<PAGE> 1
Institutional Money
Market Funds
Annual Report
For the year ended June 30, 1998
Treasury Only Money Market Fund
Government Money Market Fund
THE ONE GROUP
----------------------
FAMILY OF MUTUAL FUNDS
<PAGE> 2
IMPORTANT CUSTOMER INFORMATION. INVESTMENT PRODUCTS:
- are not deposits or obligations of, or guaranteed by,
BANC ONE CORPORATION or any of its affiliates, [FDIC LOGO
WITH SLASH
- are not insured by the FDIC, and THOUGH IT]
- are subject to investment risks, including possible
loss of the principal amount invested.
<PAGE> 3
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Table of Contents
- --------------------------------------------------------------------------------
THE ONE GROUP FAMILY OF MUTUAL FUNDS JUNE 30, 1998
Portfolio Performance Review...................................................2
Schedules of Portfolio Investments.............................................4
Statements of Assets and Liabilities...........................................7
Statements of Operations.......................................................8
Statements of Changes in Net Assets............................................9
Notes to Financial Statements.................................................10
Financial Highlights..........................................................13
Report of Independent Accountants.............................................15
1
<PAGE> 4
The One Group Treasury Only Money Market Fund
Portfolio Performance Review
- --------------------------------------------------------------------------------
THE ONE GROUP FAMILY OF MUTUAL FUNDS JUNE 30, 1998
HOW DID THE FUND PERFORM?
The seven-day yield on The One Group Treasury Only Money Market Fund was 5.04%
on June 30, 1998, down slightly from 5.12% on June 30, 1997.
WHAT CONTRIBUTED TO THE FUND'S FAIRLY STABLE YIELD?
The Fund's yield reflects the relative stability in interest rates brought on by
the Federal Reserve's unchanged monetary policy. Rate movements during the year
were fairly moderate. They reflected changing views on economic strength and
whether that strength would lead to inflationary pressures requiring Federal
Reserve action.
WHAT WERE YOUR PRIMARY STRATEGIES AND TACTICS?
The portfolio continued to benefit from a "barbell" maturity structure, a common
technique that involves investing in securities at the long and short ends of a
particular maturity range instead of those with intermediate maturities.
This strategy led to an average maturity of 49 days on June 30, 1998, enabling
the Fund to maintain its "AAA" average quality rating--the best possible--from
Standard & Poor's and Moody's Investors Service. This rating indicates that the
Fund's securities are of the highest quality and offer the lowest risk. In order
to receive this rating, a fund must have an average maturity no greater than 60
days.
WHAT IS YOUR OUTLOOK FOR THE FUND?
Economic activity and its influences on Federal Reserve policies may have a
direct effect on the Fund over the next year. Over the near term, strong
domestic demand is likely to be offset by the Asian crisis. This will require
the Federal Reserve to be diligent in directing monetary policy. This outlook
warrants continued caution so the Fund can be positioned to benefit from any
action the Federal Reserve may take.
/s/ Andrew T. Linton
Andrew T. Linton
Fund Manager
/s/ Gary J. Madich
Gary J. Madich, CFA
Senior Managing Director of Fixed Income Securities
<TABLE>
<CAPTION>
AVERAGE ANNUAL
TOTAL RETURN
7 DAY YIELD 1 YEAR 5 YEARS SINCE INCEPTION
<S> <C> <C> <C> <C>
5.04% 5.30% 4.87% 4.80%
</TABLE>
Please refer to the prospectus and the accompanying financial statements for
further information about your Fund.
2
<PAGE> 5
The One Group Government Money Market Fund
Portfolio Performance Review
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THE ONE GROUP FAMILY OF MUTUAL FUNDS JUNE 30, 1998
HOW DID THE FUND PERFORM?
The seven-day yield on The One Group Government Money Market Fund was 5.56% on
June 30, 1998, up slightly from 5.30% on June 30, 1997.
WHAT CONTRIBUTED TO THE FUND'S FAIRLY STABLE YIELD?
The Fund's yield reflects the relative rate stability caused by the Federal
Reserve's unchanged monetary policy. Rate movements throughout the year were
fairly moderate. They reflected changing views on economic strength and whether
that strength would lead to inflationary pressures requiring Federal Reserve
action.
WHAT WERE YOUR PRIMARY STRATEGIES AND TACTICS?
The Fund was invested primarily in agency securities because they offered a
yield advantage of 10 to 15 basis points over Treasuries and repurchase
agreements (one basis point equals 1/100th of a percent). The Fund also held
between 15% and 20% of its assets in floating-rate securities, which offered
yields that changed on a weekly basis. This position helped the Fund quickly
take advantage of rising interest rates.
The portfolio continued to benefit from a "barbell" maturity structure, a common
strategy that involves favoring securities at the long and short ends of a
particular maturity range over those with intermediate maturities. At the "long"
end, we purchased securities with maturities of six months to one year, and at
the "short" end, we held overnight repurchase agreements. The longer securities
allowed the Fund to benefit from the steepness of the yield curve (which occurs
when securities with longer maturities offer relatively higher yields), while
the overnight securities helped the Fund maintain a high degree of liquidity.
The Fund's barbell structure contributed to an average maturity of 37 days on
June 30, 1998, compared to 72 days on June 30, 1997.
WHAT IS YOUR OUTLOOK FOR THE FUND?
Economic activity and its influences on Federal Reserve policies may have a
direct effect on the Fund over the next year. Over the near term, strong
domestic demand is likely to be offset by the Asian crisis. This will require
the Federal Reserve to be diligent in directing monetary policy. This outlook
warrants continued caution so the Fund can be positioned to benefit from any
action the Federal Reserve may take.
/s/ Andrew T. Linton
Andrew T. Linton
Fund Manager
/s/ Gary J. Madich
Gary J. Madich, CFA
Senior Managing Director of Fixed Income Securities
<TABLE>
<CAPTION>
AVERAGE ANNUAL
TOTAL RETURN
7 DAY YIELD 1 YEAR 5 YEARS SINCE INCEPTION
<S> <C> <C> <C> <C>
5.56% 5.64% 5.09% 5.08%
</TABLE>
Please refer to the prospectus and the accompanying financial statements for
further information about your Fund.
3
<PAGE> 6
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The One Group Family of Mutual Funds
Treasury Only Money Market Fund
- --------------------------------------------------------------------------------
SCHEDULE OF PORTFOLIO INVESTMENTS JUNE 30, 1998
(Amounts in Thousands)
<TABLE>
<CAPTION>
PRINCIPAL AMORTIZED
AMOUNT SECURITY DESCRIPTION COST
- --------- ----------------------------------- ----------
<C> <S> <C>
U.S. TREASURY OBLIGATIONS (99.3%):
U.S. Treasury Bills (51.7%):
$ 41,934 7/2/98 (b)......................... $ 41,928
2,117 7/16/98............................ 2,113
69,586 7/23/98 (b)........................ 69,382
6,545 8/6/98............................. 6,513
141,005 8/20/98............................ 140,053
63,760 9/10/98............................ 63,139
32,232 9/17/98 (b)........................ 31,879
6,860 10/1/98............................ 6,772
1,835 10/15/98........................... 1,808
8,940 11/12/98........................... 8,765
--------
372,352
--------
</TABLE>
<TABLE>
<CAPTION>
PRINCIPAL AMORTIZED
AMOUNT SECURITY DESCRIPTION COST
- --------- ----------------------------------- ----------
<C> <S> <C>
U.S. TREASURY OBLIGATIONS, CONTINUED:
U.S. Treasury Notes (47.6%):
$115,000 6.25%, 7/31/98 (b)................. $115,102
52,000 5.25%, 7/31/98..................... 52,010
30,000 9.25%, 8/15/98..................... 30,144
40,088 5.88%, 8/15/98..................... 40,113
27,630 6.13%, 8/31/98 (b)................. 27,657
51,102 6.00%, 9/30/98..................... 51,177
15,994 5.88%, 3/31/99..................... 16,039
10,000 7.00%, 4/15/99..................... 10,108
--------
342,350
--------
Total U.S. Treasury Obligations 714,702
--------
Total (Amortized Cost $714,702) (a) $714,702
========
</TABLE>
- ------------
Percentages indicated are based on net assets of $719,570.
(a) Represents cost for financial reporting purposes and differs from cost for
federal income tax by $1.
(b) A portion of this security was loaned as of June 30, 1998.
See notes to financial statements.
4
<PAGE> 7
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The One Group Family of Mutual Funds
Government Money Market Fund
- --------------------------------------------------------------------------------
SCHEDULE OF PORTFOLIO INVESTMENTS JUNE 30, 1998
(Amounts in Thousands)
<TABLE>
<CAPTION>
PRINCIPAL AMORTIZED
AMOUNT SECURITY DESCRIPTION COST
- --------- ------------------------------------ ----------
<C> <S> <C>
U.S. GOVERNMENT AGENCY SECURITIES (22.2%):
Federal Farm Credit Bank (1.9%):
$ 25,000 5.60%, 10/1/98...................... $ 24,987
25,000 5.53%, 10/1/98...................... 24,999
20,000 5.50%, 4/1/99....................... 19,976
----------
69,962
----------
Federal Home Loan Bank (7.3%):
25,000 5.80%, 9/18/98...................... 25,004
7,550 5.69%, 10/2/98...................... 7,551
20,000 5.68%, 10/16/98..................... 19,996
10,000 5.60%, 10/23/98*.................... 9,999
25,000 5.84%, 12/17/98..................... 24,994
40,000 5.55%, 3/23/99...................... 39,992
25,000 5.56%, 3/25/99...................... 24,984
54,000 5.50%, 3/26/99...................... 53,956
45,000 5.63%, 4/9/99....................... 44,979
20,000 5.63%, 5/5/99....................... 19,989
----------
271,444
----------
Federal National Mortgage Assoc. (9.0%):
25,000 5.72%, 8/28/98...................... 25,004
20,000 5.71%, 9/9/98....................... 19,995
10,000 5.65%, 11/4/98*..................... 9,999
40,000 5.37%, 12/30/98..................... 38,914
10,000 5.38%, 2/9/99....................... 9,988
20,000 5.41%, 2/23/99...................... 19,985
25,000 5.37%, 2/26/99...................... 24,963
40,000 5.53%, 3/16/99*..................... 39,986
14,000 5.45%, 4/15/99...................... 13,976
50,000 5.34%, 4/23/99...................... 47,805
50,000 5.63%, 5/5/99....................... 49,952
4,000 5.26%, 6/2/99*...................... 4,000
20,000 5.26%, 7/26/99*..................... 20,000
10,000 5.26%, 9/22/99*..................... 10,000
----------
334,567
----------
Student Loan Marketing Assoc. (4.0%):
104,000 5.32%, 9/28/98*..................... 103,942
25,000 5.32%, 11/10/98*.................... 25,000
10,000 5.34%, 1/13/99*..................... 10,000
10,000 5.35%, 8/2/99*...................... 9,998
----------
148,940
----------
Total U.S. Government Agency Securities 824,913
----------
U.S. TREASURY OBLIGATIONS (1.4%):
U.S. Treasury Notes (1.4%):
25,000 5.25%, 7/31/98 (b).................. 24,993
25,000 8.88%, 2/15/99...................... 25,502
----------
Total U.S. Treasury Obligations 50,495
----------
</TABLE>
<TABLE>
<CAPTION>
PRINCIPAL AMORTIZED
AMOUNT SECURITY DESCRIPTION COST
- --------- ------------------------------------ ----------
<C> <S> <C>
REPURCHASE AGREEMENTS (77.3%):
$ 150,000 Barclays De Zoette Wedd, 6.00%,
7/1/98 (Collateralized by $150,249
various U.S. Government
Securities, 5.52% - 7.85%,
6/10/99 - 2/15/08, market value
$153,001)......................... $ 150,000
150,000 Donaldson, Lufkin & Jenrette, 5.85%,
7/1/98 (Collateralized by $150,892
various U.S. Government
Securities, 0.00% - 9.05%,
7/7/98 - 4/23/08, market value
$153,001)......................... 150,000
900,000 Goldman Sachs, 6.25%, 7/1/98
(Collateralized by $1,905,451
various U.S. Government
Securities, 5.10% - 8.58%,
1/1/08 - 2/1/38, market value
$918,000)......................... 900,000
150,000 HSBC Securities, 5.90%, 7/1/98
(Collateralized by $154,534
various U.S. Government
Securities, 0.00% - 6.53%,
7/1/98 - 4/15/08, market value
$153,004)......................... 150,000
25,000 HSBC Securities, 5.80%, 7/1/98
(Collateralized by $25,075 various
U.S. Government Securities,
0.00% - 10.35%, 7/6/98 - 12/10/15,
market value $25,504)............. 25,000
600,000 J.P. Morgan Securities, 6.10%,
7/1/98 (Collateralized by
$1,697,988 various U.S. Government
Securities, 8.50% - 9.00%,
3/15/09 - 2/15/28, market value
$618,000)......................... 600,000
300,000 J.P. Morgan Securities, 6.00%,
7/1/98 (Collateralized by $302,773
various U.S. Government
Securities, 0.00% - 9.55%,
7/6/98 - 4/17/28, market value
$306,000)......................... 300,000
150,000 Lehman Brothers Holdings, Inc.,
5.90%, 7/1/98 (Collateralized by
$159,325 various U.S. Government
Securities, 0.00% - 7.32%,
9/25/98 - 12/27/14, market value
$152,985)......................... 150,000
175,000 Prudential Securities, 6.10%, 7/1/98
(Collateralized by $190,099
various U.S. Government
Securities, 0.00% - 8.90%,
7/1/98 - 6/15/44, market value
$178,501)......................... 175,000
150,000 Societe Generale, 6.15%, 7/1/98
(Collateralized by $263,084
various U.S. Government
Securities, 8.50% - 9.00%,
11/15/17 - 10/15/26, market value
$157,220)......................... 150,000
</TABLE>
Continued
5
<PAGE> 8
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The One Group Family of Mutual Funds
Government Money Market Fund
- --------------------------------------------------------------------------------
SCHEDULE OF PORTFOLIO INVESTMENTS, CONTINUED JUNE 30, 1998
(Amounts in Thousands)
<TABLE>
<CAPTION>
PRINCIPAL AMORTIZED
AMOUNT SECURITY DESCRIPTION COST
- --------- ------------------------------------ ----------
<C> <S> <C>
REPURCHASE AGREEMENTS, CONTINUED:
$ 25,000 Societe Generale, 5.75%, 7/1/98
(Collateralized by $62,000 various
U.S. Government Securities,
7.46% - 7.76%, 7/1/25 - 2/1/27,
market value $26,732)............. $ 25,000
94,646 Westdeutsche Landesbank, 5.75%,
7/1/98 (Collateralized by $97,553
various U.S. Government
Securities, 6.50%, 6/1/28, market
value $97,575).................... 94,646
----------
Total Repurchase Agreements 2,869,646
----------
</TABLE>
<TABLE>
<CAPTION>
PRINCIPAL AMORTIZED
AMOUNT SECURITY DESCRIPTION COST
- --------- ------------------------------------ ----------
<C> <S> <C>
SHORT-TERM SECURITIES HELD AS COLLATERAL (0.7%):
$ 26,066 Paine Webber, Repurchase Agreement,
6.15%, 7/1/98 (Collateralized by
$26,162 various U.S. Government
Securities, 0.00% - 9.35%,
9/25/98 - 9/18/27, market value
$26,608).......................... $ 26,066
----------
Total Short-Term Securities Held as Collateral 26,066
----------
Total (Amortized Cost $3,771,120) (a) $3,771,120
==========
</TABLE>
- ------------
Percentages indicated are based on net assets of $3,712,252.
(a) Cost and value for federal income tax and financial reporting purposes are
the same.
(b) A portion of this security was loaned as of June 30, 1998.
* Securities having interest rates that reset weekly based on the U.S. Treasury
Bill auctions. The rate reflected on the Schedule of Portfolio Investments is
the rate in effect at June 30, 1998.
See notes to financial statements.
6
<PAGE> 9
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The One Group Family of Mutual Funds
- --------------------------------------------------------------------------------
STATEMENTS OF ASSETS AND LIABILITIES JUNE 30, 1998
(Amounts in Thousands, except per share amounts)
<TABLE>
<CAPTION>
TREASURY ONLY GOVERNMENT
MONEY MARKET MONEY MARKET
FUND FUND
------------- -------------
<S> <C> <C>
ASSETS:
Investments, at amortized cost.............................. $714,702 $ 875,408
Repurchase agreements, at cost.............................. -- 2,895,712
-------- ----------
Total.................................................. 714,702 3,771,120
Cash........................................................ 1 --
Interest receivable......................................... 7,812 9,642
Prepaid expenses and other assets........................... 9 7
-------- ----------
TOTAL ASSETS................................................ 722,524 3,780,769
-------- ----------
LIABILITIES:
Dividends payable........................................... 2,833 16,861
Payable to brokers for investments purchased................ -- 25,000
Payable for return of collateral received for securities on
loan...................................................... -- 26,066
Accrued expenses and other payables:
Investment advisory fees............................... 45 246
Administration fees.................................... 28 154
Other.................................................. 48 190
-------- ----------
TOTAL LIABILITIES........................................... 2,954 68,517
-------- ----------
NET ASSETS:
Capital..................................................... 719,663 3,712,374
Accumulated undistributed net realized gains (losses) from
investment transactions................................... (93) (122)
-------- ----------
NET ASSETS.................................................. $719,570 $3,712,252
======== ==========
Outstanding shares of beneficial interest................... 719,663 3,712,374
======== ==========
Net Asset Value:
Offering and redemption price per share................... $1.00 $1.00
======== ==========
</TABLE>
See notes to financial statements.
7
<PAGE> 10
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The One Group Family of Mutual Funds
- --------------------------------------------------------------------------------
STATEMENTS OF OPERATIONS FOR THE YEAR ENDED JUNE 30, 1998
(Amounts in Thousands)
<TABLE>
<CAPTION>
TREASURY ONLY GOVERNMENT
MONEY MARKET MONEY MARKET
FUND FUND
------------- -------------
<S> <C> <C>
INVESTMENT INCOME:
Interest income............................................. $34,333 $122,173
Income from securities lending.............................. 212 14
------- --------
TOTAL INCOME................................................ 34,545 122,187
------- --------
EXPENSES:
Investment advisory fees.................................... 519 1,735
Administration fees......................................... 324 1,085
Custodian and accounting fees............................... 31 105
Legal and audit fees........................................ 18 67
Organization costs.......................................... 4 20
Trustees' fees and expenses................................. 8 28
Transfer agent fees......................................... 10 11
Registration and filing fees................................ 36 186
Printing costs.............................................. 11 37
Other....................................................... 28 23
------- --------
TOTAL EXPENSES.............................................. 989 3,297
------- --------
Net Investment Income....................................... 33,556 118,890
------- --------
REALIZED GAINS (LOSSES) FROM INVESTMENT TRANSACTIONS:
Net realized gains (losses) from investment transactions.... (1) 62
------- --------
Change in net assets resulting from operations.............. $33,555 $118,952
======= ========
</TABLE>
See notes to financial statements.
8
<PAGE> 11
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The One Group Family of Mutual Funds
- --------------------------------------------------------------------------------
STATEMENTS OF CHANGES IN NET ASSETS
(Amounts in Thousands)
<TABLE>
<CAPTION>
TREASURY ONLY MONEY GOVERNMENT MONEY
MARKET FUND MARKET FUND
------------------------- -------------------------
<S> <C> <C> <C> <C>
YEAR YEAR YEAR YEAR
ENDED ENDED ENDED ENDED
JUNE 30, JUNE 30, JUNE 30, JUNE 30,
1998 1997 1998 1997
----------- ----------- ----------- -----------
FROM INVESTMENT ACTIVITIES:
OPERATIONS:
Net investment income........................ $ 33,556 $ 24,629 $ 118,890 $ 56,288
Net realized gains (losses) from investment
transactions............................... (1) (16) 62 (119)
----------- ----------- ----------- -----------
Change in net assets resulting from operations.... 33,555 24,613 118,952 56,169
----------- ----------- ----------- -----------
DISTRIBUTIONS TO SHAREHOLDERS:
From net investment income................... (33,556) (24,629) (118,890) (56,288)
----------- ----------- ----------- -----------
Change in net assets from shareholder
distributions................................... (33,556) (24,629) (118,890) (56,288)
----------- ----------- ----------- -----------
CAPITAL TRANSACTIONS:
Proceeds from shares issued.................. 2,224,094 1,603,666 10,068,682 4,075,935
Dividends reinvested......................... 2,709 3,409 16,460 11,375
Cost of shares redeemed...................... (1,988,092) (1,542,160) (7,456,390) (3,859,366)
----------- ----------- ----------- -----------
Change in net assets from share transactions...... 238,711 64,915 2,628,752 227,944
----------- ----------- ----------- -----------
Change in net assets.............................. 238,710 64,899 2,628,814 227,825
NET ASSETS:
Beginning of period.......................... 480,860 415,961 1,083,438 855,613
----------- ----------- ----------- -----------
End of period................................ $ 719,570 $ 480,860 $ 3,712,252 $ 1,083,438
=========== =========== =========== ===========
SHARE TRANSACTIONS:
Issued....................................... 2,224,095 1,603,664 10,068,682 4,075,935
Reinvested................................... 2,710 3,409 16,459 11,375
Redeemed..................................... (1,988,092) (1,542,160) (7,456,390) (3,859,366)
----------- ----------- ----------- -----------
Change in shares.................................. 238,713 64,913 2,628,751 227,944
=========== =========== =========== ===========
</TABLE>
See notes to financial statements.
9
<PAGE> 12
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The One Group Family of Mutual Funds
- --------------------------------------------------------------------------------
NOTES TO FINANCIAL STATEMENTS JUNE 30, 1998
1. ORGANIZATION:
The One Group (the "Trust") is registered under the Investment Company Act of
1940, as amended (the "1940 Act"), as an open-end investment company
established as a Massachusetts business trust. 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. The Funds are diversified mutual funds and
are not offered in multiple classes.
The Funds' investment objectives are as follows:
<TABLE>
<CAPTION>
FUND OBJECTIVE
---- ---------
<S> <C>
Treasury Only Money Market Fund High current income with liquidity and stability of
principal.
Government Money Market Fund High current income with liquidity and stability of
principal.
</TABLE>
2. SIGNIFICANT ACCOUNTING POLICIES:
The following is a summary of significant accounting policies followed by the
Trust in the preparation of its financial statements. The policies are in
conformity with generally accepted accounting principles. The preparation of
financial statements requires management to make estimates and assumptions
that affect the reported amounts of assets and liabilities at the date of the
financial statements and the reported amounts of income and expenses for the
period. Actual results could differ from those estimates.
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 397 days unless
such instrument is subject to a demand feature, or (b) maintain a
dollar-weighted average maturity which exceeds 90 days.
REPURCHASE AGREEMENTS
The Government Money Market Fund may invest in repurchase agreements
with institutions that are deemed by Banc One Investment Advisors
Corporation (the "Advisor") to be of good standing and creditworthy
under guidelines established by the Board of Trustees. Each repurchase
agreement is recorded at cost. The Fund requires that the securities
purchased in a repurchase agreement 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. Repurchase agreements are considered to be loans by a fund
under the 1940 Act.
SECURITY TRANSACTIONS AND RELATED INCOME
Security transactions are accounted for on a trade date basis. Net
realized gains or losses from 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.
Continued
10
<PAGE> 13
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The One Group Family of Mutual Funds
- --------------------------------------------------------------------------------
NOTES TO FINANCIAL STATEMENTS, CONTINUED JUNE 30, 1998
SECURITIES LENDING
To generate additional income, the Funds may lend up to 33% of
securities in which they are invested pursuant to agreements requiring
that the loan be continuously secured by cash, U.S. Government or U.S.
Government Agency securities, shares of an investment trust or mutual
fund, or any combination of cash and such securities as collateral equal
at all times to at least 100% of the market value plus accrued interest
on the securities lent. The Funds continue to earn interest on
securities lent while simultaneously seeking to earn interest on the
investment of collateral. Collateral is marked to market daily to
provide a level of collateral at least equal to the market value of
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 be made only to
borrowers deemed by the Advisor to be of good standing and creditworthy
under guidelines established by the Board of Trustees and when, in the
judgment of the Advisor, the consideration which can be earned currently
from such securities loans justifies the attendant risks. Loans are
subject to termination by the Funds or the borrower at any time, and
are, therefore, not considered to be illiquid investments. As of
June 30, 1998, the following Funds had securities with the following
amortized cost on loan (amounts in thousands):
<TABLE>
<CAPTION>
AMORTIZED COST AMORTIZED COST AMORTIZED COST
OF CASH OF NON-CASH OF LOANED
COLLATERAL COLLATERAL SECURITIES
-------------- -------------- --------------
<S> <C> <C> <C>
Treasury Only Money Market Fund......... -- $144,935 $137,437
Government Money Market Fund............ $26,066 -- $ 25,551
</TABLE>
The loaned securities were fully collateralized by cash and U.S.
Government securities as of June 30, 1998.
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 investment 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.
Distributions from net investment income and from net capital gains are
determined in accordance with income tax regulations which may differ
from generally accepted accounting principles. These differences are
primarily due to differing treatments for expiring capital loss
carryforwards and deferrals of certain losses. Permanent book and tax
basis differences, if any, have been reclassified among the components of
net assets.
FEDERAL INCOME TAXES
The Trust treats each Fund as a separate entity for Federal income tax
purposes. 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.
Continued
11
<PAGE> 14
- --------------------------------------------------------------------------------
The One Group Family of Mutual Funds
- --------------------------------------------------------------------------------
NOTES TO FINANCIAL STATEMENTS, CONTINUED JUNE 30, 1998
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. The Trust is registered to offer forty
series and five classes of shares: Fiduciary, Class A, Class B, Class C and
Service Class. Currently, the Trust consists of thirty-three active Funds,
and not all Funds offer all classes of shares. 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, ADMINISTRATIVE AND DISTRIBUTION AGREEMENTS:
The Trust and Advisor are parties to an investment advisory agreement under
which the Advisor is entitled to receive a fee, computed daily and paid
monthly, equal to 0.08% of the average daily net assets of each Fund.
The Trust and The One Group Services Company (the "Administrator"), a
wholly-owned subsidiary of The BISYS Group, Inc., are parties to an
administrative agreement under which the Administrator provides services for
a fee that is computed daily and paid monthly at an annual rate of 0.05% of
each Fund's average daily net assets. The Advisor also serves as
Sub-Administrator to each fund of the Trust, pursuant to an agreement between
the Administrator and the Advisor. Pursuant to this agreement, the Advisor
performs many of the Administrator's duties, for which the Advisor receives a
fee paid by the Administrator.
The One Group Services Company (the "Distributor") and the Trust are parties
to a distribution agreement under which shares of the Funds are sold on a
continuous basis. No compensation is paid to the Distributor for distribution
services for the Funds.
Certain officers of the Trust are affiliated with the Administrator. Such
officers receive no compensation from the Funds for serving in their
respective roles.
5. FEDERAL TAX INFORMATION (UNAUDITED):
At June 30, 1998 the following Funds have capital loss carryforwards which
are available to offset future capital gains, if any (amounts in thousands):
<TABLE>
<CAPTION>
FUND AMOUNT EXPIRES
- ---- ------ -------
<S> <C> <C>
Treasury Only Money Market Fund........................... $ 17 2004
Treasury Only Money Market Fund........................... 67 2005
Treasury Only Money Market Fund........................... 9 2006
Government Money Market Fund.............................. 4 2004
Government Money Market Fund.............................. 119 2005
</TABLE>
6. SUBSEQUENT EVENTS
On May 21, 1998, the Board of Trustees approved an agreement and plan of
reorganization and liquidation ("the Plan") with the Marquis Family of Funds
(the "Marquis Funds"). Under the Plan, the assets and liabilities of each
Marquis fund were transferred to a comparable One Group fund. Shares of the
comparable One Group fund were distributed to the Marquis shareholders in a
complete liquidation of each Marquis fund. A special Shareholder Meeting to
approve the plan was held on July 30, 1998. In a tax-free exchange on August
10, 1998, $69,923,110 of the Marquis Institutional Money Market Fund were
exchanged for 69,923,110 shares of the One Group Treasury Only Money Market
Fund.
12
<PAGE> 15
- --------------------------------------------------------------------------------
The One Group Family of Mutual Funds
- --------------------------------------------------------------------------------
FINANCIAL HIGHLIGHTS
<TABLE>
<CAPTION>
TREASURY ONLY MONEY MARKET FUND
--------------------------------------------------------
YEAR ENDED JUNE 30,
--------------------------------------------------------
1998 1997 1996 1995 1994
-------- -------- -------- -------- --------
<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 0.051 0.052 0.051 0.032
-------- -------- -------- -------- --------
Distributions:
Net investment income.................. (0.052) (0.051) (0.052) (0.051) (0.032)
-------- -------- -------- -------- --------
NET ASSET VALUE,
END OF PERIOD.......................... $ 1.000 $ 1.000 $ 1.000 $ 1.000 $ 1.000
======== ======== ======== ======== ========
Total Return............................. 5.30% 5.24% 5.38% 5.22% 3.23%
RATIOS/SUPPLEMENTARY DATA:
Net Assets at end of period (000)...... $719,570 $480,860 $415,961 $288,697 $217,725
Ratio of expenses to average net
assets.............................. 0.15% 0.15% 0.17% 0.20% 0.15%
Ratio of net investment income to
average net assets.................. 5.18% 5.12% 5.23% 5.14% 3.23%
Ratio of expenses to average net
assets*............................. 0.15% 0.15% 0.17% 0.21% 0.22%
Ratio of net investment income to
average net assets*................. 5.18% 5.12% 5.23% 5.13% 3.16%
</TABLE>
- ------------
* During the period, certain fees were voluntarily reduced. If such voluntary
fee reductions had not occurred, the ratios would have been as indicated.
See notes to financial statements.
13
<PAGE> 16
- --------------------------------------------------------------------------------
The One Group Family of Mutual Funds
- --------------------------------------------------------------------------------
FINANCIAL HIGHLIGHTS
<TABLE>
<CAPTION>
GOVERNMENT MONEY MARKET FUND
------------------------------------------------------------
YEAR ENDED JUNE 30,
------------------------------------------------------------
1998 1997 1996 1995 1994
---------- ---------- -------- -------- --------
<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................. 0.055 0.053 0.055 0.053 0.033
---------- ---------- -------- -------- --------
Distributions:
Net investment income................. (0.055) (0.053) (0.055) (0.053) (0.033)
---------- ---------- -------- -------- --------
NET ASSET VALUE,
END OF PERIOD......................... $ 1.000 $ 1.000 $ 1.000 $ 1.000 $ 1.000
========== ========== ======== ======== ========
Total Return............................ 5.64% 5.43% 5.61% 5.41% 3.40%
RATIOS/SUPPLEMENTARY DATA:
Net Assets at end of period (000)..... $3,712,252 $1,083,438 $855,613 $720,699 $692,253
Ratio of expenses to average net
assets............................. 0.15% 0.14% 0.18% 0.21% 0.11%
Ratio of net investment income to
average net assets................. 5.48% 5.31% 5.46% 5.28% 3.41%
Ratio of expenses to average net
assets*............................ 0.15% 0.14% 0.18% 0.22% 0.20%
Ratio of net investment income to
average net assets*................ 5.48% 5.31% 5.46% 5.27% 3.32%
</TABLE>
- ------------
* During the period, certain fees were voluntarily reduced. If such voluntary
fee reductions had not occurred, the ratios would have been as indicated.
See notes to financial statements.
14
<PAGE> 17
- --------------------------------------------------------------------------------
Report of Independent Accountants
- --------------------------------------------------------------------------------
THE ONE GROUP FAMILY OF MUTUAL FUNDS JUNE 30, 1998
To the Shareholders and Board of Trustees of
The One Group Family of Mutual Funds
In our opinion, the accompanying statements of assets and liabilities, including
the portfolios of investments, and related statements of operations and of
changes in net assets and the financial highlights present fairly, in all
material respects, the financial position of the Treasury Only Money Market Fund
and the Government Money Market Fund (two series of The One Group Family of
Mutual Funds), at June 30, 1998, the results of each of their operations for the
period then ended, the changes in each of their net assets for the periods
presented and the financial highlights for each of the periods presented, in
conformity with generally accepted accounting principles. These financial
statements and financial highlights (hereafter referred to as "financial
statements") are the responsibility of The One Group Family of Mutual Funds'
management; our responsibility is to express an opinion on these financial
statements based on our audits. We conducted our audits of these financial
statements in accordance with generally accepted auditing standards which
require that we plan and perform the audit to obtain reasonable assurance about
whether the financial statements are free of material misstatement. An audit
includes examining, on a test basis, evidence supporting the amounts and
disclosures in the financial statements, assessing the accounting principles
used and significant estimates made by management, and evaluating the overall
financial statement presentation. We believe that our audits, which included
confirmation of securities at June 30, 1998 by correspondence with the custodian
and brokers, provide a reasonable basis for the opinion expressed above.
PricewaterhouseCoopers LLP
August 18, 1998
15
<PAGE> 18
Important Customer Information.
Please Read:
Shares of The One Group:
- - are not deposits or obligations
of, or guaranteed by BANC One
CORPORATION or its affiliates
- - are not insured or guaranteed by the
FDIC or by any other governmental
agency or government-sponsored
agency of the federal government
or any state
- - are subject to investment risks,
including possible loss of the
principal amount invested.
Banc One Investment Advisors
Corporation, a registered investment
advisor and an indirect subsidiary of
BANC ONE CORPORATION, serves
as an investment advisor to The One
Group, for which it receives advisory
fees. The One Group is distributed by
The One Group Services Company,
3435 Stelzer Road, Columbus,
Ohio 43219, which is not affiliated
with BANC ONE CORPORATION and
is not a bank. Contact us at our web
site address: www.onegroup.com or
e-mail us at [email protected]
For more complete information on
any of The One Group Funds, includ-
ing management fees and expenses,
you may obtain a prospectus from
The One Group Services Company.
Read the prospectus carefully
before investing.
BANC ONE
INVESTMENT
ADVISORS
CORPORATION
[BANC ONE LOGO]
