indicate future performance. Yield and
effective yield will vary based on changes in market conditions and the level of
expenses.
The Funds may from time to time advertise comparative performance and/or its
past performance as measured by various independent sources, including, but not
limited to, BARRON'S, THE WALL STREET JOURNAL, WEISENBERGER INVESTMENT COMPANIES
SERVICE, BUSINESS WEEK, CHANGING TIMES, FINANCIAL WORLD, FORBES, FORTUNE and
MONEY. In addition, the Funds may from time to time advertise their performance
relative to certain indices and benchmark investments, including: (a) the Lipper
Analytical Services, Inc. Mutual Fund Performance Analysis, Fixed Income
Analysis and Mutual Fund Indices (which measure total return and average current
yield for the mutual fund industry and rank mutual fund performance); (b) the
CDA Mutual Fund Report published by CDA Investment Technologies, Inc. (which
analyzes price, risk and various measures of return for the mutual fund
industry); (c) the Consumer Price Index published by the U.S. Bureau of Labor
Statistics (which measures changes in the price of goods and services); (d)
Stocks, Bonds, Bills and Inflation published by Ibbotson Associates (which
provides historical performance figures for stocks, government securities and
inflation); and (e) historical investment data supplied by the research
departments of Goldman
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<PAGE>
Sachs, Smith Barney Shearson Inc., First Boston Corporation, Morgan Stanley,
Salomon Brothers, Merrill Lynch, Donaldson Lufkin and Jenrette or other
providers of such data. The composition of the investments in such indices and
the characteristics of such benchmark investments are not identical to, and in
some cases are very different from, those of each Fund's portfolio. These
indices and averages are generally unmanaged and the items included in the
calculations of such indices and averages may not be identical to the formulas
used by a Fund to calculate its performance figures.
From time to time, advertisements or information may include a discussion of
certain attributes or benefits to be derived by an investment in a Fund. Such
advertisements or information may include symbols, headlines or other material
which highlight or summarize the information discussed in more detail in the
communication.
The Trust may from time to time summarize the substance of discussions
contained in shareholder reports in advertisements and publish the Advisers'
views as to markets, the rationale for a Fund's investments and discussions of a
Fund's current asset allocation.
Each Fund's performance data will be based on historical results and will
not be intended to indicate future performance. The total return of a class of a
Fund will vary based on market conditions, portfolio and class expenses,
portfolio investments and other factors. The performance of Class A and Class B
shares will be calculated separately, and, because each class is subject to
different expenses, the performance with respect to the classes of a Fund for
the same period may differ. The value of shares of each Fund, other than Paragon
Treasury Money Market Fund, will fluctuate and an investor's shares may be worth
more or less than their original cost upon redemption. The Trust may also, at
its discretion, from time to time make a list of each Fund's holdings available
to investors upon request.
TAX INFORMATION
Each Fund has qualified and elected to be treated as a regulated investment
company under Subchapter M of the Internal Revenue Code of 1986, as amended,
(the "Code") and intends to continue to qualify for such treatment for each
taxable year. Such qualification does not involve supervision of management or
investment practices or policies by any governmental agency or bureau.
In order to qualify as a regulated investment company, each Fund must, among
other things, (a) derive at least 90% of its annual gross income from dividends,
interest, payments with respect to securities loans and gains from the sale or
other disposition of stock or securities, or other income (such as gains from
options, futures or forward contracts) derived with respect to its business of
investing in such stock or securities; (b) derive less than 30% of its annual
gross income from the sale or other disposition of stock or securities or
options and futures contracts held less than three months; and (c) diversify its
holdings so that, at the end of each quarter of its taxable year, (i) at least
50% of the market value of the Fund's total (gross) assets is represented by
cash and cash items (including receivables), U.S. Government securities,
securities of other regulated investment companies and other securities limited,
in respect of any one issuer, to an amount not greater in value than 5% of the
value of the Fund's total assets and to not more than 10% of the outstanding
voting securities of such issuer, and (ii) not more than 25% of the value of the
Fund's total assets is invested in the securities (other than U.S. Government
securities and securities of other regulated investment companies) of any one
issuer or two or more issuers controlled by the Fund and engaged in the same,
similar or related trades or business.
Each Fund, as a regulated investment company, will not be subject to Federal
income tax on any of its net investment income and net realized capital gains
that are distributed to shareholders with respect to any taxable year, provided
that the Fund distributes, in compliance with the Code's timing requirements, at
least 90% of its investment company taxable income (all of its taxable income
other than its "net capital gain", I.E., the excess of net long-term capital
gain over net short-term capital loss, after reduction by deductible expenses)
for such year and at least 90% of the excess of the tax-
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<PAGE>
exempt interest it receives, if any, over certain disallowed deductions. If a
Fund retains any investment company taxable income or net capital gain, it will
be subject to Federal income tax at regular corporate rates on the retained
amount. In order to avoid a nondeductible 4% Federal excise tax, each Fund must
distribute (or be deemed to have distributed) by December 31 of each calendar
year at least 98% of its ordinary income for such year, at least 98% of the
excess of its capital gains over its capital losses (computed, by election, on
the basis of the one-year period ending on November 30 of such year), and all
ordinary income and the excess of capital gains over capital losses for the
previous year that were not distributed in such year and on which the Fund paid
no Federal income tax.
Distributions of net investment income (including interest income from
municipal obligations, except those purchased by Paragon Louisiana Tax-Free
Fund, and income from securities loans, repurchase agreements and a portion of
the discount on certain stripped tax-exempt obligations and their coupons) and
the excess of net short-term capital gain over net long-term capital loss will
be treated as ordinary income in the hands of shareholders. For Funds other than
Paragon Value Equity Income Fund, Paragon Value Growth Fund and Paragon Gulf
South Growth Fund, such distributions are unlikely to qualify for the corporate
dividends-received deduction. In the case of Paragon Value Equity Income Fund,
Paragon Value Growth Fund and Paragon Gulf South Growth Fund, a portion of such
distributions may qualify for the corporate dividends-received deduction,
subject to the limits applicable to such deduction. Amounts eligible for the
deduction may still be taken into account in determining liability for the
Federal alternative minimum tax and result in adjustments in the tax basis of
Fund shares under certain circumstances. Distributions of a Fund's net capital
gain, as defined above, are taxable to shareholders as long-term capital gain,
regardless of the length of time the shares of a Fund have been held by such
shareholders and will not qualify for the corporate dividends-received
deduction. Net realized capital gains for a taxable year are computed by taking
into account any capital loss carryforward of a Fund. At November 30, 1994, the
following Funds had approximately the following amounts of capital loss
carryforward for U.S. Federal tax purposes:
<TABLE>
<CAPTION>
YEARS OF
FUND AMOUNT EXPIRATION
- --------------------------------------------------------------------- ------------- -----------------
<S> <C> <C>
Short-Term Government................................................ $ 948,000 2000 to 2002
Intermediate-Term Bond............................................... 4,254,000 2002
Louisiana Tax-Free................................................... 403,000 2002
</TABLE>
These amounts are available to be carried forward to offset future capital
gains of the corresponding funds to the extent permitted by applicable laws or
regulations.
Distributions of Paragon Louisiana Tax-Free Fund from the tax-exempt
interest it receives will generally be exempt from Federal income tax, provided
that the Fund qualifies as a regulated investment company and at least 50% of
the value of the Fund's total assets at the close of each quarter of its taxable
year consists of tax-exempt obligations. The portions of such distributions, if
any, derived from interest on certain private activity bonds may constitute tax
preference items and may give rise to, or increase liability under, the
alternative minimum tax for particular shareholders. In addition, all tax-exempt
distributions of the Fund may be includable in "adjusted current earnings" in
determining the corporate alternative minimum tax. Distributions from accrued
market discount income from certain bonds acquired at a market discount will not
be tax-exempt, even if the bonds acquired at a market discount pay interest that
is tax-exempt. Interest on indebtedness incurred directly or indirectly to
purchase or carry shares of the Fund will not be deductible to the extent
attributable to its tax-exempt distributions. The availability of tax-exempt
obligations and the value of the Fund's portfolio may be affected by restrictive
tax legislation enacted in recent years.
Distributions of investment company taxable income and net capital gain will
be taxable as described above, whether received in shares or in cash.
Shareholders electing to receive distributions in the form of additional shares
will have a cost basis in the shares so received equal to the amount of cash
they would have received had they elected to receive cash.
Because Paragon Treasury Money Market Fund declares daily dividends that
include realized short-term capital gains, it is possible that a portion of such
dividends could constitute a return of
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<PAGE>
capital to shareholders for tax purposes (rather than a "dividend") if capital
losses were to reduce such Fund's actual net realized short-term capital gain
for its taxable year below the dollar amount actually distributed.
Initial sales charges paid upon a purchase of Class A shares of a Fund will
not be includable in the shareholder's tax basis in computing gain or loss on a
redemption or exchange of such shares within ninety days after their purchase if
the exchange is for Class A shares of another Paragon Fund, or the redemption is
followed by a reinvestment in shares of the same or another Paragon Fund,
without the payment of sales charges as a result of a reinvestment or exchange
privilege.
Any loss realized upon a redemption or exchange of shares of a Fund with a
tax holding period of six months or less will be treated as a long-term capital
loss to the extent of any distribution of net long term capital gains with
respect to such shares. A loss realized upon a redemption or exchange of shares
of a Fund within a 61-day period beginning 30 days before and ending 30 days
after a purchase of shares of the same Fund (whether by reinvestment of
distributions or otherwise) may be disallowed under "wash sale" rules in whole
or in part. Any loss realized upon a redemption or exchange of shares of Paragon
Louisiana Tax-Free Fund with a tax holding period of six months or less will be
disallowed to the extent of any exempt-interest dividends received with respect
to such shares.
Paragon Intermediate-Term Bond Fund, Paragon Value Growth Fund and Paragon
Value Equity Income Fund may be subject to foreign taxes with respect to
investments in certain securities of foreign entities. These taxes may be
reduced under the terms of applicable U.S. income tax treaties, and the Funds
intend to satisfy any procedural requirements to qualify for benefits under
these treaties. If more than 50% of the value of its total assets at the close
of a taxable year is comprised of stock or securities of foreign corporations, a
Fund may make an election under Code Section 853 to permit its shareholders to
claim a credit or deduction on their Federal income tax returns for their pro
rata portion of qualified taxes paid by such Fund in foreign countries. In the
event such an election is made, shareholders will be required to include their
pro rata share of such taxes in gross income (in addition to the dividends they
actually receive) and will be entitled to claim a foreign tax credit or
deduction with respect to such taxes, subject to certain limitations under the
Code. Shareholders who are precluded from taking such credits or deductions will
nevertheless be taxable on their pro rata share of the foreign taxes included in
their gross income, unless they are otherwise exempt from Federal income tax.
If Paragon Value Growth Fund or Paragon Value Equity Income Fund acquires
stock in certain non-U.S. corporations that receive at least 75% of their annual
gross income from passive sources (such as interest, dividends, rents, royalties
or capital gain) or hold at least 50% of their assets in investments producing
such passive income ("passive foreign investment companies"), that Fund could be
subject to Federal income tax and additional interest charges on "excess
distributions" received from such companies or gain from the sale of stock in
such companies, even if all income or gain actually received by the Fund is
timely distributed to its shareholders. The Fund would not be able to pass
through to its shareholders any credit or deduction for such a tax. Certain
elections may, if available, ameliorate these adverse tax consequences, but any
such election would require the applicable Fund to recognize taxable income or
gain without the concurrent receipt of cash. Each of these Funds may limit
and/or manage its holdings in passive foreign investment companies to minimize
its tax liability or maximize its return from these investments.
Foreign exchange gains and losses related by a Fund in connection with
certain transactions, if any, involving foreign currency-denominated debt
securities, foreign currencies, or payables or receivables denominated in a
foreign currency are subject to Section 988 of the Code, which generally causes
such gains and losses to be treated as ordinary income and losses and may affect
the amount, timing and character of distributions to shareholders.
A Fund's transactions in options and forward contracts will give rise to
taxable income, gain or loss and will be subject to special tax rules, the
effect of which may be to accelerate income to a Fund, defer Fund losses, cause
adjustments in the holding periods of Fund securities, convert capital gains
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<PAGE>
and losses into ordinary income and losses, convert long-term capital gains into
short-term capital gains and convert short-term capital losses into long- term
capital losses. These rules could therefore affect the amount, timing and
character of distributions to shareholders.
For example, the tax treatment of certain listed non-equity options written
or purchased by a Fund (including options on debt securities, options on futures
contracts and options on securities indices) will be governed by Section 1256 of
the Code. Absent a tax election for "mixed straddles" (see below), each such
position held by a Fund on the last business day of each taxable year of a Fund
will be marked to market (i.e., treated as if it were closed out), and all
resulting gain or loss will be treated as 60% long-term capital gain or loss and
40% short-term capital gain or loss, with subsequent adjustments made to any
gain or loss realized upon an actual disposition of such positions.
When a Fund holds an option or contract governed by Section 1256 which
substantially diminishes a Fund's risk of loss with respect to another position
of the Fund not governed by Section 1256 (as might occur in some hedging
transactions), this combination of positions could be a "mixed straddle" which
is generally subject to certain straddle rules of Section 1092 of the Code in
addition to being subject in part to Section 1256. A Fund may make certain tax
elections for its "mixed straddles" which could alter certain effects of Section
1256 or Section 1092.
A Fund's activities involving options and forward contracts may be limited
by the requirement for qualification as a regulated investment company that less
than 30% of the Fund's annual gross income be derived from the disposition of
investments held less than three months.
A Fund's investments in zero coupon bonds, deferred interest bonds or bonds
that provide for payment of interest in kind are subject to special tax rules
that will affect the amount, timing and character of distributions to
shareholders by causing the Fund to recognize income prior to the receipt of
cash payments. For example, with respect to zero coupon bonds and deferred
interest bonds, a Fund will be required to accrue as income each year a portion
of the discount (or deemed discount) at which the securities were issued and to
distribute such income each year in order to maintain its qualification as a
regulated investment company and to avoid Federal income and excise taxes. A
Fund may also elect to accrue market discount on a current basis and be required
to distribute any such accrued discount. Mark to market rules applicable to
certain positions governed by Section 1256 of the Code (as described above) may
also require the recognition of gain without concurrent receipt of cash. In
order to generate cash to satisfy the distribution requirements applicable to
such income or gain, a Fund may have to dispose of portfolio securities which it
would otherwise have continued to hold.
Each Fund will be required to report to the Internal Revenue Service all
distributions (other than tax-exempt distributions) as well as gross proceeds
from the redemption or exchange of Fund shares (other than shares of Paragon
Treasury Money Market Fund) except in the case of certain exempt shareholders.
Under the backup withholding provisions of Code Section 3406, all such
reportable distributions and proceeds may be subject to backup withholding of
Federal income tax at the rate of 31% in the case of nonexempt shareholders who
fail to furnish the Fund with their correct taxpayer identification number and
with certain required certifications or if the Internal Revenue Service or a
broker notifies a Fund that the number furnished by the shareholder is incorrect
or that the shareholder is subject to backup withholding as a result of failure
to report interest or dividend income. The Funds may refuse to accept an
application that does not contain any required taxpayer identification number or
certification that the number provided is correct. If the withholding provisions
are applicable, any such distributions and proceeds, whether taken in cash or
reinvested in shares, will be reduced by the amounts required to be withheld.
Investors may wish to consult their tax advisors about the applicability of the
backup withholding provisions.
All distributions (including tax-exempt distributions), whether received in
shares or cash, as well as redemptions and exchanges (except, generally,
redemptions and exchanges of shares of Paragon Treasury Money Market Fund), must
be reported by each shareholder on the shareholder's Federal income tax return.
Each Fund will inform shareholders of the federal income tax status of its
distributions after the end of each calendar year, including, in the case of
Paragon Louisiana Tax-Free
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<PAGE>
Fund, the amounts that qualify as exempt-interest dividends and any portions of
such amounts that constitute tax preference items under the federal alternative
minimum tax. Shareholders who have not held shares of this Fund for its full
taxable year may have designated as tax-exempt or as a tax preference item a
percentage of their distributions which is not exactly equal to a proportionate
share of the amount of tax-exempt interest or tax preference income earned
during the period of their investment in such Fund. Each shareholder should
consult his or her own tax adviser to determine the tax consequences of an
investment in a Fund in the shareholder's own state and locality.
Different tax treatment, including penalties on certain excess contributions
and deferrals, certain pre-retirement and post-retirement distributions, and
certain prohibited transactions is accorded to accounts maintained as qualified
retirement plans. Shareholders should consult their tax advisers for more
information.
Assuming that each Fund qualifies as a regulated investment company for
federal income tax purposes, each Fund, as a series of a Massachusetts business
trust, will not be subject to any income tax in Massachusetts. The Funds are
also not subject to Massachusetts corporate excise or franchise tax.
The foregoing discussion relates solely to U.S. Federal income tax law as it
applies to U.S. persons (i.e., U.S. citizens and residents and U.S. domestic
corporations, partnerships, trusts and estates) subject to taxation under such
laws. Each shareholder who is not a U.S. person should consult his or her tax
adviser regarding the U.S. and non-U.S. tax consequences of ownership of shares
if a Fund, including the possibility that such a shareholder may be subject to a
U.S. withholding tax at a rate of 30% (or at a lower rate under an applicable
U.S. income tax treaty) on certain distributions or to backup withholding on
certain payments if a current IRS Form W-8 or acceptable substitute is not on
file with the Funds. The discussion does not address special tax rules
applicable to certain classes of investors, such as financial institutions,
insurance companies, and tax-exempt entities.
This discussion of the tax treatment of the Fund and its shareholders is
based on the tax laws in effect as of the date of this Statement of Additional
Information.
ORGANIZATION AND CAPITALIZATION
The Trust is a Massachusetts business trust established under the laws of
the Commonwealth of Massachusetts by a Declaration of Trust dated October 2,
1989.
Goldman Sachs purchased shares of the Funds, except Paragon Gulf South
Growth Fund, at an aggregate purchase price of $100,000 in order to provide the
initial capital of the Funds. Should Goldman Sachs redeem any of such shares
during the five year period beginning at the date of commencement of operation
of the Funds, Goldman Sachs will bear the cost of an amount equal to the then
unamortized portion of the organization expenses, multiplied by the ratio that
the redeemed shares bear to the number of the initial shares outstanding.
The authorized capital of the Trust consists of an unlimited number of
shares of beneficial interest. The Trustees have authority under the Declaration
of Trust to create and classify shares of beneficial interest in separate series
("Funds") without further action by shareholders.
The Declaration of Trust further authorizes the Trustees to classify or
reclassify any series of the shares into one or more classes. Pursuant thereto,
the Trustees have authorized the issuance of two classes of shares of each Fund
designated as Class A shares and Class B shares. Each share of a class of each
Fund represents an equal proportionate interest in the assets of that Fund
allocable to that class. Upon liquidation of a Fund, shareholders of each class
of that Fund are entitled to share PRO RATA in that Fund's net assets allocable
to such class available for distribution to shareholders. The Trust reserves the
right to create and issue additional series or classes of shares, in which case
the shares of each class of a series would participate equally in the
earnings,dividends and assets allocable to that class of the particular series.
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<PAGE>
Shares entitle their holder to one vote per share; however, separate votes
will be taken by each Fund on matters affecting an individual Fund. Shares are
freely transferable and have no preemptive, subscription or conversion rights.
All shares issued and outstanding are fully paid and non-assessable. The shares
of the Funds have non-cumulative voting rights, which means that the holders of
more than 50% of the shares voting for the election of Trustees can elect 100%
of the Trustees if they choose to do so, and, in such event, the holders of the
remaining less than 50% of the shares voting for the election of Trustees will
not be able to elect any person or persons to the Board of Trustees.
As of February 17, 1995, the only holder of record of 5% or more of the
outstanding shares of beneficial interest of Paragon Treasury Money Market Fund,
Paragon Short-Term Government Fund, Paragon Intermediate-Term Bond Fund, Paragon
Louisiana Tax-Free Fund, Paragon Value Growth Fund, Paragon Value Equity Income
Fund and Paragon Gulf South Growth Fund was Labanc & Co. -- Premier Bank, N.A.
Trustee, 451 Florida Street, Baton Rouge, Louisiana 70821 (98%, 92%, 90%, 67%,
81%, 95% and 78%, respectively). The Funds believe that such person was the
beneficial owner (as defined by applicable rules of the SEC) of certain shares
of beneficial interest of the Funds.
SHAREHOLDER AND TRUSTEE LIABILITY
The Trust is an entity of the type commonly known as a "Massachusetts
business trust", which is the form in which many mutual funds are organized.
Under Massachusetts law, shareholders of such a trust may, under certain
circumstances, be held personally liable as partners for the obligations of the
trust. The Declaration of Trust contains an express disclaimer of shareholder
liability for acts or obligations of the Trust. Notice of such disclaimer will
normally be given in each agreement, obligation or instrument entered into or
executed by the Trust or the Trustees. The Declaration of Trust provides for
indemnification by the relevant Fund for any loss suffered by a shareholder as a
result of an obligation of the Fund. The Declaration of Trust also provides that
the Trust shall, upon request, assume the defense of any claim made against any
shareholder for any act or obligation of the Trust and satisfy any judgment
thereon. Thus, the risk of a shareholder incurring financial loss on account of
shareholder liability is limited to circumstances in which a Fund is unable to
meet its obligations. The Trustees believe that, in view of the above, the risk
of personal liability of shareholders is not material.
The Declaration of Trust provides that the Trustees of the Trust shall not
be liable for any action taken by them in good faith, and that they shall be
fully protected in relying in good faith upon the records of the Trust and upon
reports made to the Trust by persons selected in good faith by the Trustees as
qualified to make such reports. The Declaration of Trust further provides that
the Trustees will not be liable for errors of judgment or mistakes of fact or
law. The Declaration of Trust provides that the Trust will indemnify Trustees
and officers of the Trust against liabilities and expenses reasonably incurred
in connection with litigation in which they may be involved because of their
positions with the Trust, unless it is determined in the manner provided in the
Declaration of Trust that they have not acted in good faith in the reasonable
belief that in the case of conduct in his or her official capacity with the
Trust, that the conduct was in the best interests of the Trust, and in all other
cases, that the conduct was at least not opposed to the best interests of the
Trust (and in the case of any criminal proceeding, he or she had no reasonable
cause to believe that the conduct was unlawful). However, nothing in the
Declaration of Trust or the By-Laws protects or indemnifies a Trustees or
officer against any liability to which he or she would otherwise be subject by
reason of willful misfeasance, bad faith, gross negligence or reckless disregard
of the duties involved in the conduct of his or her office.
CUSTODIAN
State Street Bank and Trust Company has been retained to act as custodian of
the Trust's assets and, in that capacity, maintains the accounting records and
calculates the daily net asset value per share of the Funds. Its mailing address
is P.O. Box 1713, Boston, MA 02105. The Northern Trust Company, 50 South LaSalle
Street, Chicago, Illinois 60603, serves as subcustodian of the Trust.
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<PAGE>
INDEPENDENT ACCOUNTANTS
Price Waterhouse LLP has been selected as independent accountants of the
Trust. In addition to audit services, Price Waterhouse LLP prepares the Trust's
Federal and state tax returns and provides consultation and assistance on
accounting, internal control and related matters.
FINANCIAL STATEMENTS
The financial statements and related report of Price Waterhouse LLP,
independent public accountants, contained in the 1994 Annual Report are hereby
incorporated by reference and attached hereto. A copy of the Annual Report may
be obtained without charge by writing to Goldman Sachs at 4900 Sears Tower,
Chicago, Illinois 60606, or by calling Goldman Sachs at (800) 525-7907.
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<PAGE>
PARAGON PORTFOLIO
TRUSTEES
Paul C. Nagel, Jr., Chairman
David J. Fermo
Bruce C. Gottwald, Jr.
Ernest E. Howard III
OFFICERS
Marcia L. Beck
President
Stephen H. Hopkins
Vice President
John W. Mosior
Vice President
Nancy L. Mucker
Vice President
Pauline Taylor
Vice President
Scott M. Gilman
Treasurer
Michael J. Richman
Secretary
Howard B. Surloff
Assistant Secretary
This Annual Report is authorized for distribution to prospective investors
only when preceded or accompanied by a Paragon Portfolio Prospectus which
contains facts concerning Paragon Portfolio's objectives and policies,
management, expenses and other information.
<PAGE>
PARAGON PORTFOLIO
LETTER TO SHAREHOLDERS
Fellow Shareholders:
Fiscal 1994 was quite a disappointment for both stock and bond investors.
The bond market, as represented by the Lehman Brothers Aggregate Bond Index,
sustained a total return of -3.07%, well below the long-term average for
intermediate-term government bonds of 5.2%. An extraordinarily large increase in
interest rates caused bond prices to decline across all maturities. The rise in
rates was so severe in the intermediate-term maturity range that the five-year
government bonds sustained a total return of -5.1%, the worst annual return ever
recorded for this security.
1994 was also a difficult year for stock investors, though this is masked by
the flattish returns exhibited by the popular market indices. The Standard &
Poor's 500 Index experienced a disappointing total return of 1.04% for the year,
underperforming the Dow Jones Industrial Average, which rose 4.41%. The NASDAQ
Composite Index declined .54% during the 12-month period, while the Russell 2000
Index, a popular indicator of smaller capitalization stock performance, declined
1.11% for the period. Though these indices reflect a year that was well below
average, the severity of decline in many stocks is not shown by these returns. A
startling fact is that during calendar year 1994, 40% of the stocks listed on
the New York Stock Exchange declined in value by at least 40%.
1994 was a year that favored large-capitalization stocks over small and, to
a small extent, growth stocks over value stocks. The difference between the
latter two groups was not nearly as dramatic as in the previous fiscal year. In
1993, value stocks achieved returns over 14% higher than growth stocks, while in
1994, growth stocks outperformed value stocks by approximately 2.3%.
With this recap of the markets in 1994, let us next focus on the outlook for
the economy and the financial markets. Finally, we will discuss how each of the
Paragon mutual funds fared during the year.
On November 15, the Federal Reserve surprised investors by raising the
federal funds rate and the discount rate by 75 basis points each. These are the
rates at which commercial banks borrow from one another and the Federal Reserve,
respectively. The increases were 25 basis points more than expected, and the
discount rate increase was the largest in 14 years. The Fed's decision was based
on the prospects for accelerating inflation in a strong economy.
The latest move raises our level of concern regarding the economic impact of
current Fed policy. Some signs of a slowing pace of growth are evident,
including a slowing pace of equipment spending in the second half of 1994 and no
growth in housing investment in early 1994. In addition, unit labor costs are
barely rising, and wholesale inflation is only about 1% annually. The Fed is
anxious to calm the jittery bond market, but it risks pushing economic growth
below 2% in 1995 or even causing a recession.
We forecast a growth slowdown in 1995, but conflicting reports of this
slowdown will cause the Fed to err on the side of caution and continue to raise
short-term interest rates. We project that the federal funds rate will rise to
the 6% to 6.5% range in the second half of 1995, even with inflation showing
little sign of acceleration. (See chart below.)
[C/RC]
In the near term, several factors should keep stock prices near the bottom
end of the 14 to 18 times earnings range (the S&P 500 Index is now 14.7 times
earnings). Rising short-term rates will prove to be increasingly competitive
with stock returns. Stock mutual fund cash flows have been slowing, which limits
the market's near-term upside potential. Finally, earnings momentum, which has
supported the market in 1994, will decelerate in 1995 due to slowing economic
growth. The mid-term elections provided some substantive reasons for investors
to have a positive long-term outlook
42
<PAGE>
PARAGON PORTFOLIO
LETTER TO SHAREHOLDERS -- (CONTINUED)
for the capital markets. The chances of a capital gains tax cut have risen
substantially as has the possibility for new incentives for savings and
investment. Additionally, a possible line-item veto and a balanced budget
mandate provide a case for a positive market outlook. We view the current
situation as a pullback within an ongoing bull market and, therefore, we are
confident in the current investment strategies we have selected for the Paragon
Portfolio.
PARAGON SHORT-TERM GOVERNMENT FUND
For the year ended November 30, 1994, the Class A Shares of the fund
sustained a return of .12%, based on net asset value (NAV), compared with the
Lipper Short U.S. Government Fund Average of -1.51%. We attribute this
above-average performance to changes made in the fund early in 1994. Class B
Shares recorded a total return of -.39%, based on NAV, since their inception on
October 19, 1994 through November 30, 1994.
We anticipated, in accordance with market sentiment, that the Federal
Reserve was going to raise short-term interest rates in order to offset the fear
of rising inflation. Consequently, we decided to sell about one-third of the
fund's securities and to replace them with floating rate instruments. Initially,
this caused a reduction in the income distribution, but in the long run was
beneficial in protecting the overall net asset value of the fund. The floating
rate securities were indexed to the prime rate and to LIBOR. The coupons on
these securities increased throughout the year as the Fed continued to push
rates higher.
We believe that the Federal Reserve is still considering additional rate
hikes and, therefore, plan to continue holding these floating rate securities.
When it appears that the market has regained a more stable posture, we will swap
these securities for fixed coupon securities at these higher levels. This is
expected to provide additional income to the fund in the future.
PARAGON INTERMEDIATE-TERM BOND FUND
For the year ended November 30, 1994, the Class A Shares of the fund
sustained a return of -4.77%, based on NAV, compared with the Lipper
Intermediate U.S. Government Fund Average of -3.65%. Class B Shares recorded a
total return of -.76%, based on NAV, since their inception on September 28, 1994
through November 30, 1994.
The intermediate sector of the bond market suffered significant losses in
1994 due to the market's reaction to the interest rate increases of the Federal
Reserve. Even though short rates were expected to rise, no one anticipated the
drastic effect this would have on the intermediate and long end of the bond
market. Some changes were made mid-year in an attempt to reduce the losses while
maintaining a high level of income. The asset mix remained consistent, with
approximately 75% of the securities being Treasury and agency issues. The
corporate sector has a heavy weighting in financial paper that outperformed the
utility sector but underperformed the industrials.
The distribution yield for the fund finished the year approximately 100
basis points higher than the average distribution yield for intermediate fixed
income funds tracked by Lipper Analytical Services, Inc. In maintaining this
higher level of income, some net asset value was sacrificed, resulting in the
below average total return this year. Because of the seven-year average life of
this fund, a longer term approach was taken, which we trust will be beneficial,
once interest rates stabilize.
PARAGON LOUISIANA TAX-FREE FUND
For the fiscal year ended November 30, 1994, the Class A Shares of the fund
sustained a total return of -2.97%, based on NAV. This compares to an average
return of -6.63% for other Louisiana tax-free funds calculated by Lipper
Analytical Services, Inc. This placed the fund number one for the year in total
return, which is over 2% greater than the nearest competitor. Lipper
Intermediate Municipal Debt Fund Average sustained a -3.3% return. Class B
Shares recorded a total return of -2.94%, based on NAV, since their inception on
September 16, 1994 through November 30, 1994.
43
<PAGE>
PARAGON PORTFOLIO
LETTER TO SHAREHOLDERS -- (CONTINUED)
This above-average return was due to several factors that have remained
constant over the past several years: the first is our commitment to the
intermediate sector of the market. The intermediate municipal sector did not
sustain as high a level of losses as did the taxable market. The long end of the
municipal market took the brunt of the increase in interest rates.
The second factor was the overall market presence of the fund and the
confidence that shareholders had in remaining in the fund. The redemptions in
this fund were minuscule compared with the huge redemptions of the national
funds. This fact allowed selective purchasing of Louisiana paper when large
blocks of bonds appeared, especially during the latter part of the year. Sales
were made out of attractive retail pieces, which remained in demand, thus
freeing up money to buy the underpriced institutional blocks. This not only
increased total return, but also allowed us to buy higher coupon securities that
will increase income.
PARAGON VALUE GROWTH FUND
During the fiscal year ended November 30, 1994, the Class A Shares of the
fund sustained a total return of -4.32%, based on NAV, compared with the S&P 500
return of 1.04% and the Lipper Growth & Income Fund Index return of 1.09%. Class
B Shares recorded a total return of -8.31%, based on NAV, since their inception
on September 9, 1994 through November 30, 1994.
The fund manager executed a number of small changes in the fund during the
second half of 1994. Positions were established in W.W. Grainger, Inc. and
Avnet, Inc. (Avnet debentures convertible into common stock), two firms involved
in the electronic component distribution industry. These purchases boosted the
fund's technology weighting to slightly over 12% by year-end. Other industrial-
related stocks purchased were Allied Signal, Inc., Corning Delaware LP
(convertible preferred shares) and Johnson Controls, Inc. The increased exposure
to the production segment of the economy is expected to enhance the fund's
performance over the next few years. The fund also gained exposure to the oil
refiners through the purchase of Ashland Oil Co. (convertible preferred shares)
and Sun Co., Inc. We believe the refining group will experience a resurgence in
earnings after years of lackluster performance.
Significant sales during the period included holdings in Bombay Company, a
very successful furniture retailer whose growth has slowed in 1994, and
Torchmark, an insurance company whose New York Stock Exchange record of
consecutive annual earnings increases will be broken this year.
Though the fund's long-term record of growth remains strong, as shown in the
accompanying graph, 1994 was a disappointing year. We can identify several
reasons for the subpar results:
1. The sudden decline in specialty retail stocks, i.e., Bombay Company and
Consolidated Stores Corp. in mid-1994, which are significant fund
holdings.
2. A severe correction in regional airline stocks in which the fund
maintains small positions. The severity of the decline did negatively
affect the fund's net asset value.
3. The rise in interest rates that depressed prices of the fund's small
convertible security holdings.
4. The decline in certain holdings that were subject to profit taking by
investors in a jittery market environment, due to their previous strong
price performance. Included in this group were LDDS Communications, Inc.,
Dow Chemical, Co., and Du Pont. These stocks are significant fund
holdings; therefore, they affected the fund to a greater extent than the
general market. It is important to point out that the fundamental outlook
for these companies is sound, and we continue to hold them for their
promising capital gain potential.
44
<PAGE>
PARAGON PORTFOLIO
LETTER TO SHAREHOLDERS -- (CONTINUED)
PARAGON VALUE EQUITY INCOME FUND
For the year ended November 30, 1994, the Class A Shares of the fund
sustained a return of -1.69%, based on NAV, compared with the S&P 500 return of
1.04% and the S&P Barra Value Index return of -0.17%. The Lipper Equity Income
Fund Index achieved a return of -.01% for the 12-month period. Class B Shares
recorded a total return of -3.40%, based on NAV, since their inception on
October 3, 1994 through November 30, 1994. Since our last report to shareholders
on May 31, 1994, a number of small changes were made to the fund. First, in an
effort to reduce the fund's interest rate sensitivity in a rising rate
environment, all holdings of PECO Energy and British Telecommunications were
sold, thereby reducing the utilities sector weighting by approximately 3% from
May to November. We reduced the fund's weighting in financial stocks by
approximately 6% for the six-month period ended November 30, 1994. We saw better
opportunities in other market sectors such as natural resources, capital
equipment and technology. Several issues were sold, including MBNA Corp, Banc
One 3.5% convertible preferreds, Torchmark and Federal National Mortgage
Association (partially sold).
In the basic materials and natural resources sector, we added Du Pont and
Birmingham Steel Corp., which are excellent values based on their current and
near-term earnings. This sector now represents approximately 9% of the fund
assets, up from around 5% in May. In the capital equipment and services sector,
we took partial profits in General Electric, but added Deere & Company and
Johnson Controls, Inc. This sector should be overweighted, in our opinion, since
it contains many companies that make productivity-improving equipment that is in
great demand in today's economy.
Despite selling our shares in Shoney's, Inc. and trimming our Philip Morris
position, we raised the weighting in the consumer noncyclical sector by 3% to
approximately 12%. New purchases included Conagra, Inc. and Johnson & Johnson.
This sector performed well late in 1994 as investors returned to defensive
stocks when worries mounted that the economy might slow in 1995.
We have been searching for attractive issues within the technology sector
because we believe this group has the characteristics of a market leader.
However, finding stocks of sufficient value to meet our purchase criteria has
been difficult. In the second half of 1994, we purchased office equipment
manufacturer Xerox Corp. and personal computer manufacturer Compaq Computer
Corp. We also initiated a position in a security whose price is based on the
performance of the common stock of Cisco Systems, Inc., a leading company in the
personal computer networking industry. The fund is now close to a 9% weighting
in technology issues.
There were a number of factors that contributed to the fund's
underperformance in 1994 versus the market:
1. The underperformance of value stocks in general.
2. The above-average interest sensitivity of the fund due to its holdings
of higher yielding convertible securities and its above-average dividend
yield. This could be to the fund's advantage later in 1995, should rates
decline.
3. The fall in cyclical stocks in November, which impacted the fund's
holdings to a greater degree than the market. We are confident that these
stocks will regain their leadership in 1995, once the Federal Reserve
stops raising short-term interest rates.
4. The fund's small exposure to consumer noncyclical and health care
stocks, which performed relatively well during the year.
45
<PAGE>
PARAGON PORTFOLIO
LETTER TO SHAREHOLDERS -- (CONTINUED)
Several actions had a beneficial effect on fund performance: (1) We reduced
the financial stockholdings by 8% during 1994. The rise in interest rates caused
these issues to perform poorly as a group. (2) We reduced the holdings in
electric utilities during the year, a sector that underperformed relative to
other industry groups during 1994.
PARAGON GULF SOUTH GROWTH FUND
During the fiscal year ended November 30, 1994, the Class A Shares of the
fund sustained a total return of -6.66%, based on NAV, while the S&P 500 Index
achieved a 1.04% total return. Class B Shares recorded a total return of -9.08,
based on NAV, since their inception on September 12, 1994 through November 30,
1994. The comparable mutual fund index is the Lipper Small Company Growth Fund
Index, which achieved a total return of 1.46% for the period. The fund's
performance in 1994 has allowed the Lipper Small Company Growth Index to gain a
small performance lead over the fund. This information is shown in the
accompanying graph.
Several factors contributed to the results in 1994:
1. There was a general decline in small-capitalization stocks, as evidenced
by negative total returns in several small-capitalization indices. This
was discussed in the introductory paragraphs of this report.
2. The fund has traditionally maintained a high exposure to southeastern
growth retailing and restaurant companies, such as Bombay Company,
Autozone Inc., Office Depot Inc., Heilig Meyers Co., and Cracker Barrel
Old Country Store. Stocks such as these have contributed to the fund's
long-term success; however, they were out of favor in the stock market of
1994 as investors began to question the sustainability of high earnings
growth rates in a rising interest rate environment.
3. Several of the fund's core holdings experienced considerable price
weakness due to profit taking in a jittery stock market environment. This
occurred despite no interruption of strong results in the company's
financial performance. In this category are companies such as LDDS
Communications, Inc., Heilig Meyers Co., Office Depot Inc. and Tech Data
Corporation.
4. Despite the weak market environment, a number of the fund's holdings
experienced price gains. They were:
<TABLE>
<CAPTION>
PRICE
APPRECIATION*
-----------------
<S> <C>
Coastal Healthcare Group......... 8%
Communications Central, Inc...... 32%
First Financial Management
Corp............................ 7%
Medaphis, Corp................... 33%
Miller Industries, Inc........... 12%
</TABLE>
- ------------------------
* For the period from the latter of November 30, 1993 or the purchase date, to
November 30, 1994.
We remain very positive about the potential for success with the fund's
security holdings. In the slowing economy expected in 1995, many of the
companies in which the fund invests should continue exhibiting strong earnings
growth. Companies such as Autozone, Inc., LDDS Communications, Inc. and Heilig
Meyer Co. are good examples. Their securities are expected to return to favor in
the market environment we expect. Another positive influence on the fund could
be the general performance of
46
<PAGE>
PARAGON PORTFOLIO
LETTER TO SHAREHOLDERS -- (CONTINUED)
smaller capitalization stocks relative to larger capitalization stocks. We
believe that in 1991 a multiyear cycle of small-capitalization stock
outperformance began. Historically, such cycles tend to last for approximately
seven years. Therefore, the next few years could be a period of superior returns
for smaller capitalization stocks such as those held in the Paragon Gulf South
Growth Fund.
In conclusion, we appreciate your support and look forward to helping you
meet your investment objectives.
Donald E. Allred
President and Chief Investment Officer
Premier Investment Advisors, L.L.C.
January 16, 1995
47
<PAGE>
PARAGON PORTFOLIO
STATEMENT OF INVESTMENTS
PARAGON TREASURY MONEY MARKET FUND
NOVEMBER 30, 1994
<TABLE>
<CAPTION>
INTEREST MATURITY AMORTIZED
PRINCIPAL AMOUNT RATE DATE COST
---------------- ----------- ---------- -----------------
<S> <C> <C> <C> <C>
U.S. TREASURY OBLIGATIONS -- 6.7%
United States Treasury Bills........................... $ 5,000,000 4.71% 02/02/95 $ 4,958,831
5,000,000 4.81 02/09/95 4,953,285
5,000,000 4.96 02/16/95 4,946,955
5,000,000 4.87 03/02/95 4,938,512
-----------------
Total U.S. Treasury Obligations.................... 19,797,583
-----------------
REPURCHASE AGREEMENTS -- 93.6%
Bear, Stearns and Co., dated 11/03/94, repurchase price
$10,127,264 (U.S. Treasury Note: $10,265,000, 7.25%,
11/15/96)............................................. 10,000,000 5.39 01/26/95 10,000,000
C.S. First Boston Corp., dated 10/18/94, repurchase
price $10,134,167 (U.S. Treasury Notes: $ 10,480,000,
5.50%-7.88%, 04/30/96 -- 08/15/01).................... 10,000,000 5.25 01/17/95 10,000,000
J.P. Morgan Securities, dated 10/14/94, repurchase
price $10,131,250 (U.S. Treasury Note: $9,870,000,
7.88%, 07/15/96)...................................... 10,000,000 5.25 01/11/95 10,000,000
Lehman Government Securities, Inc., dated 10/18/94,
repurchase price $10,134,167 (U.S. Treasury Notes:
$10,780,000, 5.75%-7.88%, 02/29/96 -- 08/15/01)....... 10,000,000 5.25 01/17/95 10,000,000
Lehman Government Securities, Inc., dated 10/27/94,
repurchase price $20,237,000 (U.S. Treasury Notes:
$185,000, 6.88%, 04/30/97; $21,620,000, 5.25%,
07/31/97)............................................. 20,000,000 5.40 01/13/95 20,000,000
Merrill Lynch Government Securities, Inc., dated
10/13/94, repurchase price $10,127,806 (U.S. Treasury
Note: $10,610,000, 4.38%, 08/15/96)................... 10,000,000 5.35 01/06/95 10,000,000
Joint Repurchase Agreement Account..................... 207,300,000 5.72 12/01/94 207,300,000
-----------------
Total Repurchase Agreements........................ 277,300,000
-----------------
Total Investments.................................. $ 297,097,583*
-----------------
-----------------
</TABLE>
- ------------------------
*The cost stated also represents aggregate cost for federal income tax purposes.
The percentage shown for each investment category reflects the value of
investments in that category as a percentage of total net assets.
The accompanying notes are an integral part of these financial statements.
48
<PAGE>
PARAGON PORTFOLIO
STATEMENT OF INVESTMENTS
PARAGON SHORT-TERM GOVERNMENT FUND
NOVEMBER 30, 1994
<TABLE>
<CAPTION>
PRINCIPAL INTEREST MATURITY
AMOUNT RATE DATE VALUE
-------------- ----------- ---------- ----------------
<S> <C> <C> <C> <C>
U.S. TREASURY OBLIGATIONS -- 37.5%
United States Treasury Notes............................. $ 7,000,000 5.13% 11/15/95 $ 6,887,300
5,500,000 6.25 01/31/97 5,369,430
6,000,000 6.88 04/30/97 5,914,140
3,000,000 6.38 06/30/97 2,919,150
10,000,000 5.75 10/31/97 9,508,300
3,000,000 7.38 11/15/97 2,978,370
6,000,000 6.00 11/30/97 5,734,560
5,000,000 5.13 03/31/98 4,624,400
1,500,000 5.13 04/30/98 1,384,575
9,000,000 5.13 06/30/98 8,270,190
----------------
Total U.S. Treasury Obligations
(cost $56,692,621).................................. 53,590,415
----------------
U.S. GOVERNMENT AGENCY OBLIGATIONS -- 59.0%
Federal Farm Credit Bank................................. 1,735,000 5.31 05/26/98 1,599,826
Federal Home Loan Bank................................... 3,500,000 8.40 01/25/95 3,513,055
2,000,000 6.45 03/27/95 2,002,140
2,100,000 5.38 11/27/95 2,072,007
2,000,000 6.85 02/25/97 1,969,380
4,000,000 6.60 04/13/99 3,790,040
5,000,000 7.14 05/20/99 4,829,150
Federal National Mortgage Assn........................... 25,000,000 5.12* 01/26/96 24,937,500
15,000,000 6.04* 03/07/96 14,906,100
5,000,000 8.45 10/21/96 5,088,550
1,500,000 7.05 03/10/97 1,478,835
3,000,000 7.00 04/10/97 2,951,280
3,000,000 5.35 10/10/97 2,815,290
2,000,000 5.30 03/11/98 1,845,080
4,000,000 5.35 04/01/98 3,705,640
1,000,000 6.81 04/23/99 952,080
Student Loan Marketing Assn.............................. 6,000,000 6.47* 07/23/97 5,985,000
----------------
Total U.S. Government Agency Obligations
(cost $86,013,466).................................. 84,440,953
----------------
REPURCHASE AGREEMENTS -- 3.3%
State Street Bank & Trust Company,
dated 11/30/94, repurchase price $4,710,674
(U.S. Treasury Note:
$5,005,000, 4.25%, 05/15/96)............................ 4,710,000 5.15% 12/01/94 4,710,000
----------------
Total Repurchase Agreements
(cost $4,710,000)................................... 4,710,000
----------------
Total Investments
(cost $147,416,087**)............................... $ 142,741,368
----------------
----------------
</TABLE>
The accompanying notes are an integral part of these financial statements.
49
<PAGE>
PARAGON PORTFOLIO
STATEMENT OF INVESTMENTS
PARAGON SHORT-TERM GOVERNMENT FUND (CONTINUED)
NOVEMBER 30, 1994
<TABLE>
<CAPTION>
PRINCIPAL INTEREST MATURITY
AMOUNT RATE DATE VALUE
-------------- ----------- ---------- ----------------
<S> <C> <C> <C> <C>
Federal Income Tax Information:
Gross unrealized gain for investments in which value
exceeds cost............................................ $ 2,409
Gross unrealized loss for investments in which cost
exceeds value........................................... (4,677,128)
----------------
Net unrealized loss.................................. $ (4,674,719)
----------------
----------------
</TABLE>
- ------------------------
* Variable rate security. Coupon rate disclosed is that which is in effect at
November 30, 1994.
** The cost stated also represents aggregate cost for federal income tax
purposes.
The percentage shown for each investment category reflects the value of
investments in that category as a percentage of total net assets.
The accompanying notes are an integral part of these financial statements.
50
<PAGE>
PARAGON PORTFOLIO
STATEMENT OF INVESTMENTS
PARAGON INTERMEDIATE-TERM BOND FUND
NOVEMBER 30, 1994
<TABLE>
<CAPTION>
PRINCIPAL INTEREST MATURITY
AMOUNT RATE DATE VALUE
-------------- ----------- ---------- ----------------
<S> <C> <C> <C> <C>
U.S. GOVERNMENT AND AGENCY OBLIGATIONS -- 55.7%
U.S. TREASURY OBLIGATIONS -- 24.5%
United States Treasury Bonds............................. $ 6,000,000 8.38% 08/15/00 $ 6,059,700
8,000,000 8.25 05/15/05 8,113,120
10,000,000 8.38 08/15/08 10,186,000
United States Treasury Notes............................. 4,000,000 8.38 04/15/95 4,032,880
500,000 9.25 01/15/96 511,595
4,000,000 8.88 02/15/96 4,078,520
5,000,000 6.00 12/31/97 4,774,100
10,000,000 9.00 05/15/98 10,375,000
1,000,000 8.88 11/15/98 1,036,260
3,400,000 8.88 02/15/99 3,533,450
4,000,000 9.13 05/15/99 4,201,120
2,600,000 6.38 07/15/99 2,460,406
3,000,000 5.50 04/15/00 2,702,070
12,000,000 6.25 02/15/03 10,824,840
----------------
72,889,061
----------------
U.S. GOVERNMENT AGENCY OBLIGATIONS -- 31.2%
Federal Farm Credit Bank................................. 2,000,000 7.95 04/01/02 1,935,880
Federal Home Loan Bank................................... 2,000,000 9.25 11/25/98 2,086,540
2,000,000 9.30 11/25/99 2,091,700
3,000,000 8.60 06/25/99 3,062,550
5,000,000 6.27 01/14/04 4,326,800
Federal Home Loan Mortgage Corp.......................... 1,000,000 7.14 05/01/97 984,760
2,000,000 6.44 01/28/00 1,873,040
10,000,000 6.44 03/10/03 8,866,300
3,000,000 7.88 04/28/04 2,867,730
5,000,000 7.89 05/12/04 4,782,350
5,000,000 7.50 10/25/04 4,732,000
2,017,800 7.00 01/15/08 1,785,289
7,000,000 7.00 11/15/20 6,257,860
Federal National Mortgage Assn........................... 1,000,000 9.35 02/12/96 1,026,120
2,000,000 9.20 06/10/97 2,075,900
2,000,000 8.80 07/25/97 2,058,680
2,000,000 7.64 05/06/99 1,964,340
4,000,000 8.70 06/10/99 4,114,600
3,000,000 8.90 06/12/00 3,105,420
3,000,000 8.70 06/11/01 3,044,040
2,000,000 7.90 04/10/02 1,932,500
2,000,000 6.80 10/23/02 1,817,400
3,000,000 6.20 11/12/03 2,598,540
5,200,000 7.60 04/14/04 4,884,932
</TABLE>
The accompanying notes are an integral part of these financial statements.
51
<PAGE>
PARAGON PORTFOLIO
STATEMENT OF INVESTMENTS
PARAGON INTERMEDIATE-TERM BOND FUND (CONTINUED)
NOVEMBER 30, 1994
<TABLE>
<CAPTION>
PRINCIPAL INTEREST MATURITY
AMOUNT RATE DATE VALUE
-------------- ----------- ---------- ----------------
<S> <C> <C> <C> <C>
$ 10,000,000 7.52% 04/23/04 $ 9,366,800
2,820,000 8.05 05/20/04 2,720,764
1,173,817 7.75 10/01/22 1,118,929
Student Loan Marketing Assn.............................. 2,000,000 8.27 12/15/99 2,015,300
2,500,000 5.65 12/01/00 2,210,150
1,000,000 6.53 05/22/02 998,540
----------------
92,705,754
----------------
Total U.S. Government and Agency Obligations (cost
$167,545,391)....................................... $ 165,594,815
----------------
COLLATERALIZED MORTGAGE OBLIGATIONS -- 18.2%
Federal National Mortgage Assn.
REMIC Trust 1992-135, Class L........................... 3,225,000 7.50 09/25/07 2,984,415
Federal National Mortgage Assn.
REMIC Trust 1992-202, Class M........................... 2,360,000 7.50 11/25/07 2,182,339
Federal National Mortgage Assn.
REMIC Trust 1992-205, Class K........................... 5,584,000 6.50 05/25/21 4,763,487
Federal National Mortgage Assn.
REMIC Trust 1993-56, Class PT........................... 6,901,000 6.60 02/25/21 6,012,565
Federal National Mortgage Assn.
REMIC Trust 1993-87, Class H............................ 3,597,000 6.50 10/25/21 3,106,045
Federal National Mortgage Assn.
REMIC Trust 1993-110, Class H........................... 5,000,000 6.50 05/25/23 4,295,500
Federal National Mortgage Assn.
REMIC Trust 1993-175, Class PG.......................... 7,875,000 6.50 09/25/08 6,675,480
Federal National Mortgage Assn.
REMIC Trust 1993-183, Class H........................... 5,000,000 6.50 03/25/22 4,305,550
Federal National Mortgage Assn.
REMIC Trust 1993-225, Class VG.......................... 3,595,500 6.35 08/25/13 3,052,867
GS Trust 8 Series C, Class 6............................. 10,000,000 8.50 02/20/21 9,475,200
Government National Mortgage Assn.
REMIC Trust 1994-1, Class PE............................ 5,000,000 7.50 04/16/23 4,623,850
Vendee Mortgage Trust Series 1994-1, Class 2I............ 3,000,000 6.50 12/15/06 2,591,910
----------------
Total Collateralized Mortgage
(cost $56,317,529).................................. $ 54,069,208
----------------
</TABLE>
The accompanying notes are an integral part of these financial statements.
52
<PAGE>
PARAGON PORTFOLIO
STATEMENT OF INVESTMENTS
PARAGON INTERMEDIATE-TERM BOND FUND (CONTINUED)
NOVEMBER 30, 1994
<TABLE>
<CAPTION>
PRINCIPAL INTEREST MATURITY
AMOUNT RATE DATE VALUE
-------------- ----------- ---------- ----------------
<S> <C> <C> <C> <C>
CORPORATE OBLIGATIONS -- 22.1%
BASIC MATERIALS & NATURAL RESOURCES -- 0.9%
Monsanto Co.............................................. $ 3,000,000 6.00% 07/01/00 $ 2,712,780
----------------
CONSUMER CYCLICAL -- 2.3%
Dayton Hudson Corp....................................... 1,250,000 7.25 09/01/04 1,142,250
Dillards Department Stores, Inc.......................... 2,000,000 8.75 06/15/98 2,043,840
Wal-Mart Stores.......................................... 4,000,000 7.50 05/15/04 3,778,080
----------------
6,964,170
----------------
CONSUMER NONCYCLICAL -- 2.2%
Baxter International Inc................................. 2,000,000 7.25 02/15/08 1,768,280
Coca Cola Enterprises Inc................................ 2,000,000 7.00 11/15/99 1,905,720
Philip Morris Co., Inc................................... 1,000,000 9.00 01/01/01 1,020,710
2,000,000 7.13 08/15/02 1,822,760
----------------
6,517,470
----------------
FINANCIAL -- 15.2%
AmSouth Bancorporation................................... 1,900,000 9.38 05/01/99 1,957,722
Aon Corp................................................. 2,000,000 6.70 06/15/03 1,779,520
Banc One Corp............................................ 1,000,000 8.74 09/15/03 1,000,900
Bear Stearns Companies, Inc.............................. 5,000,000 8.25 02/01/02 4,837,750
Boatmen's Bancshares, Inc................................ 5,000,000 7.63 10/01/04 4,602,500
Capital Holding Corp..................................... 2,000,000 8.90 10/20/99 2,055,580
1,000,000 8.98 09/23/03 1,022,860
2,850,000 7.82 06/23/04 2,699,892
Comerica Inc............................................. 2,990,000 7.25 10/15/02 2,764,554
Ford Motor Credit Corp................................... 2,000,000 9.38 12/15/97 2,065,900
General Electric Capital Corp............................ 2,000,000 8.65* 05/01/18 2,034,280
Harris Bancorp. Inc...................................... 1,000,000 9.38 06/01/01 1,046,470
International Lease Finance Corp......................... 3,000,000 6.50 08/15/99 2,801,160
Merrill Lynch & Co., Inc................................. 3,000,000 8.00 02/01/02 2,915,910
1,000,000 8.23 04/30/02 1,028,340
Morgan Stanley Group Inc................................. 2,000,000 9.38 06/15/01 2,052,060
NationsBank Corp......................................... 3,000,000 9.50 06/01/04 3,143,250
Sovran Financial Corp.................................... 1,500,000 9.25 06/15/06 1,546,635
SunTrust Banks, Inc...................................... 2,000,000 8.88 02/01/98 2,051,420
Wachovia Corp............................................ 2,000,000 6.38 04/15/03 1,743,040
----------------
45,149,743
----------------
TECHNOLOGY -- 0.6%
Motorola Inc............................................. 2,000,000 6.50 03/01/08 1,684,660
----------------
UTILITIES -- 0.9%
Alltel Corp.............................................. 3,000,000 7.25 04/01/04 2,772,060
----------------
Total Corporate Obligations
(cost $79,389,903).................................. 65,800,883
----------------
Total Debt Obligations
(cost $303,252,823)................................. $ 285,464,906
----------------
</TABLE>
The accompanying notes are an integral part of these financial statements.
53
<PAGE>
PARAGON PORTFOLIO
STATEMENT OF INVESTMENTS
PARAGON INTERMEDIATE-TERM BOND FUND (CONTINUED)
NOVEMBER 30, 1994
<TABLE>
<CAPTION>
PRINCIPAL INTEREST MATURITY
AMOUNT RATE DATE VALUE
------------- ----------- ---------- ----------------
<S> <C> <C> <C> <C>
REPURCHASE AGREEMENTS -- 2.4%
State Street Bank & Trust Company, dated 11/30/94,
repurchase price $7,196,029 (U.S. Treasury Note:
$7,645,000, 4.25%, 05/15/96).............................. $ 7,195,000 5.15% 12/01/94 $ 7,195,000
Total Repurchase Agreements (cost $7,195,000)........ $ 7,195,000
----------------
Total Investments (cost $310,447,823**).............. $ 292,659,906
----------------
----------------
Federal Income Tax Information:
Gross unrealized gain for investments in which value
exceeds cost.............................................. $ 1,505,139
Gross unrealized loss for investments in which cost exceeds
value..................................................... (19,293,056)
----------------
Net unrealized loss.................................. $ (17,787,917)
----------------
----------------
</TABLE>
- ------------------------
* Variable rate security. Coupon rate disclosed is that which is in effect at
November 30, 1994.
** The cost stated also represents aggregate cost for federal income tax
purposes.
The percentage shown for each investment category reflects the value of
investments in that category as a percentage of total net assets.
The accompanying notes are an integral part of these financial statements.
54
<PAGE>
PARAGON PORTFOLIO
STATEMENT OF INVESTMENTS
PARAGON LOUISIANA TAX-FREE FUND
NOVEMBER 30, 1994
<TABLE>
<CAPTION>
PRINCIPAL INTEREST MATURITY
AMOUNT RATE DATE VALUE
------------- ----------- ---------- ----------------
<S> <C> <C> <C> <C>
LOUISIANA MUNICIPAL BOND OBLIGATIONS -- 96.8%
GENERAL OBLIGATIONS -- 30.6%
Caddo Parish (MBIA)........................................ $ 200,000 7.10% 02/01/00 $ 208,422
550,000 7.20 02/01/01 573,105
300,000 7.20 02/01/02 311,487
Caddo Parish School District (MBIA)........................ 2,415,000 5.00 03/01/03 2,218,177
Calcasieu Parish School District (BIG)..................... 500,000 7.10 02/01/01 518,265
500,000 7.20 02/01/02 527,320
De Soto Parish School District............................. 120,000 8.00 08/01/05 130,566
1,070,000 5.30 10/01/05 942,691
1,245,000 5.60 10/01/06 1,094,953
Iberia Parish School District (MBIA)....................... 1,030,000 5.50 04/01/01 1,002,159
1,100,000 5.60 04/01/02 1,066,956
Iberville Consolidated School District (FSA)............... 1,620,000 5.75 10/01/03 1,570,039
Jefferson Parish (FGIC).................................... 500,000 7.10 09/01/97 521,660
500,000 7.40 09/01/99 521,555
250,000 7.70 09/01/02 261,365
Jefferson Parish Construction Waterworks District #2....... 400,000 7.25 01/15/00 400,500
LA State................................................... 6,160,000 7.00 08/01/02 6,435,106
LA State (FSA)............................................. 2,750,000 7.10 09/01/03 2,919,978
LA State (MBIA)............................................ 2,900,000 5.25 08/01/03 2,719,417
1,565,000 5.60 08/01/07 1,440,723
LA State Refunding Series A................................ 675,000 7.00 08/01/03 705,146
LA State Series A.......................................... 1,000,000 5.30 08/01/04 929,340
1,650,000 5.80 05/01/05 1,577,433
LA State University & Agriculture Auxiliary................ 1,000,000 5.30 07/01/03 934,530
Lafourche Parish Water District #3......................... 650,000 5.63 01/01/01 628,264
Lincoln Parish School District (MBIA)...................... 500,000 6.20 03/01/03 499,455
1,465,000 6.40 03/01/05 1,458,979
Monroe Parish School District (MBIA)....................... 1,220,000 8.00 03/01/01 1,347,453
1,300,000 7.00 03/01/02 1,370,408
1,390,000 7.00 03/01/03 1,464,532
Morehouse Parish Industrial International Paper Company
Project................................................... 305,000 6.00 06/01/12 263,261
Ouchita Parish School District............................. 300,000 7.60 02/01/95 301,101
Ouchita Parish West School District Refunding Series A
(FSA)..................................................... 2,000,000 6.50 03/01/03 2,036,860
1,000,000 6.60 03/01/04 1,013,850
2,695,000 6.65 03/01/05 2,723,621
1,655,000 6.70 03/01/06 1,667,280
Plaquemines Parish (AMBAC)................................. 1,440,000 6.40 08/01/04 1,443,830
525,000 6.00 08/01/08 492,429
Rapides Parish School District #11 (FGIC).................. 670,000 6.90 02/01/01 694,026
1,475,000 6.95 02/01/02 1,524,531
</TABLE>
The accompanying notes are an integral part of these financial statements.
55
<PAGE>
PARAGON PORTFOLIO
STATEMENT OF INVESTMENTS
PARAGON LOUISIANA TAX-FREE FUND (CONTINUED)
NOVEMBER 30, 1994
<TABLE>
<CAPTION>
PRINCIPAL INTEREST MATURITY
AMOUNT RATE DATE VALUE
------------- ----------- ---------- ----------------
LOUISIANA MUNICIPAL BOND OBLIGATIONS (CONTINUED)
<S> <C> <C> <C> <C>
GENERAL OBLIGATIONS (Continued)
Rapides Parish School District #62 (MBIA).................. $ 500,000 7.25% 04/01/00 $ 525,635
Shreveport................................................. 880,000 4.25 12/01/03 747,868
930,000 4.25 02/01/04 773,304
480,000 5.90 02/01/07 452,501
Shreveport (AMBAC)......................................... 480,000 6.20 03/01/02 480,706
500,000 6.70 02/01/03 510,235
St. Charles School District #1 (AMBAC)..................... 1,000,000 6.25 03/01/04 995,990
2,350,000 6.45 03/01/06 2,321,659
St. John Baptist Parish School District #1................. 870,000 6.25 03/01/05 848,467
605,000 4.90 03/01/06 504,467
695,000 5.20 03/01/09 579,936
St. John Baptist School District........................... 500,000 5.10 03/01/08 424,510
St. Landry Parish School District #1 (MBIA)................ 1,000,000 8.00 05/01/98 1,072,640
750,000 6.10 05/01/07 715,417
St. Tammany Parish Refunding (FGIC)........................ 300,000 7.40 03/01/98 315,549
Vermilion Parish Hospital (MBIA)........................... 555,000 6.35 05/01/00 567,726
----------------
Total General Obligations............................ 60,297,383
----------------
HEALTH CARE REVENUE -- 14.1%
Jefferson Parish Hospital Service District #2 (MBIA)....... 1,000,000 5.10 07/01/01 951,480
1,540,000 5.50 07/01/08 1,383,859
LA Public Facilities Authority Alton Ochsner Medical
Foundation 92-A (MBIA).................................... 2,280,000 6.30 05/15/04 2,286,658
LA Public Facilities Authority General Health (MBIA)....... 3,070,000 5.55 11/01/04 2,900,382
LA Public Facilities Authority Health and Education Series
B......................................................... 3,155,000 7.30* 12/01/15 3,202,609
LA Public Facilities Authority Health and Education
(Sumitomo Bank-LOC)....................................... 1,445,000 7.30* 12/01/15 1,496,789
LA Public Facilities Authority Lafayette Medical Center
(FSA)..................................................... 1,000,000 6.05 10/01/04 982,690
LA Public Facilities Authority Our Lady of Lake Hospital
(MBIA).................................................... 500,000 5.70 12/01/04 480,245
LA Public Facilities Authority St. Francis Medical Center
(FSA)..................................................... 1,385,000 4.80 07/01/04 1,227,387
870,000 4.90 07/01/05 768,532
LA Public Facilities Authority Woman's Hospital (FGIC)..... 500,000 7.20 10/01/97 522,505
730,000 5.40 10/01/05 676,418
1,235,000 6.85 10/01/05 1,180,882
1,715,000 5.50 10/01/06 1,582,053
</TABLE>
The accompanying notes are an integral part of these financial statements.
56
<PAGE>
PARAGON PORTFOLIO
STATEMENT OF INVESTMENTS
PARAGON LOUISIANA TAX-FREE FUND (CONTINUED)
NOVEMBER 30, 1994
<TABLE>
<CAPTION>
PRINCIPAL INTEREST MATURITY
AMOUNT RATE DATE VALUE
------------- ----------- ---------- ----------------
LOUISIANA MUNICIPAL BOND OBLIGATIONS (CONTINUED)
<S> <C> <C> <C> <C>
HEALTH CARE REVENUE (Continued)
LA Public Facilities Mary Bird Perkins Cancer Center....... $ 1,135,000 5.50% 01/01/04 $ 1,070,021
Lafourche Parish Hospital District #3...................... 525,000 5.50 10/01/04 459,218
Ouachita Parish Glenwood Hospital.......................... 2,525,000 7.50 07/01/06 2,636,832
St. Tammany Hospital District #1 (FGIC).................... 1,815,000 6.30 07/01/07 1,716,881
St. Tammany Hospital District #2........................... 1,055,000 5.80 10/01/05 1,001,532
Terrebonne Parish Hospital Service #1 (BIG)................ 1,285,000 7.40 04/01/03 1,364,927
----------------
Total Health Care Revenue............................ 27,891,900
----------------
HIGHER EDUCATION -- 4.7%
LA Public Facilities Authority Loyola University........... 500,000 9.00 10/01/95 517,255
300,000 7.50 05/15/00 320,898
500,000 7.20 10/01/00 534,870
1,960,000 6.60 04/01/05 1,965,664
LA Public Facilities Authority Tulane University........... 2,940,000 6.25 07/15/06 2,868,470
1,000,000 6.40 11/15/07 982,780
LA Public Facilities Authority Tulane University Series
B......................................................... 700,000 7.00 08/15/97 725,837
200,000 7.20 08/15/98 209,830
LA Public Facilities Authority Tulane University Series
C......................................................... 750,000 7.00 08/15/97 777,683
300,000 7.20 08/15/98 314,745
----------------
Total Higher Education............................... 9,218,032
----------------
SALES TAX REVENUE -- 41.0%
Alexandria Public Improvements (FGIC)...................... 1,710,000 5.50 05/01/01 1,677,065
Alexandria Public Improvements (MBIA)...................... 300,000 7.35 08/01/97 314,235
Baton Rouge Public Improvements (AMBAC).................... 700,000 6.85 08/01/00 738,514
800,000 6.90 08/01/01 845,928
Baton Rouge Public Improvements (FSA)...................... 2,950,000 6.00 08/01/04 2,899,437
1,000,000 6.00 08/01/06 960,600
2,100,000 6.00 08/01/08 1,972,341
765,000 6.38 08/01/09 724,593
Bossier City Public Improvements (AMBAC)................... 805,000 6.20 11/01/07 789,930
Bossier City Public Improvements (FGIC).................... 400,000 6.88 11/01/06 415,172
400,000 6.88 11/01/07 415,172
East Baton Rouge Parish (FGIC)............................. 2,490,000 4.65 02/01/04 2,141,674
East Baton Rouge Parish (MBIA)............................. 500,000 7.10 02/01/99 523,930
500,000 7.10 02/01/00 527,375
East Baton Rouge Parish Public Improvements................ 1,000,000 8.00 02/01/02 1,112,910
1,085,000 5.15 02/01/05 933,089
1,145,000 5.15 02/01/06 966,506
</TABLE>
The accompanying notes are an integral part of these financial statements.
57
<PAGE>
PARAGON PORTFOLIO
STATEMENT OF INVESTMENTS
PARAGON LOUISIANA TAX-FREE FUND (CONTINUED)
NOVEMBER 30, 1994
<TABLE>
<CAPTION>
PRINCIPAL INTEREST MATURITY
AMOUNT RATE DATE VALUE
------------- ----------- ---------- ----------------
LOUISIANA MUNICIPAL BOND OBLIGATIONS (CONTINUED)
<S> <C> <C> <C> <C>
SALES TAX REVENUE (Continued)
East Baton Rouge Parish Series A........................... $ 800,000 4.90% 10/01/05 $ 688,920
General Baton Parking Authority............................ 1,390,000 6.38 07/01/03 1,390,570
Greater Lafourche Port Fourchon Development................ 1,220,000 5.00 09/01/04 1,044,344
Iberville Parish (MBIA).................................... 300,000 6.20 09/01/98 306,828
Jefferson Parish (AMBAC)................................... 1,650,000 6.50 11/01/06 1,652,327
Jefferson Parish District A (FGIC)......................... 4,000,000 6.75 12/01/06 4,056,440
Jefferson Parish District B (FGIC)......................... 1,910,000 6.75 12/01/06 1,936,950
Jefferson Parish School Board.............................. 1,000,000 4.45 02/01/00 928,360
Jefferson Parish School Board (MBIA)....................... 1,000,000 5.95 02/01/01 1,005,300
2,500,000 6.05 02/01/02 2,515,350
1,270,000 6.15 02/01/03 1,278,801
4,280,000 6.25 02/01/08 4,176,852
Kenner LA (FGIC)........................................... 1,375,000 5.50 06/01/01 1,346,152
LA Public Facilities Authority Special Assessment
(Escrowed)................................................ 110,000 7.38 06/01/09 112,763
LA Public Facilities Authority Special Assessment (FSA).... 1,295,000 4.60 10/01/02 1,170,175
LA State Correctional Facilities Corporate Lease (FSA)..... 1,050,000 5.60 12/15/03 1,005,627
LA State Energy Power Rodemacher Unit No. 2................ 2,600,000 6.75 01/01/08 2,641,782
LA State Gas & Fuels....................................... 750,000 7.20 11/15/99 785,738
500,000 7.25 11/15/04 519,395
LA State Offshore Terminal Authority....................... 1,500,000 5.85 09/01/00 1,474,605
2,400,000 6.00 09/01/01 2,354,688
500,000 6.10 09/01/02 489,650
LA State Recovery District Tax............................. 1,910,000 5.70 07/01/98 1,903,220
Lafayette Parish Public Improvements (FGIC)................ 1,000,000 7.80 03/01/01 1,071,010
605,000 7.00 05/01/01 641,972
315,000 7.13 05/01/02 335,283
505,000 4.90 03/01/03 458,833
580,000 5.00 03/01/05 514,124
1,250,000 5.30 03/01/06 1,137,463
1,120,000 4.75 05/01/06 948,730
540,000 5.50 03/01/07 493,322
Lafayette Parish Public Power Authority.................... 730,000 6.80 11/01/00 769,048
4,000,000 7.13 11/01/07 4,229,640
Lafayette Parish Public Power Authority (AMBAC)............ 1,000,000 5.10 11/01/07 860,370
Lafayette Parish Public Power Authority (BIG).............. 500,000 7.25 11/01/12 527,115
Lafayette Parish School District........................... 500,000 7.20 04/01/99 518,415
1,500,000 7.35 04/01/01 1,554,375
1,075,000 4.88 04/01/04 955,009
1,130,000 4.88 04/01/05 986,716
</TABLE>
The accompanying notes are an integral part of these financial statements.
58
<PAGE>
PARAGON PORTFOLIO
STATEMENT OF INVESTMENTS
PARAGON LOUISIANA TAX-FREE FUND (CONTINUED)
NOVEMBER 30, 1994
<TABLE>
<CAPTION>
PRINCIPAL INTEREST MATURITY
AMOUNT RATE DATE VALUE
------------- ----------- ---------- ----------------
LOUISIANA MUNICIPAL BOND OBLIGATIONS (CONTINUED)
<S> <C> <C> <C> <C>
SALES TAX REVENUE (Continued)
Plaquemines Parish......................................... $ 420,000 6.70% 12/01/08 $ 399,911
410,000 6.70 12/01/09 391,083
Plaquemines Parish School Board............................ 605,000 6.65 03/01/05 584,254
Rapides Parish School District Construction................ 700,000 7.65 03/01/96 718,207
St. Charles Parish Public Improvements..................... 750,000 6.60 11/01/07 729,660
St. Charles Parish Public Improvements (FGIC).............. 600,000 6.80 12/01/98 602,268
St. Tammany Parish (FGIC).................................. 1,000,000 6.50 12/01/02 1,021,850
750,000 6.50 12/01/05 759,030
St. Tammany Parish District #3 Series A (FGIC)............. 1,000,000 6.50 12/01/03 1,021,850
St. Tammany Parish School District #12 (FGIC).............. 550,000 6.50 03/01/01 563,547
400,000 6.50 03/01/04 402,612
St. Tammany Parish School District (FGIC).................. 620,000 6.70 04/01/98 644,490
870,000 5.75 04/01/03 839,846
750,000 5.75 04/01/06 697,582
Sulphur Public Improvements (FGIC)......................... 470,000 5.55 04/01/03 453,588
Sulphur Public Improvements (MBIA)......................... 150,000 6.00 03/01/00 151,365
615,000 6.00 03/01/01 620,596
Tangipahoa Parish School District #1....................... 1,435,000 6.15 12/01/07 1,384,129
----------------
Total Sales Tax Revenue.............................. 80,730,601
----------------
UTILITY REVENUE -- 2.8%
Houma (FGIC)............................................... 1,560,000 6.13 01/01/07 1,523,543
Shreveport Water & Sewer (FGIC)............................ 930,000 7.75 12/01/02 1,028,385
500,000 6.25 12/01/03 502,775
Terrebone Parish Waterworks................................ 1,190,000 5.70 11/01/06 1,110,377
Ville Platte Parish........................................ 1,555,000 5.50 05/01/09 1,343,442
----------------
Total Utility Revenue................................ 5,508,522
----------------
MISCELLANEOUS LOUISIANA MUNICIPAL
BONDS -- 3.6%
Bastrop Pollution Control Industrial Development Bond
(International Paper)..................................... 1,000,000 6.90 03/01/07 989,220
Caddo Parish Industrial Development Revenue Bond (Wal-Mart
Stores)................................................... 420,000 5.95 11/01/07 389,252
De Soto Parish Pollution Control........................... 1,000,000 5.05 12/01/02 911,190
East Baton Rouge Mortgage Finance Authority................ 1,390,000 5.45 10/01/03 1,390,000
Iberia Home Mortgage Loan Association...................... 1,620,000 7.38 01/01/11 1,657,892
LA Public Facilities Authority Multi-Housing Linlake
Village................................................... 600,000 5.25 06/01/07 567,420
LA Public Facilities Authority Shreveport Single Family
Mortgage.................................................. 1,082,576 8.45 12/01/12 1,110,875
----------------
</TABLE>
The accompanying notes are an integral part of these financial statements.
59
<PAGE>
PARAGON PORTFOLIO
STATEMENT OF INVESTMENTS
PARAGON LOUISIANA TAX-FREE FUND (CONTINUED)
NOVEMBER 30, 1994
<TABLE>
<CAPTION>
PRINCIPAL INTEREST MATURITY
AMOUNT RATE DATE VALUE
------------- ----------- ---------- ----------------
LOUISIANA MUNICIPAL BOND OBLIGATIONS (CONTINUED)
<S> <C> <C> <C> <C>
MISCELLANEOUS LOUISIANA MUNICIPAL
BONDS (Continued)
Total Miscellaneous Louisiana Municipal Bonds........ $ 7,015,849
----------------
Total Louisiana Municipal Bond Obligations (cost
$198,825,031)....................................... 190,662,287
----------------
SHORT-TERM OBLIGATIONS -- 1.1%
Irvine Ranch Control Authority Water District Tax.......... 700,000 3.55%* 12/01/94 700,000
500,000 3.55* 12/01/94 500,000
LA State Recovery District Tax............................. 1,000,000 2.40* 12/01/94 1,000,000
----------------
Total Short-Term Obligations (cost $2,200,000)....... $ 2,200,000
----------------
----------------
Total Investments (cost $201,025,031**).............. $ 192,862,287
----------------
----------------
Federal Income Tax Information:
Gross unrealized gain for investments in which value
exceeds cost.............................................. $ 1,043,102
Gross unrealized loss for investments in which cost exceeds
value..................................................... (9,242,820)
----------------
Net unrealized loss...................................... $ (8,199,718)
----------------
----------------
</TABLE>
* Variable rate securities. Coupon rate disclosed is that which is in effect
at November 30, 1994.
** The aggregate cost for federal income tax purposes is $201,062,005.
<TABLE>
<S> <C> <C>
AMBAC -- Insured by American Municipal Bond Assurance Corporation.
BIG -- Insured by Bond Investors Guaranty Insurance Company.
FGIC -- Insured by Financial Guaranty Insurance Corporation.
FSA -- Insured by Financial Security Assurance, Inc.
LOC -- Letter of Credit.
MBIA -- Insured by Municipal Bond Investors Assurance Corporation.
</TABLE>
The percentage shown for each investment category reflects the value of
investments in that category as a percentage of total net assets.
The accompanying notes are an integral part of these financial statements.
60
<PAGE>
PARAGON PORTFOLIO
STATEMENT OF INVESTMENTS
PARAGON VALUE GROWTH FUND
NOVEMBER 30, 1994
<TABLE>
<CAPTION>
SHARES DESCRIPTION VALUE
- --------- ------------------------------------------------------------------------------------- ----------------
<C> <S> <C>
COMMON STOCKS -- 87.9%
BASIC MATERIALS & NATURAL RESOURCES -- 9.6%
80,000 Dow Chemical Co...................................................................... $ 5,120,000
75,000 Du Pont (E.I.) de Nemours & Co....................................................... 4,040,625
60,000 International Paper Co............................................................... 4,290,000
60,000 Nucor Corp........................................................................... 3,270,000
----------------
16,720,625
----------------
CAPITAL EQUIPMENT AND SERVICES -- 6.9%
100,000 Allied Signal, Inc................................................................... 3,262,500
115,000 General Electric Co.................................................................. 5,290,000
70,000 Johnson Controls, Inc................................................................ 3,395,000
----------------
11,947,500
----------------
CONSUMER CYCLICAL -- 18.5%
100,000 Carnival Corp........................................................................ 4,325,000
120,000 Chrysler Corp........................................................................ 5,805,000
200,000 Consolidated Stores Corp.*........................................................... 3,500,000
165,000 Home Depot, Inc...................................................................... 7,631,250
80,000 Minnesota Mining & Manufacturing Co.................................................. 4,100,000
150,000 Office Depot Inc.*................................................................... 3,562,500
140,000 Wal-Mart Stores...................................................................... 3,237,500
----------------
32,161,250
----------------
CONSUMER NONCYCLICAL -- 9.4%
150,000 Healthcare Compare Corp.*............................................................ 4,443,750
70,000 Healthsource, Inc.*.................................................................. 2,511,250
120,000 Heilig Meyers Co..................................................................... 3,150,000
130,000 United Healthcare Corp............................................................... 6,175,000
----------------
16,280,000
----------------
ENERGY -- 7.5%
75,000 Mobil Corp........................................................................... 6,393,750
80,000 Sun Co., Inc......................................................................... 2,330,000
70,000 Texaco, Inc.......................................................................... 4,348,750
----------------
13,072,500
----------------
FINANCE -- 9.1%
81,000 CCB Financial Corp................................................................... 3,118,500
90,000 Coral Gables Fedcorp, Inc.*.......................................................... 1,530,000
50,000 Federal National Mortgage Assn....................................................... 3,556,250
100,000 First Tennessee National Corp........................................................ 4,275,000
120,000 NWNL Companies, Inc.................................................................. 3,315,000
----------------
15,794,750
----------------
</TABLE>
The accompanying notes are an integral part of these financial statements.
61
<PAGE>
PARAGON PORTFOLIO
STATEMENT OF INVESTMENTS
PARAGON VALUE GROWTH FUND (CONTINUED)
NOVEMBER 30, 1994
<TABLE>
<CAPTION>
SHARES DESCRIPTION VALUE
- --------- ------------------------------------------------------------------------------------- ----------------
COMMON STOCKS (CONTINUED) -- 87.9%
<C> <S> <C>
TECHNOLOGY --- 11.1%
60,000 AMP, Inc............................................................................. $ 4,335,000
60,000 Grainger (W.W.), Inc................................................................. 3,112,500
110,000 Intel Corp........................................................................... 6,943,750
65,000 Texas Instruments, Inc............................................................... 4,907,500
----------------
19,298,750
----------------
TRANSPORTATION -- 2.4%
150,000 Atlantic Southeast Airlines, Inc..................................................... 2,287,500
130,000 Skywest, Inc......................................................................... 1,852,500
----------------
4,140,000
----------------
UTILITIES -- 13.4%
120,000 AT&T Corp............................................................................ 5,895,000
90,000 BellSouth Corp....................................................................... 4,668,750
150,000 Enron Corp........................................................................... 4,050,000
250,000 LDDS Communications, Inc.*........................................................... 5,031,250
150,000 Peco Energy Co....................................................................... 3,618,750
----------------
23,263,750
----------------
Total Common Stocks (cost $129,177,365)........................................ 152,679,125
----------------
PREFERRED STOCKS -- 5.6%
40,000 Ashland Oil Co., Convertible Preferred, 3.13%........................................ 2,260,000
75,000 Corning Delaware LP Convertible Preferred, 6.00%..................................... 3,543,750
45,000 Ford Motor Co., Convertible Preferred, 4.20%......................................... 3,965,625
----------------
Total Preferred Stocks (cost $10,295,695)...................................... 9,769,375
----------------
</TABLE>
The accompanying notes are an integral part of these financial statements.
62
<PAGE>
PARAGON PORTFOLIO
STATEMENT OF INVESTMENTS
PARAGON VALUE GROWTH FUND (CONTINUED)
NOVEMBER 30, 1994
<TABLE>
<CAPTION>
PRINCIPAL INTEREST MATURITY
AMOUNT RATE DATE VALUE
---------- -------- -------- ------------
CORPORATE OBLIGATIONS -- 4.7%
<S> <C> <C> <C> <C>
Avnet, Inc......................... $1,800,000 6.00% 04/15/12 $ 1,818,000
Michaels Stores, Inc............... 2,500,000 4.75 01/15/03 2,881,250
Sports & Recreation Inc............ 3,250,000 4.25 11/01/00 3,477,500
------------
Total Corporate Obligations
(cost $8,040,210)............. 8,176,750
------------
REPURCHASE AGREEMENTS -- 1.6%
State Street Bank & Trust Co.,
dated 11/30/94, repurchase price
$2,830,405 (U.S. Treasury Note:
$3,010,000, 4.25%, 05/15/96)...... 2,830,000 5.15 12/01/94 2,830,000
------------
Total Repurchase Agreements
(cost $2,830,000)............. 2,830,000
------------
Total Investments (cost
$150,343,270**)............... $173,455,250
------------
------------
</TABLE>
<TABLE>
<S> <C>
Federal Income Tax Information:
Gross unrealized gain for investments in which value exceeds
cost......................................................... $29,646,930
Gross unrealized loss for investments in which cost exceeds
value........................................................ (6,534,950)
-----------
Net unrealized gain........................................... $23,111,980
-----------
-----------
</TABLE>
- ------------------------
* Non-income producing security.
** The cost stated also represents aggregate cost for federal income tax
purposes.
The percentage shown for each investment category reflects the value of
investments in that category as a percentage of total net assets.
The accompanying notes are an integral part of these financial statements.
63
<PAGE>
PARAGON PORTFOLIO
STATEMENT OF INVESTMENTS
PARAGON VALUE EQUITY INCOME FUND
NOVEMBER 30, 1994
<TABLE>
<CAPTION>
SHARES DESCRIPTION VALUE
- --------- --------------------------------------------------------------------------------------- --------------
<S> <C> <C>
COMMON STOCKS -- 78.5%
BASIC MATERIALS & NATURAL RESOURCES -- 8.9%
60,000 Birmingham Steel Corp.................................................................. $ 1,275,000
24,000 Dow Chemical Co........................................................................ 1,536,000
53,000 Du Pont (E.I.) de Nemours & Co......................................................... 2,855,375
25,000 International Paper Co................................................................. 1,787,500
25,000 Monsanto Co............................................................................ 1,800,000
--------------
9,253,875
--------------
CAPITAL EQUIPMENT AND SERVICES -- 9.8%
20,000 Deere & Co............................................................................. 1,285,000
40,000 General Electric Co.................................................................... 1,840,000
21,000 Johnson Controls, Inc.................................................................. 1,018,500
68,600 Martin Marietta Corp................................................................... 2,975,525
48,600 Raytheon Co............................................................................ 3,055,725
--------------
10,174,750
--------------
CONSUMER CYCLICAL -- 14.1%
32,000 Centex Corp............................................................................ 652,000
90,000 Consolidated Stores Corp.*............................................................. 1,575,000
70,000 Fleetwood Enterprises.................................................................. 1,373,750
33,000 General Motors Corp.................................................................... 1,258,125
22,000 ITT Corp............................................................................... 1,751,750
60,600 J C Penney, Inc........................................................................ 2,787,600
46,000 Reebok International Ltd............................................................... 1,765,250
20,000 Sears Roebuck & Co..................................................................... 945,000
35,000 V.F. Corp.............................................................................. 1,697,500
16,000 Whirlpool Corp......................................................................... 798,000
--------------
14,603,975
--------------
CONSUMER NONCYCLICAL -- 11.9%
45,000 Conagra, Inc........................................................................... 1,389,375
63,000 IBP Inc................................................................................ 2,118,375
24,000 Johnson & Johnson...................................................................... 1,281,000
50,000 Phillip Morris Companies, Inc.......................................................... 2,987,500
40,000 Premark International, Inc............................................................. 1,820,000
36,000 Schering Plough Corp................................................................... 2,695,500
--------------
12,291,750
--------------
ENERGY -- 8.9%
24,000 Chevron Corp........................................................................... 1,047,000
44,000 Mobil Corp............................................................................. 3,751,000
15,000 Royal Dutch Petroleum Co. ADR.......................................................... 1,629,375
20,000 Tenneco, Inc........................................................................... 777,500
</TABLE>
The accompanying notes are an integral part of these financial statements.
64
<PAGE>
PARAGON PORTFOLIO
STATEMENT OF INVESTMENTS
PARAGON VALUE EQUITY INCOME FUND (CONTINUED)
NOVEMBER 30, 1994
<TABLE>
<CAPTION>
SHARES DESCRIPTION VALUE
- --------- --------------------------------------------------------------------------------------- --------------
COMMON STOCKS (CONTINUED) -- 78.5%
<S> <C> <C>
32,000 Texaco, Inc............................................................................ $ 1,988,000
--------------
9,192,875
--------------
FINANCE -- 8.5%
42,000 Bear Stearns Companies, Inc............................................................ 656,250
40,000 Boatmen's Bancshares, Inc.............................................................. 1,115,000
19,100 Federal National Mortgage Assn......................................................... 1,358,488
60,000 First Tennessee National Corp.......................................................... 2,565,000
30,000 Merrill Lynch and Co., Inc............................................................. 1,140,000
71,000 NWNL Companies, Inc.................................................................... 1,961,375
--------------
8,796,113
--------------
TECHNOLOGY -- 8.2%
50,000 Avnet, Inc............................................................................. 1,793,750
23,000 Compaq Computer Corp................................................................... 899,875
20,000 Intel Corp............................................................................. 1,262,500
50,000 Morgan Stanley Group, Inc.
(Cisco Systems, Inc.-PERQS)........................................................... 1,606,250
18,700 Texas Instruments Inc.................................................................. 1,411,850
15,000 Xerox Corp............................................................................. 1,473,750
--------------
8,447,975
--------------
TRANSPORTATION -- 2.8%
40,000 Atlantic Southeast Airlines, Inc....................................................... 610,000
25,000 British Airways ADR.................................................................... 1,503,125
40,000 Consolidated Freightways, Inc.......................................................... 775,000
--------------
2,888,125
--------------
UTILITIES -- 5.4%
37,000 BellSouth Corp......................................................................... 1,919,375
45,000 Entergy Corp........................................................................... 1,012,500
97,000 Niagra Mohawk Power Corp............................................................... 1,345,875
42,000 Sprint Corp............................................................................ 1,254,750
--------------
5,532,500
--------------
Total Common Stocks
(cost $76,189,436).............................................................. 81,181,938
--------------
</TABLE>
The accompanying notes are an integral part of these financial statements.
65
<PAGE>
PARAGON PORTFOLIO
STATEMENT OF INVESTMENTS
PARAGON VALUE EQUITY INCOME FUND
NOVEMBER 30, 1994
<TABLE>
<CAPTION>
SHARES DESCRIPTION VALUE
- --------- --------------------------------------------------------------------------------------- --------------
<S> <C> <C>
PREFERRED STOCKS -- 8.0%
15,000 Burlington Northern Inc., Convertible Preferred, 6.25%................................. $ 838,125
20,000 Citicorp, Convertible Preferred, 5.38%................................................. 2,300,000
35,600 Ford Motor Co., Convertible Preferred, 4.20%........................................... 3,137,250
35,500 General Motors Corp., Convertible Preferred, 3.25%..................................... 1,979,125
--------------
Total Preferred Stocks
(cost $8,312,936)............................................................... 8,254,500
--------------
</TABLE>
<TABLE>
<CAPTION>
PRINCIPAL INTEREST MATURITY
AMOUNT RATE DATE
------------- ----------- ----------
<S> <C> <C> <C> <C>
CORPORATE OBLIGATIONS -- 6.7%
Avnet, Inc................................................. $ 1,050,000 6.00% 04/15/12 1,060,500
Healthsouth Rehabilitation................................. 1,000,000 5.00 04/01/01 1,072,500
Hechinger Co............................................... 2,000,000 5.50 04/01/12 1,385,000
Pennzoil Co................................................ 2,250,000 6.50 01/15/03 2,477,812
Vencor Inc................................................. 800,000 6.00 10/01/02 889,000
----------------
Total Corporate Obligations (cost $7,076,708)................................................ 6,884,812
----------------
REPURCHASE AGREEMENTS -- 7.2%
State Street Bank & Trust Company, dated 11/30/94,
repurchase price $7,446,065 (U.S. Treasury Note:
$7,910,000, 4.25%, 05/15/96).............................. $ 7,445,000 5.15% 12/01/94 7,445,000
----------------
Total Repurchase Agreements (cost $7,445,000)................................................ 7,445,000
----------------
Total Investments (cost $99,024,080**)....................................................... $ 103,766,250
----------------
----------------
</TABLE>
<TABLE>
<S> <C>
Federal Income Tax Information:
Gross unrealized gain for investments in which value exceeds
cost......................................................... $10,243,279
Gross unrealized loss for investments in which cost exceeds
value........................................................ (5,501,109)
-----------
Net unrealized gain........................................... $ 4,742,170
-----------
-----------
</TABLE>
- ------------------------
* Non-income producing security.
** The cost stated also represents aggregate cost for federal income tax
purposes.
ADR -- American Depository Receipt.
PERQS -- Performance Equity-Linked Quarterly-Pay Security.
The percentage shown for each investment category reflects the value of
investments in that category as a percentage of total net assets.
The accompanying notes are an integral part of these financial statements.
66
<PAGE>
PARAGON PORTFOLIO
STATEMENT OF INVESTMENTS
PARAGON GULF SOUTH GROWTH FUND
NOVEMBER 30, 1994
<TABLE>
<CAPTION>
SHARES DESCRIPTION VALUE
- --------- -------------------------------------------------------------------------------------- --------------
<C> <S> <C>
COMMON STOCKS -- 85.1%
BASIC MATERIALS & NATURAL RESOURCES -- 10.2%
100,000 Albemarle Corp........................................................................ $ 1,350,000
80,000 Clayton Homes Inc..................................................................... 1,380,000
40,000 Georgia Gulf Corp.*................................................................... 1,420,000
65,000 Image Industries, Inc.*............................................................... 739,375
50,000 Nucor Corp............................................................................ 2,725,000
65,000 Shaw Group Inc.*...................................................................... 296,563
--------------
7,910,938
--------------
CAPITAL EQUIPMENT AND SERVICES -- 1.5%
75,000 Union Switch & Signal, Inc.*.......................................................... 1,143,750
--------------
CONSUMER CYCLICAL -- 15.7%
100,000 Autozone Inc.*........................................................................ 2,562,500
100,000 Heilig Meyers Co...................................................................... 2,625,000
135,000 Office Depot Inc.*.................................................................... 3,206,250
100,000 River Oaks Furniture, Inc.*........................................................... 1,450,000
105,000 Sports & Recreation Inc.*............................................................. 2,388,750
--------------
12,232,500
--------------
CONSUMER NONCYCLICAL -- 11.8%
52,000 Coastal Healthcare Group*............................................................. 1,638,000
150,000 Coventry Corp.*....................................................................... 3,750,000
75,000 Cracker Barrel Old Country Store...................................................... 1,415,625
20,000 HealthWise of America, Inc.*.......................................................... 642,500
50,000 Isolyser Company, Inc.*............................................................... 850,000
80,000 Wall Street Deli Inc.*................................................................ 880,000
--------------
9,176,125
--------------
ENERGY -- 6.4%
100,000 American Oilfield Divers, Inc.*....................................................... 662,500
45,000 Global Industries Inc.*............................................................... 967,500
100,000 Input/Output Inc.*.................................................................... 1,937,500
75,000 Landmark Graphics Corp.*.............................................................. 1,406,250
--------------
4,973,750
--------------
</TABLE>
The accompanying notes are an integral part of these financial statements.
67
<PAGE>
PARAGON PORTFOLIO
STATEMENT OF INVESTMENTS
PARAGON GULF SOUTH GROWTH FUND (CONTINUED)
NOVEMBER 30, 1994
<TABLE>
<CAPTION>
SHARES DESCRIPTION VALUE
- --------- -------------------------------------------------------------------------------------- --------------
COMMON STOCKS (CONTINUED) -- 85.1%
<C> <S> <C>
FINANCE -- 21.1%
125,000 Coral Gables Fedcorp, Inc.*........................................................... $ 2,125,000
55,000 First Financial Management Corp.*..................................................... 3,238,125
100,000 Leader Financial Corp.*............................................................... 2,062,500
100,000 Medaphis Corp.*....................................................................... 3,925,000
91,250 Regional Acceptance Corp.*............................................................ 958,125
85,000 Stewart Enterprises, Inc.............................................................. 2,018,750
70,000 United Companies Financial............................................................ 2,117,500
--------------
16,445,000
--------------
TECHNOLOGY -- 7.9%
125,000 Dallas Semiconductor Corp.*........................................................... 1,765,625
100,000 SCI Systems Inc.*..................................................................... 1,850,000
150,000 Tech Data Corp.*...................................................................... 2,550,000
--------------
6,165,625
--------------
TRANSPORTATION -- 3.7%
120,000 Atlantic Southeast Airlines Inc....................................................... 1,830,000
75,000 Miller Industries, Inc.*.............................................................. 1,087,500
--------------
2,917,500
--------------
</TABLE>
The accompanying notes are an integral part of these financial statements.
68
<PAGE>
PARAGON PORTFOLIO
STATEMENT OF INVESTMENTS
PARAGON GULF SOUTH GROWTH FUND (CONTINUED)
NOVEMBER 30, 1994
<TABLE>
<CAPTION>
SHARES DESCRIPTION VALUE
- --------- -------------------------------------------------------------------------------------- --------------
COMMON STOCKS (CONTINUED) -- 85.1%
<C> <S> <C>
UTILITIES -- 6.8%
100,000 Communications Central, Inc.*......................................................... $ 1,625,000
180,000 LDDS Communications, Inc.*............................................................ 3,622,500
--------------
5,247,500
--------------
Total Common Stocks (cost $54,445,711).......................................... 66,212,688
--------------
</TABLE>
<TABLE>
<CAPTION>
PRINCIPAL INTEREST MATURITY
AMOUNT RATE DATE
------------- ----------- ----------
<S> <C> <C> <C> <C>
CORPORATE OBLIGATIONS -- 3.5%
Michaels Stores Inc......................................... $ 1,500,000 4.75% 01/15/03 1,728,750
Mobile Telecommunications Technology Corp................... 550,000 6.75 05/15/02 997,562
--------------
Total Corporate Obligations (cost $2,101,437)............. 2,726,312
--------------
REPURCHASE AGREEMENTS -- 10.7%
State Street Bank & Trust Company, dated 11/30/94,
repurchase price $8,341,193 (U.S. Treasury Note:........... $ 8,860,000 4.25% 05/15/96
8,340,000 5.15 12/01/94 8,340,000
--------------
Total Repurchase Agreements (cost $8,340,000)............. 8,340,000
--------------
Total Investments (cost $64,887,148**).................... $ 77,279,000
--------------
--------------
</TABLE>
<TABLE>
<S> <C>
Federal income tax information:
Gross unrealized gain for investments in which value exceeds
cost......................................................... $16,327,452
Gross unrealized loss for investments in which cost exceeds
value........................................................ (3,935,600)
-----------
Net unrealized gain........................................... $12,391,852
-----------
-----------
</TABLE>
- ------------------------
* Non-income producing security.
** The cost stated also represents aggregate cost for federal income tax
purposes.
The percentage shown for each investment category reflects the value of
investments in that category as a percentage of total net assets.
The accompanying notes are an integral part of these financial statements.
69
<PAGE>
PARAGON PORTFOLIO
STATEMENTS OF ASSETS AND LIABILITIES
NOVEMBER 30, 1994
<TABLE>
<CAPTION>
SHORT-TERM INTERMEDIATE- LOUISIANA VALUE VALUE EQUITY
TREASURY MONEY GOVERNMENT TERM BOND TAX-FREE GROWTH INCOME
MARKET FUND FUND FUND FUND FUND FUND
-------------- -------------- -------------- -------------- -------------- --------------
<S> <C> <C> <C> <C> <C> <C>
ASSETS:
Investments in securities, at
value (identified cost
$297,097,583; $147,416,087;
$310,447,823; $201,025,031;
$150,343,270; $99,024,080 and
$64,887,148, respectively)..... $ 297,097,583 $ 142,741,368 $ 292,659,906 $ 192,862,287 $ 173,455,250 $ 103,766,250
Cash............................ 76,938 3,931 3,191 1,287,506 5,281 5,213
Receivables:
Investment securities sold.... -- -- 2,049,600 130,000 -- --
Interest...................... 451,030 1,252,104 4,707,355 3,520,718 70,576 99,032
Dividends..................... -- -- -- -- 532,900 312,813
Fund shares sold.............. -- 24,883 65,814 109,947 106,129 3,324
Deferred organization
expenses, net................ 1,566 945 1,756 581 518 850
Other......................... 17,845 956 907 924 2,287 626
-------------- -------------- -------------- -------------- -------------- --------------
Total assets................ 297,644,962 144,024,187 299,488,529 197,911,963 174,172,941 104,188,108
-------------- -------------- -------------- -------------- -------------- --------------
LIABILITIES:
Payables:
Investment securities
purchased.................... -- -- -- -- -- 355,746
Fund shares redeemed.......... -- 228,125 190,580 8,920 44,338 24,850
Dividends and distributions... 1,126,998 640,110 1,633,867 701,665 315,830 290,275
Advisory fees................. 46,449 59,176 122,517 65,418 95,362 56,471
Administrative fees........... 34,837 17,755 36,755 16,834 22,002 13,032
Transfer agent fees........... 9,319 20,132 28,034 27,397 41,649 13,526
Accrued expenses and other
liabilities.................. 62,414 60,371 104,141 67,879 43,907 39,130
-------------- -------------- -------------- -------------- -------------- --------------
Total liabilities........... 1,280,017 1,025,669 2,115,894 888,113 563,088 793,030
-------------- -------------- -------------- -------------- -------------- --------------
NET ASSETS:
Paid-in capital................. 296,364,625 148,621,639 319,179,737 205,625,756 144,967,163 95,318,294
Accumulated undistributed
(distributions in excess of)
net investment income.......... 320 -- 279,975 -- (3,277) 11,021
Accumulated net realized gain
(loss) on investment
transactions................... -- (948,402) (4,299,160) (439,162) 5,533,987 3,323,593
Net unrealized gain (loss) on
investments.................... -- (4,674,719) (17,787,917) (8,162,744) 23,111,980 4,742,170
-------------- -------------- -------------- -------------- -------------- --------------
Net assets.................. $ 296,364,945 $ 142,998,518 $ 297,372,635 $ 197,023,850 $ 173,609,853 $ 103,395,078
-------------- -------------- -------------- -------------- -------------- --------------
-------------- -------------- -------------- -------------- -------------- --------------
Shares of beneficial interest
outstanding ($0.01 par value),
unlimited number of shares
authorized: Class A Shares..... 296,364,625 14,506,736 31,144,093 19,663,887 12,619,309 8,947,363
-------------- -------------- -------------- -------------- -------------- --------------
-------------- -------------- -------------- -------------- -------------- --------------
<CAPTION>
GULF SOUTH
GROWTH
FUND
-------------
<S> <C>
ASSETS:
Investments in securities, at
value (identified cost
$297,097,583; $147,416,087;
$310,447,823; $201,025,031;
$150,343,270; $99,024,080 and
$64,887,148, respectively)..... $ 77,279,000
Cash............................ 5,663
Receivables:
Investment securities sold.... 2,398,215
Interest...................... 29,760
Dividends..................... 12,350
Fund shares sold.............. 156,858
Deferred organization
expenses, net................ 8,897
Other......................... 75
-------------
Total assets................ 79,890,818
-------------
LIABILITIES:
Payables:
Investment securities
purchased.................... 1,994,128
Fund shares redeemed.......... 27,403
Dividends and distributions... --
Advisory fees................. 42,704
Administrative fees........... 9,855
Transfer agent fees........... 18,310
Accrued expenses and other
liabilities.................. 27,429
-------------
Total liabilities........... 2,119,829
-------------
NET ASSETS:
Paid-in capital................. 63,961,183
Accumulated undistributed
(distributions in excess of)
net investment income.......... --
Accumulated net realized gain
(loss) on investment
transactions................... 1,417,954
Net unrealized gain (loss) on
investments.................... 12,391,852
-------------
Net assets.................. $ 77,770,989
-------------
-------------
Shares of beneficial interest
outstanding ($0.01 par value),
unlimited number of shares
authorized: Class A Shares..... 5,275,190
-------------
-------------
</TABLE>
The accompanying notes are an integral part of these financial statements.
70
<PAGE>
PARAGON PORTFOLIO
STATEMENTS OF ASSETS AND LIABILITIES (CONTINUED)
NOVEMBER 30, 1994
<TABLE>
<CAPTION>
SHORT-TERM INTERMEDIATE- LOUISIANA VALUE VALUE EQUITY
TREASURY MONEY GOVERNMENT TERM BOND TAX-FREE GROWTH INCOME
MARKET FUND FUND FUND FUND FUND FUND
-------------- -------------- -------------- -------------- -------------- --------------
<S> <C> <C> <C> <C> <C> <C>
Class B Shares.................. -- 4,171 26,178 20,378 30,118 2,661
-------------- -------------- -------------- -------------- -------------- --------------
-------------- -------------- -------------- -------------- -------------- --------------
Class A Shares
Net asset value and redemption
price per share (net
assets/shares outstanding)..... $1.00 $9.85 $9.54 $10.01 $13.73 $11.55
Maximum public offering price
per share (NAV per share --
1.0471, where applicable)...... $1.00 $10.31 $9.99 $10.48 $14.38 $12.09
-------------- -------------- -------------- -------------- -------------- --------------
-------------- -------------- -------------- -------------- -------------- --------------
Class B Shares
Net asset value and offering
price per share (net assets/
shares outstanding)............ -- $9.85 $9.56 $10.01 $13.70 $11.56
-------------- -------------- -------------- -------------- -------------- --------------
-------------- -------------- -------------- -------------- -------------- --------------
Redemption price per share (NAV
per share -- 0.950, where
applicable).................... -- $ 9.36 $ 9.08 $ 9.51 $ 13.02 $ 10.98
-------------- -------------- -------------- -------------- -------------- --------------
-------------- -------------- -------------- -------------- -------------- --------------
<CAPTION>
GULF SOUTH
GROWTH
FUND
-------------
<S> <C>
Class B Shares.................. 15,758
-------------
-------------
Class A Shares
Net asset value and redemption
price per share (net
assets/shares outstanding)..... $14.70
Maximum public offering price
per share (NAV per share --
1.0471, where applicable)...... $15.39
-------------
-------------
Class B Shares
Net asset value and offering
price per share (net assets/
shares outstanding)............ $14.66
-------------
-------------
Redemption price per share (NAV
per share -- 0.950, where
applicable).................... $ 13.93
-------------
-------------
</TABLE>
The accompanying notes are an integral part of these financial statements.
71
<PAGE>
PARAGON PORTFOLIO
STATEMENTS OF OPERATIONS
FOR THE YEAR ENDED NOVEMBER 30, 1994
<TABLE>
<CAPTION>
TREASURY SHORT-TERM
MONEY MARKET GOVERNMENT
FUND FUND
-------------- --------------
<S> <C> <C>
INVESTMENT INCOME:
Interest.................... $ 11,365,910 $ 9,083,800
Dividends (b)............... -- --
Other....................... -- 199
-------------- --------------
Total income............ 11,365,910 9,083,999
-------------- --------------
EXPENSES:
Advisory fees............... 564,345 802,652
Administration fees......... 423,259 240,815
Transfer agent fees......... 42,061 60,391
Custodian fees.............. 84,201 63,251
Professional fees........... 41,049 26,682
Trustee fees................ 6,449 4,194
Registration fees........... 4,612 17,888
Amortization of deferred
organization expenses...... 17,137 7,910
Other....................... 18,402 12,236
-------------- --------------
Total expenses.......... 1,201,515 1,236,019
Class B Share distribution
fees....................... -- 31
-------------- --------------
Total expenses and Class
B Share distribution
fees................... 1,201,515 1,236,050
-------------- --------------
Net investment income
(loss)..................... 10,164,395 7,847,949
-------------- --------------
REALIZED AND UNREALIZED GAIN
(LOSS) ON INVESTMENTS:
Net realized gain (loss) on
investment transactions.... 4,992 (442,989)
Net change in unrealized
gain (loss) on
investments................ -- (7,178,320)
-------------- --------------
Net realized and unrealized
gain (loss) on
investments................ 4,992 (7,621,309)
-------------- --------------
Net increase (decrease) in
net assets resulting from
operations................. $ 10,169,387 $ 226,640
-------------- --------------
-------------- --------------
</TABLE>
- ------------------------
(a) The Investment Advisor and Administrator waived fees of $202,083 and
$101,042, respectively, during the year ended November 30, 1994.
(b) For the Value Growth Fund and the Value Equity Income Fund, amounts are net
of $2,900 and $23,392, respectively, in foreign withholding taxes.
The accompanying notes are an integral part of these financial statements.
72
<PAGE>
<TABLE>
<CAPTION>
INTERMEDIATE- LOUISIANA VALUE VALUE EQUITY GULF SOUTH
TERM BOND TAX-FREE GROWTH INCOME GROWTH
FUND FUND (a) FUND FUND FUND
--------------- --------------- --------------- -------------- --------------
<S> <C> <C> <C> <C> <C>
INVESTMENT INCOME:
Interest.................... $ 23,638,233 $ 11,342,593 $ 590,316 $ 719,758 $ 326,724
Dividends (b)............... -- -- 3,492,327 2,881,519 174,148
Other....................... 447 219 209 739 77
--------------- --------------- --------------- -------------- --------------
Total income............ 23,638,680 11,342,812 4,082,852 3,602,016 500,949
--------------- --------------- --------------- -------------- --------------
EXPENSES:
Advisory fees............... 1,615,908 808,333 1,154,672 683,343 523,002
Administration fees......... 484,772 202,083 266,463 157,695 120,693
Transfer agent fees......... 93,780 90,450 150,091 47,610 86,581
Custodian fees.............. 116,899 105,749 63,251 43,749 37,500
Professional fees........... 53,364 30,787 26,682 14,367 12,315
Trustee fees................ 8,385 4,837 4,194 2,259 1,935
Registration fees........... 35,685 21,056 17,674 12,113 10,516
Amortization of deferred
organization expenses...... 14,208 4,499 4,215 7,741 5,628
Other....................... 27,415 40,658 15,125 8,170 6,961
--------------- --------------- --------------- -------------- --------------
Total expenses.......... 2,450,416 1,308,452 1,702,367 977,047 805,131
Class B Share distribution
fees....................... 136 261 369 20 159
--------------- --------------- --------------- -------------- --------------
Total expenses and Class
B Share distribution
fees................... 2,450,552 1,308,713 1,702,736 977,067 805,290
--------------- --------------- --------------- -------------- --------------
Net investment income
(loss)..................... 21,188,128 10,034,099 2,380,116 2,624,949 (304,341)
--------------- --------------- --------------- -------------- --------------
REALIZED AND UNREALIZED GAIN
(LOSS) ON INVESTMENTS:
Net realized gain (loss) on
investment transactions.... (4,254,181) (403,188) 5,533,531 3,338,407 1,417,789
Net change in unrealized
gain (loss) on
investments................ (32,996,842) (15,995,358) (15,998,469) (7,781,546) (6,751,273)
--------------- --------------- --------------- -------------- --------------
Net realized and unrealized
gain (loss) on
investments................ (37,251,023) (16,398,546) (10,464,938) (4,443,139) (5,333,484)
--------------- --------------- --------------- -------------- --------------
Net increase (decrease) in
net assets resulting from
operations................. $ (16,062,895) $ (6,364,447) $ (8,084,822) $ (1,818,190) $ (5,637,825)
--------------- --------------- --------------- -------------- --------------
--------------- --------------- --------------- -------------- --------------
</TABLE>
73
<PAGE>
PARAGON PORTFOLIO
STATEMENTS OF CHANGES IN NET ASSETS
FOR THE YEAR ENDED NOVEMBER 30, 1994
<TABLE>
<CAPTION>
TREASURY SHORT-TERM
MONEY MARKET GOVERNMENT
FUND FUND
---------------- ----------------
<S> <C> <C>
INCREASE (DECREASE) IN NET
ASSETS:
OPERATIONS:
Net investment income
(loss)................... $ 10,164,395 $ 7,847,949
Net realized gain (loss)
on investment
transactions............. 4,992 (442,989)
Net change in unrealized
gain (loss) on
investments.............. -- (7,178,320)
---------------- ----------------
Increase (decrease) in net
assets resulting from
operations............... 10,169,387 226,640
---------------- ----------------
DISTRIBUTIONS TO SHAREHOLDERS:
From net investment income
Class A Shares.............. (10,162,326) (7,847,743)
Class B Shares.............. -- (206)
In excess of net investment
income
Class A Shares............. -- --
From net realized gains
Class A Shares.............. (23,225) --
In excess of net realized
gains
Class A Shares.............. -- --
---------------- ----------------
Total distributions to
shareholders........... (10,185,551) (7,847,949)
---------------- ----------------
TRUST SHARE TRANSACTIONS:
Net proceeds from the sale
of shares.................. 984,598,161 37,944,427
Reinvestment of dividends
and distributions.......... 180,411 392,469
Cost of shares redeemed..... (984,527,520) (57,707,000)
---------------- ----------------
Net increase (decrease) in
net assets from Trust share
transactions............... 251,052 (19,370,104)
---------------- ----------------
Total increase
(decrease)............. 234,888 (26,991,413)
---------------- ----------------
NET ASSETS:
Beginning of year........... 296,130,057 169,989,931
---------------- ----------------
End of year................. $ 296,364,945 $ 142,998,518
---------------- ----------------
---------------- ----------------
ACCUMULATED UNDISTRIBUTED
(DISTRIBUTIONS IN EXCESS OF)
NET INVESTMENT INCOME........ $ 320 $ --
---------------- ----------------
---------------- ----------------
SUMMARY OF SHARE TRANSACTIONS:
Class A Shares
Sold........................ 984,598,161 3,731,929
Issued on reinvestment of
dividends and
distributions.............. 180,411 38,942
Redeemed.................... (984,527,520) (5,709,112)
---------------- ----------------
251,052 (1,938,241)
---------------- ----------------
Class B Shares
Sold........................ -- 4,150
Issued on reinvestment of
dividends and
distributions.............. -- 21
Redeemed.................... -- --
---------------- ----------------
-- 4,171
---------------- ----------------
Net increase (decrease) in
shares outstanding......... 251,052 (1,934,070)
---------------- ----------------
---------------- ----------------
</TABLE>
The accompanying notes are an integral part of these financial statements.
74
<PAGE>
<TABLE>
<CAPTION>
INTERMEDIATE- LOUISIANA VALUE VALUE EQUITY GULF SOUTH
TERM BOND TAX-FREE GROWTH INCOME GROWTH
FUND FUND FUND FUND FUND
---------------- ---------------- ---------------- ---------------- --------------
<S> <C> <C> <C> <C> <C>
INCREASE (DECREASE) IN NET
ASSETS:
OPERATIONS:
Net investment income
(loss)................... $ 21,188,128 $ 10,034,099 $ 2,380,116 $ 2,624,949 $ (304,341)
Net realized gain (loss)
on investment
transactions............. (4,254,181) (403,188) 5,533,531 3,338,407 1,417,789
Net change in unrealized
gain (loss) on
investments.............. (32,996,842) (15,995,358) (15,998,469) (7,781,546) (6,751,273)
---------------- ---------------- ---------------- ---------------- --------------
Increase (decrease) in net
assets resulting from
operations............... (16,062,895) (6,364,447) (8,084,822) (1,818,190) (5,637,825)
---------------- ---------------- ---------------- ---------------- --------------
DISTRIBUTIONS TO SHAREHOLDERS:
From net investment income
Class A Shares.............. (21,186,974) (10,032,553) (2,546,306) (2,973,890) --
Class B Shares.............. (1,154) (1,546) (752) (78) --
In excess of net investment
income
Class A Shares............. -- -- (3,277) -- --
From net realized gains
Class A Shares.............. (4,432,431) (2,114,555) (8,389,918) (5,318,242) (649,788)
In excess of net realized
gains
Class A Shares.............. (44,979) (35,974) -- -- --
---------------- ---------------- ---------------- ---------------- --------------
Total distributions to
shareholders........... (25,665,538) (12,184,628) (10,940,253) (8,292,210) (649,788)
---------------- ---------------- ---------------- ---------------- --------------
TRUST SHARE TRANSACTIONS:
Net proceeds from the sale
of shares.................. 54,826,753 44,951,435 36,323,019 20,175,920 18,519,488
Reinvestment of dividends
and distributions.......... 1,726,372 2,652,558 1,878,153 337,716 119,773
Cost of shares redeemed..... (58,987,271) (28,564,772) (16,706,771) (9,806,704) (9,562,871)
---------------- ---------------- ---------------- ---------------- --------------
Net increase (decrease) in
net assets from Trust share
transactions............... (2,434,146) 19,039,221 21,494,401 10,706,932 9,076,390
---------------- ---------------- ---------------- ---------------- --------------
Total increase
(decrease)............. (44,162,579) 490,146 2,469,326 596,532 2,788,777
---------------- ---------------- ---------------- ---------------- --------------
NET ASSETS:
Beginning of year........... 341,535,214 196,533,704 171,140,527 102,798,546 74,982,212
---------------- ---------------- ---------------- ---------------- --------------
End of year................. $ 297,372,635 $ 197,023,850 $ 173,609,853 $ 103,395,078 $ 77,770,989
---------------- ---------------- ---------------- ---------------- --------------
---------------- ---------------- ---------------- ---------------- --------------
ACCUMULATED UNDISTRIBUTED
(DISTRIBUTIONS IN EXCESS OF)
NET INVESTMENT INCOME........ $ 279,975 $ -- $ (3,277) $ 11,021 $ --
---------------- ---------------- ---------------- ---------------- --------------
---------------- ---------------- ---------------- ---------------- --------------
SUMMARY OF SHARE TRANSACTIONS:
Class A Shares
Sold........................ 5,310,502 4,228,003 2,439,323 1,661,828 1,146,632
Issued on reinvestment of
dividends and
distributions.............. 169,665 250,440 128,595 27,823 7,377
Redeemed.................... (5,844,772) (2,741,741) (1,142,802) (812,422) (600,948)
---------------- ---------------- ---------------- ---------------- --------------
(364,605) 1,736,702 1,425,116 877,229 553,061
---------------- ---------------- ---------------- ---------------- --------------
Class B Shares
Sold........................ 26,061 22,736 30,070 2,653 15,758
Issued on reinvestment of
dividends and
distributions.............. 117 117 55 8 --
Redeemed.................... -- (2,475) (7) -- --
---------------- ---------------- ---------------- ---------------- --------------
26,178 20,378 30,118 2,661 15,758
---------------- ---------------- ---------------- ---------------- --------------
Net increase (decrease) in
shares outstanding......... (338,427) 1,757,080 1,455,234 879,890 568,819
---------------- ---------------- ---------------- ---------------- --------------
---------------- ---------------- ---------------- ---------------- --------------
</TABLE>
75
<PAGE>
PARAGON PORTFOLIO
STATEMENTS OF CHANGES IN NET ASSETS
FOR THE YEAR ENDED NOVEMBER 30, 1993
<TABLE>
<CAPTION>
TREASURY SHORT-TERM
MONEY MARKET GOVERNMENT
FUND FUND
------------------ ----------------
<S> <C> <C>
INCREASE (DECREASE) IN NET
ASSETS:
OPERATIONS:
Net investment income
(loss)................... $ 8,321,905 $ 8,032,268
Net realized gain (loss)
on investment
transactions............. 165,940 (165,169)
Net change in unrealized
gain on investments...... -- 286,791
------------------ ----------------
Increase in net assets
resulting from
operations............. 8,487,845 8,153,890
------------------ ----------------
DISTRIBUTIONS TO CLASS A
SHAREHOLDERS FROM:
Net investment income....... (8,321,905) (8,032,268)
Net realized gains.......... (155,392) --
------------------ ----------------
(8,477,297) (8,032,268)
------------------ ----------------
TRUST SHARE TRANSACTIONS:
Net proceeds from the sale
of shares.................. 981,860,748 80,223,518
Reinvestment of dividends
and distributions.......... 111,460 464,240
Cost of shares redeemed..... (1,019,855,775) (34,347,598)
------------------ ----------------
Net increase (decrease) in
net assets from Trust share
transactions............... (37,883,567) 46,340,160
------------------ ----------------
Total increase (decrease)... (37,873,019) 46,461,782
NET ASSETS:
Beginning of year........... 334,003,076 123,528,149
------------------ ----------------
End of year................. $ 296,130,057 $ 169,989,931
------------------ ----------------
------------------ ----------------
UNDISTRIBUTED NET INVESTMENT
INCOME....................... $ -- $ --
------------------ ----------------
------------------ ----------------
SUMMARY OF CLASS A SHARE
TRANSACTIONS:
Sold........................ 981,860,748 7,703,885
Issued on reinvestment of
dividends and
distributions.............. 111,460 44,617
Redeemed.................... (1,019,855,775) (3,299,207)
------------------ ----------------
Net increase (decrease) in
Class A shares
outstanding................ (37,883,567) 4,449,295
------------------ ----------------
------------------ ----------------
</TABLE>
The accompanying notes are an integral part of these financial statements.
76
<PAGE>
<TABLE>
<CAPTION>
INTERMEDIATE- LOUISIANA VALUE VALUE EQUITY GULF SOUTH
TERM BOND TAX-FREE GROWTH INCOME GROWTH
FUND FUND FUND FUND FUND
---------------- ---------------- ---------------- ---------------- --------------
<S> <C> <C> <C> <C> <C>
INCREASE (DECREASE) IN NET
ASSETS:
OPERATIONS:
Net investment income
(loss)................... $ 20,883,114 $ 8,630,870 $ 1,874,748 $ 2,161,115 $ (136,663)
Net realized gain (loss)
on investment
transactions............. 4,414,902 2,150,543 8,389,918 5,318,243 649,788
Net change in unrealized
gain on investments...... 5,268,498 4,124,459 4,052,264 1,603,220 5,397,856
---------------- ---------------- ---------------- ---------------- --------------
Increase in net assets
resulting from
operations............. 30,566,514 14,905,872 14,316,930 9,082,578 5,910,981
---------------- ---------------- ---------------- ---------------- --------------
DISTRIBUTIONS TO CLASS A
SHAREHOLDERS FROM:
Net investment income....... (20,603,139) (8,630,870) (1,967,883) (2,091,296) (18,284)
Net realized gains.......... (1,572,467) (1,029,264) (3,124,703) (2,708,331) (1,384,432)
---------------- ---------------- ---------------- ---------------- --------------
(22,175,606) (9,660,134) (5,092,586) (4,799,627) (1,402,716)
---------------- ---------------- ---------------- ---------------- --------------
TRUST SHARE TRANSACTIONS:
Net proceeds from the sale
of shares.................. 75,454,959 63,182,593 37,887,681 21,321,478 23,676,487
Reinvestment of dividends
and distributions.......... 1,120,503 1,892,166 655,744 109,824 154,042
Cost of shares redeemed..... (29,115,348) (9,478,982) (10,240,850) (6,052,115) (9,075,578)
---------------- ---------------- ---------------- ---------------- --------------
Net increase (decrease) in
net assets from Trust share
transactions............... 47,460,114 55,595,777 28,302,575 15,379,187 14,754,951
---------------- ---------------- ---------------- ---------------- --------------
Total increase (decrease)... 55,851,022 60,841,515 37,526,919 19,662,138 19,263,216
NET ASSETS:
Beginning of year........... 285,684,192 135,692,189 133,613,608 83,136,408 55,718,996
---------------- ---------------- ---------------- ---------------- --------------
End of year................. $ 341,535,214 $ 196,533,704 $ 171,140,527 $ 102,798,546 $ 74,982,212
---------------- ---------------- ---------------- ---------------- --------------
---------------- ---------------- ---------------- ---------------- --------------
UNDISTRIBUTED NET INVESTMENT
INCOME....................... $ 279,975 $ -- $ 166,942 $ 360,040 $ --
---------------- ---------------- ---------------- ---------------- --------------
---------------- ---------------- ---------------- ---------------- --------------
SUMMARY OF CLASS A SHARE
TRANSACTIONS:
Sold........................ 6,953,681 5,815,176 2,544,235 1,737,842 1,572,226
Issued on reinvestment of
dividends and
distributions.............. 103,162 174,284 44,608 8,994 10,189
Redeemed.................... (2,676,286) (873,400) (683,557) (488,391) (601,278)
---------------- ---------------- ---------------- ---------------- --------------
Net increase (decrease) in
Class A shares
outstanding................ 4,380,557 5,116,060 1,905,286 1,258,445 981,137
---------------- ---------------- ---------------- ---------------- --------------
---------------- ---------------- ---------------- ---------------- --------------
</TABLE>
77
<PAGE>
PARAGON PORTFOLIO
TREASURY MONEY MARKET FUND
FINANCIAL HIGHLIGHTS
SELECTED DATA FOR A SHARE OUTSTANDING THROUGHOUT EACH PERIOD
<TABLE>
<CAPTION>
INCOME FROM INVESTMENT OPERATIONS
-----------------------------------------
NET ASSET NET REALIZED TOTAL
VALUE AT NET GAIN ON INCOME FROM
BEGINNING INVESTMENT INVESTMENT INVESTMENT
OF PERIOD INCOME TRANSACTIONS OPERATIONS
----------- ----------- ------------- -------------
<S> <C> <C> <C> <C>
For the Years Ended November 30,
1994 Class A Shares.............. $ 1.00 $ 0.04 $ -- $ 0.04
1993 Class A Shares.............. 1.00 0.03 -- 0.03
1992 Class A Shares.............. 1.00 0.04 -- 0.04
1991 Class A Shares.............. 1.00 0.06 -- 0.06
For the Period December 29, 1989
(commencement of operations)
through November 30,
1990 Class A Shares.............. 1.00 0.07 -- 0.07
</TABLE>
- ------------------------
(a) Assumes investment at the net asset value at the beginning of the period,
reinvestment of all dividends and distributions, a complete redemption of
the investment at the net asset value at the end of the period.
(b) Annualized.
The accompanying notes are an integral part of these financial statements.
78
<PAGE>
<TABLE>
<CAPTION>
DISTRIBUTIONS TO SHAREHOLDERS FROM
-------------------------------------------
NET TOTAL NET ASSET RATIO OF
NET REALIZED DISTRIBUTIONS VALUE NET EXPENSES
INVESTMENT GAIN ON TO AT END TOTAL TO AVERAGE
INCOME INVESTMENTS SHAREHOLDERS OF PERIOD RETURN (a) NET ASSETS
----------- ------------- --------------- ----------- ------------- ---------------
<S> <C> <C> <C> <C> <C> <C>
For the Years Ended November 30,
1994 Class A Shares.............. $ (0.04) $ -- $ (0.04) $ 1.00 3.68% 0.43%
1993 Class A Shares.............. (0.03) -- (0.03) 1.00 2.84 0.45
1992 Class A Shares.............. (0.04) -- (0.04) 1.00 3.71 0.46
1991 Class A Shares.............. (0.06) -- (0.06) 1.00 6.00 0.50
For the Period December 29, 1989
(commencement of operations)
through November 30,
1990 Class A Shares.............. (0.07) -- (0.07) 1.00 7.91(b) 0.46(b)
<CAPTION>
RATIO OF
NET INVESTMENT NET ASSETS
INCOME AT END
TO AVERAGE OF PERIOD
NET ASSETS (000'S)
----------------- -----------
<S> <C> <C>
For the Years Ended November 30,
1994 Class A Shares.............. 3.60% $ 296,365
1993 Class A Shares.............. 2.76 296,130
1992 Class A Shares.............. 3.43 334,003
1991 Class A Shares.............. 5.67 300,539
For the Period December 29, 1989
(commencement of operations)
through November 30,
1990 Class A Shares.............. 7.73(b) 236,504
</TABLE>
79
<PAGE>
PARAGON PORTFOLIO
SHORT-TERM GOVERNMENT FUND
FINANCIAL HIGHLIGHTS
SELECTED DATA FOR A SHARE OUTSTANDING THROUGHOUT EACH PERIOD
<TABLE>
<CAPTION>
INCOME FROM INVESTMENT OPERATIONS
---------------------------------------------
NET REALIZED
NET ASSET AND UNREALIZED TOTAL
VALUE AT NET GAIN (LOSS) INCOME (LOSS)
BEGINNING INVESTMENT ON INVESTMENT FROM INVESTMENT
OF PERIOD INCOME TRANSACTIONS OPERATIONS
----------- ----------- --------------- ---------------
<S> <C> <C> <C> <C>
For the Years Ended November 30,
1994 Class A Shares.............. $ 10.34 $ 0.50 $ (0.49) $ 0.01
1994 Class B Shares (c).......... 9.95 0.05 (0.10) (0.05)
1993 Class A Shares.............. 10.30 0.56 0.04 0.60
1992 Class A Shares.............. 10.35 0.67 (0.03) 0.64
1991 Class A Shares.............. 10.04 0.74 0.31 1.05
For the Period December 29, 1989
(commencement of operations)
through November 30,
1990 Class A Shares.............. 10.00 0.69 0.04 0.73
</TABLE>
- ------------------------
(a) Assumes investment at the net asset value at the beginning of the period,
reinvestment of all dividends and distributions, a complete redemption of
the investment at the net asset value at the end of the period and no sales
charges. Total return would be reduced if a sales charge for Class A Shares
or a contingent deferred sales charge for Class B Shares were taken into
account.
(b) Annualized.
(c) Class B Share activity commenced on October 19, 1994.
The accompanying notes are an integral part of these financial statements.
80
<PAGE>
<TABLE>
<CAPTION>
DISTRIBUTIONS TO SHAREHOLDERS FROM
-------------------------------------------
NET TOTAL NET ASSET RATIO OF
NET REALIZED DISTRIBUTIONS VALUE NET EXPENSES
INVESTMENT GAIN ON TO AT END TOTAL TO AVERAGE
INCOME INVESTMENTS SHAREHOLDERS OF PERIOD RETURN (a) NET ASSETS
----------- ------------- --------------- ----------- ------------ ---------------
<S> <C> <C> <C> <C> <C> <C>
For the Years Ended November 30,
1994 Class A Shares.............. $ (0.50) $ -- $ (0.50) $ 9.85 0.12% 0.77%
1994 Class B Shares (c).......... (0.05) -- (0.05) 9.85 (0.39) 1.53(b)
1993 Class A Shares.............. (0.56) -- (0.56) 10.34 5.91 0.78
1992 Class A Shares.............. (0.67) -- (0.69) 10.30 6.29 0.81
1991 Class A Shares.............. (0.74) -- (0.74) 10.35 10.90 0.84
For the Period December 29, 1989
(commencement of operations)
through November 30,
1990 Class A Shares.............. (0.69) -- (0.69) 10.04 7.67 0.84(b)
<CAPTION>
RATIO OF
NET INVESTMENT NET ASSETS
INCOME PORTFOLIO AT END
TO AVERAGE TURNOVER OF PERIOD
NET ASSETS RATE (000'S)
----------------- ------------- -----------
<S> <C> <C> <C>
For the Years Ended November 30,
1994 Class A Shares.............. 4.89% 40% $ 142,958
1994 Class B Shares (c).......... 4.92(b) 40 41
1993 Class A Shares.............. 5.35 44 169,990
1992 Class A Shares.............. 6.44 22 123,528
1991 Class A Shares.............. 7.34 15 76,921
For the Period December 29, 1989
(commencement of operations)
through November 30,
1990 Class A Shares.............. 7.60(b) 33 87,096
</TABLE>
81
<PAGE>
PARAGON PORTFOLIO
INTERMEDIATE-TERM BOND FUND
FINANCIAL HIGHLIGHTS
SELECTED DATA FOR A SHARE OUTSTANDING THROUGHOUT EACH PERIOD
<TABLE>
<CAPTION>
INCOME FROM INVESTMENT OPERATIONS
---------------------------------------------
NET REALIZED
NET ASSET AND UNREALIZED TOTAL
VALUE AT NET GAIN (LOSS) INCOME (LOSS)
BEGINNING INVESTMENT ON INVESTMENT FROM INVESTMENT
OF PERIOD INCOME TRANSACTIONS OPERATIONS
----------- ----------- --------------- ---------------
<S> <C> <C> <C> <C>
For the Years Ended November 30,
1994 Class A Shares.............. $ 10.84 $ 0.66 $ (1.16) $ (0.50)
1994 Class B Shares (c).......... 9.74 0.10 (0.18) (0.08)
1993 Class A Shares.............. 10.53 0.71 0.36 1.07
1992 Class A Shares.............. 10.41 0.76 0.12 0.88
1991 Class A Shares.............. 9.91 0.77 0.50 1.27
For the Period December 29, 1989
(commencement of operations)
through November 30,
1990 Class A Shares.............. 10.00 0.71 (0.09) 0.62
</TABLE>
- ------------------------
(a) Assumes investment at the net asset value at the beginning of the period,
reinvestment of all dividends and distributions, a complete redemption of
the investment at the net asset value at the end of the period and no sales
charges. Total return would be reduced if a sales charge for Class A Shares
or a contingent deferred sales charge for Class B shares were taken into
account.
(b) Annualized.
(c) Class B Share activity commenced on September 28, 1994.
The accompanying notes are an integral part of these financial statements.
82
<PAGE>
<TABLE>
<CAPTION>
DISTRIBUTIONS TO SHAREHOLDERS FROM
-----------------------------------------
NET TOTAL NET ASSET RATIO OF
NET REALIZED DISTRIBUTIONS VALUE NET EXPENSES
INVESTMENT GAIN ON TO AT END TOTAL TO AVERAGE
INCOME INVESTMENTS SHAREHOLDERS OF PERIOD RETURN (a) NET ASSETS
----------- ----------- --------------- ----------- ------------ ---------------
<S> <C> <C> <C> <C> <C> <C>
For the Years Ended November 30,
1994 Class A Shares.............. $ (0.66) $ (0.14) $ (0.80) $ 9.54 (4.77)% 0.76%
1994 Class B Shares (c).......... (0.10) -- (0.10) 9.56 (0.76) 1.52(b)
1993 Class A Shares.............. (0.70) (0.06) (0.76) 10.84 10.32 0.74
1992 Class A Shares.............. (0.76) -- (0.76) 10.53 8.71 0.78
1991 Class A Shares.............. (0.77) -- (0.77) 10.41 13.34 0.78
For the Period December 29, 1989
(commencement of operations)
through November 30,
1990 Class A Shares.............. (0.71) -- (0.71) 9.91 6.59 0.80(b)
<CAPTION>
RATIO OF
NET INVESTMENT NET ASSETS
INCOME PORTFOLIO AT END
TO AVERAGE TURNOVER OF PERIOD
NET ASSETS RATE (000'S)
----------------- ------------- -----------
<S> <C> <C> <C>
For the Years Ended November 30,
1994 Class A Shares.............. 6.56% 38% $ 297,123
1994 Class B Shares (c).......... 6.38(b) 38 250
1993 Class A Shares.............. 6.46 38 341,535
1992 Class A Shares.............. 7.17 24 285,684
1991 Class A Shares.............. 7.69 15 221,916
For the Period December 29, 1989
(commencement of operations)
through November 30,
1990 Class A Shares.............. 7.91(b) 14 165,464
</TABLE>
83
<PAGE>
PARAGON PORTFOLIO
LOUISIANA TAX-FREE FUND
FINANCIAL HIGHLIGHTS
SELECTED DATA FOR A SHARE OUTSTANDING THROUGHOUT EACH PERIOD
<TABLE>
<CAPTION>
INCOME FROM INVESTMENT OPERATIONS
-------------------------------------------------
NET REALIZED
NET ASSET AND UNREALIZED TOTAL
VALUE AT NET GAIN (LOSS) INCOME (LOSS)
BEGINNING INVESTMENT ON INVESTMENT FROM INVESTMENT
OF PERIOD INCOME TRANSACTIONS OPERATIONS
----------- ------------- --------------- -----------------
<S> <C> <C> <C> <C>
For the Years Ended November 30,
1994 Class A Shares.............. $ 10.96 $ 0.52 $ (0.84) $ (0.32)
1994 Class B Shares (c).......... 10.41 0.09 (0.40) (0.31)
1993 Class A Shares.............. 10.59 0.55 0.45 1.00
1992 Class A Shares.............. 10.38 0.59 0.28 0.87
1991 Class A Shares.............. 10.15 0.60 0.23 0.83
For the Period December 29, 1989
(commencement of operations)
through November 30,
1990 Class A Shares.............. 10.00 0.57 0.15 0.72
</TABLE>
- ------------------------------
(a) Assumes investment at the net asset value at the beginning of the period,
reinvestment of all dividends and distributions, a complete redemption of
the investment at the net asset value at the end of the period and no sales
charges. Total return would be reduced if a sales charge for Class A Shares
or a contingent deferred sales charge for Class B Shares were taken into
account.
(b) Annualized.
(c) Class B Share activity commenced on September 16, 1994.
The accompanying notes are an integral part of these financial statements.
84
<PAGE>
<TABLE>
<CAPTION>
DISTRIBUTIONS TO SHAREHOLDERS FROM
-------------------------------------------
NET NET ASSET RATIO OF
NET REALIZED TOTAL VALUE NET EXPENSES
INVESTMENT GAIN ON DISTRIBUTIONS TO AT END TOTAL TO AVERAGE
INCOME INVESTMENTS SHAREHOLDERS OF PERIOD RETURN (a) NET ASSETS
---------- ----------- ---------------- --------- ---------- ------------
<S> <C> <C> <C> <C> <C> <C>
For the Years Ended November 30,
1994 Class A Shares.............. $(0.52) $(0.11) $(0.63) $10.01 (2.97)% 0.65%
1994 Class B Shares (c).......... (0.09) -- (0.09) 10.01 (2.94) 1.41(b)
1993 Class A Shares.............. (0.55) (0.08) (0.63) 10.96 9.65 0.62
1992 Class A Shares.............. (0.59) (0.07) (0.66) 10.59 8.64 0.58
1991 Class A Shares.............. (0.60) -- (0.60) 10.38 8.45 0.61
For the Period December 29, 1989
(commencement of operations)
through November 30,
1990 Class A Shares.............. (0.57) -- (0.57) 10.15 7.48 0.64(b)
<CAPTION>
RATIO OF RATIO OF
NET INVESTMENT NET ASSETS RATIO OF NET INVESTMENT
INCOME PORTFOLIO AT END EXPENSES TO INCOME TO
TO AVERAGE TURNOVER OF PERIOD AVERAGE NET AVERAGE NET
NET ASSETS RATE (000'S) ASSETS ASSETS
-------------- --------- ---------- ----------- --------------
<S> <C> <C> <C> <C> <C>
For the Years Ended November 30,
1994 Class A Shares.............. 4.97% 24% $196,820 0.80% 4.82%
1994 Class B Shares (c).......... 4.45(b) 24 204 1.56(b) 4.30(b)
1993 Class A Shares.............. 5.07 25 196,534 0.78 4.91
1992 Class A Shares.............. 5.70 32 135,692 0.83 5.45
1991 Class A Shares.............. 5.86 35 88,503 0.86 5.61
For the Period December 29, 1989
(commencement of operations)
through November 30,
1990 Class A Shares.............. 6.20(b) 5 59,375 0.86(b) 5.98(b)
</TABLE>
85
<PAGE>
PARAGON PORTFOLIO
VALUE EQUITY INCOME FUND
FINANCIAL HIGHLIGHTS
SELECTED DATA FOR A SHARE OUTSTANDING THROUGHOUT EACH PERIOD
<TABLE>
<CAPTION>
INCOME FROM INVESTMENT OPERATIONS
---------------------------------------------
NET REALIZED
NET ASSET AND UNREALIZED TOTAL
VALUE AT NET GAIN (LOSS) INCOME (LOSS)
BEGINNING INVESTMENT ON INVESTMENT FROM INVESTMENT
OF PERIOD INCOME TRANSACTIONS OPERATIONS
----------- ----------- --------------- ---------------
<S> <C> <C> <C> <C>
For the Years Ended November 30,
1994 Class A Shares.............. $ 12.74 $ 0.30 $ (0.54) $ (0.24)
1994 Class B Shares (d).......... 12.01 0.04 (0.45) (0.41)
1993 Class A Shares.............. 12.20 0.28 0.93 1.21
1992 Class A Shares.............. 10.42 0.27 1.76 2.03
1991 Class A Shares.............. 9.00 0.29 1.45 1.74
For the Period December 28, 1994
(commencement of operations)
through November 30,
1990 Class A Shares.............. 10.00 0.31 (1.04) (0.73)
</TABLE>
- ------------------------
(a) Assumes investment at the net asset value at the beginning of the period,
reinvestment of all dividends and distributions, a complete redemption of
the investment at the net asset value at the end of the period and no sales
charges. Total return would be reduced if a sales charge for Class A Shares
or a contingent deferred sales charge for Class B Shares were taken into
account.
(b) Annualized.
(c) Had the Administrator not voluntarily waived a portion of the
administration fee, the expense ratio and the ratio of net investment
income to average net assets for the year ended November 30, 1991 would
have been 1.01% and 3.47% for Class A Shares.
(d) Class B Share activity commenced on October 3, 1994.
The accompanying notes are an integral part of these financial statements.
88
<PAGE>
<TABLE>
<CAPTION>
DISTRIBUTIONS TO SHAREHOLDERS FROM
-----------------------------------------
NET TOTAL NET ASSET RATIO OF
NET REALIZED DISTRIBUTIONS VALUE NET EXPENSES
INVESTMENT GAIN ON TO AT END TOTAL TO AVERAGE
INCOME INVESTMENTS SHAREHOLDERS OF PERIOD RETURN (a) NET ASSETS
----------- ----------- --------------- ----------- ------------ ---------------
<S> <C> <C> <C> <C> <C> <C>
For the Years Ended November 30,
1994 Class A Shares.............. $ (0.34) $ (0.61) $ (0.95) $ 11.55 (1.69)% 0.93%
1994 Class B Shares (d).......... (0.04) -- (0.04) 11.56 (3.40) 1.67(b)
1993 Class A Shares.............. (0.28) (0.39) (0.67) 12.74 10.24 0.93
1992 Class A Shares.............. (0.25) -- (0.25) 12.20 19.65 0.98
1991 Class A Shares.............. (0.32) -- (0.32) 10.42 20.03 0.95(c)
For the Period December 28, 1994
(commencement of operations)
through November 30,
1990 Class A Shares.............. (0.27) -- (0.27) 9.00 (7.40) 0.99(b)
<CAPTION>
RATIO OF
NET INVESTMENT NET ASSETS
INCOME PORTFOLIO AT END
TO AVERAGE TURNOVER OF PERIOD
NET ASSETS RATE (000'S)
----------------- ------------- -----------
<S> <C> <C> <C>
For the Years Ended November 30,
1994 Class A Shares.............. 2.50% 49% $ 103,364
1994 Class B Shares (d).......... 1.71(b) 49 31
1993 Class A Shares.............. 2.30 51 102,799
1992 Class A Shares.............. 2.38 36 83,136
1991 Class A Shares.............. 3.53(c) 50 59,854
For the Period December 28, 1994
(commencement of operations)
through November 30,
1990 Class A Shares.............. 3.62(b) 56 72,783
</TABLE>
89
<PAGE>
PARAGON PORTFOLIO
GULF SOUTH GROWTH FUND
FINANCIAL HIGHLIGHTS
SELECTED DATA FOR A SHARE OUTSTANDING THROUGHOUT EACH PERIOD
<TABLE>
<CAPTION>
INCOME FROM INVESTMENT OPERATIONS
---------------------------------------------
NET REALIZED
NET ASSET NET AND UNREALIZED TOTAL
VALUE AT INVESTMENT GAIN (LOSS) INCOME (LOSS)
BEGINNING INCOME ON INVESTMENT FROM INVESTMENT
OF PERIOD (LOSS) TRANSACTIONS OPERATIONS
----------- ----------- --------------- ---------------
<S> <C> <C> <C> <C>
For the Years Ending November 30,
1994 Class A Shares.............. $ 15.88 $ (0.06) $ (0.99) $ (1.05)
1994 Class B Shares (c).......... 16.10 (0.01) (1.43) (1.44)
1993 Class A Shares.............. 14.89 (0.03) 1.38 1.35
1992 Class A Shares.............. 11.59 0.02 3.29 3.31
For the Period July 1, 1991
(commencement of operations)
through November 30,
1991 Class A Shares.............. 10.00 0.02 1.59 1.61
</TABLE>
- ------------------------
(a) Assumes investment at the net asset value at the beginning of the period,
reinvestment of all dividends and distributions, a complete redemption of
the investment at the net asset value at the end of the period and no sales
charges. Total return would be reduced if a sales charge for Class A Shares
or a contingent deferred sales charge for Class B shares were taken into
account.
(b) Annualized.
(c) Class B Share activity commenced on September 12, 1994.
The accompanying notes are an integral part of these financial statements.
90
<PAGE>
<TABLE>
<CAPTION>
DISTRIBUTIONS TO SHAREHOLDERS FROM
-----------------------------------------
NET TOTAL NET ASSET RATIO OF
NET REALIZED DISTRIBUTIONS VALUE NET EXPENSES
INVESTMENT GAIN ON TO AT END TOTAL TO AVERAGE
INCOME INVESTMENTS SHAREHOLDERS OF PERIOD RETURN (a) NET ASSETS
----------- ----------- --------------- ----------- ------------ ---------------
<S> <C> <C> <C> <C> <C> <C>
For the Years Ending November 30,
1994 Class A Shares.............. $ -- $ (0.13) $ (0.13) $ 14.70 (6.66)% 1.00%
1994 Class B Shares (c).......... -- -- -- 14.66 (9.08) 1.75(b)
1993 Class A Shares.............. (0.01) (0.35) (0.36) 15.88 9.10 1.01
1992 Class A Shares.............. (0.01) -- (0.01) 14.89 28.59 1.00
For the Period July 1, 1991
(commencement of operations)
through November 30,
1991 Class A Shares.............. (0.02) -- (0.02) 11.59 16.12 1.05(b)
<CAPTION>
RATIO OF NET
NET INVESTMENT ASSETS
INCOME PORTFOLIO AT END
TO AVERAGE TURNOVER OF PERIOD
NET ASSETS RATE (000'S)
---------------- ------------- ---------
<S> <C> <C> <C>
For the Years Ending November 30,
1994 Class A Shares.............. (0.38)% 51% $ 77,540
1994 Class B Shares (c).......... (0.90)(b) 51 231
1993 Class A Shares.............. (0.21) 59 74,982
1992 Class A Shares.............. 0.15 42 55,719
For the Period July 1, 1991
(commencement of operations)
through November 30,
1991 Class A Shares.............. 0.31(b) 12 34,546
</TABLE>
91
<PAGE>
PARAGON PORTFOLIO
4900 Sears Tower
Chicago, Illinois 60606
INVESTMENT ADVISERS
Premier Investment Advisors, L.L.C.
451 Florida Street
Baton Rouge, Louisiana 70801
Goldman Sachs Asset Management
One New York Plaza
New York, New York 10004
DISTRIBUTOR AND ADMINISTRATOR
Goldman, Sachs & Co.
85 Broad Street
New York, New York 10004
CUSTODIAN
State Street Bank & Trust Company
225 Franklin Street
Boston, Massachusetts 02110
TRANSFER AGENT
Goldman, Sachs & Co.
4900 Sears Tower
Chicago, Illinois 60606
INDEPENDENT ACCOUNTANTS
Price Waterhouse LLP
1177 Avenue of the Americas
New York, NY 10036
LEGAL COUNSEL
Hale and Dorr
60 State Street
Boston, Massachusetts 02109
PARAGON PORTFOLIO PA-ANN94
ANNUAL REPORT
NOVEMBER 30, 1994
<PAGE>
APPENDIX
DESCRIPTION OF SECURITIES RATINGS*
MOODY'S INVESTORS SERVICE, INC.
Aaa: Bonds which are rated Aaa are judged to be of the best quality. They
carry the smallest degree of investment risk and are generally referred to as
"gilt edge." Interest payments are protected by a large or by an exceptionally
stable margin and principal is secure. While the various protective elements are
likely to change, such changes as can be visualized are most unlikely to impair
the fundamentally strong position of such issues.
Aa: Bonds which are rated Aa are judged to be of high quality by all
standards. Together with the Aaa group they comprise what are generally known as
high grade bonds. They are rated lower than the best bonds because margins of
protection may not be as large as in Aaa securities or fluctuation of protective
elements may be of greater amplitude or there may be other elements present
which make the long-term risks appear somewhat larger than with Aaa securities.
A: Bonds which are rated A possess many favorable investment attributes and
may be considered as upper medium grade obligations. Factors giving security to
principal and interest are considered adequate but elements may be present which
suggest a susceptibility to impairment sometime in the future.
Baa: Bonds which are rated Baa are considered as medium grade obligations,
i.e., they are neither highly protected nor poorly secured. Interest payments
and principal security appear adequate for the present but certain protective
elements may be lacking or may be characteristically unreliable over any great
length of time. Such bonds lack outstanding investment characteristics and in
fact have speculative characteristics as well.
UNRATED: Where no rating has been assigned or where a rating has been
suspended or withdrawn, it may be for reasons unrelated to the quality of the
issue.
Should no rating be assigned, the reason may be one of the following:
1. An application for rating was not received or accepted;
2. The issue or issuer belongs to a group of securities or companies that
are not rated as a matter of policy;
3. There is a lack of essential data pertaining to the issue or issuer; or
4. The issue was privately placed, in which case the rating is not
published in Moody's publications. Suspension or withdrawal may occur if
new and material circumstances arise, the effects of which preclude
satisfactory analysis if there is no longer available reasonable up-to-
date data to permit a judgment to be formed; if a bond is called for
redemption; or for other reasons.
Moody's applies numerical modifiers, 1, 2, and 3 in each generic rating
classification from Aa through B in its corporate bond rating system. The
modifier 1 indicates that the security ranks in the higher end of its generic
rating category; the modifier 2 indicates a mid-range ranking; and the modifier
3 indicates that the issue ranks in the lower end of its generic rating
category.
Moody's ratings for state and municipal and other short-term obligations
will be designated Moody's Investment Grade ("MIG"). This distinction is in
recognition of the differences between short-term credit risk and long-term
risk. Factors affecting the liquidity of the borrower are uppermost in
importance in short-term borrowing, while various factors of the first
importance in long-term borrowing risk are of lesser importance in the short
run. Symbols used will be as follows:
MIG-1 -- Notes bearing this designation are of the best quality enjoying
strong protection from established cash flows of funds for their servicing
or from established and broad-based access to the market for refinancing, or
both.
MIG-2 -- Notes bearing this designation are of high quality, with margins of
protection ample although no so large as the preceding group.
A-1
<PAGE>
MIG-3 -- Notes bearing this designation are of favorable quality with all
security elements accounted for, but lacking the undeniable strength of the
preceding grades. Market access for refinancing, in particular, is likely to
be less well established.
A short-term rating may also be assigned on an issue having a demand
feature. Such ratings will be designated as VMIG to reflect such characteristics
as payment upon periodic demand rather than fixed maturity dates and payment
relying on external liquidity. Additionally, investors should be alert to the
fact that the source of payment may be limited to the external liquidity with no
or limited legal recourse to the issuer in the event the demand is not met
VMIG-1, VMIG-2 and VMIG-3 ratings carry the same definitions as MIG-1, MIG-2 and
MIG-3, respectively.
STANDARD & POOR'S RATINGS GROUP**
AAA: Bonds rated AAA are highest grade debt obligations. This rating
indicates an extremely strong capacity to pay principal and interest.
AA: Bonds rated AA also qualify as high-quality obligations. Capacity to
pay principal and interest is very strong, and in the majority of instances they
differ from AAA issues only in small degree.
A: Bonds rated A have a strong capacity to pay principal and interest,
although they are more susceptible to the adverse effects of changes in
circumstances and economic conditions.
BBB: Bonds rated BBB are regarded as having an adequate capacity to pay
principal and interest. Whereas they normally exhibit adequate protection
parameters, adverse economic conditions or changing circumstances are more
likely to lead to a weakened capacity to pay principal and interest for bonds in
this category than in higher rated categories.
PLUS (+) OR MINUS (-): The ratings from "AA" to "B" may be modified by the
addition of a plus or minus sign to show relative standing within the major
rating categories.
UNRATED: Indicates that no public rating has been requested, that there is
insufficient information on which to base a rating, or that S&P does not rate a
particular type of obligation as a matter of policy.
Municipal notes issued since July 29, 1984 are rated "SP-1", "SP-2", and
"SP-3". The designation SP-1 indicates a very strong capacity to pay principal
and interest. A "+" is added to those issues determined to possess overwhelming
safe characteristics. An SP-2 designation indicates a satisfactory capacity to
pay principal and interest while an SP-3 designation indicates speculative
capacity to pay principal and interest.
DESCRIPTION OF COMMERCIAL PAPER RATINGS
MOODY'S INVESTORS SERVICE, INC.
P-1: Moody's Commercial Paper ratings are opinions of the ability of
issuers to repay punctually promissory obligations not having an original
maturity in excess of nine months. The designation "Prime-1" or "P-1" indicates
the highest quality repayment capacity of the rated issue.
STANDARD & POOR'S RATINGS GROUP
A-1: Standard & Poor's Commercial Paper ratings are current assessments of
the likelihood of timely payment of debts having an original maturity of no more
than 365 days. The A-1 designation indicates the degree of safety regarding
timely payment is very strong.
- ------------------------
* The ratings indicated herein are believed to be the most recent ratings
available at the date of this Additional Statement for the securities
listed. Ratings are generally given to the securities at the time of
issuance. While the rating agencies may from time to time revise such
ratings, they undertake no obligation to do so, and the ratings indicated do
not necessarily represent ratings which will be given to these securities on
the date of the Funds' fiscal year end.
** Rates all governmental bodies having $1,000,000 or more of debt outstanding,
unless adequate information is not available.
A-2
<PAGE>
THE ONE GROUP-REGISTERED TRADEMARK-
U.S. TREASURY SECURITIES MONEY MARKET FUND
PRIME MONEY MARKET FUND
- ----------------------------------------------------------------------
Supplement Dated January 12, 1996 to
Prospectus Dated November 1, 1995
The Expense Summary on page 4 pertaining to The One Group-Registered Trademark-
U.S. Treasury Securities Money Market Fund has been revised. Please replace page
4 with this Supplement.
THE ONE GROUP-REGISTERED TRADEMARK- U.S. TREASURY SECURITIES MONEY MARKET FUND
<TABLE>
<CAPTION>
FIDUCIARY SERVICE
CLASS A CLASS CLASS
- ---------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
SHAREHOLDER TRANSACTION EXPENSES(1)......................... none none none
ANNUAL OPERATING EXPENSES(2)
(as a percentage of average daily net assets)
Investment Advisory Fees (after fee waivers)(3)............. .22% .22% .22%
12b-1 Fees (after fee waivers)(4)........................... .25% none .55%
Other Expenses.............................................. .22% .22% .22%
- ---------------------------------------------------------------------------------------------------
TOTAL OPERATING EXPENSES(5)................................. .69% .44% .99%
- ---------------------------------------------------------------------------------------------------
</TABLE>
(1) A person who purchases shares through an account with a financial
institution or broker/dealer may be charged separate transaction fees by the
financial institution or broker/dealer. In addition, a wire redemption
charge, currently $7.00, is deducted from the amount of a wire redemption
payment made at the request of a shareholder.
(2) The expense information in the table has been restated to reflect current
fees that would have been applicable had they been in effect during the
previous fiscal year.
(3) Investment Advisory Fees have been revised to reflect fee waivers effective
as of the date of this Prospectus. The Adviser may voluntarily agree to
waive a part of its fees. Absent this voluntary reduction, Investment
Advisory Fees would be .35% for all classes of shares.
(4) Absent the voluntary waiver of fees under the Trust's Distribution and
Shareholder Services Plans, 12b-1 fees (as a percentage of average daily net
assets) would be .35% for Class A shares and .75% for Service Class shares.
There are no 12b-1 fees charged to Fiduciary Class shares. The 12b-1 fees
include a shareholder servicing fee of .25% of average daily net assets of
the Fund's Class A and Service Class shares. See "The Distributor" in the
One Group Funds prospectuses accompanying this Combined Prospectus/Proxy
Statement.
(5) Total Operating Expenses have been revised to reflect waivers effective as
of the date of this Prospectus. Other Expenses are based on the Fund's
expenses during the most recent fiscal year. Absent the voluntary reduction
of Investment Advisory and 12b-1 fees, Total Operating Expenses would be
.92% for Class A shares, .57% for Fiduciary Class shares and 1.32% for
Service Class shares.
<PAGE>
EXAMPLE: An investor would pay the following expense on a $1,000 investment in
Class A, Fiduciary Class and Service Class shares of the U.S. Treasury Money
Market Fund, assuming: (1) 5% annual return; and (2) redemption at the end of
each time period.
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------------
1 YEAR 3 YEARS 5 YEARS 10 YEARS
- -----------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Class A $ 7 $ 22 $ 38 $ 86
Fiduciary Class $ 5 $ 14 $ 25 $ 55
</TABLE>
Absent the voluntary reduction of fees, the dollar amounts in the above example
would be as follows:
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------------
1 YEAR 3 YEARS 5 YEARS 10 YEARS
- -----------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Class A $ 9 $ 29 $ 51 $113
Fiduciary Class $ 6 $ 18 $ 32 $ 71
- -----------------------------------------------------------------------------------
- -----------------------------------------------------------------------------------
</TABLE>
Service Class shares are offered to investors requiring additional
administrative and/or accounting services, such as sweep processing. It is not
intended that a shareholder would remain in the Service Class for more than a
very limited period of time. However, a shareholder investing on a continual
basis in the Service Class for a period of one (1) month would pay $1, three (3)
months would pay $2, one (1) year would pay $10. Absent the voluntary fee
reduction a shareholder would pay for a period of one (1) month $1, three (3)
months $3, one (1) year $13.
THESE EXAMPLES SHOULD NOT BE CONSIDERED A REPRESENTATION OF PAST OR FUTURE
EXPENSES AND ACTUAL EXPENSES MAY BE GREATER OR LESS THAN THOSE SHOWN. The
purpose of these tables is to assist the investor in understanding the various
costs and expenses that may be directly or indirectly borne by investors in the
Trust.
Investors in the Fund ("Shareholders") who are long-term Shareholders of Class A
shares and Service Class shares may pay more than the equivalent of the maximum
front-end sales charges otherwise permitted by the National Association of
Securities Dealers' Rules.
INVESTORS SHOULD RETAIN THIS SUPPLEMENT WITH THE PROSPECTUS
FOR FUTURE REFERENCE
<PAGE>
Exhibit (17)(e)
<PAGE>
Paragon Portfolio
- -----------------------------------
Semiannual Report
- ------------------------
May 31, 1995
Paragon Treasury Money Market Fund
Paragon Short-Term Government Fund
Paragon Intermediate-Term Bond Fund
Paragon Louisiana Tax-Free Fund
Paragon Value Growth Fund
Paragon Value Equity Income Fund
Paragon Gulf South Growth Fund
Dear Shareholders:
The staff of Premier Investment Advisors, L.L.C. is pleased to report to you
on the results of operations of the Paragon Portfolio for the six months ended
May 31, 1995. In this letter, we will discuss the conditions that exist in the
economy and the stock and bond markets. Then we will explain how these
conditions have affected each of the Paragon mutual funds.
The Economy
Investors have been waiting for the "soft landing" in the U.S. economy and it
appears to be here. A good indication is the rate of employment growth, which
is settling in at 150,000-200,000 new jobs each month. This is consistent with
a 2% rate of Gross Domestic Product growth. This slower rate of growth through
the year should help keep a lid on inflation, which is running around 3% based
on consumer prices. Due to the economic environment, the Federal Reserve
("Fed") has lowered the Federal Funds Rate from 6% to 5.75%. This was the first
rate cut in three years and does not appear to be the last in 1995.
The slowing in economic activity was preordained by rising short-term and
long-term interest rates in 1994. Long-term rates approached 8.2% last
November, creating a 5% real return over inflation, which investors
eventually viewed as a major buying opportunity. Yields have since dropped
<PAGE>
below 7%. Our analysis suggests that every one percentage point drop in yields
adds a full percentage point in economic activity one year later. That means
that 1996 should exhibit stronger economic activity aided by increased domestic
and foreign demand for goods and services. With unemployment below 6% and the
nation's capacity utilization already at high levels, inflation pressure may
ensue, forcing the Fed into another round of credit tightening late next year.
The Stock Market
So far this fiscal year, the Dow Jones Industrial Average has increased 21.1%
while the broader S&P 500 Index has achieved a 19.2% return. The Russell 2000
Index, a proxy for small capitalization stocks, is up 11.7% for the same
period. International stocks, as measured by the EAFE Index, have risen 5.3%
during the last six months. Clearly, U.S. stocks have been stellar performers
so far this year. What kind of stocks have been rewarding investors? Believing
that the economy is slowing to a sustainable growth rate, investors are
attracted to stocks of well-known companies with consistent earnings patterns.
Investors also have been seeking large multinational companies with exposure to
the economic recovery in Europe.
These investment characteristics help explain why large-company stocks have
outperformed smaller stocks by a considerable margin this year.
Equities continue to be supported by a belief that the U.S. economy is
executing a soft landing. Furthermore, the end of the Fed's tightening and a
drop in bond yields below 7% are strong props under stock prices. A major
negative continues to be the low average dividend yield, but we believe this is
an indication that companies have found more productive uses for their cash.
They are expanding their businesses, buying other businesses or buying back
their own shares. These activities have helped boost share prices to record
levels.
Fixed Income Market
So far this fiscal year, bonds have rallied strongly as short- and long-term
rates have plummeted. The Lehman Brothers Aggregate Bond Index has earned a
nonannualized total return of 11.4% during the last six months. This index
measures the performance of the bond market as a whole, both short- and
long-term maturities. Even the Lehman Brothers 1-3 year Government Index, a
high-quality short-term index, achieved impressive results of 6.2%,
nonannualized. Municipal bonds also rallied during the period, but to a lesser
degree. Proposals emanating from Washington concerning overhauling the nation's
tax system through a flat tax or a national sales tax spooked the muni market.
Such proposals, if enacted, would make municipal bonds much less attractive to
investors. We will watch the progress of these tax reform proposals.
Our longer term view of the bond market remains
positive.
Summary
The rise in short-term rates since February 1994 has had its desired affect
of slowing economic activity. Stock valuations appear high with the S&P 500
price to earnings (based on 1995 earnings projections) ratio at nearly 16
times, but when compared with interest rates and inflation stocks appear
slightly undervalued. Demand for U.S. securities from domestic investors
<PAGE>
appears strong, yet sentiment does not seem alarmingly high. Demand from
foreign investors could rise once the dollar stabilizes. Though a 5%-10%
technical correction could occur, the trend in U.S. stock prices for 1995
appears to be upward.
With this overview of the economy and financial markets, let us turn to the
events that shaped each Fund's results for the period.
PARAGON PORTFOLIO
LETTER TO SHAREHOLDERS
Paragon Short-Term Government Fund
For the six months ended May 31, 1995, the Class A shares of the Fund
achieved a total return of 5.6% based on net asset value ("NAV"). This compares
with the Lipper Short U.S. Government Fund average of 6.4% and the Lehman
Brothers Mutual Fund Short (1-3) Government Index return of 6.2% for the same
period. Class B shares of the Fund recorded a total return of 5.2% based on NAV
for the six months ended May 31, 1995.
The Fund underperformed these benchmarks due to its large holdings in
floating rate securities. These securities served the Fund well in 1994, but
produce a lower total return than comparable fixed rate securities when
interest rates decline. All the floating rate securities except those tied to
the prime rate were sold in May. We anticipate selling the prime-based floaters
and moving into longer fixed rate securities soon. The amount of callable bonds
in the portfolio has also been reduced since these bonds tend to lag behind
fixed rate securities in total return as well.
The portfolio should benefit should the anticipated decline in interest rates
continue.
Paragon Intermediate-Term Bond Fund
For the six months ended May 31, 1995, the Class A shares of the Fund
achieved a total return of 11.6% based on NAV. This compares with the Lipper
Intermediate U.S. Government Fund average of 9.5% and the Lehman Brothers
Intermediate Government/Corporate Index return of 9.2% for the same time
period. Class B shares of the Fund recorded a total return of 11.3% based on
NAV for the six months ended May 31, 1995.
Several changes have been made in the portfolio to further enhance the total
return should interest rates continue to move downward. The first was to
replace the majority of the callable issues with similar fixed rate securities
that will perform better in the current market environment. The other
significant change is in the mortgage-backed sector where CMO PAC securities
are being replaced with conventional pass-through pools. This change is due to
inefficiency in the current CMO market and the ability of the pools to more
closely track the returns of their corresponding Treasury bonds along the yield
curve.
<PAGE>
Paragon Louisiana Tax-Free Fund
For the six months ended May 31, 1995, the Class A shares of the Fund
achieved a total return of 8.6% based on NAV. This compares with the Lipper
Intermediate Municipal Debt Fund Average of 9.3% and the Lehman Brothers 7-Year
Municipal Bond Index return of 10.0% for
the same time period. Class B shares of the Fund recorded a total return of
8.4% based on NAV for the six months ended May 31, 1995.
Lingering problems concerning state funding of Medicaid, as well as continued
rising budget demands, dampened the performance of the returns in the Louisiana
market, compared with the returns in the national market. In an effort to react
to these pressures, we reduced the Fund's exposure to uninsured hospital debt.
The credits remaining are insured issues of the predominately large hospitals
located in Louisiana's larger population centers. We also reduced the holdings
of uninsured Louisiana State general obligation debt and replaced it with new
insured state general obligation debt that was issued in the first quarter of
1995.
As interest rates decline, refunding of municipal debt should increase,
providing pockets of opportunities for purchasing portfolio securities in the
second half of the year. Current levels of duration and average maturity should
help reduce volatility of the Fund's NAV should concerns continue in the
Louisiana bond market.
Paragon Value Growth Fund
During the six-month period ended May 31, 1995, the Paragon Value Growth Fund
Class A shares achieved a total return of 12.9% based on NAV, while the S&P 500
Index ("S&P 500") earned a total return of 19.2%. The Lipper Growth & Income
Mutual Fund Index total return for the same period was 15.4%. Class B shares of
the Fund recorded a total return of 12.6% based on NAV for the six months ended
May 31, 1995.
We can cite several factors that contributed to the Fund's return trailing
that of the S&P 500. First of all, the Fund's median market capitalization as
of March 31, 1995 (the most recent data available) was $8.9 billion, compared wi
th the S&P 500 median market capitalization of $14.2 billion. As stated
previously in this letter, market capitalization has been strongly correlated
with investment results in 1995. In addition, the Fund held underweighted
positions in some market sectors that experienced strong price gains, causing
the Fund's return to lag behind the index. These include the capital equipment
and services sector, the consumer noncyclical sector and the financial sector.
We will discuss some of these sectors in more detail shortly.
The consumer cyclical sector, which was slightly overweighted in the Fund
versus the S&P 500, underperformed the index. In addition, the Fund's specific
holdings in this group did worse than the sector as a whole. Since this sector
made up over 16% of net assets, there was a noticeable effect on investment
results.
PARAGON PORTFOLIO
LETTER TO SHAREHOLDERS-(Continued)
2
Several decisions made during the period benefitted the Fund's performance.
Though we were incorrect in underweighting the capital equipment and services
sector, the stock selection in this group showed excellent results. The average
return for the period was over 29% for these stocks, which included General
Electric, W.W. Grainger, Johnson Controls and Allied Signal. Similarly, in the
financial sector, the Fund's holdings performed quite well. Top-performing
stocks included First American Corp. of Tennessee (up approximately 26%) and
Federal National Mortgage Association (up approximately 31%).
In the technology sector, the top-performing group in the market during the
period, we correctly moved to an overweighted position with purchases of Xerox
Corp., General Instrument Corp. and, near the very end of the reporting period,
Vishay Intertechnology, Inc. Including two convertible issues (Avnet, Inc. and
Corning Delaware LP) whose underlying common shares are technology-related, the
Fund's weighting in technology was near 19% on May 31, 1995. This is well above
the S&P 500 weighting of 11.5%. The stock selection proved successful as well.
Certainly, the shares of Intel Corp. and Texas Instruments, Inc. contributed
largely to this success.
The ten largest holdings as of May 31, 1995 are listed
below.
<TABLE>
<CAPTION>
Price
Percent of Appreciation
Security Net Assets (Depreciation)*
- ----------------------- ---------- ---------------
<S> <C> <C>
Intel Corp. 4.9% 77.8%
Texas Instruments, Inc. 3.9 53.1
Home Depot, Inc. 3.5 (10.0)
Amoco Corp. 3.5 12.3
Dow Chemical Co. 3.4 14.4
WorldCom, Inc. 3.3 29.2
AT & T Corp. 3.1 3.3
United Healthcare Corp. 2.9 (21.8)
Enron Corp. 2.8 35.2
Chrysler Corp. 2.7 (10.1)
</TABLE>
* For the period from the latter of December 1, 1994, or the purchase date, to
May 31, 1995.
The Fund's performance has been disappointing during the first half of this
fiscal year, due largely to its investment style being out of sync with the
stock market. When the leadership in the market broadens to include
medium-capitalization stocks that are used a great deal in the Paragon Value
Growth Fund, investment results should become more competitive.
Paragon Value Equity Income Fund
For the six months ended May 31, 1995, the Class A shares of the Fund
achieved a total return of 17.2% based
on NAV, compared with the S&P 500 return of 19.2% and the Lipper Equity Income
Fund Index return of 14.4%. The Class B shares recorded a total return of 16.7%
based on NAV for the same six-month period. We believe the Fund trailed the
<PAGE>
performance of the S&P 500 for the following reasons: (1) Market capitalization
was strongly correlated with returns during the period. The Fund's average
market capitalization is less than the S&P 500. (2) The Fund maintained an
underweighted position in the financial sector, which outperformed the S&P 500
during the last six months. (3) The Fund held a 6% weighting in convertible
bonds, which performed positively, but lagged behind the S&P 500 returns.
A number of changes were made in the Fund during the reporting period.
Consumer cyclical stocks were reduced from 14% to 9% of net assets due to the
sale of shares in Consolidated Stores Corp., a close-out retailing company, at
a gain of 59%. General Motors Corp. shares were sold at a 31% loss, while
Whirlpool Corp. common shares were sold at a 43% capital gain. We reduced the
Fund's exposure to discretionary consumer spending, which has been slowing in
1995. We remain underweighted in this sector, which makes up 15% of the S&P
500.
The consumer noncyclical stocks were increased from 12% to 18% of net assets.
We moved closer to the S&P 500 weighting of 21% in this sector. As the economy
shows signs of slowing, these stocks should exhibit good relative performance.
Johnson & Johnson shares were sold at a 41% profit, and the proceeds were used
to purchase Baxter International, Inc., another hospital supply stock. We added
to the holdings of Bristol-Myers Squibb Co., a pharmaceutical manufacturer, and
also purchased shares of Columbia/HCA Healthcare Corp., the nation's largest
private acute-care hospital management company. Finally, we added to our
position in Premark International, Inc., bringing the Fund's weighting in this
security to approximately 3% of net assets. The consumer noncyclical stocks in
the Fund performed nearly as well as the S&P 500 during the period, rising an
average of 16%.
The technology sector experienced significant change during the period. The
Fund's weighting in this sector grew from 8% to 11% of net assets, with most of
this gain arising from price appreciation. Shares of IBM Corp. were purchased du
ring the period in an effort to increase exposure in this sector. We are
continually searching for stocks with valuation measures which suit the Fund's
investment criteria; however, these stocks are increasingly rare. IBM Corp. is
one security that now meets the Fund's criteria for purchase. The Fund's
holdings in technology achieved returns averaging 30% in the year's first half.
Shareholders
PARAGON PORTFOLIO
LETTER TO SHAREHOLDERS-(Continued)
3
<PAGE>
benefitted from an overweighted position in this sector which has been the
market leader in the current rally.
The Fund's six-month performance was positively affected by healthy gains in
the Fund's top ten stock holdings. The following table lists the Fund's ten
largest positions as of May 31, 1995.
<TABLE>
<CAPTION>
Percent of Price
Security Net Assets Appreciation*
- --------------------------------- ---------- -------------
<PAGE>
<S> <C> <C>
Mobil Corp. 3.8% 16.7%
Lockheed Martin Corp. 3.5 33.8
Citicorp Convertible Preferred 3.2 30.0
Raytheon Co. 3.2 23.3
Dow Chemical Co. 3.1 14.4
Philip Morris Companies, Inc. 3.1 21.9
DuPont (E.I.) de Nemours & Co. 3.1 26.0
Premark International, Inc. 3.0 9.6
IBP, Inc. 3.0 11.5
Ford Motor Co. Preferred A 2.9 8.4
</TABLE>
* For the period from the latter of December 1, 1994 or the purchase date, to
May 31, 1995.
Paragon Gulf South Growth Fund
For the six months ended May 31, 1995, the Class A shares of the Fund
achieved a total return of 11.4% based on NAV, compared with the Russell 2000
Index return of 11.7%. The S&P 500 Index returned 19.2% for the same period. An
appropriate peer group index for this Fund is the Lipper Small Company Growth
Fund Index, which rose 11.2% during the six month period. Class B shares of the
Fund recorded a total return of 11.0% based on NAV for the six months ended May
31, 1995.
We believe the reason for the Fund's lagging performance versus the S&P 500
Index is the unusually strong correlation between market capitalization and
investment results in 1995. The S&P 500, having a much larger average ca
pitalization than the Fund, experienced greater returns. Note that the S&P 500
also substantially outperformed the other small-capitalization indices listed
above.
The fact that the Fund achieved results similar to the Lipper Small Company
Growth Fund Index ("Lipper Small Company Index") for the six months ended May
31, 1995, hides the substantial volatility relative to this index that occurred
during this period. The Fund performed relatively well during the period from
November 30, 1994 through February 28, 1995. A performance advantage over the
Lipper Small Company Index of approximately 480 basis points was achieved
during these months. Then
during March 1995, much of this lead was given up as the Fund remained flat,
while the Lipper Small Company Index rose 2.7%. The first two weeks of April
were positive, as the Fund gained 2%, while the Lipper Small Company Index ga
ined 1.1%. Then on April 14, the Fund experienced a setback when the value of
its holdings in Health Maintenance Organization ("HMO") stocks dropped
precipitously due to some negative developments that affected a north central
U.S. HMO, but that worried investors in all HMO stocks. The Gulf South Growth
Fund's holdings in this industry include Coastal Healthcare, Coventry
Corporation and HealthWise of America, Inc. During the last two weeks of April,
the Fund declined over 3%, while the Lipper Small Company Index rose slightly
less than 1%. We are encouraged to see that since then, the Fund has regained
the ground lost in April with a return of 2.61% in May, approximately 1% more
than its comparative index. The gain has been fairly broad-based, with numerous
issues contributing.
Sectors that positively affected the Fund's results during the first six
months of the fiscal year include the energy sector, which made up about 7.9%
<PAGE>
of net assets as of May 31, 1995. Within this group of stocks we sold two oil
service companies, American Oilfield Divers and Global Industries, while adding
a small exploration and production company, Benton Oil & Gas Co. The energy
group exhibited an average return of 43%, due to a large gain in the price of
Input/Output, Inc., which is the largest holding in the group and the Fund's
fifth largest holding.
Financial stocks, which make up over 21% of net assets as of May 31, 1995,
also performed well, achieving an average return of 49%. Stocks appreciating
strongly include United Companies Financial Corp., Medaphis Corp. and Regional
Acceptance Corp. Some sales were made in this group to recognize substantial
profits. Coral Gables Fedcorp was sold following an announced buy-out of the
company. PMT Services, a payment services company, was bought and sold during
the period for a gain of 50.9%.
Holdings that negatively affected the period's results include some natural
resources/basic materials issues such as Georgia Gulf Corp., Nucor Corp. and
Image Industries, Inc. Industry conditions in which these companies operate
were responsible for these declines. We believe the outlook for these companies
remains promising.
Consumer cyclical issues showed the worst performance of any group of stocks
held in the Fund. A combination of factors involving slowing consumer spending
on discretionary and big-ticket items seems to have weakened the demand for
these stocks. However, we doubt this situation will last long.
PARAGON PORTFOLIO
LETTER TO SHAREHOLDERS-(Continued)
4
The Fund's ten largest holdings are listed below.
<TABLE>
<CAPTION>
Price
Percent of Appreciation
Security Net Assets (Depreciation)*
- ------------------------------------- ---------- ---------------
<S> <C> <C>
Medaphis Corp. 5.5% 53.5%
WorldCom, Inc. 5.3 29.2
First Financial Management
Corp. 4.4 20.6
United Companies Financial
Corp. 3.9 60.9
Input/Output, Inc. 3.8 75.5
Office Depot, Inc. 3.7 1.1
Atlantic Southeast Airlines, Inc. 3.3 58.2
Autozone, Inc. 3.2 (9.3)
Coventry Corp. 2.9 (17.5)
Stewart Enterprises, Inc. 2.9 26.3
</TABLE>
* For the period from the latter of December 1, 1994, or the purchase date, to
May 31, 1995.
<PAGE>
We are generally pleased with the Fund's progress this year, though it is
obvious that we must await the return to favor of small-capitalization stocks
before the Gulf South Growth Fund can truly shine.
In conclusion, we appreciate your support and look forward to helping you
meet your investment objectives.
Donald E. Allred
President & Chief Investment Officer
Premier Investment Advisors, L.L.C.
July 7, 1995
PARAGON PORTFOLIO
LETTER TO SHAREHOLDERS-(Continued)
5
<PAGE>
<TABLE>
<CAPTION>
Principal Interest Maturity Amortized
Amount Rate Date Cost
- ------------ -------- -------- ------------
<S> <C> <C> <C>
U.S. Treasury Obligations-7.9%
United States Treasury Bill
$ 25,000,000 5.61% 11/24/95 $ 24,314,333
------------
Repurchase Agreements-92.4%
C.S. First Boston Corp., dated 03/20/95,
repurchase price $35,535,257
(U.S. Treasury Note: $35,265,000,
6.75%, 05/31/99)
$ 35,000,000 6.05% 06/19/95 $ 35,000,000
Merrill Lynch Government Securities, Inc.,
dated 05/12/95, repurchase price
$15,188,417 (U.S. Treasury Notes:
$15,245,000, 4.25%, 05/15/96;
$310,000, 7.88%, 01/15/98)
15,000,000 5.95 07/27/95 15,000,000
Morgan Stanley & Company, Inc.,
dated 05/17/95, repurchase price
$10,150,403 (U.S. Treasury Note:
$10,580,000, 4.75%, 08/31/98)
10,000,000 5.95 08/16/95 10,000,000
</TABLE>
<TABLE>
<CAPTION>
Principal Interest Maturity Amortized
Amount Rate Date Cost
- ------------ -------- -------- ------------------
<S> <C> <C> <C>
Repurchase Agreements-Continued
Swiss Bank Corp. Government Securities,
dated 05/05/95, repurchase price
$10,149,000 (U.S. Treasury Note:
$9,725,000, 7.50%, 12/31/96)
$ 10,000,000 5.96% 08/03/95 $10,000,000
Joint Repurchase Agreement Account
215,200,000 6.15 06/01/95 215,200,000
------------------
Total Repurchase
Agreements.................... $285,200,000
------------------
Total Investments............. $309,514,333(a)
------------------
------------------
</TABLE>
- -------------------------------------------------
(a) The cost stated also represents aggregate cost for federal income tax
purposes.
The percentage shown for each investment category reflects the value of
investments in that category as a percentage of total net assets.
PARAGON PORTFOLIO
STATEMENT OF INVESTMENTS
<PAGE>
PARAGON TREASURY MONEY MARKET FUND
May 31, 1995
(Unaudited)
The accompanying notes are an integral part of these financial statements.
6
<PAGE>
<TABLE>
<CAPTION>
Principal Interest Maturity
Amount Rate Date Value
- ----------- ---------- -------- ------------
<S> <C> <C> <C>
U.S. Treasury Obligations-51.2%
United States Treasury Notes
$ 7,000,000 5.13% 11/15/95 $ 6,977,950
5,500,000 6.25 01/31/97 5,533,880
6,000,000 6.88 04/30/97 6,107,220
3,000,000 6.38 06/30/97 3,030,240
10,000,000 5.75 10/31/97 9,963,800
3,000,000 7.38 11/15/97 3,098,280
9,000,000 6.00 11/30/97 9,016,380
5,000,000 5.13 03/31/98 4,893,450
1,500,000 5.13 04/30/98 1,466,865
9,000,000 5.13 06/30/98 8,788,320
5,000,000 6.38 01/15/99 5,058,150
3,000,000 6.25 05/31/00 3,022,380
------------
Total U.S. Treasury
Obligations
(cost $67,705,964)............. $ 66,956,915
------------
U.S. Government Agency Obligations-42.4%
Federal Farm Credit Bank
$ 1,735,000 5.31% 05/26/98 $ 1,697,611
Federal Home Loan Bank
2,100,000 5.38 11/27/95 2,098,803
2,000,000 6.85 02/25/97 2,026,020
4,000,000 6.60 04/13/99 4,027,960
5,000,000 7.14 05/20/99 5,089,300
Federal National Mortgage Assn.
22,000,000 6.37(a) 01/26/96 22,014,300
5,000,000 8.45 10/21/96 5,164,400
1,500,000 7.05 03/10/97 1,500,000
3,000,000 7.00 04/10/97 3,000,000
3,000,000 5.35 10/10/97 2,943,300
2,000,000 5.30 03/11/98 1,948,560
4,000,000 5.35 04/01/98 3,902,400
------------
Total U.S. Government
Agency Obligations
(cost $55,507,400)............. $ 55,412,654
------------
</TABLE>
<TABLE>
<CAPTION>
Principal Interest Maturity
<PAGE>
Amount Rate Date Value
- ----------- -------- -------- -------------
<S> <C> <C> <C>
Repurchase Agreements-6.2%
State Street Bank & Trust Company,
dated 05/31/95, repurchase price
$8,066,232 (U.S. Treasury Note:
$8,040,000, 6.63%, 03/31/97)
$ 8,065,000 5.50% 06/01/95 $ 8,065,000
-------------
Total Repurchase
Agreements
(cost $8,065,000)............ $ 8,065,000
-------------
Total Investments
(cost $131,278,364(b))....... $130,434,569
-------------
-------------
- -------------------------------------------
Federal Income Tax Information:
Gross unrealized gain for
investments in which value
exceeds cost................. $504,216
Gross unrealized loss for
investments in which cost
exceeds value................ (1,348,011)
-------------
Net unrealized loss.......... $(843,795)
-------------
-------------
</TABLE>
- -------------------------------------------
(a) Variable rate security. Coupon rate disclosed is that which is in effect at
May 31, 1995.
(b) The cost stated also represents aggregate cost for federal income tax
purposes.
The percentage shown for each investment category reflects the value of
investments in that category as a percentage of total net assets.
PARAGON PORTFOLIO
STATEMENT OF INVESTMENTS
PARAGON SHORT-TERM GOVERNMENT FUND
May 31, 1995
(Unaudited)
The accompanying notes are an integral part of these financial statements.
7
<PAGE>
<TABLE>
<CAPTION>
Principal Interest Maturity
Amount Rate Date Value
- ----------- -------- -------- ------------
<S> <C> <C> <C>
U.S. Treasury Obligations-23.2%
United States Treasury Bonds
$ 6,000,000 8.38% 08/15/00 $ 6,039,300
8,000,000 8.25 05/15/05 8,639,200
10,000,000 8.38 08/15/08 11,224,100
United States Treasury Notes
500,000 9.25 01/15/96 510,055
4,000,000 8.88 02/15/96 4,081,560
5,000,000 6.00 12/31/97 5,009,100
10,000,000 9.00 05/15/98 10,815,000
1,000,000 8.88 11/15/98 1,088,150
3,400,000 8.88 02/15/99 3,717,594
4,000,000 9.13 05/15/99 4,431,200
2,600,000 6.38 07/15/99 2,631,382
3,000,000 5.50 04/15/00 2,934,060
12,000,000 6.25 02/15/03 11,983,680
------------
Total U.S. Treasury
Obligations
(cost $71,254,335)........... $ 73,104,381
------------
U.S. Government Agency Obligations-32.3%
Federal Farm Credit Bank
$ 5,000,000 6.88% 05/01/00 $5,057,600
2,000,000 7.95 04/01/02 2,121,260
Federal Home Loan Bank
2,000,000 9.25 11/25/98 2,176,720
2,000,000 9.30 01/25/99 2,174,340
3,000,000 8.60 06/25/99 3,245,760
5,000,000 6.27 01/14/04 4,832,000
Federal Home Loan Mortgage Corp.
2,000,000 6.44 01/28/00 2,016,440
3,000,000 7.88 04/28/04 3,114,390
5,000,000 7.89 05/12/04 5,174,800
2,017,800 7.00 01/15/08 1,972,258
Federal National Mortgage Assn.
1,000,000 9.35 02/12/96 1,023,890
2,000,000 9.20 06/10/97 2,118,320
2,000,000 8.80 07/25/97 2,107,820
4,000,000 8.70 06/10/99 4,341,840
3,000,000 8.90 06/12/00 3,342,990
3,000,000 8.70 06/11/01 3,066,270
2,000,000 7.90 04/10/02 2,076,320
3,000,000 6.20 11/12/03 2,889,300
2,820,000 8.05 05/20/04 2,944,362
</TABLE>
<TABLE>
<CAPTION>
Principal Interest Maturity
Amount Rate Date Value
- ------------- ---------- --------- -------------
<S> <C> <C> <C>
U.S. Government Agency Obligations-Continued
Federal National Mortgage Assn.-Continued
$15,000,000 7.16% 05/11/05 $15,641,400
5,870,257 7.00 06/01/10 5,098,437
5,000,000 7.00 04/01/08 5,909,411
4,934,642 7.50 05/01/25 4,962,424
5,000,000 7.50 06/01/25 5,015,650
5,000,000 7.50 06/13/25 5,015,650
Student Loan Marketing Assn.
2,000,000 8.27 12/15/99 2,128,980
2,500,000 5.65 12/01/00 2,416,450
-------------
Total U.S. Government
Agency Obligations
(cost $100,359,158)............... $101,985,082
-------------
Collateralized Mortgage Obligations (CMOs)-15.9%
Federal National Mortgage Assn.
REMIC Trust 1992-135, Class L
$ 3,225,000 7.50% 09/25/07 $ 3,338,746
Federal National Mortgage Assn.
REMIC Trust 1992-205, Class K
5,584,000 6.50 05/25/21 5,372,087
Federal National Mortgage Assn.
REMIC Trust 1993-56, Class PT
6,901,000 6.60 02/25/21 6,705,840
Federal National Mortgage Assn.
REMIC Trust 1993-87, Class H
3,597,000 6.50 10/25/21 3,470,637
Federal National Mortgage Assn.
REMIC Trust 1993-110, Class H
5,000,000 6.50 05/25/23 4,823,800
Federal National Mortgage Assn.
REMIC Trust 1993-175, Class PG
7,875,000 6.50 09/25/08 7,564,253
Federal National Mortgage Assn.
REMIC Trust 1993-183, Class H
5,000,000 6.50 03/25/22 4,821,100
Federal National Mortgage Assn.
REMIC Trust 1993-225, Class VG
3,595,500 6.35 08/25/13 3,427,878
GS Trust 8 Series C, Class 6
10,000,000 8.50 02/20/21 10,617,800
-------------
Total CMOs
(cost $50,976,876)................ $ 50,142,141
-------------
</TABLE>
PARAGON PORTFOLIO
STATEMENT OF INVESTMENTS
PARAGON INTERMEDIATE-TERM BOND FUND
May 31, 1995
(Unaudited)
The accompanying notes are an integral part of these financial statements.
8
<PAGE>
<TABLE>
<CAPTION>
Principal Interest Maturity
Amount Rate Date Value
- ---------- -------- -------- -----------
<S> <C> <C> <C>
Corporate Obligations-22.8%
BASIC MATERIALS & NATURAL RESOURCES-0.9%
Monsanto Co.
$3,000,000 6.00% 07/01/00 $ 2,945,640
-----------
CONSUMER CYCLICAL-2.4%
Dayton Hudson Corp.
1,250,000 7.25 09/01/04 1,282,112
Dillard Department Stores, Inc.
2,000,000 8.75 06/15/98 2,123,300
Wal-Mart Stores, Inc.
4,000,000 7.50 05/15/04 4,213,320
-----------
7,618,732
-----------
CONSUMER NONCYCLICAL-2.3%
Baxter International Inc.
2,000,000 7.25 02/15/08 2,034,600
Coca Cola Enterprises, Inc.
2,000,000 7.00 11/15/99 2,030,600
Philip Morris Co., Inc.
1,000,000 9.00 01/01/01 1,102,830
2,000,000 7.13 08/15/02 2,012,000
-----------
7,180,030
-----------
FINANCIAL-15.6%
AmSouth Bancorporation
1,900,000 9.38 05/01/99 2,066,611
Aon Corp.
2,000,000 6.70 06/15/03 1,974,240
Banc One Corp.
1,000,000 8.74 09/15/03 1,111,170
Bear Stearns Companies, Inc.
5,000,000 8.25 02/01/02 5,306,350
Boatmen's Bancshares, Inc.
5,000,000 7.63 10/01/04 5,206,650
Capital Holding Corp.
2,000,000 8.90 10/20/99 2,161,760
1,000,000 8.98 09/23/03 1,101,770
2,850,000 7.82 06/23/04 2,952,942
</TABLE>
<TABLE>
<CAPTION>
Principal Interest Maturity
Amount Rate Date Value
- ---------- ---------- -------- -----------
<S> <C> <C> <C>
Corporate Obligations-Continued
FINANCIAL-Continued
Comerica, Inc.
$2,990,000 7.25% 10/15/02 $3,086,069
Ford Motor Credit Corp.
2,000,000 9.38 12/15/97 2,140,580
General Electric Capital Corp.
2,000,000 8.65(a) 05/01/18 2,047,740
Harris Bancorp. Inc.
1,000,000 9.38 06/01/01 1,135,740
International Lease Finance Corp.
3,000,000 6.50 08/15/99 2,989,950
Merrill Lynch & Co., Inc.
3,000,000 8.00 02/01/02 3,160,800
1,000,000 8.23 04/30/02 1,069,120
Morgan Stanley Group, Inc.
2,000,000 9.38 06/15/01 2,232,380
NationsBank Corp.
3,000,000 9.50 06/01/04 3,494,010
Sovran Financial Corp.
1,500,000 9.25 06/15/06 1,759,455
SunTrust Banks, Inc.
2,000,000 8.88 02/01/98 2,129,360
Wachovia Corp.
2,000,000 6.38 04/15/03 1,960,940
-----------
49,087,637
-----------
TECHNOLOGY-0.6%
Motorola, Inc.
2,000,000 6.50 03/01/08 1,930,940
-----------
UTILITIES-1.0%
Alltel Corp.
3,000,000 7.25 04/01/04 3,056,580
-----------
Total Corporate
Obligations
(cost $69,205,053)............ $71,819,559
-----------
</TABLE>
PARAGON PORTFOLIO
STATEMENT OF INVESTMENTS
PARAGON INTERMEDIATE-TERM BOND FUND-(Continued)
May 31, 1995
(Unaudited)
The accompanying notes are an integral part of these financial statements.
9
<PAGE>
<TABLE>
<CAPTION>
Principal Interest Maturity
Amount Rate Date Value
- ----------- -------- -------- ------------
<S> <C> <C> <C>
Repurchase Agreements-9.9%
State Street Bank & Trust Company,
dated 05/31/95, repurchase price
$31,154,759 (U.S. Treasury Note:
$31,045,000, 6.63%, 03/31/97)
$31,150,000 5.50% 06/01/95 $31,150,000
------------
Total Repurchase
Agreements
(cost $31,150,000)........... $31,150,000
------------
Total Investments
(cost $322,945,422(b))....... $328,201,163
------------
------------
- -------------------------------------------------------------------------------
Federal Income Tax Information:
Gross unrealized gain for investments
in which value exceeds cost.......... $8,612,855
Gross unrealized loss for investments
in which cost exceeds value.......... (3,357,114)
-------------
Net unrealized gain.................. $5,255,741
-------------
-------------
</TABLE>
- ---------------------------------------------------
(a) Variable rate security. Coupon rate disclosed is that which is in effect at
May 31, 1995.
(b) The cost stated also represents aggregate cost for federal income tax
purposes.
The percentage shown for each investment category reflects the value of
investments in that category as a percentage of total net assets.
PARAGON PORTFOLIO
STATEMENT OF INVESTMENTS
PARAGON INTERMEDIATE-TERM BOND FUND-(Continued)
May 31, 1995
(Unaudited)
The accompanying notes are an integral part of these financial statements.
10
<PAGE>
<TABLE>
<CAPTION>
Principal Interest Maturity
Amount Rate Date Value
- ----------- -------- -------- ------------
<S> <C> <C> <C>
Louisiana Municipal Bond Obligations-97.0%
GENERAL OBLIGATIONS-31.0%
Caddo Parish (MBIA)
$200,000 7.10% 02/01/00 $214,456
550,000 7.20 02/01/01 589,672
300,000 7.20 02/01/02 321,123
1,415,000 5.25 02/01/06 1,410,217
Caddo Parish School District (MBIA)
750,000 5.00 03/01/03 745,215
Calcasieu Parish School District (BIG)
500,000 7.10 02/01/01 532,705
De Soto Parish School District
120,000 8.00 08/01/05 133,928
1,070,000 5.30 10/01/05 1,040,404
1,245,000 5.60 10/01/06 1,208,796
Jefferson Parish (FGIC)
500,000 7.10 09/01/97 525,540
500,000 7.40 09/01/99 528,145
250,000 7.70 09/01/02 264,825
Jefferson Parish Construction Waterworks
District #2
400,000 7.25 01/15/00 401,032
LA State
6,160,000 7.00 08/01/02 6,543,090
675,000 7.00 08/01/03 714,555
LA State (FSA)
2,750,000 7.10 09/01/03 3,064,545
LA State (MBIA)
6,290,000 6.00 05/15/99 6,585,253
Lafayette Parish (FGIC)
1,000,000 7.80 03/01/01 1,089,140
Lafourche Parish Water District #3
650,000 5.63 01/01/01 668,369
Lincoln Parish School District (MBIA)
500,000 6.20 03/01/03 525,490
1,465,000 6.40 03/01/05 1,539,217
Monroe Parish School District (FGIC)
1,230,000 5.35 03/01/05 1,230,517
1,320,000 5.35 03/01/06 1,315,512
Monroe Parish School District (MBIA)
1,220,000 8.00 03/01/01 1,393,374
1,300,000 7.00 03/01/02 1,435,109
1,390,000 7.00 03/01/03 1,547,765
Ouachita Parish West School District
Refunding Series A (FSA)
2,000,000 6.50 03/01/03 2,154,140
1,000,000 6.60 03/01/04 1,079,380
</TABLE>
<TABLE>
<CAPTION>
Principal Interest Maturity
Amount Rate Date Value
- ------------ ---------- -------- ------------
<S> <C> <C> <C>
Louisiana Municipal Bond Obligations-Continued
GENERAL OBLIGATIONS-Continued
Ouachita Parish West School District
Refunding Series A (FSA)-Continued
$ 2,695,000 6.65% 03/01/05 $2,901,599
1,655,000 6.70 03/01/06 1,777,387
Plaquemines Parish (AMBAC)
1,440,000 6.40 08/01/04 1,546,445
Rapides Parish (MBIA)
500,000 7.25 04/01/00 540,220
Rapides Parish School District #11 (FGIC)
670,000 6.90 02/01/01 718,776
1,475,000 6.95 02/01/02 1,582,247
Shreveport
880,000 4.25 12/01/03 825,009
930,000 4.25 12/01/04 862,017
480,000 5.90 02/01/07 493,934
Shreveport (AMBAC)
480,000 6.20 03/01/02 504,470
500,000 6.70 02/01/03 531,240
St. Charles School District #1 (AMBAC)
1,000,000 6.25 03/01/04 1,058,740
2,350,000 6.45 03/01/06 2,473,493
St. John Baptist Parish School District
605,000 4.90 03/01/06 566,649
500,000 5.10 03/01/08 478,980
St. John Baptist Parish School District #1
870,000 6.25 03/01/05 910,107
695,000 5.20 03/01/09 649,081
St. Landry Parish School District #1 (MBIA)
1,000,000 8.00 05/01/98 1,082,500
750,000 6.10 05/01/07 770,108
St. Tammany Parish (FGIC)
300,000 7.40 03/01/98 318,855
620,000 6.70 04/01/98 660,548
------------
Total General
Obligations..................... 60,053,919
------------
HEALTH CARE REVENUE-14.3%
LA Public Facilities Authority Alton Ochsner
Medical Foundation 92-A (MBIA)
2,280,000 6.30 05/15/04 2,460,439
LA Public Facilities Authority General Health
(MBIA)
2,820,000 5.55 11/01/04 2,905,897
LA Public Facilities Authority Health and
Education
1,765,000 7.30(a) 12/01/15 1,848,873
</TABLE>
PARAGON PORTFOLIO
STATEMENT OF INVESTMENTS
PARAGON LOUISIANA TAX-FREE FUND
May 31, 1995
(Unaudited)
The accompanying notes are an integral part of these financial statements.
11
<PAGE>
<TABLE>
<CAPTION>
Principal Interest Maturity
Amount Rate Date Value
- ----------- ---------------- -------- ------------
<S> <C> <C> <C>
Louisiana Municipal Bond Obligations-Continued
HEALTH CARE REVENUE-Continued
LA Public Facilities Authority Health
and Education Series B
$ 3,825,000 7.30%(a) 12/01/15 $3,941,050
LA Public Facilities Authority Lafayette
Medical Center (FSA)
1,000,000 6.05 10/01/04 1,068,420
LA Public Facilities Authority Mary Bird
Perkins Cancer Center (FSA)
1,135,000 5.50 01/01/04 1,160,765
LA Public Facilities Authority Our Lady of
Lake Hospital (MBIA)
500,000 5.70 12/01/04 521,570
LA Public Facilities Authority St. Francis
Medical Center (FSA)
1,385,000 4.80 07/01/04 1,341,622
870,000 4.90 07/01/05 845,301
LA Public Facilities Authority Woman's Hospital
1,235,000 6.85 10/01/05 1,291,724
LA Public Facilities Authority Woman's
Hospital (FGIC)
500,000 7.20 10/01/97 531,035
730,000 5.40 10/01/05 742,906
1,715,000 5.50 10/01/06 1,747,482
Lafourche Parish Hospital District #3
525,000 5.50 10/01/04 504,452
Ouachita Parish Glenwood Hospital
2,525,000 7.50 07/01/06 2,809,239
St. Tammany Hospital District #1 (FGIC)
1,815,000 6.30 07/01/07 1,890,903
Terrebonne Parish Hospital Service #1 (BIG)
1,285,000 7.40 04/01/03 1,396,178
Vermilion Parish Hospital (MBIA)
555,000 6.35 05/01/00 595,193
------------
Total Health Care
Revenue.............................. 27,603,049
------------
HIGHER EDUCATION-5.3%
LA Public Facilities Authority Loyola
University
500,000 9.00 10/01/95 507,420
500,000 7.20 10/01/00 552,925
1,960,000 6.60 04/01/05 2,131,245
</TABLE>
<TABLE>
<CAPTION>
Principal Interest Maturity
Amount Rate Date Value
- ------------ ---------- ---------- -------------
<S> <C> <C> <C>
Louisiana Municipal Bond Obligations-Continued
HIGHER EDUCATION-Continued
LA Public Facilities Authority Tulane University
$ 300,000 7.50% 05/15/00 $327,594
2,940,000 6.25 07/15/06 3,112,549
1,000,000 6.40 11/15/07 1,070,640
LA Public Facilities Authority Tulane
University (FGIC)
450,000 5.80 02/15/04 471,929
LA Public Facilities Authority Tulane
University Series B
700,000 7.00 08/15/97 735,581
200,000 7.20 08/15/98 213,966
LA Public Facilities Authority Tulane
University Series C
750,000 7.00 08/15/97 788,123
300,000 7.20 08/15/98 320,949
-------------
Total Higher Education............ 10,232,921
-------------
SALES TAX REVENUE-37.6%
Alexandria Public Improvements (MBIA)
300,000 7.35 08/01/97 318,573
Baton Rouge Public Improvements (AMBAC)
700,000 6.85 08/01/00 772,632
800,000 6.90 08/01/01 879,696
Baton Rouge Public Improvements (FSA)
2,000,000 6.00 08/01/04 2,109,000
1,000,000 6.00 08/01/06 1,043,720
765,000 6.38 08/01/09 796,136
Bossier City Public Improvements (AMBAC)
805,000 6.20 11/01/07 856,472
Bossier City Public Improvements (FGIC)
400,000 6.88 11/01/06 433,100
400,000 6.88 11/01/07 433,100
East Baton Rouge Parish (FGIC)
2,280,000 8.00 02/01/02 2,682,420
2,490,000 4.65 02/01/04 2,337,662
East Baton Rouge Parish (MBIA)
500,000 7.10 02/01/99 540,995
500,000 7.10 02/01/00 546,005
East Baton Rouge Parish Public Improvements
1,085,000 5.15 02/01/05 1,028,330
1,145,000 5.15 02/01/06 1,072,258
General Baton Parking Authority
1,390,000 6.38 07/01/03 1,392,821
</TABLE>
PARAGON PORTFOLIO
STATEMENT OF INVESTMENTS
PARAGON LOUISIANA TAX-FREE FUND-(Continued)
May 31, 1995
(Unaudited)
The accompanying notes are an integral part of these financial statements.
12
<PAGE>
<TABLE>
<CAPTION>
Principal Interest Maturity
Amount Rate Date Value
- ------------ --------- --------- -------------
<S> <C> <C> <C>
Louisiana Municipal Bond Obligations-Continued
SALES TAX REVENUE-Continued
General Lafourche Port Fourchon Development
$ 1,220,000 5.00% 09/01/04 $1,151,302
Iberville Parish (MBIA)
300,000 6.20 09/01/98 305,715
Jefferson Parish (AMBAC)
1,650,000 6.50 11/01/06 1,755,946
Jefferson Parish District A (FGIC)
4,250,000 6.75 12/01/06 4,607,595
Jefferson Parish District B (FGIC)
1,910,000 6.75 12/01/06 2,070,707
Jefferson Parish School Board
1,000,000 4.45 02/01/00 983,420
Jefferson Parish School Board (MBIA)
2,500,000 6.05 02/01/02 2,649,425
1,270,000 6.15 02/01/03 1,355,217
4,280,000 6.25 02/01/08 4,489,848
Kenner (FGIC)
755,000 5.75 06/01/06 786,068
LA Public Facilities Authority Sp
Assessment (Escrowed)
110,000 7.38 06/01/09 118,690
LA Public Facilities Authority Sp
Assessment (FSA)
1,295,000 4.60 10/01/02 1,233,604
LA State Correctional Facilities
Corporate Lease (FSA)
650,000 5.60 12/15/03 674,596
LA State Energy Power Rodemacher
Unit No. 2
2,600,000 6.75 01/01/08 2,815,176
LA State Gas & Fuel
750,000 7.20 11/15/99 817,410
1,500,000 7.25 11/15/04 1,636,800
LA State Offshore Terminal Authority
1,500,000 5.85 09/01/00 1,553,010
400,000 6.00 09/01/01 421,160
500,000 6.10 09/01/02 525,225
LA State Recovery District Tax
1,910,000 5.70 07/01/98 1,966,078
Lafayette Parish Public Improvements
(FGIC)
505,000 4.90 03/01/03 496,354
580,000 5.00 03/01/05 563,975
1,120,000 4.75 05/01/06 1,050,347
</TABLE>
<TABLE>
<CAPTION>
Principal Interest Maturity
Amount Rate Date Value
- ------------ --------- --------- -------------
<S> <C> <C> <C>
Louisiana Municipal Bond Obligations-Continued
SALES TAX REVENUE-Continued
Lafayette Parish Public Power Authority
$ 1,730,000 6.80% 11/01/00 $1,828,160
4,000,000 7.13 11/01/07 4,226,360
Lafayette Parish Public Power
Authority (AMBAC)
1,000,000 5.10 11/01/07 959,600
Lafayette Parish Public Power
Authority (BIG)
500,000 7.25 11/01/12 532,305
Lafayette Parish School Board
500,000 7.20 04/01/99 519,970
1,500,000 7.35 04/01/01 1,560,465
1,075,000 4.88 04/01/04 1,043,331
1,130,000 4.88 04/01/05 1,085,670
Plaquemines Parish
420,000 6.70 12/01/08 440,731
410,000 6.70 12/01/09 430,918
Plaquemines Parish School Board
605,000 6.65 03/01/05 638,239
Rapides Parish Construction Schoo
District #62
700,000 7.65 03/01/96 715,043
St. Charles Parish Public Improvements
750,000 6.60 11/01/07 787,223
St. Charles Parish Public Improvements
(FGIC)
600,000 6.80 12/01/98 605,604
St. Tammany Parish (FGIC)
1,000,000 6.50 12/01/02 1,027,500
750,000 6.50 12/01/05 769,170
St. Tammany Parish District #3 Series A
(FGIC)
1,000,000 6.50 12/01/03 1,027,500
St. Tammany Parish School District #12
(FGIC)
550,000 6.50 03/01/01 588,973
400,000 6.50 03/01/04 424,248
Sulphur Public Improvements (MBIA)
150,000 6.00 03/01/00 152,081
615,000 6.00 03/01/01 623,530
Tangipahoa Parish School District #1
1,435,000 6.15 12/01/07 1,500,522
-------------
Total Sales Tax Revenue......... 72,757,731
-------------
</TABLE>
PARAGON PORTFOLIO
STATEMENT OF INVESTMENTS
PARAGON LOUISIANA TAX-FREE FUND-(Continued)
May 31, 1995
(Unaudited)
The accompanying notes are an integral part of these financial statements.
13
<PAGE>
<TABLE>
<CAPTION>
Principal Interest Maturity
Amount Rate Date Value
- ----------- ---------- --------- ------------
<S> <C> <C> <C>
Louisiana Municipal Bond Obligations-Continued
UTILITY REVENUE-3.2%
Bossier City Public Improvements (FGIC)
$ 550,000 6.88% 11/01/08 $591,222
Houma (FGIC)
1,560,000 6.13 01/01/07 1,657,859
Shreveport Water & Sewer
500,000 6.25 12/01/03 542,870
Shreveport Water & Sewer (FGIC)
930,000 7.75 12/01/02 1,091,299
Terrebone Parish Waterworks (FGIC)
690,000 5.70 11/01/06 710,693
Ville Platte Parish
1,555,000 5.50 05/01/09 1,500,217
------------
Total Utility Revenue........... 6,094,160
------------
MISCELLANEOUS LOUISIANA MUNICIPAL BONDS-5.6%
Bastrop Pollution Control Industrial
Development (International Paper)
2,500,000 6.90 03/01/07 2,688,925
Caddo Parish Industrial Development
Revenue (Wal-Mart Stores, Inc.)
470,000 5.95 11/01/07 478,192
De Soto Parish Pollution Control
1,000,000 5.05 12/01/02 989,480
East Baton Rouge Mortgage Finance Authority
770,000 4.90 10/01/05 722,175
East Baton Rouge Mortgage Finance
Authority (GNMA/FNMA collateralized)
1,390,000 5.45 10/01/03 1,411,503
Iberia Home Mortgage Loan Association
1,575,000 7.38 01/01/11 1,689,723
LA Housing Finance Agency
1,100,000 5.70 06/01/15 1,102,926
LA Public Facilities Authority
Multi-Housing Linlake Village
610,000 5.25(a) 06/01/07 615,813
LA Public Facilities Authority Shreveport
Single Family Mortgage
1,018,790 8.45 12/01/12 1,091,410
------------
Total Miscellaneous
Louisiana Municipal
Bonds........................... 10,790,147
------------
Total Louisiana Municipal
Bond Obligations
(cost $184,261,635)............. $187,531,927
------------
</TABLE>
<TABLE>
<CAPTION>
Principal Interest Maturity
Amount Rate Date Value
- ---------- ---------------- -------- -------------
<S> <C> <C> <C>
Short-Term Obligations-2.4%
Burke County Georgia Pollution
Control
$1,500,000 4.02%(a) 07/01/24 $1,500,000
LA State Recovery District Tax
2,000,000 4.55(a) 07/01/97 2,000,000
400,000 2.93(a) 07/01/98 400,000
North Alabama Environmental Pollution
Center
800,000 4.33(a) 12/01/00 800,000
-------------
Total Short-Term
Obligations
(cost $4,700,000)................... $4,700,000
-------------
-------------
Total Investments
(cost $188,961,635(b)).............. $192,231,927
-------------
-------------
- --------------------------------------------------
Federal Income Tax Information:
Gross unrealized gain for
investments in which value
exceeds cost........................ $4,648,835
Gross unrealized loss for
investments in which cost
exceeds value....................... (1,378,543)
-------------
Net unrealized gain................. $3,270,292
-------------
-------------
</TABLE>
- -------------------------------------------------------------------------------
(a) Variable rate security. Coupon rate disclosed is that which is in effect
at May 31, 1995.
(b) The cost stated also represents aggregate cost for federal income tax
purposes.
AMBAC-Insured by American Municipal Bond Assurance
Corporation.
BIG -Insured by Bond Investors Guaranty Insurance
Company.
FGIC -Insured by Financial Guaranty Insurance
Corporation.
FSA -Insured by Financial Security Assurance, Inc.
MBIA -Insured by Municipal Bond Investors Assurance
Corporation.
The percentage shown for each investment category reflects the value of
investments in that category as a percentage of total net assets.
PARAGON PORTFOLIO
STATEMENT OF INVESTMENTS
PARAGON LOUISIANA TAX-FREE FUND-(Continued)
May 31, 1995
(Unaudited)
The accompanying notes are an integral part of these financial statements.
14
<PAGE>
<TABLE>
<CAPTION>
Shares Description Value
- ------- ---------------------------------- ------------
<S> <C> <C>
Common Stocks-84.5%
BASIC MATERIALS & NATURAL RESOURCES-8.0%
90,000 Dow Chemical Co. $ 6,603,750
75,000 Du Pont (E.I.) De Nemours & Co. 5,090,625
80,000 Nucor Corp. 3,820,000
------------
15,514,375
------------
CAPITAL EQUIPMENT & SERVICES-4.1%
100,000 Allied Signal, Inc. 4,037,500
70,000 Johnson Controls, Inc. 4,007,500
------------
8,045,000
------------
CONSUMER CYCLICAL-16.0%
200,000 Carnival Corp. 4,650,000
120,000 Chrysler Corp.(b) 5,235,000
200,000 Consolidated Stores Corp.(a) 3,750,000
150,000 Heilig Meyers Co. 3,581,250
165,000 Home Depot, Inc. 6,868,125
150,000 Office Depot, Inc.(a) 3,600,000
140,000 Wal-Mart Stores, Inc. 3,500,000
------------
31,184,375
------------
CONSUMER NONCYCLICAL-13.7%
Columbia/HCA Healthcare
125,000 Corp. 5,109,375
65,000 Darden Restaurants, Inc.(a) 715,000
100,000 Duracell International, Inc. 4,325,000
135,000 Foundation Health Corp.(a) 3,796,875
65,000 General Mills, Inc. 3,371,875
120,000 Healthcare Compare Corp.(a) 3,750,000
150,000 United Healthcare Corp. 5,587,500
------------
26,655,625
------------
ENERGY-7.1%
100,000 Amoco Corp. 6,837,500
100,000 Murphy Oil Corp. 4,375,000
80,000 Sun Co., Inc. 2,520,000
------------
13,732,500
------------
</TABLE>
<TABLE>
<CAPTION>
Shares Description Value
- ------- ------------------------------------ ------------
<S> <C> <C>
Common Stocks-Continued
FINANCE-8.2%
81,000 CCB Financial Corp.(b) $3,341,250
Federal National Mortgage
50,000 Association 4,650,000
First American Corp. of
120,000 Tennessee 4,162,500
175,000 Southtrust Corp. 3,740,625
------------
15,894,375
------------
TECHNOLOGY-15.6%
130,000 Compaq Computer Corp.(a) 5,086,250
100,000 General Instrument Corp. 3,087,500
85,000 Intel Corp. 9,541,250
65,000 Texas Instruments, Inc. 7,515,625
10,000 Vishay Intertechnology, Inc.(a) 653,460
40,000 Xerox Corp. 4,535,000
------------
30,419,085
------------
TRANSPORTATION-1.2%
100,000 Atlantic Southeast Airlines, Inc. 2,412,500
------------
UTILITIES-10.6%
120,000 AT&T Corp. 6,090,000
41,500 BellSouth Corp. 2,547,063
150,000 Enron Corp. 5,475,000
250,000 WorldCom, Inc.(a) 6,500,000
------------
20,612,063
------------
Total Common Stocks
(cost $128,330,615)......................... $164,469,898
------------
Preferred Stocks-5.8%
Ashland Oil Co., Convertible
55,000 Preferred, 3.13% $ 3,245,000
Corning Delaware LP,
75,000 Convertible Preferred, 6.00% 3,731,250
Ford Motor Co., Convertible
45,000 Preferred, 4.20% 4,297,500
------------
Total Preferred Stocks
(cost $11,095,795).......................... $ 11,273,750
------------
</TABLE>
PARAGON PORTFOLIO
STATEMENT OF INVESTMENTS
PARAGON VALUE GROWTH FUND
May 31, 1995
(Unaudited)
The accompanying notes are an integral part of these financial statements.
15
<PAGE>
<TABLE>
<CAPTION>
Principal Interest Maturity
Amount Rate Date Value
- ----------- -------- -------- ------------
<S> <C> <C> <C>
Corporate Obligations-2.9%
Avnet, Inc.
$ 2,800,000 6.00% 04/15/12 $3,097,500
Sports & Recreation, Inc.
3,250,000 4.25 11/01/00 2,474,063
------------
Total Corporate
Obligations
(cost $6,410,210) ........... $5,571,563
------------
Repurchase Agreements-7.5%
State Street Bank & Trust Co., dated
05/31/95, repurchase price $14,592,229
(U.S. Treasury Note: $14,540,000,
6.63%, 03/31/97)
$14,590,000 5.50% 06/01/95 $ 14,590,000
------------
Total Repurchase
Agreements
(cost $14,590,000) .......... $ 14,590,000
------------
Total Investments
(cost $160,426,620(c))....... $195,905,211
------------
------------
- -------------------------------------------------------------------------------
Federal Income Tax Information:
Gross unrealized gain for investments
in which value exceeds cost.......... $39,485,811
Gross unrealized loss for investments
in which cost exceeds value.......... (4,007,220)
-------------
Net unrealized gain.................. $ 35,478,591
-------------
-------------
</TABLE>
- ---------------------------------------------------
(a) Non-income producing security.
(b) There are common stock rights attached to these
securities.
(c) The cost stated also represents aggregate cost for federal income tax
purposes.
The percentage shown for each investment category reflects the value of
investments in that category as a percentage of total net assets.
PARAGON PORTFOLIO
STATEMENT OF INVESTMENTS
PARAGON VALUE GROWTH FUND-(Continued)
May 31,1995
(Unaudited)
The accompanying notes are an integral part of these financial statements.
16
<PAGE>
<TABLE>
<CAPTION>
Shares Description Value
- ------ ----------------------------- ------------
<S> <C> <C>
Common Stocks-83.6%
BASIC MATERIALS & NATURAL RESOURCES-8.9%
60,000 Birmingham Steel Corp. $ 1,125,000
50,000 Dow Chemical Co. 3,668,750
Du Pont (E.I.) de Nemours &
53,000 Co. 3,597,375
25,000 International Paper Co. 1,965,625
------------
10,356,750
------------
CAPITAL EQUIPMENT & SERVICES-12.2%
20,000 Deere & Co. 1,730,000
22,000 ITT Corp. 2,461,250
21,000 Johnson Controls, Inc. 1,202,250
68,600 Lockheed Martin Corp. 4,081,700
20,000 Paccar, Inc.(b) 962,500
48,600 Raytheon Co.(b) 3,766,500
------------
14,204,200
------------
CONSUMER CYCLICAL-9.3%
45,000 Chrysler Corp.(b) 1,963,125
70,000 Fleetwood Enterprises, Inc. 1,452,500
60,600 JC Penney, Inc. 2,855,775
46,000 Reebok International Ltd. 1,541,000
20,000 Sears Roebuck & Co. 1,127,500
35,000 VF Corp. 1,863,750
------------
10,803,650
------------
CONSUMER NONCYCLICAL-18.0%
85,000 Baxter International, Inc. 2,964,375
25,000 Bristol-Myers Squibb Co. 1,659,375
Columbia/HCA Healthcare
35,000 Corp. 1,430,625
45,000 Conagra, Inc. 1,501,875
93,000 IBP Inc. 3,487,500
50,000 Philip Morris Companies, Inc. 3,643,750
70,000 Premark International, Inc. 3,491,250
36,000 Schering Plough Corp.(b) 2,835,000
------------
21,013,750
------------
</TABLE>
<TABLE>
<CAPTION>
Shares Description Value
- ------ --------------------------------- ------------
<S> <C> <C>
Common Stocks-Continued
ENERGY-7.4%
24,000 Chevron Corp.(b) $ 1,179,000
15,000 Exxon Corp. 1,070,625
44,000 Mobil Corp.(b) 4,416,500
Royal Dutch Petroleum Co.
15,000 ADR 1,901,250
------------
8,567,375
------------
FINANCE-7.3%
Federal National Mortgage
19,100 Assn. 1,776,300
60,000 First Tennessee National Corp. 2,632,500
30,000 Merrill Lynch & Co., Inc. 1,410,000
71,000 Reliastar Financial Corp. 2,635,875
------------
8,454,675
------------
TECHNOLOGY-11.2%
50,000 Avnet, Inc. 2,275,000
23,000 Compaq Computer Corp.(a) 899,875
20,000 Intel Corp. 2,245,000
International Business
30,000 Machines Corp. 2,797,500
Morgan Stanley Group, Inc.
50,000 (Cisco Systems, Inc.-PERQS) 1,806,250
11,700 Texas Instruments, Inc. 1,352,812
15,000 Xerox Corp. 1,700,625
------------
13,077,062
------------
TRANSPORTATION-3.0%
40,000 Atlantic Southeast Airlines, Inc. 965,000
25,000 British Airways ADR 1,643,750
40,000 Consolidated Freightways, Inc. 950,000
------------
3,558,750
------------
UTILITIES-6.3%
37,000 BellSouth Corp. 2,270,875
45,000 Entergy Corp. 1,113,750
90,000 Peco Energy Co. 2,531,250
42,000 Sprint Corp. 1,407,000
------------
7,322,875
------------
Total Common Stocks
(cost $78,887,082)............... $97,359,087
------------
</TABLE>
PARAGON PORTFOLIO
STATEMENT OF INVESTMENTS
PARAGON VALUE EQUITY INCOME FUND
May 31, 1995
(Unaudited)
The accompanying notes are an integral part of these financial statements.
17
<PAGE>
<TABLE>
<CAPTION>
Shares Description Value
- ------ ---------------------------- ------------
<S> <C> <C>
Preferred Stocks-8.9%
Burlington Northern, Inc.,
15,000 Convertible Preferred, 6.25% $1,001,250
Citicorp, Convertible
26,000 Preferred, 5.38% 3,770,000
Ford Motor Co., Convertible
35,600 Preferred, 4.20% 3,399,800
General Motors Corp.,
35,500 Convertible Preferred, 3.25% 2,201,000
------------
Total Preferred Stocks
(cost $9,055,436)........... $ 10,372,050
------------
</TABLE>
<TABLE>
<CAPTION>
Principal Interest Maturity
Amount Rate Date
- ---------- -------- -------- -----------
<S> <C> <C> <C>
Corporate Obligations-6.2%
Avnet, Inc.
$1,050,000 6.00% 04/15/12 $1,161,563
Healthsouth Rehabilitation
1,000,000 5.00 04/01/01 1,085,000
Hechinger Co.
2,500,000 5.50 04/01/12 1,612,500
Pennzoil Co.
2,250,000 6.50 01/15/03 2,655,000
Sports & Recreation, Inc.
980,000 4.25 11/01/00 746,025
-----------
Total Corporate Obligations
(cost $7,619,941)........... $ 7,260,088
-----------
</TABLE>
<TABLE>
<CAPTION>
Principal Interest Maturity
Amount Rate Date Value
- ---------- -------- -------- ------------
<S> <C> <C> <C>
Repurchase Agreements-1.1%
State Street Bank & Trust Company,
dated 05/31/95, repurchase price
$1,265,193 (U.S. Treasury Note:
$1,265,000, 6.63%, 03/31/97)
$1,265,000 5.50% 06/01/95 $ 1,265,000
------------
Total Repurchase
Agreements
(cost $1,265,000)........... $ 1,265,000
------------
Total Investments
(cost $96,827,459(c))....... $116,256,225
------------
------------
- -------------------------------------------------------------------------------
Federal Income Tax Information:
Gross unrealized gain for investments
in which value exceeds cost.......... $ 21,122,479
Gross unrealized loss for investments
in which cost exceeds value.......... (1,693,713)
-------------
Net unrealized gain.................. $19,428,766
-------------
-------------
</TABLE>
- ---------------------------------------------------
(a) Non-income producing security.
(b) There are common stock rights attached to these
securities.
(c) The cost stated also represents aggregate cost for federal income tax
purposes.
ADR -American Depository Receipt
PERQS-Performance Equity-Linked Quarterly-Pay
Security
The percentage shown for each investment category reflects the value of
investments in that category as a percentage of total net assets.
PARAGON PORTFOLIO
STATEMENT OF INVESTMENTS
PARAGON VALUE EQUITY INCOME FUND-(Continued)
May 31, 1995
(Unaudited)
The accompanying notes are an integral part of these financial statements.
18
<PAGE>
<TABLE>
<CAPTION>
Shares Description Value
- ------- -------------------------------- -----------
<S> <C> <C>
Common Stocks-89.8%
BASIC MATERIALS & NATURAL RESOURCES-7.9%
100,000 Albemarle Corp. $ 1,537,500
60,000 Georgia Gulf Corp. 1,822,500
65,000 Image Industries, Inc.(a) 682,500
50,000 Nucor Corp. 2,387,500
65,000 Shaw Group, Inc. 528,125
-----------
6,958,125
-----------
CAPITAL EQUIPMENT & SERVICES-1.9%
110,000 Union Switch & Signal, Inc.(a) 1,711,875
-----------
CONSUMER CYCLICAL-16.2%
120,000 Autozone, Inc.(a) 2,790,000
75,000 Cameron Ashley, Inc.(a) 843,750
40,000 Dollar General Corp. 1,135,000
100,000 Heilig Meyers Co. 2,387,500
50,000 Michaels Stores, Inc.(a) 1,131,250
135,000 Office Depot, Inc.(a) 3,240,000
114,000 River Oaks Furniture, Inc.(a) 1,425,000
120,000 Sports & Recreation, Inc.(a) 1,380,000
-----------
14,332,500
-----------
CONSUMER NONCYCLICAL-13.1%
100,000 Apple South, Inc. 1,737,500
25,000 Coastal Physician Group, Inc.(a) 390,625
125,000 Coventry Corp.(a) 2,578,125
75,000 Cracker Barrel Old Country Store 1,828,125
50,000 HeathWise of America, Inc.(a) 1,462,500
Inphynet Medical Management,
87,000 Inc.(a) 1,413,750
800,000 Isolyser Company, Inc.(a) 2,120,000
-----------
11,530,625
-----------
ENERGY-7.9%
100,000 Benton Oil & Gas Co.(a) 1,312,500
100,000 Input/Output Inc.(a) 3,400,000
95,000 Landmark Graphics Corp.(a) 2,244,375
-----------
6,956,875
-----------
</TABLE>
<TABLE>
<CAPTION>
Shares Description Value
- ------- --------------------------------- -----------
<S> <C> <C>
Common Stocks-Continued
FINANCE-21.9%
75,000 American Federal Bank, FSB $ 1,050,000
45,000 Bankers First Corp. 1,215,000
55,000 First Financial Management Corp. 3,905,000
20,000 Leader Financial Corp. 540,000
80,000 Medaphis Corp.(a) 4,820,000
120,000 Regional Acceptance Corp.(a) 1,890,000
85,000 Stewart Enterprises, Inc. 2,550,000
United Companies Financial
77,000 Corp. 3,407,250
-----------
19,377,250
-----------
TECHNOLOGY-8.0%
60,000 Acxiom Corp.(a) 1,170,000
40,000 DSC Communications Corp.(a)(b) 1,480,000
Mobile Telecomunications
55,000 Technology Corp.(a) 1,237,500
100,000 SCI Systems, Inc.(a) 2,075,000
60,000 Scientific-Atlanta, Inc. 1,117,500
-----------
7,080,000
-----------
TRANSPORTATION-4.8%
120,000 Atlantic Southeast Airlines, Inc. 2,895,000
75,000 Miller Industries, Inc.(a) 1,378,125
-----------
4,273,125
-----------
UTILITIES-8.1%
100,000 Communications Central, Inc.(a) 825,000
100,000 EqualNet Holding Corp.(a) 1,637,500
180,000 WorldCom, Inc.(a) 4,680,000
-----------
7,142,500
-----------
Total Common Stocks
(cost $61,044,615)....................... $79,362,875
-----------
</TABLE>
PARAGON PORTFOLIO
STATEMENT OF INVESTMENTS
PARAGON GULF SOUTH GROWTH FUND
May 31, 1995
(Unaudited)
The accompanying notes are an integral part of these financial statements.
19
<PAGE>
<TABLE>
<CAPTION>
Principal Interest Maturity
Amount Rate Date Value
- ---------- -------- -------- -----------
<S> <C> <C> <C>
Repurchase Agreements-9.7%
State Street Bank & Trust Company,
dated 05/31/95, repurchase price
$8,531,303 (U.S. Treasury Note:
$8,505,000, 6.63%, 03/31/97)
$8,530,000 5.50% 06/01/95 $8,530,000
-----------
Total Repurchase
Agreements
(cost $8,530,000)........... $8,530,000
-----------
Total Investments
(cost $69,574,615(c))....... $87,892,875
-----------
-----------
- -------------------------------------------------------------------------------
Federal Income Tax Information:
Gross unrealized gain for investments
in which value exceeds cost.......... $23,435,921
Gross unrealized loss for investments
in which cost exceeds value.......... (5,117,661)
------------
Net unrealized gain.................. $18,318,260
------------
------------
</TABLE>
- --------------------------------------------------
(a) Non-income producing security.
(b) There are common stock rights attached to these
securities.
(c) The cost stated also represents aggregate cost for federal income tax
purposes.
The percentage shown for each investment category reflects the value of
investments in that category as a percentage of total net assets.
PARAGON PORTFOLIO
STATEMENT OF INVESTMENTS
PARAGON GULF SOUTH GROWTH FUND-(Continued)
May 31, 1995
(Unaudited)
The accompanying notes are an integral part of these financial statements.
20
<PAGE>
[THIS PAGE INTENTIONALLY LEFT BLANK]
21
<PAGE>
PARAGON PORTFOLIO
STATEMENTS OF ASSETS AND LIABILITIES
May 31, 1995
(Unaudited)
<TABLE>
<CAPTION>
Treasury Short-Term
Money Market Government
Fund Fund
------------ -------------
<S> <C> <C>
ASSETS:
Investments in securities, at value
(cost $309,514,333, $131,278,364, $322,945,422, $188,961,635, $160,426,620,
$96,827,459, and $69,574,615, respectively)................................... $309,514,333 $130,434,569
Cash.......................................................................... 36,851 4,478
Receivables:
Investment securities sold.................................................... - -
Interest...................................................................... 585,249 1,100,523
Dividends..................................................................... - -
Fund shares sold.............................................................. - 7,952
Deferred organization expenses, net........................................... - -
Other......................................................................... 21,985 2,172
------------ -------------
Total assets.................................................................. 310,158,418 131,549,694
------------ -------------
LIABILITIES:
Payables:
Investment securities purchased............................................... - -
Fund shares redeemed.......................................................... - 11,444
Dividends and distributions................................................... 1,491,077 550,655
Advisory fees................................................................. 51,557 55,378
Administrative fees........................................................... 38,668 16,616
Transfer agent fees........................................................... 9,923 19,098
Accrued expenses and other liabilities........................................ 45,527 67,942
------------ -------------
Total liabilities............................................................. 1,636,752 721,133
------------ -------------
NET ASSETS:
Paid-in capital............................................................... 308,460,838 132,802,292
Accumulated undistributed (distributions in excess of) net investment income.. - -
Accumulated net realized gain (loss) on investment transactions............... 60,828 (1,129,936)
Net unrealized gain (loss) on investments..................................... - (843,795)
------------ -------------
Net assets.................................................................... $308,521,666 $130,828,561
------------ -------------
------------ -------------
Shares of beneficial interest outstanding ($0.01 par value),
unlimited number of shares authorized:
Class A Shares................................................................ 308,460,838 12,903,084
------------ -------------
------------ -------------
Class B Shares................................................................ - 16,206
------------ -------------
------------ -------------
Class A Shares
Net asset value and redemption price per share
(net assets/shares outstanding)............................................... $1.00 $10.13
------------ -------------
------------ -------------
Maximum public offering price per share (NAV per share ~ 1.0471,
where applicable)............................................................. $1.00 $10.60
------------ -------------
------------ -------------
Class B Shares
Net asset value and offering price per share (net assets/shares outstanding).. - $10.13
------------ -------------
------------ -------------
Redemption price per share (NAV per share - 0.950, where applicable).......... - $9.62
------------ -------------
------------ -------------
</TABLE>
The accompanying notes are an integral part of these financial
statements.
22
<PAGE>
<TABLE>
<CAPTION>
Intermediate- Louisiana Value Value Equity Gulf South
Term Bond Tax-Free Growth Income Growth
Fund Fund Fund Fund Fund
- -------------- ------------- ------------- ------------- ------------
<S> <C> <C> <C> <C>
$328,201,163 $192,231,927 $195,905,211 $116,256,225 $87,892,875
872 563,395 1,330 4,563 3,467
- - - - 803,403
4,301,502 3,251,444 35,206 98,214 1,303
- - 480,818 339,616 16,450
13,098 46,630 37,801 11,221 35,313
- - - - 6,091
- 2,363 3,106 7,323 1,088
- -------------- ------------- ------------- ------------- ------------
332,516,635 196,095,759 196,463,472 116,717,162 88,759,990
- -------------- ------------- ------------- ------------- ------------
14,968,750 1,867,217 1,617,535 - 256,250
26,534 58,164 16,189 15,331 9,716
1,592,539 648,737 31,787 43,222 -
132,227 67,295 106,859 59,840 48,273
39,668 16,821 24,668 18,321 11,140
- 25,039 42,605 11,335 18,152
145,950 90,040 36,650 43,715 26,284
- -------------- ------------- ------------- ------------- ------------
16,905,668 2,773,313 1,876,293 191,764 369,815
- -------------- ------------- ------------- ------------- ------------
314,398,648 190,800,935 150,654,300 95,949,673 67,102,635
279,975 - (2,478) (2,622) (104,878)
(4,323,397) (748,781) 8,456,766 1,149,581 3,074,158
5,255,741 3,270,292 35,478,591 19,428,766 18,318,260
- -------------- ------------- ------------- ------------- -----------
$315,610,967 $193,322,446 $194,587,179 $116,525,398 $88,390,175
- -------------- ------------- ------------- ------------- -----------
- -------------- ------------- ------------- ------------- -----------
30,607,630 18,165,248 12,964,665 8,990,577 5,431,525
- -------------- ------------- ------------- ------------- -----------
- -------------- ------------- ------------- ------------- -----------
66,573 87,823 97,623 18,784 64,285
- -------------- ------------- ------------- ------------- -----------
- -------------- ------------- ------------- ------------- -----------
$10.29 $10.59 $14.90 $12.93 $16.08
- -------------- ------------- ------------- ------------- -----------
- -------------- ------------- ------------- ------------- -----------
$10.77 $11.09 $15.60 $13.54 $16.84
- -------------- ------------- ------------- ------------- -----------
- -------------- ------------- ------------- ------------- -----------
$10.32 $10.62 $14.88 $12.94 $15.99
- -------------- ------------- ------------- ------------- -----------
- -------------- ------------- ------------- ------------- -----------
$9.80 $10.09 $14.14 $12.29 $15.19
- -------------- ------------- ------------- ------------- -----------
- -------------- ------------- ------------- ------------- -----------
</TABLE>
23
<PAGE>
PARAGON PORTFOLIO
STATEMENTS OF OPERATIONS
For the Six Months Ended May 31, 1995
(Unaudited)
<TABLE>
<CAPTION>
Treasury Short-Term
Money Market Government
Fund Fund
--------------- ----------
<S> <C> <C>
INVESTMENT INCOME:
Interest.............................................. $8,907,248 $4,276,629
Dividends (b)......................................... - -
--------------- ----------
Total income.......................................... 8,907,248 4,276,629
--------------- -----------
EXPENSES:
Advisory fees......................................... 299,143 338,205
Administration fees................................... 224,357 101,462
Transfer agent fees................................... 33,355 29,571
Custodian fees........................................ 32,117 30,278
Professional fees..................................... 15,780 12,997
Trustee fees.......................................... 2,917 2,063
Registration fees..................................... - 6,476
Amortization of deferred organization expenses........ 1,566 945
Other................................................. 6,955 6,851
--------------- -----------
Total expenses........................................ 616,190 528,848
Class B Share distribution fees....................... - 475
--------------- -----------
Total expenses and Class B Share distribution fees.... 616,190 529,323
--------------- -----------
Net investment income (loss).......................... 8,291,058 3,747,306
--------------- -----------
REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS:
Net realized gain (loss) on investment transactions... 135,732 (181,534)
Net change in unrealized gain on investments.......... - 3,830,924
--------------- -----------
Net realized and unrealized gain on investments....... 135,732 3,649,390
--------------- -----------
Net increase in net assets resulting from operations.. $8,426,790 $7,396,696
--------------- -----------
--------------- -----------
</TABLE>
- ------
(a) The Investment Advisor and Administrator waived fees of $97,494 and
$48,746, respectively, during the six months ended May 31, 1995.
(b) For the Value Equity Income Fund, amount is net of $12,258 in foreign
withholding taxes.
The accompanying notes are an integral part of these financial
statements.
24
<PAGE>
<TABLE>
<CAPTION>
Intermediate- Louisiana Value Value Equity Gulf South
Term Bond Tax-Free Growth Income Growth
Fund Fund(a) Fund Fund Fund
- ------------- ----------------- --------------------- --------------------- -----------------
<S> <C> <C> <C> <C>
$11,542,797 $5,649,116 $403,995 $343,462 $206,684
- - 1,927,994 1,539,401 111,875
- ------------- ----------------- --------------------- --------------------- -----------------
11,542,797 5,649,116 2,331,989 1,882,863 318,559
- ------------- ----------------- --------------------- --------------------- -----------------
751,966 389,974 591,455 347,168 269,982
225,590 97,494 136,490 80,116 62,304
46,466 44,770 87,379 26,461 57,801
55,822 52,045 26,395 17,287 18,998
25,971 15,038 11,142 5,914 5,228
4,125 2,380 1,895 1,020 875
12,990 7,889 - - -
1,756 581 518 850 2,806
15,432 20,356 8,221 4,758 3,037
- ------------- ----------------- --------------------- --------------------- -----------------
1,140,118 630,527 863,495 483,574 421,031
1,779 1,923 3,338 381 2,406
- ------------- ----------------- --------------------- --------------------- -----------------
1,141,897 632,450 866,833 483,955 423,437
- ------------- ----------------- --------------------- --------------------- -----------------
10,400,900 5,016,666 1,465,156 1,398,908 (104,878)
- ------------- ----------------- --------------------- --------------------- -----------------
(24,237) (309,619) 8,456,111 1,149,288 3,073,993
23,043,658 11,433,036 12,366,611 14,686,596 5,926,408
- ------------- ----------------- --------------------- --------------------- -----------------
23,019,421 11,123,417 20,822,722 15,835,884 9,000,401
- ------------- ----------------- --------------------- --------------------- -----------------
$33,420,321 $16,140,083 $22,287,878 $17,234,792 $8,895,523
- ------------- ----------------- --------------------- --------------------- -----------------
- ------------- ----------------- --------------------- --------------------- -----------------
</TABLE>
25
<PAGE>
PARAGON PORTFOLIO
STATEMENTS OF CHANGES IN NET ASSETS
For the Six Months Ended May 31, 1995
(Unaudited)
<TABLE>
<CAPTION>
Treasury Short-Term
Money Market Government
Fund Fund
---------------- --------------
<S> <C> <C>
INCREASE (DECREASE) IN NET ASSETS:
OPERATIONS:
Net investment income (loss)......................................... $8,291,058 $3,747,306
Net realized gain (loss) on investment transactions.................. 135,732 (181,534)
Net change in unrealized gain on investments......................... - 3,830,924
---------------- --------------
Increase in net assets resulting from operations..................... 8,426,790 7,396,696
---------------- --------------
DISTRIBUTIONS TO SHAREHOLDERS:
From net investment income
Class A Shares....................................................... (8,291,378) (3,744,299)
Class B Shares....................................................... - (3,007)
In excess of net investment income
Class A Shares....................................................... - -
From net realized gains
Class A Shares....................................................... (74,904) -
Class B Shares....................................................... - -
---------------- --------------
Total distributions to shareholders.................................. (8,366,282) (3,747,306)
---------------- --------------
TRUST SHARE TRANSACTIONS:
Net proceeds from the sale of shares................................. 483,307,225 4,355,949
Reinvestment of dividends and distributions.......................... 313,399 211,868
Cost of shares redeemed.............................................. (471,524,411) (20,387,164)
---------------- --------------
Net increase (decrease) in net assets from Trust share transactions.. 12,096,213 (15,819,347)
---------------- --------------
Total increase (decrease)............................................ 12,156,721 (12,169,957)
---------------- --------------
NET ASSETS:
Beginning of period.................................................. 296,364,945 142,998,518
---------------- --------------
End of period........................................................ $308,521,666 $130,828,561
---------------- --------------
---------------- --------------
ACCUMULATED UNDISTRIBUTED (DISTRIBUTIONS IN EXCESS OF)
NET INVESTMENT INCOME ............................................... $- $-
---------------- --------------
---------------- --------------
SUMMARY OF SHARE TRANSACTIONS:
Class A Shares
Sold................................................................. 483,307,225 424,097
Issued on reinvestment of dividends and distributions................ 313,399 20,963
Redeemed............................................................. (471,524,411) (2,048,712)
---------------- --------------
12,096,213 (1,603,652)
---------------- --------------
Class B Shares
Sold................................................................. - 13,687
Issued on reinvestment of dividends and distributions................ - 301
Redeemed............................................................. - (1,953)
---------------- --------------
- 12,035
---------------- --------------
Net increase (decrease) in shares outstanding........................ 12,096,213 (1,591,617)
---------------- --------------
---------------- --------------
</TABLE>
The accompanying notes are an integral part of these financial statements.
26
<PAGE>
<TABLE>
<CAPTION>
Intermediate- Louisiana Value Value Equity Gulf South
Term Bond Tax-Free Growth Income Growth
Fund Fund Fund Fund Fund
- ------------- ----------------------- ------------- ------------------ ------------------
<S> <C> <C> <C> <C>
$10,400,900 $5,016,666 $1,465,156 $1,398,908 $(104,878)
(24,237) (309,619) 8,456,111 1,149,288 3,073,993
23,043,658 11,433,036 12,366,611 14,686,596 5,926,408
- ------------- ----------------------- ------------- ------------------ ------------------
33,420,321 16,140,083 22,287,878 17,234,792 8,895,523
- ------------- ----------------------- ------------- ------------------ ------------------
(10,386,448) (5,005,481) (1,457,273) (1,408,716) -
(14,452) (11,185) (4,606) (1,173) -
- - (2,478) (2,662) -
- - (5,514,632) (3,322,240) (1,410,185)
- - (18,700) (1,060) (7,604)
- ------------- ----------------------- ------------- ------------------ ------------------
(10,400,900) (5,016,666) (6,997,689) (4,735,851) (1,417,789)
- ------------- ----------------------- ------------- ------------------ ------------------
12,578,767 8,557,329 13,519,297 7,104,259 7,412,585
720,749 988,736 1,305,180 243,985 327,635
(18,080,605) (24,370,886) (9,137,340) (6,716,865) (4,598,768)
- ------------- ----------------------- ------------- ------------------ ------------------
(4,781,089) (14,824,821) 5,687,137 631,379 3,141,452
- ------------- ----------------------- ------------- ------------------ ------------------
18,238,332 (3,701,404) 20,977,326 13,130,320 10,619,186
- ------------- ----------------------- ------------- ------------------ ------------------
297,372,635 197,023,850 173,609,853 103,395,078 77,770,989
- ------------- ----------------------- ------------- ------------------ ------------------
$315,610,967 $193,322,446 $194,587,179 $116,525,398 $88,390,175
- ------------- ----------------------- ------------- ------------------ ------------------
- ------------- ----------------------- ------------- ------------------ ------------------
$279,975 $- $(2,478) $(2,622) $(104,878)
- ------------- ----------------------- ------------- ------------------ ------------------
- ------------- ----------------------- ------------- ------------------ ------------------
1,241,935 753,315 896,670 594,243 430,149
71,830 94,526 93,918 21,053 21,529
(1,850,228) (2,346,480) (645,232) (572,082) (295,343)
- ------------- ----------------------- ------------- ------------------ ------------------
(536,463) (1,498,639) 345,356 43,214 156,335
- ------------- ----------------------- ------------- ------------------ ------------------
42,186 72,536 68,824 15,925 50,257
1,275 816 1,717 200 523
(3,066) (5,907) (3,036) (2) (2,253)
- ------------- ----------------------- ------------- ------------------ ------------------
40,395 67,445 67,505 16,123 48,527
- ------------- ----------------------- ------------- ------------------ ------------------
(496,068) (1,431,194) 412,861 59,337 204,862
- ------------- ----------------------- ------------- ------------------ ------------------
- ------------- ----------------------- ------------- ------------------ ------------------
</TABLE>
27
<PAGE>
PARAGON PORTFOLIO
STATEMENTS OF CHANGES IN NET ASSETS
For the Year Ended November 30, 1994
<TABLE>
<CAPTION>
Treasury Short-Term
Money Market Government
Fund Fund
---------------- --------------
<S> <C> <C>
INCREASE (DECREASE) IN NET ASSETS:
OPERATIONS:
Net investment income (loss)......................................... $10,164,395 $7,847,949
Net realized gain (loss) on investment transactions.................. 4,992 (442,989)
Net change in unrealized gain (loss) on investments.................. - (7,178,320)
---------------- --------------
Increase (decrease) in net assets resulting from operations.......... 10,169,387 226,640
---------------- --------------
DISTRIBUTIONS TO SHAREHOLDERS:
From net investment income
Class A Shares....................................................... (10,162,326) (7,847,743)
Class B Shares....................................................... - (206)
In excess of net investment income
Class A Shares....................................................... - -
From net realized gains
Class A Shares....................................................... (23,225) -
In excess of net realized gains
Class A Shares....................................................... - -
---------------- --------------
Total distributions to shareholders.................................. (10,185,551) (7,847,949)
---------------- --------------
TRUST SHARE TRANSACTIONS:
Net proceeds from the sale of shares................................. 984,598,161 37,944,427
Reinvestment of dividends and distributions.......................... 180,411 392,469
Cost of shares redeemed.............................................. (984,527,520) (57,707,000)
---------------- --------------
Net increase (decrease) in net assets from Trust share transactions.. 251,052 (19,370,104)
---------------- --------------
Total increase (decrease)............................................ 234,888 (26,991,413)
---------------- --------------
NET ASSETS:
Beginning of year.................................................... 296,130,057 169,989,931
---------------- --------------
End of year.......................................................... $296,364,945 $142,998,518
---------------- --------------
---------------- --------------
ACCUMULATED UNDISTRIBUTED (DISTRIBUTIONS IN EXCESS OF)
NET INVESTMENT INCOME ............................................... $320 $-
---------------- --------------
---------------- --------------
SUMMARY OF SHARE TRANSACTIONS:
Class A Shares
Sold................................................................. 984,598,161 3,731,929
Issued on reinvestment of dividends and distributions................ 180,411 38,942
Redeemed............................................................. (984,527,520) (5,709,112)
---------------- --------------
251,052 (1,938,241)
---------------- --------------
Class B Shares
Sold................................................................. - 4,150
Issued on reinvestment of dividends and distributions................ - 21
Redeemed............................................................. - -
---------------- --------------
- 4,171
---------------- --------------
Net increase (decrease) in shares outstanding........................ 251,052 (1,934,070)
---------------- --------------
---------------- --------------
</TABLE>
The accompanying notes are an integral part of these financial statements.
28
<PAGE>
<TABLE>
<CAPTION>
Intermediate- Louisiana Value Value Equity Gulf South
Term Bond Tax-Free Growth Income Growth
Fund Fund Fund Fund Fund
- ------------- --------------------- ------------- ------------------- ------------------
<S> <C> <C> <C> <C>
$21,188,128 $10,034,099 $2,380,116 $2,624,949 $(304,341)
(4,254,181) (403,188) 5,533,531 3,338,407 1,417,789
(32,996,842) (15,995,358) (15,998,469) (7,781,546) (6,751,273)
- ------------- --------------------- ------------- ------------------- ------------------
(16,062,895) (6,364,447) (8,084,822) (1,818,190) (5,637,825)
- ------------- --------------------- ------------- ------------------- ------------------
(21,186,974) (10,032,553) (2,546,306) (2,973,890) -
(1,154) (1,546) (752) (78) -
- - (3,277) - -
(4,432,431) (2,114,555) (8,389,918) (5,318,242) (649,788)
(44,979) (35,974) - - -
- ------------- --------------------- ------------- ------------------- ------------------
(25,665,538) (12,184,628) (10,940,253) (8,292,210) (649,788)
- ------------- --------------------- ------------- ------------------- ------------------
54,826,753 44,951,435 36,323,019 20,175,920 18,519,488
1,726,372 2,652,558 1,878,153 337,716 119,773
(58,987,271) (28,564,772) (16,706,771) (9,806,704) (9,562,871)
- ------------- --------------------- ------------- ------------------- ------------------
(2,434,146) 19,039,221 21,494,401 10,706,932 9,076,390
- ------------- --------------------- ------------- ------------------- ------------------
(44,162,579) 490,146 2,469,326 596,532 2,788,777
- ------------- --------------------- ------------- ------------------- ------------------
341,535,214 196,533,704 171,140,527 102,798,546 74,982,212
- ------------- --------------------- ------------- ------------------- ------------------
$297,372,635 $197,023,850 $173,609,853 $103,395,078 $77,770,989
- ------------- --------------------- ------------- ------------------- ------------------
- ------------- --------------------- ------------- ------------------- ------------------
$279,975 $- $(3,277) $11,021 $-
- ------------- --------------------- ------------- ------------------- ------------------
- ------------- --------------------- ------------- ------------------- ------------------
5,310,502 4,228,003 2,439,323 1,661,828 1,146,632
169,665 250,440 128,595 27,823 7,377
(5,844,772) (2,741,741) (1,142,802) (812,422) (600,948)
- ------------- --------------------- ------------- ------------------- ------------------
(364,605) 1,736,702 1,425,116 877,229 553,061
- ------------- --------------------- ------------- ------------------- ------------------
26,061 22,736 30,070 2,653 15,758
117 117 55 8 -
- (2,475) (7) - -
- ------------- --------------------- ------------- ------------------- ------------------
26,178 20,378 30,118 2,661 15,758
- ------------- --------------------- ------------- ------------------- ------------------
(338,427) 1,757,080 1,455,234 879,890 568,819
- ------------- --------------------- ------------- ------------------- ------------------
- ------------- --------------------- ------------- ------------------- ------------------
</TABLE>
29
<PAGE>
PARAGON PORTFOLIO
TREASURY MONEY MARKET FUND
FINANCIAL HIGHLIGHTS
SELECTED DATA FOR A SHARE OUTSTANDING THROUGHOUT EACH PERIOD
<TABLE>
<CAPTION>
Income from investment Distributions to
operations shareholders from:
--------------------- ----------------------
Net asset Total Total
value at Net income from Net distributions
beginning investment investment investment to share-
of period income operations income holders
---------- --------- ------------ ---------- -------------
<S> <C> <C> <C> <C> <C>
For the Six Months Ended May 31,
- ---------------------------------------------------------------------------------------------------------------
1995 Class A Shares (unaudited) $1.00 $0.03 $0.03 $(0.03) $(0.03)
For the Years Ended November 30,
- ---------------------------------------------------------------------------------------------------------------
1994 Class A Shares 1.00 0.04 0.04 (0.04) (0.04)
1993 Class A Shares 1.00 0.03 0.03 (0.03) (0.03)
1992 Class A Shares 1.00 0.04 0.04 (0.04) (0.04)
1991 Class A Shares 1.00 0.06 0.06 (0.06) (0.06)
For the Period December 29, 1989 (commencement of operations) through November 30,
- -----------------------------------------------------------------------------------------------------------------
1990 Class A Shares 1.00 0.07 0.07 (0.07) (0.07)
- ------
<CAPTION>
Ratio of net
Net asset Ratio of net investment Net
value at expenses to income assets at
end Total average net to average end
of period return(a) assets net assets of period (000's)
---------- --------- ------------- ------------- -----------------
<S> <C> <C> <C> <C> <C>
For the Six Months Ended May 31,
- -------------------------------------------------------------------------------------------------------------------
1995 Class A Shares (unaudited) $1.00 5.73%(b) 0.41%(b) 5.54%(b) $308,522
For the Years Ended November 30,
- ------------------------------------------------------------------------------------------------------------------------------
1994 Class A Shares 1.00 3.68 0.43 3.60 296,365
1993 Class A Shares 1.00 2.84 0.45 2.76 296,130
1992 Class A Shares 1.00 3.71 0.46 3.43 334,003
1991 Class A Shares 1.00 6.00 0.50 5.67 300,539
For the Period December 29, 1989 (commencement of operations) through November 30,
- ------------------------------------------------------------------------------------------------------------------------------
1990 Class A Shares 1.00 7.91(b) 0.46(b) 7.73(b) 236,504
- ------
</TABLE>
(a) Assumes investment at the net asset value at the beginning of the period,
reinvestment of all dividends and distributions, a complete redemption of
the investment at the net asset value at the end of the period.
(b) Annualized.
The accompanying notes are an integral part of these financial statements.
30
<PAGE>
PARAGON PORTFOLIO
SHORT-TERM GOVERNMENT FUND
FINANCIAL HIGHLIGHTS
SELECTED DATA FOR A SHARE OUTSTANDING THROUGHOUT EACH PERIOD
<TABLE>
<CAPTION>
Distributions to shareholders
Income from investment operations from:
-------------------------------------------- -------------------------------------------
Net realized
Net asset and unrealized Total Net Total
value at Net gain (loss) income (loss) Net realized distributions
beginning investment on investment from investment investment gain on to share-
of period income transactions operations income investments holders
--------- ---------- -------------- --------------- ----------- ----------- -------------
<S> <C> <C> <C> <C> <C> <C> <C>
For the Six Months Ended May 31,
- ----------------------------------------------------------------------------------------------------------------------------------
1995 Class A Shares (unaudited) $ 9.85 $ 0.27 $ 0.28 $ 0.55 $(0.27) $ - $(0.27)
1995 Class B Shares (unaudited) 9.85 0.24 0.28 0.52 (0.24) - (0.24)
For the Years Ended November 30,
- ---------------------------------------------------------------------------------------------------------------------------------
1994 Class A Shares 10.34 0.50 (0.49) 0.01 (0.50) - (0.50)
1994 Class B Shares(c) 9.95 0.05 (0.10) (0.05) (0.05) - (0.05)
1993 Class A Shares 10.30 0.56 0.04 0.60 (0.56) - (0.56)
1992 Class A Shares 10.35 0.67 (0.03) 0.64 (0.67) - (0.69)
1991 Class A Shares 10.04 0.74 0.31 1.05 (0.74) - (0.74)
For the Period December 29, 1989 (commencement of operations) through November 30,
- -----------------------------------------------------------------------------------------------------------------------------------
1990 Class A Shares 10.00 0.69 0.04 0.73 (0.69) - (0.69)
- ------
<CAPTION>
Ratio of net Net
Net asset Ratio of net investment assets at
value at expenses to income Portfolio end
end Total average net to average turnover of period
of period return(a) assets net assets rate (000's)
--------- --------- ------------ ------------ ----------- ---------
<S> <C> <C> <C> <C> <C> <C>
For the Six Months Ended May 31,
- ---------------------------------------------------------------------------------------------------------------
1995 Class A Shares (unaudited) $10.13 5.62% 0.78%(b) 5.54%(b) 9% $130,665
1995 Class B Shares (unaudited) 10.13 5.24 1.53(b) 4.72(b) 9 164
For the Years Ended November 30
- ----------------------------------------------------------------------------------------------------------------
1994 Class A Shares 9.85 0.12 0.77 4.89 40 142,958
1994 Class B Shares(c) 9.85 (0.39) 1.53(b) 4.92(b) 40 41
1993 Class A Shares 10.34 5.91 0.78 5.35 44 169,990
1992 Class A Shares 10.30 6.29 0.81 6.44 22 123,528
1991 Class A Shares 10.35 10.90 0.84 7.34 15 76,921
For the Period December 29, 1989 (commencement of operations) through November 30,
- ----------------------------------------------------------------------------------------------------------------
1990 Class A Shares 10.04 7.67 0.84(b) 7.60(b) 33 87,096
- ------
</TABLE>
(a) Assumes investment at the net asset value at the beginning of the period,
reinvestment of all dividends and distributions, a complete redemption of
the investment at the net asset value at the end of the period and no sales
charges. Total return would be reduced if a sales charge for Class A Shares
or a contingent deferred sales charge for Class B Shares were taken into
account.
(b) Annualized.
(c) Class B Share activity commenced on October 19, 1994.
The accompanying notes are an integral part of these financial statements.
31
<PAGE>
PARAGON PORTFOLIO
INTERMEDIATE-TERM BOND FUND
FINANCIAL HIGHLIGHTS
SELECTED DATA FOR A SHARE OUTSTANDING THROUGHOUT EACH PERIOD
<TABLE>
<CAPTION>
Income from investment operations Distributions to shareholders from:
-------------------------------------------- ------------------------------------
Net realized
Net asset and unrealized Total Net Total
value at Net gain (loss) income (loss) Net realized distributions
beginning investment on investment from investment investment gain on to share-
of period income transactions operations income investments holders
--------- ---------- -------------- --------------- ----------- ----------- -------------
<S> <C> <C> <C> <C> <C> <C> <C>
For the Six Months Ended May 31,
- -----------------------------------------------------------------------------------------------------------------------------------
1995 Class A Shares (unaudited) $ 9.54 $0.34 $0.75 $1.09 $(0.34) $- $(0.34)
1995 Class B Shares (unaudited) 9.56 0.30 0.76 1.06 (0.30) - (0.30)
For the Years Ended November 30,
- -----------------------------------------------------------------------------------------------------------------------------------
1994 Class A Shares 10.84 0.66 (1.16) (0.50) (0.66) (0.14) (0.80)
1994 Class B Shares(c) 9.74 0.10 (0.18) (0.08) (0.10) - (0.10)
1993 Class A Shares 10.53 0.71 0.36 1.07 (0.70) (0.06) (0.76)
1992 Class A Shares 10.41 0.76 0.12 0.88 (0.76) - (0.76)
1991 Class A Shares 9.91 0.77 0.50 1.27 (0.77) - (0.77)
For the Period December 29, 1989 (commencement of operations) through November 30,
- -----------------------------------------------------------------------------------------------------------------------------------
1990 Class A Shares 10.00 0.71 (0.09) 0.62 (0.71) - (0.71)
- ------
<CAPTION>
Ratio of net Net
Net asset Ratio of net investment assets at
value at expenses to income Portfolio end
end Total average net to average turnover of period
of period return(a) assets net assets rate (000's)
--------- --------- ------------ ------------ ----------- ---------
<S> <C> <C> <C> <C> <C> <C>
For the Six Months Ended May 31,
- -----------------------------------------------------------------------------------------------------------------------------------
1995 Class A Shares (unaudited) $10.29 11.60% 0.76%(b) 6.91%(b) 18% $314,924
1995 Class B Shares (unaudited) 10.32 11.30 1.51(b) 6.13(b) 18 687
For the Years Ended November 30,
- -----------------------------------------------------------------------------------------------------------------------------------
1994 Class A Shares 9.54 (4.77) 0.76 6.56 38 297,123
1994 Class B Shares(c) 9.56 (0.76) 1.52(b) 6.38(b) 38 250
1993 Class A Shares 10.84 10.32 0.74 6.46 38 341,535
1992 Class A Shares 10.53 8.71 0.78 7.17 24 285,684
1991 Class A Shares 10.41 13.34 0.78 7.69 15 221,916
For the Period December 29, 1989 (commencement of operations) through November 30,
- ----------------------------------------------------------------------------------------------------------------
1990 Class A Shares 9.91 6.59 0.80(b) 7.91(b) 14 165,464
- ------
</TABLE>
- --------------------------------------------------------------------------------
(a) Assumes investment at the net asset value at the beginning of the period,
reinvestment of all dividends and distributions, a complete redemption of
the investment at the net asset value at the end of the period and no sales
charges. Total return would be reduced if a sales charge for Class A Shares
or a contingent deferred sales charge for Class B shares were taken into
account.
(b) Annualized.
(c) Class B Share activity commenced on September 28, 1994.
The accompanying notes are an integral part of these financial statements.
32
<PAGE>
PARAGON PORTFOLIO
LOUISIANA TAX-FREE FUND
FINANCIAL HIGHLIGHTS
SELECTED DATA FOR A SHARE OUTSTANDING THROUGHOUT EACH PERIOD
<TABLE>
<CAPTION>
Distributions to
Income from investment operations shareholders from:
--------------------------------------------------- ------------------
Net realized
Net asset and unrealized Total
value at Net gain (loss) income (loss) from Net
beginning investment on investment investment investment
of period income transactions operations income
--------- ---------- -------------- ------------------- ----------
<S> <C> <C> <C> <C> <C>
For the Six Months Ended May 31,
- ----------------------------------------------------------------------------------------------------------------------------
1995 Class A Shares (unaudited) $10.01 $0.27 $0.58 $0.85 $(0.27)
1995 Class B Shares (unaudited) 10.01 0.23 0.61 0.84 (0.23)
For the Years Ended November 30,
- ----------------------------------------------------------------------------------------------------------------------------
1994 Class A Shares 10.96 0.52 (0.84) (0.32) (0.52)
1994 Class B Shares(c) 10.41 0.09 (0.40) (0.31) (0.09)
1993 Class A Shares 10.59 0.55 0.45 1.00 (0.55)
1992 Class A Shares 10.38 0.59 0.28 0.87 (0.59)
1991 Class A Shares 10.15 0.60 0.23 0.83 (0.60)
For the Period December 29, 1989 (commencement of operations) through November 30,
- ----------------------------------------------------------------------------------------------------------------------------
1990 Class A Shares 10.00 0.57 0.15 0.72 (0.57)
<CAPTION>
Distributions to shareholders
from:
-----------------------------
Net Total Net asset Ratio of net
realized distributions value at expenses to
gain on to share- end Total average net
investments holders of period return(a) assets
----------- ------------- --------- --------- -------------
<S> <C> <C> <C> <C> <C>
For the Six Months Ended May 31,
- ----------------------------------------------------------------------------------------------------------------------------
1995 Class A Shares (unaudited) $- $(0.27) $10.59 8.55% 0.65%(b)
1995 Class B Shares (unaudited) - (0.23) 10.62 8.39 1.40(b)
For the Years Ended November 30,
- ----------------------------------------------------------------------------------------------------------------------------
1994 Class A Shares (0.11) (0.63) 10.01 (2.97) 0.65
1994 Class B Shares(c) - (0.09) 10.01 (2.94) 1.41(b)
1993 Class A Shares (0.08) (0.63) 10.96 9.65 0.62
1992 Class A Shares (0.07) (0.66) 10.59 8.64 0.58
1991 Class A Shares - (0.60) 10.38 8.45 0.61
For the Period December 29, 1989 (commencement of operations) through November 30,
- ----------------------------------------------------------------------------------------------------------------------------
1990 Class A Shares - (0.57) 10.15 7.48 0.64(b)
<CAPTION>
Ratios assuming no
waiver of fees
-----------------------------
Ratio of net Net Ratio of net
investment assets at Ratio of investment
income Portfolio end expenses income to
to average turnover of period to average average
net assets rate (000's) net assets net assets
----------- --------- --------- ---------- ------------
<S> <C> <C> <C> <C>
For the Six Months Ended May 31,
- -------------------------------------------------------------------------------------------------------------------------
1995 Class A Shares (unaudited) 5.15%(b) 11% $192,390 0.80%(b) 5.00%(b)
1995 Class B Shares (unaudited) 4.36(b) 11 932 1.55(b) 4.21(b)
For the Years Ended November 30,
- -------------------------------------------------------------------------------------------------------------------------
1994 Class A Shares 4.97 24 196,820 0.80 4.82
1994 Class B Shares(c) 4.45(b) 24 204 1.56(b) 4.30(b)
1993 Class A Shares 5.07 25 196,534 0.78 4.91
1992 Class A Shares 5.70 32 135,692 0.83 5.45
1991 Class A Shares 5.86 35 88,503 0.86 5.61
For the Period December 29, 1989 (commencement of operations) through November 30,
- -------------------------------------------------------------------------------------------------------------------------
1990 Class A Shares 6.20(b) 5 59,375 0.86(b) 5.98(b)
- ------
</TABLE>
(a) Assumes investment at the net asset value at the beginning of the
period, reinvestment of all dividends and distributions, a complete
redemption of the investment at the net asset value at the end of the
period and no sales charges. Total return would be reduced if a sales
charge for Class A Shares or a contingent deferred sales charge for
Class B Shares were taken into account.
(b) Annualized.
(c) Class B Share activity commenced on September 16, 1994.
The accompanying notes are an integral part of these financial statements.
33
<PAGE>
PARAGON PORTFOLIO
VALUE GROWTH FUND
FINANCIAL HIGHLIGHTS
SELECTED DATA FOR A SHARE OUTSTANDING THROUGHOUT EACH PERIOD
<TABLE>
<CAPTION>
Distributions to shareholders
Income from investment operations from:
------------------------------------------------ ------------------------------------
Net realized
Net asset and unrealized Total Net Total
value at Net gain (loss) income (loss) from Net realized distributions
beginning investment on investment investment investment Gain on To share-
of period income transactions operations income investments holders
--------- ---------- --------------- ------------------- ---------- ------------- ---------
<S> <C> <C> <C> <C> <C> <C> <C>
For the Six Months Ended May 31,
- -----------------------------------------------------------------------------------------------------------------------------------
1995 Class A Shares (unaudited) $13.73 $0.11 $1.61 $1.72 $(0.11) $(0.44) $(0.55)
1995 Class B Shares (unaudited) 13.70 0.05 1.63 1.68 (0.06) (0.44) (0.50)
For the Years Ended November 30,
- -----------------------------------------------------------------------------------------------------------------------------------
1994 Class A Shares 15.29 0.20 (0.86) (0.66) (0.21) (0.69) (0.90)
1994 Class B Shares(d) 14.98 0.03 (1.28) (1.25) (0.03) - (0.03)
1993 Class A Shares 14.38 0.17 1.25 1.42 (0.18) (0.33) (0.51)
1992 Class A Shares 11.90 0.17 2.68 2.85 (0.15) (0.22) (0.37)
1991 Class A Shares 9.75 0.19 2.19 2.38 (0.21) (0.02) (0.23)
For the Period December 29, 1989 (commencement of operations) through November 30,
- -----------------------------------------------------------------------------------------------------------------------------------
1990 Class A Shares 10.00 0.24 (0.28) (0.04) (0.21) 0.00 (0.21)
<CAPTION>
Ratio of net Net
Net asset Ratio of net investment assets at
value at expenses to income Portfolio end
end Total average net to average turnover of period
of period return(a) assets net assets rate (000's)
----------- ----------- ------------ ------------- --------- ---------
<S> <C> <C> <C> <C> <C> <C>
For the Six Months Ended May 31,
- ------------------------------------------------------------------------------------------------------------------
1995 Class A Shares (unaudited) $14.90 12.93% 0.95%(b) 1.61%(b) 32% $193,134
1995 Class B Shares (unaudited) 14.88 12.63 1.70(b) 0.88(b) 32 1,453
For the Years Ended November 30,
- ------------------------------------------------------------------------------------------------------------------
1994 Class A Shares 13.73 (4.32) 0.96 1.34 53 173,198
1994 Class B Shares(d) 13.70 (8.31) 1.71(b) 0.76(b) 53 412
1993 Class A Shares 15.29 10.13 0.96 1.21 66 171,141
1992 Class A Shares 14.38 24.27 0.97 1.25 43 133,614
1991 Class A Shares 11.90 24.97 0.95(c) 1.73(c) 54 93,400
For the Period December 29, 1989 (commencement of operations) through November 30,
- ------------------------------------------------------------------------------------------------------------------
1990 Class A Shares 9.75 (0.40) 1.03(b) 2.68(b) 53 45,937
</TABLE>
- -------
(a) Assumes investment at the net asset value at the beginning of the period,
reinvestment of all dividends and distributions, a complete redemption of
the investment at the net asset value at the end of the period and no sales
charges. Total return would be reduced if a sales charge for Class A Shares
or a contingent deferred sales charge for Class B Shares were taken into
account.
(b) Annualized.
(c) Had the Administrator not voluntarily waived a portion of the
administration fee, the expense ratio and the ratio of net investment
income to average net assets for the year ended November 30, 1991 would
have been 1.02% and 1.66% for Class A Shares.
(d) Class B Share activity commenced on September 9, 1994.
The accompanying notes are an integral part of these financial statements.
34
<PAGE>
PARAGON PORTFOLIO
VALUE EQUITY INCOME FUND
FINANCIAL HIGHLIGHTS
SELECTED DATA FOR A SHARE OUTSTANDING THROUGHOUT EACH PERIOD
<TABLE>
<CAPTION>
Distributions to shareholders
Income from investment operations from:
------------------------------------------------ -----------------------------------
Net realized
Net asset and unrealized Total Total
value at Net gain (loss) income (loss) from Net Net realized distribution
beginning investment on investment investment investment gain on to share
of period income transactions operations income investments holders
--------- ---------- --------------- ------------------- ---------- ------------ ------------
<S> <C> <C> <C> <C> <C> <C> <C>
For the Six Months Ended May 31,
- ------------------------------------------------------------------------------------------------------------------------------------
1995 Class A Shares (unaudited) $11.55 $0.16 $1.75 $1.91 $(0.16) $(0.37) $(0.53)
1995 Class B Shares (unaudited) 11.56 0.11 1.76 1.87 (0.12) (0.37) (0.49)
For the Years Ended November 30,
- ------------------------------------------------------------------------------------------------------------------------------------
1994 Class A Shares 12.74 0.30 (0.54) (0.24) (0.34) (0.61) (0.95)
1994 Class B Shares(d) 12.01 0.04 (0.45) (0.41) (0.04) - (0.04)
1993 Class A Shares 12.20 0.28 0.93 1.21 (0.28) (0.39) (0.67)
1992 Class A Shares 10.42 0.27 1.76 2.03 (0.25) - (0.25)
1991 Class A Shares 9.00 0.29 1.45 1.74 (0.32) - (0.32)
For the Period December 28, 1994 (commencement of operations) through November 30,
- ------------------------------------------------------------------------------------------------------------------------------------
1990 Class A Shares 10.00 0.31 (1.04) (0.73) (0.27) - (0.27)
</TABLE>
<TABLE>
<CAPTION>
Ratio of net Net
Net asset Ratio of net investment assets at
value at expenses to income (loss) Portfolio end
end Total average net to average turnover of period
of period return(a) assets net assets rate (000's)
----------- ----------- ------------ ------------- --------- ----------
<S> <C> <C> <C> <C> <C> <C>
For the Six Months Ended May 31,
- ------------------------------------------------------------------------------------------------------------------------------------
1995 Class A Shares (unaudited) $12.93 17.16% 0.90%(b) 2.62%(b) 17% $116,282
1995 Class B Shares (unaudited) 12.94 16.74 1.65(b) 1.81(b) 17 243
For the Years Ended November 30,
- ------------------------------------------------------------------------------------------------------------------------------------
1994 Class A Shares 11.55 (1.69) 0.93 2.50 49 103,364
1994 Class B Shares(d) 11.56 (3.40) 1.67(b) 1.71(b) 49 31
1993 Class A Shares 12.74 10.24 0.93 2.30 51 102,799
1992 Class A Shares 12.20 19.65 0.98 2.38 36 83,136
1991 Class A Shares 10.42 20.03 0.95(c) 3.53(c) 50 59,854
For the Period December 28, 1994 (commencement of operations) through November 30,
- ------------------------------------------------------------------------------------------------------------------------------------
1990 Class A Shares 9.00 (7.40) 0.99(b) 3.62(b) 56 72,783
- --------
</TABLE>
(a) Assumes investment at the net asset value at the beginning of the period,
reinvestment of all dividends and distributions, a complete redemption of
the investment at the net asset value at the end of the period and no sales
charges. Total return would be reduced if a sales charge for Class A Shares
or a contingent deferred sales charge for Class B Shares were taken into
account.
(b) Annualized.
(c) Had the Administrator not voluntarily waived a portion of the
administration fee, the expense ratio and the ratio of net investment
income to average net assets for the year ended November 30, 1991 would
have been 1.01% and 3.47% for Class A Shares.
(d) Class B Share activity commenced on October 3, 1994.
The accompanying notes are an integral part of these financial statements.
35
<PAGE>
PARAGON PORTFOLIO
GULF SOUTH GROWTH FUND
FINANCIAL HIGHLIGHTS
SELECTED DATA FOR A SHARE OUTSTANDING THROUGHOUT EACH PERIOD
<TABLE>
<CAPTION>
Distributions to shareholders
Income from investment operations from:
------------------------------------------------ -----------------------------------
Net realized
Net asset and unrealized Total Net Total
value at Net gain (loss) income (loss) from Net realized distribution
beginning investment on investment investment investment gain on to share
of period income transactions operations income investments holders
--------- ---------- --------------- ------------------- ---------- ----------- ------------
<S> <C> <C> <C> <C> <C> <C> <C>
For the Six Months Ended May 31,
- ----------------------------------------------------------------------------------------------------------------------------------
1995 Class A Shares (unaudited) $14.70 $(0.02) $1.67 $1.65 $- $(0.27) $(0.27)
1995 Class B Shares (unaudited) 14.66 (0.05) 1.65 1.60 - (0.27) (0.27)
For the Years Ending November 30,
- ----------------------------------------------------------------------------------------------------------------------------------
1994 Class A Shares 15.88 (0.06) (0.99) (1.05) - (0.13) (0.13)
1994 Class B Shares(c) 16.10 (0.01) (1.43) (1.44) - - -
1993 Class A Shares 14.89 (0.03) 1.38 1.35 (0.01) (0.35) (0.36)
1992 Class A Shares 11.59 0.02 3.29 3.31 (0.01) - (0.01)
For the Period July 1, 1991 (commencement of operations) through November 30,
- ----------------------------------------------------------------------------------------------------------------------------------
1991 Class A Shares 10.00 0.02 1.59 1.61 (0.02) - (0.02)
</TABLE>
<TABLE>
<CAPTION> Ratio of Net
Net asset Ratio of net Investment net assets at
value at expenses to income portfolio end
end Total average net to average turnover of period
of period return(a) assets net assets rate (000's)
----------- ----------- ------------ ------------- --------- ---------
<S> <C> <C> <C> <C> <C> <C>
For the Six Months Ended May 31,
- ----------------------------------------------------------------------------------------------------------------------------------
1995 Class A Shares (unaudited) $16.08 11.38% 1.01%(b) (0.25)%(b) 26% $87,362
1995 Class B Shares (unaudited) 15.99 11.04 1.76 (b) (1.01)(b) 26 1,028
For the Years Ending November 30,
- ----------------------------------------------------------------------------------------------------------------------------------
1994 Class A Shares 14.70 (6.66) 1.00 (0.38) 51 77,540
1994 Class B Shares(c) 14.66 (9.08) 1.75(b) (0.90)(b) 51 231
1993 Class A Shares 15.88 9.10 1.01 (0.21) 59 74,982
1992 Class A Shares 14.89 28.59 1.00 0.1 542 55,719
For the Period July 1, 1991 (commencement of operations) through November 30,
- ----------------------------------------------------------------------------------------------------------------------------------
1991 Class A Shares 11.59 16.12 1.05(b) 0.31(b) 12 34,546
- --------
</TABLE>
(a) Assumes investment at the net asset value at the beginning of the period,
reinvestment of all dividends and distributions, a complete redemption of
the investment at the net asset value at the end of the period and no sales
charges. Total return would be reduced if a sales charge for Class A Shares
or a contingent deferred sales charge for Class B shares were taken into
account.
(b) Annualized.
(c) Class B Share activity commenced on September 12, 1994.
The accompanying notes are an integral part of these financial statements.
36
<PAGE>
PARAGON PORTFOLIO
NOTES TO FINANCIAL STATEMENTS
May 31, 1995
(Unaudited)
Note 1. Significant Accounting Policies
Paragon Portfolio (the "Trust") is a Massachusetts business trust registered
under the Investment Company Act of 1940, as amended, as an open-end management
investment company. The Trust consists of eleven portfolios, seven of which
(the "Funds") are contained within: Paragon Short-Term Government Fund, Paragon
Intermediate-Term Bond Fund, Paragon Louisiana Tax-Free Fund, Paragon Value
Growth Fund, Paragon Value Equity Income Fund and Paragon Gulf South Growth
Fund (collectively, the "Non-Money Market Funds") and Paragon Treasury Money
Market Fund (the "Money Market Fund"). Each of the Funds offers two classes of
shares, Class A Shares and Class B Shares. Class B Shares of the Money Market
Fund will be issued only upon an exchange of Class B Shares of any of the
Non-Money Market Funds. Paragon Gulf South Growth Fund is a non-diversified
portfolio; all other portfolios are diversified. The following is a summary of
significant accounting policies followed by the Funds which are in conformity
with those generally accepted in the investment company industry.
Investment Valuation. Portfolio securities of the Money Market Fund are
valued at amortized cost which approximates market value. Under this method,
all investments purchased at a discount or a premium are valued by amortizing
the difference between original purchase price and maturity value of the issue
over the period to maturity. For the Non-Money Market Funds, equity securities
traded on a national securities exchange or the National Association of
Securities Dealers NASDAQ System ("NASDAQ") are valued at their last sale price
on the principal exchange on which they are traded or NASDAQ (if NASDAQ is the
principal market for such securities) on the valuation day or, if no sale
occurs, at the mean between the closing bid and asked prices. Unlisted equity
securities for which market quotations are available are valued at the mean
between the most recent bid and asked prices. Fixed-income securities are
valued at prices supplied by an independent pricing service which reflect
broker/dealer-supplied valuations and electronic data processing techniques.
Short-term debt obligations maturing in sixty days or less are valued at
amortized cost. Other assets and assets whose market values, in the investment
adviser's opinion, do not reflect fair value are valued at fair value using
methods determined in good faith by the Board of Trustees.
Securities Transactions and Investment Income. Securities transactions are
recorded on the trade date. Realized gains and losses on sales of investments
are calculated on the identified cost basis. Dividend income is recorded on the
ex-dividend date and interest income is recorded on the accrual basis.
Premiums and Discounts on Debt Securities Owned. The Paragon Louisiana
Tax-Free Fund amortizes premiums on debt securities on the effective yield
basis, and does not accrete discounts on debt securities. The Paragon
Intermediate-Term Bond and Paragon Short-Term Government Funds accrete
discounts on long-term debt securities and do not amortize premiums. The
Paragon Value Growth, Paragon Value Equity Income, and Paragon Gulf South
Growth Funds accrete discounts and amortize premiums on long-term debt
securities. Original issue discounts on debt securities are amortized to
interest income over the life of the security with a corresponding increase in
the cost basis of that security. The Paragon Short-Term Government and the
Paragon Intermediate-Term Bond Funds may invest in mortgage-backed securities.
Certain mortgage security paydown gains and losses are taxable as ordinary
income. Such paydown gains and losses increase or decrease taxable ordinary
income available for distributions and are classified as interest income in the
accompanying Statements of Operations.
Federal Taxes. The Trust's policy is to comply with the requirements of the
Internal Revenue Code applicable to regulated investment companies and to
distribute each year substantially all of the investment company taxable and
tax-exempt income to the shareholders of each Fund. Accordingly, no federal tax
provisions are required.
At November 30, 1994, the Trust's last tax year-end, the following Funds had
approximately the following amounts of capital loss carryforward for U.S.
Federal tax purposes:
<TABLE>
<CAPTION>
Fund Amount Years of Expiration
- ------------------------------------- ----------- -------------------
<S> <C> <C>
Paragon Short-Term Government Fund... $ 948,000 2000 to 2002
Paragon Intermediate-Term Bond Fund.. $ 4,254,000 2002
Paragon Louisiana Tax-Free Fund...... $ 403,000 2002
</TABLE>
These amounts are available to be carried forward to offset future capital
gains of the corresponding funds to the extent permitted by applicable laws or
regulations.
Deferred Organization Costs. Organization-related costs are being amortized
on a straight-line basis over a period of five years.
37
<PAGE>
Note 1. Significant Accounting Policies - (continued)
Expenses. Expenses incurred by the Trust which do not specifically relate to
an individual Fund are allocated to the Funds based on each Fund's relative
average net assets for the period. Shareholders of Class B Shares bear all
expenses which are directly attributable to such shares.
Note 2. Agreements
The Non-Money Market Funds have entered into Investment Advisory Agreements
with Premier Investment Advisors, L.L.C., ("Premier"), the successor to Premier
Investment Advisors, Inc. effective December 31, 1993 and a subsidiary of
Premier Bank N.A. The Money Market Fund has entered into an Investment Advisory
Agreement with Goldman Sachs Asset Management ("GSAM"), a separate operating
division of Goldman, Sachs & Co.("Goldman Sachs"), and into a Subadvisory
Agreement with Premier and GSAM. Pursuant to the terms of the Investment
Advisory Agreements, Premier and GSAM manage the investments and make
investment decisions for each Non-Money Market Fund and for the Money Market
Fund, respectively. For these services, each Fund pays its investment adviser a
monthly fee at the following annual rate of the corresponding Fund's average
daily net assets:
<TABLE>
<S> <C>
Paragon Treasury Money Market Fund... .20%
Paragon Short-Term Government Fund... .50%
Paragon Intermediate-Term Bond Fund.. .50%
Paragon Louisiana Tax-Free Fund...... .50%
Paragon Value Growth Fund............ .65%
Paragon Value Equity Income Fund..... .65%
Paragon Gulf South Growth Fund....... .65%
</TABLE>
With respect to the Paragon Louisiana Tax-Free Fund, Premier has advised the
Trust that, as of January 1, 1993 and until further notice, it has voluntarily
agreed to reduce its advisory fee from .50% to .40% of the Fund's average daily
net assets. For the six months ended May 31, 1995, Premier waived $97,494 of
its advisory fee for the Paragon Louisiana Tax-Free Fund.
Pursuant to the Subadvisory Agreement among the Money Market Fund, GSAM and
Premier, Premier reviews on a quarterly basis the portfolio and investment
strategy of the Money Market Fund and consults with GSAM as needed concerning
that Fund's investments. As compensation, GSAM pays to Premier quarterly a
subadvisory fee equal to, on an annual basis, .10% of that Fund's average daily
net assets.
GSAM serves as the Trust's administrator pursuant to an Administration
Agreement. Under the Administration Agreement, GSAM administers the Trust's
business affairs. As compensation for services rendered under the
Administration Agreement, each Fund pays GSAM a fee, computed daily and payable
monthly, at the annual rate of .15% of the average daily net assets of the
corresponding Fund. With respect to the Paragon Louisiana Tax-Free Fund, GSAM
has advised the Trust that, as of February 5, 1990, and until further notice,
it has voluntarily agreed to reduce its administration fee from .15% to .10% of
the Fund's average daily net assets. For the six months ended May 31, 1995,
GSAM waived $48,746 of its administration fee for the Paragon Louisiana
Tax-Free Fund.
Goldman Sachs serves as the Distributor of shares of the Funds pursuant to a
Distribution Agreement with the Trust. Goldman Sachs may receive a portion of
the sales load imposed on the sale of Class A Shares of the Non-Money Market
Funds and has advised the Trust that it retained approximately $19,100 during
the six months ended May 31, 1995.
The Trust, on behalf of each Fund, has adopted a Distribution Plan for Class
B Shares (the "Class B Plan") pursuant to Rule 12b-1. Under the Class B Plan,
each Fund pays Goldman Sachs a quarterly fee for distribution services with
respect to the Class B Shares equal to, on an annual basis, .75% of each Fund's
average daily net assets attributable to the Class B Shares of such Fund.
The Distributor recovers distribution expenses with respect to the Class B
Shares also through the receipt of contingent deferred sales charges.
Goldman Sachs also serves as Transfer Agent of the Trust for a fee.
PARAGON PORTFOLIO
NOTES TO FINANCIAL STATEMENTS-(Continued)
May 31, 1995
(Unaudited)
38
<PAGE>
Note 3. Repurchase Agreements
During the term of a repurchase agreement, the value of the underlying
securities, including accrued interest, is required to equal or exceed the
value of the repurchase agreement. The underlying securities for all repurchase
agreements are held in safekeeping in the customer-only account of State Street
Bank & Trust Co., the Funds' custodian, at the Federal Reserve Bank of Boston,
or at sub-custodians. The market values of the underlying securities are
monitored by pricing them daily.
In connection with transactions in repurchase agreements, if the seller
defaults and the value of the collateral declines, or if the seller enters an
insolvency proceeding, realization of the collateral by the Trust may be
delayed or limited.
Note 4. Joint Repurchase Agreement Account
The Money Market Fund, together with other registered investment companies
having advisory agreements with GSAM, transfers uninvested cash balances into a
joint account, the daily aggregate balance of which is invested in one or more
repurchase agreements. The underlying securities for the repurchase agreements
are U.S. Treasury obligations. As of May 31, 1995, the Money Market Fund had a
8.19% undivided interest in the repurchase agreements in this joint account
which equalled $215,200,000 in principal amount. At May 31, 1995, the
repurchase agreements in the joint account along with the corresponding
underlying securities (including the type of security, principal amount,
interest rate and maturity date) were as follows:
<TABLE>
<CAPTION>
Principal Interest Maturity Amortized
Amount Rate Date Cost
-------------- ------- -------- --------------
<S> <C> <C> <C> <C>
Bankers Trust Securities Corp., dated 05/31/95, repurchase
price $550,093,958 (U.S. Treasury Note: $556,830,000,
6.13%, 05/15/98)............................................................ $550,000,000 6.15% 06/01/95 $550,000,000
Bear Stearns Companies, dated 05/31/95, repurchase price
$500,085,417 (U.S. Treasury Strips: $621,616,000,
05/15/97-05/15/01).......................................................... 500,000,000 6.15 06/01/95 500,000,000
Daiwa Securities, dated 05/31/95, repurchase price
$300,051,250 (U.S. Treasury Note: $305,240,000,
6.13%, 05/31/97)............................................................ 300,000,000 6.15 06/01/95 300,000,000
First Boston Corp., dated 05/31/95, repurchase price
$300,051,042 (U.S. Treasury Bills: $312,018,000,
06/01/95-02/08/96).......................................................... 300,000,000 6.13 06/01/95 300,000,000
Lehman Government Securities, dated 05/31/95, repurchase
price $70,012,153 (U.S. Treasury Principal-Only Strips:
$97,723,000,
05/15/00-08/15/00).......................................................... 70,000,000
SBC Government Securities, Inc., dated 05/31/95, repurchase
price $500,085,556 (U.S. Treasury Notes: $410,110,000, 4.63-8.50%,
08/15/95-07/31/96) (U.S. Treasury Bill: $92,800,000,
04/04/96)................................................................... 500,000,000 6.16 06/01/95 500,000,000
Smith Barney Shearson, Inc., dated 05/31/95, repurchase price
$407,269,790 (U.S. Treasury Notes: $365,520,000,
4.25-9.00%, 05/15/96-02/15/01) (U.S. Treasury Interest-Only
Strip: $52,185,000, 11/15/99)............................................... 407,200,000 6.17 06/01/95 407,200,000
--------------
Total Joint Repurchase Agreement Account................................... $2,627,200,000
==============
</TABLE>
PARAGON PORTFOLIO
NOTES TO FINANCIAL STATEMENTS-(Continued)
May 31, 1995
(Unaudited)
39
<PAGE>
Note 5. Investment Transactions
Purchases and proceeds of sales or maturities of long-term investments for
the six months ended May 31, 1995, were as follows:
Paragon Short-Term Government Fund
<TABLE>
<S> <C>
Purchases (excluding U.S. Government and agency obligations).. $ -
Sales (excluding U.S. Government and agency obligations)...... -
Purchases of U.S. Government and agency obligations........... 11,011,875
Sales of U.S. Government and agency obligations............... 30,328,047
Paragon Intermediate-Term Bond Fund
Purchases (excluding U.S. Government and agency obligations).. $ -
Sales (excluding U.S. Government and agency obligations)...... 2,694,375
Purchases of U.S. Government and agency obligations........... 51,152,481
Sales of U.S. Government and agency obligations............... 59,963,129
Paragon Louisiana Tax-Free Fund
Purchases (excluding U.S. Government and agency obligations).. $20,217,869
Sales (excluding U.S. Government and agency obligations)...... 34,212,796
Purchases of U.S. Government and agency obligations........... -
Sales of U.S. Government and agency obligations............... -
Paragon Value Growth Fund
Purchases (excluding U.S. Government and agency obligations).. $56,170,628
Sales (excluding U.S. Government and agency obligations)...... 66,303,388
Purchases of U.S. Government and agency obligations........... -
Sales of U.S. Government and agency obligations............... -
Paragon Value Equity Income Fund
Purchases (excluding U.S. Government and agency obligations).. $23,011,530
Sales (excluding U.S. Government and agency obligations)...... 20,193,904
Purchases of U.S. Government and agency obligations........... -
Sales of U.S. Government and agency obligations............... -
Paragon Gulf South Growth Fund
Purchases (excluding U.S. Government and agency obligations).. $21,682,747
Sales (excluding U.S. Government and agency obligations)...... 20,259,273
Purchases of U.S. Government and agency obligations........... -
Sales of U.S. Government and agency obligations............... -
</TABLE>
The Money Market Fund invests only in short-term investments.
Note 6. Capital Shares and Distributions
As of May 31, 1995, Premier Bank, N.A. Trustee, in its capacity as trustee or
fiduciary of trusts and employee benefit plans, is the beneficial owner of
approximately the following percentages of the outstanding shares of beneficial
interest of each of the Funds:
<TABLE>
<S> <C>
Paragon Treasury Money Market Fund... 95%
Paragon Short-Term Government Fund... 92%
Paragon Intermediate-Term Bond Fund.. 90%
Paragon Louisiana Tax-Free Fund...... 69%
Paragon Value Growth Fund............ 81%
Paragon Value Equity Income Fund..... 94%
Paragon Gulf South Growth Fund....... 76%
</TABLE>
PARAGON PORTFOLIO
NOTES TO FINANCIAL STATEMENTS-(Continued)
May 31, 1995
(Unaudited)
40
<PAGE>
Note 7. Concentration of Credit Risk
The Paragon Louisiana Tax-Free Fund invests substantially all of its assets
in debt obligations of issuers located in the State of Louisiana. The issuers'
abilities to meet their obligations may be affected by Louisiana economic or
political developments.
PARAGON PORTFOLIO
NOTES TO FINANCIAL STATEMENTS-(Continued)
May 31, 1995
(Unaudited)
41
<PAGE>
Paragon Portfolio
- ------------------
Trustees
Paul C. Nagel, Jr., Chairman
Bruce C. Gottwald, Jr.
Ernest E. Howard III
Officers
Paul W. Klug
President
Marcia L. Beck
Vice President
John W. Mosior
Vice President
Nancy L. Mucker
Vice President
Pauline Taylor
Vice President
Scott M. Gilman
Treasurer
Michael J. Richman
Secretary
Howard B. Surloff
Assistant Secretary
This Semiannual Report is authorized for distribution to prospective
investors only when preceded or accompanied by a Paragon Portfolio Prospectus
which contains facts concerning Paragon Portfolio's objectives and policies,
management, expenses and other information.
<PAGE>
PARAGON PORTFOLIO
4900 Sears Tower
Chicago, Illinois 60606
INVESTMENT ADVISOR
Premier Investment Advisors, L.L.C.
451 Florida Street
Baton Rouge, Louisiana 70801
INVESTMENT ADVISOR AND
ADMINISTRATOR
Goldman Sachs Asset Management
One New York Plaza
New York, New York 10004
DISTRIBUTOR
Goldman, Sachs & Co.
85 Broad Street
New York, New York 10004
CUSTODIAN
State Street Bank & Trust Company
225 Franklin Street
Boston, Massachusetts 02110
TRANSFER AGENT
Goldman, Sachs & Co.
4900 Sears Tower
Chicago, Illinois 60606
INDEPENDENT ACCOUNTANTS
Price Waterhouse LLP
1177 Avenue of the Americas
New York, NY 10036
LEGAL COUNSEL
Hale and Dorr
60 State Street
Boston, Massachusetts 02109
