<PAGE> 1
As filed with the Securities and Exchange Commission on August 26, 1998
Registration Nos. 2-95973 and 811-4236
SECURITIES AND EXCHANGE COMMISSION
Washington, DC 20549
FORM N-lA
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REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933 / X /
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POST-EFFECTIVE AMENDMENT NO. 45 / X /
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and
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REGISTRATION STATEMENT UNDER THE INVESTMENT COMPANY ACT / X /
OF 1940 ----
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AMENDMENT NO. 46 / X /
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THE ONE GROUP(R)
(Exact Name of Registrant as Specified in Charter)
1111 POLARIS PARKWAY
P.O. BOX 710211
COLUMBUS, OHIO 43271-0211
(Address of Principal Executive Offices)
(800) 480-4311
(Registrant's Telephone Number)
MARK S. REDMAN
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 East Broad Street, 18th Fl.
1301 K Street, N.W., Suite 800E Columbus, Ohio 43271-0158
Washington, D.C. 20005
Approximate Date of Proposed Public Offering: Immediately upon effectiveness
It is proposed that this filing will become effective (check appropriate box)
______ Immediately upon filing pursuant to paragraph (b)
<PAGE> 2
on (DATE) pursuant to paragraph(b)
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X 60 days after filing pursuant to paragraph(a)(1)
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on (DATE) pursuant to paragraph(a)(1)
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75 days after filing pursuant to paragraph(a)(2)
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on (DATE) pursuant to paragraph(a)(2) of Rule 485.
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If appropriate, check the following box:
----- post-effective amendment designates a new effective date for a
previously filed post- effective amendment.
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, 1998 was filed on
September __, 1998.
<PAGE> 3
THE ONE GROUP(R)
CROSS REFERENCE SHEET
<TABLE>
<CAPTION>
Form N-1A Part A Item Prospectus Caption
- --------------------- ------------------
<S> <C>
1. Cover Page Cover Page
2. Synopsis About the Fund
3. Financial Highlights
4. General Description About the Fund, More About the
of Registrant Fund, How To Do Business with The
One Group(R); Details About the Fund's
Investment Practices and Policies
5. Management of the Fund About the Fund; More About the Fund;
Organization & Management of the
Fund;
6. Capital Stock and Other About the Fund; Shareholder
Securities Information
7. Purchase of Securities How To Do Business with
Being Offered The One Group(R), Organization &
Management of the Fund
8. Redemption or Repurchase How To Do Business with
The One Group(R)
9. Pending Legal Proceedings Inapplicable
COMBINED STATEMENT OF
ADDITIONAL INFORMATION
FORM N-1A PART B ITEM CAPTION
- --------------------- -------
10. Cover Page Cover Page
11. Table of Contents Table of Contents
12. General Information and History The Trust; Additional Information -
Description of Shares
13. Investment Objective and Policies Investment Objectives and Policies
14. Management of the Fund Management of the Trust
</TABLE>
<PAGE> 4
<TABLE>
<S> <C>
15. Control Persons and Principal Additional Information -
Holders of Securities Miscellaneous
16. Investment Advisory and Other
Services Management of the Trust
17. Brokerage Allocation Management of the Trust - Portfolio
Transactions
18. Capital Stock and Other Securities Valuation; Additional
Information Regarding the Calculation
of Per Share Net Asset Value;
Additional Purchase and
Redemption Information;
Additional Information
19. Purchase, Redemption and Pricing of Valuation; Additional
Securities Being Offered Information Regarding the Calculation
Per Share Net Asset Value;
Additional Purchase and Redemption
Information; Management of the
Trust
20. Tax Status Investment Objectives and Policies -
Additional Tax Information Concerning
the Fund
21. Underwriters Management of the Trust - Distributor
22. Calculation of Performance Data Additional Information - Calculation of
Performance Data
23. Financial Statements To be incorporated by reference in a
485b filing
PART C
Information required to be included in Part C is set forth under the appropriate Item, so numbered, in Part C of the
Registration Statement.
</TABLE>
<PAGE> 5
THE ONE GROUP(R) FAMILY OF MUTUAL FUNDS
EQUITY FUNDS
COMBINED PROSPECTUS
OCTOBER __, 1998
THE ONE GROUP(R) ASSET ALLOCATION FUND
THE ONE GROUP(R) LARGE COMPANY GROWTH FUND
THE ONE GROUP(R) LARGE COMPANY VALUE FUND
THE ONE GROUP(R) GROWTH OPPORTUNITIES FUND
THE ONE GROUP(R) INTERNATIONAL EQUITY INDEX FUND
THE ONE GROUP(R) DISCIPLINED VALUE FUND
THE ONE GROUP(R) EQUITY INDEX FUND
THE ONE GROUP(R) INCOME EQUITY FUND
THE ONE GROUP(R) VALUE GROWTH FUND
THE ONE GROUP(R) SMALL CAPITALIZATION FUND
This prospectus describes ten mutual funds with a variety of investment
objectives, including total return, capital appreciation, current income, and
long-term capital growth. The information in this prospectus is important.
Please read it carefully before you invest, and save it for future reference.
PLEASE REMEMBER THAT SHARES OF THE FUNDS: O ARE NOT DEPOSITS OR
OBLIGATIONS OF, OR GUARANTEED BY BANC ONE CORPORATION OR ITS AFFILIATES; O ARE
NOT INSURED OR GUARANTEED BY THE FEDERAL DEPOSIT INSURANCE CORPORATION OR BY ANY
FEDERAL OR STATE GOVERNMENTAL AGENCY; O INVOLVE INVESTMENT RISK, INCLUDING THE
POSSIBLE LOSS OF THE PRINCIPAL AMOUNT INVESTED.
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION NOR HAS THE COMMISSION PASSED UPON THE ACCURACY OR
ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A
CRIMINAL OFFENSE.
<PAGE> 6
TABLE OF CONTENTS
A BRIEF PREVIEW OF THE FUNDS 1
ABOUT THE FUNDS 2
The One Group(R) Asset Allocation Fund 2
The One Group(R) Large Company Growth Fund 8
The One Group(R) Large Company Value Fund 14
The One Group(R) Growth Opportunities Fund 20
The One Group(R) International Equity Index Fund 26
The One Group(R) Disciplined Value Fund 31
The One Group(R) Equity Index Fund 36
The One Group(R) Income Equity Fund 42
The One Group(R) Value Growth Fund 48
The One Group(R) Small Capitalization Fund 54
MORE ABOUT THE FUNDS 60
HOW TO DO BUSINESS WITH THE ONE GROUP 62
Purchasing Fund Shares 62
Sales Charges 65
Sales Charge Reductions and Waivers 66
Exchanging Fund Shares 69
Redeeming Fund Shares 70
SHAREHOLDER INFORMATION 73
Voting Rights 73
Dividend Policies 75
Tax Treatment of the Funds 75
Tax Treatment of Shareholders 75
Shareholder Inquiries 76
ORGANIZATION AND MANAGEMENT OF THE FUNDS 76
The Funds 76
The Board of Trustees 76
The Advisor 76
The Sub-Advisor 77
The Distributor 77
The Administrator and Sub-Administrator 77
The Transfer Agent, Custodian and Sub-Custodian 78
DETAILS ABOUT THE FUNDS' INVESTMENT PRACTICES AND
POLICIES 79
Investment Practices 79
Investment Risks 82
Investment Policies 83
APPENDIX: DESCRIPTION OF RATINGS 85
<PAGE> 7
A BRIEF PREVIEW OF THE FUNDS
WHAT ARE THE GOALS OF THE ONE GROUP EQUITY FUNDS?
The Funds are designed for a variety of investment objectives, including total
return, capital appreciation, current income, and long-term capital growth. Each
Fund pursues a different objective and involves different risks. Please read
about each Fund before investing.
WHAT ARE THE FUNDS' INVESTMENT STRATEGIES?
The Funds normally will invest in a variety of equity securities, including
common stock. The Funds also may invest in debt securities and preferred stocks
which are convertible into common stock, and lend their portfolio securities .
Most of the Funds may invest in securities of foreign issuers.
WHAT ARE THE MAIN RISKS OF INVESTING IN THE FUNDS?
Equity securities such as those in which the Funds may invest are more volatile
and carry more risk than some other forms of investment. Accordingly, as with
all equity investments, you may lose money by investing in the Funds. The Funds
may invest in derivative securities. These securities may expose the Funds to
special risks. In addition, investments in foreign securities may expose the
Funds to risks that are different from investments in U.S. securities. An
investment in the Funds is not a deposit of BANC ONE CORPORATION or its
affiliates and is not insured or guaranteed by the Federal Deposit Insurance
Corporation or any other government agency. For more information about risks,
please read "More About the Funds" and "Investment Risks."
WHAT CLASSES OF SHARES ARE AVAILABLE?
The Funds currently offer four classes of Shares: Class A, Class B, Class C and
Class I. Class A, Class B and Class C shares are offered to the general public.
Class I 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. The section called "How To Do Business
With The One Group" will provide more information. Class I shares are not
available to Individual Retirement Accounts ("IRA").
HOW DO I PURCHASE AND REDEEM SHARES?
You may buy and redeem shares of the Funds on any day that the Funds are open
for business. Class C shares are not available for purchase in all of the Funds.
Purchase and redemption procedures are explained in greater detail in "How To Do
Business With The One Group." For additional information, call The One Group
Services Company at 1-800-480-4111.
HOW ARE DIVIDENDS PAID?
Generally, dividends are declared on the last business day of each month and are
distributed periodically on the first business day of each month. The One Group
International Equity Index Fund, however, distributes dividends annually. Any
capital gains are distributed at least annually. Distributions are paid in
additional shares of the same class unless you elect to take the payment in
cash. For a more detailed discussion of dividends, see "Dividend Policies."
WHO MANAGES THE FUNDS?
Banc One Investment Advisors Corporation ("Banc One Investment Advisors"), an
indirect subsidiary of BANC ONE CORPORATION, serves as the advisor of the Funds.
Banc One Investment Advisors is paid a fee for its services. Independence
International Associates, Inc. (the "Sub-Advisor") serves as Sub-Advisor to the
International Equity Index Fund. The Sub-Advisor's fees are paid by Banc One
Investment Advisors. A more detailed discussion regarding Banc One Investment
Advisors, its services and compensation can be found in the Prospectus under the
headings "The Advisor" and "Expense Summary." Additional information regarding
the Sub-Advisor is located in the Prospectus under the heading "The
Sub-Advisor."
1
<PAGE> 8
THE ONE GROUP(R) ASSET ALLOCATION FUND
INVESTMENT OBJECTIVE
The Fund seeks to provide total return while preserving capital.
PRINCIPAL INVESTMENT STRATEGY
The Fund invests in a combination of stocks, fixed income securities and money
market instruments. Banc One Investment Advisors will regularly review the
Fund's asset allocations and vary them over time to favor investments which they
believe will provide the most favorable total return. In making asset allocation
decisions, Banc One Investment Advisors will evaluate projections of risk,
market and economic conditions, volatility, yields and expected return. Because
the Fund seeks total return over the long term, Banc One Investment Advisors
will not attempt to time the market. Rather, asset allocation shifts will be
made gradually over time.
PORTFOLIO SECURITIES
The Fund normally will invest between 40% and 75% of its total assets in all
types of equity securities, including the stock of both large and small
capitalization companies, as well as growth and value securities. Up to 20% of
the equities held by the Fund may be foreign securities, including American
Depository Receipts. Between 25% and 60% of the Fund's total assets will be
invested in fixed income securities, including bonds, notes, and other debt
securities. The balance of the Fund's total assets will be invested in money
market instruments. For a list of all the securities in which the Fund may
invest, please read "Investment Practices."
RISK CONSIDERATIONS
The Fund invests in equity securities, which may increase or decrease in value.
As a result, the value of your investment in the Fund may increase or decrease
in value. The Fund also will invest in fixed income securities. The value of
these securities will change in response to interest rate changes and other
factors. This is especially true to the extent the Fund invests in debt
securities in the lowest investment grade category. Such securities have
speculative characteristics. Before you invest, please read "More About the
Funds" and "Investment Practices."
FUND MANAGEMENT
The Fund is managed by a team of portfolio managers, research analysts, and
other investment management professionals. Each team member makes
recommendations about the securities in the Fund. The research analysts provide
in-depth industry analysis and recommendations, while the portfolio managers
determine strategy, industry weightings, Fund holdings, and cash positions.
2
<PAGE> 9
SHAREHOLDER EXPENSES
<TABLE>
<CAPTION>
SHAREHOLDER TRANSACTION EXPENSES(1) CLASS A CLASS B CLASS C CLASS I
- ----------------------------------- ------- ------- ------- -------
<S> <C> <C> <C> <C>
Maximum Sales Charge Imposed on
Purchases (as a percentage of
offering price) 4.50% none none none
Maximum Contingent Deferred Sales
Charge (as a percentage of original
purchase price or redemption
proceeds, as applicable) none(2) 5.00% 1.00% none
Redemption Fees none none none none
Exchange Fees none none none none
ANNUAL OPERATING EXPENSES (as a
percentage of average daily net
assets)(3)
Investment Advisory Fees (after fee
waiver)(4) .55% .55% .55% .55%
12b-1 Fees (after fee waiver)(5) .25% 1.00% 1.00% none
Other Expenses .40% .40% .40% .40%
Total Fund Operating Expenses
(after fee waivers)(6) 1.20% 1.95% 1.95% .95%
</TABLE>
(1) If you buy or sell shares through a Shareholder Servicing Agent, you
may be charged separate transaction fees by the Shareholder Servicing
Agent. In addition, a $10.00 sub-minimum account fee may be applicable
and a $7.00 charge will be deducted from the redemption amounts paid by
wire.
(2) Except for purchases of $1 million or more. Please see "Sales Charges."
(3) Expense information has been restated to reflect current fees.
(4) Without the fee waiver, Investment Advisory Fees would be .65% for all
classes of shares.
(5) Due to 12b-1 fees, long-term Class A, Class B and Class C shareholders
may pay more than the equivalent of the maximum front-end sales charges
permitted by the rules of the National Association of Securities
Dealers. Without the voluntary waiver, 12b-1 fees would be .35% for
Class A shares.
(6) Total Operating Expenses have been revised to reflect fee waivers.
Without the voluntary reduction of Investment Advisory and 12b-1 fees,
Total Operating Expenses would be 1.40% for Class A shares, 2.05% for
Class B shares, 2.05% for Class C shares and 1.05% for Class I shares.
EXAMPLE
An investor would pay the following expenses on a $1,000 investment in the Fund,
assuming: (1) payment of the maximum sales charge; (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 $57 $81 $108 $184
Class A (without fee waivers) $59 $87 $118 $205
Class B $70 $91 $125 $208
Class B (without fee waiver) $71 $94 $130 $221
Class C $30 $61 $105 $227
Class C (without fee waiver) $31 $64 $110 $238
Class I $10 $30 $ 53 $117
Class I (without fee waiver) $11 $33 $ 58 $128
</TABLE>
Assuming no redemption the end of each time period, the dollar amounts in the
above example would be as follows:
3
<PAGE> 10
<TABLE>
<CAPTION>
1 YEAR 3 YEARS 5 YEARS 10 YEARS
------ ------- ------- --------
<S> <C> <C> <C> <C>
Class A $57 $81 $108 $184
Class A (without fee waivers) $59 $87 $118 $205
Class B $20 $61 $105 $208
Class B (without fee waiver) $21 $64 $110 $221
Class C $20 $61 $105 $227
Class C (without fee waiver) $21 $64 $110 $238
Class I $10 $30 $ 53 $117
Class I (without fee waiver) $11 $33 $ 58 $128
</TABLE>
Class B shares automatically convert to Class A shares after eight (8) years.
Therefore, the "10 years" examples above reflect this conversion.
These examples are designed to assist you in understanding the various costs and
expenses that may be directly or indirectly paid by investors in the Fund. THESE
EXAMPLES SHOULD NOT BE CONSIDERED A REPRESENTATION OF PAST OR FUTURE EXPENSES
AND ACTUAL EXPENSES MAY BE GREATER OR LESS THAN THOSE SHOWN.
4
<PAGE> 11
THE ONE GROUP(R) ASSET ALLOCATION FUND FINANCIAL HIGHLIGHTS
The Financial Highlights are intended to help you understand the Fund's
financial performance for the past 10 years, or since inception if less than 10
years. The total returns in the table represent the rate a shareholder would
have earned on an investment in the Fund (assuming reinvestment of all dividends
and distributions). This information has been derived from financial statements
audited by PricewaterhouseCoopers, LLP, whose report, along with the Fund's
financial statements, is incorporated by reference in the Statement of
Additional Information, which is available upon request.
<TABLE>
<CAPTION>
YEAR ENDED JUNE 30,
-------------------
CLASS I 1998 1997 1996 1995 1994 1993(a)
--------------- ---- ---- ---- ---- ---- -------
<S> <C> <C> <C> <C> <C> <C>
NET ASSET VALUE, BEGINNING OF PERIOD $ 11.71 $ 10.73 $ 9.64 $ 10.06 $ 10.00
Investment Activities
Net investment income 0.43 0.41 0.38 0.29 0.07
Net realized and unrealized gains
(losses) from investments 1.81 1.16 1.12 (0.38) 0.06
------- -------- -------- ------- -------
Total from Investment Activities 2.24 1.57 1.50 (0.09) 0.13
------- -------- -------- ------- -------
Distributions
From net investment income (0.43) (0.41) (0.37) (0.29) (0.07)
From net realized gains (0.54) (0.18) (0.04) (0.04) --
------- -------- -------- ------- -------
Total Distributions (0.97) (0.59) (0.41) (0.33) (0.07)
------- -------- -------- ------- -------
NET ASSET VALUE, END OF PERIOD $ 12.98 $ 11.71 $ 10.73 $ 9.64 $ 10.06
======= ======== ======== ======= =======
Total Return 20.16% 14.87% 16.06% (1.01)% 5.45%(b)
RATIOS/SUPPLEMENTARY DATA:
Net Assets at end of period (000) $94,971 $ 50,323 $ 37,658 $42,751 $30,441
Ratio of expenses to average net
assets 0.80% 0.94% 1.06% 1.06% 0.90%(b)
Ratio of net investment income to
average net assets 3.55% 3.58% 3.72% 2.91% 3.03%(b)
Ratio of expenses to average net
assets* 1.00% 1.19% 1.31% 1.33% 1.34%(b)
Ratio of net investment income to
average net assets* 3.35% 3.33% 3.47% 2.64% 2.59%(b)
Portfolio turnover(c) 80.96% 73.38% 115.36% 56.55% 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)
Portfolio turnover is calculated on the basis of the Fund as a whole without
distinguishing among the classes of shares issued.
5
<PAGE> 12
<TABLE>
<CAPTION>
YEAR ENDED JUNE 30,
-------------------
CLASS A 1998 1997 1996 1995 1994 1993(a)
------- ---- ---- ---- ---- ---- -------
<S> <C> <C> <C> <C> <C> <C>
NET ASSET VALUE, BEGINNING OF PERIOD $ 11.72 $ 10.74 $ 9.65 $10.06 $10.00
Investment Activities
Net investment income 0.39 0.37 0.35 0.27 0.05
Net realized and unrealized gains
(losses) from investments 1.83 1.16 1.13 (0.38) 0.07
Total from Investment Activities 2.22 1.53 1.48 (0.11) 0.12
------- ------- ------- ------ ------
Distributions From net investment
income (0.40) (0.37) (0.34) (0.26) (0.06)
In excess of net investment income -- -- (0.01) -- --
From net realized gains (0.54) (0.18) (0.04) (0.04) --
------- ------- ------- ------ ------
Total Distributions (0.94) (0.55) (0.39) (0.30) (0.06)
------- ------- ------- ------ ------
NET ASSET VALUE, END OF PERIOD $ 13.00 $ 11.72 $ 10.74 $ 9.65 $10.06
======= ======= ======= ====== ======
Total Return (Excludes Sales Charge) 19.85% 14.48% 15.76% (1.19)% 5.23%(b)
RATIOS/SUPPLEMENTARY DATA:
Net Assets at end of period (000) $31,379 $17,849 $ 4,745 $1,691 $ 571
Ratio of expenses to average net
assets 1.05% 1.19% 1.31% 1.33 % 1.15%(b)
Ratio of net investment income to
average net assets 3.30% 3.33% 3.57% 2.68 % 2.84%(b)
Ratio of expenses to average net
assets* 1.34% 1.54% 1.66% 1.67 % 1.62%(b)
Ratio of net investment income to
average net assets* 3.01% 2.98% 3.22% 2.34 % 2.37%(b)
Portfolio turnover(c) 80.96% 73.38% 115.36% 56.55 % 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)
The Fund commenced operations on April 2, 1993. (b) Annualized. (c) Portfolio
turnover is calculated on the basis of the Fund as a whole without
distinguishing among the classes of shares issued.
6
<PAGE> 13
THE ONE GROUP(R) ASSET ALLOCATION FUND FINANCIAL HIGHLIGHTS
<TABLE>
<CAPTION>
YEAR ENDED JUNE 30,
-------------------
CLASS B 1998 1997 1996 1995 1994(a)
------- ---- ---- ---- ---- -------
<S> <C> <C> <C> <C> <C>
NET ASSET VALUE, BEGINNING OF PERIOD $ 11.76 $ 10.76 $ 9.67 $10.37
------- ------- ------- ------
Investment Activities
Net investment income 0.30 0.28 0.27 0.08
Net realized and unrealized gains
(losses) from investments 1.83 1.18 1.14 (0.70)
------- ------- ------- ------
Total from Investment Activities 2.13 1.46 1.41 (0.62)
------- ------- ------- ------
Distributions From net investment
income (0.31) (0.28) (0.27) (0.08)
In excess of net investment income -- -- (0.01) --
From net realized gains (0.54) (0.18) (0.04) --
------- ------- ------- ------
Total Distributions (0.85) (0.46) (0.32) (0.08)
------- ------- ------- ------
NET ASSET VALUE, END OF PERIOD $ 13.04 $ 11.76 $ 10.76 $ 9.67
======= ======= ======= ======
Total Return (Excludes Sales Charge) 18.90% 13.79% 14.90% (5.98)%(b)
RATIOS/SUPPLEMENTARY DATA:
Net Assets at end of period (000) $43,900 $18,575 $ 3,019 $1,862
Ratio of expenses to average net
assets 1.81% 1.94% 2.07% 2.40%(c)
Ratio of net investment income to
average net assets 2.54% 2.58% 2.77% 1.99%(c)
Ratio of expenses to average net
assets* 2.01% 2.19% 2.31% 2.40%(c)
Ratio of net investment income to
average net assets* 2.34% 2.33% 2.52% 1.99%(c)
Portfolio turnover(d) 80.96% 73.38% 115.36% 56.55%
</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 commenced offering shares on January 14, 1994. (b) Not annualized.
(c) Annualized. (d) Portfolio turnover is calculated on the basis of the Fund
as a whole without distinguishing among the classes of shares issued.
7
<PAGE> 14
THE ONE GROUP(R) LARGE COMPANY GROWTH FUND
INVESTMENT OBJECTIVE
The Fund seeks long-term capital appreciation and growth of income by investing
primarily in equity securities.
INVESTMENT STRATEGY
The Fund invests primarily in equity securities of large, well-established
companies. The weighted average capitalization of companies in which the Fund
invests normally will exceed the market median capitalization of the Standard &
Poor's 500 Composite Stock Price Index ("S&P 500).*
PORTFOLIO SECURITIES
The Fund normally invests at least 65% of its total assets in the equity
securities of companies described above, including common stock, warrants and
rights to buy common stocks. The remainder of the Fund's total assets may be
invested in nonconvertible fixed income securities, options and futures,
repurchase agreements, and securities issued by the U.S. government and its
agencies and instrumentalities. For daily cash management purposes, the Fund may
invest in repurchase agreements and cash equivalents. For a list of all the
securities in which the Fund may invest, please read "Investment Practices."
RISK CONSIDERATIONS
The Fund invests in equity securities, which may increase or decrease in value.
As a result, the value of your investment in the Fund may increase or decrease
in value. The Fund also may invest in fixed income securities. The value of
these securities will change in response to interest rate changes and other
factors. This is especially true to the extent the Fund invests in debt
securities with speculative characteristics. Before you invest, please read
"More About the Funds" and "Investment Practices."
FUND MANAGEMENT
The Fund is managed by a team of portfolio managers, research analysts, and
other investment management professionals. Each team member makes
recommendations about the securities in the Fund. The research analysts provide
in-depth industry analysis and recommendations, while the portfolio managers
determine strategy, industry weightings, Fund holdings, and cash positions.
* "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.
8
<PAGE> 15
SHAREHOLDER EXPENSES
<TABLE>
<CAPTION>
SHAREHOLDER TRANSACTION EXPENSES(1) CLASS A CLASS B CLASS C CLASS I
- ----------------------------------- ------- ------- ------- -------
<S> <C> <C> <C> <C>
Maximum Sales Charge Imposed on
Purchases (as a percentage of
offering price) 4.50% none none none
Maximum Contingent Deferred Sales
Charge (as a percentage of
original purchase price or
redemption proceeds, as applicable) none(2) 5.00% 1.00% none
Redemption Fees none none none none
Exchange Fees none none none none
ANNUAL OPERATING EXPENSES (as a
percentage of average daily net
assets)(3)
Investment Advisory Fees .74% .74% .74% .74%
12b-1 Fees (after fee waiver)(4) .25% 1.00% 1.00% none
Other Expenses .26% .26% .26% .26%
Total Fund Operating Expenses
(after fee waiver)(5) 1.25% 2.00% 2.00% 1.00%
</TABLE>
(1) If you buy or sell shares through a Shareholder Servicing Agent, you
may be charged separate transaction fees by the Shareholder Servicing
Agent. In addition, a $10.00 sub-minimum account fee may be applicable
and a $7.00 charge will be deducted from redemption amounts paid by
wire.
(2) Except for purchases of $1 million or more. Please see "Sales Charges."
(3) Expense information has been restated to reflect current fees.
(4) Due to 12b-1 fees, long-term Class A, Class B and Class C shareholders
may pay more than the equivalent of the maximum front-end sales charges
permitted by the rules of the National Association of Securities
Dealers. Without the voluntary waiver, 12b-1 fees would be .35% for
Class A shares.
(5) Without the voluntary reduction of 12b-1 fees, Total Operating Expenses
would be 1.35% for Class A shares.
EXAMPLE
An investor would pay the following expenses on a $1,000 investment in the Fund,
assuming: (1) payment of the maximum sales charge; (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 $57 $83 $111 $189
Class A (without fee waiver) $58 $86 $116 $200
Class B $70 $93 $128 $213
Class C $30 $63 $108 $233
Class I $10 $32 $ 55 $122
</TABLE>
9
<PAGE> 16
Assuming no redemption at the end of the periods, 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 $57 $83 $111 $189
Class A (without fee waiver) $58 $86 $116 $200
Class B $20 $63 $108 $213
Class C $20 $63 $108 $233
Class I $10 $32 $ 55 $122
</TABLE>
Class B shares automatically convert to Class A shares after eight (8) years.
Therefore, the "10 years" examples above reflect this conversion.
These examples are designed to assist you in understanding the various costs and
expenses that may be directly or indirectly paid by investors in the Fund. THESE
EXAMPLES SHOULD NOT BE CONSIDERED A REPRESENTATION OF PAST OR FUTURE EXPENSES
AND ACTUAL EXPENSES MAY BE GREATER OR LESS THAN THOSE SHOWN.
10
<PAGE> 17
THE ONE GROUP(R) LARGE COMPANY GROWTH FUND FINANCIAL HIGHLIGHTS
The Financial Highlights are intended to help you understand the Fund's
financial performance for the past 10 years, or since inception if less than 10
years. The total returns in the table represent the rate a shareholder would
have earned on an investment in the Fund (assuming reinvestment of all dividends
and distributions). This information has been derived from financial statements
audited by PricewaterhouseCoopers, LLP, whose report, along with the Fund's
financial statements, is incorporated by reference in the Statement of
Additional Information, which is available upon request.
<TABLE>
<CAPTION>
YEAR ENDED JUNE 30,
-------------------
CLASS I 1998 1997 1996 1995 1994 1993 1992(b)
--------------- ---- ---- ---- ---- ---- ---- -------
<S> <C> <C> <C> <C> <C> <C> <C>
NET ASSET VALUE, BEGINNING
OF PERIOD $ 15.44 $ 13.47 $ 11.32 $ 10.92 $ 9.85 $ 10.00
---------- -------- -------- -------- ------- -------
Investment Activities
Net investment income 0.12 0.18 0.20 0.20 0.23 0.08
Net realized and unrealized
gains (losses) from
investments 4.79 2.14 3.04 0.67 1.12 (0.16)
---------- -------- -------- -------- ------- -------
Total from Investment
Activities 4.91 2.32 3.24 0.87 1.35 (0.08)
---------- -------- -------- -------- ------- -------
Distributions
From net investment income (0.11) (0.18) (0.20) (0.20) (0.23) (0.07)
From net realized gains (0.80) (0.17) (0.89) (0.27) (0.05) --
---------- -------- -------- -------- ------- -------
Total Distributions (0.91) (0.35) (1.09) (0.47) (0.28) (0.07)
---------- -------- -------- -------- ------- -------
NET ASSET VALUE, END OF
PERIOD $ 19.44 $ 15.44 $ 13.47 $ 11.32 $ 10.92 $ 9.85
========== ======== ======== ======== ======= =======
Total Return 33.11% 17.36% 21.85% 8.04% 13.92% (0.80)%(c)
RATIOS/SUPPLEMENTARY DATA:
Net Assets at end of
period (000) $1,142,864 $745,986 $531,595 $150,035 $41,317 $25,019
Ratio of expenses to
average net assets 0.99% 0.96% 1.00% 0.78% 0.39% 0.30%(c)
Ratio of net investment
income to average net
assets 0.69% 1.20% 1.72% 1.87% 2.24% 2.37%(c)
Ratio of expenses to
average net assets* 0.99% 0.99% 1.00% 1.13% 1.43% 1.49%(c)
Ratio of net investment
income to average net
assets* 0.69% 1.17% 1.72% 1.52% 1.21% 1.12%(c)
Portfolio turnover(a) 57.17% 35.51% 14.22% 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)
Portfolio turnover is calculated on the basis of the Fund as a whole without
distinguishing among the classes of shares issued. (b) The Fund commenced
operations on February 28, 1992. (c) Annualized.
11
<PAGE> 18
<TABLE>
<CAPTION>
YEAR ENDED JUNE 30,
-------------------
CLASS A 1998 1997 1996 1995 1994(a)
------- ---- ---- ---- ---- -------
<S> <C> <C> <C> <C> <C>
NET ASSET VALUE, BEGINNING
OF PERIOD $ 15.83 $ 13.83 $ 11.62 $ 11.78
------- ------- ------- -------
Investment Activities
Net investment income 0.08 0.14 0.17 0.04
Net realized and unrealized
gains (losses) from investments 4.88 2.17 3.10 (0.16)
-------- ------- ------- -------
Total from Investment
Activities 4.96 2.31 3.27 (0.12)
-------- ------- ------- -------
Distributions
From net investment income (0.07) (0.14) (0.16) (0.04)
In excess of net investment
income -- -- (0.01) --
From net realized gains (0.80) (0.17) (0.89) --
-------- ------- ------- -------
Total Distributions (0.87) (0.31) (1.06) (0.04)
-------- ------- ------- -------
NET ASSET VALUE, END OF PERIOD $ 19.92 $ 15.83 $ 13.83 $ 11.62
======== ======= ======= =======
Total Return (Excludes Sales
Charge) 32.57% 16.85% 21.52% (1.02)%(b)
RATIOS/SUPPLEMENTARY DATA:
Net Assets at end of period (000) $125,910 $75,114 $27,428 $ 368
Ratio of expenses to average
net assets 1.24% 1.21% 1.26% 1.25%(c)
Ratio of net investment income
to average net assets 0.44% 0.95% 1.49% 1.78%(c)
Ratio of expenses to average
net assets* 1.32% 1.34% 1.36% 1.35%(c)
Ratio of net investment income
to average net assets* 0.36% 0.82% 1.39% 1.68%(c)
Portfolio turnover(d) 57.17% 35.51% 14.22% 9.04%
</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 January 1, 1994. (b) Not annualized. (c)
Annualized. (d) Portfolio turnover is calculated on the basis of the Fund as
a whole without distinguishing among the classes of shares issued.
12
<PAGE> 19
THE ONE GROUP(R) LARGE COMPANY GROWTH FUND FINANCIAL HIGHLIGHTS
<TABLE>
<CAPTION>
YEAR ENDED JUNE 30,
-------------------
CLASS B 1998 1997 1996 1995 1994(a)
------- ---- ---- ---- ---- -------
<S> <C> <C> <C> <C> <C>
NET ASSET VALUE, BEGINNING OF PERIOD $ 15.63 $ 13.63 $11.47 $ 11.57
-------- ------- ------ -------
Investment Activities
Net investment income (loss) (0.04) 0.05 0.09 0.03
Net realized and unrealized gains
(losses) from investments 4.82 2.17 3.06 (0.10)
-------- ------- ------ -------
Total from Investment Activities 4.78 2.22 3.15 (0.07)
-------- ------- ------ -------
Distributions From net investment
income -- (0.05) (0.09) (0.03)
In excess of net investment income -- -- (0.01) --
From net realized gains (0.80) (0.17) (0.89) --
-------- ------- ------ -------
Total Distributions (0.80) (0.22) (0.99) (0.03)
-------- ------- ------ -------
NET ASSET VALUE, END OF PERIOD $ 19.61 $ 15.63 $13.63 $ 11.47
======== ======= ====== =======
Total Return (Excludes Sales Charge) 31.74 % 16.41% 20.65% (0.66)%(b)
RATIOS/SUPPLEMENTARY DATA:
Net Assets at end of period (000) $132,268 $56,261 $6,918 $ 334
Ratio of expenses to average net
assets 2.00 % 1.96% 2.01% 1.99%(c)
Ratio of net investment income
(loss) to average net assets (0.33)% 0.20% 0.74% 0.96%(c)
Ratio of expenses to average net
assets* 2.00 % 1.99% 2.01% 1.99%(c)
Ratio of net investment income
(loss) to average net assets* (0.33)% 0.17% 0.74% 0.96%(c)
Portfolio turnover(d) 57.17 % 35.51% 14.22% 9.04%
</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 Shares commenced offering on January 14, 1994. (b) Not annualized.
(c) Annualized. (d) Portfolio turnover is calculated on the basis of the Fund
as a whole without distinguishing among the classes of shares issued.
13
<PAGE> 20
THE ONE GROUP(R) LARGE COMPANY VALUE FUND
INVESTMENT OBJECTIVE
The Fund seeks capital appreciation with the incidental goal of achieving
current income by investing primarily in equity securities.
INVESTMENT STRATEGY
The Fund invests in equity securities of large capitalization companies that are
believed to be selling below their long-term investment values. The weighted
average capitalization of companies in which the Fund invests normally will
exceed the market median capitalization of the Standard & Poor's 500 Composite
Stock Price Index ("S&P 500).* The Fund also may invest in the stock of
companies which have "breakup values" well in excess of current market values or
which have uniquely undervalued corporate assets.
PORTFOLIO SECURITIES
The Fund normally invests at least 65% of its total assets in the equity
securities of companies described above, including common stocks and debt
securities and preferred stock that is convertible to common stock. A portion of
the Fund's assets will be held in cash equivalents. For a list of all the
securities in which the Fund may invest, please read "Investment Practices."
RISK CONSIDERATIONS
The Fund invests in equity securities, which may increase or decrease in value.
As a result, the value of your investment in the Fund may increase or decrease
in value. Before you invest, please read "More About the Funds" and "Investment
Practices."
FUND MANAGEMENT
The Fund is managed by a team of portfolio managers, research analysts, and
other investment management professionals. Each team member makes
recommendations about the securities in the Fund. The research analysts provide
in-depth industry analysis and recommendations, while the portfolio managers
determine strategy, industry weightings, Fund holdings, and cash positions.
* "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.
14
<PAGE> 21
SHAREHOLDER EXPENSES
<TABLE>
<CAPTION>
SHAREHOLDER TRANSACTION EXPENSES(1) CLASS A CLASS B CLASS C CLASS I
- ----------------------------------- ------- ------- ------- -------
<S> <C> <C> <C> <C>
Maximum Sales Charge Imposed on
Purchases (as a percentage of
offering price) 4.50% none none none
Maximum Contingent Deferred Sales
Charge (as a percentage of original
purchase price or redemption
proceeds, as applicable) none(2) 5.00% 1.00% none
Redemption Fees none none none none
Exchange Fees none none none none
ANNUAL OPERATING EXPENSES (as a
percentage of average daily net
assets)(3)
Investment Advisory Fees .74% .74% .74% .74%
12b-1 Fees (after fee waiver)(4) .25% 1.00% 1.00% none
Other Expenses .26% .26% .26% .26%
Total Fund Operating Expenses
(after fee waiver)(5) 1.25% 2.00% 2.00% 1.00%
</TABLE>
(1) If you buy or sell shares through a Shareholder Servicing Agent, you
may be charged separate transaction fees by the Shareholder Servicing
Agent. In addition, a $10.00 sub-minimum account fee may be applicable
and a $7.00 charge will be deducted from redemption amounts paid by
wire.
(2) Except for purchases of $1 million or more. Please see "Sales Charges."
(3) Expense information has been restated to reflect current fees.
(4) Due to 12b-1 fees, long-term Class A, Class B and Class C shareholders
may pay more than the equivalent of the maximum front-end sales charges
permitted by the rules of the National Association of Securities
Dealers. Without the voluntary waiver, 12b-1 fees would be .35% for
Class A shares.
(5) Without the voluntary reduction of 12b-1 fees, Total Operating Expenses
would be 1.35% for Class A shares.
EXAMPLE
An investor would pay the following expenses on a $1,000 investment in the Fund,
assuming: (1) payment of the maximum sales charge; (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 $57 $83 $111 $189
Class A (without fee waiver) $58 $86 $116 $200
Class B $70 $93 $128 $213
Class C $30 $63 $108 $233
Class I $10 $32 $ 55 $122
</TABLE>
Assuming no redemption at the end of the period, the dollar amounts in the above
example would be as follows:
15
<PAGE> 22
<TABLE>
<CAPTION>
1 YEAR 3 YEARS 5 YEARS 10 YEARS
------ ------- ------- --------
<S> <C> <C> <C> <C>
Class A $57 $83 $111 $189
Class A (without fee waiver) $58 $86 $116 $200
Class B $20 $63 $108 $213
Class C $20 $63 $108 $233
Class I $10 $32 $ 55 $122
</TABLE>
Class B shares automatically convert to Class A shares after eight (8) years.
Therefore, the "10 years" examples above reflect this conversion.
These examples are designed to assist you in understanding the various costs and
expenses that may be directly or indirectly paid by investors in the Fund. THESE
EXAMPLES SHOULD NOT BE CONSIDERED A REPRESENTATION OF PAST OR FUTURE EXPENSES
AND ACTUAL EXPENSES MAY BE GREATER OR LESS THAN THOSE SHOWN.
16
<PAGE> 23
THE ONE GROUP(R) LARGE COMPANY VALUE FUND FINANCIAL HIGHLIGHTS
The Financial Highlights are intended to help you understand the Fund's
financial performance for the past 10 years, or since inception if less than 10
years. The total returns in the table represent the rate a shareholder would
have earned on an investment in the Fund (assuming reinvestment of all dividends
and distributions). This information has been derived from financial statements
audited by PricewaterhouseCoopers, LLP, whose report, along with the Fund's
financial statements, is incorporated by reference in the Statement of
Additional Information, which is available upon request.
<TABLE>
<CAPTION>
YEAR ENDED JUNE 30,
-------------------
CLASS I 1998 1997 1996 1995 1994 1993 1992 1991(c)
------- ---- ---- ---- ---- ---- ---- ---- -------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
NET ASSET VALUE, BEGINNING
OF PERIOD $ 12.83 $ 12.87 $ 11.34 $ 11.64 $ 11.34 $ 10.07 $ 10.00
-------- -------- -------- -------- -------- ------- -------
Investment Activities
Net investment income 0.27 0.31 0.31 0.20 0.18 0.21 0.08
Net realized and unrealized
gains (losses) from
investments 3.01 1.20 2.18 (0.01) 0.58 1.34 0.07
-------- -------- -------- -------- -------- ------- -------
Total from Investment
Activities 3.28 1.51 2.49 0.19 0.76 1.55 0.15
-------- -------- -------- -------- -------- ------- -------
Distributions
From net investment income (0.26) (0.31) (0.32) (0.19) (0.18) (0.21) (0.08)
From net realized gains (1.06) (1.24) (0.64) (0.30) (0.28) (0.07) --
-------- -------- -------- -------- -------- ------- -------
Total Distributions (1.32) (1.55) (0.96) (0.49) (0.46) (0.28) (0.08)
-------- -------- -------- -------- -------- ------- -------
NET ASSET VALUE, END OF PERIOD $ 14.79 $ 12.83 $ 12.87 $ 11.34 $ 11.64 $ 11.34 $ 10.07
======== ======== ======== ======== ======== ======= =======
Total Return 27.10% 12.71% 23.42% (1.59)% 6.73% 15.53% 4.47%(b)
RATIOS/SUPPLEMENTARY DATA:
Net Assets at end of period
(000) $686,156 $584,527 $365,376 $169,127 $132,833 $62,075 $36,237
Ratio of expenses to average
net assets 0.97% 0.97% 1.00% 0.95% 0.86% 0.82% 0.52%(b)
Ratio of net investment
income to average net assets 1.99% 2.43% 2.74% 1.72% 1.62% 1.91% 2.48%(b)
Ratio of expenses to average net
assets* 0.97% 0.98% 1.01% 1.02% 1.12% 1.34% 1.26%(b)
Ratio of net investment income
to average net assets* 1.99% 2.42% 2.73% 1.65% 1.36% 1.39% 1.74%(b)
Portfolio turnover(a) 77.05% 186.84% 203.13% 111.72% 51.75% 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)
Portfolio turnover is calculated on the basis of the Fund as a whole without
distinguishing among the classes of shares issued. (b) Annualized. (c) The
Fund commenced operations on March 1, 1991.
17
<PAGE> 24
<TABLE>
<CAPTION>
YEAR ENDED JUNE 30,
-------------------
CLASS A 1998 1997 1996 1995 1994 1993 1992(c)
------- ---- ---- ---- ---- ---- ---- -------
<S> <C> <C> <C> <C> <C> <C> <C>
NET ASSET VALUE, BEGINNING OF PERIOD $ 12.87 $ 12.89 $11.34 $11.64 $11.33 $11.42
Investment Activities
Net investment income 0.23 0.27 0.28 0.17 0.16 0.07
Net realized and unrealized gains
(losses) from investments 3.04 1.22 2.20 (0.01) 0.59 (0.08)
------- ------- ------ ------ ------ ------
Total from Investment Activities 3.27 1.49 2.48 0.16 0.75 (0.01)
------- ------- ------ ------ ------ ------
Distributions
From net investment income (0.23) (0.27) (0.27) (0.16) (0.16) (0.08)
In excess of net investment income -- -- (0.02) -- -- --
From net realized gains (1.06) (1.24) (0.64) (0.30) (0.28) --
------- ------- ------ ------ ------ ------
Total Distributions (1.29) (1.51) (0.93) (0.46) (0.44) (0.08)
------- ------- ------ ------ ------ ------
NET ASSET VALUE, END OF PERIOD $ 14.85 $ 12.87 $12.89 $11.34 $11.64 $11.33
======= ======= ====== ====== ====== ======
Total Return (Excludes Sales Charge) 26.90% 12.40% 22.64% 1.35% 6.64% (0.33%)(c)
RATIOS/SUPPLEMENTARY DATA:
Net Assets at end of period (000) $14,832 $ 9,380 $3,481 $ 698 $ 451 $ 12
Ratio of expenses to average net
assets 1.22% 1.22% 1.25% 1.20% 1.10% 1.02%(c)
Ratio of net investment income
to average net assets 1.72% 2.18% 2.52% 1.57% 1.41% 2.12%(c)
Ratio of expenses to average
net assets* 1.31% 1.33% 1.37% 1.37% 1.50% 1.22%(c)
Ratio of net investment income
to average net assets* 1.63% 2.07% 2.41% 1.40% 1.01% 1.92%(c)
Portfolio turnover(a) 77.05% 186.84% 203.13% 111.72% 51.75% 55.90%
</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)
Portfolio turnover is calculated on the basis of the Fund as a whole without
distinguishing among the classes of shares issued. (b) Class A Shares
commenced offering on February 28, 1992. (c) Annualized.
18
<PAGE> 25
THE ONE GROUP(R) LARGE COMPANY VALUE FUND FINANCIAL HIGHLIGHTS
<TABLE>
<CAPTION>
YEAR ENDED JUNE 30,
-------------------
CLASS B 1998 1997 1996 1995 1994(a)
------- ---- ---- ---- ---- -------
<S> <C> <C> <C> <C> <C>
NET ASSET VALUE, BEGINNING OF PERIOD $ 12.98 $ 12.96 $ 11.41 $ 11.87
------- ------- ------- -------
Investment Activities
Net investment income 0.14 0.18 0.17 0.05
Net realized and unrealized gains
(losses) from investments 3.04 1.26 2.19 (0.46)
------- ------- ------- -------
Total from Investment Activities 3.18 1.44 2.36 (0.41)
------- ------- ------- -------
Distributions
From net investment income (0.15) (0.18) (0.17) (0.05)
From net realized gains (1.06) (1.24) (0.64) --
------- ------- ------- -------
Total Distributions (1.21) (1.42) (0.81) (0.05)
------- ------- ------- -------
NET ASSET VALUE, END OF PERIOD $ 14.95 $ 12.98 $ 12.96 $ 11.41
======= ======= ======= =======
Total Return (Excludes Sales Charge) 25.86% 11.95% 22.28% 3.48%(b)
RATIOS/SUPPLEMENTARY DATA:
Net Assets at end of period (000) $ 9,288 $ 4,135 $ 861 $ 182
Ratio of expenses to average
net assets 1.97% 1.97% 2.00% 2.00%(c)
Ratio of net investment income
to average net assets 0.96% 1.43% 1.74% 1.06%(c)
Ratio of expenses to average
net assets* 1.97% 1.98% 2.01% 2.00%(c)
Ratio of net investment income
to average net assets* 0.96% 1.42% 1.72% 1.06%(c)
Portfolio turnover(d) 77.05% 186.84% 203.13% 111.72%
</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 Shares commenced offering on January 14, 1994. (b) Not annualized.
(c) Annualized. (d) Portfolio turnover is calculated on the basis of the Fund
as a whole without distinguishing among the classes of shares issued.
19
<PAGE> 26
THE ONE GROUP(R) GROWTH OPPORTUNITIES FUND
INVESTMENT OBJECTIVE
The Fund seeks growth of capital and secondarily, current income by investing
primarily in equity securities.
INVESTMENT STRATEGY
The Fund invests in securities that have the potential to produce above-average
earnings growth per share over a one-to-three year period. Typically, the Fund
acquires shares of established companies with a history of above-average growth,
as well as those companies expected to enter periods of above-average growth.
Not all the securities purchased by the Fund will pay dividends. The Fund also
invests in smaller companies in emerging growth industries.
PORTFOLIO SECURITIES
The Fund normally invests at least 80% of its total assets in equity securities,
including common stocks and debt securities and preferred stocks that are
convertible to common stock. A portion of the Fund's assets will be held in cash
equivalents. For a list of all the securities in which the Fund may invest,
please read "Investment Practices."
RISK CONSIDERATIONS
The Fund invests in equity securities which may increase or decrease in value.
Therefore, the value of your investment in the Fund may increase or decrease in
value. Also, the stocks of smaller companies may be subject to greater risks
than those of larger companies. Before you invest, please read "More About the
Funds" and "Investment Practices."
FUND MANAGEMENT
The Fund is managed by a team of portfolio managers, research analysts, and
other investment management professionals. Each team member makes
recommendations about the securities in the Fund. The research analysts provide
in-depth industry analysis and recommendations, while the portfolio managers
determine strategy, industry weightings, Fund holdings, and cash positions.
20
<PAGE> 27
SHAREHOLDER EXPENSES
<TABLE>
<CAPTION>
SHAREHOLDER TRANSACTION EXPENSES(1) CLASS A CLASS B CLASS C CLASS I
- ----------------------------------- ------- ------- ------- -------
<S> <C> <C> <C> <C>
Maximum Sales Charge Imposed on
Purchases (as a percentage of
offering price) 4.50% none none none
Maximum Contingent Deferred Sales
Charge (as a percentage of
original purchase price or
redemption proceeds, as applicable) none(2) 5.00% 1.00% none
Redemption Fees none none none none
Exchange Fees none none none none
ANNUAL OPERATING EXPENSES (as a
percentage of average daily
net assets)(3)
Investment Advisory Fees .74% .74% .74% .74%
12b-1 Fees (after fee waiver)(4) .25% 1.00% 1.00% none
Other Expenses .26% .26% .26% .26%
Total Fund Operating Expenses
(after fee waiver)(5) 1.25% 2.00% 2.00% 1.00%
</TABLE>
(1) If you buy or sell shares through a Shareholder Servicing Agent, you
may be charged separate transaction fees by the Shareholder Servicing
Agent. In addition, a $10.00 sub-minimum account fee may be applicable
and a $7.00 charge will be deducted from the redemption amounts paid by
wire.
(2) Except for purchases of $1 million or more. Please see "Sales Charges."
(3) Expense information has been restated to reflect current fees.
(4) Due to 12b-1 fees, long-term Class A, Class B and Class C shareholders
may pay more than the equivalent of the maximum front-end sales charges
permitted by the rules of the National Association of Securities
Dealers. Without the voluntary waiver, 12b-1 fees would be .35% for
Class A shares.
(5) Without the voluntary reduction of 12b-1 fees, Total Operating Expenses
would be 1.35% for Class A shares.
EXAMPLE
An investor would pay the following expenses on a $1,000 investment in the Fund,
assuming: (1) payment of the maximum sales charge; (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 $57 $83 $111 $189
Class A (without fee waiver) $58 $86 $116 $200
Class B $70 $93 $128 $213
Class C $30 $63 $108 $233
Class I $10 $32 $ 55 $122
</TABLE>
Assuming no redemption at the end of the period, the dollar amounts in the above
example would be as follows:
21
<PAGE> 28
<TABLE>
<CAPTION>
1 YEAR 3 YEARS 5 YEARS 10 YEARS
------ ------- ------- --------
<S> <C> <C> <C> <C>
Class A $57 $83 $111 $189
Class A (without fee waiver) $58 $86 $116 $200
Class B $20 $63 $108 $213
Class C $20 $63 $108 $233
Class I $10 $32 $ 55 $122
</TABLE>
Class B shares automatically convert to Class A shares after eight (8) years.
Therefore, the "10 years" examples above reflect this conversion.
These examples are designed to assist you in understanding the various costs and
expenses that may be directly or indirectly paid by investors in the Fund. THESE
EXAMPLES SHOULD NOT BE CONSIDERED A REPRESENTATION OF PAST OR FUTURE EXPENSES
AND ACTUAL EXPENSES MAY BE GREATER OR LESS THAN THOSE SHOWN.
22
<PAGE> 29
THE ONE GROUP(R) GROWTH OPPORTUNITIES FUND FINANCIAL HIGHLIGHTS
The Financial Highlights are intended to help you understand the Fund's
financial performance for the past 10 years, or since inception if less than 10
years. The total returns in the table represent the rate a shareholder would
have earned on an investment in the Fund (assuming reinvestment of all dividends
and distributions). This information has been derived from financial statements
audited by PricewaterhouseCoopers, LLP, whose report, along with the Fund's
financial statements, is incorporated by reference in the Statement of
Additional Information, which is available upon request.
<TABLE>
<CAPTION>
YEAR ENDED JUNE 30,
-------------------
CLASS I 1998 1997 1996 1995 1994 1993 1992 1991
------- ---- ---- ---- ---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C> <C> <C>
NET ASSET VALUE, BEGINNING OF PERIOD $ 18.81 $ 18.40 $ 15.96 $ 16.96 $ 14.54 $ 12.92 $ 12.14
-------- -------- -------- -------- -------- ------- -------
Investment Activities
Net investment income 0.25 0.20 0.06 0.07 0.06 0.09 0.21
Net realized and unrealized gains
(losses) from investments 3.59 3.83 2.98 (0.05) 2.99 1.87 0.92
-------- -------- -------- -------- -------- -------- -------
Total from Investment Activities 3.84 4.03 3.04 0.02 3.05 1.96 1.13
-------- -------- -------- -------- -------- -------- -------
Distributions
From net investment income (0.25) (0.20) (0.06) (0.07) (0.06) (0.08) (0.21)
In excess of net investment (0.02) -- -- -- -- -- --
From net realized gains (2.92) (3.42) (0.54) (0.95) (0.57) (0.26) (0.14)
-------- -------- -------- -------- -------- -------- -------
Total Distributions (3.19) (3.62) (0.60) (1.02) (0.63) (0.34) (0.35)
-------- -------- -------- -------- -------- -------- -------
NET ASSET VALUE, END OF PERIOD $ 19.46 $ 18.81 $ 18.40 $ 15.96 $ 16.96 $ 14.54 $ 12.92
======== ======== ======== ======== ======== ======== =======
Total Return 22.75% 24.63% 19.75% (0.16)% 21.36% 15.15% 9.85%
RATIOS/SUPPLEMENTARY DATA:
Net Assets at end of period (000) $623,911 $532,525 $413,518 $389,567 $232,898 $131,533 $53,831
Ratio of expenses to average
net assets 0.99% 1.00% 0.98% 0.98% 0.89% 0.75% 0.45%
Ratio of net investment income
to average net assets 1.32% 1.15% 0.38% 0.42% 0.41% 1.23% 1.75%
Ratio of expenses to average net
assets* 0.99% 1.01% 0.98% 1.03% 1.11% 0.51% 1.19%
Ratio of net investment income
to average net assets* 1.32% 1.14% 0.38% 0.37% 0.19% 0.03% 1.01%
Portfolio turnover(a) 301.35% 435.30% 132.63% 70.67% 64.64% 42.77% 68.83%
</TABLE>
<TABLE>
<CAPTION>
CLASS I 1990 1989(b)
------- ---- -------
<S> <C> <C>
NET ASSET VALUE, BEGINNING OF PERIOD $ 10.71 $ 10.00
------- -------
Investment Activities
Net investment income 0.19 0.11
Net realized and unrealized gains
(losses) from investments 1.97 0.71
------- -------
Total from Investment Activities 2.16 0.82
------- -------
Distributions
From net investment income (0.19) (0.11)
In excess of net investment -- --
From net realized gains (0.54) --
------- -------
Total Distributions (0.73) (0.11)
------- -------
NET ASSET VALUE, END OF PERIOD $ 12.14 $ 10.71
======= =======
Total Return 20.83% 24.86%(c)
RATIOS/SUPPLEMENTARY DATA:
Net Assets at end of period (000) $31,804 $22,753
Ratio of expenses to average net assets 0.41% 0.38%(c)
Ratio of net investment income to average net assets 1.65% 3.20%(c)
Ratio of expenses to average net assets* 1.15% 1.12%(c)
Ratio of net investment income to average net assets* 0.91% 2.46%(c)
Portfolio turnover(a) 92.55% 68.51%
</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)
Portfolio turnover is calculated on the basis of the Fund as a whole without
distinguishing among the classes of shares issued. (b) The Fund commenced
operations on March 2, 1989; at that time, the Fund did not offer multiple
classes of shares. Subsequently all shares of the Fund were redesignated as
Class I shares. (c) Annualized.
23
<PAGE> 30
<TABLE>
<CAPTION>
YEAR ENDED JUNE 30,
-------------------
CLASS A 1998 1997 1996 1995 1994 1993 1992(c)
------- ---- ---- ---- ---- ---- ---- -------
<S> <C> <C> <C> <C> <C> <C> <C>
NET ASSET VALUE, BEGINNING OF PERIOD $ 18.76 $ 18.36 $ 15.93 $16.96 $ 14.54 $ 16.53
Investment Activities
Net investment income 0.21 0.17 0.02 0.04 0.03 0.01
Net realized and unrealized gains
(losses) from investments 3.58 3.80 2.98 (0.08) 3.00 (1.99)
------- ------- ------- ------ ------- -------
Total from Investment Activities 3.79 3.97 3.00 (0.04) 3.03 (1.98)
Distributions
From net investment income (0.24) (0.15) (0.01) (0.03) (0.04) (0.01)
In excess of net investment income (0.02) -- (0.02) (0.01) -- --
From net realized gains (2.92) (3.42) (0.54) (0.95) (0.57) --
------- ------- ------- ------ ------- -------
Total Distributions (3.18) (3.57) (0.57) (0.99) (0.61) (0.01)
------- ------- ------- ------ ------- -------
NET ASSET VALUE, END OF PERIOD $ 19.37 $ 18.76 $ 18.36 $15.93 $ 16.96 $ 14.54
======= ======= ======= ====== ======= =======
Total Return (Excludes Sales Charge) 22.52% 24.32% 19.50% (0.52)% 21.70%(a) (34.00)%(a)
RATIOS/SUPPLEMENTARY DATA:
Net Assets at end of period (000) $43,370 $28,052 $11,178 $8,097 $ 5,757 $ 84
Ratio of expenses to average net
assets 1.25% 1.25% 1.23% 1.22% 1.11 %(a) 1.31 %(a)
Ratio of net investment income
to average net assets 0.92% 0.90% 0.12% 0.27% 0.25 %(a) 0.12 %(a)
Ratio of expenses to average
net assets* 1.34% 1.36% 1.33% 1.38% 1.48 %(a) 1.50 %(a)
Ratio of net investment income
(loss) to average net assets* 0.83% 0.79% 0.02% 0.11% (0.12)%(a) (0.07)%(a)
Portfolio turnover(b) 301.35% 435.30% 132.63% 70.67% 64.64% 42.77%
</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) Portfolio turnover is calculated on the basis
of the Fund as a whole without distinguishing among the classes of shares
issued. (c) Class A Shares commenced offering on February 18, 1992.
24
<PAGE> 31
THE ONE GROUP(R) GROWTH OPPORTUNITIES FUND FINANCIAL HIGHLIGHTS
<TABLE>
<CAPTION>
YEAR ENDED JUNE 30,
-------------------
CLASS B 1998 1997 1996 1995 1994(a)
------- ---- ---- ---- ---- -------
<S> <C> <C> <C> <C> <C>
NET ASSET VALUE, BEGINNING OF
PERIOD $ 18.43 $ 18.14 $ 15.85 $17.44
------- ------- ------- ------
Investment Activities
Net investment income (loss) 0.11 0.09 (0.07) (0.02)
Net realized and unrealized
gains (losses) from
investments 3.44 3.69 2.90 (1.56)
------- ------- ------- ------
Total from Investment Activities 3.55 3.78 2.83 (1.58)
------- ------- ------- ------
Distributions
From net investment income (0.22) (0.07) -- (0.01)
In excess of net investment
income (0.02) -- -- --
From net realized gains (2.92) (3.42) (0.54) --
------- ------- ------- ------
Total Distributions (3.16) (3.49) (0.54) (0.01)
------- ------- ------- ------
NET ASSET VALUE, END OF PERIOD $ 18.82 $ 18.43 $ 18.14 $15.85
======= ======= ======= ======
Total Return (Excludes Sales
Charge) 21.73% 23.53% 18.47% (9.07)%(b)
RATIOS/SUPPLEMENTARY DATA:
Net Assets at end of period
(000) $37,409 $12,910 $ 2,787 $1,131
Ratio of expenses to average
net assets 2.00% 2.00% 1.98% 2.12%(c)
Ratio of net investment income
(loss) to average net assets 0.01% 0.15% (0.63)% (0.55)%(c)
Ratio of expenses to average
net assets* 2.00% 2.01% 1.98% 2.12%(c)
Ratio of net investment income
(loss) to average net assets* 0.01% 0.14% (0.63)% (0.55)%(c)
Portfolio turnover(d) 301.35% 435.30% 132.63% 70.67%
</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 Shares commenced offering on January 14, 1994. (b) Not annualized.
(c) Annualized. (d) Portfolio turnover is calculated on the basis of the Fund
as a whole without distinguishing among the classes of shares issued.
25
<PAGE> 32
THE ONE GROUP(R) INTERNATIONAL EQUITY INDEX FUND
INVESTMENT OBJECTIVE
The Fund seeks to provide investment results that correspond to the aggregate
price and dividend performance of the securities in the MSCI EAFE GDP Index.*
INVESTMENT STRATEGY
The Fund attempts to track the capital performance and dividend income of the
Index by investing in a representative portion of the stocks which match as
closely as possible the characteristics of the stocks which comprise the Index.
The Fund also will invest in stock index futures. The Fund will attempt to
achieve a correlation between the performance of its portfolio and that of the
MSCI EAFE GDP Index of at least 0.90, without taking into account expenses.
Perfect correlation would be 1.00.
PORTFOLIO SECURITIES
The Fund normally invests at least 65% of its total assets in foreign equity
securities, consisting of common stocks (including American Depository Receipts)
and preferred stocks, securities convertible to common stock (provided they are
traded on an exchange or over-the-counter), warrants and receipts. No more than
10% of the Fund's assets will be held in cash or cash equivalents. The Fund may
invest up to 10% of its net assets in securities of emerging international
markets such as Mexico, Chile and Brazil, either directly through local
exchanges, through publicly traded closed-end country funds, or through "passive
foreign investment companies." a substantial portion of the Fund's assets will
be denominated in foreign currencies. For a list of all the securities in which
the Fund may invest, please read "Investment Practices."
RISK CONSIDERATIONS
The Fund invests in equity securities which may increase or decrease in value.
Therefore, the value of your investment in the Fund may increase or decrease in
value. Because the Fund's investments are tied to an index, fluctuations in the
index will affect the value of your investment in the Fund. Also, investments in
foreign securities involve risks different from investments in U.S. securities.
Before you invest, please read "More About the Funds" and "Investment Risks."
FUND MANAGEMENT
Independence International Associates, Inc. ("Independence International")
serves as sub-advisor to the Fund. Independence International is an indirect
subsidiary of John Hancock Mutual Life Insurance Company.
* Gross Domestic Produced Weighted Morgan Stanley Capital International Europe,
Australia and Far East Index. MSCI EAFE GDP Index is a registered service
mark of Morgan Stanley Capital International, which does not sponsor and is
in no way affiliated with the Fund.
26
<PAGE> 33
SHAREHOLDER EXPENSES
<TABLE>
<CAPTION>
SHAREHOLDER TRANSACTION EXPENSES(1) CLASS A CLASS B CLASS C CLASS I
- ----------------------------------- ------- ------- ------- -------
<S> <C> <C> <C> <C>
Maximum Sales Charge Imposed on Purchases
(as a percentage of offering price) 4.50% none none none
Maximum Contingent Deferred Sales Charge
(as a percentage of original purchase
price or redemption proceeds, as
applicable) none(2) 5.00% 1.00% none
Redemption Fees none none none none
Exchange Fees none none none none
ANNUAL OPERATING EXPENSES
(as a percentage of average daily net assets)(3)
Investment Advisory Fees .55% .55% .55% .55%
12b-1 Fees (after fee waiver)(4) .25% 1.00% 1.00% none
Other Expenses .40% .40% .40% .40%
Total Fund Operating Expenses (after fee
waiver)(5) 1.20% 1.95% 1.95% .95%
</TABLE>
(1) If you buy or sell shares through a Shareholder Servicing Agent, you
may be charged separate transaction fees by the Shareholder Servicing
Agent. In addition, a $10.00 sub-minimum account fee may be applicable
and a $7.00 charge will be deducted from the redemption amounts paid by
wire.
(2) Except for purchases of $1 million or more. Please see "Sales Charges."
(3) Expense information has been restated to reflect current fees.
(4) Due to 12b-1 fees, long-term Class A, Class B and Class C shareholders
may pay more than the equivalent of the maximum front-end sales charges
permitted by the rules of the National Association of Securities
Dealers. Without the voluntary waiver, 12b-1 fees would be .35% for
Class A shares.
(5) Without the voluntary reduction of 12b-1 fees, Total Operating Expenses
would be 1.30% for Class A shares.
EXAMPLE
An investor would pay the following expenses on a $1,000 investment in the Fund,
assuming: (1) payment of the maximum sales charge; (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 $57 $81 $108 $184
Class A (without fee waiver) $58 $84 $113 $195
Class B $70 $91 $125 $208
Class C $30 $61 $105 $227
Class I $10 $30 $ 53 $117
</TABLE>
Assuming no redemption at the end of the period, 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 $57 $81 $108 $184
Class A (without fee waiver) $58 $84 $113 $195
Class B $20 $61 $105 $208
Class C $20 $61 $105 $227
Class I $10 $30 $ 53 $117
</TABLE>
Class B shares automatically convert to Class A shares after eight (8) years.
Therefore, the "10 years" examples above reflect this conversion.
27
<PAGE> 34
These examples are designed to assist you in understanding the various costs and
expenses that may be directly or indirectly paid by investors in the Fund. 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 ONE GROUP(R) INTERNATIONAL EQUITY INDEX FUND FINANCIAL HIGHLIGHTS
The Financial Highlights are intended to help you understand the Fund's
financial performance for the past 10 years, or since inception if less than 10
years. The total returns in the table represent the rate a shareholder would
have earned on an investment in the Fund (assuming reinvestment of all dividends
and distributions). This information has been derived from financial statements
audited by PricewaterhouseCoopers, LLP, whose report, along with the Fund's
financial statements, is incorporated by reference in the Statement of
Additional Information, which is available upon request.
<TABLE>
<CAPTION>
YEAR ENDED JUNE 30,
-------------------
CLASS I 1998 1997 1996 1995 1994 1993(a)
------- ---- ---- ---- ---- ---- -------
<S> <C> <C> <C> <C> <C> <C>
NET ASSET VALUE, BEGINNING OF PERIOD $ 15.17 $ 13.93 $ 13.46 $ 11.80 $ 10.00
-------- -------- -------- -------- -------
Investment Activities
Net investment income 0.15 0.11 0.13 0.11 0.06
Net realized and unrealized gains from
investments 2.02 1.43 0.46 1.68 1.75
-------- -------- -------- -------- -------
Total from Investment Activities 2.17 1.54 0.59 1.79 1.81
-------- -------- -------- -------- -------
Distributions
From net investment income (0.17) (0.16) (0.08) (0.11) (0.01)
In excess of net investment income (0.13) (0.02) -- -- --
From net realized gains (0.15) (0.12) (0.04) (0.01) --
In excess of net realized gains -- -- -- (0.01) --
-------- -------- -------- -------- -------
Total Distributions (0.45) (0.30) (0.12) (0.13) (0.01)
-------- -------- -------- -------- -------
NET ASSET VALUE, END OF PERIOD $ 16.89 $ 15.17 $ 13.93 $ 13.46 $ 11.80
======== ======== ======== ======== =======
Total Return 14.64% 11.22% 4.20% 15.44% 26.96%(b)
RATIOS/SUPPLEMENTARY DATA:
Net Assets at end of period (000) $449,949 $347,790 $218,299 $145,640 $35,384
Ratio of expenses to average net assets 0.86% 0.97% 1.04% 1.02% 1.22%(b)
Ratio of net investment income to average
net assets 1.00% 1.04% 1.25% 1.27% 1.37%(b)
Ratio of expenses to average net assets* 0.86% 1.00% 1.04% 1.02% 2.34%(b)
Ratio of net investment income to average
net assets* 1.00% 1.01% 1.25% 1.27% 0.25%(b)
Portfolio turnover(c) 9.61% 6.28% 4.67% 7.74% 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)
Fiduciary Shares commenced offering on April 5, 1993. (b) Annualized. (c)
Portfolio turnover is calculated on the basis of the Fund as a whole without
distinguishing among the classes of shares issued.
28
<PAGE> 35
<TABLE>
<CAPTION>
YEAR ENDED JUNE 30,
-------------------
CLASS A 1998 1997 1996 1995 1994 1993(a)
------- ---- ---- ---- ---- ---- -------
<S> <C> <C> <C> <C> <C> <C>
NET ASSET VALUE, BEGINNING OF PERIOD $ 15.16 $ 13.92 $13.49 $11.80 $11.74
------- ------- ------ ------ ------
Investment Activities
Net investment income 0.11 0.14 0.12 0.09 0.02
Net realized and unrealized gains
from investments 2.03 1.40 0.43 1.67 0.04
------- ------- ------ ------ ------
Total from Investment Activities 2.14 1.54 0.55 1.76 0.06
------- ------- ------ ------ ------
Distributions
From net investment income (0.13) (0.16) (0.08) (0.05) --
In excess of net investment income (0.10) (0.02) -- -- --
From net realized gains (0.15) (0.12) (0.04) (0.02) --
------- ------- ------ ------ ------
Total Distributions (0.38) (0.30) (0.12) (0.07) --
------- ------- ------ ------ ------
NET ASSET VALUE, END OF PERIOD $ 16.92 $ 15.16 $13.92 $13.49 $11.80
======= ======= ====== ====== ======
Total Return (Excludes Sales Charge) 14.31% 11.20% 3.87% 15.18% 2.87%(b)
RATIOS/SUPPLEMENTARY DATA:
Net Assets at end of period (000) $12,562 $10,789 $5,028 $2,395 $ 153
Ratio of expenses to average net
assets 1.11% 1.22% 1.28% 1.26% 1.47%(b)
Ratio of net investment income to
average net assets 0.73% 0.79% 1.09% 1.15% 2.10%(b)
Ratio of expenses to average net assets* 1.19% 1.35% 1.38% 1.36% 2.35%(b)
Ratio of net investment income to
average net assets* 0.65% 0.66% 0.99% 1.05% 1.22%(b)
Portfolio turnover(c) 9.61% 6.28% 4.67% 7.74% 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 April 2, 1993. (b) Annualized. (c) Portfolio
turnover is calculated on the basis of the Fund as a whole without
distinguishing among the classes of shares issued.
29
<PAGE> 36
THE ONE GROUP(R) INTERNATIONAL EQUITY INDEX FUND FINANCIAL HIGHLIGHTS
<TABLE>
<CAPTION>
YEAR ENDED JUNE 30,
-------------------
CLASS B 1998 1997 1996 1995 1994(a)
------- ---- ---- ---- ---- -------
<S> <C> <C> <C> <C> <C>
NET ASSET VALUE, BEGINNING OF PERIOD $ 14.79 $ 13.73 $ 13.40 $13.00
------- ------- ------- ------
Investment Activities
Net investment income 0.09 0.03 0.03 0.06
Net realized and unrealized gains
from investments 1.86 1.32 0.41 0.34
------- ------- ------- ------
Total from Investment Activities 1.95 1.35 0.44 0.40
------- ------- ------- ------
Distributions
From net investment income (0.08) (0.15) (0.07) --
In excess of net investment income (0.07) (0.02) -- --
From net realized gains (0.15) (0.12) (0.04) --
------- ------- ------- ------
Total Distributions (0.30) (0.29) (0.11) --
------- ------- ------- ------
NET ASSET VALUE, END OF PERIOD $ 16.44 $ 14.79 $ 13.73 $13.40
======= ======= ======= ======
Total Return (Excludes Sales Charge) 13.37% 9.97% 3.17% 3.23%(b)
RATIOS/SUPPLEMENTARY DATA:
Net Assets at end of period (000) $10,033 $ 5,856 $ 3,687 $1,872
Ratio of expenses to average net assets 1.86% 1.97% 2.04% 2.00%(c)
Ratio of net investment income
to average net assets 0.08% 0.04% 0.25% 1.37%(c)
Ratio of expenses to average net assets* 1.86% 2.00% 2.04% 2.00%(c)
Ratio of net investment income
to average net assets* 0.08% 0.01% 0.25% 1.37%(c)
Portfolio turnover(d) 9.61% 6.28% 4.67% 7.74%
</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 Shares commenced offering on January 14, 1994. (b) Not annualized.
(c) Annualized. (d) Portfolio turnover is calculated on the basis of the Fund
as a whole without distinguishing among the classes of shares issued.
30
<PAGE> 37
THE ONE GROUP(R) DISCIPLINED VALUE FUND
INVESTMENT OBJECTIVE
The Fund seeks capital appreciation with the secondary goal of achieving current
income by investing primarily in equity securities.
INVESTMENT STRATEGY
The Fund primarily invests in the equity securities of companies with
below-market average price-to-earnings and price-to-book value ratios. The Fund
considers the issuer's soundness and earnings prospects. If Banc One Investment
Advisors determines that a company's fundamentals are declining or that the
company's ability to pay dividends has been impaired, it likely may consider
eliminating the Fund's holding of the company's stock.
PORTFOLIO SECURITIES
The Fund normally invests at least 80% of its total assets in equity securities,
including common stocks, debt securities, and preferred stocks that are
convertible into common stocks. a portion of the Fund's assets will be held in
cash equivalents. For a list of all the securities in which the Fund may invest,
please read "Investment Practices."
RISK CONSIDERATIONS
The Fund invests in equity securities which may increase or decrease in value.
Therefore, the value of your investment in the Fund may increase or decrease in
value. Before you invest, please read "More About the Funds" and "Investment
Practices."
FUND MANAGEMENT
The Fund is managed by a team of portfolio managers, research analysts, and
other investment management professionals. Each team member makes
recommendations about the securities in the Fund. The research analysts provide
in-depth industry analysis and recommendations, while the portfolio managers
determine strategy, industry weightings, Fund holdings, and cash positions.
31
<PAGE> 38
SHAREHOLDER EXPENSES
<TABLE>
<CAPTION>
SHAREHOLDER TRANSACTION EXPENSES(1) CLASS A CLASS B CLASS C CLASS I
- ----------------------------------- ------- ------- ------- -------
<S> <C> <C> <C> <C>
Maximum Sales Charge Imposed on Purchases
(as a percentage of offering price) 4.50% none none none
Maximum Contingent Deferred Sales Charge
(as a percentage of original purchase
price or redemption proceeds, as applicable) none(2) 5.00% 1.00% none
Redemption Fees none none none none
Exchange Fees none none none none
ANNUAL OPERATING EXPENSES (as a
percentage of average daily net assets)(3)
Investment Advisory Fees .74% .74% .74% .74%
12b-1 Fees (after fee waiver)(4) .25% 1.00% 1.00% none
Other Expenses .26% .26% .26% .26%
Total Fund Operating Expenses (after fee
waiver)(5) 1.25% 2.00% 2.00% 1.00%
</TABLE>
(1) If you buy or sell shares through a Shareholder Servicing Agent, you
may be charged separate transaction fees by the Shareholder Servicing
Agent. In addition, a $10.00 sub-minimum account fee may be applicable
and a $7.00 charge will be deducted from the redemption amounts paid by
wire.
(2) Except for purchases of $1 million or more. Please see "Sales Charges."
(3) Expense information has been restated to reflect current fees.
(4) Due to 12b-1 fees, long-term Class A, Class B and Class C shareholders
may pay more than the equivalent of the maximum front-end sales charges
permitted by the rules of the National Association of Securities
Dealers. Without the voluntary waiver, 12b-1 fees would be .35% for
Class A shares.
(5) Without the voluntary reduction of 12b-1 fees, Total Operating Expenses
would be 1.35% for Class A shares.
EXAMPLE
An investor would pay the following expenses on a $1,000 investment in the Fund,
assuming: (1) payment of the maximum sales charge; (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 $57 $83 $111 $189
Class A (without fee waiver) $58 $86 $116 $200
Class B $70 $93 $128 $213
Class C $30 $63 $108 $233
Class I $10 $32 $ 55 $122
</TABLE>
Assuming no redemption at the end of each time period, 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 $57 $83 $111 $189
Class A (without fee waiver) $58 $86 $116 $200
Class B $20 $63 $108 $213
Class C $20 $63 $108 $233
Class I $10 $32 $ 55 $122
</TABLE>
Class B shares automatically convert to Class A shares after eight (8) years.
Therefore, the "10 years" examples above reflect this conversion.
These examples are designed to assist you in understanding the various costs and
expenses that may be directly or indirectly paid by investors in the Fund. THESE
EXAMPLES SHOULD NOT BE CONSIDERED A REPRESENTATION OF PAST OR FUTURE EXPENSES
AND ACTUAL EXPENSES MAY BE GREATER OR LESS THAN THOSE SHOWN.
32
<PAGE> 39
THE ONE GROUP(R) DISCIPLINED VALUE FUND FINANCIAL HIGHLIGHTS
The Financial Highlights are intended to help you understand the Fund's
financial performance for the past 10 years, or since inception if less than 10
years. The total returns in the table represent the rate a shareholder would
have earned on an investment in the Fund (assuming reinvestment of all dividends
and distributions). This information has been derived from financial statements
audited by PricewaterhouseCoopers, LLP, whose report, along with the Fund's
financial statements, is incorporated by reference in the Statement of
Additional Information, which is available upon request.
<TABLE>
<CAPTION>
YEAR ENDED JUNE 30,
-------------------
CLASS I 1998 1997 1996 1995 1994
------- ---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C>
NET ASSET VALUE, BEGINNING OF PERIOD $ 14.69 $ 13.20 $ 11.90 $ 12.76
Investment Activities
Net investment income 0.22 0.29 0.28 0.26
Net realized and unrealized gains from
investments 2.57 2.27 1.57 0.29
Total from Investment Activities 2.79 2.56 1.85 0.55
-------- -------- -------- --------
Distributions
From net investment income (0.22) (0.29) (0.27) (0.26)
From net realized gains (1.61) (0.78) (0.28) (1.15)
-------- -------- -------- --------
Total Distributions (1.83) (1.07) (0.55) (1.41)
-------- -------- -------- --------
NET ASSET VALUE, END OF PERIOD $ 15.65 $ 14.69 $ 13.20 $ 11.90
======== ======== ======== ========
Total Return 20.56% 20.10% 16.03% 4.04%
RATIOS/SUPPLEMENTARY DATA:
Net Assets at end of period (000) $562,302 $522,474 $448,530 $418,238
Ratio of expenses to average net assets 0.98% 0.99% 1.00% 0.93%
Ratio of net investment income to
average net assets 1.52% 2.04% 2.21% 2.14%
Ratio of expenses to average net assets* 0.98% 1.00% 1.10% 0.98%
Ratio of net investment income to
average net assets* 1.52% 2.03% 2.11% 2.09%
Portfolio turnover(a) 92.66% 90.55% 176.66% 56.33%
</TABLE>
<TABLE>
<CAPTION>
CLASS I 1993 1992 1991 1990 1989(b)
------- ---- ---- ---- ---- -------
<S> <C> <C> <C> <C> <C>
NET ASSET VALUE, BEGINNING OF PERIOD $ 11.49 $ 10.20 $ 10.42 $ 10.85 $ 10.00
Investment Activities
Net investment income 0.28 0.34 0.39 0.48 0.14
Net realized and unrealized gains from
investments 1.27 1.29 (0.23) (0.09) 0.85
-------- --------- -------- ------- -------
Total from Investment Activities 1.55 1.63 0.16 0.39 0.99
-------- --------- -------- ------- -------
Distributions
From net investment income (0.28) (0.34) (0.38) (0.48) (0.14)
From net realized gains -- -- (0.34) --
------- -------
Total Distributions (0.28) (0.34) (0.38) (0.82) (0.14)
-------- --------- -------- ------- -------
NET ASSET VALUE, END OF PERIOD $ 12.76 $ 11.49 $ 10.20 $ 10.42 $ 10.85
======== ========= ======== ======= =======
Total Return 13.58% 16.24% 1.75% 3.49% 29.90%(c)
RATIOS/SUPPLEMENTARY DATA:
Net Assets at end of period (000) $211,785 $155,234 $74,481 $59,992 $45,872
Ratio of expenses to average net assets 0.89 0.69% 0.41% 0.35% 0.33%(c)
Ratio of net investment income to
average net assets 2.30% 3.17% 3.92% 4.36% 3.95%(c)
Ratio of expenses to average net assets* 1.08% 1.23% 1.15% 1.09% 1.07%(c)
Ratio of net investment income to
average net assets* 2.11% 2.63% 3/18% 3.62% 3.21%(c)
Portfolio turnover(a) 108.79% 25.32% 49.62% 51.14% 14.66%
</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)
Portfolio turnover is calculated on the basis of the Fund as a whole without
distinguishing among the classes of shares issued. (b) Class I Shares
commenced offering on March 2, 1989. (c)Annualized.
33
<PAGE> 40
<TABLE>
<CAPTION>
YEAR ENDED JUNE 30,
-------------------
CLASS A 1998 1997 1996 1995 1994 1993 1992(b)
------- ---- ---- ---- ---- ---- ---- -------
<S> <C> <C> <C> <C> <C> <C> <C>
NET ASSET VALUE, BEGINNING OF PERIOD $ 14.72 $ 13.22 $ 11.91 $ 12.75 $ 11.49 $11.45
------- ------- ------- ------- ------- ------
Investment Activities
Net investment income 0.19 0.25 0.24 0.24 0.25 0.12
Net realized and unrealized gains
from investments 2.57 2.28 1.59 0.30 1.26 0.06
------- ------- ------- ------- ------- ------
Total from Investment Activities 2.76 2.53 1.83 0.54 1.51 0.18
------- ------- ------- ------- ------- ------
Distributions
From net investment income (0.19) (0.25) (0.24) (0.23) (0.25) (0.14)
From net realized gains (1.61) (0.78) (0.26) (1.10) -- --
In excess of net realized gains -- -- (0.02) (0.05) -- --
Total Distributions (1.80) (1.03) (0.52) (1.38) (0.25) (0.14)
------- ------- ------- ------- ------- ------
NET ASSET VALUE, END OF PERIOD $ 15.68 $ 14.72 $ 13.22 $ 11.91 $ 12.75 $11.49
======= ======= ======= ======= ======= ======
Total Return (Excludes Sales Charge) 20.21% 19.80% 15.43% 3.95% 13.27% 1.56%(c)
RATIOS/SUPPLEMENTARY DATA:
Net Assets at end of period (000) $23,909 $20,838 $13,560 $10,448 $ 3,435 $ 35
Ratio of expenses to average
net assets 1.23% 1.24% 1.26% 1.18% 1.12% 1.29%(c)
Ratio of net investment income
to average net assets 1.26% 1.79% 1.99% 2.00% 2.06% 2.43%(c)
Ratio of expenses to average
net assets* 1.31% 1.35% 1.36% 1.33% 1.46% 1.49%(c)
Ratio of net investment income
to average net assets* 1.18% 1.68% 1.89% 1.85% 1.72% 2.23%(c)
Portfolio turnover(a) 92.66% 90.55% 176.66% 56.33% 108.79% 25.32%
</TABLE>
* During the period, certain fees were voluntarily reduced. If such voluntary
fee reductions had not occurred, the ratios would have been as indicated. (a)
Portfolio turnover is calculated on the basis of the Fund as a whole without
distinguishing among the classes of shares issued. (b) Class A Shares
commenced offering on February 18, 1992. (c) Annualized.
34
<PAGE> 41
THE ONE GROUP(R) DISCIPLINED VALUE FUND FINANCIAL HIGHLIGHTS
<TABLE>
<CAPTION>
YEAR ENDED JUNE 30,
-------------------
CLASS B 1998 1997 1996 1995 1994(a)
------- ---- ---- ---- ---- -------
<S> <C> <C> <C> <C> <C>
NET ASSET VALUE, BEGINNING OF PERIOD $ 14.69 $ 13.19 $ 11.90 $12.60
------- ------- ------- ------
Investment Activities
Net investment income 0.08 0.15 0.15 0.07
Net realized and unrealized gains
(losses) from investments 2.55 2.27 1.58 (0.70)
------- ------- ------- ------
Total from Investment Activities 2.63 2.42 1.73 (0.63)
------- ------- ------- ------
Distributions
From net investment income (0.07) (0.14) (0.15) (0.06)
In excess of net investment income -- -- (0.01) (0.01)
From net realized gains (1.61) (0.78) (0.28) --
------- ------- ------- ------
Total Distributions (1.68) (0.92) (0.44) (0.07)
------- ------- ------- ------
NET ASSET VALUE, END OF PERIOD $ 15.64 $ 14.69 $ 13.19 $11.90
======= ======= ======= ======
Total Return (Excludes Sales Charge) 19.19% 18.93% 14.92% (5.00)%(b)
RATIOS/SUPPLEMENTARY DATA:
Net Assets at end of period (000) $20,499 $16,305 $11,222 $5,356
Ratio of expenses to average net
assets 1.98% 1.99% 2.00% 1.96%(c)
Ratio of net investment income to
average net assets 0.51% 1.04% 1.26% 1.80%(c)
Ratio of expenses to average net
assets* 1.98% 2.00% 2.01% 1.96%(c)
Ratio of net investment income to
average net assets* 0.51% 1.03% 1.25% 1.80%(c)
Portfolio turnover(d) 92.66% 90.55% 176.66% 56.33%
</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 Shares commenced offering on January 14, 1994. (b) Not annualized.
(c) Annualized. (d) Portfolio turnover is calculated on the basis of the Fund
as a whole without distinguishing among the classes of shares issued.
35
<PAGE> 42
THE ONE GROUP(R) EQUITY INDEX FUND
INVESTMENT OBJECTIVE
The Fund seeks investment results that correspond to the aggregate price and
dividend performance of securities in the Standard & Poor's 500 Composite Stock
Price Index ("S&P 500 Index").*
INVESTMENT STRATEGY
The Fund invests primarily in stocks included in the S&P 500 Index and,
secondarily in stock index futures. Banc One Investment Advisors will seek to
achieve a correlation between the performance of the Fund and that of the S&P
500 Index. To implement this strategy, Banc One Investment Advisors generally
selects stocks in the order of their weightings in the S&P 500 Index beginning
with the heaviest weighted stocks. The Fund will attempt to achieve a
correlation between the performance of its portfolio and that of the S&P 500
Index of at least 0.95, without taking into account expenses. Perfect
correlation would be 1.00.
PORTFOLIO SECURITIES
The percentage of a stock that the Fund holds will be approximately the same
percentage that the stock represents in the S&P 500 Index. In addition, the Fund
may hold up to 10% of its net assets in cash or cash equivalents. For a list of
all the securities in which the Fund may invest, please read "Investment
Practices."
RISK CONSIDERATIONS
The Fund invests in equity securities, which may increase or decrease in value.
Therefore, the value of your investment in the Fund may increase or decrease in
value. Because the Fund's investments are tied to an index, fluctuations in the
index will affect the value of your investment in the Fund. Before you invest,
please read "More About the Funds" and "Investment Risks."
FUND MANAGEMENT
The Fund is managed by a team of portfolio managers, research analysts, and
other investment management professionals. Each team member makes
recommendations about the securities in the Fund. The research analysts provide
in-depth industry analysis and recommendations, while the portfolio managers
determine strategy, industry weightings, Fund holdings, and cash positions.
* "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.
36
<PAGE> 43
SHAREHOLDER EXPENSES
<TABLE>
<CAPTION>
SHAREHOLDER TRANSACTION EXPENSES(1) CLASS A CLASS B CLASS C CLASS I
- ----------------------------------- ------- ------- ------- -------
<S> <C> <C> <C> <C>
Maximum Sales Charge Imposed on Purchases
(as a percentage of offering price) 4.50% none none none
Maximum Contingent Deferred Sales Charge
(as a percentage of original purchase
price or redemption proceeds, as
applicable) none(2) 5.00% 1.00% none
Redemption Fees none none none none
Exchange Fees none none none none
ANNUAL OPERATING EXPENSES
(as a percentage of average daily net assets)(3)
Investment Advisory Fees (after fee
waiver)(4) .25% .25% .25% .25%
12b-1 Fees (after fee waiver)(5) .25% 1.00% 1.00% none
Other Expenses .25% .25% .25% .25%
Total Fund Operating Expenses (after fee
waivers)(6) .75% 1.50% 1.50% .50%
</TABLE>
(1) If you buy or sell shares through an account with a Shareholder
Servicing Agent, you may be charged separate transaction fees by the
Shareholder Servicing Agent. In addition, a $10.00 sub-minimum account
fee may be applicable and a $7.00 charge will be deducted from the
redemption amounts paid by wire.
(2) Except for purchases of $1 million or more. Please see "Sales Charges."
(3) Expense information has been restated to reflect current fees.
(4) Without the fee waiver, Investment Advisory Fees would be .30% for all
classes of shares.
(5) Due to 12b-1 fees, long-term Class A, Class B and Class C shareholders
may pay more than the equivalent of the maximum front-end sales charges
permitted by the rules of the National Association of Securities
Dealers. Without the voluntary waiver, 12b-1 fees would be .35% for
Class A shares.
(6) Without the voluntary reduction of Investment Advisory and 12b-1 fees,
Total Operating Expenses would be .90% for Class A shares, 1.55% for
Class B shares, 1.55% for Class C shares and .55% for Class I shares.
EXAMPLE
An investor would pay the following expenses on a $1,000 investment in the Fund,
assuming: (1) payment of the maximum sales charge; (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 $52 $68 $ 85 $134
Class A (without fee waivers) $54 $72 $ 93 $151
Class B $65 $77 $102 $159
Class B (without fee waivers) $66 $79 $104 $167
Class C $25 $47 $ 82 $179
Class C (without fee waivers) $26 $49 $ 84 $185
Class I $ 5 $16 $ 28 $ 63
Class I (without fee waiver) $ 6 $18 $ 31 $ 69
</TABLE>
37
<PAGE> 44
Assuming no redemption at the end of each time period, 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 $52 $68 $85 $134
Class A (without fee waivers) $54 $72 $93 $151
Class B $15 $47 $82 $159
Class B (without fee waivers) $16 $49 $84 $167
Class C $15 $47 $82 $179
Class C (without fee waivers) $16 $49 $84 $185
Class I $ 5 $16 $28 $ 63
Class I (without fee waivers) $ 6 $18 $31 $ 69
</TABLE>
Class B shares automatically convert to Class A shares after eight (8) years.
Therefore, the "10 years" examples above reflect this conversion.
These examples are designed to assist you in understanding the various costs and
expenses that may be directly or indirectly paid by investors in the Fund. THESE
EXAMPLES SHOULD NOT BE CONSIDERED A REPRESENTATION OF PAST OR FUTURE EXPENSES
AND ACTUAL EXPENSES MAY BE GREATER OR LESS THAN THOSE SHOWN.
38
<PAGE> 45
THE ONE GROUP(R) EQUITY INDEX FUND FINANCIAL HIGHLIGHTS
The Financial Highlights are intended to help you understand the Fund's
financial performance for the past 10 years, or since inception if less than 10
years. The total returns in the table represent the rate a shareholder would
have earned on an investment in the Fund (assuming reinvestment of all dividends
and distributions). This information has been derived from financial statements
audited by PricewaterhouseCoopers, LLP, whose report, along with the Fund's
financial statements, is incorporated by reference in the Statement of
Additional Information, which is available upon request.
<TABLE>
<CAPTION>
YEAR ENDED JUNE 30,
-------------------
CLASS I 1998 1997 1996 1995 1994 1993 1992(b)
------- ---- ---- ---- ---- ---- ---- -------
<S> <C> <C> <C> <C> <C> <C> <C>
NET ASSET VALUE, BEGINNING OF PERIOD $ 16.66 $ 14.03 $ 11.59 $ 11.92 $ 10.92 $ 10.00
-------- -------- -------- -------- ------- -------
Investment Activities
Net investment income 0.35 0.33 0.32 0.29 0.30 0.26
Net realized and unrealized
gains (losses) from
investments 5.27 3.16 2.59 (0.20) 1.13 0.95
-------- -------- -------- -------- ------- -------
Total from Investment Activities 5.62 3.49 2.91 0.09 1.43 1.21
-------- -------- -------- -------- ------- -------
Distributions
From net investment income (0.33) (0.33) (0.29) (0.29) (0.30) (0.26)
In excess of net investment
income -- (0.01) (0.02) (0.04) -- --
From net realized gains (0.15) (0.52) (0.16) (0.09) (0.13) (0.03)
-------- -------- -------- -------- ------- -------
Total Distributions (0.48) (0.86) (0.47) (0.42) (0.43) (0.29)
-------- -------- -------- -------- ------- -------
NET ASSET VALUE, END OF PERIOD $ 21.80 $ 16.66 $ 14.03 $ 11.59 $ 11.92 $ 10.92
======== ======== ======== ======== ======= =======
Total Return 34.30% 25.47% 25.79% 0.63% 13.04% 12.14%(c)
RATIOS/SUPPLEMENTARY DATA:
Net Assets at end of period(000) $480,819 $321,058 $234,895 $165,370 $96,446 $62,150
Ratio of expenses to average
net assets 0.30% 0.30% 0.33% 0.46% 0.50% 0.73%(c)
Ratio of net investment income
to average net assets 1.87% 2.18% 2.57% 2.44% 2.46% 2.43%(c)
Ratio of expenses to average
net assets * 0.61% 0.59% 0.66% 0.59% 0.87% 1.16%(c)
Ratio of net investment income
to average net assets * 1.56% 1.89% 2.24% 2.31% 2.09% 2.00%(c)
Portfolio turnover(a) 5.81% 9.08% 2.71% 11.81% 2.71% 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)
Portfolio turnover is calculated on the basis of the Fund as a whole without
distinguishing among the classes of shares issued. (b) The Fund commenced
operations on July 2, 1991. (c) Annualized.
39
<PAGE> 46
<TABLE>
<CAPTION>
YEAR ENDED JUNE 30,
-------------------
CLASS A 1998 1997 1996 1995 1994 1993 1992(b)
------- ---- ---- ---- ---- ---- ---- -------
<S> <C> <C> <C> <C> <C> <C> <C>
NET ASSET VALUE, BEGINNING OF PERIOD $ 16.67 $ 14.02 $11.59 $11.91 $10.92 $10.94
Investment Activities
Net investment income 0.29 0.27 0.29 0.28 0.30 0.08
Net realized and unrealized
gains (losses) from
investments 5.28 3.18 2.58 (0.20) 1.10 --
------- ------- ------ ------ ------ ------
Total from Investment Activities 5.57 3.45 2.87 0.08 1.40 0.08
------- ------- ------ ------ ------ ------
Distributions
From net investment income (0.28) (0.27) (0.28) (0.27) (0.28) (0.10)
In excess of net investment
income -- (0.01) -- (0.04) -- --
From net realized gains (0.15) (0.52) (0.16) (0.09) (0.13) --
------- ------- ------ ------ ------ ------
Total Distributions (0.43) (0.80) (0.44) (0.40) (0.41) (0.10)
------- ------- ------ ------ ------ ------
NET ASSET VALUE, END OF PERIOD $ 21.81 $ 16.67 $14.02 $11.59 $11.91 $10.92
======= ======= ====== ====== ====== ======
Total Return (Excludes Sales
Charge) 33.94% 25.16% 25.43% 0.56% 12.75% 1.32%(c)
RATIOS/SUPPLEMENTARY DATA:
Net Assets at end of period(000) $98,338 $32,186 $3,003 $1,416 $512 $ 5
Ratio of expenses to average
net assets 0.55% 0.55% 0.56% 0.62% 0.52% 1.09%(c)
Ratio of net investment income
to average net assets 1.59% 1.93% 2.38% 2.37% 2.51% 1.97%(c)
Ratio of expenses to average
net assets * 0.95% 0.94% 1.01% 0.94% 0.99% 1.27%(c)
Ratio of net investment income
to average net assets * 1.19% 1.54% 1.94% 2.05% 2.04% 1.79%(c)
Portfolio turnover(a) 5.81% 9.08% 2.71% 11.81% 2.71% 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)
Portfolio turnover is calculated on the basis of the Fund as a whole without
distinguishing among the classes of shares issued. (b) Class A Shares
commenced offering on February 18, 1992. (c) Annualized.
40
<PAGE> 47
<TABLE>
<CAPTION>
YEAR ENDED JUNE 30,
-------------------
CLASS B 1998 1997 1996 1995 1994(a)
------- ---- ---- ---- ---- -------
<S> <C> <C> <C> <C> <C>
NET ASSET VALUE, BEGINNING OF PERIOD $ 16.68 $ 14.05 $11.61 $12.39
Investment Activities
Net investment income 0.16 0.16 0.18 0.09
Net realized and unrealized
gains (losses) from
investments 5.27 3.16 2.61 (0.78)
--------- -------- ------ ------
Total from Investment Activities 5.43 3.32 2.79 (0.69)
--------- -------- ------ ------
Distributions
From net investment income (0.16) (0.16) (0.19) (0.09)
In excess of net investment income -- (0.01) -- --
From net realized gains (0.15) (0.52) (0.16) --
--------- -------- ------ ------
Total Distributions (0.31) (0.69) (0.35) (0.09)
--------- -------- ------ ------
NET ASSET VALUE, END OF PERIOD $ 21.80 $ 16.68 $14.05 $11.61
========= ======== ====== ======
Total Return (Excludes Sales
Charge) 32.93% 24.05% 24.58% (5.57)%(b)
RATIOS/SUPPLEMENTARY DATA:
Net Assets at end of period (000) $ 168,699 $ 38,538 $1,408 $ 248
Ratio of expenses to average net assets 1.30% 1.30% 1.34% 1.10%(c)
Ratio of net investment income
to average net assets 0.83% 1.18% 1.60% 2.08%(c)
Ratio of expenses to average net assets* 1.61% 1.59% 1.67% 1.15%(c)
Ratio of net investment income
to average net assets* 0.52% 0.89% 1.27% 2.03%(c)
Portfolio turnover(d) 5.81% 9.08% 2.71% 11.81%
</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 Shares commenced offering on January 14, 1994. (b) Not annualized.
(c) Annualized. (d) Portfolio turnover is calculated on the basis of the Fund
as a whole without distinguishing among the classes of shares issued.
41
<PAGE> 48
THE ONE GROUP(R) INCOME EQUITY FUND
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.
INVESTMENT STRATEGY
The Fund attempts to keep its yield above the Standard & Poor's 500 Composite
Price Index ("S&P 500 Index")* by investing in common stocks of corporations
which regularly pay dividends, as well as stocks with favorable long-term
fundamental characteristics. Continued payment of dividends cannot be assured.
Because achieving yield is the primary consideration in selecting securities,
stocks of companies that are out of favor in the financial community may also be
purchased.
PORTFOLIO SECURITIES
The Fund normally invests at least 65% of its total assets in the equity
securities of companies described above, including common stocks, debt
securities, and preferred stocks that are convertible into common stocks. a
portion of the Fund's assets will be held in cash equivalents. For a list of all
the securities in which the Fund may invest, please read "Investment Practices."
RISK CONSIDERATIONS
The Fund invests in equity securities, which may increase or decrease in value.
Therefore, the value of your investment in the Fund may increase or decrease in
value. Before you invest, please read "More About the Funds" and "Investment
Practices."
FUND MANAGEMENT
The Fund is managed by a team of portfolio managers, research analysts, and
other investment management professionals. Each team member makes
recommendations about the securities in the Fund. The research analysts provide
in-depth industry analysis and recommendations, while the portfolio managers
determine strategy, industry weightings, Fund holdings, and cash positions.
* "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.
42
<PAGE> 49
SHAREHOLDER EXPENSES
<TABLE>
<CAPTION>
SHAREHOLDER TRANSACTION EXPENSES(1) CLASS A CLASS B CLASS C CLASS I
- ----------------------------------- ------- ------- ------- -------
<S> <C> <C> <C> <C>
Maximum Sales Charge Imposed on Purchases
(as a percentage of offering price) 4.50% none none none
Maximum Contingent Deferred Sales Charge
(as a percentage of original purchase
price or redemption proceeds, as
applicable) none(2) 5.00% 1.00% none
Redemption Fees none none none none
Exchange Fees none none none none
ANNUAL OPERATING EXPENSES
(as a percentage of average daily
net assets)(3)
Investment Advisory Fees .74% .74% .74% .74%
12b-1 Fees (after fee waiver)(4) .25% 1.00% 1.00% none
Other Expenses .26% .26% .26% .26%
Total Fund Operating Expenses
(after fee waiver)(5) 1.25% 2.00% 2.00% 1.00%
</TABLE>
(1) If you buy or sell shares through a Shareholder Servicing Agent, you
may be charged separate transaction fees by the Shareholder Servicing
Agent. In addition, a $10.00 sub-minimum account fee may be applicable
and a $7.00 charge will be deducted from redemption amounts paid by
wire.
(2) Except for purchases of $1 million or more. Please see "Sales Charges."
(3) Expense information has been restated to reflect current fees.
(4) Due to 12b-1 fees, long-term Class A, Class B and Class C shareholders
may pay more than the equivalent of the maximum front-end sales charges
permitted by the rules of the National Association of Securities
Dealers. Without the voluntary waiver, 12b-1 fees would be .35% for
Class A shares.
(5) Without the voluntary reduction of 12b-1 fees, Total Operating Expenses
would be 1.35% for Class A shares.
EXAMPLE
An investor would pay the following expenses on a $1,000 investment in the Fund,
assuming: (1) payment of the maximum sales charge; (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 $57 $83 $111 $189
Class A (without fee waiver) $58 $86 $116 $200
Class B $70 $93 $128 $213
Class C $30 $63 $108 $233
Class I $10 $32 $ 55 $122
</TABLE>
Assuming no redemption at the end of each time period, the dollar amounts in the
above example would be as follows:
43
<PAGE> 50
<TABLE>
<CAPTION>
1 YEAR 3 YEARS 5 YEARS 10 YEARS
------ ------- ------- --------
<S> <C> <C> <C> <C>
Class A $57 $83 $111 $189
Class A (without fee waiver) $58 $86 $116 $200
Class B $20 $63 $108 $213
Class C $20 $63 $108 $233
Class I $10 $32 $ 55 $122
</TABLE>
Class B shares automatically convert to Class A shares after eight (8) years.
Therefore, the "10 years" examples above reflect this conversion.
These examples are designed to assist you in understanding the various costs and
expenses that may be directly or indirectly paid by investors in the Fund. THESE
EXAMPLES SHOULD NOT BE CONSIDERED A REPRESENTATION OF PAST OR FUTURE EXPENSES
AND ACTUAL EXPENSES MAY BE GREATER OR LESS THAN THOSE SHOWN.
44
<PAGE> 51
THE ONE GROUP(R) INCOME EQUITY FUND FINANCIAL HIGHLIGHTS
The Financial Highlights are intended to help you understand the Fund's
financial performance for the past 10 years, or since inception if less than 10
years. The total returns in the table represent the rate a shareholder would
have earned on an investment in the Fund (assuming reinvestment of all dividends
and distributions). This information has been derived from financial statements
audited by PricewaterhouseCoopers, LLP, whose report, along with the Fund's
financial statements, is incorporated by reference in the Statement of
Additional Information, which is available upon request.
<TABLE>
<CAPTION>
YEAR ENDED JUNE 30,
-------------------
CLASS I 1998 1997 1996 1995 1994 1993 1992
------- ---- ---- ---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C> <C> <C>
NET ASSET VALUE, BEGINNING OF
PERIOD $ 17.65 $ 15.13 $ 13.22 $ 13.21 $ 12.24 $ 11.35
-------- -------- -------- -------- -------- --------
Investment Activities
Net investment income 0.36 0.40 0.40 0.39 0.43 0.49
Net realized and unrealized
gains from investments 4.89 3.22 2.28 0.01 0.97 0.90
-------- -------- -------- -------- -------- --------
Total from Investment Activities 5.25 3.62 2.68 0.40 1.40 1.39
-------- -------- -------- -------- -------- --------
Distributions
From net investment income (0.36) (0.40) (0.40) (0.39) (0.43) (0.50
From net realized gains (0.61) (0.70) (0.37) -- -- --
-------- -------- -------- -------- -------- --------
Total Distributions (0.97) (1.10) (0.77) (0.39) (0.43) (0.50)
-------- -------- -------- -------- -------- --------
NET ASSET VALUE, END OF PERIOD $ 21.93 $ 17.65 $ 15.13 $ 13.22 $ 13.21 $ 12.24
======== ======== ======== ======== ======== ========
Total Return 30.90% 24.53% 21.04% 3.27% 11.56% 12.36%
RATIOS/SUPPLEMENTARY DATA:
Net Assets at end of period (000) $649,007 $321,827 $170,919 $198,787 $153,144 $125,050
Ratio of expenses to average
net assets 1.00% 0.98% 1.01% 0.98% 0.90% 0.70%
Ratio of net investment income
to average net assets 1.91% 2.44% 2.85% 3.18% 3.37% 4.12%
Ratio of expenses to average
net assets* 1.00% 1.01% 1.01% 1.05% 1.07% 1.23%
Ratio of net investment income
to average net assets* 1.91% 2.41% 2.85% 3.11% 3.20% 3.59%
Portfolio turnover(a) 28.18% 14.92% 4.03% 22.69% 7.53% 5.99%
</TABLE>
<TABLE>
<CAPTION>
CLASS I 1991 1990 1989(b)
------- ---- ---- ----
<S> <C> <C> <C>
NET ASSET VALUE, BEGINNING OF PERIOD $11.06 $ 10.32 $ 9.10
------ ------- -------
Investment Activities
Net investment income 0.54 0.53 0.45
Net realized and unrealized
gains from investments 0.26 0.77 1.22
---- ------- -------
Total from Investment Activities 0.80 1.30 1.67
---- ------- -------
Distributions
From net investment income (0.51) (0.56) (0.45)
From net realized gains -- -- --
------ ------- -------
Total Distributions (0.51) (0.56) (0.45
------- -------
NET ASSET VALUE, END OF PERIOD $11.35 $ 11.06 $ 10.32
------ ------- -------
Total Return 7.48% 12.79% 18.59%
RATIOS/SUPPLEMENTARY DATA:
Net Assets at end of period (000) $73,552 $37,056 $24,591
Ratio of expenses to average
net assets 0.42% 0.49% 0.66%
Ratio of net investment income
to average net assets 4.80% 4.94% 5.35%
Ratio of expenses to average
net assets* 1.16% 1.23% 1.42%
Ratio of net investment income
to average net assets* 4.06% 4.20% 4.59%
Portfolio turnover(a) 9.36% 9.81% 7.14%
</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)
Portfolio turnover is calculated on the basis of the Fund as a whole without
distinguishing among the classes of shares issued. (b) Share class commenced
operations July 2, 1987.
45
<PAGE> 52
<TABLE>
<CAPTION>
YEAR ENDED JUNE 30,
-------------------
CLASS A 1998 1997 1996 1995 1994 1993 1992(b)
------- ---- ---- ---- ---- ---- ---- -------
<S> <C> <C> <C> <C> <C> <C> <C>
NET ASSET VALUE, BEGINNING OF PERIOD $ 17.64 $ 15.11 $ 13.20 $13.20 $12.23 $12.34
------- ------- ------- ------ ------ ------
Investment Activities
Net investment income 0.31 0.38 0.03 0.36 0.40 0.20
Net realized and unrealized gains
from investments 4.87 3.20 2.29 -- 0.98 (0.10)
Total from Investment Activities 5.18 3.58 2.32 0.36 1.38 0.10
------- ------- ------- ------- ------ ------
Distributions
From net investment income (0.31) (0.35) (0.03) (0.34) (0.41) (0.21)
In excess of net investment income -- -- (0.01) (0.02) -- --
From net realized gains (0.61) (0.70) (0.37) -- -- --
------- ------- ------- ------- ------ ------
Total Distributions (0.92) (1.05) (0.41) (0.36) (0.41) (0.21)
------- ------- ------- ------- ------ ------
NET ASSET VALUE, END OF PERIOD $ 21.90 $ 17.64 $ 15.11 $ 13.20 $13.20 $12.23
======= ======= ======= ======= ====== ======
Total Return (Excludes Sales Charge) 30.39% 24.23% 20.79% 2.95% 11.38% 2.16%(c)
RATIOS/SUPPLEMENTARY DATA:
Net Assets at end of period (000) $78,976 $44,284 $13,793 $12,054 $9,513 $ 118
Ratio of expenses to average
net assets 1.25% 1.23% 1.26% 1.23% 1.11% 1.29%(c)
Ratio of net investment income to
average net assets 1.65% 2.19% 2.61% 3.01% 3.32% 3.97%(c)
Ratio of expenses to average net
assets* 1.34% 1.36% 1.36% 1.40% 1.43% 1.49%(c)
Ratio of net investment income to
average net assets* 1.56% 2.06% 2.51% 2.84% 3.00% 3.77%(c)
Portfolio turnover(a) 28.18% 14.92% 4.03% 22.69% 7.53% 5.99%
</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)
Portfolio turnover is calculated on the basis of the Fund as a whole without
distinguishing among the classes of shares issued. (b) Class A Shares
commenced offering on February 18, 1992. (c) Annualized.
46
<PAGE> 53
THE ONE GROUP(R) INCOME EQUITY FUND FINANCIAL HIGHLIGHTS
<TABLE>
<CAPTION>
YEAR ENDED JUNE 30,
-------------------
CLASS B 1998 1997 1996 1995 1994(a)
------- ---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C>
NET ASSET VALUE, BEGINNING OF PERIOD $ 17.68 $ 15.14 $ 13.23 $ 13.83
------- ------- ------- -------
Investment Activities
Net investment income 0.17 0.24 0.26 0.11
Net realized and unrealized gains
(losses) from investments 4.89 3.23 2.29 (0.60)
------- ------- ------- -------
Total from Investment Activities 5.06 3.47 2.55 (0.49)
------- ------- ------- -------
Distributions
From net investment income (0.18) (0.23) (0.25) (0.11)
In excess of net investment income -- -- (0.02) --
From net realized gains (0.61) (0.70) (0.37) --
------- ------- ------- -------
Total Distributions (0.79) (0.93) (0.64) (0.11)
------- ------- ------- -------
NET ASSET VALUE, END OF PERIOD $ 21.95 $ 17.68 $ 15.14 $ 13.23
======= ======= ======= =======
Total Return (Excludes Sales Charge) 29.48% 23.41% 19.91% (3.37)%(b)
RATIOS/SUPPLEMENTARY DATA:
Net Assets at end of period (000) $79,518 $29,169 $ 3,468 $ 1,714
Ratio of expenses to average net assets 2.00% 1.98% 2.01% 1.95%(c)
Ratio of net investment income
to average net assets 0.89% 1.44% 1.88% 2.70%(c)
Ratio of expenses to average net assets* 2.00% 2.01% 2.02% 1.95%(c)
Ratio of net investment income
to average net assets* 0.89% 1.41% 1.87% 2.70%(c)
Portfolio turnover(d) 28.18% 14.92% 4.03% 22.69%
</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 B Shares commenced offering on January 14, 1994. (b) Not Annualized.
(c) Annualized. (d) Portfolio turnover is calculated on the basis of the Fund
as a whole without distinguishing among the classes of shares issued.
47
<PAGE> 54
THE ONE GROUP(R) VALUE GROWTH FUND
INVESTMENT OBJECTIVE
The Fund seeks long term capital growth and growth of income with a secondary
objective of providing a moderate level of current income.
INVESTMENT STRATEGY
The Fund invests primarily in common stocks of overlooked or undervalued
companies that have the potential for earnings growth over time. The Fund uses a
multi-style approach, meaning that it may invest across varied capitalization
levels targeting both value and growth oriented companies. Because the Fund
seeks return over the long term, Banc One Investment Advisors will not attempt
to time the market.
PORTFOLIO SECURITIES
The Fund normally invests at least 65% of its total assets in equity securities
described above. Up to 35% of its total assets may be invested in U.S.
Government Securities, other investment grade fixed income securities, cash, and
cash equivalents. For a list of all the securities in which the Fund may invest,
please read "Investment Practices."
RISK CONSIDERATIONS
The Fund invests in equity securities which may increase or decrease in value.
As a result, your investment in the Fund may increase or decrease in value. The
Fund also may invest in fixed income securities. The value of these securities
will change in response to interest rate changes and other factors. This is
especially true to the extent that the Fund invests in debt securities with
speculative characteristics. Before you invest, please read "More About the
Funds" and "Investment Risks."
FUND MANAGEMENT
The Fund is managed by a team of portfolio managers, research analysts, and
other investment management professionals. Each team member makes
recommendations about the securities in the Fund. The research analysts provide
in-depth industry analysis and recommendations, while the portfolio managers
determine strategy, industry weightings, Fund holdings, and cash positions.
48
<PAGE> 55
SHAREHOLDER EXPENSES
<TABLE>
<CAPTION>
SHAREHOLDER TRANSACTION EXPENSES(1) CLASS A CLASS B CLASS C CLASS I
- ----------------------------------- ------- ------- ------- -------
<S> <C> <C> <C> <C>
Maximum Sales Charge Imposed on Purchases
(as a percentage of offering price) 4.50% none none none
Maximum Contingent Deferred Sales Charge
(as a percentage of original purchase
price or redemption proceeds, as applicable) none(2) 5.00% 1.00% none
Redemption Fees none none none none
Exchange Fees none none none none
ANNUAL OPERATING EXPENSES
(as a percentage of average daily net assets)(3)
Investment Advisory Fees .74% .74% .74% .74%
12b-1 Fees (after fee waiver)(4) .25% 1.00% 1.00% none
Other Expenses .26% .26% .26% .26%
Total Fund Operating Expenses
(after fee waiver)(5) 1.25% 2.00% 2.00% 1.00%
</TABLE>
(1) If you buy or sell shares through a Shareholder Servicing Agent, you
may be charged separate transaction fees by the Shareholder Servicing
Agent. In addition, a $10.00 sub-minimum account fee may be applicable
and a $7.00 charge will be deducted from redemption amounts paid by
wire.
(2) Except for purchases of $1 million or more. Please see "Sales Charges."
(3) Expense information has been restated to reflect current fees.
(4) Due to 12b-1 fees, long-term Class A, Class B and Class C shareholders
may pay more than the equivalent of the maximum front-end sales charges
permitted by the rules of the National Association of Securities
Dealers. Without the voluntary waiver, 12b-1 fees would be .35% for
Class A shares.
(5) Without the voluntary reduction of 12b-1 fees, Total Operating Expenses
would be 1.35% for Class A shares.
EXAMPLE
An investor would pay the following expenses on a $1,000 investment in the Fund,
assuming: (1) payment of the maximum sales charge; (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 $57 $83 $111 $189
Class A (without fee waiver) $58 $86 $116 $200
Class B $70 $93 $128 $213
Class C $30 $63 $108 $233
Class I $10 $32 $ 55 $122
</TABLE>
Assuming no redemption at the end of each time period, the dollar amounts in the
above example would be as follows:
49
<PAGE> 56
<TABLE>
<CAPTION>
1 YEAR 3 YEARS 5 YEARS 10 YEARS
------ ------- ------- --------
<S> <C> <C> <C> <C>
Class A $57 $83 $111 $189
Class A (without fee waiver) $58 $86 $116 $200
Class B $20 $63 $108 $213
Class C $20 $63 $108 $233
Class I $10 $32 $ 55 $122
</TABLE>
Class B shares automatically convert to Class A shares after eight (8) years.
Therefore, the "10 years" examples above reflect this conversion.
These examples are designed to assist you in understanding the various costs and
expenses that may be directly or indirectly paid by investors in the Fund. THESE
EXAMPLES SHOULD NOT BE CONSIDERED A REPRESENTATION OF PAST OR FUTURE EXPENSES
AND ACTUAL EXPENSES MAY BE GREATER OR LESS THAN THOSE SHOWN.
50
<PAGE> 57
THE ONE GROUP(R) VALUE GROWTH FUND FINANCIAL HIGHLIGHTS
The Financial Highlights are intended to help you understand the Fund's
financial performance for the past 10 years, or since inception if less than 10
years. The total returns in the table represent the rate a shareholder would
have earned on an investment in the Fund (assuming reinvestment of all dividends
and distributions). This information has been derived from financial statements
audited by PricewaterhouseCoopers, LLP, whose report, along with the Fund's
financial statements, is incorporated by reference in the Statement of
Additional Information, which is available upon request.
<TABLE>
<CAPTION>
MARCH 26, 1996 TO
YEAR ENDED JUNE 30, JUNE 30,
------------------------ -----------------
CLASS I 1998 1997 1996(a)
------- ---- ---- -------
<S> <C> <C> <C>
NET ASSET VALUE, BEGINNING OF PERIOD $ 10.39 $ 10.00
Investment Activities
Net investment income 0.11 0.03
Net realized and unrealized gains from investments 2.85 0.39
-------- --------
Total from Investment Activities 2.96 0.42
-------- --------
Distributions
From net investment income (0.11) (0.03)
From net realized gains (1.73) --
-------- --------
Total Distributions (1.84) (0.03)
-------- --------
NET ASSET VALUE, END OF PERIOD $ 11.51 $ 10.39
======== ========
Total Return 31.97% 10.49%(b)(c)
RATIOS/SUPPLEMENTARY DATA:
Net Assets at end of period (000) $430,837 $191,212
Ratio of expenses to average net assets 0.98% 0.95%(d)
Ratio of net investment income to average net assets 1.06% 1.13%(d)
Ratio of expenses to average net assets* 1.00% 1.04%(d)
Ratio of net investment income to average net assets* 1.04% 1.04%(d)
Portfolio turnover(e) 113.17% 65.21%
</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 date reorganized as a fund of The One Group. (b) Represents total
return for Class A Shares from December 1, 1995 through March 25, 1996 plus
total return for Class I Shares for the period from March 26, 1996 through
June 30, 1996. (c) Not annualized. (d) Annualized. (e) Portfolio turnover is
calculated on the basis of the Fund as a whole without distinguishing among
the classes of shares issued.
51
<PAGE> 58
<TABLE>
<CAPTION>
SEVEN
MONTHS
YEAR ENDED ENDED YEAR ENDED JUNE 30,
JUNE 30, JUNE 30, -------------------
--------------- ---------
CLASS A 1998 1997 1996(a) 1995 1994 1993 1992 1991
------- ---- ---- ------- ---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C> <C> <C> <C>
NET ASSET VALUE, BEGINNING OF PERIOD $ 10.39 $ 11.15 $ 9.00 $ 10.02 $ 9.42 $ 7.80 $ 6.39
------- ------- -------- -------- -------- -------- -------
Investment Activities Net investment
income 0.09 0.94 0.12 0.13 0.11 0.11 0.12
Net realized and unrealized gains
(losses) from investments 2.83 0.08 2.44 (0.56) 0.83 1.75 1.44
------- ------- -------- -------- -------- -------- -------
Total from Investment Activities 2.92 1.02 2.56 (0.43) 0.94 1.86 1.56
------- ------- -------- -------- -------- -------- -------
Distributions
From net investment income (0.08) (0.94) (0.12) (0.14) (0.12) (0.10) (0.14)
In excess of net investment income -- (0.01) -- -- -- -- --
From net realized gains (1.73) (0.83) (0.29) (0.45) (0.22) (0.14) (0.01)
------- ------- -------- -------- -------- -------- -------
Total Distributions (1.81) (1.78) (0.41) (0.59) (0.34) (0.24) (0.15)
------- ------- -------- -------- -------- -------- -------
NET ASSET VALUE, END OF PERIOD $ 11.50 $ 10.39 $ 11.15 $ 9.00 $ 10.02 $ 9.42 $ 7.80
======= ======= ======== ======== ======== ======== =======
Total Return (Excludes Sales Charge) 31.53% 10.40%(b) 29.57% (4.32)% 10.13% 24.27% 24.97%
RATIOS/SUPPLEMENTARY DATA:
Net Assets at end of period (000) $47,306 $35,984 $217,978 $173,198 $171,141 $133,614 $93,400
Ratio of expenses to average net assets 1.23% 0.97%(c) 0.95% 0.96% 0.96% 0.97% 0.95%
Ratio of net investment income to
average net assets 0.83% 0.65%(c) 1.25% 1.34% 1.21% 1.25% 1.73%
Ratio of expenses to average net assets* 1.34% 1.05%(c) 0.95% 0.96% 0.96% 0.97% 1.02%
Ratio of net investment income to
average net assets* 0.72% 0.77%(c) 1.25% 1.34% 1.21% 1.25% 1.66%
Portfolio turnover(d) 113.17% 65.21% 77.00% 53.00% 66.00% 43.00% 54.00%
</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)
Upon reorganizing as a fund of The One Group, the Paragon Value Growth Fund
became the Value Growth Fund. Financial highlights for the periods prior to
March 26, 1996 represent the Paragon Value Growth Fund. The per share data
for the periods prior to March 26, 1996 have been restated to reflect the
impact of restatement of net asset value from $15.26 to $10.00 effective
March 26, 1996. (b) Not annualized. (c) Annualized. (d) Portfolio turnover is
calculated on the basis of the Fund as a whole without distinguishing among
the classes of shares issued.
52
<PAGE> 59
THE ONE GROUP(R) VALUE GROWTH FUND FINANCIAL HIGHLIGHTS
<TABLE>
<CAPTION>
SEVEN MONTHS SEPT. 9, 1994
YEAR ENDED ENDED YEAR ENDED TO
JUNE 30, JUNE 30, NOV. 30, NOV. 30,
------------------ ---------- -------- --------
CLASS B 1998 1997 1996(a) 1995 1994(b)
------- ---- ---- ------- ---- -------
<S> <C> <C> <C> <C> <C>
NET ASSET VALUE, BEGINNING OF PERIOD $ 10.39 $ 11.16 $ 9.01 $ 9.85
------- ------- ------- ------
Investment Activities
Net investment income 0.01 0.91 0.05 0.02
Net realized and unrealized gains
(losses) from investments 2.82 0.07 2.46 (0.84)
------- ------- ------- ------
Total from Investment Activities 2.83 0.98 2.51 (0.82)
------- ------- ------- ------
Distributions
From net investment income (0.02) (0.91) (0.07) (0.02)
In excess of net investment income -- (0.01) -- --
From net realized gains (1.73) (0.83) (0.29) --
------- ------- ------- ------
Total Distributions (1.75) (1.75) (0.36) (0.02)
------- ------- ------- ------
NET ASSET VALUE, END OF PERIOD $ 11.47 $ 10.39 $ 11.16 $ 9.01
======= ======= ======= ======
Total Return (Excludes Sales Charge) 30.52% 9.86%(c) 28.74% (8.31)%(c)
RATIOS/SUPPLEMENTARY DATA:
Net Assets at end of period (000) $10,517 $ 4,673 $ 2,923 $412
Ratio of expenses to average net assets 1.98% 1.56%(d) 1.70% 1.71%(d)
Ratio of net investment income to
average net assets 0.07% 0.13%(d) 0.38% 0.76%(d)
Ratio of expenses to average net assets* 2.00% 1.94%(d) 1.70% 1.71%(d)
Ratio of net investment income to
average net assets* 0.05% 0.05%(d) 0.38% 0.76%(d)
Portfolio turnover(e) 113.17% 65.21% 77.00% 53.00%
</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)
Upon reorganizing as a fund of The One Group, the Paragon Value Growth Fund
became the Value Growth Fund. Financial highlights for the periods prior to
March 26, 1996 represent the Paragon Value Growth Fund. The per share data
for the periods prior to March 26, 1996 have been restated to reflect the
impact of restatement of net asset value from $15.21 to $10.00 effective
March 26, 1996. (b) Class B Shares commenced offering September 9, 1994. (c)
Not annualized. (d) Annualized. (e) Portfolio turnover is calculated on the
basis of the Fund as a whole without distinguishing among the classes of
shares issued.
53
<PAGE> 60
THE ONE GROUP(R) SMALL CAPITALIZATION FUND
INVESTMENT OBJECTIVE
The Fund seeks long-term capital growth primarily by investing in a portfolio of
equity securities of small capitalization and emerging growth companies.
INVESTMENT STRATEGY
The Fund invests primarily in common stocks, debt securities, preferred stocks,
convertible securities, warrants, and other equity securities of small
capitalization companies. Generally, Banc One Investment Advisors selects a
portfolio of companies with a market capitalization equivalent to the median
market capitalization of the S&P Small-Cap 600 Index*, although the Fund may
occasionally hold securities of companies with larger capitalizations if doing
so contributes to the Fund's investment objective. This Fund was formerly called
The One Group Gulf South Growth Fund.
PORTFOLIO SECURITIES
The Fund invests at least 65% of its total assets in the securities described in
"Investment Strategy." Up to 35% of its total assets may be invested in U.S.
Government Securities, other investment grade fixed income securities, cash, and
cash equivalents. For a list of all the securities in which the Fund may invest,
please read "Investment Practices."
RISK CONSIDERATIONS
The Fund invests in equity securities which may increase or decrease in value.
As a result, your investment in the Fund may increase or decrease in value.
Also, smaller companies may be subject to greater business risks than larger
companies. Before you invest, please read "More About the Funds" and "Investment
Risks."
FUND MANAGEMENT
The Fund is managed by a team of portfolio managers, research analysts, and
other investment management professionals. Each team member makes
recommendations about the securities in the Fund. The research analysts provide
in-depth industry analysis and recommendations, while the portfolio managers
determine strategy, industry weightings, Fund holdings, and cash positions.
* "Standard & Poor's Small-Cap 600" is a registered service mark of Standard &
Poor's Corporation, which does not sponsor and is in no way affiliated with
the Fund.
54
<PAGE> 61
SHAREHOLDER EXPENSES
<TABLE>
<CAPTION>
SHAREHOLDER EXPENSES CLASS A CLASS B CLASS C CLASS I
- -------------------- ------- ------- ------- -------
<S> <C> <C> <C> <C>
Maximum Sales Charge Imposed on Purchases
(as a percentage of offering price) 4.50% none none none
Maximum Contingent Deferred Sales Charge
(as a percentage of original purchase
price or redemption proceeds, as applicable) none(2) 5.00% 1.00% none
Redemption Fees none none none none
Exchange Fees none none none none
ANNUAL OPERATING EXPENSES
(as a percentage of average daily net assets)(3)
Investment Advisory Fees .74% .74% .74% .74%
12b-1 Fees (after fee waiver)(4) .25% 1.00% 1.00% none
Other Expenses .31% .31% .31% .31%
Total Fund Operating Expenses
(after fee waiver)(5) 1.30% 2.05% 2.05% 1.05%
</TABLE>
(1) If you buy or sell shares through a Shareholder Servicing Agent, you
may be charged separate transaction fees by the Shareholder Servicing
Agent. In addition, a $10.00 sub-minimum account fee may be applicable
and a $7.00 charge will be deducted from redemption amounts paid by
wire.
(2) Except for purchases of $1 million or more. Please see "Sales Charges."
(3) Expense information has been restated to reflect current fees.
(4) Due to 12b-1 fees, long-term Class A, Class B and Class C shareholders
may pay more than the equivalent of the maximum front-end sales charges
permitted by the rules of the National Association of Securities
Dealers. Without the voluntary waiver, 12b-1 fees would be .35% for
Class A shares.
(5) Without the voluntary reduction of 12b-1 fees, Total Operating Expenses
would be 1.40% for Class A shares.
EXAMPLE
An investor would pay the following expenses on a $1,000 investment in the Fund,
assuming: (1) payment of the maximum sales charge; (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
Class A (without fee waiver) $59 $87 $118 $205
Class B $71 $94 $130 $219
Class C $31 $64 $110 $238
Class I $11 $33 $ 58 $128
</TABLE>
Assuming no redemption at the end of each time period, the dollar amounts in the
above example would be as follows:
55
<PAGE> 62
<TABLE>
<CAPTION>
1 YEAR 3 YEARS 5 YEARS 10 YEARS
------ ------- ------- --------
<S> <C> <C> <C> <C>
Class A $58 $84 $113 $195
Class A (without fee waiver) $59 $87 $118 $205
Class B $21 $64 $110 $219
Class C $21 $64 $110 $238
Class I $11 $33 $ 58 $128
</TABLE>
Class B shares automatically convert to Class A shares after eight (8) years.
Therefore, the "10 years" examples above reflect this conversion.
These examples are designed to assist you in understanding the various costs and
expenses that may be directly or indirectly paid by investors in the Fund. These
examples should not be considered representations of past or future expenses and
actual expenses may be greater or less than those shown.
56
<PAGE> 63
THE ONE GROUP(R) SMALL CAPITALIZATION FUND FINANCIAL HIGHLIGHTS
The Financial Highlights are intended to help you understand the Fund's
financial performance for the past 10 years, or since inception if less than 10
years. The total returns in the table represent the rate a shareholder would
have earned on an investment in the Fund (assuming reinvestment of all dividends
and distributions). This information has been derived from financial statements
audited by PricewaterhouseCoopers, LLP, whose report, along with the Fund's
financial statements, is incorporated by reference in the Statement of
Additional Information, which is available upon request.
<TABLE>
<CAPTION>
MARCH 26, 1996
YEAR ENDED TO
JUNE 30, JUNE 30,
--------------------- ----------
CLASS I 1998 1997 1996(a)
------- ---- ---- -------
<S> <C> <C>
NET ASSET VALUE, BEGINNING OF PERIOD $ 10.75 $ 10.00
------- -------
Investment Activities
Net investment income (loss) (0.02) --
Net realized and unrealized gains from investments 1.31 0.78
------- -------
Total from Investment Activities 1.29 0.78
------- -------
Distributions
From net realized gains (1.10) (0.03)
------- -------
Total Distributions (1.10) (0.03)
------- -------
NET ASSET VALUE, END OF PERIOD $ 10.94 $ 10.75
======= =======
Total Return 13.44 % 13.39 %(b)(c)
RATIOS/SUPPLEMENTARY DATA:
Net Assets at end of period (000) $78,318 $83,371
Ratio of expenses to average net assets 1.02 % 0.96 %(d)
Ratio of net investment income (loss) to average net assets (0.16)% (0.16) (d)
Ratio of expenses to average net assets* 1.12 % 1.05 %(d)
Ratio of net investment income (loss) to average net assets* (0.26)% (0.25)%(d)
Portfolio turnover(e) 92.01% 59.57 %
</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 date reorganized as a fund of The One Group. (b) Represents total
return for Class A Shares from December 1, 1995 through March 25, 1996 plus
total return for Class I Shares for the period from March 26, 1996 through
June 30, 1996. (c) Not annualized. (d) Annualized. (e) Portfolio turnover is
calculated on the basis of the Fund as a whole without distinguishing among
the classes of shares issued.
57
<PAGE> 64
<TABLE>
<CAPTION>
SEVEN FIVE
MONTHS MONTHS
YEAR ENDED ENDED ENDED
JUNE 30, JUNE 30, YEAR ENDED NOVEMBER 30, NOV. 30,
-------------- --------- ----------------------- --------
CLASS A 1998 1997 1996(a) 1995 1994 1993 1992 1991(e)
------- ---- ---- ------- ---- ---- ---- ---- -------
<S> <C> <C> <C> <C> <C> <C> <C>
NET ASSET VALUE, BEGINNING OF PERIOD $ 10.73 $ 11.50 $ 9.36 $ 10.11 $ 9.48 $ 7.38 $ 6.37
------- ------- ------- ------- ------- ------- -------
Investment Activities
Net investment income (loss) (0.04) (0.07) (0.04) (0.04) (0.02) 0.01 0.01
Net realized and unrealized gains
(losses) from investments 1.35 1.40 2.35 (0.63) 0.88 2.10 1.01
------- ------- ------- ------- ------- ------- -------
Total from Investment Activities 1.31 1.33 2.31 (0.67) 0.86 2.11 1.02
------- ------- ------- ------- ------- ------- -------
Distributions
From net investment income -- -- -- -- (0.01) (0.01) (0.01)
From net realized gains (1.10) (2.10) (0.17) (0.08) (0.22) -- --
------- ------- ------- ------- ------- ------- -------
Total Distributions (1.10) (2.10) (0.17) (0.08) (0.23) (0.01) (0.01)
------- ------- ------- ------- ------- ------- -------
NET ASSET VALUE, END OF PERIOD $ 10.94 $ 10.73 $ 11.50 $ 9.36 $ 10.11 $ 9.48 $ 7.38
======= ======= ======= ======= ======= ======= =======
Total Return (Excludes Sales Charge) 13.52 % 12.85 %(b) 25.07 % (6.66)% 9.10% 28.59% 16.12%(b)
RATIOS/SUPPLEMENTARY DATA:
Net Assets at end of period (000) $17,299 $18,356 $95,467 $77,540 $74,982 $55,719 $34,546
Ratio of expenses to average net
assets 1.27 % 1.05 %(c) 1.03 % 1.00 % 1.01% 1.00% 1.05%(c)
Ratio of net investment income
(loss) to average net assets (0.41)% (0.33)%(c) (0.36)% (0.38)% (0.21)% 0.15% 0.31%(c)
Ratio of expenses to average net
assets* 1.45 % 1.37 %(c) 1.03 % 1.00 % 1.01 % 1.00% 1.05%(c)
Ratio of net investment income
(loss) to average net assets* (0.59)% (0.35)%(c) (0.36)% (0.30)% (0.21)% 0.15% 0.31%(c)
Portfolio turnover(d) 92.01% 59.57% 65.00% 51.00% 59.00% 42.00% 12.00%
</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)
Upon reorganizing as a fund of The One Group, the Paragon Gulf South Growth
Fund became the Gulf South Growth Fund. Financial highlights for the periods
prior to March 26, 1996 represent the Paragon Gulf South Growth Fund. The per
share data for the periods prior to March 26, 1996 have been restated to
reflect the impact of restatement of net asset value from $15.70 to $10.00
effective March 26, 1996. (b) Not annualized. (c) Annualized. (d) Portfolio
turnover is calculated on the basis of the Fund as a whole without
distinguishing among the classes of shares issued. (e) Period from
commencement of operations.
58
<PAGE> 65
THE ONE GROUP(R) SMALL CAPITALIZATION FUND FINANCIAL HIGHLIGHTS
<TABLE>
<CAPTION>
MONTHS YEAR SEPT. 12,
YEAR ENDED ENDED ENDED 1994 TO
JUNE 30, JUNE 30, NOV. 30, NOV. 30,
----------------- -------- -------- --------
CLASS B 1998 1997 1996(a) 1995 1994(b)
------- ---- ---- ------- ---- -------
<S> <C> <C> <C> <C>
NET ASSET VALUE, BEGINNING OR PERIOD $ 10.72 $ 11.56 $ 9.47 $ 10.40
------- -------- -------- --------
Investment Activities
Net investment loss (0.10) (0.06) (0.07) (0.01)
Net realized and unrealized
gains (losses) from
investments 1.32 1.35 2.33 (0.92)
------- ------- ------- -------
Total from Investment Activities 1.22 1.29 2.26 (0.93)
------- ------- ------- -------
Distributions
From net realized gains (1.10) (2.13) (0.17) --
------- ------- ------- -------
Total Distributions (1.10) (2.13) (0.17) --
------- ------- ------- -------
NET ASSET VALUE, END OF PERIOD $ 10.84 $ 10.72 $ 11.56 $ 9.47
------- ------- ------- -------
Total Return (Excludes Sales Charge) 12.74 % 12.47 %(c) 24.21 % (9.08)%(c)
RATIOS/SUPPLEMENTARY DATA:
Net Assets at end of period (000) $ 3,835 $ 2,545 $ 1,814 $ 231
Ratio of expenses to average
net assets 2.02 % 1.87 %(d) 1.78 % 1.75 %(d)
Ratio of net investment income
(loss) to average net assets (1.16)% (1.10)%(d) (1.16)% (0.90)%(d)
Ratio of expenses to average
net assets* 2.12 % 1.92 %(d) 1.78 % 1.75 %(d)
Ratio of net investment
income (loss) to average net
assets* (1.26)% (1.15)%(d) (1.16)% (0.90)%(d)
Portfolio turnover(e) 92.01% 59.57% 65.00% 51.00%
</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)
Upon reorganizing as a fund of The One Group, the Paragon Gulf South Growth
Fund became the Gulf South Growth Fund. Financial highlights for the periods
prior to March 26, 1996 represent the Paragon Gulf South Growth Fund. The per
share data for the periods prior to March 26, 1996 have been restated to
reflect the impact of restatement of net asset value from $15.48 to $10.00
effective March 26, 1996. (b) Class B Shares commenced offering September 12,
1994. (c) Not annualized. (d) Annualized. (e) Portfolio turnover is
calculated on the basis of the Fund as a whole without distinguishing among
the classes of shares issued.
59
<PAGE> 66
MORE ABOUT THE FUNDS
PORTFOLIO QUALITY
The Funds only purchase securities that meet certain rating criteria.
o If the Funds invest in municipal bonds, the bonds must be rated as
investment grade.
o Other municipal securities, such as tax-exempt commercial paper, notes
and variable rate demand obligations, must be rated in one of the two
highest investment grade categories at the time of investment.
o Corporate bonds generally will be rated in one of the three highest
investment grade categories.
o Banc One Investment Advisors reserves the right to invest in corporate
bonds which present attractive opportunities and are rated in the
lowest investment grade category. These corporate bonds may be riskier
than higher rated bonds.
If the securities are unrated, Banc One Investment Advisors must determine that
they are of comparable quality to rated securities. Banc One Investment Advisors
will look at a security's rating at the time of investment. For more information
about ratings, please see "Description of Ratings" in the Appendix.
ILLIQUID INVESTMENTS
Each Fund may invest up to 15% of its net assets in illiquid investments. A
security is illiquid if it cannot be sold at approximately the value assessed by
the Fund within seven (7) days. Banc One Investment Advisors will follow
guidelines adopted by The One Group Board of Trustees in determining whether an
investment is illiquid.
SPECIAL RISK CONSIDERATIONS
Derivatives: Some of the Funds invest in securities that are considered to be
"derivatives." Derivatives are securities that derive their value from the
performance of underlying assets or securities. These include:
o options, futures contracts, and options on futures contracts
o warrants
o mortgage-backed securities, including collateralized mortgage
obligations and Real Estate Mortgage Investment Conduits (CMOs and
REMICs) and stripped mortgage-backed securities (IOs and POs)
o asset-backed securities
o swap, cap and floor transactions
o new financial products
o currency forwards
o structured instruments
These securities may be more volatile than other investments. Derivatives
present, to varying degrees, market, credit, leverage, liquidity, and management
risks. For a more detailed discussion of these risks, please read "Investment
Risks." A Fund's use of derivatives may cause the Fund to recognize higher
amounts of short-term capital gains (generally taxed at ordinary income tax
rates) than it would if the Fund did not use such instruments.
Small Capitalization Companies: Investments in smaller, younger companies may be
riskier than investments in larger, more established companies. These companies
may be more vulnerable to changes in economic conditions, specific industry
conditions, market fluctuations, and other factors effecting the profitability
of other companies. Because economic events may have a greater impact on smaller
companies, there may be a greater and more frequent fluctuation in their stock
price. This may cause frequent and unexpected increases or decreases in the
value of your investment.
Fixed Income Securities: Investments in fixed income securities (for example,
bonds) will increase or decrease in value based on changes in interest rates. If
rates increase, the value of a Fund's investments generally declines. On the
other hand, if rates fall, the value of the investments generally increases. The
value of your investment in a Fund will increase and decrease as the value
60
<PAGE> 67
of a Fund's investments increase and decrease. While securities with longer
duration and maturities tend to produce higher yields, they also are subject to
greater fluctuations in value when interest rates change. Usually changes in the
value of fixed income securities will not affect cash income generated, but may
affect the value of your investment.
Index Funds: An index fund's investment objective is to track the performance of
a specified index. Therefore, securities may be purchased, retained and sold by
an index fund at times when an actively managed fund would not do so. As a
result, you can expect greater risk of loss (and a correspondingly greater
prospect of gain) from changes in the value of securities that are heavily
weighted in the index than would be the case if the funds were not fully
invested in such securities. Because of this, an index fund's share price can be
volatile and you should be able to handle sudden, and sometimes substantial,
fluctuations in the value of your investment.
International Funds: Investments in foreign securities involve risks different
from investments in U.S. securities. For more details, see "Investment
Practices" and "Investment Risks." Because of these risk factors, the share
price of the International Equity Index Fund is expected to be volatile, and you
should be able to sustain sudden, and sometimes substantial, fluctuations in the
value of your investment.
61
<PAGE> 68
HOW TO DO BUSINESS WITH THE ONE GROUP
PURCHASING FUND SHARES
WHERE CAN I BUY SHARES?
You may purchase Fund shares from the following sources:
o The One Group Services Company, and
o Shareholder Servicing Agents. These include investment advisors,
brokers, financial planners, banks, insurance companies, retirement or
401(k) plan sponsors, or other intermediaries. Shares purchased this
way will be held for you by the Shareholder Servicing Agent.
WHEN CAN I BUY SHARES?
o Purchases may be made on any business day. This includes any day that
the Funds are open for business, other than weekends, days on which the
New York Stock Exchange ("NYSE") is closed, and the following holidays:
New Years Day, Martin Luther King, Jr. Day, Presidents' Day, Good
Friday, Memorial Day, Independence Day, Labor Day, Thanksgiving, and
Christmas.
o Purchase requests received by The One Group Services Company before 4
p.m. Eastern Time ("ET") will be effective that day. On occasion, the
NYSE will close before 4 p.m. ET. When that happens, purchase requests
received after the NYSE closes will be effective the following business
day.
o Purchase orders may be canceled by the Fund's Custodian, State Street
Bank and Trust Company, if it does not receive "federal funds" by 4:00
p.m. ET (i) on the business day after the order is placed if you are
buying Class I shares, and (ii) on the third business day if you are
purchasing Class A, Class B or Class C shares.
o If your shares are held by a Shareholder Servicing Agent, it is the
responsibility of the Shareholder Servicing Agent to send your purchase
or redemption order to the Fund. Your Shareholder Servicing Agent may
have an earlier cut-off time for purchase and redemption requests.
o The One Group Services Company can reject a purchase order if it does
not think that it is in the best interests of a Fund and/or its
shareholders to accept the order.
o Shares are electronically recorded. Therefore, certificates will not be
issued.
WHAT KIND OF SHARES CAN I BUY?
The One Group offers the following classes of shares:
o Class A, Class B and Class C shares are available to the general
public.
o Class I shares are available to institutional investors and any
organization authorized to act in a fiduciary, advisory, custodial or
agency capacity. We will refer to these entities as "Intermediaries."
o If you intend to hold your shares for six or more years, Class B shares
may be appropriate for you. If you intend to hold your shares for less
than six years, you may want to consider Class A or Class C shares.
The One Group Fund Direct IRA. The One Group offers a retirement plan
and, in 1999, may offer an education plan. These plans allow
participants to defer taxes while their retirement and education
savings grow. The education IRA requires a minimum investment of $500.
Call The One Group Services Company at 1-800-480-4111 for an Adoption
Agreement.
62
<PAGE> 69
HOW MUCH DO SHARES COST?
o Shares are sold at net asset value ("NAV") plus a sales charge, if any.
o Each class of shares in each Fund has a different NAV. This is
primarily because each class has different distribution expenses.
o NAV per share is calculated by dividing the total market value of a
Fund's investments and other assets allocable to a class (minus class
expenses) by the number of outstanding shares in that class.
o A Fund's NAV changes every day. NAV is calculated each business day
following the close of the NYSE at 4:00 p.m. ET. On occasion, the NYSE
will close before 4 p.m. ET. When that happens, NAV will be calculated
as of the time the NYSE closes.
HOW DO I OPEN AN ACCOUNT?
1. Read the prospectus carefully, and select the Fund or Funds most
appropriate for you.
2. Decide how much you want to invest.
o The minimum initial investment is $1,000 ($100 for employees
of BANC ONE CORPORATION and its affiliates).
o Subsequent investments must be at least $100 ($25 for
employees of BANC ONE CORPORATION and its affiliates).
o You may purchase no more than $250,000 of Class B shares at
one time.
o The One Group Services Company may waive these minimums.
3. Complete the Account Application Form. Be sure to sign up for all of
the Account privileges that you plan to take advantage of. Doing so now
means that you will not have to complete additional paperwork later.
4. Send the completed application and a personal check (unless you choose
to pay by wire or bank transfer) payable to "The One Group" to:
State Street Bank and Trust Company
c/o The One Group
P.O. Box 8528
Boston, MA 02266-8528
Contributions to Fund Direct IRAs should be made payable to "State
Street Bank and Trust Company for the Benefit of (your name)."
5. All checks should be in U.S. dollars. Third party checks will not be
accepted. Redemptions from a Fund will not be permitted for ten (10)
calendar days if purchases are made by check or under the Systematic
Investment Plan (see below).
6. If you purchase shares through a Shareholder Servicing Agent, you may
be required to complete additional forms or follow additional
procedures. You should contact your Shareholder Servicing Agent
regarding purchases, exchanges and redemptions.
7. If you have any questions, contact your Shareholder Servicing Agent or
call The One Group Services Company at 1-800-480-4111.
CAN I PURCHASE SHARES OVER THE TELEPHONE?
Yes. Simply select this option on your Account Application Form and then:
o Contact your Shareholder Servicing Agent or The One Group Services
Company at 1-800-480-4111 to relay your purchase instructions.
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<PAGE> 70
o Send a personal check made payable to "The One Group" to State Street
Bank and Trust Company (see address above), authorize a bank transfer,
or initiate a wire transfer to the following wire address:
State Street Bank & Trust Company
Attn: Custody & Shareholder Services
ABA 011 000 028
DDA 99034167
FBO The One Group Fund (ex: The One Group Asset Allocation Fund - A)
Your Account Number (ex: 123456789)
Your Account Registration (ex: John Smith & Mary Smith, JTWROS)
o The One Group uses reasonable procedures to confirm that instructions
given by telephone are genuine. These procedures include recording
telephone instructions and asking for personal identification. If these
procedures are followed, The One Group will not be responsible for any
loss, liability, cost or expense of acting upon unauthorized or
fraudulent instructions; you bear the risk of loss.
o You may revoke your right to make purchases over the telephone by
sending a letter to:
State Street Bank and Trust Company
c/o The One Group
P.O. Box 8528
Boston, MA 02266-8528
CAN I AUTOMATICALLY INVEST ON A SYSTEMATIC BASIS?
Yes. After your Account is established, you may purchase additional Class A,
Class B and Class C shares by making automatic monthly investments from your
bank account. The minimum initial investment is still $1,000, but minimum
automatic additions are only $25. The One Group Services Company may waive these
minimums. To establish a Systematic Investment Plan:
o Select the "Systematic Investment Plan" option on the Account
Application Form.
o Provide the necessary information about the bank account from which
your investments will be made.
o Shares purchased under a Systematic Investment Plan may not be redeemed
for ten (10) calendar days.
o The One Group currently does not charge for this service, but may
impose a charge in the future. However, your bank may impose a charge
for debiting your bank account.
o You may revoke your right to make systematic investments by calling The
One Group Services Company at 1-800-480-4111 or by sending a letter to:
State Street Bank and Trust Company
c/o The One Group
P.O. Box 8528
Boston, MA 02266-8528
Conversion Feature
Your Class B shares automatically convert to Class A shares after eight years
(measured from the end of the month in which they were purchased).
o After conversion, your shares will be subject to the lower distribution
and shareholder servicing fees charged on Class A shares.
o You will not be assessed any sales charges or fees for conversion of
shares, nor will you be subject to any Federal income tax.
o Because the share price of the Class A shares may be higher than that
of the Class B shares at the time of conversion, you may receive fewer
Class A shares; however, the dollar value will be the same.
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<PAGE> 71
o If you have exchanged Class B shares of one Fund for Class B shares of
another, the time you held the shares in each Fund will be added
together.
SALES CHARGES
The One Group Services Company compensates Shareholder Servicing Agents who sell
shares of The One Group. Compensation comes from sales charges, 12b-1 fees and
payments by The One Group Services Company from its own resources. The One Group
Services Company, at its own expense, also will provide promotional incentives
in the form of travel expenses, lodging and bonuses to licensed individuals who
sell shares of the Funds, as well as vacation trips (including lodging at luxury
resorts), tickets to entertainment events, and merchandise. Occasionally, cash
incentives will be paid to select Shareholder Servicing Agents. Those
Shareholder Servicing Agents who may receive special incentives include Banc One
Securities Corporation, The Advisors Group, United Planners Financial Services
of America, Inc., The Legend Group, and Rosewood Retirement Advisory Services,
LLC.
Class A Shares
This table shows the amount of sales charge you pay and the commissions paid to
Shareholder Servicing Agents.
<TABLE>
<CAPTION>
SALES CHARGE AS A % SALES CHARGE AS A % COMMISSION AS A % OF
AMOUNT OF PURCHASE OF THE OFFERING PRICE OF YOUR INVESTMENT OF OFFERING PRICE
- ------------------ ---------------------- ------------------ --------------------
<S> <C> <C> <C>
Less than $100,000 4.50% 4.71% 4.05%
$100,000-$249,999 3.50% 3.63% 3.05%
$250,000-$499,999 2.50% 2.56% 2.05%
$500,000-$999,999 2.00% 2.04% 1.60%
$1,000,000* 0.00% 0.00% 0.00%
</TABLE>
* If you purchase $1 million or more of Class A shares and are not
assessed a sales charge at the time of purchase, you will be charged
the equivalent of 1% of the purchase price if you redeem any or all of
the Class A shares within one year of purchase.
Class B Shares
Class B shares are offered at NAV, without any up-front sales charges. However,
if you redeem these shares within six years of the purchase date, you will be
assessed a Contingent Deferred Sales Charge ("CDSC") according to the following
schedule:
CDSC AS A %
OF DOLLAR AMOUNT
YEARS SINCE PURCHASE SUBJECT TO CHARGE
-------------------- -----------------
0-1 5.00%
1-2 4.00%
2-3 3.00%
3-4 3.00%
4-5 2.00%
5-6 1.00%
more than 6 0.00%
The One Group Services Company pays a commission of 4.00% of the original
purchase price to Shareholder Servicing Agents who sell Class B shares.
CLASS C SHARES
Class C shares are offered at NAV, without any up-front sales charge. However,
if you redeem your shares within one year of the purchase date, you will be
assessed a CDSC as follows:
65
<PAGE> 72
CDSC AS A % OF DOLLAR
YEARS SINCE PURCHASE AMOUNT SUBJECT TO CHARGE
-------------------- ------------------------
0-1 1.00%
After first year none
Shareholder Servicing Agents selling Class C shares receive a commission of
1.00% of the original purchase price from The One Group Services Company.
How the CDSC is Calculated
o The Fund assumes that all purchases made in a given month were made on
the first day of the month.
o The CDSC is based on the current market value or the original cost of
the shares, whichever is less.
o A sales charge is not imposed on increases in NAV above the initial
purchase price, nor is a sales charge assessed on shares acquired
through reinvestment of dividends or capital gains distributions.
o To keep your CDSC as low as possible, the Fund first will redeem any
shares in your account that carry no CDSC, starting with Class A
Shares. After that, the Fund will redeem the shares you have held for
the longest time and thus have the lowest CDSC.
o If you exchange Class B or Class C shares of an unrelated mutual fund
for Class B or Class C shares of The One Group in connection with a
fund reorganization, the CDSC applicable to your original shares
(including the period of time you have held those shares) will be
applied to The One Group shares you receive in the reorganization.
12B-1 FEES
12b-1 fees are paid by The One Group to The One Group Services Company as
compensation for its services and expenses. The One Group Services Company in
turn pays all or part of the 12b-1 fee to Shareholder Servicing Agents that sell
shares of The One Group.
o The 12b-1 fees vary by share class as follows:
1. Class A shares pay a 12b-1 fee of .35% of the average daily
net assets of the Fund, which is currently being waived to
.25%.
2. Class B and Class C shares pay a 12b-1 fee of 1.00% of the
average daily net assets of the Fund. This will cause expenses
for Class B and Class C shares to be higher and dividends to
be lower than for Class A shares.
3. There are no 12b-1 fees for Class I shares.
o 12b-1 fees, together with the CDSC, help The One Group Services Company
sell Class B and Class C shares without an "up-front" sales charge by
defraying the costs of advancing brokerage commissions and other
expenses paid to Shareholder Servicing Agents.
o The One Group Services Company may use up to .25% of the fees for
shareholder servicing and up to .75% for distribution. During the last
fiscal year, The One Group Services Company received 12b-1 fees
totaling .25% and 1.00% of the average daily net assets of Class A and
Class B shares, respectively.
o The One Group Services Company may pay 12b-1 fees to its affiliates and
to Banc One Investment Advisors and its affiliates (or any sub-advisor)
for brokerage and other agency transactions.
SALES CHARGE REDUCTIONS AND WAIVERS
REDUCING YOUR CLASS A SALES CHARGES
There are several ways you can reduce the sales charges you pay on Class A
shares:
66
<PAGE> 73
1. Right of Accumulation: You may add the market value of any Class A,
Class B or Class C shares of a Fund (except a money market fund) that
you (and your spouse and minor children) already own to the amount of
your next Class A purchase for purposes of calculating the sales
charge. An Intermediary also may take advantage of this option.
2. Letter of Intent: With an initial investment of $2,000, you may
purchase Class A shares of one or more funds over the next 13 months
and pay the same sales charge that you would have paid if all shares
were purchased at once. A percentage of your investment will be held in
escrow until the full amount covered by the Letter of Intent has been
invested.
To take advantage of the accumulation privilege or letter of intent, complete
the appropriate section of your fund application, or contact your investment
representative. To determine if you are eligible for the accumulation privilege,
contact The One Group Services Company at 1-800-480-4111. These programs may be
terminated or amended at any time.
WAIVER OF THE CLASS A SALES CHARGE
NO SALES CHARGE IS IMPOSED ON CLASS A SHARES OF THE FUNDS IF THE SHARES WERE:
1. Bought with the reinvestment of dividends and capital gains
distributions.
2. Acquired in exchange for other Fund shares if a comparable sales charge
has been paid for the exchanged shares.
3. Bought by officers, directors or trustees, retirees and employees (and
their spouses and immediate family members) of:
o The One Group.
o BANC ONE CORPORATION and its subsidiaries and affiliates.
o The One Group Services Company and its subsidiaries and
affiliates.
o State Street Bank and Trust Company and its subsidiaries and
affiliates.
o Broker/dealers who have entered into dealer agreements with
The One Group and their subsidiaries and affiliates.
o An investment sub-advisor of a fund of The One Group and such
sub-advisor's subsidiaries and affiliates.
4. Bought by:
o Affiliates of BANC ONE CORPORATION and certain accounts (other
than IRA Accounts) for which an Intermediary acts in a
fiduciary, advisory, agency, custodial or similar capacity.
o 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 One Group Services Company.
o Retirement and deferred compensation plans and trusts used to
fund those plans, including, but not limited to, those defined
in sections 401(a), 403(b) or 457 of the Internal Revenue Code
and "rabbi trusts."
o Shareholder Servicing Agents who have a dealer arrangement
with The One Group Services Company, 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 Shareholder Servicing
Agents who place trades for their own accounts if the accounts
are linked to the master account of such Shareholder Servicing
Agent.
5. Bought with proceeds from the sale of Class I shares of a Fund of The
One Group or acquired in an exchange of Class I shares of a Fund for
Class A shares of the same Fund, but only if the purchase is made
within 60 days of the sale or distribution.
6. Bought with proceeds from the sale of shares of a mutual fund,
including a Fund of The One Group, for which a sales charge was paid,
but only if the purchase is made within 60 days of the sale or
distribution.
67
<PAGE> 74
7. Bought in an IRA with the proceeds of a distribution from an employee
benefit plan, but only if the purchase is made within 60 days of the
sale or distribution and, at the time of the distribution, the employee
benefit plan had plan assets invested in a Fund of The One Group.
8. Bought with assets of The One Group.
9. Bought in connection with plans of reorganizations of a Fund, such as
mergers, asset acquisitions and exchange offers to which a Fund is a
party.
The waivers described in (5), (6) and (7) above will not continue indefinitely
and may be discontinued at any time without notice.
WAIVER OF THE CLASS B SALES CHARGE
No sales charge is imposed on redemptions of Class B shares of the Funds:
1. Provided that you withdraw no more than 10% of your account value
annually. You do not have to participate in the Systematic Withdrawal
Plan to take advantage of this waiver.
2. If you buy the shares in connection with certain retirement plans, such
as 401(k) and similar qualified plans.
3. If you are the shareholder (or a joint shareholder), or a participant
or beneficiary of certain retirement plans and you die or become
disabled (as defined by the Tax Code), but only if the redemption is
made within one year of such death or disability.
4. That represent a minimum required distribution from an IRA Account or
other qualifying retirement plan, but only if you are at least age 70
1/2.
5. Exchanged in connection with plans of reorganizations of a Fund, such
as mergers, asset acquisitions and exchange offers to which a Fund is a
party.
6. Acquired in exchange for Class B shares of other Funds of The One Group.
WAIVER OF THE CLASS C SALES CHARGE
No sales charge is imposed on redemptions of Class C shares of the Funds:
1. Provided that you withdraw no more than 10% of the account value
annually. You do not have to participate in the Systematic Withdrawal
Plan to take advantage of this waiver.
2. If you buy the shares in connection with certain retirement plans, such
as 401(k) and similar qualified plans.
3. If you are the shareholder (or a joint shareholder), or a participant
or beneficiary of certain retirement plans and you die or become
disabled (as defined by the Tax Code), but only if the redemption is
made within one year of such death or disability.
4. That represent a minimum required distribution from an IRA Account or
other qualifying retirement plan, but only if you are at least age 70
1/2.
5. Exchanged in connection with plans of reorganizations of a Fund, such
as mergers, asset acquisitions and exchange offers to which a Fund is a
party.
6. Acquired in exchange for Class C shares of other Funds of The One Group.
7. If The One Group Services Company receives notice before you invest
indicating that your Shareholder Servicing Agent, due to the type of
account that you have, is waiving its commission.
To take advantage of any of these sales charge waivers, you must qualify for
such waiver in advance. To see if you qualify, contact The One Group Services
Company at 1-800-480-4111 or your Shareholder Servicing Agent.
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<PAGE> 75
EXCHANGING FUND SHARES
WHAT ARE MY EXCHANGE PRIVILEGES?
You may make the following exchanges:
o Class I shares of a Fund may be exchanged for Class A shares of that
Fund or for Class A or Class I shares of another Fund of The One Group.
o Class A shares of a Fund may be exchanged for Class I shares of that
Fund or for Class A or Class I shares of another Fund of The One Group,
but only if you are eligible to purchase those shares.
o Class B shares of a Fund may be exchanged for Class B shares of another
Fund of The One Group.
o Class C shares of a Fund may be exchanged for Class C shares of another
Fund of The One Group.
The One Group Funds offer a Systematic Exchange Privilege which allows you to
automatically exchange shares of one fund to another on a monthly or quarterly
basis. This privilege is useful in Dollar Cost Averaging. To participate in this
privilege, please select it on your account application. To learn more about it,
please call The One Group Services Company at 1-800-480-4111.
The One Group does not charge a fee for this privilege. In addition, The One
Group may change the terms and conditions of your exchange privileges upon 60
days written notice.
WHEN ARE EXCHANGES PROCESSED?
Exchanges are processed the same business day they are received, provided:
o State Street Bank and Trust Company receives the request by 4:00 p.m.,
ET.
o You have provided The One Group with all of the information necessary
to process the exchange.
o You have received a current prospectus of the Fund or Funds in which
you wish to invest.
o You have contacted your Shareholder Servicing Agent, if necessary.
DO I PAY A SALES CHARGE ON AN EXCHANGE?
Generally, you will not pay a sales charge on an exchange. However:
o You will pay a sales charge if you own Class I shares of a Fund and you
want to exchange those shares for Class A shares, unless you qualify
for a sales charge waiver (see above).
o You will pay a sales charge if you bought Class A shares of a Fund:
1. That does not charge a sales charge and you want to exchange
them for shares of a Fund that does, in which case you would
pay the sales charge applicable to the Fund into which you are
exchanging.
2. That charged a lower sales charge than the Fund into which you
are exchanging, in which case you would pay the difference
between that Fund's sales charge and all other sales charges
you have already paid.
o If you exchange Class B or Class C shares of a Fund, you will not pay a
sales charge at the time of the exchange, however:
1. Your new Class B or Class C shares will be subject to the
higher CDSC of either the Fund from which you exchanged, the
Fund into which you exchanged, or any Fund from which you
previously exchanged.
2. The current holding period for your exchanged Class B or Class
C shares is carried over to your new shares.
ARE EXCHANGES TAXABLE?
Generally:
o An exchange between classes of shares of the same Fund is not taxable
for Federal income tax purposes.
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<PAGE> 76
o An exchange between Funds is considered a sale and generally results in
a capital gain or loss for Federal income tax purposes.
o You should talk to your tax advisor before making an exchange.
ARE THERE LIMITS ON EXCHANGES?
Yes. The exchange privilege is not intended as a way for you to speculate on
short term movements in the market. Therefore:
o To prevent disruptions in the management of the Funds, The One Group
limits excessive exchange activity.
o Exchange activity is excessive if it exceeds two substantive exchange
redemptions (within 30 days of each other) within a twelve month
period.
o In addition, The One Group reserves the right to reject any exchange
request (even those that are not excessive) if the Fund reasonably
believes that the exchange will result in excessive transaction costs
or otherwise adversely affect other shareholders.
REDEEMING FUND SHARES
WHEN CAN I REDEEM SHARES?
You may redeem all or some of your shares on any day that the Funds are open for
business.
o Redemption requests received by The One Group Services Company before
4:00 p.m. ET (or when the NYSE closes) will be effective that day.
HOW DO I REDEEM SHARES?
o Unless you have selected the telephone option on your Account
Application Form, you must send a written redemption request to your
Shareholder Servicing Agent, if applicable, or to State Street Bank and
Trust Company at the following address:
The One Group
c/o State Street Bank and Trust Company
P.O. Box 8528
Boston, MA 02266-8528
o All requests for redemptions from IRA accounts must be in writing.
o You may request redemption forms by calling The One Group Services
Company at 1-800-480-4111.
o State Street Bank and Trust Company may require that the signature on
your redemption request be guaranteed by a commercial bank, a member of
a domestic stock exchange, or a member of the Securities Transfer
Association
Medallion Program or the Stock Exchange Medallion Program, unless:
1. the redemption is for $50,000 worth of shares or less;
2. the redemption is payable to the shareholder of record;
3. the redemption check is mailed to the shareholder at the
record address; or
4. the redemption is payable by wire or bank transfer (ACH) to a
pre-existing bank account.
o On the Account Application Form you may elect to have the redemption
proceeds mailed or wired to:
1. a designated commercial bank; or
2. State Street Bank and Trust Company or your Shareholder
Servicing Agent.
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<PAGE> 77
o State Street Bank and Trust Company may charge you a wire redemption
fee. The current charge is $7.00.
o Your redemption proceeds will be paid within seven days after receipt
of the redemption request.
WHAT WILL MY SHARES BE WORTH?
o If you own Class A and Class I shares and the Fund receives your
redemption request by 4:00 p.m. ET (or when the NYSE closes), you will
receive that day's NAV.
o If you own Class B or Class C shares and the Fund receives your
redemption request by 4:00 p.m. ET (or when the NYSE closes), you will
receive that day's NAV, minus the amount of any applicable CDSC.
CAN I REDEEM BY TELEPHONE?
Yes, if you selected this option on your Account Application Form.
o Call your Shareholder Servicing Agent or State Street Bank and Trust
Company at 1-800-480-4111 to relay your redemption request.
o Your redemption proceeds will be mailed or wired to the commercial bank
account you designated on your Account Application Form.
o State Street Bank and Trust Company may charge you a wire redemption
fee. The current charge is $7.00.
o The One Group uses reasonable procedures to confirm that instructions
given by telephone are genuine. These procedures include recording
telephone instructions and asking for personal identification. If these
procedures are followed, The One Group will not be responsible for any
loss, liability, cost or expense of acting upon unauthorized or
fraudulent instructions; you bear the risk of loss.
O REDEMPTIONS FROM YOUR IRA ACCOUNT MAY NOT BE MADE BY TELEPHONE.
CAN I REDEEM ON A SYSTEMATIC BASIS?
If you have an account value of at least $10,000, you may elect to receive
monthly, quarterly or annual payments of not less than $100 each.
o Select the "Systematic Withdrawal Plan" option on the Account
Application Form.
o Specify the amount you wish to receive and the frequency of the
payments.
o You may designate a person other than yourself as the payee.
o There is no charge for this service.
o If you select this option, please keep in mind that:
1. It may not be in your best interest to buy additional Class A
shares while participating in a Systematic Withdrawal Plan.
This is because Class A shares have an up-front sales charge.
2. If you own Class B or Class C shares, you or your designated
payee may receive systematic payments provided the payments
are limited to no more than 10% of your account value
annually, measured from the date the redemption request is
received.
3. If you are age 70 1/2, you may elect to receive payments to
the extent that the payment represents a minimum required
distribution from an IRA or other qualifying retirement plan.
4. If the amount of the systematic payment exceeds the income
earned by your account since the previous payment under the
Systematic Withdrawal Plan, payments will be made by redeeming
some of your shares. This will reduce the amount of your
investment.
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<PAGE> 78
ADDITIONAL INFORMATION REGARDING REDEMPTIONS
o All redemptions will be for cash.
o If you redeem shares for which you paid by check, and The One Group has
not yet received payment on the check, The One Group will delay
forwarding your redemption proceeds for 10 or more days until payment
has been collected from your bank.
o Because of the high cost of handling small investments, The One Group
charges a sub-minimum account fee. Accounts under $1,000 that are not
participating in a Systematic Investment Plan will be assessed an
annual fee of $10.00. The sub-minimum account fee will not apply to IRA
accounts and the accounts of employees of BANC ONE CORPORATION and its
affiliates.
o The One Group may suspend your ability to redeem when:
1. Trading on the New York Stock Exchange ("NYSE") is restricted.
2. The NYSE is closed (other then weekend and holiday closings).
3. The SEC has permitted a suspension.
4. An emergency exists.
The Statement of Additional Information offers more details about this
process.
o You generally will recognize a gain or loss on a redemption for Federal
income tax purposes. You should talk to your tax advisor before making
a redemption.
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<PAGE> 79
SHAREHOLDER INFORMATION
VOTING RIGHTS
The Funds do not hold annual shareholder meetings, but may hold special
meetings. The special meetings are held, for example, to elect or remove
Trustees, change a Fund's fundamental investment objective, or approve an
investment advisory contract.
As a Fund shareholder, you have one vote for each share that you own. Each Fund,
and each class of shares within each Fund, vote separately on matters relating
solely to that Fund or class, or which affect that Fund or class differently.
However, all shareholders will have equal voting rights on matters that affect
all shareholders equally.
BANC ONE CORPORATION (100 East Broad Street, Columbus, Ohio, 43271), through its
affiliates, may be deemed for purposes of the Investment Company Act of 1940, to
control the Funds. This is because as of July 30, 1998, BANC ONE CORPORATION or
its affiliates possessed the power to vote substantially all of the Class I
shares of the Funds.
On the same date, the following shareholders owned 25% or more of Class A, Class
B or Class C shares of the Funds. As a consequence, they are considered to be
controlling persons of these classes of the Funds listed below.
<TABLE>
<CAPTION>
PERCENTAGE OF TYPE OF
NAME AND ADDRESS FUND/CLASS OWNERSHIP OWNERSHIP
- ---------------- ---------- --------- ---------
<S> <C> <C> <C>
Dean Witter For The Benefit Of Large Company 30.88% Record
Selma J Berry & Growth Fund
Colin G Berry JTTEN Class C
Church St Station B PO Box 250
New York, NY 10008-0250
Strafe & Co Large Company 90.89% Record
Attn Mutual Funds 0393 Growth Fund
100 E Broad Street Class I
Columbus, OH 43215-3607
Strafe & Co Disciplined Value 86.48% Record
Attn Mutual Funds 0393 Fund
100 E Broad Street Class I
Columbus, OH 43215-3607
Banc One Securities Corp FBO Growth 78.53% Record
The One Investment Solution Opportunities Fund
733 Greencrest Dr Class C
Westerville, OH 43081-4903
Strafe & Co Cash Div Cash Growth 84.32% Record
C/O Bank One Trust Co Opportunities Fund
Attn Mutual Fund 0393 Class I
100 E Broad Street
Columbus, OH 43215
Dean Witter For The Benefit Of Income Equity Fund 71.70% Record
McKee Char TR/Lynn A Hammond Class C
& Clare W White Co-TTEES
Church St Station B PO Box 250
New York NY 10013-0250
Strafe & Co Income Equity Fund 92.64% Record
Attn Mutual Funds 0393 Class I
100 E Broad Street
Columbus OH 43215-3607
</TABLE>
73
<PAGE> 80
<TABLE>
<CAPTION>
PERCENTAGE OF TYPE OF
NAME AND ADDRESS FUND/CLASS OWNERSHIP OWNERSHIP
- ---------------- ---------- --------- ---------
<S> <C> <C> <C>
Banc One Securities Corp FBO Equity Index Fund 32.30% Beneficial
The One Investment Solution Class A
733 Greencrest Dr
Westerville OH 43081-4903
Banc One Securities Corp FBO Equity Index Fund 62.48% Beneficial
The One Investment Solution Class C
733 Greencrest Dr
Westerville OH 43081-4903
Strafe & Co. Equity Index Fund 88.78% Record
Attn Mutual Funds 0393 Class I
100 E Broad Street
Columbus OH 43215-3607
Banc One Sec Svgs Plan -Equity Fund Equity Index Fund 30.56% Beneficial
100 E Broad Street Class I
Columbus, OH 43215-3607
Strafe & Co. Large Company 89.11% Record
Attn Mutual Funds 0393 Value Fund
100 E Broad Street Class I
Columbus OH 43215-3607
Banc One Securities Corp FBO International Equity 49.22% Beneficial
The One Investment Solution Index Fund
733 Greencrest Dr Class C
Westerville OH 43081-4903
Dean Witter For The Benefit Of International Equity 26.58% Record
Robert M Lynch & Index Fund
PO Box 250 Church Street Station Class C
New York, NY 1008-0250
Strafe & Co International Equity 87.62% Record
Attn Mutual Funds 0393 Index Fund
100 E Broad Street Class I
Columbus OH 43215-3607
Banc One Securities Corp FBO Value Growth Fund 66.95% Beneficial
The One Investment Solution Class C
733 Greencrest Dr
Westerville OH 43081-4903
Strafe & Co. Value Growth Fund 83.80% Record
Attn: Mutual Funds 0393 Class I
100 E. Broad Street
Columbus, OH 43215-3607
Strafe & Co. Small Company 77.52% Record
Attn: Mutual Funds 0393 Growth Fund
100 E. Broad Street Class I
Columbus, OH 43215-3607
Strafe & Co. Asset Allocation 79.54% Record
Attn: Mutual Funds 0393 Fund
100 E. Broad Street Class I
Columbus, OH 43215-3607
</TABLE>
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<PAGE> 81
DIVIDEND POLICIES
DIVIDENDS
The Funds generally declare dividends on the last business day of each month.
Dividends are distributed on the first business day of the next month. Capital
gains, if any, for all Funds are distributed at least annually.
The Funds pay dividends and distributions on a per-share basis. This means that
the value of your shares will be reduced by the amount of the payment. If you
purchase shares shortly before the record date for a dividend or the
distribution of capital gains, you will pay the full price for the shares and
receive some portion of the price back as a taxable dividend or distribution.
Dividends payable on Class I shares will be more than those payable on other
classes of shares. This is because Class A, Class B and Class C shares have
higher distribution expenses.
DIVIDEND REINVESTMENT
You automatically will receive all income dividends and capital gain
distributions in additional shares of the same Fund and class, unless you have
elected to take such payment in cash. The price of the shares is the NAV
determined immediately following the dividend record date. Reinvested dividends
and distributions receive the same tax treatment as dividends and distributions
paid in cash.
If you want to change the way in which you receive dividends and distributions,
you must write to State Street Bank & Trust Company at P.O. Box 8528, Boston, MA
02266-8528, at least 15 days prior to the distribution. The change is effective
upon receipt by State Street.
SPECIAL DIVIDEND RULES FOR CLASS B SHARES
Class B shares received as dividends and capital gains distributions will be
accounted for separately. Each time any Class B shares (other than those in the
sub-account) convert to Class A shares, a percentage of the Class B shares in
the sub-account will also convert to Class A shares. (See "Conversion Feature.")
TAX TREATMENT OF THE FUNDS
TAX STATUS OF THE FUND
Each Fund intends to qualify as a "regulated investment company" for Federal
income tax purposes. If the Funds qualify, as they have in the past, they will
pay no federal income tax on the earnings they distribute to shareholders.
TAX TREATMENT OF SHAREHOLDERS
TAXATION OF SHAREHOLDER TRANSACTIONS
A sale, exchange, or redemption of Fund shares generally will produce either a
taxable gain or a loss. You are responsible for any tax liabilities generated by
your transactions.
TAXATION OF DISTRIBUTIONS
Each Fund will distribute substantially all of its net investment income
(including, for this purpose, net short-term capital gains) on at least an
annual basis. Dividends you receive from a Fund, whether reinvested or received
in cash, will be taxable to you. Dividends from a Fund's net investment income
will be taxable as ordinary income and dividends from a Fund's long-term capital
gains will be taxable to you as such, regardless of how long you have held the
shares.
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<PAGE> 82
Dividends paid in January, but declared in October, November or December of the
previous year, will be considered to have been paid the previous December.
TAXATION OF RETIREMENT PLANS
Distributions by the Funds to qualified retirement plans will not be taxable.
However, if shares are held by a plan that ceases to qualify for tax-exempt
treatment or by an individual who has received shares as a distribution from a
retirement plan, the distributions will be taxable to the plan or individual as
described in "Taxation of Distributions." If you are considering purchasing
shares with qualified retirement plan assets, you should consult your tax
advisor for a more complete explanation of the Federal, state, local and (if
applicable) foreign tax consequences of making such an investment.
TAX INFORMATION
The Form 1099 that is mailed to you every January details your dividends and
their federal tax category. Even though the Funds provide you with this
information, you are responsible for verifying your tax liability with your tax
professional. For additional tax information see the Statement of Additional
Information. Please note that this tax discussion is general in nature; no
attempt has been made to present a complete explanation of the Federal, state,
local or foreign tax treatment of the Funds or their shareholders.
SHAREHOLDER INQUIRIES
If you have any questions or need additional information, please write The One
Group Services Company at 3435 Stelzer Road, Columbus, OH 43219 or call
1-800-480-4111.
REPORTING
In March and September you will receive a financial report from The One Group.
In addition, The One Group will periodically send you proxy statements and other
reports.
ORGANIZATION AND MANAGEMENT OF THE FUNDS
THE FUNDS
Each Fund is a series of The One Group, an open-end management investment
company. The One Group currently consists of 40 separate Funds. Ten of the Funds
are described in this prospectus; the other Funds are described in separate
prospectuses. Each Fund described in this prospectus is diversified. Each Fund
is supervised by the Board of Trustees.
THE BOARD OF TRUSTEES
The Trustees oversee the management and administration of the Funds. The
Trustees are responsible for making major decisions about each Fund's investment
objectives and policies, but delegate the day-to-day administration of the Funds
to the officers of The One Group.
THE ADVISOR
Banc One Investment Advisors makes the day-to-day investment decisions for the
Funds and continuously reviews, supervises and administers the Funds' investment
programs. Banc One Investment Advisors has served as investment advisor to The
One Group since 1993. Prior to that time, The One Group was advised by
affiliates of Banc One Investment Advisors. In addition to The One Group, Banc
One Investment Advisors serves as investment advisor to other mutual funds and
individual, corporate, charitable and retirement accounts. As of June 30, 1998,
Banc One Investment Advisors, an indirect, wholly-owned subsidiary of BANC ONE
CORPORATION, managed over $59 billion in assets.
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<PAGE> 83
For the fiscal year ended June 30, 1998, the Funds paid advisory fees at the
following rates:
<TABLE>
<CAPTION>
ANNUAL RATE
AS PERCENTAGE
OF AVERAGE DAILY
FUND NAME NET ASSETS
- ------------------------------------------------------------------------------------------------------------------------
<S> <C>
The One Group(R)Asset Allocation Fund .55%
The One Group(R)Large Company Growth Fund .74%
The One Group(R)Large Company Value Fund .74%
The One Group(R)Growth Opportunities Fund .74%
The One Group(R)International Equity Index Fund .47%
The One Group(R)Disciplined Value Fund .74%
The One Group(R)Equity Index Fund .10%
The One Group(R)Income Equity Fund .74%
The One Group(R)Value Growth Fund .74%
The One Group(R)Small Capitalization Fund .74%
</TABLE>
THE SUB-ADVISOR
Independence International Associates, Inc. ("Independence International"), 53
State Street, Boston, Massachusetts, 02109, is the sub-advisor to the
International Equity Index Fund. Independence International specializes in the
management of international equity portfolios. Independence International is an
indirect subsidiary of John Hancock Mutual Life Insurance Company. As of June
30, 1998, Independence International had approximately $2.2 billion in assets
under management.
For the fiscal year ended June 30, 1998, Banc One Investment Advisors paid
Independence International sub-investment advisory fees at the following rates:
<TABLE>
<CAPTION>
ANNUAL RATE
AS PERCENTAGE
OF AVERAGE DAILY
FUND ASSETS NET ASSETS
- ------------------------------------------------------------------------------------------------------------------------
<S> <C>
Up to $10 million .275%
Over $10,000,000 up to $25,000,000 .225%
Over $25,000,000 up to $50,000,000 .195%
Over $50,000,000 up to $100,000,000 .125%
Over $100,000,000 .060%
</TABLE>
THE DISTRIBUTOR
The One Group Services Company, 3435 Stelzer Road, Columbus, Ohio 43219, a
wholly-owned subsidiary of The BISYS Group, Inc., markets the Funds and
distributes shares through selling brokers, financial institutions, investment
advisors, and other financial representatives.
THE ADMINISTRATOR AND SUB-ADMINISTRATOR
The One Group Services Company also serves as the Funds' administrator. The One
Group Services Company is responsible for responding to shareholder inquiries
and requests for information, as well as providing regulatory compliance and
reporting. For these services, The One Group Services Company receives a fee
based on the total assets of The One Group. For the first $1.5 billion in One
Group assets, The One Group Services Company receives an annual fee of .20% of
each Fund's average daily net assets. The annual rate declines to .18% on assets
up to $2 billion, and to .16% when assets exceed $2 billion. The fee is
calculated daily and paid monthly. Some Funds are not included in the
calculations. Banc One Investment Advisors, the Sub-Administrator, provides
office space, equipment, and facilities, as well as legal and regulatory
support.
77
<PAGE> 84
THE TRANSFER AGENT, CUSTODIAN AND SUB-CUSTODIAN
State Street Bank and Trust Company, P.O. Box 8528, Boston, MA 02266-8528, or
your Shareholder Servicing Agent, if appropriate, handles shareholder
recordkeeping and statementing, distributes dividends, and processes buy and
sell requests. As the Funds' custodian, State Street holds the Funds' assets,
settles all portfolio trades and assists in calculating the Funds' net asset
values. Bank One Trust Company, N.A. serves as sub-custodian in connection with
the Funds' securities lending activities under an agreement with State Street
Bank and Trust Company. Bank One Trust Company, N.A. is paid a fee by the Funds
for this service.
YEAR 2000
Preparing for the Year 2000 is a high priority for The One Group Family of
Mutual Funds. Both The One Group Services Company and Banc One Investment
Advisors have formed dedicated teams to help them successfully achieve Year 2000
compliance. In addition, these teams are responsible for assessing the readiness
of all other service providers to The One Group. Year 2000 remediation efforts
are directed toward both information technology and non-information technology
systems. Non-information technology systems include elevators, photocopy
machines, and facsimile machines, and should have no significant impact on the
delivery of services to The One Group.
Banc One Investment Advisors has identified 49 information technology systems
and interfaces that provide service and support to The One Group. Each system is
assigned a priority rating: high, medium or low. Systems rated "high" are those
which are essential to the operation of The One Group. Each system rated "high"
is scheduled to be Year 2000 compliant by December 31, 1998. All systems will be
tested for compliance throughout 1999.
Many, if not all, of the systems are owned or operated by third party servicers
(for example, The One Group's Custodian). Consequently, remediation efforts must
be made by those servicers. Banc One Investment Advisors and The One Group
Services Company have, and will continue to, monitor the remediation progress of
the service providers. This process involves documentation, on-site visits, and
review of remediation plans and test results. Both Banc One Investment Advisors
and The One Group Services Company have budgeted in excess of $700,000 in fiscal
year 1998 and over $1 million in fiscal year 1998 toward the remediation effort
for all systems and interfaces. Neither The One Group nor its shareholders will
bear any of the direct remediation expenses.
Neither The One Group Services Company nor Banc One Investment Advisors
currently anticipate that the move to Year 2000 will have a material impact on
their ability to continue to provide the Funds with service at current levels.
Likewise, The One Group currently anticipates that the more to Year 2000 will
not have a material impact on its operations.
78
<PAGE> 85
DETAILS ABOUT THE FUNDS' INVESTMENT PRACTICES AND POLICIES
INVESTMENT PRACTICES
The Funds invest in a variety of securities and employ a number of investment
techniques. Each security and technique involves certain risks. What follows is
a list of the securities and techniques utilized by the Funds, as well as the
risks inherent in their use. Equity securities are subject mainly to market
risk. Fixed income securities are primarily influenced by market, credit and
prepayment risks, although certain securities may be subject to additional
risks. For a more complete discussion, see the Statement of Additional
Information. Following the table is a more complete discussion of risk.
<TABLE>
<CAPTION>
FUND NAME FUND CODE
- -------------------------------------------------------------------------------------------------------------
<S> <C>
The One Group(R)Asset Allocation Fund 1
The One Group(R)Large Company Growth Fund 2
The One Group(R)Large Company Value Fund 3
The One Group(R)Growth Opportunities Fund 4
The One Group(R)Disciplined Value Fund 5
The One Group(R)Income Equity Fund 6
The One Group(R)Value Growth Fund 7
The One Group(R)Small Capitalization Fund 8
The One Group(R)International Equity Index Fund 9
The One Group(R)Equity Index Fund 10
</TABLE>
<TABLE>
<CAPTION>
INSTRUMENT FUND CODE RISK TYPE
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<S> <C> <C>
U.S. Treasury Obligations: Bills, notes, 1-10 Market
bonds, STRIPS, and CUBES.
Treasury Receipts: TRS, TIGRs, and CATS. 1-10 Market
U.S. Government Agency Securities: Securities 1-10 Market
issued by agencies and instrumentalities of Credit
the U.S. Government. These include Ginnie Mae,
Fannie Mae, and Freddie Mac.
Certificates of Deposit: Negotiable instruments with a stated 1-10 Market
maturity. Credit
Liquidity
Time Deposits: Non-negotiable receipts issued by a bank in 1-10 Liquidity
exchange for the deposit of funds. Credit
Market
Common Stock: Shares of ownership of a company. 1-10 Market
Repurchase Agreements: The purchase of a security and the 1-10 Credit
simultaneous commitment to return the security to the seller at Market
an agreed upon price on an agreed upon date. This is treated as Liquidity
a loan.
Reverse Repurchase Agreement: The sale of a security and the 1-10 Market
simultaneous commitment to buy the security back at an agreed Leverage
upon price on an agreed upon date. This is treated as a
borrowing by a Fund.
</TABLE>
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<TABLE>
<CAPTION>
INSTRUMENT FUND CODE RISK TYPE
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<S> <C> <C>
Securities Lending: The lending of up to 331/3% of the Fund's total assets. 1-10 Credit
In return the Fund will receive cash, other securities, and/or letters of credit Market
as collateral. Leverage
When-Issued Securities and Forward Commitments: Purchase or 1-10 Market
contract to purchase securities at a fixed price for delivery at Leverage
a future date. Liquidity
Investment Company Securities: Shares of other mutual funds, 1-10 Market
including money market funds of The One Group and shares of
other investment companies for which Banc One Investment Advisors serves as
investment advisor or administrator. Banc One Investment Advisors will waive
certain fees when investing in funds for which it serves as investment advisor.
Convertible Securities: Bonds or preferred stock that convert to 1-10 Market
common stock. Credit
Call and Put Options: A call option gives the buyer the right to 1-10 Management
buy, and obligates the seller of the option to sell, a security Liquidity
at a specified price. A put option gives the buyer the right to Credit
sell, and obligates the seller of the option to buy, a security Market
at a specified price. The Funds will sell only covered call and Leverage
secured put options.
Futures and Related Options: A contract providing for the future 1-10 Management
sale and purchase of a specified amount of a specified security, Market
class of securities, or an index at a specified time in the Credit
future and at a specified price. Liquidity
Leverage
Real Estate Investment Trusts ("REITs"): Pooled investment 1-10 Liquidity
vehicles which invest primarily in income producing real estate Management
or real estate related loans or interest. Market
Regulatory
Tax
Pre-payment
Bankers' Acceptances: Bills of exchange or time drafts drawn on 1-10 Credit
and accepted by a commercial bank. Maturities are generally six Liquidity
months or less. Market
Commercial Paper: Secured and unsecured short-term promissory 1-10 Credit
notes issued by corporations and other entities. Maturities Liquidity
generally vary from a few days to nine months. Market
Foreign Securities: Stocks issued by foreign companies, as well 1-9 Market
as commercial paper of foreign issuers and obligations of Political
foreign banks, overseas branches of U.S. banks and supranational Liquidity
entities. Includes American Depository Receipts. Foreign
Investment
Restricted Securities: Securities not registered under the 1-10 Liquidity
Securities Act of 1933, such as privately placed commercial Market
paper and Rule 144A securities.
Variable and Floating Rate Instruments: Obligations with 1-10 Credit
interest rates which are reset daily, weekly, quarterly or some Liquidity
other period and which may be payable to the Fund on demand. Market
Warrants: Securities, typically issued with preferred stock or 1-3, 7-10 Market
bonds, that give the holder the right to buy a proportionate Credit
amount of common stock at a specified price.
</TABLE>
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<CAPTION>
INSTRUMENT FUND CODE RISK TYPE
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<S> <C> <C>
Preferred Stock: A class of stock that generally pays a dividend 1-10 Market
at a specified rate and has preference over common stock
in the payment of dividends and in liquidation.
Mortgage-Backed Securities: Debt obligations secured by real 1 Pre-payment
estate loans and pools of loans. These include collateralized Market
mortgage obligations ("CMOs"), Real Estate Mortgage Investment Credit
Conduits ("REMICs") and Stripped Mortgage-Backed Securities Regulatory
("SMBS").
Corporate Debt Securities: Corporate bonds and non-convertible 1 Market
debt securities. Credit
Demand Features: Securities that are subject to puts and standby 1 Market
commitments to purchase the securities at a fixed price (usually Liquidity
with accrued interest) within a fixed period of time following Management
demand by a Fund.
Asset-Backed Securities: Securities secured by company 1 Pre-payment
receivables, home equity loans, truck and auto loans, leases, Market
credit card receivables and other securities backed by other Credit
types of receivables or other assets.
Mortgage Dollar Rolls: A transaction in which a Fund sells 1 Pre-payment
securities for delivery in a current month and simultaneously Market
contracts with the same party to repurchase similar but not Regulatory
identical securities on a specified future date.
Adjustable Rate Mortgage Loans ("ARMs"): Loans in a mortgage 1 Pre-payment
pool which provide for a fixed initial mortgage interest rate Market
for a specified period of time, after which the rate may be Credit
subject to periodic adjustments. Regulatory
Swaps, Caps and Floors: A Fund may enter into these transactions 1-10 Management
to manage its exposure to changing interest rates and other Credit
factors. Swaps involve an exchange of obligations by two Liquidity
parties. Caps and floors entitle a purchaser to a principal Market
amount from the seller of the cap or floor to the extent
that a specified index exceeds or falls below a predetermined
interest rate or amount.
New Financial Products: New options and futures contracts and 1-10 Management
other financial products continue to be developed and the Funds Credit
may invest in such options, contracts and products. Market
Liquidity
Structured Instruments: Debt securities issued by agencies and 1 Market
instrumentalities of the U.S. government, banks, municipalities, Liquidity
corporations and other businesses whose interest and/or Management
principal payments are indexed to foreign currency exchange Credit
rates, interest rates, or one or more other referenced indices. Foreign
Investment
Municipal Securities: Securities issued by a state or political 1 Market
subdivision to obtain funds for various public purposes. Credit
Municipal securities include private activity bonds and Political
industrial development bonds, as well as General Obligation Tax
Notes, Tax Anticipation Notes, Bond Anticipation Notes, Revenue Anticipation
Notes, Project Notes, other short-term tax-exempt obligations, municipal leases,
and obligations of municipal housing authorities and single family revenue
bonds.
</TABLE>
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INSTRUMENT FUND CODE RISK TYPE
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<S> <C> <C>
Obligations of Supranational Agencies: Obligations of 9 Credit
supranational agencies who are chartered to promote economic Foreign
development and are supported by various governments Investment
and governmental agencies.
Currency Futures and Related Options: The Funds may engage in 9 Management
transactions in financial futures and related options, which are Liquidity
generally described above. The Funds will enter into these Credit
transactions in foreign currencies for hedging purposes Market
only. Political
Leverage
Foreign
Investment
Forward Foreign Exchange Transactions: Contractual agreement to 9 Management
purchase or sell one specified currency for another currency at Liquidity
a specified future date and price. The Funds will enter into Credit
forward foreign exchange transactions for hedging purposes only. Market
Political
Leverage
Foreign
Investment
Standard & Poor's Depository Receipts ("SPDRs"): SPDRs represent 1-8,10 Market
ownership in a long-term unit investment trust that holds a portfolio
common stocks designed to track the price performance and dividend
yield of the S&P 500 Index. A SPDR entitles a holder to receive proportionate
quarterly cash distributions corresponding to the dividends that accrue to the
S&P 500 Index stocks in the underlying portfolio, less trust expenses.
</TABLE>
INVESTMENT RISKS
Below is a more complete discussion of the types of risks inherent in the
securities and investment techniques listed above. Because of these risks, the
value of the securities held by the Funds may fluctuate, as will the value of
your investment in the Funds. Certain investments are more susceptible to these
risk than others.
o Credit Risk. The risk that the issuer of a security, or the
counterparty to a contract, will default or otherwise become unable to
honor a financial obligation. Credit risk is generally higher for
non-investment grade securities. The price of a security can be
adversely affected prior to actual default as its credit status
deteriorates and the probability of default rises.
o Leverage Risk. The risk associated with securities or practices that
multiply small index or market movements into large changes in value.
Leverage is often associated with investments in derivatives, but also
may be embedded directly in the characteristics of other securities.
o Hedged. When a derivative (a security whose value is based on
another security or index) is used as a hedge against an
opposite position that the fund also holds, any loss generated
by the derivative should be substantially offset by gains on
the hedged investment, and vice versa. While hedging can
reduce or eliminate losses, it can also reduce or eliminate
gains. Hedges are sometimes subject to imperfect matching
between the derivative and underlying security, and there can
be no assurance that a Fund's hedging transactions will be
effective.
o Speculative. To the extent that a derivative is not used as a
hedge, the fund is directly exposed to the risks of that
derivative. Gains or losses from speculative positions in a
derivative may be substantially greater than the derivative's
original cost.
o Liquidity Risk. The risk that certain securities may be difficult or
impossible to sell at the time and the price that would normally
prevail in the market. The seller may have to lower the price, sell
other securities instead or forego an investment opportunity, any of
which could have a negative effect on fund management or performance.
This includes
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the risk of missing out on an investment opportunity because the assets
necessary to take advantage of it are tied up in less advantageous
investments.
o Management Risk. The risk that a strategy used by a fund's management
may fail to produce the intended result. This includes the risk that
changes in the value of a hedging instrument will not match those of
the asset being hedged. Incomplete matching can result in unanticipated
risks.
o Market Risk. The risk that the market value of a security may move up
and down, sometimes rapidly and unpredictably. These fluctuations may
cause a security to be worth less than the price originally paid for
it, or less than it was worth at an earlier time. Market risk may
affect a single issuer, industry, sector of the economy or the market
as a whole. There is also the risk that the current interest rate may
not accurately reflect existing market rates. For fixed income
securities, market risk is largely, but not exclusively, influenced by
changes in interest rates. A rise in interest rates typically causes a
fall in values, while a fall in rates typically causes a rise in
values. Finally, key information about a security or market may be
inaccurate or unavailable. This is particularly relevant to investments
in foreign securities.
o Political Risk. The risk of losses attributable to unfavorable
governmental or political actions, seizure of foreign deposits, changes
in tax or trade statutes, and governmental collapse and war.
o Foreign Investment Risk. The risk associated with higher transaction
costs, delayed settlements, currency controls and adverse economic
developments. This also includes the risk that fluctuations in the
exchange rates between the U.S. dollar and foreign currencies may
negatively affect an investment. Adverse changes in exchange rates may
erode or reverse any gains produced by foreign currency denominated
investments and may widen any losses. Exchange rate volatility also my
affect the ability of an issuer to repay U.S. dollar denominated debt,
thereby increasing credit risk.
o Pre-Payment Risk. The risk that the principal repayment of a security
will occur at an unexpected time, especially that the repayment of a
mortgage or asset-backed security occurs either significantly sooner or
later than expected. Changes in pre-payment rates can result in greater
price and yield volatility. Pre-payments generally accelerate when
interest rates decline.
When mortgage and other obligations are pre-paid, a Fund may have to
reinvest in securities with a lower yield. Further, with early
prepayment, a Fund may fail to recover any premium paid, resulting in
an unexpected capital loss.
o Tax Risk. The risk that the issuer of the securities will fail to
comply with certain requirements of the Internal Revenue Code, which
would cause adverse tax consequences.
o Regulatory Risk. The risk associated with Federal and state laws which
may restrict the remedies that a mortgage lender has when a borrower
defaults on mortgage loans. These laws include restrictions on
foreclosures, redemption rights after foreclosure, Federal and state
bankruptcy and debtor relief laws, restrictions on "due on sale"
clauses, and state usury laws.
INVESTMENT POLICIES
Each Fund's investment objective and the investment policies summarized below
are fundamental. This means that they cannot be changed without the consent of a
majority of the outstanding shares of the Funds. The full text of the
fundamental policies can be found in the Statement of Additional Information.
Each Fund may not:
1. Purchase an issuer's securities if as a result more than 5% of its
total assets would be invested in the securities of that issuer or the
Fund would own more than 10% of the outstanding voting securities of
that issuer. This does not include securities issued or guaranteed by
the United States, its agencies or instrumentalities, and repurchase
agreements involving these securities. This restriction applies with
respect to 75% of a Fund's total assets.
2. Concentrate its investments in the securities of one or more issuers
conducting their principal business in a particular industry or group
of industries. This does not include obligations issued or guaranteed
by the U.S. government or its agencies and instrumentalities and
repurchase agreements involving such securities.
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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.
The One Group Equity Index Fund may not:
1. Invest more than 10% of its total assets in securities issued or
guaranteed by the United States, its agencies or instrumentalities.
Additional investment policies can be found in the Statement of Additional
Information.
TEMPORARY DEFENSIVE POSITION
Sometimes Banc One Investment Advisors or the Sub-Advisor decides that the Funds
should temporarily be invested in cash and cash equivalents. Cash equivalents
include:
o Securities issued by the U.S. Government, its agencies and
instrumentalities
o Repurchase Agreements
o Certificates of Deposit
o Bankers' Acceptances
o Commercial Paper (rated in one of the two highest rating categories)
o Variable Rate Master Demand Notes
o Bank Money Market Deposit Accounts
The Asset Allocation Fund, the Large Company Growth Fund, the Large Company
Value Fund, the Disciplined Value Fund, the Income Equity Fund, the Growth
Opportunities Fund, the Value Growth Fund, and the Small Capitalization Fund may
temporarily invest up to 100% of their total assets in cash and cash
equivalents. The International Equity Index Fund and Equity Index Fund may
temporarily invest only 10% of their total assets in cash and cash equivalents.
The International Equity Index Fund may invest up to 20% of its total assets in
debt securities issued or guaranteed by foreign governments or any of their
political subdivisions, agencies or instrumentalities, or by supranational
issuers rated in one of the three highest rating categories.
While the Funds are engaged in a temporary defensive position, they will not be
pursuing their investment objectives. Therefore, the Funds will pursue a
temporary defensive position only when market conditions warrant.
PORTFOLIO TURNOVER
Portfolio turnover 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 Funds and may result in additional tax consequences to you. The portfolio
turnover rate for each Fund for the fiscal year ended June 30, 1998 is shown on
the Financial Highlights. To the extent portfolio turnover results in short-term
capital gains, such gains will generally be taxed at ordinary income tax rates.
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APPENDIX
DESCRIPTION OF RATINGS
The following is a summary of published ratings by major credit rating agencies.
Credit ratings evaluate only the safety of principal and interest payments, not
the market value risk of lower quality securities. Credit rating agencies may
fail to change credit ratings to reflect subsequent events on a timely basis.
Although Banc One Investment Advisors considers security ratings when making
investment decisions, it also performs its own investment analysis and does not
rely solely on the ratings assigned by credit agencies.
Unrated securities will be treated as non-investment grade securities unless
Banc One Investment Advisors determines that such securities are the equivalent
of investment grade securities. Securities that have received different ratings
from more than one agency are considered investment grade if at least one agency
has rated the security investment grade.
DESCRIPTION OF COMMERCIAL PAPER RATINGS
DUFF & PHELPS CREDIT RATING CO. ("DUFF")
D-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 obligations.
D-1 Very high certainty of timely payment. Liquidity factors are
excellent and supported by good fundamental protection
factors. Risk factors are minor.
D-1- High certainty of timely payment. Liquidity factors are strong
and supported by good fundamental protection factors. Risk
factors are very small.
STANDARD & POOR'S CORPORATION ("S&P")
A-1 Highest category of commercial paper. Capacity to meet
financial commitment is strong. Obligations designated with a
plus sign (+) indicate that capacity to meet financial
commitment is extremely strong.
A-2 Issues somewhat more susceptible to adverse effects of changes
in circumstances and economic conditions than obligations in
higher rating categories. However, the capacity to meet
financial commitments is satisfactory.
FITCH'S IBCA LIMITED ("FITCH")
F1 Highest capacity for timely repayment. Those issues rated F1+
possess a particularly strong credit feature.
F2 Satisfactory capacity for timely repayment although such
capacity may be susceptible to adverse changes in business,
economic or financial conditions.
MOODY'S INVESTORS SERVICE ("MOODY'S")
PRIME-1 Superior ability for repayment.
PRIME-2 Strong ability for repayment.
DESCRIPTION OF BANK RATINGS
MOODY'S
These ratings represent Moody's opinion of a bank's intrinsic safety and
soundness.
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A These banks possess exceptional intrinsic financial strength.
Typically they will be major financial institutions with
highly valuable and defensible business franchises, strong
financial fundamentals, and a very attractive and stable
operating environment.
B These banks possess strong intrinsic financial strength.
Typically, they will be important institutions with valuable
and defensible business franchises, good financial
fundamentals, and an attractive and stable operating
environment.
C These banks possess good intrinsic financial strength.
Typically, they will be institutions with valuable and
defensible business franchises. These banks will demonstrate
either acceptable financial fundamentals within a stable
operating environment, or better than average financial
fundamentals within an unstable operating environment.
S&P
S&P's credit rating is a current opinion of an obligor's overall financial
capacity (its creditworthiness) to pay its financial obligation.
Aaa The highest rating assigned by S&P. The obligor's capacity to
meet its financial commitment on the obligation is extremely
strong.
Aa The obligor's capacity to meet its financial commitments on
the obligation is very strong.
A The obligation is somewhat more susceptible to the adverse
effects of changes in circumstances and economic conditions
than obligations in higher rated categories. However, the
obligor's capacity to meet its financial commitment on the
obligation is still strong.
DESCRIPTION OF INSURANCE RATINGS
MOODY'S
These ratings represent Moody's opinions of the ability of insurance companies
to pay punctually senior policyholder claims and obligations.
Aaa Insurance companies rated in this category offer exceptional
financial security. While the financial strength of these
companies is likely to change, such changes as can be
visualized are most unlikely to impair their fundamentally
strong position.
Aa These insurance companies offer excellent financial security.
Together with the Aaa group, they constitute what are
generally known as high grade companies. They are rated lower
than Aaa companies because long-term risks appear somewhat
larger.
A Insurance companies rated in this category offer good
financial security. However, elements may be present which
suggest a susceptibility to impairment sometime in the future.
S&P
S&P's credit rating is a current opinion of the creditworthiness of an obligor
with respect to a specific financial obligation, a specific class of financial
obligations, or a specific financial program.
AAA This is the highest rating assigned by S&P. The obligor's
capacity to meet its financial commitment on the obligation is
extremely strong.
AA The obligor's capacity to meet its financial commitments on
the obligation is very strong.
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A An obligation rated A is somewhat more susceptible to the
adverse effects of changes in circumstances and economic
conditions than obligations in higher rated categories.
However, the obligor's capacity to meet its financial
commitment on the obligation is still strong.
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DESCRIPTION OF CORPORATE/MUNICIPAL BOND RATINGS
S&P
INVESTMENT GRADE
AAA The highest rating. The rating indicates an extremely strong
capacity to meet its financial commitment.
AA Differs from AAA issues only in a small degree. The obligor's
capacity to meet its financial commitment is very strong.
A These bonds are somewhat more susceptible to the adverse
effects of changes in circumstances and economic conditions
than debt in higher rated categories. However, capacity to
meet its financial commitment on the obligation is still
strong.
BBB Exhibits adequate protection parameters. However, adverse
economic conditions or changing circumstances are more likely
to lead to a weakened capacity to meet its financial
commitment on the obligation.
SPECULATIVE GRADE
BB Less vulnerable to non-payment than other speculative issues.
However, these bonds face major ongoing uncertainties or
exposure to adverse business, financial or economic conditions
which could lead to inadequate capacity to meet financial
commitment on the obligation.
B More vulnerable to non-payment than obligations rated BB, but
currently has the capacity to meet its financial commitment on
the obligation. Adverse business, financial or economic
conditions will likely impair capacity or willingness to meet
its financial commitment on the obligation.
CCC Currently vulnerable to non-payment, and is dependent upon
favorable business, financial, and economic conditions to meet
its financial commitment on the obligation. In the event of
adverse business, financial, or economic conditions, they are
not likely to have the capacity to meet its financial
commitment on the obligation.
CC Currently highly vulnerable to non-payment.
C This rating may be used to cover a situation where a
bankruptcy petition has been filed, or similar action has been
taken, but payments on this obligation are being continued.
D Bonds in payment default.
Ratings from AA to CCC may be modified by a plus (+) or minus (-) to show
relative standing within the major rating categories.
MOODY'S
INVESTMENT GRADE
Aaa 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 an exceptionally stable,
margin and principal is secure.
Aa High quality by all standards. Margins of protection may not
be as large as in Aaa securities, fluctuation of protective
elements may be greater, or there may be other elements
present that make the long-term risks appear somewhat larger
than in Aaa securities.
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A These bonds possess many favorable investment attributes and
are to be considered as upper-medium grade obligations.
Factors giving security to principal and interest are
considered adequate, but elements may be present which suggest
a susceptibility to impairment sometime in the future.
Baa These bonds are considered 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.
NON-INVESTMENT GRADE
Ba These bonds have speculative elements; their future cannot be
considered as well assured. The protection of interest and
principal payments may be very moderate and thereby not well
safeguarded during good and bad times over the future.
B These bonds lack the characteristics of a desirable investment
(i.e., potentially low assurance of timely interest and
principal payments or maintenance of other contract terms over
any long period of time may be small).
Caa Bonds in this category have poor standing and may be in
default. These bonds carry an element of danger with respect
to principal and interest payments.
Ca Speculative to a high degree and could be in default or have
other marked shortcomings. Ca is the lowest rating.
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DESCRIPTION OF MUNICIPAL NOTE RATINGS
MOODY'S
MIG1 & VMIGX1 Short-term municipal securities rated MIG1 or
VMIG1 are of the best quality. They have strong
protection from established cash flows, superior
liquidity support or demonstrated broad-based access
to the market for refinancing.
MIG2 & VMIGX1 These Short-term municipal securities are of
high quality. Margins of protection are ample although
not so large as in the preceding group.
MIG3 & VMIG3 Favorable quality. All security elements are
accounted for, but the undeniable strength of the
preceding grades is lacking. Liquidity and cash flow
protection may be narrow and marketing access for
refinancing is likely to be less well established.
S&P
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.
SP-1 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.
SP-3 Speculative capacity to pay principal and interest.
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DESCRIPTION OF PREFERRED STOCK RATINGS
MOODY'S
aaa Top-quality preferred stock. This rating indicates good asset
protection and the least risk of dividend impairment within
the universe of preferred stocks.
aa High-grade preferred stock. This rating indicates that there
is a reasonable assurance the earnings and asset protection
will remain relatively well maintained in the foreseeable
future.
a Upper-medium grade preferred stock. While risks are judged to
be somewhat greater than in the "aaa" and "aa" classification,
earnings and asset protection are, nevertheless, expected to
be maintained at adequate levels.
baa Medium-grade preferred stock, neither highly protected nor
poorly secured. Earnings and asset protection appear adequate
at present but may be questionable over any great length of
time.
S&P
S&P's preferred stock rating is an assessment of the capacity and willingness of
an issuer to pay preferred stock dividends and any applicable sinking fund
obligations.
AAA Highest rating. This rating indicates an extremely strong
capacity to pay the preferred stock obligations.
AA High-quality, fixed-income security. The capacity to pay
preferred stock obligations is very strong, although not as
overwhelming as for issues rated "AAA."
A Backed by a sound capacity to pay the preferred stock
obligations, although it is somewhat more susceptible to the
adverse effects of changes in circumstances and economic
conditions.
BBB Backed by an adequate capacity to pay the preferred stock
obligations. Whereas the issuer normally exhibits adequate
protection parameters, adverse economic conditions or changing
circumstances are more likely to lead to a weakened capacity
to make payments for a preferred stock in this category than
for issues in the "A" category.
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SHORT-TERM DEBT RATINGS
Thompson Bank Watch, Inc. ("TBW") assigns ratings to specific debt instruments
with original maturities of one year or less. The TBW Short-Term ratings
specifically assess the likelihood of an untimely payment of principal and
interest.
TBW-1 Very high degree of likelihood that principal and interest
will be paid on a timely basis.
TBW-2 While degree of safety regarding timely repayment of principal
and interest is strong, the relative degree is not as high as
for issues rated TBW-1.
TBW-3 Lowest investment grade category. While more susceptible to
adverse developments than obligations with higher ratings,
capacity to service principal and interest in a timely fashion
is considered adequate.
TBW-4 Non-investment grade and, therefore, speculative.
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Investment Advisor and Sub-Administrator
Banc One Investment Advisors Corporation
1111 Polaris Parkway
P.O. Box 710211
Columbus, OH 43271-0211
Sub-Advisor
Independence International Associates, Inc.
53 State Street
Boston, MA 02109
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 8528
Boston, MA 02266-8528
Legal Counsel
Ropes & Gray
One Franklin Square
1301 K Street, N.W.
Suite 800 East
Washington, D.C. 20005
Independent Accountants
PricewaterhouseCoopers, LLP
100 East Broad Street
Columbus, OH 43215
THE STATEMENT OF ADDITIONAL INFORMATION CONTAINS MORE DETAILED INFORMATION ABOUT
THE FUNDS. THE CURRENT STATEMENT OF ADDITIONAL INFORMATION HAS BEEN FILED WITH
THE SECURITIES AND EXCHANGE COMMISSION AND IS AVAILABLE WITHOUT CHARGE BY
CALLING 1-800-480-4111 OR BY WRITING TO THE ONE GROUP SERVICES COMPANY AT 3435
STELZER ROAD, COLUMBUS, OHIO 43219. THE STATEMENT OF ADDITIONAL INFORMATION IS
INCORPORATED INTO THIS PROSPECTUS BY REFERENCE. THE SEC MAINTAINS A WEB SITE
(WWW.SEC.GOV) THAT CONTAINS THE STATEMENT OF ADDITIONAL INFORMATION, MATERIALS
INCORPORATED BY REFERENCE AND OTHER INFORMATION REGARDING THE ONE GROUP(R).
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THE ONE GROUP(R) FAMILY OF MUTUAL FUNDS
BOND FUNDS
COMBINED PROSPECTUS
OCTOBER , 1998
THE ONE GROUP(R) INTERMEDIATE BOND FUND
THE ONE GROUP(R) INCOME BOND FUND
THE ONE GROUP(R) GOVERNMENT BOND FUND
THE ONE GROUP(R) ULTRA SHORT-TERM INCOME FUND
THE ONE GROUP(R) LIMITED VOLATILITY BOND FUND
THE ONE GROUP(R) TREASURY & AGENCY FUND
THE ONE GROUP(R) HIGH YIELD BOND FUND
This prospectus describes seven funds with a
variety of investment objectives, including current income,
capital preservation, state tax-exempt
income, and low volatility. The information in this prospectus is important.
Please read it carefully before you invest, and save it
for future reference.
PLEASE REMEMBER THAT SHARES OF THE FUNDS: O ARE NOT DEPOSITS OR
OBLIGATIONS OF, OR GUARANTEED BY BANC ONE CORPORATION OR ITS AFFILIATES; O
ARE NOT INSURED OR GUARANTEED BY THE FEDERAL DEPOSIT INSURANCE CORPORATION
OR BY ANY FEDERAL OR STATE GOVERNMENTAL AGENCY; O INVOLVE INVESTMENT RISK,
INCLUDING THE POSSIBLE LOSS OF THE PRINCIPAL AMOUNT INVESTED.
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES
AND EXCHANGE COMMISSION NOR HAS THE COMMISSION PASSED UPON THE ACCURACY
OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A
CRIMINAL OFFENSE.
<PAGE> 101
TABLE OF CONTENTS
A BRIEF PREVIEW OF THE FUNDS 1
ABOUT THE FUNDS 3
The One Group(R)Intermediate Bond Fund 3
The One Group(R)Income Bond Fund 8
The One Group(R)Government Bond Fund 15
The One Group(R)Ultra Short-Term Income Fund 21
The One Group(R)Limited Volatility Bond Fund 27
The One Group(R)Treasury & Agency Fund 33
The One Group High Yield Bond Fund 39
MORE ABOUT THE FUNDS 42
HOW TO DO BUSINESS WITH THE ONE GROUP 45
Purchasing Fund Shares 45
Sales Charges 48
Sales Charge Reductions and Waivers 51
Exchanging Fund Shares 53
Redeeming Fund Shares 54
SHAREHOLDER INFORMATION 57
Voting Rights 57
Dividend Policies 58
Tax Treatment of the Funds 58
Tax Treatment of Shareholders 58
Shareholder Inquiries 59
ORGANIZATION AND MANAGEMENT OF THE FUNDS 59
The Funds 59
The Board of Trustees 59
The Advisor 60
The Distributor 60
The Administrator and Sub-Administrator 60
The Transfer Agent, Custodian and Sub-Custodian 60
DETAILS ABOUT THE FUNDS' INVESTMENT PRACTICES AND POLICIES 62
Investment Practices 62
Investment Risks 67
Investment Policies 68
APPENDIX: DESCRIPTION OF RATINGS 70
<PAGE> 102
A BRIEF PREVIEW OF THE FUNDS
WHAT ARE THE GOALS OF THE ONE GROUP BOND FUNDS?
The Funds are designed for a variety of investment objectives, including:
- - current income
- - current income consistent with the preservation of capital
- - current income with a primary focus on income that is exempt from state
income taxes
- - current income consistent with low volatility of principal.
Each Fund pursues a different objective and involves different risks. Please
read about each Fund before investing.
WHAT ARE THE FUNDS' INVESTMENT STRATEGIES?
The Intermediate Bond Fund, the Limited Volatility Bond Fund, the Ultra
Short-Term Income Fund, and the Income Bond Fund invest in high and medium grade
debt securities of all types with average maturities ranging from one to twenty
years. The Income Bond Fund and the High Yield Bond Fund also may invest in
lower grade debt securities, although the Income Bond Fund will limit its
investments in such securities to no more than 30% of its total assets. The
Government Bond Fund and the Treasury & Agency Fund invest in obligations issued
or guaranteed by the U.S. government, its agencies and instrumentalities.
Several of the Funds may invest in preferred stock.
WHAT ARE THE MAIN RISKS OF INVESTING IN THE FUNDS?
The Funds invest in fixed-income investments that are subject to market
fluctuations as a result of changes in interest rates. As a result, the value of
investments in the Funds may decrease during periods of rising interest rates
and increase during periods of declining interest rates. In addition, some of
the Funds invest in mortgage-related securities which have significantly greater
price and yield volatility than traditional fixed-income securities. Also, the
Income Bond Fund and the High Yield Bond Fund may invest in securities in ANY
rating category, some of which are regarded as predominately speculative. An
investment in the Funds is not a deposit of BANC ONE CORPORATION or its
affiliates and is not insured or guaranteed by the Federal Deposit Insurance
Corporation or any other government agency. For more information about risks,
please read "More About the Funds" and "Investment Risks."
WHAT CLASSES OF SHARES ARE AVAILABLE?
The Funds currently offer four classes of Shares: Class A, Class B, Class C and
Class I. Class A, Class B and Class C shares are offered to the general
public. Class I 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. Class I shares are
not available to Individual Retirement Accounts ("IRA"). The section called "How
To Do Business With The One Group" will provide more information.
HOW DO I PURCHASE AND REDEEM SHARES?
You may buy and redeem shares of the Funds on any day that the Funds are open
for business. Class C shares are not available for purchase in all of the funds.
Purchase and redemption procedures are explained in greater detail in "How To Do
Business With The One Group." For additional information, call The One Group
Services Company at 1-800-480-4111.
HOW ARE DIVIDENDS PAID?
Generally, dividends are declared on each business day and are distributed 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
you elect to take the payment in cash. For a more detailed discussion of
dividends, see "Dividend Policies."
1
<PAGE> 103
WHO MANAGES THE FUNDS?
Banc One Investment Advisors Corporation ("Banc One Investment Advisors"), an
indirect subsidiary of BANC ONE CORPORATION, serves as the advisor of the Funds.
Banc One Investment Advisors is paid a fee for its services. Banc One High Yield
Partners, LLC (the "Sub-Advisor") serves as Sub-Advisor to the High Yield Bond
Fund. The Sub-Advisor's fees are paid by Banc One Investment Advisors. A more
detailed discussion regarding Banc One Investment Advisors, its services and
compensation can be found in the Prospectus under the headings "The Advisor" and
"Expense Summary." Additional information regarding the Sub-Advisor is located
in the Prospectus under the heading "The Sub-Advisor."
2
<PAGE> 104
THE ONE GROUP(R) INTERMEDIATE BOND FUND
INVESTMENT OBJECTIVE
The Fund seeks current income consistent with the preservation of capital by
investing in high and medium-grade fixed-income securities with intermediate
maturities.
INVESTMENT STRATEGY
Generally, the Fund invests in debt securities of all types including bonds,
notes, U.S. Government obligations, and taxable and tax-exempt municipal
securities rated as investment grade at the time of investment, (or, if unrated,
determined by Banc One Investment Advisors, to be of comparable quality). The
fund's average weighted maturity will ordinarily range between three and ten
years, taking into account expected prepayment of principal on certain
investments, although the Fund may shorten the weighted average maturity to as
little as one year for temporary defensive purposes.
PORTFOLIO SECURITIES
The Fund normally invests at least 80% of its total assets in debt securities.
Debt securities include bonds, notes and other obligations. As a matter of
fundamental policy, at least 65% of the Fund's total assets will consist of
bonds and at least 50% of total assets will consist of obligations issued by the
U.S. Government or its agencies and instrumentalities, some of which may be
subject to repurchase agreements. However, the Fund intends to hold at least 65%
of its total assets in such government obligations. Up to 20% of the Fund's
total assets may be invested in preferred stock. For a list of all the
securities in which the Fund may invest, please read "Investment Practices."
RISK CONSIDERATIONS
The Fund may invest in debt securities that are rated in the lowest investment
grade category. Such investments are considered to have speculative
characteristics. In addition, the Fund invests in fixed-income securities. The
value of these securities will change in response to interest rate changes and
other factors. This is especially true to the extent the Fund invests in debt
securities in the lowest investment grade category. The Fund also invests in
mortgage-related securities which may have greater price and yield volatility
than traditional fixed income securities. Before you invest, please read "More
About the Funds" and "Investment Risks."
FUND MANAGEMENT
The Fund is managed by a team of portfolio managers, research analysts and fixed
income traders. The team works together to establish general duration and sector
strategies for the Fund. Each team member makes recommendations about securities
in the Fund. The research analysts and trading personnel provide individual
security and sector recommendations, while the portfolio managers select and
allocate individual securities in a manner designed to meet the investment
objectives of the Fund.
3
<PAGE> 105
SHAREHOLDER EXPENSES
<TABLE>
<CAPTION>
SHAREHOLDER TRANSACTION EXPENSES(1) CLASS A CLASS B CLASS C CLASS I
- ----------------------------------- ------- ------- ------- -------
<S> <C> <C> <C> <C>
Maximum Sales Charge Imposed on Purchases
(as a percentage of offering price) 4.50% none none none
Maximum Contingent Deferred Sales Charge
(as a percentage of original purchase price
or redemption proceeds, as applicable) none(2) 5.00% 1.00% none
Redemption Fees none none none none
Exchange Fees none none none none
ANNUAL OPERATING EXPENSES(3) (as a
percentage of average daily net assets)
Investment Advisory Fees (after fee waiver)(4) .40% .40% .40% .40%
12b-1 Fees (after fee waiver)(5) .25% .90% .90% none
Other Expenses .22% .22% .22% .22%
Total Fund Operating Expenses
(after fee waivers)(6) .87% 1.52% 1.52% .62%
</TABLE>
(1) If you buy or sell shares through a Shareholder Servicing Agent, you
may be charged separate transaction fees by the Shareholder Servicing
Agent. In addition, a $10.00 sub-minimum account fee may be applicable
and a $7.00 charge will be deducted from redemption amounts paid by
wire.
(2) Except for purchases of $1 million or more. Please see "Sales Charges."
(3) Expense information has been restated to reflect current fees.
(4) Without the fee waiver, Investment Advisory Fees would be .60% for all
classes of shares.
(5) Due to 12b-1 fees, long-term Class A, Class B and Class C shareholders
may pay more than the equivalent of the maximum front-end sales charges
permitted by the rules of the National Association of Securities
Dealers. Without the voluntary waiver of fees, 12b-1 fees would be .35%
for Class A shares and 1.00% for Class B and Class C shares.
(6) Without the voluntary reduction of Investment Advisory and 12b-1 fees,
Total Operating Expenses would be 1.17% for Class A shares, 1.82% for
Class B shares, 1.82% for Class C shares and .82% for Class I
shares.
EXAMPLE
An investor would pay the following expenses on a $1,000 investment in the Fund,
assuming: (1) payment of the maximum sales charge; (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 53 72 91 147
Class A (without fee waivers) 56 80 106 181
Class B 65 78 103 164
Class B (without fee waivers) 68 87 119 197
Class C 25 48 83 181
Class C (without fee waivers) 28 57 99 214
Class I 20 35 77
Class I (without fee waiver) 8 26 46 101
</TABLE>
Assuming no redemption at the end of each time period, 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 53 72 91 147
Class A (without fee waivers) 56 80 106 181
Class B 15 48 83 164
Class B (without fee waivers) 18 57 99 197
Class C 15 48 85 181
</TABLE>
4
<PAGE> 106
<TABLE>
<CAPTION>
SHAREHOLDER TRANSACTION EXPENSES(1) CLASS A CLASS B CLASS C CLASS I
- ----------------------------------- ------- ------- ------- -------
<S> <C> <C> <C> <C>
Class C (without fee waivers) 18 57 99 214
Class I 6 20 35 77
Class I (without fee waiver) 8 26 46 101
</TABLE>
Class B shares automatically convert to Class A shares after eight (8) years.
Therefore, the "10 years" examples above reflect this conversion.
These examples are designed to assist you in understanding the various costs and
expenses that may be directly or indirectly paid by investors in the Fund. THESE
EXAMPLES SHOULD NOT BE CONSIDERED A REPRESENTATION OF PAST OR FUTURE EXPENSES
AND ACTUAL EXPENSES MAY BE GREATER OR LESS THAN THOSE SHOWN.
5
<PAGE> 107
THE ONE GROUP(R) INTERMEDIATE BOND FUND FINANCIAL HIGHLIGHTS
The Financial Highlights are intended to help you understand the Fund's
financial performance for the past 10 years or since inception, if less than 10
years. The total returns in the table represent the rate a shareholder would
have earned on an investment in the Fund (assuming reinvestment of all dividends
and distributions). This information has been derived from financial statements
audited by PricewaterhouseCoopers LLP, whose report, along with the Fund's
financial statements, is incorporated by reference in the Statement of
Additional Information, which is available upon request.
<TABLE>
<CAPTION>
YEARS ENDED JUNE 30,
--------------------
CLASS I 1998 1997 1996 1995 1994 1993(e) 1992(c)(e)
------- ---- ---- ---- ---- ---- ------- ----------
<S> <C> <C> <C> <C> <C> <C> <C>
NET ASSET VALUE, BEGINNING OF PERIOD $ 9.84 $ 10.01 $ 9.72 $ 10.51 $ 10.09 $ 10.00
-------- -------- -------- ------- ------- -------
Investment Activities
Net investment income 0.65 0.66 0.66 0.60 0.63 0.22
Net realized and unrealized gains
(losses) from investments and
futures 0.08 (0.17) 0.29 (0.67) 0.42 0.08
-------- -------- -------- ------- ------- -------
Total from Investment Activities 0.73 0.49 0.95 (0.07) 1.05 0.30
-------- -------- -------- ------- ------- -------
Distributions
Net investment income (0.65) (0.66) (0.66) (0.60) (0.63) (0.21)
In excess of net investment income -- -- -- (0.02) -- --
Net realized gains -- -- -- (0.10) -- --
-------- -------- -------- ------- ------- -------
Total Distributions (0.65) (0.66) (0.66) (0.72) (0.63) (0.21)
-------- -------- -------- ------- ------- -------
NET ASSET VALUE, END OF PERIOD $ 9.92 $ 9.84 $ 10.01 $ 9.72 $ 10.51 $ 10.09
======== ======== ======== ======= ======= =======
Total Return 7.68% 4.95% 10.15% (0.74)% 10.67% 3.00%(d)
RATIOS/SUPPLEMENTARY DATA:
Net Assets at end of period (000) $522,423 $230,812 $191,216 $98,483 $44,252 $23,457
Ratio of expenses to average net
assets 0.54% 0.54% 0.56% 0.32% 0.39% 0.36%(b)
Ratio of net investment income to
average net assets 6.63% 6.56% 6.88% 6.04% 6.14% 6.99%(b)
Ratio of expenses to average net
assets* 0.81% 0.87% 0.99% 0.87% 1.17% 1.33%(b)
Ratio of net investment income
to average net assets* 6.36% 6.23% 6.45% 5.49% 5.36% 6.02%(b)
Portfolio Turnover(a) 55.91% 101.06% 99.71% 85.62% 21.51% 11.74%
</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) Portfolio turnover is calculated on the basis of the
Fund as a whole without distinguishing among the classes of shares
issued. (b) Annualized. (c) The Fund commenced operations February 28,
1992. (d) Not annualized. (e) Audited by other auditors.
6
<PAGE> 108
<TABLE>
<CAPTION>
YEAR ENDED JUNE 30,
-------------------
CLASS A 1998 1997 1996 1995(a)
------- ---- ---- ---- -------
<S> <C> <C> <C> <C>
NET ASSET VALUE, BEGINNING OF PERIOD $ 9.87 $ 10.04 $ 9.45
------- ------- ------
Investment Activities
Net investment income 0.63 0.64 0.37
Net realized and unrealized gains
(losses) from investments and futures 0.08 (0.17) 0.59
------- ------- ------
Total from Investment Activities 0.71 0.47 0.96
------- ------- ------
Distributions
Net investment income (0.63) (0.64) (0.37)
------- ------- ------
Total Distributions (0.63) (0.64) (0.37)
------- ------- ------
NET ASSET VALUE, END OF PERIOD $ 9.95 $ 9.87 $10.04
======= ======= ======
Total Return (Excludes Sales Charge) 7.40% 4.77% 10.29%(b)
RATIOS/SUPPLEMENTARY DATA:
Net Assets at end of period (000) $18,763 $13,706 $4,941
Ratio of expenses to average net assets 0.78% 0.79% 0.83%(c)
Ratio of net investment income to average
net assets 6.35% 6.31% 6.64%(c)
Ratio of expenses to average net assets* 1.16% 1.22% 1.66%(c)
Ratio of net investment income to
average net assets* 5.97% 5.88% 5.81%(c)
Portfolio Turnover(d) 55.91% 101.06% 99.71%
</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) Class A Shares commenced operations November 30,
1994. (b) Not annualized. (c) Annualized. (d) Portfolio turnover is
calculated on the basis of the Fund as a whole without distinguishing
among the classes of shares issued.
<TABLE>
<CAPTION>
YEAR ENDED JUNE 30,
-------------------
CLASS B 1998 1997 1996 1995(a)
------- ---- ---- ---- -------
<S> <C> <C> <C> <C>
NET ASSET VALUE, BEGINNING OF PERIOD $ 9.83 $10.01 $ 9.45
------- ------ ------
Investment Activities
Net investment income 0.56 0.58 0.23
Net realized and unrealized gains
(losses) from investments and futures 0.09 (0.18) 0.56
------- ------ ------
Total from Investment Activities 0.65 0.40 0.79
------- ------ ------
Distributions
Net investment income (0.56) (0.58) (0.23)
------- ------ ------
Total Distributions (0.56) (0.58) (0.23)
------- ------ ------
NET ASSET VALUE, END OF PERIOD $ 9.92 $ 9.83 $10.01
======= ====== ======
Total Return (Excludes Sales Charge) 6.83% 4.10% 8.22%(b)
RATIOS/SUPPLEMENTARY DATA:
Net Assets at end of period (000) $10,152 $6,077 $ 266
Ratio of expenses to average net assets 1.44% 1.44% 1.51%(c)
Ratio of net investment income to
average net assets 5.71% 5.66% 6.15%(c)
Ratio of expenses to average net assets* 1.81% 1.87% 2.34%(c)
Ratio of net investment income to
average net assets* 5.34% 5.23% 5.31%(c)
Portfolio Turnover(d) 55.91% 101.06% 99.71%
</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 Fund commenced operations on November 30, 1994.
(b) Not annualized. (c) Annualized. (d) Portfolio turnover is
calculated on the basis of the Fund as a whole without distinguishing
among the classes of shares issued.
CLASS C
7
<PAGE> 109
THE ONE GROUP(R) INCOME BOND FUND
INVESTMENT OBJECTIVE
The Fund seeks a high level of current income by investing primarily in a
diversified portfolio of high, medium and low grade debt securities.
INVESTMENT STRATEGY
The Fund invests in all types of debt securities rated as investment grade or
below investment grade, as well as convertible securities, preferred stock, and
loan participations. The Fund's average weighted maturity will normally range
between five and twenty years, although the Fund may shorten its weighted
average to as little as two years if deemed appropriate for temporary defensive
purposes.
PORTFOLIO SECURITIES
The Fund invests at least 70% of its total assets in debt securities of all
types rated as investment grade at the time of investment or, if unrated,
determined to be of comparable quality by Banc One Investment Advisors. In
addition, up to 30% of the Fund's total assets may be invested in convertible
securities, preferred stock, loan participations and debt securities rated below
investment grade or, if unrated, determined by Banc One Investment Advisors to
be of comparable quality. Securities rated below investment grade are called
"high yield bonds," "non-investment grade bonds" and "junk bonds." These
securities generally are rated in the fifth or lower rating categories (for
example, BB or lower by Standard & Poor's Corporation and Ba or lower by Moody's
Investors Service, Inc.), and are considered to be speculative. Even though it
may invest in debt securities in all rating categories, the Fund will not invest
more than 20% of its total assets in securities rated below the fifth rating
category. As a matter of fundamental policy, at least 65% of the Fund's total
assets will consist of bonds. The Fund also may purchase taxable or tax-exempt
municipal securities. For a list of all the securities in which the Fund may
invest, please read "Investment Practices."
RISK CONSIDERATIONS
The Fund invests in debt securities rated below investment grade that are
considered speculative. While these securities generally provide a higher yield
than higher rated debt securities, they are subject to a greater degree of risk.
Issuers of these securities may include smaller, less creditworthy companies or
highly indebted firms. The credit quality of securities in the high yield bond
market can change suddenly and unexpectedly. Before you invest, please read
"More About the Funds" and "Investment Risks."
FUND MANAGEMENT
The Fund is managed by a team of portfolio managers, research analysts and fixed
income traders. The team works together to establish general duration and sector
strategies for the Fund. Each team member makes recommendations about securities
in the Fund. The research analysts and trading personnel provide individual
security and sector recommendations, while the portfolio managers select and
allocate individual securities in a manner designed to meet the investment
objectives of the Fund.
8
<PAGE> 110
SHAREHOLDER EXPENSES
<TABLE>
<CAPTION>
SHAREHOLDER TRANSACTION EXPENSES(1) CLASS A CLASS B CLASS C CLASS I
- ----------------------------------- ------- ------- ------- -------
<S> <C> <C> <C> <C>
Maximum Sales Charge Imposed on
Purchases (as a percentage of offering
price) 4.50% none none none
Maximum Contingent Deferred Sales
Charge (as a percentage of original
purchase price or redemption proceeds,
as applicable) none(2) 5.00% 1.00% none
Redemption Fees none none none none
Exchange Fees none none none none
ANNUAL OPERATING EXPENSES (as a
percentage of average daily net assets)(3)
Investment Advisory Fees (after fee
waiver)(4) .40% .40% .40% .40%
12b-1 Fees (after fee waiver)(5) .25% .90% .90% none
Other Expenses .22% .22% .22% .22%
Total Fund Operating Expenses (after
fee waiver)(6) .87% 1.52% 1.52% .62%
</TABLE>
(1) If you buy or sell shares through a Shareholder Servicing Agent, you
may be charged separate transaction fees by the Shareholder Servicing
Agent. In addition, a $10.00 sub-minimum account fee may be applicable
and a $7.00 charge will be deducted from redemption amounts paid by
wire.
(2) Except for purchases of $1 million or more. Please see "Sales Charges."
(3) Expense information has been restated to reflect current fees.
(4) Without the fee waiver, Investment Advisory Fees would be .60% for all
classes of shares.
(5) Due to 12b-1 fees, long-term Class A, Class B and Class C shareholders
may pay more than the equivalent of the maximum front-end sales charges
permitted by the rules of the National Association of Securities
Dealers. Without the voluntary waiver of fees, 12b-1 fees would be .35%
for Class A shares and 1.00% for Class B and Class C shares.
(6) Without the voluntary reduction of Investment Advisory and 12b-1 fees,
Total Operating Expenses would be 1.17% for Class A shares, 1.82% for
Class B shares, 1.82% for Class C shares and .82% for Class I shares.
9
<PAGE> 111
EXAMPLE
An investor would pay the following expenses on a $1,000 investment in the Fund,
assuming: (1) payment of the maximum sales charge; (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 $53 $72 $ 91 $147
Class A (without fee waivers) $56 $80 $106 $181
Class B $65 $78 $103 $164
Class B (without fee waivers) $68 $87 $119 $197
Class C $25 $48 $ 83 $181
Class C (without fee waivers) $28 $57 $ 99 $214
Class I $ 6 $20 $ 35 $ 77
Class I (without fee waiver) $ 8 $26 $ 46 $101
</TABLE>
Assuming no redemption at the end of each time period, 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 $53 $72 $ 91 $147
Class A (without fee waivers) $56 $80 $106 $181
Class B $15 $48 $ 83 $164
Class B (without fee waivers) $18 $57 $ 99 $197
Class C $15 $48 $ 83 $181
Class C (without fee waivers) $18 $57 $ 99 $214
Class I $ 6 $20 $ 35 $ 77
Class I (without fee waiver) $ 8 $26 $ 46 $101
</TABLE>
Class B shares automatically convert to Class A shares after eight (8) years.
Therefore, the "10 years" examples above reflect this conversion.
These examples are designed to assist you in understanding the various costs and
expenses that may be directly or indirectly paid by investors in the Fund. THESE
EXAMPLES SHOULD NOT BE CONSIDERED A REPRESENTATION OF PAST OR FUTURE EXPENSES
AND ACTUAL EXPENSES MAY BE GREATER OR LESS THAN THOSE SHOWN.
10
<PAGE> 112
THE ONE GROUP(R) INCOME BOND FUND FINANCIAL HIGHLIGHTS
The Financial Highlights are intended to help you understand the Fund's
financial performance for the past 10 years or since inception, if less than 10
years. The total returns in the table represent the rate a shareholder would
have earned on an investment in the Fund (assuming reinvestment of all dividends
and distributions). This information has been derived from financial statements
audited by PricewaterhouseCoopers LLP, whose report, along with the Fund's
financial statements, is incorporated by reference in the Statement of
Additional Information, which is available upon request.
<TABLE>
<CAPTION>
YEARS ENDED JUNE 30,
--------------------
CLASS I 1998 1997 1996 1995 1994 1993 1992 1991
------- ---- ---- ---- ---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C> <C> <C> <C>
NET ASSET VALUE,
BEGINNING OF PERIOD $ 9.33 $ 9.54 $ 9.23 $ 10.43 $ 10.18 $ 9.59 $ 9.49
-------- -------- -------- -------- -------- -------- --------
Investment Activities
Net investment income 0.64 0.65 0.64 0.54 0.66 0.71 0.79
Net realized and unrealized
gains (losses) from
investments and futures 0.09 (0.21) 0.35 (0.74) 0.38 0.59 0.06
-------- -------- -------- -------- -------- -------- --------
Total from Investment
Activities 0.73 0.44 0.99 (0.20) 1.04 1.30 0.85
-------- -------- -------- -------- -------- -------- --------
Distributions
Net investment income (0.64) (0.65) (0.64) (0.57) (0.66) (0.71) (0.75)
Net realized gains -- -- (0.04) (0.43) (0.13) -- --
-------- -------- -------- -------- -------- -------- --------
Total Distributions (0.64) (0.65) (0.68) (1.00) (0.79) (0.71) (0.75)
-------- -------- -------- -------- -------- -------- --------
NET ASSET VALUE, END
OF PERIOD $ 9.42 $ 9.33 $ 9.54 $ 9.23 $ 10.43 $ 10.18 $ 9.59
-------- -------- -------- -------- -------- -------- --------
Total Return 8.10% 4.62% 11.29% (2.54)% 10.62% 13.85% 9.20%
RATIOS/SUPPLEMENTARY DATA:
Net Assets at end of period
(000) $730,754 $520,239 $474,124 $560,071 $483,291 $376,898 $269,856
Ratio of expenses to average
net assets 0.60% 0.59% 0.59% 0.53% 0.56% 0.49% 0.29%
Ratio of net investment income
to average net assets 6.85% 6.76% 6.94% 5.35% 6.44% 7.18% 7.88%
Ratio of expenses to average
net assets* 0.80% 0.81% 0.86% 0.85% 0.90% 1.04% 0.89%
Ratio of net investment income
to average net assets* 6.65% 6.54% 6.67% 5.03% 6.10% 6.63% 7.28%
Portfolio Turnover(a) 55.18% 95.52% 262.25% 131.04% 143.52% 32.50% 39.63%
</TABLE>
<TABLE>
<CAPTION>
CLASS I 1990 1989
------- ---- ----
<S> <C> <C>
NET ASSET VALUE, BEGINNING OF
PERIOD $ 9.92 $ 9.88
------- -------
Investment Activities
Net investment income 0.80 0.64
Net realized and unrealized
gains (losses) from
investments and futures (0.20) 0.04
-------
Total from Investment Activities 0.60 0.68
------- -------
Distributions
Net investment income (0.80) (0.64)
Net realized gains (0.23) --
------- -------
Total Distributions (1.03) (0.64)
------- -------
NET ASSET VALUE, END OF PERIOD $ 9.49 $ 9.92
------- -------
Total Return 6.37% 7.32%
RATIOS/SUPPLEMENTARY DATA:
Net Assets at end of period
(000) $57,308 $49,128
</TABLE>
11
<PAGE> 113
<TABLE>
<CAPTION>
CLASS I 1990 1989
------- ---- ----
<S> <C> <C>
Ratio of expenses to average
net assets 0.40% 0.45%
Ratio of net investment income
to average net assets 8.27% 8.66%
Ratio of expenses to average
net assets* 1.00% 1.06%
Ratio of net investment income
to average net assets* 7.67% 8.05%
Portfolio Turnover(a) 119.23% 194.19%
</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) Portfolio turnover is calculated on the basis of the Fund as a whole
without distinguishing among the classes of shares issued.
12
<PAGE> 114
THE ONE GROUP(R) INCOME BOND FUND FINANCIAL HIGHLIGHTS
<TABLE>
<CAPTION>
YEAR ENDED JUNE 30,
-------------------
CLASS A 1998 1997 1996 1995 1994 1993 1992(c)
------- ---- ---- ---- ---- ---- ---- -------
<S> <C> <C> <C> <C> <C> <C> <C>
NET ASSET VALUE,
BEGINNING OF PERIOD $ 9.32 $ 9.54 $ 9.22 $ 10.43 $ 10.16 $ 10.06
------- ------- ------ ------- ------- -------
Investment Activities
Net investment income 0.62 0.63 0.61 0.52 0.63 0.26
Net realized and unrealized
gains (losses) from
investments and futures 0.09 (0.23) 0.36 (0.75) 0.41 0.11
------- ------- ------ ------ ------- -------
Total from Investment Activities 0.71 0.40 0.97 (0.23) 1.04 0.37
------- ------- ------ ------ ------- -------
Distributions
Net investment income (0.62) (0.62) (0.60) (0.55) (0.64) (0.27)
In excess of net investment
income -- -- (0.01) -- -- --
Net realized gains -- -- (0.04) (0.43) (0.13) --
------- ------- ------ ------ ------- -------
Total Distributions (0.62) (0.62) (0.65) (0.98) (0.77) (0.27)
------- ------- ------ ------ ------- -------
NET ASSET VALUE, END
OF PERIOD $ 9.41 $ 9.32 $ 9.54 $ 9.22 $ 10.43 $ 10.16
------- ------- ------ ------ ------- -------
Total Return (Excludes
Sales Charge) 7.85% 4.26% 10.90% (2.33)% 10.58% 10.16%(b)
RATIOS/SUPPLEMENTARY DATA:
Net Assets at end of
period (000) $14,325 $10,127 $6,796 $5,347 $ 7,064 $ 188
Ratio of expenses to
average net assets 0.85% 0.84% 1.01% 0.78% 0.77% 0.97%(b)
Ratio of net investment
income to average net
assets 6.59% 6.51% 6.57% 5.25% 6.12% 6.58%(b)
Ratio of expenses to
average net assets* 1.15% 1.16% 1.38% 1.20% 1.26% 1.27%(b)
Ratio of net investment
income to average net
assets* 6.29% 6.19% 6.20% 4.83% 5.63% 6.28%(b)
Portfolio Turnover(a) 55.18% 95.52% 262.25% 131.04% 143.52% 32.50%
</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) Portfolio turnover is calculated on the basis of the
Fund as a whole without distinguishing among the classes of shares
issued. (b) Annualized. (c) Class A Shares commenced offering on
February 18, 1992.
13
<PAGE> 115
THE ONE GROUP(R) INCOME BOND FUND FINANCIAL HIGHLIGHTS
<TABLE>
<CAPTION>
YEAR ENDED JUNE 30,
-------------------
CLASS B 1998 1997 1996 1995 1994(a)
------- ---- ---- ---- ---- -------
<S> <C> <C> <C> <C> <C>
NET ASSET VALUE, BEGINNING
OF PERIOD $ 9.40 $ 9.62 $ 9.29 $ 9.97
------- ------ ------ ------
Investment Activities
Net investment income 0.56 0.56 0.56 0.17
Net realized and unrealized
gains (losses) from
investments and
futures 0.09 (0.21) 0.38 (0.70)
------- ------ ------ ------
Total from Investment Activities 0.65 0.35 0.94 (0.53)
------- ------ ------ ------
Distributions
Net investment income (0.56) (0.57) (0.57) (0.15)
------- ------ ------ ------
Net realized gains -- -- (0.04) --
------- ------ ------ ------
Total Distributions (0.56) (0.57) (0.61) (0.15)
------- ------ ------ ------
NET ASSET VALUE, END
OF PERIOD $ 9.49 $ 9.40 $ 9.62 $ 9.29
------- ------ ------ ------
Total Return (Excludes
Sales Charge) 7.15% 3.65% 10.63% (5.29)%(b)
RATIOS/SUPPLEMENTARY DATA:
Net Assets at end of
period (000) $10,873 $6,110 $1,887 $ 723
Ratio of expenses to
average net assets 1.50% 1.49% 1.49% 1.45%(c)
Ratio of net investment
income to average
net assets 5.95% 5.86% 6.16% 5.20%(c)
Ratio of expenses to
average net assets* 1.80% 1.81% 1.86% 1.84%(c)
Ratio of net investment
income to average net
assets* 5.65% 5.54% 5.80% 4.81%(c)
Portfolio Turnover(d) 55.18% 95.52% 262.25% 131.04%
</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 Shares commenced offering on January 17,
1994. (b) Not annualized. (c) Annualized. (d) Portfolio turnover is
calculated on the basis of the Fund as a whole without distinguishing
among the classes of shares issued.
14
<PAGE> 116
THE ONE GROUP(R) GOVERNMENT BOND FUND
INVESTMENT OBJECTIVE
The Fund seeks a high level of current income with liquidity and safety of
principal.
INVESTMENT STRATEGY
The Fund limits its investments to securities issued by the U.S. Government and
its agencies and instrumentalities or related to securities issued by the U.S.
Government and its agencies and instrumentalities. The Fund's average weighted
remaining maturity will ordinarily range between three and fifteen years, taking
into account expected prepayment of principal on certain investments. However,
the Fund's average weighted remaining maturity may be outside this range if
warranted by market conditions.
PORTFOLIO SECURITIES
At least 65% of the Fund's total assets will be invested in debt instruments
with principal and interest guaranteed 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 secured by mortgages that
are issued or guaranteed by certain U.S. government agencies or
instrumentalities. For a list of all the securities in which the Fund may
invest, please read "Investment Practices."
RISK CONSIDERATIONS
The Fund's ability to achieve higher income is not as great as that of funds
that invest in lower-quality instruments. In addition, the Fund invests in
fixed-income securities. The value of these securities will change in response
to interest rate changes and other factors. The Fund also invests in
mortgage-related securities which may have greater price and yield volatility
than traditional fixed income securities. Before you invest, please read "More
About the Funds" and "Investment Risks."
FUND MANAGEMENT
The Fund is managed by a team of portfolio managers, research analysts and fixed
income traders. The team works together to establish general duration and sector
strategies for the Fund. Each team member makes recommendations about securities
in the Fund. The research analysts and trading personnel provide individual
security and sector recommendations, while the portfolio managers select and
allocate individual securities in a manner designed to meet the investment
objectives of the Fund.
15
<PAGE> 117
SHAREHOLDER EXPENSES
<TABLE>
<CAPTION>
SHAREHOLDER TRANSACTION EXPENSES(1) CLASS A CLASS B CLASS C CLASS I
- ----------------------------------- ------- ------- ------- -------
<S> <C> <C> <C> <C>
Maximum Sales Charge Imposed on Purchases
(as a percentage of offering price) 4.50% none none none
Maximum Contingent Deferred Sales Charge
(as a percentage of original purchase
price or redemption proceeds, as
applicable) none(2) 5.00% 1.00% none
Redemption Fees none none none none
Exchange Fees none none none none
ANNUAL OPERATING EXPENSES (as a
percentage of average daily net assets)(3)
Investment Advisory Fees .45% .45% .45% .45%
12b-1 Fees (after fee waiver)(4) .25% .90% .90% none
Other Expenses .24% .24% .24% .24%
Total Fund Operating Expenses (after fee
waiver)(5) .94% 1.59% 1.59% .69%
</TABLE>
(1) If you buy or sell shares through a Shareholder Servicing Agent, you
may be charged separate transaction fees by the Shareholder Servicing
Agent. In addition, a $10.00 sub-minimum account fee may be applicable
and a $7.00 charge will be deducted from redemption amounts paid by
wire.
(2) Except for purchases of $1 million or more. Please see "Sales Charges."
(3) Expense information has been restated to reflect current fees.
(4) Due to 12b-1 fees, long-term Class A, Class B and Class C shareholders
may pay more than the equivalent of the maximum front-end sales charges
permitted by the rules of the National Association of Securities
Dealers. Without the voluntary waiver of fees, 12b-1 fees would be .35%
for Class A shares and 1.00% for Class B and Class C shares.
(5) Without the voluntary reduction of 12b-1 fees, Total Operating Expenses
would be 1.04% for Class A shares and 1.69% for Class B shares and
Class C shares.
EXAMPLE
An investor would pay the following expenses on a $1,000 investment in the Fund,
assuming: (1) payment of the maximum sales charge; (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 $ 95 $155
Class A (without fee waiver) $55 $77 $100 $166
Class B $66 $80 $107 $172
Class B (without fee waiver) $67 $83 $112 $183
Class C $26 $50 $ 87 $189
Class C (without fee waiver) $27 $53 $ 92 $200
Class I $ 7 $22 $ 38 $ 86
</TABLE>
16
<PAGE> 118
Assuming no redemption at the end of each time period, 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 $54 $74 $ 95 $155
Class A (without fee waiver) $55 $77 $100 $166
Class B $16 $50 $ 87 $172
Class B (without fee waiver) $17 $53 $ 92 $183
Class C $16 $50 $ 87 $189
Class C (without fee waiver) $17 $53 $ 92 $200
Class I $ 7 $22 $ 38 $ 86
</TABLE>
Class B shares automatically convert to Class A shares after eight (8) years.
Therefore, the "10 years" examples above reflect this conversion.
These examples are designed to assist you in understanding the various costs and
expenses that may be directly or indirectly paid by investors in the Fund. THESE
EXAMPLES SHOULD NOT BE CONSIDERED A REPRESENTATION OF PAST OR FUTURE EXPENSES
AND ACTUAL EXPENSES MAY BE GREATER OR LESS THAN THOSE SHOWN.
17
<PAGE> 119
THE ONE GROUP(R) GOVERNMENT BOND FUND FINANCIAL HIGHLIGHTS
The Financial Highlights are intended to help you understand the Fund's
financial performance for the past 10 years or since inception, if less than 10
years. The total returns in the table represent the rate a shareholder would
have earned on an investment in the Fund (assuming reinvestment of all dividends
and distributions). This information has been derived from financial statements
audited by PricewaterhouseCoopers LLP, whose report, along with the Fund's
financial statements, is incorporated by reference in the Statement of
Additional Information, which is available upon request.
<TABLE>
<CAPTION>
YEAR ENDED JUNE 30,
-------------------
CLASS I 1998 1997 1996 1995 1994 1993(a)
------- ---- ---- ---- ---- ---- -------
<S> <C> <C> <C> <C> <C> <C>
NET ASSET VALUE, BEGINNING OF PERIOD $ 9.56 $ 9.81 $ 9.35 $ 10.15 $ 10.00
-------- -------- -------- -------- -------
Investment Activities
Net investment income 0.62 0.62 0.62 0.51 0.20
Net realized and unrealized gains
(losses) from investments and futures 0.13 (0.25) 0.46 (0.77) 0.15
-------- -------- -------- -------- -------
Total from Investment Activities 0.75 0.37 1.08 (0.26) 0.35
-------- -------- -------- -------- -------
Distributions
Net investment income (0.62) (0.62) (0.61) (0.50) (0.20)
In excess of net investment income -- -- (0.01) (0.02) --
In excess of net realized gains -- -- -- (0.02) --
-------- -------- -------- -------- -------
Total Distributions (0.62) (0.62) (0.62) (0.54) (0.20)
-------- -------- -------- -------- -------
NET ASSET VALUE, END OF PERIOD $ 9.69 $ 9.56 $ 9.81 $ 9.35 $ 10.15
-------- -------- -------- -------- -------
Total Return 8.10% 3.81% 12.04% (2.73)% 9.03%(b)
RATIOS/SUPPLEMENTARY DATA:
Net Assets at end of period (000) $724,423 $677,326 $379,826 $209,692 $52,152
Ratio of expenses to average net assets 0.62% 0.68% 0.71% 0.68% 0.69%(b)
Ratio of net investment income to
average net assets 6.45% 6.34% 6.65% 5.13% 5.43%(b)
Ratio of expenses to average
net assets* 0.68% 0.69% 0.73% 0.71% 1.05%(b)
Ratio of net investment income
to average net assets* 6.39% 6.33% 6.63% 5.10% 5.07%(b)
Portfolio Turnover(c) 60.53% 62.70% 106.14% 377.78% 139.24%
</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 offering on February 8, 1993. (b)
Annualized. (c) Portfolio turnover is calculated on the basis of the
Fund as a whole without distinguishing among the classes of shares
issued.
18
<PAGE> 120
THE ONE GROUP(R) GOVERNMENT BOND FUND FINANCIAL HIGHLIGHTS
<TABLE>
<CAPTION>
YEAR ENDED JUNE 30,
-------------------
CLASS A 1998 1997 1996 1995 1994 1993(a)
------- ---- ---- ---- ---- ---- -------
<S> <C> <C> <C> <C> <C> <C>
NET ASSET VALUE, BEGINNING
OF PERIOD $ 9.56 $ 9.81 $ 9.35 $ 10.17 $ 10.22
------- ------- ------- ------- -------
Investment Activities
Net investment income 0.60 0.60 0.61 0.48 0.17
Net realized and unrealized
gains (losses) from investments
and futures 0.13 (0.25) 0.45 (0.79) (0.05)
------- ------- ------- ------- -------
Total from Investment Activities 0.73 0.35 1.06 (0.31) 0.12
------- ------- ------- ------- -------
Distributions
Net investment income (0.60) (0.60) (0.59) (0.47) (0.17)
In excess of net investment income -- -- (0.01) (0.02) --
In excess of net realized gains -- -- -- (0.02) --
------- ------- ------- ------- -------
Total Distributions (0.60) (0.60) (0.60) (0.51) (0.17)
------- ------- ------- ------- -------
NET ASSET VALUE, END OF PERIOD $ 9.69 $ 9.56 $ 9.81 $ 9.35 $ 10.17
------- ------- ------- ------- -------
Total Return (Excludes Sales Charge) 7.83% 3.58% 11.84% (3.16)% 5.35%(b)
RATIOS/SUPPLEMENTARY DATA:
Net Assets at end of period (000) $34,727 $38,800 $ 8,130 $ 1,690 $ 840
Ratio of expenses to average
net assets 0.87% 0.93% 0.97% 0.92% 0.95%(b)
Ratio of net investment income
to average net assets 6.20% 6.09% 6.46% 4.84% 5.56%(b)
Ratio of expenses to average
net assets* 1.03% 1.04% 1.09% 1.05% 1.44%(b)
Ratio of net investment income
to average net assets* 6.04% 5.98% 6.34% 4.71% 5.07%(b)
Portfolio Turnover(c) 60.53% 62.70% 106.14% 377.78% 139.24%
</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 March 6, 1993.
(b) Annualized. (c) Portfolio turnover is calculated on the basis of
the Fund as a whole without distinguishing among the classes of shares
issued.
19
<PAGE> 121
THE ONE GROUP(R) GOVERNMENT BOND FUND FINANCIAL HIGHLIGHTS
<TABLE>
<CAPTION>
YEAR ENDED JUNE 30,
-------------------
CLASS B 1998 1997 1996 1995 1994(a)
------- ---- ---- ---- ---- -------
<S> <C> <C> <C> <C> <C>
NET ASSET VALUE, BEGINNING
OF PERIOD $ 9.56 $ 9.81 $ 9.35 $10.04
------- ------- ------ ------
Investment Activities
Net investment income 0.54 0.54 0.55 0.18
Net realized and unrealized
gains (losses) from
investments and futures 0.13 (0.25) 0.46 (0.69)
------- ------- ------ ------
Total from Investment Activities 0.67 0.29 1.01 (0.51)
------- ------- ------ ------
Distributions
Net investment income (0.54) (0.54) (0.55) (0.16)
In excess of net
investment income -- -- -- (0.02)
------- ------- ------ ------
Total Distributions (0.54) (0.54) (0.55) (0.18)
------- ------- ------ ------
NET ASSET VALUE, END OF PERIOD $ 9.69 $ 9.56 $ 9.81 $ 9.35
------- ------- ------ ------
Total Return (Excludes
Sales Charge) 7.14% 2.95% 11.20% (4.99)%(b)
RATIOS/SUPPLEMENTARY DATA:
Net Assets at end of
period (000) $11,729 $10,782 $2,513 $ 656
Ratio of expenses to
average net assets 1.52% 1.58% 1.62% 1.52%(c)
Ratio of net investment
income to average net assets 5.55% 5.44% 5.76% 4.60%(c)
Ratio of expenses to average
net assets* 1.68% 1.69% 1.74% 1.63%(c)
Ratio of net investment
income to average net assets* 5.39% 5.33% 5.64% 4.49%(c)
Portfolio Turnover(d) 60.53% 62.70% 106.14% 377.78%
</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 Shares commenced offering on January 14,
1994. (b) Not annualized. (c) Annualized. (d) Portfolio turnover is
calculated on the basis of the Fund as a whole without distinguishing
among the classes of shares issued.
20
<PAGE> 122
THE ONE GROUP(R) ULTRA SHORT-TERM INCOME FUND
INVESTMENT OBJECTIVE
The Fund seeks a high level of current income consistent with low volatility of
principal by investing in a diversified portfolio of short-term investment grade
securities.
INVESTMENT STRATEGY
The Fund invests in all types of debt securities, including money market
instruments, adjustable rate mortgage backed securities and taxable and
tax-exempt municipal securities. The Fund will maintain a maximum duration
approximately equal to that of a two-year U.S. Treasury security, although the
Fund's actual duration is expected to be approximately equal to that of a one
year U.S. Treasury security.
PORTFOLIO SECURITIES
The Fund normally invests at least 80% of its total assets in debt securities.
In addition, up to 20% of the Fund's total assets may be invested in other
securities, including preferred stock. The Fund will invest in adjustable rate
mortgage pass-through securities and other securities representing an interest
in or secured by mortgages with periodic interest rate resets (some of which may
be subject to repurchase agreements). These securities often are issued or
guaranteed by the U.S. Government, its agencies or instrumentalities. However,
the Fund may also purchase mortgage-backed securities that are issued by
non-governmental entities. Such securities may or may not have private insurer
guarantees of timely payments. For a list of all the securities in which the
Fund may invest, please read "Investment Practices."
RISK CONSIDERATIONS
The Fund invests in fixed-income investments that are subject to market
fluctuations as a result of changes in interest rates. As a result, the value of
investments in the Fund may decrease during periods of rising interest rates. In
addition, the Fund invests in mortgage-related securities which may have greater
price and yield volatility than traditional fixed-income securities. The Fund
also uses investment management hedging techniques that may expose the Fund to
special risks. Before you invest, please read "More About the Funds" and
"Investment Risks."
FUND MANAGEMENT
The Fund is managed by a team of portfolio managers, research analysts and fixed
income traders. The team works together to establish general duration and sector
strategies for the Fund. Each team member makes recommendations about securities
in the Fund. The research analysts and trading personnel provide individual
security and sector recommendations, while the portfolio managers select and
allocate individual securities in a manner designed to meet the investment
objectives of the Fund.
21
<PAGE> 123
SHAREHOLDER EXPENSES
<TABLE>
<CAPTION>
SHAREHOLDER TRANSACTION EXPENSES(1) CLASS A CLASS B CLASS C CLASS I
- ------------------------------------ ------- ------- ------- -------
<S> <C> <C> <C> <C>
Maximum Sales Charge Imposed on Purchases
(as a percentage of offering price) 3.00% none none none
Maximum Contingent Deferred Sales Charge
(as a percentage of original purchase
price or redemption proceeds, as
applicable) none(2) 3.00% 1.00% none
Redemption Fees none none none none
Exchange Fees none none none none
ANNUAL OPERATING EXPENSES (as a
percentage of average daily net
assets)(3)
Investment Advisory Fees (after fee
waiver)(4) .30% .30% .30% .30%
12b-1 Fees (after fee waiver)(5) .25% .75% .75% none
Other Expenses .25% .25% .25% .25%
Total Fund Operating Expenses (after fee
waivers)(6) .80% 1.30% 1.30% .55%
</TABLE>
(1) If you buy or sell shares through a Shareholder Servicing Agent, you
may be charged separate transaction fees by the Shareholder Servicing
Agent. In addition, a $10.00 sub-minimum account fee may be applicable
and a $7.00 charge will be deducted from redemption amounts paid by
wire.
(2) Except for purchases of $1 million or more. Please see "Sales Charges."
(3) Expense information has been restated to reflect current fees.
(4) Without the fee waiver, Investment Advisory Fees would be .55% for all
classes of shares.
(5) Due to 12b-1 fees, long-term Class A, Class B and Class C shareholders
may pay more than the equivalent of the maximum front-end sales charges
permitted by the rules of the National Association of Securities
Dealers. Without the voluntary waiver of fees, 12b-1 fees would be .35%
for Class A shares and 1.00% for Class B and Class C shares.
(6) Without the voluntary reduction of Investment Advisory and 12b-1 fees,
Total Operating Expenses would be 1.15% for Class A shares, 1.80% for
Class B shares, 1.80% for Class C shares, and .80% for Class I shares.
EXAMPLE
An investor would pay the following expenses on a $1,000 investment in the Fund,
assuming: (1) payment of the maximum sales charge; (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
Class A (without fee waivers) $41 $65 $91 $166
Class B $43 $61 $71 $130
Class B (without fee waivers) $48 $77 $97 $179
Class C $23 $41 $71 $157
Class C (without fee waivers $28 $57 $97 $212
Class I $ 6 $18 $31 $ 69
Class I (without fee waiver) $ 8 $26 $44 $ 99
</TABLE>
Assuming no redemption at the end of each time period, the dollar amounts in the
above example would be as follows:
22
<PAGE> 124
<TABLE>
<CAPTION>
1 YEAR 3 YEARS 5 YEARS 10 YEARS
------ ------- ------- --------
<S> <C> <C> <C> <C>
Class A 38 55 73 126
Class A (without fee waivers) 41 65 91 166
Class B 13 41 71 130
Class B (without fee waivers) 18 57 97 179
Class C 13 41 71 157
Class C (without fee waivers) 18 57 97 212
Class I 6 18 31 69
Class I (without fee waiver) 8 26 44 99
</TABLE>
Class B shares automatically convert to Class A shares after six (6) years.
Therefore, the "10 years" examples above reflect this conversion.
These examples are designed to assist you in understanding the various costs and
expenses that may be directly or indirectly paid by investors in the Fund. THESE
EXAMPLES SHOULD NOT BE CONSIDERED A REPRESENTATION OF PAST OR FUTURE EXPENSES
AND ACTUAL EXPENSES MAY BE GREATER OR LESS THAN THOSE SHOWN.
23
<PAGE> 125
THE ONE GROUP(R) ULTRA SHORT-TERM INCOME FUND FINANCIAL HIGHLIGHTS
The Financial Highlights are intended to help you understand the Fund's
financial performance for the past 10 years or since inception, if less than 10
years. The total returns in the table represent the rate a shareholder would
have earned on an investment in the Fund (assuming reinvestment of all dividends
and distributions). This information has been derived from financial statements
audited by PricewaterhouseCoopers LLP, whose report, along with the Fund's
financial statements, is incorporated by reference in the Statement of
Additional Information, which is available upon request.
<TABLE>
<CAPTION>
YEAR ENDED JUNE 30,
-------------------
CLASS I 1998 1997 1996 1995 1994 1993(a)
------- ---- ---- ---- ---- ---- -------
<S> <C> <C> <C> <C> <C> <C>
NET ASSET VALUE, BEGINNING
OF PERIOD $ 9.79 $ 9.84 $ 9.85 $ 10.03 $ 10.00
-------- ------- ------- -------- --------
Investment Activities
Net investment income 0.62 0.62 0.55 0.36 0.17
Net realized and unrealized
gains (losses) from
investments and futures 0.05 (0.07) (0.05) (0.15) 0.03
-------- ------- ------- -------- --------
Total from Investment Activities 0.67 0.55 0.50 0.21 0.20
-------- ------- ------- -------- --------
Distributions
Net investment income (0.59) (0.60) (0.48) (0.37) (0.17)
In excess of net investment income -- -- (0.03) (0.02) --
-------- ------- ------- -------- --------
Total Distributions (0.59) (0.60) (0.51) (0.39) (0.17)
-------- ------- ------- -------- --------
NET ASSET VALUE, END OF PERIOD $ 9.87 $ 9.79 $ 9.84 $ 9.85 $ 10.03
-------- ------- ------- -------- --------
Total Return 7.14% 5.71% 5.14% 2.16% 4.93%(b)
RATIOS/SUPPLEMENTARY DATA:
Net Assets at end of period (000) $114,413 $57,276 $51,050 $139,593 $154,413
Ratio of expenses to average
net assets 0.35% 0.45% 0.61% 0.65% 0.58%(b)
Ratio of net investment income
to average net assets 6.02% 6.20% 5.18% 3.70% 4.71%(b)
Ratio of expenses to average
net assets* 0.81% 1.06% 1.01% 0.81% 1.03%(b)
Ratio of net investment income
to average net assets* 5.56% 5.59% 4.78% 3.54% 4.26%(b)
Portfolio Turnover(c) 70.36% 67.65% 2.91% 242.20% 109.96%
</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 2, 1993.
(b) Annualized. (c) Portfolio turnover is calculated on the basis of
the Fund as a whole without distinguishing among the classes of shares
issued.
<TABLE>
<CAPTION>
YEAR ENDED JUNE 30,
-------------------
CLASS A 1998 1997 1996 1995 1994 1993(a)
------- ---- ---- ---- ---- ---- -------
<S> <C> <C> <C> <C> <C> <C>
NET ASSET VALUE, BEGINNING
OF PERIOD $ 9.78 $ 9.83 $ 9.84 $ 10.03 $ 10.00
------- ------ ------ ------- -------
Investment Activities
Net investment income 0.58 0.58 0.52 0.36 0.14
Net realized and unrealized
gains (losses) from
investments and futures 0.09 (0.06) (0.06) (0.17) 0.03
------- ------ ------ ------- -------
Total from Investment Activities 0.67 0.52 0.46 0.19 0.17
------- ------ ------ ------- -------
Distributions
Net investment income (0.58) (0.57) (0.46) (0.34) (0.14)
In excess of net investment income -- -- (0.01) (0.04) --
------- ------ ------ ------- -------
Total Distributions (0.58) (0.57) (0.47) (0.38) (0.14)
------- ------ ------ ------- -------
NET ASSET VALUE, END OF PERIOD $ 9.87 $ 9.78 $ 9.83 $ 9.84 $ 10.03
------- ------ ------ ------- -------
Total Return (Excludes Sales Charge) 7.00% 5.42% 4.84% 1.95% 4.78%(b)
RATIOS/SUPPLEMENTARY DATA:
Net Assets at end of period (000) $29,643 $3,969 $4,631 $19,053 $ 3,106
Ratio of expenses to average
net assets 0.61% 0.70% 0.86% 0.89% 0.81%(b)
Ratio of net investment income
to average net assets 5.78% 5.95% 4.88% 3.54% 4.47%(b)
Ratio of expenses to average
net asset* 1.17% 1.41% 1.36% 1.14% 1.34%(b)
Ratio of net investment income
to average net asset* 5.22% 5.24% 4.38% 3.29% 3.95%(b)
Portfolio Turnover(c) 70.36% 67.65% 2.91% 242.20% 109.96%
</TABLE>
24
<PAGE> 126
* 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 offering on March 10, 1993. (b)
Annualized. (c) Portfolio turnover is calculated on the basis of the
Fund as a whole without distinguishing among the classes of shares
issued.
25
<PAGE> 127
THE ONE GROUP(R) ULTRA SHORT-TERM INCOME FUND FINANCIAL HIGHLIGHTS
<TABLE>
<CAPTION>
YEAR ENDED JUNE 30,
-------------------
CLASS B 1998 1997 1996 1995 1994(a)
------- ---- ---- ---- ---- -------
<S> <C> <C> <C> <C> <C>
NET ASSET VALUE, BEGINNING
OF PERIOD $ 9.76 $ 9.84 $ 9.86 $ 9.98
------ ------ ------- -------
Investment Activities
Net investment income 0.54 0.52 0.47 0.12
Net realized and
unrealized gains
(losses) from investments
and futures 0.05 (0.07) (0.04) (0.11)
------ ------ ------- -------
Total from Investment Activities 0.59 0.45 0.43 0.01
------ ------ ------- -------
Distributions
Net investment income (0.54) (0.53) (0.45) (0.12)
In excess of net
investment income -- -- -- (0.01)
------ ------ ------- -------
Total Distributions (0.54) (0.53) (0.45) (0.13)
------ ------ ------- -------
NET ASSET VALUE, END OF PERIOD $ 9.81 $ 9.76 $ 9.84 $ 9.86
Total Return (Excludes
Sales Charge) 6.22% 4.63% 4.77% (0.09)%(b)
RATIOS/SUPPLEMENTARY DATA:
Net Assets at end of
period (000) $2,818 $1,144 $ 160 $ 15
Ratio of expenses to
average net assets 1.07% 1.20% 1.31% 1.41%(c)
Ratio of net investment
income to average net
assets 5.18% 5.45% 4.91% 3.49%(c)
Ratio of expenses to
average net assets* 1.81% 2.06% 1.96% 1.83%(c)
Ratio of net investment
income to average net assets* 4.44% 4.59% 4.26% 3.07%(c)
Portfolio Turnover(d) 70.36% 67.65% 2.91% 242.20%
</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 offering on January 14, 1994. (b)
Not annualized. (c) Annualized. (d) Portfolio turnover is calculated on
the basis of the Fund as a whole without distinguishing among the
classes of shares issued.
26
<PAGE> 128
THE ONE GROUP(R) LIMITED VOLATILITY BOND FUND
INVESTMENT OBJECTIVE
The Fund seeks current income consistent with preservation of capital through
investment in high and medium-grade fixed-income securities.
INVESTMENT STRATEGY
The Fund invests in all types of debt securities with short to intermediate
maturities. The Fund's average weighted maturity will ordinarily range between
one and five years taking into account expected prepayment of principal on
certain investments, although the Fund may shorten the weighted average maturity
to as little as 90 days for temporary defensive purposes.
PORTFOLIO SECURITIES
The Fund invests at least 80% of its total assets in debt securities with short
to intermediate maturities. 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, its agencies, or instrumentalities (some of which may be
subject to repurchase agreements). The Fund also may purchase taxable or
tax-exempt municipal securities. Up to 20% the total assets may be invested in
preferred stock. For a list of all the securities in which the Fund may invest,
please read "Investment Practices."
RISK CONSIDERATIONS
The Fund may invest in debt securities that are rated in the lowest investment
grade category. Such investments are considered to have speculative
characteristics. In addition, the Fund invests in fixed-income securities. The
value of these securities will change in response to interest rate changes and
other factors. In addition, the Fund invests in mortgage-related securities
which may have greater price and yield volatility than traditional fixed-income
securities. Before you invest, please read "More About the Funds" and
"Investment Risks."
FUND MANAGEMENT
The Fund is managed by a team of portfolio managers, research analysts and fixed
income traders. The team works together to establish general duration and sector
strategies for the Fund. Each team member makes recommendations about securities
in the Fund. The research analysts and trading personnel provide individual
security and sector recommendations, while the portfolio managers select and
allocate individual securities in a manner designed to meet the investment
objectives of the Fund.
27
<PAGE> 129
SHAREHOLDER EXPENSES
<TABLE>
<CAPTION>
SHAREHOLDER TRANSACTION EXPENSES(1) CLASS A CLASS B CLASS C CLASS I
- ------------------------------------ ------- ------- ------- -------
<S> <C> <C> <C> <C>
Maximum Sales Charge Imposed on Purchases
(as a percentage of offering price) 3.00% none none none
Maximum Contingent Deferred Sales Charge
(as a percentage of original purchase
price or redemption proceeds, as
applicable) none(2) 3.00% 1.00% none
Redemption Fees none none none none
Exchange Fees none none none none
ANNUAL OPERATING EXPENSES (as a
percentage of average daily net assets)(3)
Investment Advisory Fees (after fee
waiver)(4) .40% .40% .40% .40%
12b-1 Fees (after fee waiver)(5) .25% .75% .75% none
Other Expenses .22% .22% .22% .22%
Total Fund Operating Expenses (after fee
waiver)(6) .87% 1.37% 1.37% .62%
</TABLE>
(1) If you buy or sell shares through a Shareholder Servicing Agent, you
may be charged separate transaction fees by the Shareholder Servicing
Agent. In addition, a $10.00 sub-minimum account fee may be applicable
and a $7.00 charge will be deducted from redemption amounts paid by
wire.
(2) Except for purchases of $1 million or more. Please see "Sales Charges."
(3) Expense information has been restated to reflect current fees.
(4) Without the fee waiver, Investment Advisory Fees would be .60% for all
classes of shares.
(5) Due to 12b-1 fees, long-term Class A, Class B and Class C shareholders
may pay more than the equivalent of the maximum front-end sales charges
permitted by the rules of the National Association of Securities
Dealers. Without the voluntary waiver of fees, 12b-1 fees would be .35%
for Class A shares and 1.00% for Class B and Class C shares.
(6) Without the voluntary reduction of Investment Advisory and 12b-1 fees,
Total Operating Expenses would be 1.17% for Class A shares, 1.82% for
Class B shares, 1.82% for Class C shares and .82% for Class I shares.
EXAMPLE
An investor would pay the following expenses on a $1,000 investment in the Fund,
assuming: (1) payment of the maximum sales charge; (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 $39 $57 $77 $134
Class A (without fee waivers) $42 $66 $92 $168
Class B $44 $63 $75 $138
Class B (without fee waivers) $48 $77 $99 $181
Class C $24 $43 $75 $165
Class C (without fee waivers) $28 $57 $99 $214
Class I $ 6 $20 $35 $ 77
Class I (without fee waiver) $ 8 $26 $46 $101
</TABLE>
Assuming no redemption at the end of each time period, the dollar amounts in the
above example would be as follows:
28
<PAGE> 130
<TABLE>
<CAPTION>
1 YEAR 3 YEARS 5 YEARS 10 YEARS
------ ------- ------- --------
<S> <C> <C> <C> <C>
Class A $39 $57 $77 $134
Class A (without fee waivers) $42 $66 $92 $168
Class B $14 $43 $75 $138
Class B (without fee waivers) $18 $57 $99 $181
Class C $14 $43 $75 $165
Class C (without fee waivers) $18 $57 $99 $214
Class I $ 6 $20 $35 $ 77
Class I (without fee waiver) $ 8 $26 $46 $101
</TABLE>
Class B shares automatically convert to Class A shares after six (6) years.
Therefore, the "10 years" examples above reflect this conversion.
These examples are designed to assist you in understanding the various costs and
expenses that may be directly or indirectly paid by investors in the Fund. THESE
EXAMPLES SHOULD NOT BE CONSIDERED A REPRESENTATION OF PAST OR FUTURE EXPENSES
AND ACTUAL EXPENSES MAY BE GREATER OR LESS THAN THOSE SHOWN.
29
<PAGE> 131
THE ONE GROUP(R) LIMITED VOLATILITY BOND FUND FINANCIAL HIGHLIGHTS
The Financial Highlights are intended to help you understand the Fund's
financial performance for the past 10 years or since inception, if less than 10
years. The total returns in the table represent the rate a shareholder would
have earned on an investment in the Fund (assuming reinvestment of all dividends
and distributions). This information has been derived from financial statements
audited by PricewaterhouseCoopers LLP, whose report, along with the Fund's
financial statements, is incorporated by reference in the Statement of
Additional Information, which is available upon request.
<TABLE>
<CAPTION>
YEAR ENDED JUNE 30,
-------------------
CLASS I 1998 1997 1996 1995 1994 1993 1992 1991
------- ---- ---- ---- ---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C> <C> <C> <C>
NET ASSET VALUE, BEGINNING OF
PERIOD $ 10.42 $ 10.53 $ 10.33 $ 10.87 $ 10.72 $ 10.26 $ 10.00
-------- -------- -------- -------- -------- -------- --------
Investment Activities
Net investment income 0.63 0.64 0.60 0.54 0.61 0.70 0.58
Net realized and unrealized
gains (losses) from
investments and futures 0.05 (0.11) 0.19 (0.45) 0.25 0.47 0.25
Total from Investment
Activities 0.68 0.53 0.79 0.09 0.86 1.17 0.83
-------- -------- -------- -------- -------- -------- --------
Distributions
Net investment income (0.63) (0.64) (0.59) (0.55) (0.62) (0.70) (0.57)
In excess of net investment
income -- -- -- (0.02) -- -- --
Net realized gains -- -- -- (0.06) (0.09) (0.01) --
-------- -------- -------- -------- -------- -------- --------
Total Distributions (0.63) (0.64) (0.59) (0.63) (0.71) (0.71) (0.57)
-------- -------- -------- -------- -------- -------- --------
NET ASSET VALUE, END OF PERIOD $ 10.47 $ 10.42 $ 10.53 $ 10.33 $ 10.87 $ 10.72 $ 10.26
======== ======== ======== ======== ======== ======== ========
Total Return 6.75% 5.13% 7.96% 0.79% 8.27% 11.75% 9.76%(b)
RATIOS/SUPPLEMENTARY DATA:
Net Assets at end of period
(000) $563,979 $604,916 $410,746 $447,394 $397,820 $301,907 $154,991
Ratio of expenses to average
net assets 0.51% 0.51% 0.52% 0.50% 0.56% 0.52% 0.32%(b)
Ratio of net investment
income to average net
assets 6.06% 6.06% 5.82% 5.10% 5.70% 6.63% 7.49%(b)
Ratio of expenses to average
net assets* 0.81% 0.82% 0.85% 0.85% 0.90% 1.04% 0.92%(b)
Ratio of net investment
income to average net
assets* 5.76% 5.75% 5.49% 4.75% 5.36% 6.11% 6.89%(b)
Portfolio Turnover(a) 66.61% 75.20% 76.43% 30.61% 40.28% 43.87% 24.69%
</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) Portfolio turnover is calculated on the basis of the
Fund as a whole without distinguishing among the classes of shares
issued. (b) Annualized.
30
<PAGE> 132
<TABLE>
<CAPTION>
YEAR ENDED JUNE 30,
-------------------
CLASS A 1998 1997 1996 1995 1994 1993 1992(c)
------- ---- ---- ---- ---- ---- ---- -------
<S> <C> <C> <C> <C> <C> <C> <C>
NET ASSET VALUE, BEGINNING OF PERIOD $ 10.41 $ 10.52 $ 10.32 $ 10.87 $ 10.72 $10.61
------- ------- ------- ------- ------- ------
Investment Activities
Net investment income 0.61 0.63 0.56 0.52 0.59 0.24
Net realized and unrealized gains
(losses) from investments and
futures 0.05 (0.13) 0.21 (0.46) 0.24 0.13
------- ------- ------- ------- ------- ------
Total from Investment Activities 0.66 0.50 0.77 0.06 0.83 0.37
------- ------- ------- ------- ------- ------
Distributions
Net investment income (0.61) (0.61) (0.56) (0.51) (0.59) (0.26)
In excess of net investment income -- -- (0.01) (0.04) -- --
Net realized gains -- -- -- (0.06) (0.09) --
------- ------- ------- ------- ------- ------
Total Distributions (0.61) (0.61) (0.57) (0.61) (0.68) (0.26)
------- ------- ------- ------- ------- ------
NET ASSET VALUE, END OF PERIOD $ 10.46 $ 10.41 $ 10.52 $ 10.32 $ 10.87 $10.72
======= ======= ======= ======= ======= ======
Total Return (Excludes Sales Charge) 6.47% 4.86% 7.67% 0.49% 8.04% 9.84%(b)
RATIOS/SUPPLEMENTARY DATA:
Net Assets at end of period (000) $20,055 $21,343 $12,516 $15,216 $15,719 $ 161
Ratio of expenses to average net
assets 0.76% 0.76% 0.77% 0.75% 0.76% 0.99%(b)
Ratio of net investment income to
average net assets 5.81% 5.81% 5.57% 4.92% 5.35% 5.95%(b)
Ratio of expenses to average
net assets* 1.16% 1.17% 1.20% 1.20% 1.27% 1.29%(b)
Ratio of net investment income to
average net assets* 5.41% 5.40% 5.14% 4.47% 4.84% 5.65%(b)
Portfolio Turnover(a) 66.61% 75.20% 76.43% 30.61% 40.28% 43.87%
</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) Portfolio turnover is calculated on the basis of the
Fund as a whole without distinguishing among the classes of shares
issued. (b) Annualized. (c) Class A Shares commenced offering on
February 18, 1992.
31
<PAGE> 133
THE ONE GROUP(R) LIMITED VOLATILITY BOND FUND - FINANCIAL HIGHLIGHTS
<TABLE>
<CAPTION>
YEAR ENDED JUNE 30,
-------------------
CLASS B 1998 1997 1996 1995 1994(a)
------- ---- ---- ---- ---- -------
<S> <C> <C> <C> <C>
NET ASSET VALUE, BEGINNING OF PERIOD $10.49 $10.60 $10.40 $10.78
Investment Activities
Net investment income 0.55 0.55 0.53 0.17
Net realized and unrealized gains
(losses) from investments and
futures 0.04 (0.10) 0.19 (0.37)
Total from Investment Activities 0.59 0.45 0.72 (0.20)
Distributions
Net investment income (0.55) (0.56) (0.52) (0.15)
In excess of net realized gains -- -- -- (0.03)
Total Distributions (0.55) (0.56) (0.52) (0.18)
NET ASSET VALUE, END OF PERIOD $10.53 $10.49 $10.60 $10.40
Total Return (Excludes Sales Charge) 5.74% 4.28% 7.18% (1.81)%(b)
RATIOS/SUPPLEMENTARY DATA:
Net Assets at end of period (000) $4,920 $4,923 $2,906 $1,974
Ratio of expenses to average net
assets 1.20% 1.26% 1.28% 1.26%(c)
Ratio of net investment income to
average net assets 5.21% 5.31% 5.10% 4.39%(c)
Ratio of expenses to average net
assets* 1.81% 1.82% 1.86% 1.86%(c)
Ratio of net investment income to
average net assets* 4.60% 4.75% 4.52% 3.79%(c)
Portfolio Turnover(d) 66.61% 75.20% 76.43% 30.61%
</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 Shares commenced offering on January 14,
1994. (b) Not annualized. (c) Annualized. (d) Portfolio turnover is
calculated on the basis of the Fund as a whole without distinguishing
among the classes of shares issued.
32
<PAGE> 134
THE ONE GROUP(R) TREASURY & AGENCY FUND
INVESTMENT OBJECTIVE
The Fund seeks a high level of current income by investing in U.S. Treasury and
other U.S. Agency obligations with a primary, but not exclusive, focus on issues
that produce income exempt from state income taxes.
INVESTMENT STRATEGY
The Fund invests in U.S. Treasury and other U.S. Agency obligations including
fixed-income securities and mortgage-related securities. Normally, the Fund's
average weighted maturity will range between two and five years.
PORTFOLIO SECURITIES
The Fund normally invests at least 65% of its total assets in U.S. Treasury
bills, notes and other obligations issued or guaranteed by the U.S. Treasury
("Treasury Obligations") and securities issued or guaranteed by U.S. Government
agencies and instrumentalities. Treasury Obligations may include Separately
Traded Registered Interest and Principal Securities ("STRIPS"), Coupon Under
Book Entry Safekeeping ("CUBES"), and securities of other government-only
investment companies, including other funds of The One Group. The Fund also may
invest in government mortgage-backed securities and government adjustable rate
mortgage loans ("ARMs"), as well as engage in securities lending. For a list of
all the securities in which the Fund may invest, please read "Investment
Practices."
RISK CONSIDERATIONS
The Fund invests in fixed-income securities. The value of these securities will
change in response to interest rate changes and other factors. Before you
invest, please read "More About the Funds" and "Investment Risks."
FUND MANAGEMENT
The Fund is managed by a team of portfolio managers, research analysts and fixed
income traders. The team works together to establish general duration and sector
strategies for the Fund. Each team member makes recommendations about securities
in the Fund. The research analysts and trading personnel provide individual
security and sector recommendations, while the portfolio managers select and
allocate individual securities in a manner designed to meet the investment
objectives of the Fund.
33
<PAGE> 135
SHAREHOLDER EXPENSES
<TABLE>
<CAPTION>
SHAREHOLDER TRANSACTION EXPENSES(1) CLASS A CLASS B CLASS C CLASS I
- ------------------------------------ ------- ------- ------- -------
<S> <C> <C> <C> <C>
Maximum Sales Charge Imposed on Purchases
(as a percentage of offering price) 3.00% none none none
Maximum Contingent Deferred Sales Charge
(as a percentage of original purchase
price or redemption proceeds, as
applicable) none(2) 3.00% 1.00% none
Redemption Fees none none none none
Exchange Fees none none none none
ANNUAL OPERATING EXPENSES (as a
percentage of average daily net assets)(3)
Investment Advisory Fees (after fee
waiver)(4) .20% .20% .20% .20%
12b-1 Fees (after fee waiver)(5) .25% .75% .75% none
Other Expenses .25% .25% .25% .25%
Total Fund Operating Expenses (after fee
waiver)(6) .70% 1.20% 1.20% .45%
</TABLE>
(1) If you buy or sell shares through a Shareholder Servicing Agent, you
may be charged separate transaction fees by the Shareholder Servicing
Agent. In addition, a $10.00 sub-minimum account fee may be applicable
and a $7.00 charge will be deducted from redemption amounts paid by
wire.
(2) Except for purchases of $1 million or more. Please see "Sales Charges."
(3) Expense information has been restated to reflect current fees.
(4) Without the fee waiver, Investment Advisory Fees would be .40% for all
classes of shares.
(5) Due to 12b-1 fees, long-term Class A, Class B and Class C shareholders
may pay more than the equivalent of the maximum front-end sales charges
permitted by the rules of the National Association of Securities
Dealers. Without the voluntary waiver of fees, 12b-1 fees would be .35%
for Class A shares and 1.00% for Class B and Class C shares.
(6) Without the voluntary reduction of fees, Total Operating Expenses would
be 1.00% for Class A shares, 1.65% for Class B shares, 1.65% for Class
C shares and .65% for Class I shares.
34
<PAGE> 136
EXAMPLE
An investor would pay the following expenses on a $1,000 investment in the Fund,
assuming: (1) payment of the maximum sales charge; (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 $37 $52 $68 $114
Class A (without fee waivers) $40 $61 $84 $149
Class B $42 $58 $66 $119
Class B (without fee waivers) $47 $72 $90 $162
Class C $22 $38 $66 $145
Class C (without fee waivers) $27 $52 $90 $195
Class I $ 5 $14 $25 $ 57
Class I (without fee waivers) $ 7 $21 $36 $ 81
</TABLE>
Assuming no redemption at the end of each time period, 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 $37 $52 $68 $114
Class A (without fee waivers) $40 $61 $84 $149
Class B $12 $38 $66 $119
Class B (without fee waivers) $17 $52 $90 $162
Class C $12 $38 $66 $145
Class C (without fee waivers) $17 $52 $90 $195
Class I $ 5 $14 $25 $ 57
Class I (without fee waivers) $ 7 $21 $36 $ 81
</TABLE>
Class B shares automatically convert to Class A shares after six (6) years.
Therefore, the "10 years" examples above reflect this conversion.
These examples are designed to assist you in understanding the various costs and
expenses that may be directly or indirectly paid by investors in the Fund. THESE
EXAMPLES SHOULD NOT BE CONSIDERED A REPRESENTATION OF PAST OR FUTURE EXPENSES
AND ACTUAL EXPENSES MAY BE GREATER OR LESS THAN THOSE SHOWN.
35
<PAGE> 137
THE ONE GROUP(R) TREASURY & AGENCY FUND FINANCIAL HIGHLIGHTS
The Financial Highlights are intended to help you understand the Fund's
financial performance for the past 10 years or since inception, if less than 10
years. The total returns in the table represent the rate a shareholder would
have earned on an investment in the Fund (assuming reinvestment of all dividends
and distributions). This information has been derived from financial statements
audited by PricewaterhouseCoopers LLP, whose report, along with the Fund's
financial statements, is incorporated by reference in the Statement of
Additional Information, which is available upon request.
<TABLE>
<CAPTION>
JANUARY 20, 1997
YEAR ENDED THROUGH
CLASS I JUNE 30, 1998 JUNE 30, 1997(a)
------- ------------- ----------------
<S> <C>
NET ASSET VALUE, BEGINNING OF PERIOD $ 10.00
--------
Investment Activities
Net investment income 0.28
Net realized and unrealized gains (losses) from investments
and futures (0.01)
--------
Total from Investment Activities 0.27
--------
Distributions
Net investment income (0.28)
--------
NET ASSET VALUE, END OF PERIOD $ 9.99
========
Total Return (Excludes Sales Charge) 2.78%(b)
RATIOS/SUPPLEMENTARY DATA:
Net Assets at end of period (000) $110,084
Ratio of expenses to average net assets 0.45%(c)
Ratio of net investment income to average net assets 6.44%(c)
Ratio of expenses to average net assets* 0.78%(c)
Ratio of net investment income to average net assets* 6.11%(c)
Portfolio Turnover(d) 54.44%
</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) Not
annualized. (c) Annualized. (d) Portfolio turnover is calculated on the
basis of the Fund as a whole without distinguishing among the classes
of shares issued.
36
<PAGE> 138
<TABLE>
<CAPTION>
JANUARY 20, 1997
YEAR ENDED THROUGH
CLASS A JUNE 30, 1998 JUNE 30, 1997(a)
------- ------------- ----------------
<S> <C>
NET ASSET VALUE, BEGINNING OF PERIOD $10.00
------
Investment Activities
Net investment income 0.29
Net realized and unrealized gains (losses) from
investments and futures (0.02)
------
Total from Investment Activities 0.27
------
Distributions
Net investment income (0.29)
------
NET ASSET VALUE, END OF PERIOD $ 9.98
======
Total Return (Excludes Sales Charge) 2.78%(b)
RATIOS/SUPPLEMENTARY DATA:
Net Assets at end of period (000) $ 94
Ratio of expenses to average net assets 0.71%(c)
Ratio of net investment income to average net assets 6.47%(c)
Ratio of expenses to average net assets* 1.15%(c)
Ratio of net investment income to average net assets* 6.03%(c)
Portfolio Turnover(d) 54.44%
</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) Not
annualized. (c) Annualized. (d) Portfolio turnover is calculated on the
basis of the Fund as a whole without distinguishing among the classes
of shares issued.
37
<PAGE> 139
THE ONE GROUP(R) TREASURY & AGENCY FUND FINANCIAL HIGHLIGHTS
<TABLE>
<CAPTION>
JANUARY 20, 1997
YEAR ENDED THROUGH
CLASS B JUNE 30, 1998 JUNE 30, 1997(a)
------- ------------- ----------------
<S> <C>
NET ASSET VALUE, BEGINNING OF PERIOD $10.00
------
Investment Activities
Net investment income 0.26
Net realized and unrealized gains (losses) from investments
and futures (0.01)
------
Total from Investment Activities 0.25
------
Distributions
Net investment income (0.26)
------
NET ASSET VALUE, END OF PERIOD $ 9.99
======
Total Return (Excludes Sales Charge) 2.58%(b)
RATIOS/SUPPLEMENTARY DATA:
Net Assets at end of period (000) $ 80
Ratio of expenses to average net assets 1.23%(c)
Ratio of net investment income to average net assets 6.30%(c)
Ratio of expenses to average net assets* 1.81%(c)
Ratio of net investment income to average net assets* 5.72%(c)
Portfolio Turnover(d) 54.44%
</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) Not
annualized. (c) Annualized. (d) Portfolio turnover is calculated on the
basis of the Fund as a whole without distinguishing among the classes
of shares issued.
38
<PAGE> 140
THE ONE GROUP HIGH YIELD BOND FUND
INVESTMENT OBJECTIVE: The Fund seeks a high level of current income by investing
primarily in a diversified portfolio of debt securities which are rated below
investment grade or unrated. Capital appreciation is a secondary objective.
INVESTMENT STRATEGY: The Fund invests in all types of high yield, high risk debt
securities. The Fund also may invest in convertible securities, preferred stock,
common stock, and loan participations. The Fund's weighted average maturity will
normally range between five and ten years, although the Fund may shorten its
weighted average maturity to as little as two years if deemed appropriate for
temporary defensive purposes.
PORTFOLIO SECURITIES: The Fund normally invests at least 80% of its total assets
in debt securities, loan participations, convertible securities and preferred
stock which are rated below investment grade or unrated, although the Fund may
invest up to 100% of the Fund's total assets in such securities. Securities
rated below investment grade are called "high yield bonds," "non-investment
grade bonds," "below investment grade bonds" and "junk bonds." These securities
generally are rated in the fifth or lower rating categories (for example, BB or
lower by Standard & Poor's Corporation and Ba or lower by Moody's Investors
Service, Inc.), and are considered to be speculative. The Fund also may invest
up to 20% of its total assets in other securities, including investment grade
debt securities. As a matter of fundamental policy, at least 65% of the Fund's
total assets will consist of bonds. For a list of all the securities in which
the Fund may invest, please read "Investment Practices."
RISK CONSIDERATIONS: The Fund invests in debt securities which are considered
speculative. While these securities generally provide a higher yield than higher
rated debt securities, they are subject to a greater degree of risk. Issuers of
these securities may include highly leveraged, less creditworthy companies or
financially distressed firms. The credit quality of these securities can change
suddenly and unexpectedly. Before you invest, please read "More About the
Funds," "Special Investment Risks," and "Investment Risks."
FUND MANAGEMENT: Banc One High Yield Partners, LLC serves as sub-advisor to the
Fund. Banc One High Yield Partners, LLC is controlled by Banc One Investment
Advisors and Pacholder Associates, Inc. Anthony L. Longi, Jr., an officer of
Banc One High Yield Partners, LLC is the Manager of the Fund. As an officer of
Pacholder Associates, Inc., Mr. Longi has served as portfolio manager of the
USF&G Pacholder Fund, Inc. since 1994 and as a high yield research analyst since
1987.
39
<PAGE> 141
- --------------------------------------------------------------------------------
SHAREHOLDER EXPENSES
<TABLE>
<CAPTION>
SHAREHOLDER TRANSACTION EXPENSES(1) CLASS A CLASS B CLASS C CLASS I
------- ------- ------- -------
<S> <C> <C> <C> <C>
Maximum Sales Charge Imposed on Purchases 4.50% none none none
(as a percentage of offering price)
Maximum Contingent Deferred Sales Charge none(2) 5.00% 1.00% none
(as a percentage of original purchase price
or redemption proceeds, as applicable)
Redemption Fees none none none none
Exchange Fees none none none none
ANNUAL OPERATING EXPENSE
(as a percentage of average daily net assets)
Investment Advisory Fees (after fee waiver)(3) .60% .60% .60% .60%
12b-1 Fees (after fee waiver)(4) .25% .90% .90% none
Other Expenses (after fee waiver)(5) .35% .35% .35% .35%
Total Fund Operating Expenses (after fee waivers)(6) 1.20% 1.85% 1.85% .95%
</TABLE>
(1) If you buy or sell shares through a Shareholder Servicing Agent, you
may be charged separate transaction fees by the Shareholder Servicing
Agent. In addition, a $10.00 sub-minimum account fee may be applicable
and a $7.00 charge will be deducted from redemption amounts paid by
wire.
(2) Except for purchases of $1 million or more. Please see "Sales Charges."
(3) Without the fee waiver, Investment Advisory Fees would be .75% for all
classes of shares.
(4) Due to 12b-1 fees, long-term Class A, Class B and Class C shareholders
may pay more than the equivalent of the maximum front-end sales charges
permitted by the rules of the National Association of Securities
Dealers. Without the voluntary waiver, 12b-1 fees would be .35% for
Class A shares and 1.00% for Class B and Class C shares.
(5) Without the fee waiver, Other Expenses would be .70% for all classes.
(6) Without the voluntary reduction of Investment Advisory and 12b-1 fees,
Total Operating Expenses would be 1.80% for Class A shares, 2.45% for
Class B shares, 2.45% for Class C shares and 1.45% for Class I shares.
EXAMPLE: An investor would pay the following expenses on a $1,000 investment in
the Fund, assuming: (1) payment of the maximum sales charge; (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 $81
Class A (without fee waiver) $59 $89
Class B $69 $88
Class B (without fee waiver) $71 $96
Class C $29 $58
Class C (without fee waiver) $31 $66
Class I $10 $30
Class I (without fee waiver) $11 $35
</TABLE>
Assuming no redemption at the end of each time period, the dollar amounts in the
above example would be as follows:
<TABLE>
<CAPTION>
1 YEAR 3 YEARS
------ -------
<S> <C> <C>
Class A $57 $81
Class A (without fee waiver) $59 $89
Class B $19 $58
Class B (without fee waiver) $21 $66
Class C $19 $58
Class C (without fee waiver) $21 $66
Class I $10 $30
Class I (without fee waiver) $11 $35
</TABLE>
Class B shares automatically convert to Class A shares after eight (8) years.
Therefore, the "10 years" examples above reflect this conversion.
40
<PAGE> 142
These examples are designed to assist you in understanding the various costs and
expenses that may be directly or indirectly paid by investors in the Fund. THESE
EXAMPLES SHOULD NOT BE CONSIDERED A REPRESENTATION OF PAST OR FUTURE EXPENSES
AND ACTUAL EXPENSES MAY BE GREATER OR LESS THAN THOSE SHOWN.
FINANCIAL HIGHLIGHTS
This section normally would include Financial Highlights for the Fund. Because
the Fund had not begun operations as of June 30, 1998, there are no Financial
Highlights for the Fund.
41
<PAGE> 143
MORE ABOUT THE FUNDS
WHEN THE PROSPECTUS REFERS TO "BONDS," WHAT TYPES OF INVESTMENTS ARE INCLUDED?
"Bonds" include debt instruments issued by the U.S. Treasury, U.S. Government
agencies, corporations, municipalities, securities issued or guaranteed by
foreign governments, their agencies or instrumentalities, securities issued by
domestic and supranational banks, mortgage-related securities, asset-backed
securities, stripped government securities and zero coupon obligations.
PORTFOLIO QUALITY
The Funds only purchase securities that meet the following criteria:
DEBT SECURITIES
o The Government Bond Fund and the Treasury & Agency Fund may invest in
debt securities rated in any of the three highest investment grade
rating categories.
o The Ultra Short-Term Income Fund, the Intermediate Bond Fund, and the
Limited Volatility Bond Fund may invest in debt securities rated in any
of the four investment grade rating categories.
o The Income Bond Fund and the High Yield Bond Fund may purchase
securities in ANY rating category. Please read "Special Risk
Considerations" and "High Yield/Junk Bonds" for more information about
the Income Bond Fund.
PREFERRED STOCK
o The Ultra Short-Term Income Fund, the Limited Volatility Bond Fund and
the Intermediate Bond Fund may only invest in preferred stock rated in
any of the four highest rating categories.
o The Income Bond Fund and the High Yield Bond Fund may invest in
preferred stock in any rating category.
MUNICIPAL SECURITIES
o The Intermediate Bond Fund and the Limited Volatility Bond Fund and the
Ultra Short-Term Income Fund may only invest in municipal bonds rated
in any of the four highest rating categories.
o The Intermediate Bond Fund and the Ultra Short-Term Income Fund may
only invest in other municipal securities, such as tax-exempt
commercial paper, notes and variable rate demand obligations that are
rated in the highest or second highest rating categories. The Limited
Volatility Bond Fund may invest in such securities only if they are
rated in the highest rating category.
o The Income Bond Fund and the High Yield Bond Fund may invest in
municipal securities rated in ANY category.
COMMERCIAL PAPER
o The Intermediate Bond Fund, the Limited Volatility Bond Fund and the
Ultra Short-Term Income Fund may invest in commercial paper rated in
the highest or second highest rating category.
o The High Yield Bond Fund and the Income Bond Fund may invest in
commercial paper in any rating category.
If the securities are unrated, Banc One Investment Advisors must determine that
they are of comparable quality to rated securities. Banc One Investment Advisors
will look at a security's rating at the time of investment. For more information
about ratings, please see "Description of Ratings" in the Appendix.
ILLIQUID INVESTMENTS
Each Fund may invest up to 15% of its net assets in illiquid investments. A
security is illiquid if it cannot be sold at approximately the value assessed by
the Fund within seven (7) days. Banc One Investment Advisors will follow
guidelines adopted by The One Group Board of Trustees in determining whether an
investment is illiquid.
42
<PAGE> 144
SPECIAL RISK CONSIDERATIONS
Fixed Income Securities: Investments in fixed income securities (for example,
bonds) will increase or decrease in value based on changes in interest rates. If
rates increase, the value of a Fund's investments generally declines. On the
other hand, if rates fall, the value of the investments generally increases. The
value of your investment in a Fund will increase and decrease as the value of a
Fund's investments increase and decrease. While securities with longer duration
and maturities tend to produce higher yields, they also are subject to greater
fluctuations in value when interest rates change. Usually, changes in the value
of fixed income securities will not affect cash income generated, but may affect
the value of your investment.
Derivatives: Some of the Funds invest in securities that are considered to be
derivatives. "Derivatives" are securities that derive their value from the
performance of underlying assets or securities. These include:
o options, futures contracts, and options on futures contracts
o mortgage-backed securities, including collateralized mortgage
obligations and Real Estate Mortgage Investment Conduits (CMOs and
REMICs) and stripped mortgage-backed securities (IOs and POs)
o asset-backed securities
o swap, cap and floor transactions
o new financial products
o structured instruments
o inverse floating rate instruments
These securities may be more volatile than other investments. Derivatives
present, to varying degrees, market, credit, leverage, liquidity, and management
risks. For a more detailed discussion of these risks, please read "Investment
Risks." The Fund's use of derivatives may cause the Fund to recognize higher
amounts of short-term capital gains (generally taxed at ordinary income tax
rates) than it would if the Fund did not use such instruments.
Lower Rated Securities: The Intermediate Bond Fund, the Ultra Short-Term Income
Fund and the Income Bond Fund may invest in debt securities rated in the lowest
investment grade category. Securities in this rating category are considered to
have speculative characteristics. Changes in economic conditions or other
circumstances may have a greater effect on the ability of issuers of these
securities to make principal and interest payments than they do on issuers of
higher grade securities.
High Yield/Junk Bonds: The Income Bond Fund and the High Yield Bond Fund invest
in high yield securities that are unrated or rated below investment grade
(commonly known as "junk bonds"). These securities are considered to be high
risk investments. You should not invest in the Funds unless you are willing to
assume the greater risk associated with high yield securities. These risks
include the following:
GREATER RISK OF LOSS. There is a greater risk that issuers of lower
rated securities will default than issuers of higher rated securities.
Issuers of lower rated securities may be less creditworthy, highly
indebted, financially distressed, or bankrupt. These issuers are more
vulnerable to real or perceived economic changes, political changes or
adverse industry developments. If an issuer fails to pay principal or
interest, the Funds would experience a decrease in income and a decline
in the market value of its investments. The Funds may also incur
additional expenses in seeking recovery from the issuer.
SENSITIVITY TO INTEREST RATE AND ECONOMIC CHANGES. The income and
market value of the Funds' securities may fluctuate more than higher
rated securities. Although non-investment grade securities tend to be
less sensitive to interest rate changes than investment grade
securities, non-investment grade securities are more sensitive to
short-term corporate, economic and market developments. During periods
of economic uncertainty and change, the market price of the Funds'
investments and the Funds' net asset value may be volatile.
VALUATION DIFFICULTIES. It is more difficult to value lower rated
securities than higher rated securities. If an issuer's financial
condition deteriorates, accurate financial and business information may
be limited or unavailable. In addition, the Funds' investments may be
thinly traded and there may be no established secondary market. Because
of the lack of market pricing and current information for certain of
the Funds' investments, valuation of such investments is much more
dependent on judgment than is the case with higher rated securities.
43
<PAGE> 145
LIQUIDITY. There may be no established secondary or public market for
the Funds' investments. As a result, the Funds may be required to sell
investments at substantial losses or retain them indefinitely even
where an issuer's financial condition is deteriorating.
HIGH YIELD BOND MARKET. Unlike investment grade securities (including
securities which were investment grade when issued but have fallen
below investment grade), the track record for bond default rates on new
issues of non-investment grade bonds is relatively short. It may be
that future default rates on new issues of non-investment grade
securities will be more widespread and higher than in the past,
especially if economic conditions deteriorate.
CREDIT QUALITY. Credit quality of non-investment grade securities can
change suddenly and unexpectedly, and even recently-issued credit
ratings may not fully reflect the actual risks posed by a particular
high-yield security. For these reasons, the Funds will not rely solely
on ratings issued by established credit rating agencies, but will use
such ratings in conjunction with Banc One Investment Advisor's or the
sub-advisor's independent and ongoing review of credit quality. (Please
see "Description of Ratings" in the Appendix for additional
information). Because investments in lower rated or unrated securities
involve greater investment risk, achievement of the Funds' investment
objectives will be more dependent on Banc One Investment Advisor's or
the sub-advisor's credit analysis than would be the case if the Funds
were investing in higher rated securities. The Funds may seek to hedge
investments through transactions in options, futures contracts and
related options. The Funds also may use swap agreements to further
manage exposure to lower rated securities.
EXPERIENCE OF ADVISOR AND SUB-ADVISOR. The High Yield Bond Fund's
portfolio managers have been responsible for the day-to-day management
of the USF& G Pacholder Fund, Inc. since 1988. The USF&G Pacholder
Fund, Inc. is a closed end fund that invests primarily in high risk,
high yield securities. Open-end investment companies, like the Fund,
are subject to different regulatory requirements than closed-end funds
such as the USF&G Pacholder Fund, Inc. Banc One Partners, Banc One
Investment Advisors and the portfolio manager have limited experience
in managing an open-end investment company (like the Fund) that
primarily invests in high yield, high risk bonds.
Foreign Securities: Investments in foreign securities involve risks different
from investments in U.S. securities. For more details, see "Investment
Practices" and "Investment Risks." Because of these risk factors, the share
price of the a Fund investing in foreign securities is expected to be volatile,
and you should be able to sustain sudden, and sometimes substantial,
fluctuations in the value of your investment.
44
<PAGE> 146
HOW TO DO BUSINESS WITH THE ONE GROUP
PURCHASING FUND SHARES
WHERE CAN I BUY SHARES?
You may purchase Fund shares from the following sources:
o The One Group Services Company, and
o Shareholder Servicing Agents. These include investment advisors,
brokers, financial planners, banks, insurance companies, retirement or
401(k) plan sponsors, or other intermediaries. Shares purchased this
way will be held for you by the Shareholder Servicing Agent.
WHEN CAN I BUY SHARES?
o Purchases may be made on any business day. This includes any day that
the Funds are open for business, other than weekends, days on which the
New York Stock Exchange ("NYSE") is closed, and the following holidays:
New Year's Day, Martin Luther King, Jr. Day, Presidents' Day, Good
Friday, Memorial Day, Independence Day, Labor Day, Thanksgiving, and
Christmas.
o Purchase requests received by The One Group Services Company before 4
p.m. Eastern Time ("ET"), will be effective that day. On occasion, the
NYSE will close before 4 p.m. ET. When that happens, purchase requests
received after the NYSE closes will be effective the following business
day.
o Purchase orders may be canceled by the Fund's Custodian, State Street
Bank and Trust Company, if it does not receive "federal funds" by 4:00
p.m. ET (i) on the business day after the order is placed if you are
buying Class I shares, and (ii) on the third business day if you are
purchasing Class A, Class B or Class C shares.
o If your shares are held by a Shareholder Servicing Agent, it is the
responsibility of the Shareholder Servicing Agent to send your purchase
or redemption order to the Fund. Your Shareholder Servicing Agent may
have an earlier cut-off time for purchase and redemption requests.
o The One Group Services Company can reject a purchase order if it does
not think that it is in the best interests of a Fund and/or its
shareholders to accept the order.
o Shares are electronically recorded. Therefore, certificates will not be
issued.
WHAT KIND OF SHARES CAN I BUY?
The One Group offers the following classes of shares:
o Class A, Class B and Class C shares are available to the general
public.
o Class I shares are available to institutional investors and any
organization authorized to act in a fiduciary, advisory, custodial or
agency capacity. We will refer to these entities as "Intermediaries."
o If you intend to hold your shares six or more years, Class B shares may
be appropriate for you. If you intend to hold your shares for less than
six years, you may want to consider Class A or Class C shares.
The One Group Fund Direct IRA. The One Group offers a retirement plan and, in
1999, may offer an education plan. These plans allow participants to defer taxes
while their retirement and education savings grow. The education IRA requires a
minimum investment of $500. Call The One Group Services Company at
1-800-480-4111 for an Adoption Agreement.
HOW MUCH DO SHARES COST?
o Shares are sold at net asset value ("NAV") plus a sales charge, if any.
o Each class of shares in each Fund has a different NAV. This is
primarily because each class has different distribution expenses.
45
<PAGE> 147
o NAV per share is calculated by dividing the total market value of a
Fund's investments and other assets allocable to a class (minus class
expenses) by the number of outstanding shares in that class.
o A Fund's NAV changes every day. NAV is calculated each business day
following the close of the NYSE at 4:00 p.m. ET. On occasion, the NYSE
will close before 4:00 p.m ET. When that happens, NAV will be
calculated as of the time the NYSE closes.
HOW DO I OPEN AN ACCOUNT?
1. Read the prospectus carefully, and select the Fund or Funds most
appropriate for you.
2. Decide how much you want to invest.
o The minimum initial investment for all Funds except the
Treasury & Agency Fund is $1,000 ($100 for employees of BANC
ONE CORPORATION and its affiliates). The minimum initial
investment for the Treasury & Agency Fund is $50,000.
o Subsequent investments for all Funds except the Treasury &
Agency Fund must be at least $100 ($25 for employees of BANC
ONE CORPORATION and its affiliates). Subsequent investments
for the Treasury & Agency Fund must be at least $1,000.
o You may purchase no more than $250,000 of Class B shares at
one time.
o The One Group Services Company may waive these minimums.
3. Complete the Account Application Form. Be sure to sign up for all of
the Account privileges that you plan to take advantage of. Doing so now
means that you will not have to complete additional paperwork later.
4. Send the completed application and a personal check (unless you choose
to pay by wire or bank transfer) payable to "The One Group" to:
State Street Bank and Trust Company
c/o The One Group
P.O. Box 8528
Boston, MA 02266-8528
Contributions to Fund Direct IRAs should be made payable to "State
Street Bank and Trust Company for the Benefit of (your name)."
5. All checks should be in U.S. dollars. Third party checks will not be
accepted. Redemptions from a Fund will not be permitted for ten (10)
calendar days if purchases are made by check or under the Systematic
Investment Plan (see below).
6. If you purchase shares through a Shareholder Servicing Agent, you may
be required to complete additional forms or follow additional
procedures. You should contact your Shareholder Servicing Agent
regarding purchases, exchanges and redemptions.
7. If you have any questions, contact your Shareholder Servicing Agent or
call The One Group Services Company at 1-800-480-4111.
46
<PAGE> 148
CAN I PURCHASE SHARES OVER THE TELEPHONE?
Yes, simply select this option on your Account Application Form and then:
o Contact your Shareholder Servicing Agent or The One Group Services
Company at 1-800-480-4111 to relay your purchase instructions.
o Send a personal check made payable to "The One Group" to State Street
Bank and Trust Company (see address above), authorize a bank transfer
or initiate a wire transfer to the following wire address:
State Street Bank & Trust Company
Attn: Custody & Shareholder Services
ABA 011 000 028
DDA 99034167
FBO The One Group Fund (ex: The One Group Intermediate Bond Fund - A)
Your Account Number (ex: 123456789)
Your Account Registration (ex: John Smith & Mary Smith, JTWROS)
o The One Group uses reasonable procedures to confirm that instructions
given by telephone are genuine. These procedures include recording
telephone instructions and asking for personal identification. If these
procedures are followed, The One Group will not be responsible for any
loss, liability, cost or expense of acting upon unauthorized or
fraudulent instructions; you bear the risk of loss.
o You may revoke your right to make purchases over the telephone by
sending a letter to:
State Street Bank and Trust Company
c/o The One Group
P.O. Box 8528
Boston, MA 02266-8528
CAN I AUTOMATICALLY INVEST ON A SYSTEMATIC BASIS?
Yes, except for The Treasury & Agency Fund. After your Account is established,
you may purchase additional Class A, Class B and Class C shares by making
automatic monthly investments from your bank account. The minimum initial
investment is still $1,000, but minimum automatic additions are only $25. The
One Group Services Company may waive these minimums. To establish a Systematic
Investment Plan:
o Select the "Systematic Investment Plan" option on the Account
Application Form.
o Provide the necessary information about the bank account from which
your investments will be made.
o Shares purchased under a Systematic Investment Plan may not be redeemed
for ten (10) calendar days.
o The One Group currently does not charge for this service, but may
impose a charge in the future. However, your bank may impose a charge
for debiting your bank account.
o You may revoke your right to make systematic investments by calling The
One Group Services Company at 1-800-480-4111 or by sending a letter
to:
State Street Bank and Trust Company
c/o The One Group
P.O. Box 8528
Boston, MA 02266-8528
CONVERSION FEATURE
o Your Class B shares automatically convert to Class A shares.
o Class B shares of the Intermediate Bond Fund, the Income Bond Fund, the
Government Bond Fund and the High Yield Bond Fund automatically convert
to Class A shares after eight years. Class B shares of the Ultra
Short-Term Income Fund, the Limited Volatility Bond Fund, and the
Treasury & Agency Fund automatically convert to Class A shares after
six years.
47
<PAGE> 149
o Conversion periods are measured from the end of the month in which the
Class B shares were purchased.
o After conversion, your shares will be subject to the lower distribution
and shareholder servicing fees charged on Class A shares.
o You will not be assessed any sales charges or fees for conversion of
shares, nor will you be subject to any Federal income tax.
o Because the share price of the Class A shares may be higher than that
of the Class B shares at the time of conversion, you may receive fewer
Class A shares; however, the dollar value will be the same.
o If you have exchanged Class B shares of one Fund for Class B shares of
another, the time you held the shares in each Fund will be added
together for purposes of calculating the six and eight year time
periods.
SALES CHARGES
The One Group Services Company compensates Shareholder Servicing Agents who sell
shares of The One Group. Compensation comes from: sales charges, 12b-1 fees and
payments by The One Group Services Company from its own resources. The One Group
Services Company, at its own expense, also will provide promotional incentives
in the form of travel expenses, lodging and bonuses to licensed individuals who
sell shares of the Funds, as well as vacation trips, (including lodging at
luxury resorts), tickets to entertainment events, and merchandise. Occasionally,
cash incentives will be paid to select Shareholder Servicing Agents. Those
Shareholder Servicing Agents who may receive special incentives include Banc One
Securities Corporation, The Advisors Group, United Planners Financial Services
of America, Inc., The Legend Group, and Rosewood Retirement Advisory Services,
LLC.
CLASS A SHARES
If you buy Class A shares of THE LIMITED VOLATILITY BOND FUND, THE ULTRA
SHORT-TERM INCOME FUND and THE TREASURY & AGENCY FUND, the following table shows
the amount of sales charge and the commissions paid to Shareholder Servicing
Agents.
<TABLE>
<CAPTION>
SALES CHARGE
AS A % COMMISSION
OF THE SALES CHARGE AS A % OF
OFFERING AS A % OFFERING
AMOUNT OF PURCHASE PRICE OF YOUR INVESTMENT PRICE
- ------------------ ----- ------------------ -----
<S> <C> <C> <C>
Less than $100,000 3.00% 3.09% 2.70%
$100,000-$249,999 2.50% 2.56% 2.18%
$250,000-$499,999 2.00% 2.04% 1.64%
$500,000-$999,999 1.50% 1.52% 1.20%
$1,000,000* 0.00% 0.00% 0.00%
</TABLE>
If you buy Class A shares of THE INTERMEDIATE BOND FUND, THE INCOME BOND FUND,
THE GOVERNMENT BOND FUND AND THE HIGH YIELD BOND FUND the following table shows
the amount of sales charge and the commissions paid to Shareholder Servicing
Agents.
<TABLE>
<CAPTION>
SALES CHARGE
AS A % COMMISSION
OF THE SALES CHARGE AS A % OF
OFFERING AS A % OFFERING
AMOUNT OF PURCHASE PRICE OF YOUR INVESTMENT PRICE
- ------------------ ----- ------------------ -----
<S> <C> <C> <C>
Less than $100,000 4.50% 4.71% 4.05%
$100,000-$249,999 3.50% 3.63% 3.05%
$250,000-$499,999 2.50% 2.56% 2.05%
$500,000-$999,999 2.00% 2.04% 1.60%
$1,000,000* 0.00% 0.00% 0.00%
</TABLE>
* If you purchase $1 million or more of Class A shares and are not assessed a
sales charge at the time of purchase, you will be charged the equivalent of
1% of the purchase price if you redeem any or all of the Class A shares
within one year of purchase.
48
<PAGE> 150
CLASS B SHARES
Class B shares are offered at NAV, without any up-front sales charges. However,
if you redeem Class B shares of the INTERMEDIATE BOND FUND, THE INCOME BOND
FUND, THE GOVERNMENT BOND FUND or THE HIGH YIELD BOND FUND before the sixth
anniversary of purchase, you will be assessed a Contingent Deferred Sales Charge
("CDSC") according to the following schedule:
CDSC AS A
YEARS % OF DOLLAR
SINCE AMOUNT SUBJECT
PURCHASE TO CHARGE
-------- ---------
0-1 5.00%
1-2 4.00%
2-3 3.00%
3-4 3.00%
4-5 2.00%
5-6 1.00%
more than 6 None
Or if you redeem Class B shares of the ULTRA SHORT-TERM INCOME FUND, THE LIMITED
VOLATILITY BOND FUND OR THE TREASURY & AGENCY FUND prior to the fourth
anniversary of purchase, you will be assessed a CDSC according to the following
schedule:
CDSC AS A
YEARS % OF DOLLAR
SINCE AMOUNT SUBJECT
PURCHASE TO CHARGE
-------- ---------
0-1 3.00%
1-2 3.00%
2-3 2.00%
3-4 1.00%
more than 4 None
The One Group Services Company pays a commission of 4.00% of the original
purchase to Shareholder Servicing Agents who sell Class B shares of the
Intermediate Bond Fund, the Income Bond Fund, the Government Bond Fund and the
High Yield Bond Fund. Shareholder Servicing Agents who sell Class B shares of
the Ultra Short-Term Income Fund, the Limited Volatility Bond Fund and the
Treasury & Agency Fund receive a commission of 2.75% from The One Group Services
Company.
CLASS C SHARES
Class C shares are offered at NAV, without any up-front sales charge. However,
if you redeem your shares within one year of the purchase date, you will be
assessed a CDSC as follows:
CDSC AS A
YEARS % OF DOLLAR
SINCE AMOUNT SUBJECT
PURCHASE TO CHARGE
-------- ---------
0-1 1.00%
After first year None
Shareholder Servicing Agents selling Class C shares receive a commission of
1.00% of the original purchase price from The One Group Services Company.
How the CDSC is Calculated
o The Fund assumes that all purchases made in a given month were made on
the first day of the month.
o The CDSC is based on the current market value or the original cost of
the shares, whichever is less.
49
<PAGE> 151
o A sales charge is not imposed on increases in NAV above the initial
purchase price, nor is a sales charge assessed on shares acquired
through reinvestment of dividends or capital gains distributions.
o To keep your CDSC as low as possible, the Fund first will redeem any
shares in your account that carry no CDSC, starting with Class A
shares. After that, the Fund will redeem the shares you have held for
the longest time and thus have the lowest CDSC.
o If you exchange Class B or Class C shares of an unrelated mutual fund
for Class B or Class C shares of The Group in connection with a fund
reorganization, the CDSC applicable to your original shares (including
the period of time you have held those shares) will be applied to The
One Group shares you receive in the reorganization.
12B-1 FEES
12b-1 fees are paid by The One Group to The One Group Services Company as
compensation for its services and expenses. The One Group Services Company in
turn pays all or part of the 12b-1 fee to Shareholder Servicing Agents that sell
shares of The One Group.
o The 12b-1 fees vary by share class as follows:
1. Class A shares pay a 12b-1 fee of .35% of the average daily
net assets of the Fund, which is currently being waived to
.25%.
2. Class B and Class C shares pay a 12b-1 fee of 1.00% of the
average daily net assets of the Fund, which is currently being
waived to .90% for the Intermediate Bond Fund, the Income Bond
Fund, the Government Bond Fund and the High Yield Bond Fund
and to .75% for the Limited Volatility Bond Fund, the Ultra
Short-Term Income Fund, and the Treasury & Agency Fund. This
will cause expenses for Class B and Class C shares to be
higher and dividends to be lower than for Class A shares.
3. There are no 12b-1 fees for Class I shares.
o 12b-1 fees, together with the CDSC, help The One Group Services Company
sell Class B and Class C shares without an "up-front" sales charge by
defraying the costs of advancing brokerage commissions and other
expenses paid to Shareholder Servicing Agents.
o The One Group Services Company may use up to .25% of the fees for
shareholder servicing and up to .75% for distribution. During the last
fiscal year, The One Group Services Company received 12b-1 fees
totaling .25% of the average daily net assets of the Class A shares of
the Funds. In addition, The One Group Services Company received 12b-1
fees totaling .90% of the average daily net assets of the Class B
shares of the Intermediate Bond Fund, the Income Bond Fund, and the
Government Bond Fund, and .75% for Class B shares of the Limited
Volatility Bond Fund, the Ultra Short-Term Income Fund, and the
Treasury & Agency Fund.
o The One Group Services Company may pay 12b-1 fees to its affiliates and
to Banc One Investment Advisors and its affiliates (or any sub-advisor)
for brokerage and other agency transactions.
50
<PAGE> 152
SALES CHARGE REDUCTIONS AND WAIVERS
REDUCING YOUR CLASS A SALES CHARGES
There are several ways you can reduce the sales charges you pay on Class A
shares:
1. Right of Accumulation: You may add the market value of any Class A,
Class B or Class C shares of a Fund (except a money market fund) that
you (and your spouse and minor children) already own to the amount of
your next Class A purchase for purposes of calculating the sales
charge. An Intermediary also may take advantage of this option.
2. Letter of Intent: With an initial investment of $2,000, you may
purchase Class A shares of one or more Funds over the next 13 months
and pay the same sales charge that you would have paid if all shares
were purchased at once. A percentage of your investment will be held in
escrow until the full amount covered by the Letter of Intent has been
invested.
To take advantage of the accumulation privilege or letter of intent, complete
the appropriate section of your fund application, or contact your Shareholder
Servicing Agent. To determine if you are eligible for the accumulation
privilege, contact The One Group Services Company at 1-800-480-4111. These
programs may be terminated or amended at any time.
WAIVER OF THE CLASS A SALES CHARGE
No sales charge is imposed on Class A shares of the Funds if the shares were:
1. Bought with the reinvestment of dividends and capital gains
distributions.
2. Acquired in exchange for other Fund shares if a comparable sales charge
has been paid for the exchanged shares.
3. Bought by officers, directors or trustees, retirees and employees (and
their spouses and immediate family members) of:
o The One Group.
o BANC ONE CORPORATION and its subsidiaries and affiliates.
o The One Group Services Company and its subsidiaries and
affiliates.
o State Street Bank and Trust Company and its subsidiaries and
affiliates.
o Broker/dealers who have entered into dealer agreements with
The One Group and their subsidiaries and affiliates.
o An investment sub-advisor of a fund of The One Group and such
sub-advisor's subsidiaries and affiliates.
4. Bought by:
o Affiliates of BANC ONE CORPORATION and certain accounts (other
than IRA Accounts) for which an Intermediary acts in a
fiduciary, advisory, agency, custodial or similar capacity.
o 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 One Group Services Company.
o Retirement and deferred compensation plans and trusts used to
fund those plans, including, but not limited to, those defined
in sections 401(a), 403(b) or 457 of the Internal Revenue Code
and "rabbi trusts."
o Shareholder Servicing Agents who have a dealer arrangement
with The One Group Services Company, 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 Shareholder Servicing
Agents who place trades for their own accounts if the accounts
are linked to the master account of such Shareholder Servicing
Agent.
5. Bought with proceeds from the sale of Class I shares of a Fund of The
One Group or acquired in an exchange of Class I shares of a Fund for
Class A shares of the same Fund, but only if the purchase is made
within 60 days of the sale or distribution.
51
<PAGE> 153
6. Bought with proceeds from the sale of shares of a mutual fund,
including a Fund of The One Group, for which a sales charge was paid,
but only if the purchase is made within 60 days of the sale or
distribution.
7. Bought in an IRA with the proceeds of a distribution from an employee
benefit plan, but only if the purchase is made within 60 days of the
sale or distribution and, at the time of the distribution, the employee
benefit plan had plan assets invested in a Fund of The One Group.
8. Bought with assets of The One Group.
9. Bought in connection with plans of reorganizations of a Fund, such as
mergers, asset acquisitions and exchange offers to which a Fund is a
party.
The waivers described in (5), (6) and (7) above will not continue indefinitely
and may be discontinued at any time without notice.
WAIVER OF THE CLASS B SALES CHARGE
No sales charge is imposed on redemptions of Class B shares of the Funds:
1. Provided that you withdraw no more than 10% of the account value
annually. You do not have to participate in the Systematic Withdrawal
Plan to take advantage of this waiver.
2. If you buy the shares in connection with certain retirement plans, such
as 401(k) and similar qualified plans.
3. If you are the shareholder (or a joint shareholder), or a participant
or beneficiary of certain retirement plans and you die or become
disabled (as defined by the Tax Code), but only if the redemption is
made within one year of such death or disability.
4. That represent a minimum required distribution from an IRA Account or
other qualifying retirement plan, but only if you are at least age
70-1/2.
5. Exchanged in connection with plans of reorganizations of a Fund, such
as mergers, asset acquisitions and exchange offers to which a Fund is a
party.
6. Acquired in exchange for Class B shares of other Funds of The One
Group.
WAIVER OF THE CLASS C SALES CHARGE
No sales charge is imposed on redemptions of Class C shares of the Funds:
1. Provided that you withdraw no more than 10% of the account value
annually. You do not have to participate in the Systematic Withdrawal
Plan to take advantage of this waiver.
2. If you buy the shares in connection with certain retirement plans, such
as 401(k) and similar qualified plans.
3. If you are the shareholder (or a joint shareholder), or a participant
or beneficiary of certain retirement plans and you die or become
disabled (as defined by the Tax Code), but only if the redemption is
made within one year of such death or disability.
4. That represent a minimum required distribution from an IRA Account or
other qualifying retirement plan, but only if you are at least age
70-1/2.
5. Exchanged in connection with plans of reorganizations of a Fund, such
as mergers, asset acquisitions and exchange offers to which a Fund is a
party.
6. Acquired in exchange for Class C shares of other Funds of The One
Group.
7. If The One Group Services Company receives notice before you invest
indicating that your Shareholder Servicing Agent, due to the type of
account that you have, is waiving their commission.
To take advantage of any of these sales charge waivers, you must qualify for
such waiver in advance of the purchase. To see if you qualify, contact The One
Group Services Company at 1-800-480-4111 or your Shareholder Servicing Agent.
52
<PAGE> 154
EXCHANGING FUND SHARES
WHAT ARE MY EXCHANGE PRIVILEGES?
You may make the following exchanges:
o Class I shares of a Fund may be exchanged for Class A shares of that
Fund or for Class A or Class I shares of another Fund of The One Group.
o Class A shares of a Fund may be exchanged for Class I shares of that
Fund or for Class A or Class I shares of another Fund of The One Group,
but only if you are eligible to purchase those shares.
o Class B shares of a Fund may be exchanged for Class B shares of another
Fund of The One Group.
o Class C shares of a Fund may be exchanged for Class C shares of another
Fund of The One Group.
The One Group Funds offer a Systematic Exchange Privilege which allows you to
automatically exchange shares of one fund to another on a monthly or quarterly
basis. This privilege is useful in Dollar Cost Averaging. To participate in this
privilege, please select it on your account application. To learn more about it,
please call The One Group Services Company at 1-800-480-4111.
The One Group does not charge a fee for this privilege. In addition, The One
Group may change the terms and conditions of your exchange privileges upon 60
days written notice.
WHEN ARE EXCHANGES PROCESSED?
Exchanges are processed the same business day they are received, provided:
o State Street Bank and Trust Company receives the request by 4:00 p.m.,
ET.
o You have provided The One Group with all of the information necessary
to process the exchange.
o You have received a current prospectus of the Fund or Funds in which
you wish to invest.
o You have contacted your Shareholder Servicing Agent, if necessary.
DO I PAY A SALES CHARGE ON AN EXCHANGE?
Generally, you will not pay a sales charge on an exchange. However:
o You will pay a sales charge if you own Class I shares of a Fund and you
want to exchange those shares for Class A shares, unless you qualify
for a sales charge waiver (see above).
o You will pay a sales charge if you bought Class A shares of a Fund:
1. That does not charge a sales charge and you want to exchange
them for shares of a Fund that does, in which case you would
pay the sales charge applicable to the Fund into which you are
exchanging.
2. That charged a lower sales charge than the Fund into which you
are exchanging, in which case you would pay the difference
between that Fund's sales charge and all other sales charges
you have already paid.
o If you exchange Class B or Class C shares of a Fund, you will not pay a
sales charge the time of the exchange, however:
1. Your new Class B or Class C shares will be subject to the
higher CDSC of either the Fund from which you exchanged, the
Fund into which you exchanged, or any Fund from which you
previously exchanged.
2. The current holding period for your exchanged Class B or Class
C shares is carried over to your new shares.
53
<PAGE> 155
ARE EXCHANGES TAXABLE?
Generally:
o An exchange between classes of shares of the same Fund is not taxable
for Federal income tax purposes.
o An exchange between Funds is considered a sale and generally results in
a capital gain or loss for Federal income tax purposes.
o You should talk to your tax advisor before making an exchange.
ARE THERE LIMITS ON EXCHANGES?
Yes. The exchange privilege is not intended as a way for you to speculate on
short-term movements in the market. Therefore:
o To prevent disruptions in the management of the Funds, The One Group
limits excessive exchange activity.
o Exchange activity is excessive if it EXCEEDS TWO SUBSTANTIVE EXCHANGE
REDEMPTIONS (WITHIN 30 DAYS OF EACH OTHER) WITHIN A TWELVE MONTH
PERIOD.
o In addition, The One Group reserves the right to reject any exchange
request (even those that are not excessive) if the Fund reasonably
believes that the exchange will result in excessive transaction costs
or otherwise adversely affect other shareholders.
REDEEMING FUND SHARES
WHEN CAN I REDEEM SHARES?
o You may redeem all or some of your shares on any day that the Funds are
open for business.
o Redemption requests received by The One Group Services Company before
4:00 p.m. ET (or when the NYSE closes), will be effective that day.
HOW DO I REDEEM SHARES?
o Unless you have selected the telephone option on your Account
Application Form, you must send a written redemption request to your
Shareholder Servicing Agent, if applicable, or State Street Bank and
Trust Company at the following address:
The One Group c/o State Street Bank and Trust Company P.O. Box 8528
Boston, MA 02266-8528
o All requests for redemptions from IRA accounts must be in writing.
o You may request redemption forms by calling The One Group Services
Company at (800) 480-4111.
o State Street Bank and Trust Company may require that the signature on
your redemption request be guaranteed by a commercial bank, a member of
a domestic stock exchange, or a member of the Securities Transfer
Association Medallion Program or the Stock Exchange Medallion Program,
unless:
1. the redemption is for $50,000 worth of shares or less;
2. the redemption is payable to the shareholder of record;
3. the redemption check is mailed to the shareholder at the
record address; or
4. the redemption is payable by wire or bank transfer (ACH) to a
pre-existing bank account.
o On the Account Application Form, you may elect to have the redemption
proceeds mailed or wired to:
1. a designated commercial bank; or
2. State Street Bank and Trust Company or your Shareholder
Servicing Agent.
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<PAGE> 156
o State Street Bank and Trust Company may charge you a wire redemption
fee. The current charge is $7.00
o Your redemption proceeds will be paid within seven days after receipt
of the redemption request.
WHAT WILL MY SHARES BE WORTH?
o If you own Class A and Class I shares and the Fund receives your
redemption request by 4:00 p.m. ET (or when the NYSE closes), you will
receive that day's NAV.
o If you own Class B or Class C shares and the Fund receives your
redemption request by 4:00 p.m. ET (or when the NYSE closes), you will
receive that day's NAV, minus the amount of any applicable CDSC.
CAN I REDEEM BY TELEPHONE?
Yes, if you selected this option on your Account Application Form.
o Call your Shareholder Servicing Agent or State Street Bank and Trust
Company at 1-800-480-4111 to relay your redemption request.
o Your redemption proceeds will be mailed or wired to the commercial bank
account you designated on your Account Application Form.
o State Street Bank and Trust Company may charge you a wire redemption
fee. The current charge is $7.00.
o The One Group uses reasonable procedures to confirm that instructions
given by telephone are genuine. These procedures include recording
telephone instructions and asking for personal identification. If these
procedures are followed, The One Group will not be responsible for any
loss, liability, cost or expense of acting upon unauthorized or
fraudulent instructions; you bear the risk of loss.
o REDEMPTIONS FROM YOUR IRA ACCOUNT MAY NOT BE MADE BY TELEPHONE.
CAN I REDEEM ON A SYSTEMATIC BASIS?
If you have an account value of at least $10,000 you may elect to receive
monthly, quarterly or annual payments of not less than $100 each.
o Select the "Systematic Withdrawal Plan" option on the Account
Application Form.
o Specify the amount you wish to receive and the frequency of the
payments.
o You may designate a person other than yourself as the payee.
o There is no charge for this service.
o If you select this option, please keep in mind that:
1. It may not be in your best interest to buy additional Class A
shares while participating in a Systematic Withdrawal Plan.
This is because Class A shares have an up-front sales charge.
2. If you own Class B or Class C shares, you or your designated
payee may receive systematic payments provided the payments
are limited to no more than 10% of your account value
annually, measured from the date the redemption request is
received.
3. If you are age 70-1/2, you may elect to receive payments to
the extent that the payment represents a minimum required
distribution from an IRA or other qualifying retirement plan.
These payments may be less than $100 each.
4. If the amount of the systematic payment exceeds the income
earned by your account since the previous payment under the
Systematic Withdrawal Plan, payments will be made by redeeming
some of your shares. This will reduce the amount of your
investment.
55
<PAGE> 157
ADDITIONAL INFORMATION REGARDING REDEMPTIONS
o All redemptions will be for cash.
o If you redeem shares for which you paid by check, and The One Group has
not yet received payment on the check, The One Group will delay
forwarding your redemption proceeds for 10 or more days until payment
has been collected from your bank.
o Because of the high cost of handling small investments, The One Group
charges a sub-minimum account fee. Accounts under $1,000 that are not
participating in a Systematic Investment Plan will be assessed an
annual fee of $10.00. The sub-minimum account fee will not apply to IRA
accounts and the accounts of employees of BANC ONE CORPORATION and its
affiliates.
o The One Group may suspend your ability to redeem when:
1. Trading on the NYSE is restricted.
2. The NYSE is closed (other than weekend and holiday closings).
3. The SEC has permitted a suspension.
4. An emergency exists.
The Statement of Additional Information offers more details about this
process.
o You generally will recognize a gain or loss on a redemption for Federal
income tax purposes. You should talk to your tax advisor before making
a redemption.
56
<PAGE> 158
SHAREHOLDER INFORMATION
VOTING RIGHTS
The Funds do not hold annual shareholder meetings, but may hold special
meetings. The special meetings are held, for example, to elect or remove
Trustees, change a Fund's fundamental investment objective, or approve an
investment advisory contract.
As a Fund shareholder, you have one vote for each share that you own. Each Fund,
and each class of shares within each Fund, vote separately on matters relating
solely to that Fund or class, or which affect that Fund or class differently.
However, all shareholders will have equal voting rights on matters that affect
all shareholders equally.
BANC ONE CORPORATION (100 East Broad Street, Columbus, Ohio, 43271), through its
affiliates, may be deemed for purposes of the Investment Company Act of 1940 to
control the Funds. This is because as of July 30, 1998, BANC ONE CORPORATION or
its affiliates possessed the power to vote substantially all of the Class I
shares of the Funds.
On the same date, the following shareholders owned 25% or more of Class A, Class
B or Class C shares of the Funds. As a consequence, they are considered to be
controlling persons of these classes of the Funds listed below.
<TABLE>
<CAPTION>
NAME AND PERCENTAGE OF TYPE OF
ADDRESS FUND/CLASS OWNERSHIP OWNERSHIP
- ------- ---------- --------- ---------
<S> <C> <C> <C>
Strafe & Co Income Bond Fund 88.91% Record
C/O Bank One Trust Co Class I
Attn Mutual Funds
100 E Broad St
Columbus, OH 43215-3607
Strafe & Co Government Bond Fund 88.55% Record
Attn Mutual Funds 0393 Class I
100 E Broad Street
Columbus OH 43215-3607
Strafe & Co. Ultra Short-Term 89.12% Record
Attn: Mutual Funds 0393 Income Fund
100 E. Broad Street Class I
Columbus, OH 43215-3607
Banc One Securities Corp FBO Intermediate Bond Fund 55.94% Beneficial
The One Investment Solution Class A
733 Greencrest Dr
Westerville OH 43081-4903
Banc One Securities Corp FBO Intermediate Bond Fund 55.34% Beneficial
The One Investment Solution Class C
733 Greencrest Dr
Westerville OH 43081-4903
Strafe & Co Intermediate Bond Fund 91.33% Record
Attn Mutual Funds 0393 Class I
100 E Broad Street
Columbus OH 43215-3607
Strafe & Co. Treasury & Agency Fund 99.87% Record
Attn: Mutual Funds 0393 Class I
100 E. Broad Street
Columbus, OH 43215-3607
</TABLE>
57
<PAGE> 159
DIVIDEND POLICIES
DIVIDENDS
The Funds generally declare dividends on each business day. Dividends are
distributed on the first business day of each month. Capital gains, if any, for
all Funds are distributed at least annually. To maintain a relatively even rate
of distributions from the Treasury & Agency Fund, the monthly distributions for
that Fund may be fixed from time to time at rates consistent with Banc One
Investment Advisors' long-term earnings expectations.
Dividends payable on Class I shares will be more than those payable on other
classes of shares. This is because Class A, Class B and Class C shares have
higher distribution expenses.
The Funds pay dividends and distributions on a per-share basis. This means that
the value of your shares will be reduced by the amount of the payment. If you
purchase shares shortly before the record date for a dividend or the
distribution of capital gains, you will pay the full price for the shares and
receive some portion of the price back as a taxable dividend or distribution.
DIVIDEND REINVESTMENT
You automatically will receive all income dividends and capital gain
distributions in additional shares of the same Fund and class, unless you have
elected to take such payment in cash. The price of the shares is the NAV
determined immediately following the dividend record date. Reinvested dividends
and distributions receive the same tax treatment as dividends and distributions
paid in cash.
If you want to change the way in which you receive dividends and distributions,
you must write to State Street Bank & Trust Company at P.O. Box 8528, Boston, MA
02266-8528, at least 15 days prior to the distribution. The change is effective
upon receipt by State Street.
SPECIAL DIVIDEND RULES FOR CLASS B SHARES
Class B shares received as dividends and capital gains distributions will be
accounted for separately. Each time any Class B shares (other than those in the
sub-account) convert to Class A shares, a percentage of the Class B shares in
the sub-account will also convert to Class A shares. (See "Conversion Feature.")
TAX TREATMENT OF THE FUNDS
TAX STATUS OF THE FUND
Each Fund intends to qualify as a "regulated investment company" for Federal
income tax purposes. If the Funds qualify, as they have in the past, they will
pay no federal income tax on the earnings they distribute to shareholders.
TAX TREATMENT OF SHAREHOLDERS
TAXATION OF SHAREHOLDER TRANSACTIONS
A sale, exchange, or redemption of Fund shares generally will produce either a
taxable gain or a loss. You are responsible for any tax liabilities generated by
your transactions.
TAXATION OF ZERO-COUPON SECURITIES
Some of the Funds may acquire certain securities issued with original issue
discount (including zero-coupon securities). Current Federal tax requires that a
holder (such as a Fund) of such a security must include in taxable income a
portion of the original issue discount which accrues during the tax year on such
security even if a Fund receives no payment in cash on the security during the
year. As an investment company, a Fund must pay out substantially all of its net
investment income each year, including any original issue discount. Accordingly,
a Fund may be required to pay out in income distribution each year an amount
which is greater than the total amount of cash interest a Fund actually
received. Such distributions will be made from the cash assets of a Fund or by
liquidation of investments if necessary. If a distribution of cash necessitates
the liquidation of investments, Banc One Investment Advisors or the Sub-Adviser
will select which securities to sell and a Fund may realize a gain or loss from
those
58
<PAGE> 160
sales. In the event a Fund realizes net capital gains from these transactions,
you may receive a larger capital gain distribution, if any, than you would in
the absence of such transactions.
TAXATION OF DISTRIBUTIONS
Each Fund will distribute substantially all of its net investment income
(including, for this purpose, net short-term capital gains) on at least an
annual basis. Dividends you receive from a Fund, whether reinvested or received
in cash, will be taxable to you. Dividends from a Fund's net investment income
will be taxable as ordinary income and dividends from a Fund's long-term capital
gains will be taxable to you as such, regardless of how long you have held the
shares.
Dividends paid in January, but declared in October, November or December of the
previous year, will be considered to have been paid the previous December.
TAXATION OF RETIREMENT PLANS
Distributions by the Funds to qualified retirement plans will not be taxable.
However, if shares are held by a plan that ceases to qualify for tax-exempt
treatment or by an individual who has received the shares as a distribution from
a retirement plan, the distributions will be taxable to the plan or individual
as described in "Taxation of Distributions." If you are considering purchasing
shares with qualified retirement plan assets, you should consult your tax
advisor for a more complete explanation of the Federal, state, local and (if
applicable) foreign tax consequences of making such an investment.
TAX INFORMATION
The Form 1099 that is mailed to you every January details your dividends and
their federal tax category. Even though the Funds provide you with this
information, you are responsible for verifying your tax liability with your tax
professional. For additional tax information see the Statement of Additional
Information. Please note that this tax discussion is general in nature; no
attempt has been made to present a complete explanation of the Federal, state,
local or foreign tax treatment of the Funds or their shareholders.
SHAREHOLDER INQUIRIES
If you have any questions or need additional information, please write The One
Group Services Company at 3435 Stelzer Road, Columbus, OH 43219 or call
1-800-480-4111.
REPORTING
In March and September you will receive a financial report from The One
Group. In addition, The One Group will periodically send you proxy
statements and other reports.
ORGANIZATION AND MANAGEMENT OF THE FUNDS
THE FUNDS
Each Fund is a series of The One Group, an open-end management investment
company. The One Group currently consists of 40 separate Funds. Each Fund
described in this prospectus is diversified. Seven of the Funds are described in
this prospectus; the other Funds are described in separate prospectuses. Each
Fund is supervised by the Board of Trustees.
THE BOARD OF TRUSTEES
The Trustees oversee the management and administration of the Funds. The
Trustees are responsible for making major decisions about each Fund's investment
objectives and policies, but delegate the day-to-day administration of the Funds
to the officers of The One Group.
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<PAGE> 161
THE ADVISOR
Banc One Investment Advisors makes the day-to-day investment decisions for the
Funds and continuously reviews, supervises and administers the Funds' investment
programs. Banc One Investment Advisors has served as investment advisor to The
One Group since 1993. Prior to that time, The One Group was advised by
affiliates of Banc One Investment Advisors. In addition to The One Group, Banc
One Investment Advisors serves as investment advisor to other mutual funds and
individual, corporate, charitable and retirement accounts. As of June 30, 1998,
Banc One Investment Advisors, an indirect, wholly-owned subsidiary of BANC ONE
CORPORATION, managed over $59 billion in assets.
For the fiscal year ended June 30, 1998, the Funds paid investment advisory fees
at the following rates:
ANNUAL RATE
AS PERCENTAGE
OF AVERAGE DAILY
FUND NAME NET ASSETS
--------- ----------
The One Group(R) Intermediate Bond Fund .33%
The One Group(R) Income Bond Fund .40%
The One Group(R) Government Bond Fund .43%
The One Group(R) Ultra Short-Term Income Fund .21%
The One Group(R) Limited Volatility Bond Fund .31%
The One Group(R) Treasury & Agency Fund .20%
THE SUB-ADVISOR
Banc One High Yield Partners, LLC makes the day-to-day investment decisions for
the High Yield Bond Fund and administers the Fund's investment program, subject
to supervision by Banc One Investment Advisors and the Trustees. Banc One High
Yield Partners, LLC was formed in May, 1998 to provide investment advice related
to high yield, high risk investments to the High Yield Bond Fund and other
advisory clients. Banc One High Yield Partner, LLC is controlled by Banc One
Investment Advisors and Pacholder Associates, Inc., an investment advisory firm
which specializes in high yield, high risk, fixed income securities. Banc One
High Yield Partners is entitled to a fee for its services. The fee, which is
equal to .70% of the Fund's average daily net assets, is calculated daily and
paid monthly. Banc One Investment Advisors pays Banc One High Yield Partner's
fee. Banc One High Yield Partners has agreed to waive part of its fee. The fee
waiver is voluntary and may be terminated at any time.
BANC ONE HIGH YIELD PARTNERS, LLC -- PRIOR PERFORMANCE OF PACHOLDER ASSOCIATES,
INC.
Banc One Partners, the Sub-Advisor of the High Yield Bond Fund, was
formed as a limited liability company under an agreement between Banc One
Investment Advisors and Pacholder Associates, Inc. ("Pacholder") Under the
Agreement, Pacholder is responsible for providing portfolio management services
on behalf of Banc One Partners for the High Yield Bond Fund. Pacholder is also
responsible for advising the Pacholder Fund, Inc., a closed-end fund (the
"Pacholder Fund") through a limited liability company known as Pacholder &
Company, LLC.(1)
The following table shows historical performance of the Pacholder Fund,
a fund with substantially similar investment objectives, policies, strategies
and risks to the High Yield Bond Fund as measured against a specified market
index. This information is provided to show the past performance of Pacholder in
managing a substantially similar fund. THIS INFORMATION DOES NOT REPRESENT THE
PERFORMANCE OF THE HIGH YIELD BOND FUND. YOU SHOULD NOT CONSIDER THIS
PERFORMANCE DATA AS AN INDICATION OF FUTURE PERFORMANCE OF THE HIGH YIELD BOND
FUND OR THE PACHOLDER FUND.
WITH THE EXCEPTION OF 1995, THE EXPENSE RATIO OF THE PACHOLDER FUND HAS
BEEN HIGHER THAN THE PROJECTED EXPENSE RATIO OF HIGH YIELD BOND FUND. THE
EXPENSE RATIO HAS AN IMPACT ON THE TOTAL RETURN THAT SHAREHOLDERS IN THE FUND
WOULD REALIZE. UNLIKE THE HIGH YIELD BOND FUND, THE PACHOLDER FUND PAYS A
PERFORMANCE BASED INVESTMENT ADVISORY FEE. WITH THE EXCEPTION OF INVESTMENT
ADVISORY FEES PAID IN 1991 AND 1995, THE PACHOLDER FUND'S INVESTMENT ADVISORY
FEES HAVE BEEN HIGHER THAN THE CONTRACTUAL ADVISORY FEES OF THE HIGH YIELD BOND
FUND.
UNLIKE THE HIGH YIELD BOND FUND, THE PACHOLDER FUND IS A CLOSED-END
FUND THAT HAS ISSUED BOTH COMMON AND PREFERRED STOCK. HOLDERS OF PREFERRED STOCK
IN THE PACHOLDER FUND ARE ENTITLED TO FIXED RATE DISTRIBUTIONS. THE FIRST COLUMN
SHOWS THE NAV RETURN REALIZED BY HOLDERS OF COMMON SHARES IN THE PACHOLDER FUND
AFTER DISTRIBUTIONS WERE MADE TO PREFERRED SHAREHOLDERS. THE SECOND COLUMN SHOWS
THE NAV RETURN THAT WOULD HAVE BEEN REALIZED IF PREFERRED SHARES HAD NOT BEEN
ISSUED. THE THIRD COLUMN COMPARES THE PERFORMANCE OF THE PACHOLDER FUND TO A
SPECIFIED MARKET INDEX.
<TABLE>
<CAPTION>
PACHOLDER FUND HISTORICAL PERFORMANCE(2)
Total Return Assuming
Common Shareholders' common stock is not CS First Boston
Return Based on leveraged through issuance High Yield
NAV(3) of preferred stock(4) Index
<S> <C> <C> <C>
1/1/98-6/30/98 4.83% 4.59% 4.31%
1997 15.44% 12.00% 12.63%
1996 20.40% 16.63% 12.42%
1995 10.68% 10.41% 17.38%
1994 0.72% 2.21% -0.97%
1993 20.27% 18.40% 18.91%
1992 18.78% 19.38% 16.66%
1991 36.71% 36.72%(3)(5) 43.75%
1990 -0.87% -0.87%(3)(5) -6.38%
1989(6) NA NA
1 YR Annualized Return 11.80% 10.67% 10.98%
3 YR Annualized Return 13.67% 11.61% 11.86%
5 YR Annualized Return 11.59% 10.35% 10.44%
Since 1990(6) 14.43% 13.59% 13.19%
</TABLE>
1. Prior to August 21, 1998, Pacholder was responsible for advising the
Pacholder Fund through a partnership known as Pacholder & Company.
2. Performance information is provided net of Fund expenses. Total return
reflects changes in net asset value and reinvestment of dividends and
distributions.
3. Return to holders of common shares of the Pacholder Fund after distribution
of dividends to preferred shareholders. Performance was derived using the method
for calculating the total return of a closed-end fund as required by SEC Form
N-2. The returns were audited by the Pacholder Fund's independent auditor in
conjunction with the audit of the Pacholder Fund.
4. Adjusts total return to show what shareholders would have received if the
Pacholder Fund's common stock was not leveraged through the issuance of
preferred stock. Assumes no distribution of dividends to preferred shareholders
and that all shareholders in the Pacholder Fund hold common stock. The net
investment performance has been computed in accordance with the Performance
Presentation Standards established by the Association for Investment Management
and Research ("AIMR-PPS"), but has not been verified by an entity independent of
Banc One Investment Advisors and Pacholder. The net investment performance
represents total return, assuming reinvestment of all dividends and proceeds
from capital transactions.
5. No preferred stock was issued prior to April 6, 1992.
6. The Pacholder Fund commenced operation on November 23, 1988. However, the
Pacholder Fund was not managed with substantially similar investment objectives
to the High Yield Bond Fund in 1988 and 1989.
THE DISTRIBUTOR
The One Group Services Company, 3435 Stelzer Road, Columbus, Ohio 43219, a
wholly-owned subsidiary of The BISYS Group, Inc., markets the Funds and
distributes shares through selling brokers, financial institutions, investment
advisors, and other financial representatives.
THE ADMINISTRATOR AND SUB-ADMINISTRATOR
The One Group Services Company also serves as the Funds' administrator. The One
Group Services Company is responsible for responding to shareholder inquiries
and requests for information, as well as providing regulatory reporting and
compliances. For these services, The One Group Services Company receives a fee
based on the total assets of The One Group. For the first $1.5 billion in One
Group assets, The One Group Services Company receives an annual fee of .20% of
each Fund's average daily net assets. The annual rate declines to .18% on assets
up to $2 billion, and to .16% when assets exceed $2 billion. The fee is
calculated daily and paid monthly. Some Funds are not included in the
calculations.
Banc One Investment Advisors, the Sub-Administrator, provides office space,
equipment and facilities, as well as legal and regulatory support.
THE TRANSFER AGENT, CUSTODIAN AND SUB-CUSTODIAN
State Street Bank and Trust Company, P.O. Box 8528, Boston, MA 02266-8528, or
your Shareholder Servicing Agent if appropriate, handles shareholder
recordkeeping and statements, distributes dividends, and processes buy and sell
requests. As the Funds' custodian, State Street holds the Funds' assets, settles
all portfolio trades and assists in calculating the Funds' net asset values.
Bank One Trust Company, N.A. serves as sub-custodian in connection with the
Funds' securities lending activities under
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an agreement with State Street Bank and Trust Company, Bank One Trust Company,
N.A. is paid a fee paid by the Funds for this service.
YEAR 2000
Preparing for the Year 2000 is a high priority for The One Group Family of
Mutual Funds. Both The One Group Services Company and Banc One Investment
Advisors have formed dedicated teams to help them successfully achieve Year 2000
compliance. In addition, these teams are responsible for assessing the readiness
of all other service providers to The One Group. Year 2000 remediation efforts
are directed toward both information technology and non-information technology
systems. Non-information technology systems include elevators, photocopy
machines, and facsimile machines, and should have no significant impact on the
delivery of services to The One Group.
Banc One Investment Advisors has identified 49 information technology systems
and interfaces that provide service and support to The One Group. Each system is
assigned a priority rating: high, medium or low. Systems rated "high" are those
which are essential to the operation of The One Group. Each system rated "high"
is scheduled to be Year 2000 compliant by December 31, 1998. All systems will be
tested for compliance throughout 1999.
Many, if not all, of the systems are owned or operated by third party servicers
(for example, The One Group's Custodian). Consequently, remediation efforts must
be made by those servicers. Banc One Investment Advisors and The One Group
Services Company have, and will continue to, monitor the remediation progress of
the service providers. This process involves documentation, on-site visits, and
review of remediation plans and test results. Both Banc One Investment Advisors
and The One Group Services Company have budgeted in excess of $700,000 in fiscal
year 1998 and over $1 million in fiscal year 1998 toward the remediation effort
for all systems and interfaces. Neither The One Group nor its shareholders will
bear any of the direct remediation expenses.
Neither The One Group Services Company nor Banc One Investment Advisors
currently anticipate that the move to Year 2000 will have a material impact on
their ability to continue to provide the Funds with service at current levels.
Likewise, The One Group currently anticipates that the more to Year 2000 will
not have a material impact on its operations.
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DETAILS ABOUT THE FUNDS' INVESTMENT PRACTICES AND POLICIES
INVESTMENT PRACTICES
The Funds invest in a variety of securities and employ a number of investment
techniques. Each security and technique involves certain risks. What follows is
a list of the securities and techniques utilized by the Funds, as well as the
risks inherent in their use. Fixed income securities are primarily influenced by
market, credit and prepayment risks, although certain securities may be subject
to additional risks. For a more complete discussion, see the Statement of
Additional Information. Following the table is a more complete discussion of
risk.
FUND NAME FUND CODE
The One Group(R) Intermediate Bond Fund 1
The One Group(R) Income Bond Fund 2
The One Group(R) Government Bond Fund 3
The One Group(R) Ultra Short-Term Income Fund 4
The One Group(R) Limited Volatility Bond Fund 5
The One Group(R) Treasury & Agency Fund 6
The One Group(R) High Yield Bond Fund 7
<TABLE>
<CAPTION>
INSTRUMENT FUND CODE RISK TYPE
- ---------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
U.S. Treasury Obligations: Bills, notes, bonds, STRIPS, and 1-7 Market
CUBES.
Treasury Receipts: TRS, TIGRs, and CATS. 1-7 Market
U.S. Government Agency Securities: Securities issued by agencies 1-7 Market
and instrumentalities of the U.S. Government. These include Credit
Ginnie Mae, Fannie Mae, and Freddie Mac.
Certificates of Deposit: Negotiable instruments with a stated 1, 2, 4, 5, 7 Credit
maturity. Market
Liquidity
Time Deposits: Non-negotiable receipts issued by a bank in 1, 2, 4, 5, 7 Market
exchange for the deposit of funds. Liquidity
Credit
Repurchase Agreements: The purchase of a security and the 1-7 Credit
simultaneous commitment to return the security to the seller at Market
an agreed upon price on an agreed upon date. This is treated as Liquidity
a loan.
</TABLE>
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<TABLE>
<CAPTION>
INSTRUMENT FUND CODE RISK TYPE
- -------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Reverse Repurchase Agreement: The sale of a security and the 1-7 Market
simultaneous commitment to buy the security back at an agreed Leverage
upon price on an agreed upon date. This is treated as a
borrowing by a Fund.
Securities Lending: The lending of up to 33 1/3 % of the Fund's 1-7 Credit
total assets. In return the Fund will receive cash, other securities, Market
and/or letters of credit as collateral. Leverage
When-Issued Securities and Forward Commitments: Purchase or 1-5, 7 Market
contract to purchase securities at a fixed price for delivery at Leverage
a future date. Liquidity
Investment Company Securities: Shares of other mutual funds, 1, 2, 4-7 Market
including money market funds of The One Group and shares of
other investment companies for which Banc One Investment Advisors serves as
investment advisor or administrator. The Treasury & Agency Fund will only
purchase shares of investment companies which invest exclusively in U.S.
Treasury and other U.S. Agency obligations. Banc One Investment Advisors will
waive certain fees when investing in funds for which it serves as investment
advisor.
Convertible Securities: Bonds or preferred stock that convert to 1, 2, 4, 7 Market
common stock. Credit
Call and Put Options: A call option gives the buyer the right to 1-4, 7 Management
buy, and obligates the seller of the option to sell, a security Liquidity
at a specified price. A put option gives the buyer the right to Credit
sell, and obligates the seller of the option to buy, a security Market
at a specified price. The Funds will sell covered call and Leverage
secured put options.
Futures and Related Options: A contract providing for the future 1-4, 5, 7 Management
sale and purchase of a specified amount of a specified security, Market
class of securities, or an index at a specified time in the Credit
future and at a specified price. Liquidity
Leverage
Real Estate Investment Trusts ("REITs"): Pooled investment 2, 7 Liquidity
vehicles which invest primarily in income producing real estate Management
or real estate related loans or interest. Market
Pre-payment
Tax
Regulatory
Bankers' Acceptances: Bills of exchange or time drafts drawn on 1, 2, 4, 5, 7 Credit
and accepted by a commercial bank. Maturities are generally six Liquidity
months or less. Market
</TABLE>
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<TABLE>
<CAPTION>
INSTRUMENT FUND CODE RISK TYPE
- -------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Commercial Paper: Secured and unsecured short-term promissory 1, 2, 4, 5, 7 Credit
notes issued by corporations and other entities. Maturities Liquidity
generally vary from a few days to nine months. Market
Foreign Securities: Debt issued by foreign governments, foreign 1, 2, 4, 5, 7 Market
corporations, domestic subsidiaries of foreign corporations, and Political
foreign banks, as well as commercial paper of foreign issuers Liquidity
and obligations of foreign banks and overseas branches of U.S. Foreign Investment
banks and of foreign issuers and supranational entities. The High Yield Bond
Fund also may purchase equity securities issued by the entities listed above.
Restricted Securities: Securities not registered under the 1, 2, 4, 5, 7 Liquidity
Securities Act of 1933, such as privately placed commercial paper Market
and Rule 144A securities.
Variable and Floating Rate Instruments: Obligations with 1-7 Market
interest rates which are reset daily, weekly, quarterly or some Credit
other period and which may be payable to the Fund on demand. The Liquidity
Treasury & Agency Fund will invest in these securities only if
they are issued by the U.S. Treasury or another U.S. Government
Agency.
Warrants: Securities, typically issued with preferred stock or 2, 7 Market
bonds that give the holder the right to buy a proportionate Credit
amount of common stock at a specified price.
Preferred Stock: A class of stock that generally pays a dividend 1, 2, 4, 5, 7 Market
at a specified rate and has preference over common stock in the
payment of dividends and in liquidation.
Mortgage-Backed Securities: Debt obligations secured by real 1-7 Pre-payment
estate loans and pools of loans. These include collateralized Market
mortgage obligations ("CMOs") and Real Estate Mortgage Credit
Investment Conduits ("REMICs"). Regulatory
Corporate Debt Securities: Corporate bonds and non-convertible 1, 2, 4, 5, 7 Market
debt securities. Credit
Demand Features: Securities that are subject to puts and standby 1, 2, 4, 5, 7 Market
commitments to purchase the securities at a fixed price (usually Liquidity
with accrued interest) within a fixed period of time following Management
demand by a Fund.
Asset-Backed Securities: Securities secured by company 1, 2, 4, 5, 7 Pre-payment
receivables, home equity loans truck and auto loans, leases, Market
credit card receivables and other securities backed by other Credit
types of receivables or other assets.
</TABLE>
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<TABLE>
<CAPTION>
INSTRUMENT FUND CODE RISK TYPE
- -------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Mortgage Dollar Rolls: A transaction in which a Fund sells 1-7 Pre-payment
securities for delivery in a current month and simultaneously Market
contracts with the same party to repurchase similar but not Regulatory
identical securities on a specified future date.
Adjustable Rate Mortgage Loans ("ARMs"): Loans in a mortgage 1-7 Pre-payment
pool which provide for a fixed initial mortgage interest rate Market
for a specified period of time, after which the rate may be Credit
subject to periodic adjustments. The Treasury & Agency Fund will Regulatory
only buy Government ARMs.
Swaps, Caps And Floors: A Fund may enter into these transactions 1-4, 5, 7 Management
to manage its exposure to changing interest rates and other Credit
factors. Swaps involve an exchange of obligations by two Liquidity
parties. Caps and floors entitle a purchaser to a principal Market
amount from the seller of the cap or floor to the extent that a
specified index exceeds or falls below a predetermined interest
rate or amount.
New Financial Products: New options and futures contracts and 1-4, 7 Management
other financial products continue to be developed and the Fund Credit
may invest in such options, contracts and products. Market
Liquidity
Structured Instruments: Debt securities issued by agencies and 1-7 Market
instrumentalities of the U.S. government, banks, municipalities, Liquidity
corporations and other businesses whose interest and/or Management
principal payments are indexed to foreign currency exchange Credit
rates, interest rates, or one or more other referenced indices. Foreign
Investment
Municipal Securities: Securities issued by a state or political 1, 2, 4, 5, 7 Credit
subdivision to obtain funds for various public purposes. Political
Municipal securities include private activity bonds and Tax
industrial development bonds, as well as General Obligation Market
Notes, Anticipation Notes, Bond Tax Anticipation Notes, Revenue Anticipation
Notes, Project Notes, other short-term tax-exempt obligations, municipal leases,
and obligations of municipal housing authorities and single family revenue
bonds.
Zero Coupon Debt Securities: Bonds and other debt that pay no 1-7 Credit
interest, but are issued at a discount from their value at Market
maturity. When held to maturity, their entire return equals the Zero Coupon
difference between their issue price and their maturity value.
Zero-Fixed-Coupon Debt Securities: Zero coupon debt securities 1-7 Credit
which convert on a specified date to interest bearing debt Market
securities. Zero Coupon
</TABLE>
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<TABLE>
<CAPTION>
INSTRUMENT FUND CODE RISK TYPE
- -------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Stripped Mortgage-Backed Securities: Derivative multi-class 1-4, 7 Pre-payment
mortgage securities which are usually structured with two Market
classes of shares that receive different proportions of the Credit
interest and principal from a pool of mortgage assets. These Regulatory
include IOs and POs. The Funds only invest in Stripped
Mortgage-Backed Securities issued or guaranteed by the U.S.
government, its agencies or instrumentalities.
Inverse Floating Rate Instruments: Leveraged floating rate debt 1-4, 7 Market
instruments with interest rates that reset in the opposite Leverage
direction from the market rate of interest to which the inverse Credit
floater is indexed.
Loan Participations and Assignments: Participations in, or 1, 2, 4, 5, 7 Credit
assignments of all or a portion of loans to corporations or to Political
governments, including governments of the less developed Liquidity
countries ("LDC's"). Foreign Investment
Market
Fixed Rate Mortgage Loans: Investments in fixed rate mortgage 1-7 Credit
loans or mortgage pools which bear simple interest at fixed Pre-payment
annual rates and have original terms ranging from 5 to 40 years. Regulatory
Market
Short-Term Funding Agreements: Investments in short-term funding 1, 2, 4, 5, 7 Credit
agreements issued by banks and highly rated U.S. insurance Liquidity
companies such as Guaranteed Investment Contracts ("GIC's") and Market
Bank Investment Contracts ("BIC's").
Common Stock: Shares of ownership of a company. 7 Market
</TABLE>
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INVESTMENT RISKS
Below is a more complete discussion of the types of risks inherent in the
securities and investment techniques listed above. Because of these risks, the
value of the securities held by the Funds may fluctuate, as will the value of
your investment in the Funds. Certain investments are more susceptible to these
risk than others.
o Credit Risk. The risk that the issuer of a security, or the
counterparty to a contract, will default or otherwise become unable to
honor a financial obligation. Credit risk is generally higher for
non-investment grade securities. The price of a security can be
adversely affected prior to actual default as its credit status
deteriorates and the probability of default rises.
o Leverage Risk. The risk associated with securities or practices (such
as borrowing) that multiply small index or market movements into large
changes in value. Leverage is often associated with investments in
derivatives, but also may be embedded directly in the characteristics
of other securities.
o Hedged. When a derivative (a security whose value is based on
another security or index) is used as a hedge against an
opposite position that the fund also holds, any loss generated
by the derivative should be substantially offset by gains on
the hedged investment, and vice versa. While hedging can
reduce or eliminate losses, it can also reduce or eliminate
gains. Hedges are sometimes subject to imperfect matching
between the derivative and underlying security, and there can
be no assurance that a Fund's hedging transactions will be
effective.
o Speculative. To the extent that a derivative is not used as a
hedge, the fund is directly exposed to the risks of that
derivative. Gains or losses from speculative positions in a
derivative may be substantially greater than the derivative's
original cost.
o Liquidity Risk. The risk that certain securities may be difficult or
impossible to sell at the time and the price that would normally
prevail in the market. The seller may have to lower the price, sell
other securities instead or forego an investment opportunity, any of
which could have a negative effect on fund management or performance.
This includes the risk of missing out on an investment opportunity
because the assets necessary to take advantage of it are tied up in
less advantageous investments.
o Management Risk. The risk that a strategy used by a fund's management
may fail to produce the intended result. This includes the risk that
changes in the value of a hedging instrument will not match those of
the asset being hedged.
Incomplete matching can result in unanticipated risks.
o Market Risk. The risk that the market value of a security may move up
and down, sometimes rapidly and unpredictably. These fluctuations may
cause a security to be worth less than the price originally paid for
it, or less than it was worth at an earlier time. Market risk may
affect a single issuer, industry, sector of the economy or the market
as a whole. There is also the risk that the current interest rate may
not accurately reflect existing market rates. For fixed income
securities, market risk is largely, but not exclusively, influenced by
changes in interest rates. A rise in interest rates typically causes a
fall in values, while a fall in rates typically causes a rise in
values. Finally, key information about a security or market may be
inaccurate or unavailable. This is particularly relevant to investments
in foreign securities.
o Political Risk. The risk of losses attributable to unfavorable
governmental or political actions, seizure of foreign deposits, changes
in tax or trade statutes, and governmental collapse and war.
o Foreign Investment Risk. The risk associated with higher transaction
costs, delayed settlements, currency controls and adverse economic
developments. This includes the risk that fluctuations in the exchange
rates between the U.S. dollar and foreign currencies may negatively
affect an investment. Adverse changes in exchange rates may erode or
reverse any gains produced by foreign currency denominated investments
and may widen any losses. Exchange rate volatility also may affect the
ability of an issuer to repay U.S. dollar denominated debt, thereby
increasing credit risk.
o Pre-Payment Risk. The risk that the principal repayment of a security
will occur at an unexpected time, especially that the repayment of a
mortgage or asset-backed security occurs either significantly sooner or
later than expected. Changes in pre-payment rates can result in greater
price and yield volatility. When mortgage and other obligations are
pre-paid, a Fund may have to reinvest in securities with a lower yield.
Further, with early prepayment, a Fund may fail to recover any premium
paid, resulting in an unexpected capital loss.
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<PAGE> 169
o Tax Risk. The risk that the issuer of the securities will fail to
comply with certain requirements of the Internal Revenue Code, which
would cause adverse tax consequences.
o Regulatory Risk. The risk associated with Federal and state laws which
may restrict the remedies that a mortgage lender has when a borrower
defaults on mortgage loans. These laws include restrictions on
foreclosures, redemption rights after foreclosure, Federal and state
bankruptcy and debtor relief laws, restrictions on "due on sale"
clauses, and state usury laws.
o Zero coupon risk. The risk associated with changes in interest rates.
The market prices of securities structured as zero coupon or
pay-in-kind securities are generally affected to a greater extent by
interest rate changes. These securities tend to be more volatile than
securities which pay interest periodically. This risk is similar to
Market Risk, which is described above.
INVESTMENT POLICIES
Each Fund's investment objective and the following investment policies
summarized below are fundamental. This means that they cannot be changed without
the consent of a majority of the outstanding shares of the Funds. In addition to
the fundamental policies mentioned earlier, the following fundamental policies
apply to each Fund as specified. The full text of the fundamental policies can
be found in the Statement of Additional Information.
Each Fund may not:
1. Purchase the securities of an issuer if as a result more than 5% of its
total assets would be invested in the securities of that issuer or the
Fund would own more than 10% of the outstanding voting securities of
that issuer. This does not include securities issued or guaranteed by
the United States, its agencies or instrumentalities, securities of
registered investment companies, and repurchase agreements involving
these securities. This restriction applies with respect to 75% of a
Fund's total assets.
2. Concentrate their investment in the securities of one or more issuers
conducting their principal business in a particular industry or group
of industries. This does not include obligations issued or guaranteed
by the U.S. Government or its agencies and instrumentalities and
repurchase agreements involving such 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.
Additional investment policies are set forth in the Statement of Additional
Information.
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<PAGE> 170
TEMPORARY DEFENSIVE POSITION
For temporary defensive purposes as determined by Banc One Investment Advisors
or the Sub-Advisor, the Funds may invest up to 100% of their assets in money
market instruments, and may hold a portion of their assets in cash for liquidity
purposes. While the Funds are engaged in a temporary defensive position, they
will not be pursuing their investment objectives. Therefore, the Funds will
pursue a temporary defensive position only when market conditions warrant.
PORTFOLIO TURNOVER
Portfolio turnover 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 Funds and may result in additional tax consequences to you. The portfolio
turnover rate for each Fund for the fiscal year ended June 30, 1998 is shown on
the Financial Highlights. The estimated portfolio turnover rate for the High
Yield Bond Fund will not exceed 100%. To the extent portfolio turnover results
in short-term capital gains, such gains will generally be taxed at ordinary
income tax rates.
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APPENDIX
DESCRIPTION OF RATINGS
The following is a summary of published ratings by major credit rating agencies.
Credit ratings evaluate only the safety of principal and interest payments, not
the market value risk of lower quality securities. Credit rating agencies may
fail to change credit ratings to reflect subsequent events on a timely basis.
Although Banc One Investment Advisors considers security ratings when making
investment decisions, it also performs its own investment analysis and does not
rely solely on the ratings assigned by credit agencies.
Unrated securities will be treated as non-investment grade securities unless
Banc One Investment Advisors or a Sub-Advisor determines that such securities
are the equivalent of investment grade securities. Securities that have received
different ratings from more than one agency are considered investment grade if
at least one agency has rated the security investment grade.
DESCRIPTION OF COMMERCIAL PAPER RATINGS
Duff & Phelps Credit Rating Co. ("Duff")
- ----------------------------------------
D-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 obligations.
D-1 Very high certainty of timely payment. Liquidity factors are
excellent and supported by good fundamental protection
factors. Risk factors are minor.
D-1- High certainty of timely payment. Liquidity factors are strong
and supported by good fundamental protection factors. Risk
factors are very small.
D-2 Good certainty of timely payment. Liquidity facts and company
fundamentals are sound. Although ongoing funding needs may
enlarge total financing requirements, access to capital
markets is good. Risk factors are small.
D-3 Satisfactory liquidity and other protection factors qualify
issues as to investment grade. Risk factors are larger and
subject to more variation. Nevertheless, timely payment is
expected.
D-4 Speculative investment characteristics. Liquidity is not
sufficient to insure against disruption in debt service.
Operating factors and market access may be subject to a high
degree of variation.
D-5 Issuer failed to meet scheduled principal and/interest
payments.
Standard & Poor's Corporation ("S&P")
- -------------------------------------
A-1 Highest category of commercial paper. Capacity to meet
financial commitment is strong. Obligations designated with a
plus sign (+) indicate that capacity to meet financial
commitment is extremely strong.
A-2 Issues somewhat more susceptible to adverse effects of changes
in circumstances and economic conditions than obligations in
higher rating categories. However, the capacity to meet
financial commitments is satisfactory.
A-3 Exhibits adequate protection parameters. However, adverse
economic conditions or changing circumstances are more likely
to lead to a weakened capacity of the obligor to meet its
financial commitment on the obligation.
B Regarded as having significant speculative characteristics.
The obligor currently has the capacity to meet its financial
commitment on the obligation; however, it faces major ongoing
uncertainties which could lead to the obligor's inadequate
capacity to meet its financial commitment on the obligation.
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C Currently vulnerable to nonpayment and is dependent upon
favorable business, financial, and economic conditions for the
obligor to meet its financial commitment on the obligation.
D In payment default. The D rating category is used when
payments on an obligation are not made on the date due even if
the applicable grace period has not expired, unless Standard &
Poor's believes that such payments will be made during such
grace period. The D rating also will be used upon the filing
of a bankruptcy petition or the taking of a similar action if
payments on an obligation are jeopardized.
Fitch's IBCA Limited ("Fitch")
- ------------------------------
F1 Highest capacity for timely repayment. Those issues rated F1+
possess a particularly strong credit feature.
F2 Satisfactory capacity for timely repayment although such
capacity may be susceptible to adverse changes in business,
economic or financial conditions.
F3 Adequate capacity for timely repayment, but more susceptible
to adverse changes business, economic or financial conditions
than for obligations in higher categories.
B Capacity for timely repayment is susceptible to adverse
changes in business, economic or financial conditions.
C High risk of default or which are currently in default.
Moody's Investors Service ("Moody's")
- -------------------------------------
Prime-1 Superior ability for repayment.
Prime-2 Strong ability for repayment.
Prime-3 Acceptable ability for repayment. 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.
Not Prime Does not fall within any of the Prime rating categories.
DESCRIPTION OF BANK RATINGS
---------------------------
Moody's
- -------
These ratings represent Moody's opinion of a bank's intrinsic safety and
soundness.
A These banks possess exceptional intrinsic financial strength. Typically
they will be major financial institutions with highly valuable and
defensible business franchises, strong financial fundamentals, and a
very attractive and stable operating environment.
B These banks possess strong intrinsic financial strength. Typically,
they will be important institutions with valuable and defensible
business franchises, good financial fundamentals, and an attractive and
stable operating environment.
C These banks possess good intrinsic financial strength. Typically, they
will be institutions with valuable and defensible business franchises.
These banks will demonstrate either acceptable financial fundamentals
within a stable operating environment, or better than average financial
fundamentals within an unstable operating environment.
D These banks possess adequate financial strength, but may be limited by
one or more of the following factors: a vulnerable or developing
business franchise; weak financial fundamentals; or an unstable
operating environment.
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E These banks possess very weak intrinsic financial strength, require
periodic outside support or suggest an eventual need for outside
assistance. Such institutions may be limited by one or more of the
following factors: a business franchise of questionable value;
financial fundamentals that are seriously deficient in one or more
respects; or a highly unstable operating environment.
DESCRIPTION OF TAXABLE BOND RATINGS
-----------------------------------
S&P
S&P's credit rating is a current opinion of an obligor's overall financial
capacity (its creditworthiness) to pay its financial obligation.
AAA The highest rating assigned by S&P. The obligor's capacity to meet its
financial commitment on the obligation is extremely strong.
AA The obligor's capacity to meet its financial commitments on the
obligation is very strong.
A The obligation is somewhat more susceptible to the adverse effects of
changes in circumstances and economic conditions than obligations in
higher rated categories. However, the obligor's capacity to meet its
financial commitment on the obligation is still strong.
BBB Exhibits adequate protection parameters. However, adverse economic
conditions or changing circumstances are more likely to lead to a
weakened capacity of the obligor to meet its financial commitment on
the obligation.
Obligations rated BB, B, CCC, CC, and C are regarded as having significant
speculative characteristics. BB indicates the least degree of speculation and C
the highest. While such obligations will likely have some quality and protective
characteristics, these may be outweighed by large uncertainties or major
exposures to adverse conditions.
BB Less vulnerable to nonpayment than other speculative issues. However,
such issues face major ongoing uncertainties or exposure to adverse
business, financial, or economic conditions which could lead to the
obligor's inadequate capacity to meet its financial commitment on the
obligation.
B More vulnerable to nonpayment than obligations rated BB, but the
obligor currently has the capacity to meet its financial commitment on
the obligation. Adverse business, financial, or economic conditions
will likely impair the obligor's capacity or willingness to meet its
financial commitment on the obligation.
CCC Currently vulnerable to nonpayment, and dependent upon favorable
business, financial, and economic conditions for the obligor to meet
its financial commitment on the obligation. In the event of adverse
business, financial, or economic conditions, the obligor is not likely
to have the capacity to meet its financial commitment on the
obligation.
CC Currently highly vulnerable to nonpayment.
C Used to cover a situation where a bankruptcy petition has been filed or
similar action has been taken, but payments on this obligation are
being continued.
D In payment default. Used when payments on an obligation are not made on
the date due even if the applicable grace period has not expired,
unless Standard & Poor's believes that such payments will be made
during such grace period. Also used upon the filing of a bankruptcy
petition or the taking of a similar action if payments on an obligation
are jeopardized.
Moody's
- -------
Investment Grade
Aaa 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 an exceptionally stable, margin and principal is secure.
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Aa High quality by all standards. Margins of protection may not be as
large as in Aaa securities, fluctuation of protective elements may be
greater, or there may be other elements present that make the long-term
risks appear somewhat larger than in Aaa securities.
A These bonds possess many favorable investment attributes and are to be
considered as upper-medium grade obligations. Factors giving security
to principal and interest are considered adequate, but elements may be
present which suggest a susceptibility to impairment sometime in the
future.
Baa These bonds are considered 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.
Non-Investment Grade
Ba These bonds have speculative elements; their future cannot be
considered as well assured. The protection of interest and principal
payments may be very moderate and thereby not well safeguarded during
good and bad times over the future.
B These bonds lack the characteristics of a desirable investment (i.e.,
potentially low assurance of timely interest and principal payments or
maintenance of other contract terms over any long period of time may be
small).
Caa Bonds in this category have poor standing and may be in default. These
bonds carry an element of danger with respect to principal and interest
payments.
Ca Speculative to a high degree and could be in default or have other
marked shortcomings. C is the lowest rating.
Fitch
- -----
Investment Grade
AAA Highest rating category. The obligor's capacity for timely repayment of
principal and interest is extremely strong.
AA The obligor's capacity for timely repayment is very strong.
A Bonds and preferred stock considered to be investment grade and of high
credit quality. The obligor's ability for timely repayment is strong.
However, adverse changes in business, economic, or financial conditions
are more likely to affect the capacity for timely repayment than
obligations in higher rated categories.
BBB The obligor's capacity for timely repayment of principal and interest
is adequate. However, adverse changes in business, economic or
financial conditions and circumstances, are more likely to affect the
capacity for timely repayment than for obligations in higher rated
categories.
Non-Investment Grade
BB Obligations for which capacity for timely repayment of principal and
interest is uncertain. These obligations are speculative to some degree
and capacity for repayment remains susceptible over time to adverse
changes in business, financial or economic conditions.
B The Obligor's capacity for timely repayment of principal and interest
is uncertain. Timely repayment of principal and interest is not
sufficiently protected against adverse changes in business, economic or
financial conditions and these obligations are far more speculative
than those in higher rated categories.
CCC Obligations for which there is a current perceived possibility of
default. Timely repayment of principal and interest is dependent on
favorable business, economic, or financial conditions and these
obligations are far more speculative than those in higher rated
categories.
CC Obligations which are highly speculative or which have a high risk of
default.
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C Obligations which are currently in default.
DESCRIPTION OF INSURANCE RATINGS
Moody's
- -------
These ratings represent Moody's opinions of the ability of insurance companies
to pay punctually senior policyholder claims and obligations.
Aaa Insurance companies rated in this category offer exceptional financial
security. While the financial strength of these companies is likely to
change, such changes as can be visualized are most unlikely to impair
their fundamentally strong position.
Aa These insurance companies offer excellent financial security. Together
with the Aaa group, they constitute what are generally known as high
grade companies. They are rated lower than Aaa companies because
long-term risks appear somewhat larger.
A Insurance companies rated in this category offer good financial
security. However, elements may be present which suggest a
susceptibility to impairment sometime in the future.
Baa Insurance companies rated in this category offer adequate financial
security. However, certain protective elements may be lacking or may be
characteristically unreliable over any great length of time.
BA Insurance companies rated in this category offer questionable financial
security. Often the ability of these companies to meet policyholder
obligations may be very moderate and thereby not well safeguarded int
he future.
B Insurance companies rated in this company offer poor financial
security. Assurance of punctual payment of policyholder obligations
over any long period of time is small.
Caa Insurance companies rated in this category offer very poor financial
security. They may be in default on their policyholder obligations or
there may be present elements of danger with respect to punctual
payment of policyholder obligations and claims.
Ca Insurance companies rated in this category offer extremely poor
financial security. Such companies are often in default on their
policyholder obligations or have other marked shortcomings.
C Insurance companies rated in this category are the lowest rated class
of insurance company and can be regarded as having extremely poor
prospects of ever offering financial security.
S&P
- ---
An insurer rated 'BBB' or higher is regarded as having financial security
characteristics that outweigh any vulnerabilities, and is highly likely to have
the ability to meet financial commitments.
AAA EXTREMELY STRONG financial security characteristics. 'AAA' is the
highest Insurer Financial Strength Rating assigned by Standard &
Poor's.
AA VERY STRONG financial security characteristics, differing only slightly
from those rated higher.
A STRONG financial security characteristics, but Is somewhat more likely
to be affected by adverse business conditions than are insurers with
higher ratings.
BBB GOOD financial security characteristics, but is more likely to be
affected by adverse business conditions than are higher rated insurers.
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An insurer rated 'BB' or lower is regarded as having vulnerable characteristics
that may outweigh its strength. 'BB' indicates the least degree of vulnerability
within the range; 'CC' the highest.
BB MARGINAL financial security characteristics. Positive attributes exist,
but adverse business conditions could lead to insufficient ability to
meet financial commitments.
B WEAK financial security characteristics. Adverse business conditions
will likely impair its ability to meet financial commitments.
CCC VERY WEAK financial security characteristics, and is dependent on
favorable business conditions to meet financial commitments.
CC EXTREMELY WEAK financial security characteristics and is likely not to
meet some of its financial commitments.
R An insurer rated 'R' has experienced a REGULATORY ACTION regarding
solvency. The rating does not apply to insurers subject only to
nonfinancial actions such as market conduct violations.
NR NOT RATED, which implies no opinion about the insurer's financial
security.
Plus (+) or minus (-)
Following ratings from 'AA' to 'CCC' show relative standing within the major
rating categories.
DESCRIPTION OF MUNICIPAL NOTE RATINGS
Moody's
MIG1 & VMIG1 Short-term municipal securities rated MIG1 or VMIG1
are of the best quality. They have strong protection from
established cash flows, superior liquidity support or
demonstrated broad-based access to the market for refinancing.
MIG2 & VMIG2 These Short-term municipal securities rated are of high
quality. Margins of protection are ample although not so large
as in the preceding group.
MIG3 & VMIG3 Favorable quality. All security elements are accounted for,
but the undeniable strength of the preceding grades is
lacking. Liquidity and cash flow protection may be narrow and
marketing access for refinancing is likely to be less well
established.
MIG4 & VMIG4 This denotes adequate quality protection commonly regarded as
required of an investment security is present and although not
distinctly or predominantly speculative, there is a specific
risk.
SG This denotes speculative quality. Our instruments in this
category each margins of protection.
S&P
- ---
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.
SP-1 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.
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SP-3 Speculative capacity to pay principal and interest.
Description of Preferred Stock Ratings
Moody's
- -------
aaa Top-quality preferred stock. This rating indicates good asset
protection and the least risk of dividend impairment within the
universe of preferred stocks.
aa High-grade preferred stock. This rating indicates that there is a
reasonable assurance the earnings and asset protection will remain
relatively well maintained in the foreseeable future.
a Upper-medium grade preferred stock. While risks are judged to be
somewhat greater than in the "aaa" and "aa" classification, earnings
and asset protection are, nevertheless, expected to be maintained at
adequate levels.
baa Medium-grade preferred stock, neither highly protected nor poorly
secured. Earnings and asset protection appear adequate at present but
may be questionable over any great length of time.
ba Considered to have speculative elements and its future cannot be
considered well assured. Earnings and asset protection may be very
moderate and not well safeguarded during adverse periods. Uncertainty
of position characterizes preferred stocks in this class.
b Lacks the characteristics of a desirable investment. Assurance of
dividend payments and maintenance of other terms of the issue over any
long period of time may be small.
caa Likely to be in arrears on dividend payments. This rating designation
does not purport to indicate the future status of payments.
ca Speculative in a high degree and is likely to be in arrears on
dividends with little likelihood of eventual payments.
c Lowest rated class of preferred or preference stock. Issues so rated
can thus be regarded as having extremely poor prospects of ever
attaining any real investment standing.
Note: Moody's applies numerical modifiers 1, 2, and 3 in each rating
classification; 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.
S&P
- ---
S&P's preferred stock rating is an assessment of the capacity and willingness of
an issuer to pay preferred stock dividends and any applicable sinking fund
obligations.
AAA Highest rating. This rating indicates an extremely strong capacity to
pay the preferred stock obligations.
AA High-quality, fixed-income security. The capacity to pay preferred
stock obligations is very strong, although not as overwhelming as for
issues rated "AAA."
A Backed by a sound capacity to pay the preferred stock obligations,
although it is somewhat more susceptible to the adverse effects of
changes in circumstances and economic conditions.
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BBB Backed by an adequate capacity to pay the preferred stock obligations.
Whereas the issuer normally exhibits adequate protection parameters,
adverse economic conditions or changing circumstances are more likely
to lead to a weakened capacity to make payments for a preferred stock
in this category than for issues in the "A" category.
CCC Regarded, on balance, as predominantly speculative with respect to the
issuer's capacity to pay preferred stock obligations. BB indicates the
lowest degree of speculation and CCC the highest. While such issues
will likely have some quality and protective characteristics, these are
outweighed by large uncertainties or major risk exposures to adverse
conditions.
CC In arrears on dividends or sinking fund payments, but that is currently
paying.
C Nonpaying issue.
D Nonpaying issue with the issuer in default on debt instruments.
N.R. No rating has been requested, insufficient information on which to base
a rating, or Standard & Poor's does not rate a particular type of
obligation as a matter of policy.
Plus (+) or minus (-)
To provide more detailed indications of preferred stock quality, ratings from AA
to CCC may be modified by the addition of a plus or minus sign to show relative
standing within the major rating categories.
SHORT-TERM DEBT RATINGS
Thompson Bank Watch, Inc. ("TBW") ratings apply only to the unsecured commercial
paper and other senior short-term and deposit obligations of entities to which
the ratings have been assigned. The TBW Short-Term ratings specifically assess
the likelihood of an untimely payment of principal and interest.
TBW-1 Very high degree of likelihood that principal and interest will be paid
on a timely basis.
TBW-2 While degree of safety regarding timely repayment of principal and
interest is strong, the relative degree is not as high as for issues
rated TBW-1.
TBW-3 Lowest investment grade category. While more susceptible to adverse
developments than obligations with higher ratings, capacity to service
principal and interest in a timely fashion is considered adequate.
TBW-4 Non-investment grade and, therefore, speculative.
DESCRIPTION OF MUNICIPAL BOND RATINGS
(INCLUDING FOREIGN, MORTGAGE AND ASSET-BACKED SECURITIES)
S&P
INVESTMENT GRADE
AAA The highest rating. The rating indicates an extremely strong
capacity to meet its financial commitment.
AA Differs from AAA issues only in a small degree. The obligor's
capacity to meet its financial commitment is very strong.
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<PAGE> 179
A These bonds are somewhat more susceptible to the adverse
effects of changes in circumstances and economic conditions
than debt in higher rated categories. However, capacity to
meet its financial commitment on the obligation is still
strong.
BBB Exhibits adequate protection parameters. However, adverse
economic conditions or changing circumstances are more likely
to lead to a weakened capacity to meet its financial
commitment on the obligations.
SPECULATIVE GRADE
BB Less vulnerable to non-payment than other speculative issues.
However, these bonds face major ongoing uncertainties or
exposure to adverse business, financial or economic conditions
which could lead to inadequate capacity to meet financial
commitment on the obligations.
B More vulnerable to non-payment than obligations rated BB, but
currently has the capacity to meet its financial commitment on
the obligation. Adverse business, financial or economic
conditions will likely impair capacity or willingness to meet
its financial commitment on the obligation.
CCC Currently vulnerable to non-payment, and is dependent upon
favorable business, financial, and economic conditions to meet
its financial commitment on the obligation. In the event of
adverse business, financial, or economic conditions, they are
not likely to have the capacity to meet its financial
commitment on the obligation.
CC Currently highly vulnerable to non-payment.
C This rating may be used to cover a situation where a
bankruptcy petition has been filed, or similar action has been
taken, but payments on this obligation are being continued.
D Bonds in payment default.
Ratings from AA to CCC may be modified by a plus (+) or minus (-) to show
relative standing within the major rating categories.
MOODY'S
INVESTMENT GRADE
Aaa 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 an exceptionally stable,
margin and principal is secure.
Aa High quality by all standards. Margins of protection may not
be as large as in Aaa securities, fluctuation of protective
elements may be greater, or there may be other elements
present that make the long-term risks appear somewhat larger
than in Aaa securities.
A These bonds possess many favorable investment attributes and
are to be considered as upper-medium grade obligations.
Factors giving security to principal and interest are
considered adequate, but elements may be present which suggest
a susceptibility to impairment sometime in the future.
Baa These bonds are considered 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.
NON-INVESTMENT GRADE
Ba These bonds have speculative elements; their future cannot be
considered as well assured. The protection of interest and
principal payments may be very moderate and thereby not well
safeguarded during good and bad times over the future.
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B These bonds lack the characteristics of a desirable investment
(i.e., potentially low assurance of timely interest and
principal payments or maintenance of other contract terms over
any long period of time may be small).
Caa Bonds in this category have poor standing and may be in
default. These bonds carry an element of danger with respect
to principal and interest payments.
Ca Speculative to a high degree and could be in default or have
other marked shortcomings. Ca is the lowest rating.
SHORT-TERM DEBT RATINGS
Thompson Bank Watch, Inc. ("TBW") assigns ratings to specific debt instruments
with original maturities of one year or less. The TBW Short-Term ratings
specifically assess the likelihood of an untimely payment of principal and
interest.
TBW-1 Very high degree of likelihood that principal and interest
will be paid on a timely basis.
TBW-2 While degree of safety regarding timely repayment of principal
and interest is strong, the relative degree is not as high as
for issues rated TBW-1.
TBW-3 Lowest investment grade category. While more susceptible to
adverse developments than obligations with higher ratings,
capacity to service principal and interest in a timely fashion
is considered adequate.
TBW-4 Non-investment grade and, therefore, speculative.
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Investment Advisor and Sub-Administrator
Banc One Investment Advisors Corporation
1111 Polaris Parkway
P.O. Box 710211
Columbus, OH 43271-0211
Sub-Advisor
Banc One High Yield Partners, LLC
1111 Polaris Parkway
P.O. Box 710211
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 8528
Boston, MA 02266-8528
Legal Counsel
Ropes & Gray
One Franklin Square
1301 K Street, N.W.
Suite 800 East
Washington, D.C. 20005
Independent Accountants
PricewaterhouseCoopers, LLP
100 East Broad Street
Columbus, OH 43215
THE STATEMENT OF ADDITIONAL INFORMATION CONTAINS MORE DETAILED INFORMATION ABOUT
THE FUNDS. THE CURRENT STATEMENT OF ADDITIONAL INFORMATION HAS BEEN FILED WITH
THE SECURITIES AND EXCHANGE COMMISSION AND IS AVAILABLE WITHOUT CHARGE BY
CALLING 1-800-480-4111 OR BY WRITING TO THE ONE GROUP SERVICES COMPANY AT 3435
STELZER ROAD, COLUMBUS, OHIO 43219. THE STATEMENT OF ADDITIONAL INFORMATION IS
INCORPORATED INTO THIS PROSPECTUS BY REFERENCE. THE SEC MAINTAINS A WEB SITE
(www.sec.gov) THAT CONTAINS THE STATEMENT OF ADDITIONAL INFORMATION, MATERIALS
INCORPORATED BY REFERENCE AND OTHER INFORMATION REGARDING THE ONE GROUP(R).
82
<PAGE> 184
THE ONE GROUP(R) FAMILY OF MUTUAL FUNDS
MUNICIPAL BOND FUNDS
COMBINED PROSPECTUS
OCTOBER , 1998
THE ONE GROUP(R) INTERMEDIATE TAX-FREE BOND FUND
THE ONE GROUP(R) MUNICIPAL INCOME FUND
THE ONE GROUP(R) ARIZONA MUNICIPAL BOND FUND
THE ONE GROUP(R) WEST VIRGINIA MUNICIPAL BOND FUND
THE ONE GROUP(R) LOUISIANA MUNICIPAL BOND FUND
THE ONE GROUP(R) OHIO MUNICIPAL BOND FUND
THE ONE GROUP(R) KENTUCKY MUNICIPAL BOND FUND
This prospectus describes seven mutual funds that attempt to produce income
exempt from Federal and/or state income tax. The information in the prospectus
is important. Please read it carefully before you invest, and save it for future
reference.
PLEASE REMEMBER THAT SHARES OF THE FUNDS: O ARE NOT DEPOSITS OR
OBLIGATIONS OF, OR GUARANTEED BY BANC ONE CORPORATION OR ITS AFFILIATES; O ARE
NOT INSURED OR GUARANTEED BY THE FEDERAL DEPOSIT INSURANCE CORPORATION OR BY ANY
FEDERAL OR STATE GOVERNMENTAL AGENCY; O INVOLVE INVESTMENT RISK, INCLUDING THE
POSSIBLE LOSS OF THE PRINCIPAL AMOUNT INVESTED.
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION NOR HAS THE COMMISSION PASSED UPON THE ACCURACY OR ADEQUACY
OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.
<PAGE> 185
TABLE OF CONTENTS
PAGE
----
A BRIEF PREVIEW OF THE FUNDS 1
ABOUT THE FUNDS 3
The One Group(R) Intermediate Tax-Free Bond Fund 3
The One Group(R) Municipal Income Fund 9
The One Group(R) Arizona Municipal Bond Fund 15
The One Group(R) West Virginia Municipal Bond Fund 21
The One Group(R) Louisiana Municipal Bond Fund 27
The One Group(R) Ohio Municipal Bond Fund 33
The One Group(R) Kentucky Municipal Bond Fund 39
MORE ABOUT THE FUNDS 45
HOW TO DO BUSINESS WITH THE ONE GROUP 47
Purchasing Fund Shares 47
Sales Charges 50
Sales Charge Reductions and Waivers 51
Exchanging Fund Shares 54
Redeeming Fund Shares 55
SHAREHOLDER INFORMATION 58
Voting Rights 58
Dividend Policies 59
Tax Treatment of the Funds 60
Tax Treatment of Shareholders 60
Shareholder Inquiries 61
ORGANIZATION AND MANAGEMENT OF THE FUNDS 61
The Funds 61
The Board of Trustees 62
The Advisor 62
The Distributor 62
The Administrator and Sub-Administrator 62
The Transfer Agent, Custodian and Sub-Custodian 62
DETAILS ABOUT THE FUNDS' INVESTMENT PRACTICES AND POLICIES 64
Investment Practices 64
Investment Risks 66
Investment Policies 67
APPENDIX: DESCRIPTION OF RATINGS 70
<PAGE> 186
A BRIEF PREVIEW OF THE FUNDS
WHAT ARE THE GOALS OF THE MUNICIPAL BOND FUNDS?
The Funds are designed to produce income exempt from Federal and/ or state
income tax. Each Fund pursues a different investment objective and involves
different risks. These Funds may not be appropriate for Individual Retirement
Accounts, Qualified Plans, and other Retirement Plans that receive favorable tax
treatment. Please read about each Fund before investing.
WHAT ARE THE FUNDS' INVESTMENT STRATEGIES?
The Intermediate Tax-Free Bond Fund, and the Municipal Income Fund invest in
debt securities issued by or on behalf of states, territories, and possessions
of the United States and their agencies that produce interest that is exempt
from Federal income tax. The Arizona Municipal Bond Fund, the West Virginia
Municipal Bond Fund, the Louisiana Municipal Bond Fund, the Kentucky Municipal
Bond Fund, and the Ohio Municipal Bond Fund invest in debt securities of their
respective states that produce interest that is exempt from Federal income tax
and the personal income tax of each Fund's respective state.
WHAT ARE THE MAIN RISKS OF INVESTING IN THE FUNDS?
The Funds invest in fixed-income investments that are subject to market
fluctuations as a result of changes in interest rates. As a result, the value of
investments in the Funds may decrease during periods of rising interest rates
and increase during periods of declining interest rates. In addition, some of
the Funds invest in mortgage-related securities which may have greater price and
yield volatility than traditional fixed-income securities. All of the Funds,
except the Intermediate Tax- Free Bond Fund and the Municipal Income Fund, are
non-diversified funds which expose investors to special risks, including risks
associated with state specific investments. An investment in the Funds is not a
deposit of BANC ONE CORPORATION or its affiliates and is not insured or
guaranteed by the Federal Deposit Insurance Corporation or any other government
agency. For more information about risks, please read "More About the Funds" and
"Investment Risks."
WHAT CLASSES OF SHARES ARE AVAILABLE?
The Funds currently offer four classes of Shares: Class A, Class B, Class C and
Class I. Class A, Class B and Class C shares are offered to the general
public. Class I 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. The section called
"How To Do Business With The One Group" will provide more information.
HOW DO I PURCHASE AND REDEEM SHARES?
You may buy and redeem shares of the Funds on any day that the Funds are open
for business. Class C shares are not available for purchase in all of the funds.
Purchase and redemption procedures are explained in greater detail in "How To Do
Business With The One Group." For additional information, call The One Group
Services Company at 1-800-480-4111.
HOW ARE DIVIDENDS PAID?
Generally, dividends are declared on each business day and are distributed
periodically 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 you elect to take the payment in cash. For a more detailed
discussion of dividends, see "Dividend Policies."
1
<PAGE> 187
WHO MANAGES THE FUNDS?
Banc One Investment Advisors Corporation ("Banc One Investment Advisors"), an
indirect subsidiary of BANC ONE CORPORATION, serves as the advisor of the Funds.
Banc One Investment Advisors is paid a fee for its services. A more detailed
discussion regarding Banc One Investment Advisors, its services and compensation
can be found in the Prospectus under the headings "The Advisor" and "Expense
Summary."
2
<PAGE> 188
THE ONE GROUP(R) INTERMEDIATE TAX-FREE BOND FUND
INVESTMENT OBJECTIVE
The Fund is a diversified fund that seeks current income exempt from Federal
income taxes consistent with prudent investment management and the preservation
of capital.
INVESTMENT STRATEGY
The Fund invests in bonds and notes of states, territories and possessions of
the United States, including the District of Columbia, and their respective
authorities, political subdivisions, agencies and instrumentalities, the
interest on which is exempt from Federal income tax ("Municipal Securities").
The Fund's average weighted maturity normally will range between three and ten
years.
PORTFOLIO SECURITIES
The Fund invests at least 80% of its net assets in Municipal Securities. As a
matter of fundamental policy, the Fund invests at least 65% of its total assets
in bonds. The Fund also may invest in mortgage-backed securities, restricted
securities, and mortgage dollar rolls. The securities in which the Fund invests
may have fixed rates of return or floating or variable rates. For a list of all
securities in which the Fund may invest, please read "Investment Practices."
RISK CONSIDERATIONS
The Fund may invest in Municipal Securities that are rated in the lowest
investment grade. Even though such securities are generally considered
investment grade, they are considered to have speculative characteristics.
Issuers of such securities are more vulnerable to changes in economic conditions
than issuers of higher grade securities. The Municipal Securities are also fixed
income investments. The value of these securities will change in response to
interest rate changes and other factors. In addition, the Fund invests in
mortgage-related securities which have significantly greater price and yield
volatility than traditional fixed-income securities. Before you invest, please
read "More About the Funds" and "Investment Risks."
TAX CONSIDERATIONS
Up to 20% of the Fund's assets may be invested in Municipal Securities, the
interest on which may be subject to the Federal alternative minimum tax for
individuals. Shareholders who are subject to the Federal alternative minimum tax
may have all or a portion of their income from the Fund subject to Federal
income tax. In addition, corporate shareholders will be required to take the
interest on Municipal Securities into account in determining their alternative
minimum taxable income.
FUND MANAGEMENT
The Fund is managed by a team of portfolio managers, research analysts and fixed
income traders. The team works together to establish general duration and sector
strategies for the Fund. Each team member makes recommendations about securities
in the Fund. The research analysts and trading personnel provide individual
security and sector recommendations, while the portfolio managers select and
allocate individual securities in a manner designed to meet the investment
objectives of the Fund.
3
<PAGE> 189
SHAREHOLDER EXPENSES
<TABLE>
<CAPTION>
SHAREHOLDER TRANSACTION EXPENSES(1) CLASS A CLASS B CLASS C CLASS I
- ------------------------------------ ------- ------- ------- -------
<S> <C> <C> <C> <C>
Maximum Sales Charge Imposed on Purchases
(as a percentage of offering price) 4.50% none none none
Maximum Contingent Deferred Sales Charge
(as a percentage of original purchase
price or redemption proceeds, as
applicable) none(2) 5.00% 1.00% none
Redemption Fees none none none none
Exchange Fees none none none none
ANNUAL OPERATING EXPENSES(3) (as a
percentage of average daily net assets)
Investment Advisory Fees (after fee
waiver)(4) .42% .42% .42% .42%
12b-1 Fees (after fee waiver)(5) .25% .90% .90% none
Other Expenses .24% .24% .24% .24%
Total Fund Operating Expenses (after fee
waivers)(6) .91% 1.56% 1.56% .66%
</TABLE>
(1) If you buy or sell shares through a Shareholder Servicing Agent, you may
be charged separate transaction fees by the Shareholder Servicing Agent.
In addition, a $10.00 sub-minimum account fee may be applicable and a
$7.00 charge will be deducted from redemption amounts paid by wire.
(2) Except for purchases of $1 million or more. Please see "Sales Charges."
(3) Expense information has been restated to reflect current fees.
(4) Without the fee waiver, Investment Advisory Fees would be .60% for all
classes of shares.
(5) Due to 12b-1 fees, long-term Class A, Class B and Class C shareholders may
pay more than the equivalent of the maximum front-end sales charges
permitted by the rules of the National Association of Securities Dealers.
Without the voluntary waiver of fees, 12b-1 fees would be .35% for Class A
shares and 1.00% for Class B and Class C shares.
(6) Without the voluntary reduction of Investment Advisory and 12b-1 fees,
Total Operating Expenses would be 1.19 % for Class A shares, 1.84% for
Class B shares, 1.84% for Class C shares and .84% for Class I
shares.
EXAMPLE
An investor would pay the following expenses on a $1,000 investment in the Fund,
assuming: (1) payment of the maximum sales charge; (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 $73 $ 93 $152
Class A (without fee waivers) $57 $81 $107 $183
Class B $66 $79 $105 $168
Class B (without fee waivers) $69 $88 $120 $199
</TABLE>
4
<PAGE> 190
<TABLE>
<CAPTION>
1 YEAR 3 YEARS 5 YEARS 10 YEARS
------ ------- ------- --------
<S> <C> <C> <C> <C>
Class C $26 $49 $ 85 $186
Class C (without fee waivers) $29 $58 $100 $216
Class I $ 7 $21 $ 37 $ 82
Class I (without fee waiver) $ 9 $27 $ 47 $104
</TABLE>
Assuming no redemption at the end of each time period, 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 $54 $73 $ 93 $152
Class A (without fee waivers) $57 $81 $107 $183
Class B $16 $49 $ 85 $168
Class B (without fee waivers) $19 $58 $101 $199
Class C $16 $49 $ 85 $186
Class C (without fee waivers) $19 $58 $100 $216
Class I $ 7 $21 $ 37 $ 82
Class I (without fee waiver) $ 9 $27 $ 47 $104
</TABLE>
Class B shares automatically convert to Class A shares after eight (8) years.
Therefore, the "10 years" examples above reflect this conversion.
These examples are designed to assist you in understanding the various costs and
expenses that may be directly or indirectly paid by investors in the Fund. THESE
EXAMPLES SHOULD NOT BE CONSIDERED A REPRESENTATION OF PAST OR FUTURE EXPENSES
AND ACTUAL EXPENSES MAY BE GREATER OR LESS THAN THOSE SHOWN.
5
<PAGE> 191
THE ONE GROUP(R) INTERMEDIATE TAX-FREE BOND FUND FINANCIAL HIGHLIGHTS
The Financial Highlights are intended to help you understand the Fund's
financial performance for the past 10 years or since inception, if less than 10
years. The total returns in the table represent the rate a shareholder would
have earned on an investment in the Fund (assuming reinvestment of all dividends
and distributions). This information has been derived from financial statements
audited by PricewaterhouseCoopers LLP, whose report, along with the Fund's
financial statements, is incorporated by reference in the Statement of
Additional Information, which is available upon request.
<TABLE>
<CAPTION>
YEARS ENDED JUNE 30,
--------------------
CLASS I 1998 1997 1996 1995 1994 1993 1992 1991(c)
------- ---- ---- ---- ---- ---- ---- ---- -------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
NET ASSET VALUE, BEGINNING
OF PERIOD $ 10.67 $ 10.64 $ 10.49 $ 11.15 $ 10.69 $ 10.28 $ 10.00
-------- -------- -------- -------- ------- ------- -------
Investment Activities:
Net investment income 0.54 0.52 0.54 0.52 0.53 0.55 0.49
Net realized and
unrealized gains
(losses) from investments 0.27 0.04 0.15 (0.52) 0.49 0.42 0.27
-------- -------- -------- -------- ------- ------- -------
Total from Investment Activities 0.81 0.56 0.69 0.00 1.02 0.97 0.76
-------- -------- -------- -------- ------- ------- -------
Distributions:
Net investment income (0.54) (0.51) (0.54) (0.53) (0.52) (0.55) (0.48)
In excess of net investment
income -- -- -- (0.01) -- -- --
Net realized gains (0.02) (0.02) -- (0.01) (0.04) (0.01) --
In excess of net realized
gains -- -- -- (0.11) -- -- --
-------- -------- -------- -------- -------- -------- -------
Total Distributions (0.56) (0.53) (0.54) (0.66) (0.56) (0.56) (0.48)
-------- -------- -------- -------- -------- -------- -------
NET ASSET VALUE, END OF
PERIOD $ 10.92 $ 10.67 $ 10.64 $ 10.49 $ 11.15 $ 10.69 $ 10.28
-------- -------- -------- -------- -------- -------- -------
Total Return 7.76% 5.39% 6.75% (0.11)% 9.79% 9.54% 9.49%(b)
RATIOS/SUPPLEMENTARY DATA:
Net Assets at end of
period (000) $451,089 $217,201 $211,229 $182,611 $166,489 $142,672 $82,192
Ratio of expenses to
average net assets 0.58% 0.54% 0.53% 0.48% 0.54% 0.55% 0.30%(b)
Ratio of net investment
income to average net
assets 5.05% 4.87% 5.17% 4.78% 4.93% 5.28% 6.04%(b)
Ratio of expenses to
average net assets* 0.81% 0.87% 0.88% 0.84% 0.94% 1.07% 0.90%(b)
Ratio of net investment
income to average net
assets* 4.82% 4.54% 4.82% 4.42% 4.53% 4.77% 5.44%(b)
Portfolio turnover(a) 86.89% 111.58% 199.76% 105.98% 31.99% 11.50% 35.15%
</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) Portfolio turnover is calculated on the basis of the Fund as a whole
without distinguishing among the classes of shares issued. (b) Annualized.
(c) The Class I commenced operations on September 4, 1990.
6
<PAGE> 192
<TABLE>
<CAPTION>
YEARS ENDED JUNE 30,
--------------------
CLASS A 1998 1997 1996 1995 1994 1993 1992(c)
------- ---- ---- ---- ---- ---- ---- -------
<S> <C> <C> <C> <C> <C> <C> <C>
NET ASSET VALUE,
BEGINNING OF PERIOD $ 10.67 $ 10.63 $ 10.48 $ 11.14 $ 10.69 $ 10.57
------- -------- -------- -------- -------- -------
Investment Activities:
Net investment income 0.51 0.50 0.51 0.50 0.55 0.15
Net realized and
unrealized gains
(losses) from investments 0.26 0.05 0.15 (0.52) 0.44 0.18
------- -------- -------- -------- -------- -------
Total from Investment
Activities 0.77 0.55 0.66 (0.02) 0.99 0.33
------- -------- -------- -------- -------- -------
Distributions:
Net investment income (0.51) (0.49) (0.49) (0.52) (0.50) (0.21)
In excess of net
investment income -- -- (0.02) (0.01) -- --
Net realized gains (0.02) (0.02) -- -- (0.04) --
In excess of net realized
gains -- -- -- (0.11) -- --
------- ------- ------- ------- ------- -------
Total Distributions (0.53) (0.51) (0.51) (0.64) (0.54) (0.21)
------- ------- ------- ------- ------- -------
NET ASSET VALUE, END
OF PERIOD $ 10.91 $ 10.67 $ 10.63 $ 10.48 $ 11.14 $ 10.69
------- ------- ------- ------- ------- -------
Total Return (Excludes
Sales Charge) 7.39% 5.28% 6.49% (0.33)% 9.47% 8.68%(b)
RATIOS/SUPPLEMENTARY DATA:
Net Assets at end of
period (000) $ 8,457 $ 6,622 $ 5,614 $ 5,556 $ 5,480 $ 5
Ratio of expenses to
average net assets 0.83% 0.79% 0.78% 0.73% 0.71% 1.02%(b)
Ratio of net investment
income to average
net assets 4.75% 4.62% 4.91% 4.57% 4.77% 4.91%(b)
Ratio of expenses to
average net assets* 1.15% 1.22% 1.23% 1.19% 1.27% 1.32%(b)
Ratio of net investment
income to average
net assets* 4.43% 4.19% 4.46% 4.11% 4.21% 4.61%(b)
Portfolio turnover(a) 86.89% 111.58% 199.76% 105.98% 31.99 11.50%
</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) Portfolio turnover is calculated on the basis of the Fund as
a whole without distinguishing among the classes of shares issued. (b)
Annualized. (c) Class A Shares commenced offering on February 18, 1992.
7
<PAGE> 193
THE ONE GROUP(R) INTERMEDIATE TAX-FREE BOND FUND FINANCIAL HIGHLIGHTS
<TABLE>
<CAPTION>
YEAR ENDED JUNE 30,
-------------------
CLASS B 1998 1997 1996 1995 1994(a)
------- ---- ---- ---- ---- -------
<S> <C> <C> <C> <C> <C>
NET ASSET VALUE, BEGINNING
OF PERIOD $ 10.68 $ 10.65 $ 10.50 $ 11.18
------- ------- ------- -------
Investment Activities:
Net investment income 0.45 0.43 0.46 0.17
Net realized and unrealized
gains (losses) from
investments 0.27 0.04 0.14 (0.67)
------- ------- ------- -------
Total from Investment Activities 0.72 0.47 0.60 (0.50)
------- ------- ------- -------
Distributions:
Net investment income (0.45) (0.42) (0.45) (0.17)
Net realized gains (0.02) (0.02) -- --
In excess of net realized gains -- -- -- (0.01)
------- ------- ------- -------
Total Distributions (0.47) (0.44) (0.45) (0.18)
------- ------- ------- -------
NET ASSET VALUE, END OF PERIOD $ 10.93 $ 10.68 $ 10.65 $ 10.50
------- ------- ------- -------
Total Return (Excludes
Sales Charge) 6.82% 4.48% 5.89% (4.48)%(b)
RATIOS/SUPPLEMENTARY DATA:
Net Assets at end of period
(000) $ 3,307 $ 2,439 $ 1,116 $ 549
Ratio of expenses to average
net assets 1.47% 1.44% 1.43% 1.40%(c)
Ratio of net investment
income to average net assets 4.09% 3.97% 4.29% 4.08%(c)
Ratio of expenses to average
net assets* 1.78% 1.87% 1.88% 1.85%(c)
Ratio of net investment
income to average net assets* 3.78% 3.54% 3.84% 3.63%(c)
Portfolio turnover(d) 86.89% 111.58% 199.76% 105.98%
</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 Shares commenced offering on January 14, 1994. (b) Not
annualized. (c) Annualized. (d) Portfolio turnover is calculated on the
basis of the Fund as a whole without distinguishing among the classes of
shares issued.
8
<PAGE> 194
THE ONE GROUP(R) MUNICIPAL INCOME FUND
INVESTMENT OBJECTIVE
The Fund is a diversified fund that seeks current income exempt from Federal
income taxes.
INVESTMENT STRATEGY
The Fund invests in debt securities of states, territories and possessions of
the United States, including the District of Columbia, and their respective
authorities, political subdivisions, agencies and instrumentalities, the
interest on which is exempt from Federal income tax ("Municipal Securities").
The Fund's average weighted maturity normally will range from five to fifteen
years, although the Fund may shorten its average weighted maturity to as little
as two years if appropriate for temporary defensive purposes.
PORTFOLIO SECURITIES
The Fund invests at least 80% of its net assets in Municipal Securities. As a
matter of fundamental policy, the Fund invests at least 65% of its total assets
in bonds. As a matter of fundamental policy, the Fund will not invest more than
25% of its net assets (i) in securities within a single industry; or (ii) in
securities of governmental units or issuers in the same state, territory, or
possession. However, the Fund will, from time to time, invest more than 25% of
its net assets in municipal housing authority obligations and single-family
mortgage revenue bonds. The Fund also may invest in mortgage-backed securities,
restricted securities, and mortgage dollar rolls. The securities in which the
Fund invests may have fixed rates of return or floating or variable rates. For a
list of all securities in which the Fund may invest, please read "Investment
Practices."
RISK CONSIDERATIONS
The Fund may invest in Municipal Securities that are rated in the lowest
investment grade. Even though such securities are generally considered
investment grade securities, they are considered to have speculative
characteristics. Issuers of such securities are more vulnerable to changes in
economic conditions than issuers of higher grade securities. The Municipal
Securities are also fixed-income investments. The value of these securities will
change in response to interest rates and other factors. In addition, the Fund
invests in mortgage-related securities which may have greater price and yield
volatility than traditional fixed-income securities. Before you invest, please
read "More About the Funds" and "Investment Risks."
TAX CONSIDERATIONS
Up to 100% of the Fund's assets may be invested in Municipal Securities the
interest on which may be subject to Federal alternative minimum tax for
individuals. Shareholders who are subject to the Federal alternative minimum tax
may have all or a portion of their income from the Fund subject to Federal
income tax. In addition, corporate shareholders will be required to take the
interest on Municipal Securities into account in determining their alternative
minimum taxable income.
FUND MANAGEMENT
The Fund is managed by a team of portfolio managers, research analysts and fixed
income traders. The team works together to establish general duration and sector
strategies for the Fund. Each team member makes recommendations about securities
in the Fund. The research analysts and trading personnel provide individual
security and sector recommendations, while the portfolio managers select and
allocate individual securities in a manner designed to meet the investment
objectives of the Fund.
9
<PAGE> 195
SHAREHOLDER EXPENSES
<TABLE>
<CAPTION>
SHAREHOLDER TRANSACTION EXPENSES(1) CLASS A CLASS B CLASS C CLASS I
- ------------------------------------ ------- ------- ------- -------
<S> <C> <C> <C> <C>
Maximum Sales Charge Imposed on Purchases
(as a percentage of offering price) 4.50% none none none
Maximum Contingent Deferred Sales Charge
(as a percentage of original purchase
price or redemption proceeds, as
applicable) none(2) 5.00% 1.00% none
Redemption Fees none none none none
Exchange Fees none none none none
ANNUAL OPERATING EXPENSES(as a
percentage of average daily net assets)(3)
Investment Advisory Fees (after fee
waiver)(4) .35% .35% .35% .35%
12b-1 Fees (after fee waiver)(5) .25% .90% .90% none
Other Expenses .27% .27% .27% .27%
Total Fund Operating Expenses (after fee
waivers)(6) .87% 1.52% 1.52% .62%
</TABLE>
(1) If you buy or sell shares through a Shareholder Servicing Agent, you
may be charged separate transaction fees by the Shareholder Servicing
Agent. In addition, a $10.00 sub-minimum account fee may be applicable
and a $7.00 charge will be deducted from redemption amounts paid by
wire.
(2) Except for purchases of $1 million or more. Please see "Sales Charges."
(3) Expense information has been restated to reflect current fees.
(4) Without the fee waiver, Investment Advisory Fees would be .45% for all
classes of shares.
(5) Due to 12b-1 fees, long-term Class A, Class B and Class C shareholders
may pay more than the equivalent of the maximum front-end sales charges
permitted by the rules of the National Association of Securities
Dealers. Without the voluntary waiver of fees, 12b-1 fees would be .35%
for Class A shares and 1.00% for Class B and Class C shares.
(6) Without the voluntary reduction of Investment Advisory and 12b-1 fees,
Total Operating Expenses would be 1.07% for Class A shares, 1.72% for
Class B shares, 1.72% for Class C shares and .72% for Class I
shares.
EXAMPLE
An investor would pay the following expenses on a $1,000 investment in the Fund,
assuming: (1) payment of the maximum sales charge; (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 $53 $72 $ 91 $147
Class A (without fee waivers) $55 $78 $101 $170
Class B $65 $78 $103 $164
Class B (without fee waivers) $67 $84 $113 $186
Class C $25 $48 $ 83 $181
Class C (without fee waivers) $27 $54 $ 93 $203
Class I $ 6 $20 $ 35 $ 77
Class I (without fee waiver) $ 7 $23 $ 40 $ 89
</TABLE>
Assuming no redemption at the end of each time period, the dollar amounts in the
above example would be as follows:
10
<PAGE> 196
<TABLE>
<CAPTION>
1 YEAR 3 YEARS 5 YEARS 10 YEARS
------ ------- ------- --------
<S> <C> <C> <C> <C>
Class A $53 $72 $ 91 $147
Class A (without fee waivers) $55 $78 $101 $170
Class B $15 $48 $ 83 $164
Class B (without fee waivers) $17 $54 $ 93 $186
Class C $15 $48 $ 83 $181
Class C (without fee waivers) $17 $54 $ 93 $203
Class I $ 6 $20 $ 35 $ 77
Class I (without fee waiver) $ 7 $23 $ 40 $ 89
</TABLE>
Class B shares automatically convert to Class A shares after eight (8) years.
Therefore, the "10 years" examples above reflect this conversion.
These examples are designed to assist you in understanding the various costs and
expenses that may be directly or indirectly paid by investors in the Fund. THESE
EXAMPLES SHOULD NOT BE CONSIDERED A REPRESENTATION OF PAST OR FUTURE EXPENSES
AND ACTUAL EXPENSES MAY BE GREATER OR LESS THAN THOSE SHOWN.
11
<PAGE> 197
THE ONE GROUP(R) MUNICIPAL INCOME FUND FINANCIAL HIGHLIGHTS
The Financial Highlights are intended to help you understand the Fund's
financial performance for the past 10 years, or since inception, if less than 10
years. The total returns in the table represent the rate a shareholder would
have earned on an investment in the Fund (assuming reinvestment of all dividends
and distributions). This information has been derived from financial statements
audited by PricewaterhouseCoopers, LLP, whose report, along with the Fund's
financial statements, is incorporated by reference in the Statement of
Additional Information, which is available upon request.
<TABLE>
<CAPTION>
YEARS ENDED JUNE 30,
--------------------
CLASS I 1998 1997 1996 1995 1994 1993(a)
------- ---- ---- ---- ---- ---- -------
<S> <C> <C> <C> <C> <C> <C>
NET ASSET VALUE, BEGINNING
OF PERIOD $ 9.66 $ 9.69 $ 9.66 $ 10.11 $ 10.00
-------- -------- -------- -------- -------
Investment Activities:
Net investment income 0.53 0.56 0.57 0.56 0.19
Net realized and unrealized
gains (losses) from
investments 0.18 (0.03) 0.03 (0.42) 0.11
-------- -------- -------- -------- -------
Total from Investment Activities 0.71 0.53 0.60 0.14 0.30
-------- -------- -------- -------- -------
Distributions:
Net investment income (0.53) (0.56) (0.57) (0.56) (0.19)
In excess of net realized gains -- -- -- (0.03) --
-------- -------- -------- -------- -------
Total Distributions (0.53) (0.56) (0.57) (0.59) (0.19)
-------- -------- -------- -------- -------
NET ASSET VALUE, END OF PERIOD $ 9.84 $ 9.66 $ 9.69 $ 9.66 $ 10.11
-------- -------- -------- -------- -------
Total Return 7.49% 5.54% 6.46% 1.36% 5.18%(b)
RATIOS/SUPPLEMENTARY DATA:
Net Assets at end of period (000) $408,577 $241,115 $185,916 $152,763 $40,777
Ratio of expenses to average
net assets 0.57% 0.56% 0.56% 0.54% 0.54%(b)
Ratio of net investment income
to average net assets 5.38% 5.70% 6.02% 5.61% 5.66%(b)
Ratio of expenses to average
net assets* 0.68% 0.76% 0.74% 0.71% 1.01%(b)
Ratio of net investment income
to average net assets* 5.27% 5.50% 5.84% 5.44% 5.19%(b)
Portfolio turnover(c) 62.83% 83.17% 66.02% 101.48% 66.12%
</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 9, 1993. (b) Annualized. (c)
Portfolio turnover is calculated on the basis of the Fund as a whole
without distinguishing among the classes of shares issued.
12
<PAGE> 198
<TABLE>
<CAPTION>
YEARS ENDED JUNE 30,
--------------------
CLASS A 1998 1997 1996 1995 1994 1993(a)
------- ---- ---- ---- ---- ---- -------
<S> <C> <C> <C> <C> <C> <C>
NET ASSET VALUE, BEGINNING
OF PERIOD $ 9.69 $ 9.72 $ 9.67 $ 10.12 $ 10.06
------- ------- ------- -------- -------
Investment Activities:
Net investment income 0.51 0.55 0.55 0.55 0.19
Net realized and
unrealized
gains (losses) from
investments 0.18 (0.04) 0.05 (0.43) 0.05
------- ------- ------- -------- -------
Total from Investment
Activities 0.69 0.51 0.60 0.12 0.24
------- ------- ------- -------- -------
Distributions:
Net investment income (0.51) (0.54) (0.55) (0.54) (0.18)
In excess of net realized
gains -- -- -- (0.03) --
------- ------- ------- -------- -------
Total Distributions (0.51) (0.54) (0.55) (0.57) (0.18)
------- ------- ------- -------- -------
NET ASSET VALUE, END OF
PERIOD $ 9.87 $ 9.69 $ 9.72 $ 9.67 $ 10.12
------- ------- ------- -------- -------
Total Return (Excludes
Sales Charge) 7.24% 5.35% 6.21% 1.34% 6.86%
RATIOS/SUPPLEMENTARY DATA:
Net Assets at end of
period (000) $41,829 $25,787 $11,462 $10,725 $ 4,106
Ratio of expenses to
average net assets 0.82% 0.81% 0.81% 0.79% 0.80%(b)
Ratio of net investment
income to average
net assets 5.13% 5.45% 5.76% 5.44% 5.71%(b)
Ratio of expenses to
average net assets* 1.03% 1.11% 1.09% 1.06% 1.36%(b)
Ratio of net investment
income to average
net assets* 4.92% 5.15% 5.48% 5.17% 5.15%(b)
Portfolio turnover(c) 62.83% 83.17% 66.02% 101.48% 66.12%
</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 23, 1993. (b) Annualized.
(c) Portfolio turnover is calculated on the basis of the Fund as a whole
without distinguishing among the classes of shares issued.
13
<PAGE> 199
THE ONE GROUP(R) MUNICIPAL INCOME FUND FINANCIAL HIGHLIGHTS
<TABLE>
<CAPTION>
YEARS ENDED JUNE 30,
--------------------
CLASS B 1998 1997 1996 1995 1994(a)
------- ---- ---- ---- ---- -------
<S> <C> <C> <C> <C> <C>
NET ASSET VALUE, BEGINNING
OF PERIOD $ 9.66 $ 9.69 $ 9.62 $ 10.10
------- ------- ------ -------
Investment Activities:
Net investment income 0.44 0.47 0.49 0.24
Net realized and unrealized
gains (losses) from
investments 0.18 (0.03) 0.07 (0.48)
------- ------- ------ -------
Total from Investment
Activities 0.62 0.44 0.56 (0.24)
------- ------- ------ -------
Distributions:
Net investment income (0.44) (0.47) (0.49) (0.24)
------- ------- ------ -------
Total Distributions (0.44) (0.47) (0.49) (0.24)
------- ------- ------ -------
NET ASSET VALUE, END
OF PERIOD $ 9.84 $ 9.66 $ 9.69 $ 9.62
------- ------- ------ -------
Total Return (Excludes
Sales Charge) 6.55% 4.65% 5.58% (1.98)%(b)
RATIOS/SUPPLEMENTARY DATA:
Net Assets at end of
period (000) $36,258 $23,204 $8,326 $4,855
Ratio of expenses to
average net assets 1.47% 1.46% 1.46% 1.41%(c)
Ratio of net investment income
to average net assets 4.48% 4.80% 5.14% 4.95%(c)
Ratio of expenses to
average net assets* 1.67% 1.76% 1.74% 1.62%(c)
Ratio of net investment
income to average
net assets* 4.28% 4.50% 4.86% 4.74%(c)
Portfolio turnover(d) 62.83% 83.17% 66.02% 101.48%
</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 Shares commenced offering on January 14, 1994. (b) Not
annualized. (c) Annualized. (d) Portfolio turnover is calculated on the
basis of the Fund as a whole without distinguishing among the classes of
shares issued.
CLASS C
14
<PAGE> 200
THE ONE GROUP(R) ARIZONA MUNICIPAL BOND FUND
INVESTMENT OBJECTIVE
The Fund is a non-diversified fund that seeks current income exempt from Federal
income tax and Arizona personal income tax, consistent with the preservation of
principal.
INVESTMENT STRATEGY
The Fund invests in debt securities issued by or on behalf of Arizona and its
respective authorities, political subdivisions, agencies and instrumentalities,
the interest on which, in the opinion of issuer's counsel, is exempt from
Federal income tax and Arizona personal income tax ("Arizona Municipal
Securities"). The Fund's average weighted maturity normally will be between five
and twenty years, although the Fund may invest in securities of any maturity.
PORTFOLIO SECURITIES
The Fund invests at least 80% of its total assets in Arizona Municipal
Securities. This is a fundamental policy. The Fund also may invest up to 20% of
its total assets in bonds and notes of states (other than Arizona) as well as of
territories and possessions of the United States, including the District of
Columbia, and their respective authorities, agencies, instrumentalities, and
political subdivisions, the interest on which is exempt from Federal income tax
("Municipal Securities"). The securities in which the Fund invests may have
fixed rates of return or floating or variable rates. For a list of all
securities in which the Fund may invest, please read "Investment Practices."
RISK CONSIDERATIONS
The Fund invests in Arizona Municipal Securities, which may be impacted by
economic and political developments in Arizona. The Arizona Municipal Securities
also include fixed-income investments. The value of these securities will change
in response to interest rate changes and other factors. Before you invest,
please read "More About the Funds" and "Investment Risks."
TAX CONSIDERATIONS
Up to 100% of the Fund's assets may be invested in Arizona Municipal Securities
and Municipal Securities the interest on which may be subject to Federal
alternative minimum tax for individuals. Shareholders who are subject to the
Federal alternative minimum tax may have all or a portion of their income from
the Fund subject to Federal income tax. In addition, corporate shareholders will
be required to take the interest on Municipal Securities and Arizona Municipal
Securities into account in determining their alternative minimum taxable income.
FUND MANAGEMENT
The Fund is managed by a team of portfolio managers, research analysts and fixed
income traders. The team works together to establish general duration and sector
strategies for the Fund. Each team member makes recommendations about securities
in the Fund. The research analysts and trading personnel provide individual
security and sector recommendations, while the portfolio managers select and
allocate individual securities in a manner designed to meet the investment
objectives of the Fund.
15
<PAGE> 201
SHAREHOLDER EXPENSES
<TABLE>
<CAPTION>
SHAREHOLDER TRANSACTION EXPENSES CLASS A CLASS B CLASS C CLASS I
- -------------------------------- ------- ------- ------- -------
<S> <C> <C> <C> <C>
Maximum Sales Charge Imposed on Purchases
(as a percentage of offering price) 4.50% none none none
Maximum Contingent Deferred Sales Charge
(as a percentage of original purchase
price or redemption proceeds, as
applicable) none(2) 5.00% 1.00% none
Redemption Fees none none none none
Exchange Fees none none none none
ANNUAL OPERATING EXPENSES (as a
percentage of average daily net assets)(3)
Investment Advisory Fees (after fee
waiver)(4) .40% .40% .40% .40%
12b-1 Fees (after fee waiver)(5) .25% .90% .90% none
Other Expenses .32% .32% .32% .32%
Total Fund Operating Expenses (after fee
waivers)(6) .97% 1.62% 1.62% .72%
</TABLE>
(1) If you buy or sell shares through a Shareholder Servicing Agent, you
may be charged separate transaction fees by the Shareholder Servicing
Agent. In addition, a $10.00 sub minimum account fee may be applicable
and a $7.00 charge will be deducted from redemption amounts paid by
wire.
(2) Except for purchases of $1 million or more. Please see "Sales Charges."
(3) Expense information has been restated to reflect current fees.
(4) Without the fee waiver, Investment Advisory Fees would be .45% for all
classes of shares.
(5) Due to 12b-1 fees, long-term Class A, Class B and Class C shareholders
may pay more than the equivalent of the maximum front-end sales charges
permitted by the rules of the National Association of Securities
Dealers. Without the voluntary waiver of fees, 12b-1 fees would be .35%
for Class A shares and 1.00% for Class B and Class C shares.
(6) Without the voluntary reduction of Investment Advisory and 12b-1 fees,
Total Operating Expenses would be 1.12% for Class A shares, 1.77% for
Class B shares, 1.77% for Class C shares and .77% for Class I
shares.
16
<PAGE> 202
EXAMPLE
An investor would pay the following expenses on a $1,000 investment in the Fund,
assuming: (1) payment of the maximum sales charge; (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 $75 $ 96 $159
Class A (without fee waivers) $56 $79 $104 $175
Class B $66 $81 $108 $175
Class B (without fee waivers) $68 $86 $116 $191
Class C $26 $51 $ 88 $192
Class C (without fee waivers) $28 $56 $ 96 $208
Class I $ 7 $23 $ 40 $ 89
Class I (without fee waiver) $ 8 $25 $ 43 $ 95
</TABLE>
Assuming no redemption at the end of each time period, 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 $54 $75 $ 96 $159
Class A (without fee waivers) $56 $79 $104 $175
Class B $16 $51 $ 88 $175
Class B (without fee waivers) $18 $56 $ 96 $191
Class C $16 $51 $ 88 $192
Class C (without fee waivers) $18 $56 $ 96 $208
Class I $ 7 $23 $ 40 $ 89
Class I (without fee waiver) $ 8 $25 $ 43 $ 95
</TABLE>
Class B shares automatically convert to Class A shares after eight (8) years.
Therefore, the "10 years" examples above reflect this conversion.
These examples are designed to assist you in understanding the various costs and
expenses that may be directly or indirectly paid by investors in the Fund. THESE
EXAMPLES SHOULD NOT BE CONSIDERED A REPRESENTATION OF PAST OR FUTURE EXPENSES
AND ACTUAL EXPENSES MAY BE GREATER OR LESS THAN THOSE SHOWN.
17
<PAGE> 203
THE ONE GROUP(R) ARIZONA MUNICIPAL BOND FUND FINANCIAL HIGHLIGHTS
The Financial Highlights are intended to help you understand the Fund's
financial performance for the past 10 years, or since inception, if less than 10
years. The total returns in the table represent the rate a shareholder would
have earned on an investment in the Fund (assuming reinvestment of all dividends
and distributions). This information has been derived from financial statements
audited by PricewaterhouseCoopers, LLP, whose report, along with the Fund's
financial statements, is incorporated by reference in the Statement of
Additional Information, which is available upon request.
<TABLE>
<CAPTION>
JAN. 20, 1997
YEAR ENDED THROUGH
CLASS I JUNE 30, 1998 JUNE 30, 1997(a)
------- ------------- ---------------
<S> <C>
NET ASSET VALUE, BEGINNING OF PERIOD $ 10.00
--------
Investment Activities:
Net investment income 0.23
Net realized and unrealized gains from investments 0.06
Total from Investment Activities 0.29
Distributions:
Net investment income (0.23)
--------
Total Distributions (0.23)
--------
NET ASSET VALUE, END OF PERIOD $ 10.06
--------
Total Return 2.90%(b)
RATIOS/SUPPLEMENTARY DATA:
Net Assets at end of period (000) $255,755
Ratio of expenses to average net assets 0.59%(c)
Ratio of net investment income to average net assets 5.09%(c)
Ratio of expenses to average net assets* 0.66%(c)
Ratio of net investment income to average net assets* 5.02%(c)
Portfolio turnover(d) 5.66%
</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) Not annualized. (c)
Annualized. (d) Portfolio turnover is calculated on the basis of the Fund
as a whole without distinguishing among the classes of shares issued.
18
<PAGE> 204
<TABLE>
<CAPTION>
JAN. 20, 1997
YEAR ENDED THROUGH
CLASS A JUNE 30, 1998 JUNE 30, 1997(a)
------- ------------- ----------------
<S> <C>
NET ASSET VALUE, BEGINNING OF PERIOD $ 10.00
-------
Investment Activities:
Net investment income 0.15
Net realized and unrealized gains (losses) from investments (0.01)
-------
Total from Investment Activities 0.14
Distributions:
Net investment income (0.15)
Total Distributions (0.15)
NET ASSET VALUE, END OF PERIOD $ 9.99
-------
Total Return (Excludes Sales Charge) 1.40%(b)
RATIOS/SUPPLEMENTARY DATA:
Net Assets at end of period (000) $ 1,500
Ratio of expenses to average net assets 0.85%(c)
Ratio of net investment income to average net assets 4.90%(c)
Ratio of expenses to average net assets* 0.96%(c)
Ratio of net investment income to average net assets* 4.79%(c)
Portfolio turnover(d) 5.66%
</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) Not annualized. (c)
Annualized. (d) Portfolio turnover is calculated on the basis of the Fund
as a whole without distinguishing among the classes of shares issued.
19
<PAGE> 205
THE ONE GROUP(R) ARIZONA MUNICIPAL BOND FUND FINANCIAL HIGHLIGHTS
<TABLE>
<CAPTION>
JAN. 20, 1997
YEAR ENDED THROUGH
CLASS B JUNE 30, 1998 JUNE 30, 1997(a)
------- ------------- ----------------
<S> <C>
NET ASSET VALUE, BEGINNING OF PERIOD $ 10.00
-------
Investment Activities:
Net realized and unrealized gains from investments 0.09
-------
Total from Investment Activities 0.09
-------
NET ASSET VALUE, END OF PERIOD $ 10.09
-------
Total Return (Excludes Sales Charge) 0.90%(b)
RATIOS/SUPPLEMENTARY DATA:
Net Assets at end of period (000) $ --(c)
Ratio of expenses to average net assets --(d)
Ratio of net investment income to average net assets --(d)
Ratio of expenses to average net assets* --(d)
Ratio of net investment income to average net assets* --(d)
Portfolio turnover(e) 5.66%
</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) Not annualized. (c) Amount
is less than $1,000. (d) Since net assets are less than $1,000, ratios have
not been presented. (e) Portfolio turnover is calculated on the basis of
the Fund as a whole without distinguishing among the classes of shares
issued.
20
<PAGE> 206
THE ONE GROUP(R) WEST VIRGINIA MUNICIPAL BOND FUND
INVESTMENT OBJECTIVE
The Fund is a non-diversified fund that seeks current income exempt from Federal
income tax and West Virginia personal income tax, consistent with the
preservation of principal.
INVESTMENT STRATEGY
The Fund invests in debt securities issued by or on behalf of West Virginia and
its respective authorities, political subdivisions, agencies and
instrumentalities, the interest on which, in the opinion of issuer's counsel, is
exempt from Federal income tax and West Virginia personal income tax ("West
Virginia Municipal Securities"). Generally, the Fund's average weighted maturity
will be between five and twenty years, although the Fund may invest in
securities of any maturity.
PORTFOLIO SECURITIES
The Fund invests at least 80% of its total assets in West Virginia Municipal
Securities. This is a fundamental policy. The Fund also may invest up to 20% of
its total assets in bonds and notes of states (other than West Virginia) as well
as of territories and possessions of the United States, including the District
of Columbia, and their respective authorities, agencies, instrumentalities, and
political subdivisions, the interest on which is exempt from Federal income tax
("Municipal Securities"). The securities in which the Fund invests may have
fixed rates of return or floating or variable rates. For a list of all
securities in which the Fund may invest, please read "Investment Practices."
RISK CONSIDERATIONS
The Fund invests in West Virginia Municipal Securities, which may be impacted by
economic and political developments in West Virginia. The West Virginia
Municipal Securities also include fixed-income investments. The value of these
securities will change in response to interest rate changes and other factors.
Before you invest, please read "More About the Funds" and "Investment Risks."
TAX CONSIDERATIONS
Up to 100% of the Fund's assets may be invested in West Virginia Municipal
Securities and Municipal Securities the interest on which may be subject to
Federal alternative minimum tax for individuals. Shareholders who are subject to
the Federal alternative minimum tax may have all or a portion of their income
from the Fund subject to Federal income tax. In addition, corporate shareholders
will be required to take the interest on Municipal Securities and West Virginia
Municipal Securities into account in determining their alternative minimum
taxable income.
FUND MANAGEMENT
The Fund is managed by a team of portfolio managers, research analysts and fixed
income traders. The team works together to establish general duration and sector
strategies for the Fund. Each team member makes recommendations about securities
in the Fund. The research analysts and trading personnel provide individual
security and sector recommendations, while the portfolio managers select and
allocate individual securities in a manner designed to meet the investment
objectives of the Fund.
21
<PAGE> 207
SHAREHOLDER EXPENSES
<TABLE>
<CAPTION>
SHAREHOLDER TRANSACTION EXPENSES(1) CLASS A CLASS B CLASS C CLASS I
- ------------------------------------ -------- ------- ------- -------
<S> <C> <C> <C> <C>
Maximum Sales Charge Imposed on Purchases
(as a percentage of offering price) 4.50% none none none
Maximum Contingent Deferred Sales Charge
(as a percentage of original purchase
price or redemption proceeds, as
applicable) none(2) 5.00% 1.00% none
Redemption Fees none none none none
Exchange Fees none none none none
ANNUAL OPERATING EXPENSES) (as a
percentage of average daily net assets)(3)
Investment Advisory Fees (after fee
waiver)(4) .40% .40% .40% .40%
12b-1 Fees (after fee waiver)(5) .25% .90% .90% none
Other Expenses .32% .32% .32% .32%
Total Fund Operating Expenses (after fee
waivers)(6) .97% 1.62% 1.62% .72%
</TABLE>
(1) If you buy or sell shares through a Shareholder Servicing Agent, you
may be charged separate transaction fees by the Shareholder Servicing
Agent. In addition, a $10.00 sub-minimum account fee may be applicable
and a $7.00 charge will be deducted from redemption amounts paid by
wire.
(2) Except for purchases of $1 million or more. Please see "Sales Charges."
(3) Expense information has been restated to reflect current fees.
(4) Without the fee waiver, Investment Advisory Fees would be .45% for all
classes of shares.
(5) Due to 12b-1 fees, long-term Class A, Class B and Class C shareholders
may pay more than the equivalent of the maximum front-end sales charges
permitted by the rules of the National Association of Securities
Dealers. Without the voluntary waiver of fees, 12b-1 fees would be .35%
for Class A shares and 1.00% for Class B and Class C shares.
(6) Without the voluntary reduction of Investment Advisory and 12b-1 fees,
Total Operating Expenses would be 1.12% for Class A shares, 1.77% for
Class B shares, 1.77% for Class C shares and .77% for Class I
shares.
EXAMPLE
An investor would pay the following expenses on a $1,000 investment in the Fund,
assuming: (1) payment of the maximum sales charge; (2) 5% annual return; and (3)
redemption at the end of each time period.
22
<PAGE> 208
<TABLE>
<CAPTION>
1 YEAR 3 YEARS 5 YEARS 10 YEARS
------- ------- ------- --------
<S> <C> <C> <C> <C>
Class A $54 $75 $ 96 $159
Class A (without fee waivers) $56 $79 $104 $175
Class B $66 $81 $108 $175
Class B (without fee waivers) $68 $86 $116 $191
Class C $26 $51 $ 88 $192
Class C (without fee waivers) $28 $56 $ 96 $208
Class I $ 7 $23 $ 40 $ 89
Class I (without fee waiver) $ 8 $25 $ 43 $ 95
</TABLE>
Assuming no redemption at the end of each time period, 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 $54 $75 $ 96 $159
Class A (without fee waivers) $56 $79 $104 $175
Class B $16 $51 $ 88 $175
Class B (without fee waivers) $18 $56 $ 96 $191
Class C $16 $51 $ 88 $192
Class C (without fee waivers) $18 $56 $ 96 $208
Class I $ 7 $23 $ 40 $ 89
Class I (without fee waiver) $ 8 $25 $ 43 $ 95
</TABLE>
Class B shares automatically convert to Class A shares after eight (8) years.
Therefore, the "10 years" examples above reflect this conversion.
These examples are designed to assist you in understanding the various costs and
expenses that may be directly or indirectly paid by investors in the Fund. THESE
EXAMPLES SHOULD NOT BE CONSIDERED A REPRESENTATION OF PAST OR FUTURE EXPENSES
AND ACTUAL EXPENSES MAY BE GREATER OR LESS THAN THOSE SHOWN.
23
<PAGE> 209
THE ONE GROUP(R) WEST VIRGINIA MUNICIPAL BOND FUND FINANCIAL HIGHLIGHTS
The Financial Highlights are intended to help you understand the Fund's
financial performance for the past 10 years, or since inception, if less than 10
years. The total returns in the table represent the rate a shareholder would
have earned on an investment in the Fund (assuming reinvestment of all dividends
and distributions). This information has been derived from financial statements
audited by PricewaterhouseCoopers, LLP, whose report, along with the Fund's
financial statements, is incorporated by reference in the Statement of
Additional Information, which is available upon request.
<TABLE>
<CAPTION>
JAN. 20, 1997
YEAR ENDED THROUGH
CLASS I JUNE 30, 1998 JUNE 30, 1997(a)
------- ------------- ----------------
<S> <C>
NET ASSET VALUE, BEGINNING OF PERIOD $ 10.00
-------
Investment Activities:
Net investment income 0.22
Net realized and unrealized gains from investments 0.06
Total from Investment Activities 0.28
Distributions:
Net investment income (0.22)
-------
Total Distributions (0.22)
-------
NET ASSET VALUE, END OF PERIOD $ 10.06
-------
Total Return 2.84%(b)
RATIOS/SUPPLEMENTARY DATA:
Net Assets at end of period (000) $96,270
Ratio of expenses to average net assets 0.59%(c)
Ratio of net investment income to average net assets 5.04%(c)
Ratio of expenses to average net assets* 0.67%(c)
Ratio of net investment income to average net assets* 4.96%(c)
Portfolio turnover(d) 6.21%
</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) Not annualized. (c)
Annualized. (d) Portfolio turnover is calculated on the basis of the Fund
as a whole without distinguishing among the classes of shares issued.
24
<PAGE> 210
<TABLE>
<CAPTION>
JAN. 20, 1997
YEAR ENDED THROUGH
CLASS A JUNE 30, 1998 JUNE 30, 1997(a)
------- ------------- ----------------
<S> <C>
NET ASSET VALUE, BEGINNING OF PERIOD $10.00
------
Investment Activities:
Net investment income 0.16
Net realized and unrealized gains from investments 0.15
Total from Investment Activities 0.31
Distributions:
Net investment income (0.16)
------
Total Distributions (0.16)
------
NET ASSET VALUE, END OF PERIOD $10.15
------
Total Return (Excludes Sales Charge) 3.08%(b)
RATIOS/SUPPLEMENTARY DATA:
Net Assets at end of period (000) $ 808
Ratio of expenses to average net assets 0.84%(c)
Ratio of net investment income to average net assets 4.94%(c)
Ratio of expenses to average net assets* 0.97%(c)
Ratio of net investment income to average net assets* 4.81%(c)
Portfolio turnover(d) 6.21%
</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) Not annualized. (c)
Annualized. (d) Portfolio turnover is calculated on the basis of the Fund
as a whole without distinguishing among the classes of shares issued.
25
<PAGE> 211
THE ONE GROUP(R) WEST VIRGINIA MUNICIPAL BOND FUND FINANCIAL HIGHLIGHTS
<TABLE>
<CAPTION>
JAN. 20, 1997
YEAR ENDED THROUGH
CLASS B JUNE 30, 1998 JUNE 30, 1997(a)
------- ------------- ----------------
<S> <C>
NET ASSET VALUE, BEGINNING OF PERIOD $10.00
------
Investment Activities:
Net investment income 0.14
Net realized and unrealized gains from investments 0.12
Total from Investment Activities 0.26
Distributions:
Net investment income (0.14)
------
Total Distributions (0.14)
------
NET ASSET VALUE, END OF PERIOD $10.12
------
Total Return (Excludes Sales Charge) 2.64%(b)
RATIOS/SUPPLEMENTARY DATA:
Net Assets at end of period (000) $ 614
Ratio of expenses to average net assets 1.49%(c)
Ratio of net investment income to average net assets 4.08%(c)
Ratio of expenses to average net assets* 1.62%(c)
Ratio of net investment income to average net assets* 3.95%(c)
Portfolio turnover(d) 6.21%
</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) Not annualized. (c)
Annualized. (d) Portfolio turnover is calculated on the basis of the Fund
as a whole without distinguishing among the classes of shares issued.
26
<PAGE> 212
THE ONE GROUP(R) LOUISIANA MUNICIPAL BOND FUND
INVESTMENT OBJECTIVE
The Fund is a non-diversified fund that seeks current income both consistent
with the preservation of principal and exempt from Federal income tax and
Louisiana income tax.
INVESTMENT STRATEGY
The Fund invests in investment grade municipal securities issued by or on behalf
of Louisiana and its authorities, political subdivisions, agencies and
instrumentalities, the interest on which, in the opinion of issuer's counsel, is
exempt from both Federal income tax and Louisiana state income tax ("Louisiana
Municipal Securities"). The Fund's average weighted maturity normally will be
between five and twenty years, although the Fund may invest in securities of any
maturity.
PORTFOLIO SECURITIES
The Fund invests at least 80% of its net assets in Louisiana Municipal
Securities. This is a fundamental policy. The Fund also may hold up to 20% of
its total assets in cash or invest in municipal securities of other states
("Municipal Securities"), short-term taxable investments including repurchase
agreements, and U.S. Government Securities or other cash equivalents. The
securities in which the Fund invests may have fixed rates of return or floating
or variable rates. For a list of all securities in which the Fund may invest,
please read "Investment Practices."
RISK CONSIDERATIONS
The Fund invests in Louisiana Municipal Securities, which may be impacted by
economic and political developments in Louisiana. The Louisiana Municipal
Securities also include fixed-income investments. The value of these securities
will change in response to interest rate changes and other factors. Before you
invest, please read "More About the Funds" and "Investment Risks."
TAX CONSIDERATIONS
Up to 100% of the Fund's assets may be invested in Louisiana Municipal
Securities and Municipal Securities the interest on which may be subject to
Federal alternative minimum tax for individuals. Shareholders who are subject to
the Federal alternative minimum tax may have all or a portion of their income
from the Fund subject to Federal income tax. In addition, corporate shareholders
will be required to take the interest on Municipal Securities and Louisiana
Municipal Securities into account in determining their alternative minimum
taxable income.
FUND MANAGEMENT
The Fund is managed by a team of portfolio managers, research analysts and fixed
income traders. The team works together to establish general duration and sector
strategies for the Fund. Each team member makes recommendations about securities
in the Fund. The research analysts and trading personnel provide individual
security and sector recommendations, while the portfolio managers select and
allocate individual securities in a manner designed to meet the investment
objectives of the Fund.
27
<PAGE> 213
SHAREHOLDER EXPENSES
<TABLE>
<CAPTION>
SHAREHOLDER TRANSACTION EXPENSES(1) CLASS A CLASS B CLASS C CLASS I
- ------------------------------------ -------- ------- ------- -------
<S> <C> <C> <C> <C>
Maximum Sales Charge Imposed on Purchases
(as a percentage of offering price) 4.50% none none none
Maximum Contingent Deferred Sales Charge
(as a percentage of original purchase
price or redemption proceeds, as
applicable) none(2) 5.00% 1.00% none
Redemption Fees none none none none
Exchange Fees none none none none
ANNUAL OPERATING EXPENSES) (as a
percentage of average daily net assets)(3)
Investment Advisory Fees (after fee
waiver)(4) .40% .40% .40% .40%
12b-1 Fees (after fee waiver)(5) .25% .90% .90% none
Other Expenses .32% .32% .32% .32%
Total Fund Operating Expenses (after fee
waivers)(6) .97% 1.62% 1.62% .72%
</TABLE>
(1) If you buy or sell shares through a Shareholder Servicing Agent, you
may be charged separate transaction fees by the Shareholder Servicing
Agent. In addition, a $10.00 sub-minimum account fee may be applicable
and a $7.00 charge will be deducted from redemption amounts paid by
wire.
(2) Except for purchases of $1 million or more. Please see "Sales Charges."
(3) Expense information has been restated to reflect current fees.
(4) Without the fee waiver, Investment Advisory Fees would be .60% for all
classes of shares.
(5) Due to 12b-1 fees, long-term Class A, Class B and Class C shareholders
may pay more than the equivalent of the maximum front-end sales charges
permitted by the rules of the National Association of Securities
Dealers. Without the voluntary waiver of fees, 12b-1 fees would be .35%
for Class A shares and 1.00% for Class B and Class C shares.
(6) Without the voluntary reduction of Investment Advisory and 12b-1 fees,
Total Operating Expenses would be 1.27% for Class A shares, 1.92% for
Class B shares, 1.92% for Class C shares and .92% for Class I
shares.
EXAMPLE
An investor would pay the following expenses on a $1,000 investment in the Fund,
assuming: (1) payment of the maximum sales charge; (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 $75 $ 96 $159
Class A (without fee waivers) $57 $83 $112 $191
Class B $66 $81 $108 $175
Class B (without fee waivers) $69 $90 $124 $207
Class C $26 $51 $ 88 $192
Class C (without fee waivers) $29 $60 $104 $224
Class I $ 7 $23 $ 40 $ 89
Class I (without fee waiver) $ 9 $29 $ 51 $113
</TABLE>
28
<PAGE> 214
Assuming no redemption at the end of each time period, 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 $54 $75 $ 96 $159
Class A (without fee waivers) $57 $83 $112 $191
Class B $16 $51 $ 88 $175
Class B (without fee waivers) $19 $60 $104 $207
Class C $16 $51 $ 88 $192
Class C (without fee waivers) $19 $60 $104 $224
Class I $ 7 $23 $ 40 $ 89
Class I (without fee waiver) $ 9 $29 $ 51 $113
</TABLE>
Class B shares automatically convert to Class A shares after eight (8) years.
Therefore, the "10 years" examples above reflect this conversion.
These examples are designed to assist you in understanding the various costs and
expenses that may be directly or indirectly paid by investors in the Fund. THESE
EXAMPLES SHOULD NOT BE CONSIDERED A REPRESENTATION OF PAST OR FUTURE EXPENSES
AND ACTUAL EXPENSES MAY BE GREATER OR LESS THAN THOSE SHOWN.
29
<PAGE> 215
THE ONE GROUP(R) LOUISIANA MUNICIPAL BOND FUND FINANCIAL HIGHLIGHTS
The Financial Highlights are intended to help you understand the Fund's
financial performance for the past 10 years or since inception, if less than 10
years. The total returns in the table represent the rate a shareholder would
have earned on an investment in the Fund (assuming reinvestment of all dividends
and distributions). This information has been derived from financial statements
audited by PricewaterhouseCoopers, LLP, whose report, along with the Fund's
financial statements, is incorporated by reference in the Statement of
Additional Information, which is available upon request.
<TABLE>
<CAPTION>
YEAR ENDED JUNE 30, MARCH 26, 1996
------------------------ THROUGH
CLASS I 1998 1997 JUNE 30, 1996(a)
------- ---- ---- ----------------
<S> <C> <C>
NET ASSET VALUE, BEGINNING OF PERIOD $ 9.93 $ 10.00
-------- --------
Investment Activities:
Net investment income 0.49 0.13
Net realized and unrealized gains (losses)
from investments 0.17 (0.07)
-------- --------
Total from Investment Activities 0.66 0.06
-------- --------
Distributions:
Net investment income (0.49) (0.13)
-------- --------
Total Distributions (0.49) (0.13)
-------- --------
NET ASSET VALUE, END OF PERIOD $ 10.10 $ 9.93
-------- --------
Total Return 6.81% 0.90%(b)(c)
RATIOS/SUPPLEMENTARY DATA:
Net Assets at end of period (000) $113,338 $136,041
Ratio of expenses to average net assets 0.62% 0.71%(d)
Ratio of net investment income to
average net assets 4.91% 4.76%(d)
Ratio of expenses to average net assets* 0.84% 0.86%(d)
Ratio of net investment income to
average net assets* 4.69% 4.61%(d)
Portfolio turnover(e) 17.39% 16.72%
</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 date reorganized as a fund of The One Group. (b) Not annualized.
(c) Represents total return for Class A Shares from December 1, 1995 through
March 25, 1996 plus total return for Class I Shares for the period March
26, 1996 through June 30, 1996. (d) Annualized. (e) Portfolio turnover is
calculated on the basis of the Fund as a whole without distinguishing among
the classes of shares issued.
30
<PAGE> 216
<TABLE>
<CAPTION>
SEVEN MONTHS
YEAR ENDED JUNE 30, ENDED JUNE 30, YEAR ENDED NOVEMBER 30,
------------------- -------------- -----------------------
CLASS A 1998 1997 1996(a) 1995 1994 1993 1992 1991
------- ---- ---- ------- ---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C> <C> <C> <C>
NET ASSET VALUE, BEGINNING OF
PERIOD $ 9.93 $ 10.09 $ 9.38 $ 10.27 $ 9.92 $ 9.73 $ 9.51
------- ------- -------- -------- -------- -------- -------
Investment Activities:
Net investment income 0.47 0.24 0.50 0.49 0.52 0.55 0.56
Net realized and unrealized
gains (losses) from
investments 0.17 (0.16) 0.71 (0.79) 0.42 0.26 0.22
------- ------- -------- -------- -------- -------- -------
Total from Investment
Activities 0.64 0.08 1.21 (0.30) 0.94 0.82 0.78
------- ------- -------- -------- -------- -------- -------
Distributions:
Net investment income (0.47) (0.24) (0.50) (0.49) (0.52) (0.55) (0.56)
Net realized gains -- -- -- (0.10) (0.07) (0.07) --
------- ------- -------- -------- -------- -------- -------
Total Distributions (0.47) (0.24) (0.50) (0.59) (0.59) (0.62) (0.56)
------- ------- -------- -------- -------- -------- -------
NET ASSET VALUE,
END OF PERIOD $ 10.10 $ 9.93 $ 10.09 $ 9.38 $ 10.27 $ 9.92 $ 9.73
------- ------- -------- -------- -------- -------- -------
Total Return (Excludes Sales
Charge) 6.55% 0.84%(b) 13.11% (2.97)% 9.65% 8.64% 8.45%
RATIOS/SUPPLEMENTARY DATA:
Net Assets at end of period
(000) $48,498 $53,479 $206,119 $196,820 $196,534 $135,692 $88,503
Ratio of expenses to average
net assets 0.87% 0.69%(c) 0.62% 0.65% 0.62% 0.58% 0.61%
Ratio of net investment
income to average net
assets 4.66% 4.71%(c) 5.07% 4.97% 5.07% 5.70% 5.86%
Ratio of expenses to average
net assets* 1.19% 0.86%(c) 0.77% 0.80% 0.78% 0.83% 0.86%
Ratio of net investment
income to average net
assets* 4.34% 4.54%(c) 4.92% 4.82% 4.91% 5.45% 5.61%
Portfolio turnover(d) 17.39% 16.72% 28.00% 24.00% 25.00% 32.00% 35.00%
</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)
Upon reorganizing as a fund of The One Group, the Paragon Louisiana Tax-Free
Fund became the Louisiana Municipal Bond Fund. Financial highlights for the
periods prior to March 26, 1996 represents the Paragon Louisiana Tax-Free
Fund. The per share data for the periods prior to March 26, 1996 have been
restated to reflect the impact of restatement of net asset value from $10.67
to $10.00 effective March 26, 1996. (b) Not annualized. (c) Annualized. (d)
Portfolio turnover is calculated on the basis of the Fund as a whole without
distinguishing among the classes of shares issued.
31
<PAGE> 217
THE ONE GROUP(R) LOUISIANA MUNICIPAL BOND FUND FINANCIAL HIGHLIGHTS
<TABLE>
<CAPTION>
SEVEN MONTHS SEPT. 16, 1994
YEAR ENDED ENDED YEAR ENDED THROUGH
JUNE 30, JUNE 30, NOV. 30, NOV. 30,
--------------- ------------ ---------- --------
CLASS B 1998 1997 1997(a) 1995 1994(b)
------- ---- ---- ------- ---- -------
<S> <C> <C> <C> <C> <C>
NET ASSET VALUE, BEGINNING OF PERIOD $ 9.93 $10.09 $ 9.36 $9.73
------ ------ ------ -----
Investment Activities:
Net investment income 0.40 0.21 0.42 0.08
Net realized and unrealized
gains (losses) from
investments 0.17 (0.16) 0.73 (0.37)
------ ------ ------ -----
Total from Investment Activities 0.57 0.05 1.15 (0.29)
------ ------ ------ -----
Distributions:
Net investment income (0.40) (0.21) (0.42) (0.08)
------ ------ ------ -----
Total Distributions (0.40) (0.21) (0.42) (0.08)
NET ASSET VALUE, END OF PERIOD $10.10 $ 9.93 $10.09 $9.36
------ ------ ------ -----
Total Return (Excludes Sales Charge) 5.87% 0.48%(c) 12.52% 2.94%(c)
RATIOS/SUPPLEMENTARY DATA:
Net Assets at end of period (000) $3,835 $3,223 $2,115 $ 204
Ratio of expenses to average
net assets 1.51% 1.50%(d) 1.37% 1.41%(d)
Ratio of net investment income
to average net assets 4.02% 3.98%(d) 4.27% 4.45%(d)
Ratio of expenses to average
net assets* 1.85% 1.70%(d) 1.52% 1.56%(d)
Ratio of net investment
income to average net assets* 3.68% 3.78%(d) 4.12% 4.30%(d)
Portfolio turnover(e) 17.39% 16.72% 28.00% 24.00%
</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)
Upon reorganizing as a fund of The One Group, the Paragon Louisiana Tax-Free
Fund became the Louisiana Municipal Bond Fund. Financial highlights for the
periods prior to March 26, 1996 represents the Paragon Louisiana Tax-Free
Fund. The per share data for the periods prior to March 26, 1996 have been
restated to reflect the impact of restatement of net asset value from $10.70
to $10.00 effective March 26, 1996. (b) Class B Shares commenced offering on
September 16, 1994. (c) Not annualized. (d) Annualized. (e) Portfolio
turnover is calculated on the basis of the Fund as a whole without
distinguishing among the classes of shares issued.
32
<PAGE> 218
THE ONE GROUP(R) OHIO MUNICIPAL BOND FUND
INVESTMENT OBJECTIVE
The Fund is a non-diversified fund that seeks current income exempt from Federal
income tax and Ohio personal income tax, consistent with the preservation of
principal.
INVESTMENT STRATEGY
The Fund invests in debt securities issued by or on behalf of Ohio and its
respective authorities, political subdivisions, agencies and instrumentalities,
the interest on which, in the opinion of issuer's counsel, is exempt from
Federal income tax and Ohio personal income tax ("Ohio Municipal Securities").
Generally, the Fund's average weighted maturity will be between five and twenty
years, although the Fund may invest in securities of any maturity.
PORTFOLIO SECURITIES
The Fund invests at least 80% of its total assets in Ohio Municipal Securities.
This is a fundamental policy. The Fund also may invest up to 20% of its total
assets in bonds and notes of states (other than Ohio) as well as of territories
and possessions of the United States, including the District of Columbia, and
their respective authorities, agencies, instrumentalities, and political
subdivisions, the interest on which, in the opinion of issuer's counsel, is
exempt from Federal income tax ("Municipal Securities"). The securities in which
the Fund invests may have fixed rates of return or floating or variable rates.
For a list of all securities in which the Fund may invest, please read
"Investment Practices."
RISK CONSIDERATIONS
The Fund invests in Ohio Municipal Securities, which may be impacted by economic
and political developments in Ohio. The Ohio Municipal Securities also include
fixed-income investments. The value of these securities will change in response
to interest rate changes and other factors. Before you invest, please read "More
About the Funds" and "Investment Risks."
TAX CONSIDERATIONS
Up to 100% of the Fund's assets may be invested in Ohio Municipal Securities and
Municipal Securities the interest on which may be subject to Federal alternative
minimum tax for individuals. Shareholders who are subject to the Federal
alternative minimum tax may have all or a portion of their income from the Fund
subject to Federal income tax. In addition, corporate shareholders will be
required to take the interest on Municipal Securities and Ohio Municipal
Securities into account in determining their alternative minimum taxable income.
FUND MANAGEMENT
The Fund is managed by a team of portfolio managers, research analysts and fixed
income traders. The team works together to establish general duration and sector
strategies for the Fund. Each team member makes recommendations about securities
in the Fund. The research analysts and trading personnel provide individual
security and sector recommendations, while the portfolio managers select and
allocate individual securities in a manner designed to meet the investment
objectives of the Fund.
33
<PAGE> 219
SHAREHOLDER EXPENSES
<TABLE>
<CAPTION>
SHAREHOLDER TRANSACTION EXPENSES(1) CLASS A CLASS B CLASS C CLASS I
- ------------------------------------ -------- ------- ------- -------
<S> <C> <C> <C> <C>
Maximum Sales Charge Imposed on Purchases
(as a percentage of offering price) 4.50% none none none
Maximum Contingent Deferred Sales Charge
(as a percentage of original purchase
price or redemption proceeds, as
applicable) none(2) 5.00% 1.00% none
Redemption Fees none none none none
Exchange Fees none none none none
ANNUAL OPERATING EXPENSES(3) (as a
percentage of average daily net assets)
Investment Advisory Fees (after fee
waiver)(4) .40% .40% .40% .40%
12b-1 Fees (after fee waiver)(5) .25% .90% .90% none
Other Expenses .22% .22% .22% .22%
Total Fund Operating Expenses (after fee
waivers)(6) .87% 1.52% 1.52% .62%
</TABLE>
(1) If you buy or sell shares through a Shareholder Servicing Agent, you
may be charged separate transaction fees by the Shareholder Servicing
Agent. In addition, a $10.00 sub-minimum account fee may be applicable
and a $7.00 charge will be deducted from redemption amounts paid by
wire.
(2) Except for purchases of $1 million or more. Please see "Sales Charges."
(3) Expense information has been restated to reflect current fees.
(4) Without the fee waiver, Investment Advisory Fees would be .60% for all
classes of shares.
(5) Due to 12b-1 fees, long-term Class A, Class B and Class C shareholders
may pay more than the equivalent of the maximum front-end sales charges
permitted by the rules of the National Association of Securities
Dealers. Without the voluntary waiver of fees, 12b-1 fees would be .35%
for Class A shares and 1.00% for Class B and Class C shares.
(6) Without the voluntary reduction of Investment Advisory and 12b-1 fees,
Total Operating Expenses would be 1.17% for Class A shares, 1.82% for
Class B shares, 1.82% for Class C shares and .82% for Class I
shares.
EXAMPLE
An investor would pay the following expenses on a $1,000 investment in the Fund,
assuming: (1) payment of the maximum sales charge; (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 $53 $72 $ 91 $147
Class A (without fee waivers) $56 $80 $106 $181
Class B $65 $78 $103 $164
Class B (without fee waivers) $68 $87 $119 $197
Class C $25 $48 $ 83 $181
Class C (without fee waivers) $28 $57 $ 99 $214
Class I $ 6 $20 $ 35 $ 77
Class I (without fee waiver) $ 8 $26 $ 46 $101
</TABLE>
34
<PAGE> 220
Assuming no redemption at the end of each time period, 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 $53 $72 $ 91 $147
Class A (without fee waivers) $56 $80 $106 $181
Class B $15 $48 $ 83 $164
Class B (without fee waivers) $19 $60 $104 $205
Class C $15 $48 $ 83 $181
Class C (without fee waivers) $18 $57 $ 99 $214
Class I $ 6 $20 $ 35 $ 77
Class I (without fee waiver) $ 8 $26 $ 46 $101
</TABLE>
Class B shares automatically convert to Class A shares after eight (8) years.
Therefore, the "10 years" examples above reflect this conversion.
These examples are designed to assist you in understanding the various costs and
expenses that may be directly or indirectly paid by investors in the Fund. THESE
EXAMPLES SHOULD NOT BE CONSIDERED A REPRESENTATION OF PAST OR FUTURE EXPENSES
AND ACTUAL EXPENSES MAY BE GREATER OR LESS THAN THOSE SHOWN.
35
<PAGE> 221
THE ONE GROUP(R) OHIO MUNICIPAL BOND FUND FINANCIAL HIGHLIGHTS
The Financial Highlights are intended to help you understand the Fund's
financial performance for the past 10 years, or since inception if less than 10
years. The total returns in the table represent the rate a shareholder would
have earned on an investment in the Fund (assuming reinvestment of all dividends
and distributions). This information has been derived from financial statements
audited by PricewaterhouseCoopers, LLP, whose report, along with the Fund's
financial statements, is incorporated by reference in the Statement of
Additional Information, which is available upon request.
<TABLE>
<CAPTION>
YEARS ENDED JUNE 30,
--------------------
CLASS I 1998 1997 1996 1995 1994 1993 1992(c)
------- ---- ---- ---- ---- ---- ---- -------
<S> <C> <C> <C> <C> <C> <C> <C>
NET ASSET VALUE, BEGINNING
OF PERIOD $ 10.69 $ 10.65 $ 10.58 $ 11.11 $ 10.48 $ 10.00
-------- ------- ------- ------- ------- -------
Investment Activities:
Net investment income 0.56 0.56 0.55 0.51 0.54 0.56
Net realized and
unrealized gains
(losses) from investments 0.19 0.04 0.07 (0.50) 0.62 0.47
-------- ------- ------- ------- ------- -------
Total from Investment
Distributions:
Net investment income (0.56) (0.56) (0.55) (0.52) (0.53) (0.55)
In excess of net
realized gains -- -- -- (0.02) -- --
-------- ------- ------- ------- ------- -------
Total Distributions (0.56) (0.56) (0.55) (0.54) (0.53) (0.55)
-------- ------- ------- ------- ------- -------
NET ASSET VALUE, END
OF PERIOD $ 10.88 $ 10.69 $ 10.65 $ 10.58 $ 11.11 $ 10.48
-------- ------- ------- ------- ------- -------
Total Return 7.22% 5.69% 6.07% 0.07% 11.43% 10.64%
RATIOS/SUPPLEMENTARY DATA:
Net Assets at end of
period (000) $133,172 $80,611 $79,993 $93,261 $74,792 $45,199
Ratio of expenses to
average net assets 0.54% 0.57% 0.58% 0.53% 0.55% 0.63%(b)
Ratio of net investment
income to average net assets 5.24% 5.17% 5.29% 4.76% 5.14% 5.61%(b)
Ratio of expenses to average net
assets* 0.84% 0.95% 0.91% 0.86% 0.94% 1.21%(b)
Ratio of net investment income to
average net assets* 4.94% 4.79% 4.96% 4.43% 4.75% 5.03%(b)
Portfolio turnover(a) 7.45% 24.61% 77.69% 16.77% 26.67% 9.78%
</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) Portfolio turnover is calculated on the basis of the Fund as a whole
without distinguishing among the classes of shares issued. (b) Annualized.
(c) Fund commenced operation on July 2, 1991.
36
<PAGE> 222
<TABLE>
<CAPTION>
YEARS ENDED JUNE 30,
--------------------
CLASS A 1998 1997 1996 1995 1994 1993 1992(c)
------- ---- ---- ---- ---- ---- ---- -------
<S> <C> <C> <C> <C> <C> <C> <C>
NET ASSET VALUE, BEGINNING
OF PERIOD $ 10.72 $ 10.68 $ 10.61 $ 11.13 $ 10.48 $ 10.29
------- ------- ------- ------- ------- -------
Investment Activities:
Net investment income 0.54 0.55 0.53 0.50 0.52 0.20
Net realized and unrealized
gains (losses) from
investments 0.19 0.03 0.07 (0.48) 0.64 0.21
------- ------- ------- ------- ------- -------
Total from Investment Activities 0.73 0.58 0.60 0.02 1.16 0.41
------- ------- ------- ------- ------- -------
Distributions:
Net investment income (0.54) (0.54) (0.51) (0.50) (0.51) (0.22)
In excess of net
investment income -- -- (0.02) (0.02) -- --
In excess of net realized gains -- -- -- (0.02) -- --
------- ------- ------- ------- ------- -------
Total Distributions (0.54) (0.54) (0.53) (0.54) (0.51) (0.22)
------- ------- ------- ------- ------- -------
NET ASSET VALUE, END
OF PERIOD $ 10.91 $ 10.72 $ 10.68 $ 10.61 $ 11.13 $ 10.48
------- ------- ------- ------- ------- -------
Total Return (Excludes
Sales Charge) 6.95% 5.44% 5.79% (0.05)% 11.40% 10.85%(b)
RATIOS/SUPPLEMENTARY DATA:
Net Assets at end of
period (000) $16,114 $16,507 $12,006 $14,883 $13,092 $ 41
Ratio of expenses to
average net assets 0.79% 0.82% 0.82% 0.78% 0.77% 1.01%(b)
Ratio of net investment
income to average net assets 4.96% 4.92% 5.01% 4.63% 4.85% 5.16%(b)
Ratio of expenses to average net
assets* 1.19% 1.30% 1.25% 1.21% 1.25% 1.40%(b)
Ratio of net investment
income to average net assets* 4.56% 4.44% 4.58% 4.20% 4.37% 4.77%(b)
Portfolio turnover(a) 7.45% 24.61% 77.69% 16.77% 26.67% 9.78%
</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) Portfolio turnover is calculated on the basis of the Fund as a whole
without distinguishing among the classes of shares issued. (b) Annualized.
(c) Class A Shares commenced offering on February 18, 1992.
37
<PAGE> 223
<TABLE>
<CAPTION>
THE ONE GROUP(R) OHIO MUNICIPAL BOND FUND FINANCIAL HIGHLIGHTS
YEARS ENDED JUNE 30,
--------------------
CLASS B 1998 1997 1996 1995 1994(a)
------- ---- ---- ---- ---- -------
<S> <C> <C> <C> <C> <C>
NET ASSET VALUE, BEGINNING
OF PERIOD $ 10.79 $10.75 $10.68 $11.31
------- ------ ------ ------
Investment Activities:
Net investment income 0.47 0.48 0.43 0.17
Net realized and
unrealized gains
(losses) from investments 0.19 0.03 0.07 (0.62)
------- ------ ------ ------
Total from Investment
Activities 0.66 0.51 0.50 (0.45)
------- ------ ------ ------
Distributions:
Net investment income (0.47) (0.47) (0.43) (0.17)
In excess of net
investment income -- -- -- (0.01)
------- ------ ------ ------
Total Distributions (0.47) (0.47) (0.43) (0.18)
------- ------ ------- -------
NET ASSET VALUE, END
OF PERIOD $ 10.98 $10.79 $10.75 $10.68
------- ------ ------ ------
Total Return (Excludes
Sales Charge) 6.26% 4.79% 5.17% (4.02)%(b)
RATIOS/SUPPLEMENTARY DATA:
Net Assets at end of
period (000) $14,316 $8,854 $3,209 $2,043
Ratio of expenses
to average net assets 1.44% 1.47% 1.48% 1.28%(c)
Ratio of net investment
income to average
net assets 4.33% 4.27% 4.40% 4.23%(c)
Ratio of expenses to
average net assets* 1.84% 1.95% 1.91% 1.68%(c)
Ratio of net investment
income to average
net assets* 3.93% 3.79% 3.97% 3.83%(c)
Portfolio turnover(d) 7.45% 24.61% 77.69% 16.77%
</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 Shares commenced offering on January 14, 1994. (b) Not
annualized. (c) Annualized. (d) Portfolio turnover is calculated on the
basis of the Fund as a whole without distinguishing among the classes of
shares issued.
38
<PAGE> 224
THE ONE GROUP(R) KENTUCKY MUNICIPAL BOND FUND
INVESTMENT OBJECTIVE
The Fund is a non-diversified fund that seeks current income exempt from Federal
income tax and Kentucky personal income tax, consistent with the preservation of
principal.
INVESTMENT STRATEGY
The Fund invests in debt securities issued by or on behalf of Kentucky and its
respective authorities, political subdivisions, agencies and instrumentalities,
the interest on which, in the opinion of issuer's counsel, is exempt from
Kentucky personal income tax ("Kentucky Municipal Securities"), as well as debt
securities that, in the opinion of issuer's counsel, produce interest that is
exempt from Federal income tax ("Municipal Securities"). Generally, the Fund's
average weighted maturity will be between five and twenty years, although the
Fund may invest in securities of any maturity.
PORTFOLIO SECURITIES
The Fund invests at least 80% of its total assets in Municipal Securities.
Alternatively, the Fund invests its assets so that at least 80% of its annual
interest income is exempt from Federal income tax. The Fund invests at least 65%
of its total assets in Kentucky Municipal Securities. Each of these investment
policies are fundamental. The Fund may also invest up to 35% of its total assets
in bonds and notes of states (other than Kentucky) as well as of territories and
possessions of the United States, including the District of Columbia, and their
respective authorities, agencies, instrumentalities, and political subdivisions,
the interest on which is exempt from Federal income tax. The securities in which
the Fund invests may have fixed rates of return or floating or variable rates.
For a list of all securities in which the Fund may invest, please read
"Investment Practices."
RISK CONSIDERATIONS
The Fund invests in Kentucky Municipal Securities, which may be impacted by
economic and political developments in Kentucky. The Fund's investments also
include fixed-income investments. The value of these securities will change in
response to interest rate changes and other factors. Before you invest, please
read "More About the Funds" and "Investment Risks."
TAX CONSIDERATIONS
Up to 100% of the Fund's assets may be invested in Kentucky Municipal Securities
and Municipal Securities the interest on which may be subject to Federal
alternative minimum tax for individuals. Shareholders who are subject to the
Federal alternative minimum tax may have all or a portion of their income from
the Fund subject to Federal income tax. In addition, corporate shareholders will
be required to take the interest on Municipal Securities and Kentucky Municipal
Securities into account in determining their alternative minimum taxable income.
FUND MANAGEMENT
The Fund is managed by a team of portfolio managers, research analysts and fixed
income traders. The team works together to establish general duration and sector
strategies for the Fund. Each team member makes recommendations about securities
in the Fund. The research analysts and trading personnel provide individual
security and sector recommendations, while the portfolio managers select and
allocate individual securities in a manner designed to meet the investment
objectives of the Fund.
39
<PAGE> 225
SHAREHOLDER EXPENSES
<TABLE>
<CAPTION>
SHAREHOLDER TRANSACTION EXPENSES(1) CLASS A CLASS B CLASS C CLASS I
- ------------------------------------ -------- ------- ------- -----
<S> <C> <C> <C> <C>
Maximum Sales Charge Imposed on Purchases
(as a percentage of offering price) 4.50% none none none
Maximum Contingent Deferred Sales Charge
(as a percentage of original purchase
price or redemption proceeds, as
applicable) none(2) 5.00% 1.00% none
Redemption Fees none none none none
Exchange Fees none none none none
ANNUAL OPERATING EXPENSES) (as a
percentage of average daily net assets)(3)
Investment Advisory Fees (after fee
waiver)(4) .40% .40% .40% .40%
12b-1 Fees (after fee waiver)(5) .25% .90% .90% none
Other Expenses .32% .32% .32% .32%
Total Fund Operating Expenses (after fee
waivers)(6) .97% 1.62% 1.62% .72%
</TABLE>
(1) If you buy or sell shares through a Shareholder Servicing Agent, you
may be charged separate transaction fees by the Shareholder Servicing
Agent. In addition, a $10.00 sub-minimum account fee may be applicable
and a $7.00 charge will be deducted from redemption amounts paid by
wire.
(2) Except for purchases of $1 million or more. Please see "Sales Charges."
(3) Expense information has been restated to reflect current fees.
(4) Without the fee waiver, Investment Advisory Fees would be .45% for all
classes of shares.
(5) Due to 12b-1 fees, long-term Class A, Class B and Class C shareholders
may pay more than the equivalent of the maximum front-end sales charges
permitted by the rules of the National Association of Securities
Dealers. Without the voluntary waiver of fees, 12b-1 fees would be .35%
for Class A shares and 1.00% for Class B and Class C shares.
(6) Without the voluntary reduction of Investment Advisory and 12b-1 fees,
Total Operating Expenses would be 1.12% for Class A shares, 1.77% for
Class B shares, 1.77% for Class C shares and .77% for Class I
shares.
EXAMPLE
An investor would pay the following expenses on a $1,000 investment in the Fund,
assuming: (1) payment of the maximum sales charge; (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 $75 $ 96 $159
Class A (without fee waivers) $56 $79 $104 $175
Class B $66 $81 $108 $175
Class B (without fee waivers) $68 $86 $116 $191
Class C $26 $51 $ 88 $192
Class C (without fee waivers) $28 $56 $ 96 $208
Class I $ 7 $23 $ 40 $ 89
Class I (without fee waiver) $ 8 $25 $ 43 $ 95
</TABLE>
Assuming no redemption at the end of each time period, 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 $54 $75 $ 96 $159
Class A (without fee waivers) $56 $79 $104 $175
</TABLE>
40
<PAGE> 226
<TABLE>
<CAPTION>
1 YEAR 3 YEARS 5 YEARS 10 YEARS
------ ------- ------- --------
<S> <C> <C> <C> <C>
Class B $16 $51 $88 $175
Class B (without fee waivers) $18 $56 $96 $191
Class C $16 $51 $88 $192
Class C (without fee waivers) $18 $56 $96 $208
Class I $ 7 $23 $40 $ 89
Class I (without fee waiver) $ 8 $25 $43 $ 95
</TABLE>
Class B shares automatically convert to Class A shares after eight (8) years.
Therefore, the "10 years" examples above reflect this conversion.
These examples are designed to assist you in understanding the various costs and
expenses that may be directly or indirectly paid by investors in the Fund. THESE
EXAMPLES SHOULD NOT BE CONSIDERED A REPRESENTATION OF PAST OR FUTURE EXPENSES
AND ACTUAL EXPENSES MAY BE GREATER OR LESS THAN THOSE SHOWN.
41
<PAGE> 227
THE ONE GROUP(R) KENTUCKY MUNICIPAL BOND FUND FINANCIAL HIGHLIGHTS
The Financial Highlights are intended to help you understand the Fund's
financial performance for the past 10 years or since inception, if less than 10
years. Certain information reflects financial results for a single Fund share.
The total returns in the table represent the rate a shareholder would have
earned on an investment in the Fund (assuming reinvestment of all dividends and
distributions). This information has been derived from financial statements
audited by PricewaterhouseCoopers, LLP, whose report, along with the Fund's
financial statements, is incorporated by reference in the Statement of
Additional Information, which is available upon request.
<TABLE>
<CAPTION>
JANUARY 20, FEBRUARY 1, MARCH 12,
YEAR ENDED 1995 TO 1994 TO 1993 TO
JUNE 30, JUNE 30, JANUARY 19, JANUARY 31,
-------------- ----------- ------------ ------------
CLASS I 1998 1997 1996 1995(a) 1995(a) 1994(b)(c)
------- ---- ---- ---- ---------- ------------ ------------
<S> <C> <C> <C> <C> <C> <C>
NET ASSET VALUE, BEGINNING
OF PERIOD $ 10.04 $ 9.92 $ 9.49 $ 10.45 $ 10.00
-------- ------- ------- ------- -------
Investment Activities:
Net investment income 0.50 0.50 0.20 0.41 0.36
Net realized and unrealized
gains (losses)
from investments 0.16 0.12 0.43 (0.95) 0.43
-------- ------- ------- ------- -------
Total from Investment Activities 0.66 0.62 0.63 (0.54) 0.79
-------- ------- ------- ------- -------
Distributions:
Net investment income (0.50) (0.50) (0.20) (0.42) (0.34)
-------- ------- ------- ------- -------
Total Distributions (0.50) (0.50) (0.20) (0.42) (0.34)
-------- ------- ------- ------- -------
NET ASSET VALUE, END OF PERIOD $ 10.20 $ 10.04 $ 9.92 $ 9.49 $ 10.45
-------- ------- ------- ------- -------
Total Return 6.74% 6.35% 6.56%(d) (5.17)%(d) 8.05%(d)
RATIOS/SUPPLEMENTARY DATA:
Net Assets at end of
period (000) $116,830 $30,300 $32,520 $41,953 $64,663
Ratio of expenses to
average net assets 0.59% 0.68% 0.65%(e) 1.03%(e) 0.70%(e)
Ratio of net investment
income to average net
assets 5.12% 4.60% 4.70%(e) 4.27%(e) 4.19%(e)
Ratio of expenses to
average net assets* 0.72% 1.02% 0.97%(e) 1.05%(e) 0.91%(e)
Ratio of net investment
income to average net
assets* 4.99% 4.26% 4.38%(e) 4.25%(e) 3.98%(e)
Portfolio turnover(f) 13.30% 16.78% 19.75% 10.00% 5.00%
</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) Period from date reorganized as a fund of The One Group. (b) Prior to
reorganizing as a fund of The One Group, the Fund offered only one class of
shares. (c) Period from commencement of operations. (d) Not annualized. (e)
Annualized. (f) Portfolio turnover is calculated on the basis of the Fund
as a whole without distinguishing among the classes of shares issued.
42
<PAGE> 228
<TABLE>
<CAPTION>
YEAR ENDED
JUNE 30, JANUARY 20, 1995
-------------------- TO
CLASS A 1998 1997 1996 JUNE 30, 1995(a)
------- ---- ---- ---- ----------------
<S> <C> <C> <C> <C>
NET ASSET VALUE, BEGINNING
OF PERIOD $10.05 $ 9.93 $ 9.49
------ ------ ------
Investment Activities:
Net investment income 0.48 0.44 0.19
Net realized and unrealized
gains from investments 0.16 0.12 0.44
------ ------ ------
Total from Investment Activities 0.64 0.56 0.63
------ ------ ------
Distributions:
Net investment income (0.48) (0.44) (0.19)
------ ------ ------
Total Distributions (0.48) (0.44) (0.19)
------ ------ ------
NET ASSET VALUE, END OF PERIOD $10.21 $10.05 $ 9.93
------ ------ ------
Total Return (Excludes
Sales Charge) 6.46% 5.70% 5.66%(b)
RATIOS/SUPPLEMENTARY DATA:
Net Assets at end of
period (000) $5,554 $8,178 $8,818
Ratio of expenses to
average net assets 0.84% 0.93% 0.90%(c)
Ratio of net investment
income to average
net assets 4.66% 4.35% 4.44%(c)
Ratio of expenses to average
net assets* 1.04% 1.37% 1.33%(c)
Ratio of net investment
income to average
net assets* 4.46% 3.91% 4.01%(c)
Portfolio turnover(d) 13.30% 16.78% 19.75%
</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 date reorganized as a fund of The One Group. (b) Not
annualized. (c) Annualized. (d) Portfolio turnover is calculated on the
basis of the Fund as a whole without distinguishing among the classes of
shares issued.
43
<PAGE> 229
THE ONE GROUP(R) KENTUCKY MUNICIPAL BOND FUND FINANCIAL HIGHLIGHTS
<TABLE>
<CAPTION>
MARCH 16, 1995
YEAR ENDED TO
CLASS B 1998 1997 JUNE 30, 1996 JUNE 30, 1995(a)
------- ---- ---- ------------- ----------------
<S> <C> <C> <C> <C>
NET ASSET VALUE, BEGINNING
OF PERIOD $ 9.99 $ 9.87 $ 9.75
------- ------ ------
Investment Activities:
Net investment income 0.41 0.38 0.14
Net realized and unrealized
gains from investments 0.16 0.13 0.12
------- ------ ------
Total from Investment Activities 0.57 0.51 0.26
------- ------ ------
Distributions:
Net investment income (0.41) (0.39) (0.14)
------- ------ ------
Total Distributions (0.41) (0.39) (0.14)
------- ------ ------
NET ASSET VALUE, END OF PERIOD $ 10.15 $ 9.99 $ 9.87
------- ------ ------
Total Return (Excludes
Sales Charge) 5.81% 5.16% 2.63%(b)
RATIOS/SUPPLEMENTARY DATA:
Net Assets at end of
period (000) $ 2,399 $1,457 $ 79
Ratio of expenses to
average net assets 1.47% 1.58% 1.58%(c)
Ratio of net investment
income to average net assets 4.05% 3.70% 3.89%(c)
Ratio of expenses to average
net assets* 1.70% 2.02% 2.21%(c)
Ratio of net investment income
to average net assets* 3.82% 3.26% 3.25%(c)
Portfolio turnover(d) 13.30% 16.78% 19.75%
</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 Shares commenced offering on March 16, 1995. (b) Not
annualized. (c) Annualized. (d) Portfolio turnover is calculated on the
basis of the Fund as a whole without distinguishing among the classes of
shares issued.
44
<PAGE> 230
MORE ABOUT THE FUNDS
WHEN THE PROSPECTUS REFERS TO "BONDS," WHAT TYPES OF INVESTMENTS ARE INCLUDED?
"Bonds" include debt instruments issued by the U.S. Treasury, U.S. Government
agencies, mortgage related securities, municipalities and zero coupon
obligations as well as debt instruments issued by states and their respective
authorities, political subdivisions, agencies and instrumentalities.
PORTFOLIO QUALITY
The Funds only purchase securities that meet certain rating criteria:
o Municipal Securities that are bonds must be rated as investment grade.
o Arizona Municipal Securities, West Virginia Municipal Securities, Louisiana
Municipal Securities, Ohio Municipal Securities, and Kentucky Municipal
Securities that are bonds must be rated as investment grade.
o Other securities such as taxable and tax-exempt commercial paper, notes,
and variable demand obligations must be rated in one of the two highest
investment grade categories.
o The Louisiana Municipal Bond Fund may also invest in short-term tax-exempt
municipal securities rated at least MIG3 (VMIG3) by Moody's or SP-2 by S&P.
These securities may have speculative characteristics.
If the securities are unrated, Banc One Investment Advisors must determine that
they are of comparable quality to rated securities. Banc One Investment Advisors
will look at a security's rating at the time of investment. For more information
about ratings, please see "Description of Ratings" in the Appendix.
ILLIQUID INVESTMENTS
Each Fund may invest up to 15% of its net assets in illiquid investments. A
security is illiquid if it cannot be sold at approximately the value assessed by
the Fund within seven (7) days. Banc One Investment Advisors will follow
guidelines adopted by The One Group Board of Trustees in determining whether an
investment is illiquid.
SPECIAL RISK CONSIDERATIONS
Fixed Income Securities: Investments in fixed income securities (for example,
bonds) will increase or decrease in value based on changes in interest rates. If
rates increase, the value of a Fund's investments generally declines. On the
other hand, if rates fall, the value of the investments generally increases. The
value of your investment in a Fund will increase and decrease as the value of a
Fund's investments increase and decrease. While securities with longer duration
and maturities tend to produce higher yields, they also are subject to greater
fluctuations in value when interest rates change. Usually, changes in the value
of fixed income securities will not affect cash income generated, but may affect
the value of your investment.
Derivatives: Some of the Funds invest in securities that are considered to be
"derivatives." "Derivatives" are securities that derive their value from the
performance of underlying assets or securities. These include:
o options
o futures contracts
o options on futures contracts
o mortgage-backed securities, including collateralized mortgage obligations
and Real Estate Mortgage Investment Conduits (CMOs and REMICs) and stripped
mortgage-backed securities (IOs and POs)
o structured instruments
o swaps, caps and floors
o new financial products
o inverse floating rate instruments
45
<PAGE> 231
These securities may be more volatile than other investments. Derivatives
present, to varying degrees, market, credit, leverage, liquidity, and management
risks. The Fund's use of derivatives may cause the Fund to recognize higher
amounts of short-term capital gains (generally taxed at ordinary income tax
rates) than it would if the Fund did not use such instruments. For a more
detailed discussion of these risks, please read "Investment Risks".
Non-Diversified Funds: All of the Funds (except the Intermediate Tax-Free Bond
Fund and the Municipal Income Fund) are "non-diversified" funds. This means that
the Funds may invest a more significant portion of their assets in the
securities of a single issuer than can a "diversified" fund. In addition, the
Funds' investments are concentrated geographically. These concentrations
increase the risk of loss to the Funds if an issuer fails to make interest or
principal payments or if the market value of a security declines.
Municipal Securities: Because the Arizona Municipal Bond Fund, the West Virginia
Municipal Bond Fund, the Louisiana Municipal Bond Fund, the Ohio Municipal Bond
Fund, and the Kentucky Municipal Bond Fund are not diversified and because they
concentrate in securities of Arizona, West Virginia, Louisiana, Ohio, and
Kentucky issuers, respectively, certain factors may have a disproportionate
negative effect on the Funds' investments. These factors may include certain
economic conditions, constitutional amendments, legislative measures, executive
orders, administrative regulations and voter initiatives. For instance, the Ohio
economy relies to a significant degree on manufacturing. As a result, economic
activity in Ohio tends to be cyclical, which may affect the market value of Ohio
Municipal Securities or the ability of issuers to make timely payments of
interest and principal. Similarly, coal mining and related industries are an
important part of the West Virginia economy. Increased government regulation and
a reduced demand for coal has adversely affected that industry. The Louisiana
economy, like that of West Virginia, is heavily dependent on a single industry,
in this case energy (oil and gas). Louisiana continues to recover from the oil
price declines of the mid-1980's, although its debt burden is well above that of
other states, while wealth and income indicators are below the national average.
Both West Virginia and Louisiana post unemployment rates above the national
average.
Arizona's population growth continues to outpace the national average. However,
this growth is expensive and Arizona's economic outlook depends on its ability
to match long-term revenues with expenditures. In addition, Arizona's continued
growth depends to some extent on its ability to manage its water resources.
Unlike the municipal securities of most states, nearly all Kentucky Municipal
Securities are not general obligations of the issuer; rather, payment depends on
revenues generated by the property financed by the security.
For a more complete description of the risks of investing in state specific
securities, please see the Statement of Additional Information.
46
<PAGE> 232
HOW TO DO BUSINESS WITH THE ONE GROUP
PURCHASING FUND SHARES
WHERE CAN I BUY SHARES?
You may purchase Fund shares from the following sources:
o The One Group Services Company, and
o Shareholder Servicing Agents. These include investment advisors, brokers,
financial planners, banks, insurance companies, retirement or 401(k) plan
sponsors, or other intermediaries. Shares purchased this way will be held
for you by the Shareholder Servicing Agent.
WHEN CAN I BUY SHARES?
o Purchases may be made on any business day. This includes any day that the
Funds are open for business, other than weekends, days on which the New
York Stock Exchange ("NYSE") is closed, and the following holidays: New
Years Day, Martin Luther King, Jr. Day, Presidents' Day, Good Friday,
Memorial Day, Independence Day, Labor Day, Thanksgiving, and Christmas.
o Purchase requests received by The One Group Services Company before 4:00
p.m. Eastern time ("ET"), will be effective that day. One occasion, the
NYSE will close before 4:00 p.m. When that happens, purchases received
after the NYSE closes will be effective the following business day.
o Purchase orders may be cancelled by the Fund's Custodian, State Street Bank
and Trust Company, if it does not receive "federal funds" by 4:00 p.m. ET
(i) on the business day after the order is placed if you are buying
Class I shares, and (ii) on the third business day if you are
purchasing Class A, Class B or Class C shares.
o If your shares are held by a Shareholder Servicing Agent, it is the
responsibility of the Shareholder Servicing Agent to send your purchase or
redemption order to the Fund. Your Shareholder Servicing Agent may have an
earlier cut-off time for purchase and redemption requests.
o The One Group Services Company can reject a purchase order if it does not
think that it is in the best interests of a Fund and/or its shareholders to
accept the order.
o Shares are electronically recorded. Therefore, certificates will not be
issued.
47
<PAGE> 233
WHAT KIND OF SHARES CAN I BUY?
The One Group offers the following classes of shares:
o Class A, Class B and Class C shares are available to the general public.
o Class I shares are available to institutional investors and any
organization authorized to act in a fiduciary, advisory, custodial or
agency capacity. We will refer to these entities as "Intermediaries."
o If you intend to hold your shares six or more years, Class B shares may be
appropriate for you. If you intend to hold your shares for less than six
years, you may want to consider Class A or Class C shares.
HOW MUCH DO SHARES COST?
o Shares are sold at net asset value ("NAV") plus a sales charge, if any.
o Each class of shares in each Fund has a different NAV. This is primarily
because each class has different distribution expenses.
o NAV per share is calculated by dividing the total market value of a Fund's
investments and other assets allocable to a class (minus class expenses) by
the number of outstanding shares in that class.
o A Fund's NAV changes every day. NAV is calculated each business day
following the close of the NYSE at 4:00 p.m. ET. On occasion, the NYSE will
close before 4:00 p.m. ET. When that happens, NAV will be calculated as of
the time the NYSE closes.
HOW DO I OPEN AN ACCOUNT?
1. Read the prospectus carefully, and select the Fund or Funds most
appropriate for you.
2. Decide how much you want to invest.
o The minimum initial investment is $1,000 ($100 for employees of BANC
ONE CORPORATION and its affiliates).
o Subsequent investments must be at least $100 ($25 for employees of BANC
ONE CORPORATION and its affiliates).
o You may purchase no more than $250,000 of Class B shares at one time.
o The One Group Services Company may waive these minimums.
3. Complete the Account Application Form. Be sure to sign up for all of the
Account privileges that you plan to take advantage of. Doing so now means
that you will not have to complete additional paperwork later.
4. Send the completed application and a personal check (unless you choose to
pay by wire or bank transfer) payable to "The One Group" to:
State Street Bank and Trust Company
c/o The One Group
P.O. Box 8528
Boston, MA 02266-8528
5. All checks should be in U.S. dollars. Third party checks will not be
accepted. Redemptions from a Fund will not be permitted for ten (10)
calendar days if purchases are made by check or under the Systematic
Investment Plan (see below).
6. If you purchase shares through a Shareholder Servicing Agent, you may be
required to complete additional forms or follow additional procedures. You
should contact your Shareholder Servicing Agent regarding purchases,
exchanges and redemptions.
48
<PAGE> 234
7. If you have any questions, contact your Shareholder Servicing Agent or call
The One Group Services Company at 1-800-480-4111.
CAN I PURCHASE SHARES OVER THE TELEPHONE?
Yes. Simply select this option on your Account Application Form and then:
o Contact your Shareholder Servicing Agent or The One Group Services Company
at 1-800-480-4111 to relay your purchase instructions.
o Send a personal check made payable to "The One Group" to State Street Bank
and Trust Company (see address above), authorize a bank transfer or
initiate a wire transfer to the following wire address:
State Street Bank & Trust Company
Attn: Custody & Shareholder Services
ABA 011 000 028
DDA 99034167
FBO The One Group Fund (ex: The One Group Intermediate Tax-Free Bond
Fund - A)
Your Account Number (ex: 123456789)
Your Account Registration (ex: John Smith & Mary Smith, JTWROS)
o The One Group uses reasonable procedures to confirm that instructions given
by telephone are genuine. These procedures include recording telephone
instructions and asking for personal identification. If these procedures
are followed, The One Group will not be responsible for any loss,
liability, cost or expense of acting upon unauthorized or fraudulent
instructions; you bear the risk of loss.
o You may revoke your right to make purchases over the telephone by sending a
letter to:
State Street Bank and Trust Company
c/o The One Group
P.O. Box 8528
Boston, MA 02266-8528
CAN I AUTOMATICALLY INVEST ON A SYSTEMATIC BASIS?
Yes. After your Account is established, you may purchase additional Class A,
Class B and Class C shares by making automatic monthly investments from your
bank account. The minimum initial investment is still $1,000, but minimum
automatic additions are only $25. The One Group Services Company may waive these
minimums. To establish a Systematic Investment Plan:
o Select the "Systematic Investment Plan" option on the Account Application
Form.
o Provide the necessary information about the bank account from which your
investments will be made.
o Shares purchased under a Systematic Investment Plan may not be redeemed for
ten (10) calendar days.
o The One Group currently does not charge for this service, but may impose a
charge in the future. However, your bank may impose a charge for debiting
your bank account.
o You may revoke your right to make systematic investments by calling The One
Group Services Company at 1-800-480- 4111 or by sending a letter to:
State Street Bank and Trust Company
c/o The One Group
P.O. Box 8528
Boston, MA 02266-8528
CONVERSION FEATURE
Your Class B shares automatically convert to Class A shares after eight years
(measured from the end of the month in which they were purchased).
49
<PAGE> 235
o After conversion, your shares will be subject to the lower distribution and
shareholder servicing fees charged on Class A shares.
o You will not be assessed any sales charges or fees for conversion of
shares, nor will you be subject to any Federal income tax.
o Because the share price of the Class A shares may be higher than that of
the Class B shares at the time of conversion, you may receive fewer Class A
shares; however, the dollar value will be the same.
o If you have exchanged Class B shares of one Fund for Class B shares of
another, the time you held the shares in each Fund will be added together.
SALES CHARGES
The One Group Services Company compensates Shareholder Servicing Agents who sell
shares of The One Group. Compensation comes from: sales charges, 12b-1 fees and
payments by The One Group Services Company from its own resources. The One Group
Services Company, at its own expense, also will provide promotional incentives
in the form of travel expenses, lodging and bonuses to licensed individuals who
sell shares of the Funds, as well as vacation trips (including lodging at luxury
resorts), tickets to entertainment events, and merchandise. Occasionally, cash
incentives will be paid to select Shareholder Servicing Agents. Those
Shareholder Servicing Agents who may receive special incentives include Banc One
Securities Corporation, The Advisors Group, United Planners Financial Services
of America, Inc., The Legend Group, and Rosewood Retirement Advisory Services,
LLC.
CLASS A SHARES
This table shows the amount of sales charge you pay and the commissions paid to
SHAREHOLDER SERVICING AGENTS.
COMMISSION
<TABLE>
<CAPTION>
SALES CHARGE
AS A % AS A % AS A %
OF THE OFFERING OF YOUR OF
AMOUNT OF PURCHASE PRICE INVESTMENT PRICE
- ------------------ ----- ---------- -----
<S> <C> <C> <C>
Less than $100,000 4.50% 4.71% 4.05%
$100,000-$249,999 3.50% 3.63% 3.05%
$250,000-$499,999 2.50% 2.56% 2.05%
$500,000-$999,999 2.00% 2.04% 1.60%
$1,000,000* 0.00% 0.00% 0.00%
</TABLE>
* If you purchase $1 million or more of Class A shares and are not assessed a
sales charge at the time of purchase, you will be charged the equivalent of
1% of the purchase price if you redeem any or all of the Class A shares
within one year of purchase.
CLASS B SHARES
Class B shares are offered at NAV, without any up-front sales charges. However,
if you redeem these shares within six years of the purchase date, you will be
assessed a Contingent Deferred Sales Charge ("CDSC") according to the following
CDSC AS A % OF DOLLAR
YEAR SINCE PURCHASE AMOUNT SUBJECT TO CHARGE
------------------- ------------------------
0-1 5.00%
1-2 4.00%
2-3 3.00%
3-4 3.00%
4-5 2.00%
5-6 1.00%
more than 6 0.00%
50
<PAGE> 236
The One Group Services Company pays a commission of 4.00% of the original
purchase price to Shareholder Servicing Agents who sell Class B shares.
CLASS C SHARES
Class C shares are offered at NAV, without any up-front sales charge. However,
if you redeem your shares within one year of the purchase date, you will be
assessed a CDSC as follows:
CDSC AS A % OF DOLLAR
YEAR SINCE PURCHASE AMOUNT SUBJECT TO CHARGE
------------------- ------------------------
0-1 1.00%
After first year None
Shareholder Servicing Agents selling Class C shares receive a commission of
1.00% of the original purchase price from The One Group Services Company.
HOW THE CDSC IS CALCULATED
o The Fund assumes that all purchases made in a given month were made on
the first day of the month.
o The CDSC is based on the current market value or the original cost of
the shares, whichever is less.
o A sales charge is not imposed on increases in NAV above the initial
purchase price, nor is a sales charge assessed on shares acquired
through reinvestment of dividends or capital gains distributions.
o To keep your CDSC as low as possible, the Fund first will redeem any
shares in your account that carry no CDSC, starting with Class A
shares. After that, the Fund will redeem the shares you have held for
the longest time and thus have the lowest CDSC.
12B-1 FEES
12b-1 fees are paid by The One Group to The One Group Services Company as
compensation for its services and expenses. The One Group Services Company in
turn pays all or part of the 12b-1 fee to Shareholder Servicing Agents that sell
shares of The One Group.
o The 12b-1 fees vary by share class as follows:
1. Class A shares pay a 12b-1 fee of .35% of the average daily
net assets of the Fund, which is currently being waived to
.25%.
2. Class B and Class C shares pay a 12b-1 fee of 1.00% of the
average daily net assets of the Fund, which is currently being
waived to .90%. This will cause expenses for Class B and Class
C shares to be higher and dividends to be lower than for Class
A shares.
3. There are no 12b-1 fees for Class I shares.
o 12b-1 fees, together with the CDSC, help The One Group Services Company
sell Class B and Class C shares without an "up-front" sales charge by
defraying the costs of advancing brokerage commissions and other
expenses paid to Shareholder Servicing Agents.
o The One Group Services Company may use up to .25% of the fees for
shareholder servicing and up to .75% for distribution. During the last
fiscal year, The One Group Services Company received 12b-1 fees
totaling .25% and 1.00% of the average daily net assets of Class A and
Class B shares, respectively.
o The One Group Services Company may pay 12b-1 fees to its affiliates and
to Banc One Investment Advisors and its affiliates (or any sub-advisor)
for brokerage and other agency transactions.
SALES CHARGE REDUCTIONS AND WAIVERS
REDUCING YOUR CLASS A SALES CHARGES
There are several ways you can reduce the sales charges you pay on Class A
shares:
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<PAGE> 237
1. Right of Accumulation: You may add the market value of any Class A,
Class B or Class C shares of a Fund (except a money market fund) that
you (and your spouse and minor children) already own of any One Group
Fund (except a money market fund) to the amount of your next Class A
purchase for purposes of calculating the sales charge.
An Intermediary also may take advantage of this option.
2. Letter of Intent: With an initial investment of $2,000, you may
purchase Class A shares of one or more Funds over the next 13 months
and pay the same sales charge that you would have paid if all shares
were purchased at once. A percentage of your investment will be held in
escrow until the full amount covered by the Letter of Intent has been
invested.
To take advantage of the accumulation privilege or letter of intent, complete
the appropriate section of your fund application, or contact your Shareholder
Servicing Agent. To determine if you are eligible for the accumulation
privilege, contact The One Group Services Company at 1-800-480-4111. These
programs may be terminated or amended at any time.
WAIVER OF THE CLASS A SALES CHARGE
No sales charge is imposed on Class A shares of the Funds if the shares were:
1. Bought with the reinvestment of dividends and capital gains
distributions.
2. Acquired in exchange for other Fund shares if a comparable sales charge
has been paid for the exchanged shares.
3. Bought by officers, directors or trustees, retirees and employees (and
their spouses and immediate family members) of:
o The One Group.
o BANC ONE CORPORATION and its subsidiaries and affiliates.
o The One Group Services Company and its subsidiaries and
affiliates.
o State Street Bank and Trust Company and its subsidiaries and
affiliates.
o Broker/dealers who have entered into dealer agreements with
The One Group and their subsidiaries and affiliates.
o An investment sub-advisor of a fund of The One Group and such
sub-advisor's subsidiaries and affiliates.
4. Bought by:
o Affiliates of BANC ONE CORPORATION and certain accounts (other
than IRA Accounts) for which an Intermediary acts in a
fiduciary, advisory, agency, custodial or similar capacity.
o 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 One Group Services Company.
o Retirement and deferred compensation plans and trusts used to
fund those plans, including, but not limited to, those defined
in Sections 401(a), 403(b) or 457 of the Internal Revenue Code
and "rabbi trusts."
o Shareholder Servicing Agents who have a dealer arrangement
with The One Group Services Company, 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 Shareholder Servicing
Agents who place trades their own accounts if the accounts are
linked to the master account of such Shareholder Servicing
Agent.
5. Bought with proceeds from the sale of Class I shares of a Fund
of The One Group or acquired in an exchange of Class I shares
of a Fund for Class A shares of the same Fund, but only if the purchase
is made within 60 days of the sale or distribution.
6. Bought with proceeds from the sale of shares of a mutual fund,
including a Fund of The One Group, for which a sales charge was paid,
but only if the purchase is made within 60 days of the sale or
distribution.
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<PAGE> 238
7. Bought in an IRA with the proceeds of a distribution from an employee
benefit plan, but only if the purchase is made within 60 days of the
sale or distribution and, at the time of the distribution, the employee
benefit plan had plan assets invested in a Fund of The One Group.
8. Bought with assets of The One Group.
9. Bought in connection with plans of reorganizations of a Fund, such as
mergers, asset acquisitions and exchange offers to which a Fund is a
party.
The waivers described in (5), (6) and (7) above will not continue indefinitely
and may be discontinued at any time without notice.
WAIVER OF THE CLASS B SALES CHARGE
No sales charge is imposed on redemptions of Class B shares of the Funds:
1. Provided that you withdraw no more than 10% of the account value
annually. You do not have to participate in the Systematic Withdrawal
Plan to take advantage of this waiver.
2. If you buy the shares in connection with certain retirement plans, such
as 401(k) and similar qualified plans.
3. If you are the shareholder (or a joint shareholder), or a participant
or beneficiary of certain retirement plans and you die or become
disabled (as defined by the Tax Code), but only if the redemption is
made within one year of such death or disability.
4. That represent a minimum required distribution from an IRA Account or
other qualifying retirement plan, but only if you are at least age
70-1/2.
5. Exchanged in connection with plans of reorganizations of a Fund, such
as mergers, asset acquisitions and exchange offers to which a Fund is a
party.
6. Acquired in exchange for Class B shares of other Funds of The One
Group.
WAIVER OF THE CLASS C SALES CHARGE
No sales charge is imposed on redemptions of Class C shares of the Funds:
1. Provided that you withdraw no more than 10% of the account value
annually. You do not have to participate in the Systematic Withdrawal
Plan to take advantage of this waiver.
2. If you buy the shares in connection with certain retirement plans, such
as 401(k) and similar qualified plans.
3. If you are the shareholder (or a joint shareholder), or a participant
or beneficiary of certain retirement plans and you die or become
disabled (as defined by the Tax Code), but only if the redemption is
made within one year of such death or disability.
4. That represent a minimum required distribution from an IRA Account or
other qualifying retirement plan, but only if you are at least age
70-1/2.
5. Exchanged in connection with plans of reorganizations of a Fund, such
as mergers, asset acquisitions and exchange offers to which a Fund is a
party.
6. Acquired in exchange for Class C shares of other Funds of The One
Group.
7. If The One Group Services Company receives notice before you invest
indicating that your Shareholder Servicing Agent, due to the type of
account that you have, is waiving its commissions.
To take advantage of any of these sales charge waivers, you must qualify for
such waiver in advance. To see if you qualify, contact The One Group Services
Company at 1-800-480-4111 or your Shareholder Servicing Agent.
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<PAGE> 239
\EXCHANGING FUND SHARES
WHAT ARE MY EXCHANGE PRIVILEGES?
You may make the following exchanges:
o Class I shares of a Fund may be exchanged for Class A shares of
that Fund or for Class A or Class I shares of another Fund of
The One Group.
o Class A shares of a Fund may be exchanged for Class I shares of
that Fund or for Class A or Class I shares of another Fund of
The One Group, but only if you are eligible to purchase those shares.
o Class B shares of a Fund may be exchanged for Class B shares of another
Fund of The One Group.
o Class C shares of a Fund may be exchanged for Class C shares of another
Fund of The One Group.
The One Group Funds offer a Systematic Exchange Privilege which allows you to
automatically exchange shares of one fund to another on a monthly or quarterly
basis. This privilege is useful in Dollar Cost Averaging. To participate in this
privilege, please select it on your account application. To learn more about it,
please call The One Group Services Company at 1-800-480-4111.
The One Group does not charge a fee for this privilege. In addition, The One
Group may change the terms and conditions of your exchange privileges upon 60
days written notice.
WHEN ARE EXCHANGES PROCESSED?
Exchanges are processed the same business day they are received, provided:
o State Street Bank and Trust Company receives the request by 4:00 p.m.
ET.
o You have provided The One Group with all of the information necessary
to process the exchange.
o You have received a current prospectus of the Fund or Funds in which
you wish to invest.
o You have contacted your Shareholder Servicing Agent, if necessary.
DO I PAY A SALES CHARGE ON AN EXCHANGE?
Generally, you will not pay a sales charge on an exchange. However:
o You will pay a sales charge if you own Class I shares of a Fund
and you want to exchange those shares for Class A shares, unless you
qualify for a sales charge waiver (see above).
o You will pay a sales charge if you bought Class A shares of a Fund:
1. That does not charge a sales charge and you want to exchange
them for shares of a Fund that does, in which case you would
pay the sales charge applicable to the Fund into which you are
exchanging.
2. That charged a lower sales charge than the Fund into which you
are exchanging, in which case you would pay the difference
between that Fund's sales charge and all other sales charges
you have already paid.
o If you exchange Class B or Class C shares of a Fund, you will not pay a
sales charge at the time of the exchange, however:
1. Your new Class B or Class C shares will be subject to the
higher CDSC of either the Fund from which you exchanged, the
Fund into which you exchanged, or any Fund from which you
previously exchanged.
2. The current holding period for your exchanged Class B or Class
C shares is carried over to your new shares.
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<PAGE> 240
ARE EXCHANGES TAXABLE?
Generally:
o An exchange between classes of shares of the same Fund is not taxable.
o An exchange between Funds is considered a sale and generally results in
a capital gain or loss for Federal income tax purposes.
o You should talk to your tax advisor before making an exchange.
ARE THERE LIMITS ON EXCHANGES?
Yes. The exchange privilege is not intended as a way for you to speculate on
short-term movements in the market. Therefore:
o To prevent disruptions in the management of the Funds, The One Group
limits excessive exchange activity.
o Exchange activity is excessive if it EXCEEDS TWO SUBSTANTIVE EXCHANGE
REDEMPTIONS (WITHIN 30 DAYS OF EACH OTHER) WITHIN A TWELVE MONTH
PERIOD.
o In addition, The One Group reserves the right to reject any exchange
request (even those that are not excessive) if the Fund reasonably
believes that the exchange will result in excessive transaction costs
or otherwise adversely affect other shareholders.
REDEEMING FUND SHARES
WHEN CAN I REDEEM SHARES?
o You may redeem all or some of your shares on any day that the Funds are
open for business.
o Redemption requests received by The One Group Services Company before
4:00 p.m. ET (or when the NYSE closes) will be effective that day.
HOW DO I REDEEM SHARES?
o Unless you have selected the telephone option on your Account
Application Form, you must send a written redemption request to your
Shareholder Servicing Agent, if applicable, or State Street Bank and
Trust Company at the following address:
The One Group
c/o State Street Bank and Trust Company
P.O. Box 8528
Boston, MA 02266-8528
o All requests for redemptions from IRA accounts must be in writing.
o You may request redemption forms by calling The One Group Services
Company at 1-800-480-4111.
o State Street Bank and Trust Company may require that the signature on
your redemption request be guaranteed by a commercial bank, a member of
a domestic stock exchange, or a member of the Securities Transfer
Association Medallion Program or the Stock Exchange Medallion Program,
unless:
1. the redemption is for $50,000 worth of shares or less;
2. the redemption is payable to the shareholder of record;
3. the redemption check is mailed to the shareholder at the
record address; or
4. the redemption is payable by wire or bank transfer (ACH) to a
pre-existing bank account.
o On the Account Application Form you may elect to have the redemption
proceeds mailed or wired to:
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<PAGE> 241
1. a designated commercial bank; or
2. State Street Bank and Trust Company or your Shareholder
Servicing Agent.
o State Street Bank and Trust Company may charge you a wire redemption
fee. The current charge is $7.00.
o Your redemption proceeds will be paid within seven days after receipt
of the redemption request.
WHAT WILL MY SHARES BE WORTH?
o If you own Class A and Class I shares and the Fund receives
your redemption request by 4:00 p.m. ET (or when the NYSE closes), you
will receive that day's NAV.
o If you own Class B or Class C shares and the Fund receives your
redemption request by 4:00 p.m. ET (or when the NYSE closes), you will
receive that day's NAV, minus the amount of any applicable CDSC.
CAN I REDEEM BY TELEPHONE?
Yes, if you selected this option on your Account Application Form.
o Call your Shareholder Servicing Agent or State Street Bank and Trust
Company at 1-800-480-4111 to relay your redemption request.
o Your redemption proceeds will be mailed or wired to the commercial bank
account you designated on your Account Application Form.
o State Street Bank and Trust Company may charge you a wire redemption
fee. The current charge is $7.00.
o The One Group uses reasonable procedures to confirm that instructions
given by telephone are genuine. These procedures include recording
telephone instructions and asking for personal identification. If these
procedures are followed, The One Group will not be responsible for any
loss, liability, cost or expense of acting upon unauthorized or
fraudulent instructions; you bear the risk of loss.
CAN I REDEEM ON A SYSTEMATIC BASIS?
If you have an account value of at least $10,000 you may elect to receive
monthly, quarterly or annual payments of not less than $100 each.
o Select the "Systematic Withdrawal Plan" option on the Account
Application Form.
o Specify the amount you wish to receive and the frequency of the
payments.
o You may designate a person other than yourself as the payee.
o There is no charge for this service.
o If you select this option, please keep in mind that:
1. It may not be in your best interest to buy additional Class A
shares while participating in a Systematic Withdrawal Plan.
This is because Class A shares have an up-front sales charge.
2. If you own Class B or Class C shares, you or your designated
payee may receive systematic payments provided the payments
are limited to no more than 10% of your account value
annually, measured from the date the redemption request is
received.
3. If the amount of the systematic payment exceeds the income
earned by your account since the previous payment under the
Systematic Withdrawal Plan, payments will be made by redeeming
some of your shares. This will reduce the amount of your
investment.
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<PAGE> 242
ADDITIONAL INFORMATION REGARDING REDEMPTIONS
o All redemptions will be for cash.
o If you redeem shares for which you paid by check, and The One Group has
not yet received payment on the check, The One Group will delay
forwarding your redemption proceeds for 10 or more days until payment
has been collected from your bank.
o Because of the high cost of handling small investments, The One Group
charges a sub-minimum account fee. Accounts under $1,000 that are not
participating in a Systematic Investment Plan will be assessed an
annual fee of $10.00. The sub-minimum account fee will not apply to IRA
accounts and the accounts of employees of BANC ONE CORPORATION and its
affiliates.
o The One Group may suspend your ability to redeem when:
1. Trading on the NYSE is restricted.
2. The NYSE is closed (other than weekend and holiday
closings).
3. The SEC has permitted a suspension.
4. An emergency exists.
The Statement of Additional Information offers more details about this
process.
o You generally will recognize a gain or loss on a redemption for Federal
income tax purposes. You should talk to your tax advisor before making
a redemption.
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<PAGE> 243
SHAREHOLDER INFORMATION
VOTING RIGHTS
The Funds do not hold annual shareholder meetings, but may hold special
meetings. The special meetings are held, for example, to elect or remove
Trustees, change a Fund's fundamental investment objective, or approve an
investment advisory contract.
As a Fund shareholder, you have one vote for each share that you own. Each Fund,
and each class of shares within each Fund, vote separately on matters relating
solely to that Fund or class, or which affect that Fund or class differently.
However, all shareholders will have equal voting rights on matters that affect
all shareholders equally. BANC ONE CORPORATION (100 East Broad Street, Columbus,
Ohio, 43271), through its affiliates, may be deemed for purposes of the
Investment Company Act of 1940 to control the Funds. This is because as of July
30, 1998, BANC ONE CORPORATION or its affiliates possessed the power to vote
substantially all of the Class I shares of each Fund other than the
Kentucky Municipal Bond Fund.
On that same date, the following shareholders owned 25% or more of Class A,
Class B or Class C shares of the Funds. As a consequence, they are considered to
be controlling persons of these classes of the Funds.
<TABLE>
<CAPTION>
PERCENTAGE OF TYPE OF
NAME AND ADDRESS FUND/CLASS OWNERSHIP OWNERSHIP
- ---------------- ---------- --------- ---------
<S> <C> <C> <C>
Northern Trust Bank of AZ Ttee Arizona Municipal Bond 33.72% Record
For Thomas A Brand & Rev Trust Fund
PO Box 92956 Class A
Chicago, IL 60675-2956
Carolyn S Ward Arizona Municipal Bond 25.81% Beneficial
James D Ward JT TEN Fund
825 W Annadale Class B
Tucson, AZ 85737-6923
Strafe & Co Arizona Municipal Bond 100.00% Record
Attn Mutual Funds 0393 Fund
100 E Broad Street Class I
Columbus, OH 43215-3607
Strafe & Co Income Bond Fund 88.91% Record
C/O Bank One Trust Co Class I
Attn Mutual Funds
100 E Broad St
Columbus, OH 43215-3607
Strafe & Co. Ohio Municipal Bond 98.98% Record
Attn Mutual Funds 0393 Fund
100 E Broad Street Class I
Columbus OH 43215-3607
Strafe & Co Louisiana Municipal 98.38% Record
Attn Mutual Funds 0393 Bond Fund
100 E Broad Street Class I
Columbus OH 43215-3607
Banc One Securities Corp FBO Municipal Income Fund 44.14% Beneficial
The One Investment Solution Class A
733 Greencrest Dr
Westerville OH 43081-4903
Banc One Securities Corp FBO Municipal Income Fund 39.48% Beneficial
The One Investment Solution Class C
733 Greencrest Dr
Westerville OH 43081-4903
</TABLE>
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<PAGE> 244
<TABLE>
<CAPTION>
PERCENTAGE OF TYPE OF
NAME AND ADDRESS FUND/CLASS OWNERSHIP OWNERSHIP
- ---------------- ---------- --------- ---------
<S> <C> <C> <C>
Dean Witter For The Benefit Of Municipal Income Fund 25.64% Record
Gale R Hershberger & Class C
Linda L Hershberger JTTEN
Church St Station B PO Box 250
New York, NY 10013-0250
Strafe & Co Municipal Income Fund 99.15% Record
Attn Mutual Funds Class I
100 E Broad Street
Columbus OH 43215-3607
Dean Witter For The Benefit Of West Virginia Municipal 26.33% Record
Stephen A Lewis Bond Fund Class A
3720 Noyles Avenue
5 World Trade Center 6th Floor
New York NY 10048-0205
Strafe & Co West Virginia Municipal 98.52% Record
Attn Mutual Funds 0393 Bond Fund Class I
100 E Broad Street Class
Columbus OH 43215-3607
</TABLE>
DIVIDEND POLICIES
DIVIDENDS
The Funds generally declare dividends daily. Dividends are distributed on the
first business day of each month. Capital gains, if any, for all Funds are
distributed at least annually.
The Funds pay dividends and distributions on a per-share basis. This means that
the value of your shares will be reduced by the amount of the payment. If you
purchase shares shortly before the record date for a dividend or the
distribution of capital gains, you will pay the full price for the shares and
receive some portion of the price back as a taxable dividend or distribution.
Dividends payable on Class I shares will be more than those payable on
other classes of shares. This is because Class A, Class B and Class C shares
have higher distribution expenses.
DIVIDEND REINVESTMENT
You automatically will receive all income dividends and capital gain
distributions in additional shares of the same Fund and class, unless you have
elected to take such payment in cash. The price of the shares is the NAV
determined immediately following the dividend record date. Reinvested dividends
and distributions receive the same tax treatment as dividends and distributions
paid in cash.
If you want to change the way in which you receive dividends and distributions,
you must write to State Street Bank & Trust Company at P.O. Box 8528, Boston, MA
02266-8528, at least 15 days prior to the distribution. The change is effective
upon receipt by State Street.
SPECIAL DIVIDEND RULES FOR CLASS B SHARES
Class B shares received as dividends and capital gains distributions will be
accounted for separately. Each time any Class B shares (other than those in the
sub-account) convert to Class A shares, a percentage of the Class B shares in
the sub-account will also convert to Class A shares. (See "Conversion Feature.")
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<PAGE> 245
TAX TREATMENT OF THE FUNDS
TAX STATUS OF THE FUND
Each Fund intends to qualify as a "regulated investment company" for Federal
income tax purposes. If the Funds qualify, as they have in the past, they will
pay no Federal income tax on the earnings they distribute to shareholders.
TAX TREATMENT OF SHAREHOLDERS
TAXATION OF SHAREHOLDER TRANSACTIONS
A sale, exchange, or redemption of Fund shares generally will produce either a
taxable gain or a loss. You are responsible for any tax liabilities generated by
your transactions.
FEDERAL TAXATION OF DISTRIBUTIONS
Exempt-Interest Dividends. If, at the close of each quarter of its taxable year,
at least 50% of the value of a Fund's assets consists of obligations the
interest on which is excludable from gross income, the Fund may pay
"exempt-interest dividends" to you. Generally, exempt-interest dividends are
excludable from gross income. However:
1. If you receive Social Security or Railroad Retirement benefits, you may
be taxed on a portion of such benefits if you receive exempt-interest
dividends from the Funds.
2. 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.
Interest on Private Activity Bonds: The Municipal Income Fund, the Arizona
Municipal Bond Fund, the West Virginia Municipal Bond Fund, the Kentucky
Municipal Bond Fund, the Louisiana Municipal Bond Fund, and the Ohio Municipal
Bond Fund may invest as much as 100% of their assets in municipal securities
issued to finance private activities the interest on which is a tax preference
item for purposes of the Federal alternative minimum tax ("Private Activity
Bonds"). The Intermediate Tax-Free Bond Fund may invest as much as 20% of its
assets in such Private Activity Bonds. As a result, Fund shareholders who are
subject to the Federal alternative minimum tax may have all or a portion of
their income from those Funds subject to Federal income tax. Additionally,
corporate shareholders will be required to take the interest on municipal
securities (including municipal securities of each Fund's respective state) into
account in determining their alternative minimum taxable income. Persons who are
substantial users of facilities financed by Private Activity Bonds or who are
"related persons" of such substantial users should consult their tax advisors
before investing in the Funds.
Investment Income and Capital Gains Dividends. Each Fund will distribute
substantially all of its net investment income (including, for this purpose, net
short-term capital gains) on at least an annual basis. Dividends you receive
from a Fund, other than "exempt-interest dividends," will be taxable to you,
whether reinvested or received in cash. Dividends from a Fund's net investment
income, if any, will be taxable as ordinary income and capital gains dividends
will be taxable to you as such, regardless of how long you have held the shares.
Dividends paid in January, but declared in October, November or December of the
previous year, will be considered to have been paid the previous December.
State and Local Taxation of Distributions: Dividends that are derived from the
Funds' investments in U.S. government obligations may not be entitled to the
exemptions from state and local taxes that would be available if you purchased
U.S. government obligations directly.
The funds will notify you annually of the percentage of income and distributions
derived from U.S. government obligations. Unless otherwise discussed below,
investment income and capital gains dividends may be subject to state and local
taxes.
Louisiana Taxes: Distributions from the Louisiana Municipal Bond Fund, 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, are exempt from Louisiana income tax.
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<PAGE> 246
Arizona Taxes: Exempt-interest dividends from the Arizona Municipal Bond Fund,
which are derived from interest on tax-exempt obligations of the State of
Arizona and its political subdivisions and certain obligations of the United
States or its territories are exempt from Arizona income tax. Other
distributions from the Fund, including those related to long-term and short-term
capital gains, will be subject to Arizona income tax. Arizona law does not
permit a deduction for interest paid or accrued on indebtedness incurred or
continued to purchase or carry obligations, the interest on which is exempt from
Arizona income tax.
West Virginia Taxes: Distributions from the West Virginia Municipal Bond Fund
which are derived from interest or dividends on obligations or securities of a
West Virginia state or local municipal governmental body generally are exempt
from West Virginia income tax. In addition, you will not pay that tax on the
portion of your income from the Fund which represents interest or dividends
received on obligations or securities of the United States and some of its
authorities, commissions or instrumentalities.
Kentucky Taxes: Dividends received from the Kentucky Municipal Bond Fund which
are derived from interest on Kentucky Municipal Securities are exempt from the
Kentucky individual income tax. Dividends paid from interest earned on
securities that are merely guaranteed by the Federal government, repurchase
agreements collateralized by U.S. government obligations, or from interest
earned on obligations of other states are not exempt from Kentucky individual
income tax. Any distributions of net short-term and net long-term capital gain
earned by the Fund are includable in each Shareholder's Kentucky adjusted gross
income as dividend income and long-term capital gain, respectively, and are both
taxed at ordinary income tax rates.
Ohio Taxes: Dividends received from the Ohio Municipal Bond Fund which are
derived from interest on Ohio Municipal Securities are exempt from the Ohio
personal income tax. In addition, gain from the sale or transfer of certain Ohio
Municipal Securities is also exempt from Ohio income tax. Certain Ohio
municipalities may have retained the right to tax dividends from the Fund.
Corporate investors must include the Fund shares in the corporation's tax base
for purposes of the Ohio franchise tax net worth computation, but not for the
net income computation.
Information in the preceding paragraphs in based on the current law as well as
current policies of the various state Departments of Taxation, all of which may
change.
TAX INFORMATION
The Form 1099 that is mailed to you every January details your dividends and
their federal tax category. Even though the Funds provide you with this
information, you are responsible for verifying your tax liability with your tax
professional. For additional tax information see the Statement of Additional
Information. Please note that this tax discussion is general in nature; no
attempt has been made to present a complete explanation of the Federal, state,
local or foreign tax treatment of the Funds or their shareholders.
SHAREHOLDER INQUIRIES
If you have any questions or need additional information, please write The One
Group Services Company at 3435 Stelzer Road, Columbus, OH 43219 or call
1-800-480-4111.
REPORTING
In September and March you will receive a financial report from The One Group.
In addition, The One Group will periodically send you proxy statements and other
reports.
ORGANIZATION AND MANAGEMENT OF THE FUNDS FUND NAME
THE FUNDS
Each Fund is a series of The One Group, an open-end management investment
company. The One Group currently consists of 40 separate Funds. Seven of the
Funds are described in this prospectus; the other Funds are described in
separate prospectuses. Two of the Funds described in this prospectus are
diversified, and five of the Funds described in this prospectus are
non-diversified. Each Fund is supervised by the Board of Trustees.
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<PAGE> 247
THE BOARD OF TRUSTEES
The Trustees oversee the management and administration of the Funds. The
Trustees are responsible for making major decisions about each Fund's investment
objectives and policies, but delegate the day-to-day administration of the Funds
to the officers of The One Group.
THE ADVISOR
Banc One Investment Advisors makes the day-to-day investment decisions for the
Funds and continuously reviews, supervises and administers the Funds' investment
programs. Banc One Investment Advisors has served as investment advisor to The
One Group since 1993. Prior to that time, The One Group was advised by
affiliates of Banc One Investment Advisors. In addition to The One Group, Banc
One Investment Advisors serves as investment advisor to other mutual funds and
individual, corporate, charitable and retirement accounts. As of June 30, 1998,
Banc One Investment Advisors, an indirect, wholly-owned subsidiary of BANC ONE
CORPORATION, managed over $59 billion in assets. For the fiscal year ended June
30, 1998, the Funds paid investment advisory fees at the following rates:
ANNUAL RATE AS
PERCENTAGE
OF AVERAGE
DAILY
NET ASSETS
- ----------------------------------------------------------------------------
The One Group(R) Intermediate Tax-Free Bond Fund .30%
The One Group(R) Municipal Income Fund .35%
The One Group(R) Arizona Municipal Bond Fund .41%
The One Group(R) West Virginia Municipal Bond Fund .34%
The One Group(R) Louisiana Municipal Bond Fund .37%
The One Group(R) Ohio Municipal Bond Fund .30%
The One Group(R) Kentucky Municipal Fund .30%
THE DISTRIBUTOR
The One Group Services Company, 3435 Stelzer Road, Columbus, Ohio 43219, a
wholly-owned subsidiary of The BISYS Group, Inc., markets the Funds and
distributes shares through selling brokers, financial institutions, investment
advisors, and other financial representatives.
THE ADMINISTRATOR AND SUB-ADMINISTRATOR
The One Group Services Company also serves as the Funds' administrator. The One
Group Services Company is responsible for responding to shareholder inquiries
and requests for information, as well as providing regulatory reporting and
compliance. For these services, The One Group Services Company receives a fee
based on the total assets of The One Group. For the first $1.5 billion in One
Group assets, The One Group Services Company receives an annual fee of .20% of
each Fund's average daily net assets. The annual rate declines to .18% on assets
up to $2 billion, and to .16% when assets exceed $2 billion. The fee is
calculated daily and paid monthly. Some Funds are not included in the
calculations. Banc One Investment Advisors, the Sub-Administrator, provides
office space, equipment, and facilities, as well as legal and regulatory
support.
THE TRANSFER AGENT, CUSTODIAN AND SUB-CUSTODIAN
State Street Bank and Trust Company, P.O. Box 8528, Boston, MA 02266-8528 or
your Shareholder Servicing Agent, if appropriate, handles shareholder
recordkeeping and statements, distributes dividends, and processes buy and sell
requests. As the Funds' custodian, State Street holds the Funds' assets, settles
all portfolio trades and assists in calculating the Funds' net asset values.
Bank One Trust Company, N.A. serves as sub-custodian in connection with the
Funds' securities lending
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activities under an agreement with State Street Bank and Trust Company and Bank
One Trust Company, N.A. Bank One Trust Company, N.A. is paid a fee by the Funds
for this service.
YEAR 2000
Preparing for the Year 2000 is a high priority for The One Group Family of
Mutual Funds. Both The One Group Services Company and Banc One Investment
Advisors have formed dedicated teams to help them successfully achieve Year 2000
compliance. In addition, these teams are responsible for assessing the readiness
of all other service providers to The One Group. Year 2000 remediation efforts
are directed toward both information technology and non-information technology
systems. Non-information technology systems include elevators, photocopy
machines, and facsimile machines, and should have no significant impact on the
delivery of services to The One Group.
Banc One Investment Advisors has identified 49 information technology systems
and interfaces that provide service and support to The One Group. Each system is
assigned a priority rating: high, medium or low. Systems rated "high" are those
which are essential to the operation of The One Group. Each system rated "high"
is scheduled to be Year 2000 compliant by December 31, 1998. All systems will be
tested for compliance throughout 1999.
Many, if not all, of the systems are owned or operated by third party servicers
(for example, The One Group's Custodian). Consequently, remediation efforts must
be made by those servicers. Banc One Investment Advisors and The One Group
Services Company have, and will continue to, monitor the remediation progress of
the service providers. This process involves documentation, on-site visits, and
review of remediation plans and test results. Both Banc One Investment Advisors
and The One Group Services Company have budgeted in excess of $700,000 in fiscal
year 1998 and over $1 million in fiscal year 1998 toward the remediation effort
for all systems and interfaces. Neither The One Group nor its shareholders will
bear any of the direct remediation expenses.
Neither The One Group Services Company nor Banc One Investment Advisors
currently anticipate that the move to Year 2000 will have a material impact on
their ability to continue to provide the Funds with service at current levels.
Likewise, The One Group currently anticipates that the more to Year 2000 will
not have a material impact on its operations.
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DETAILS ABOUT THE FUNDS' INVESTMENT PRACTICES AND POLICIES
INVESTMENT PRACTICES
The Funds invest in a variety of securities and employ a number of investment
techniques. Each security and technique involves certain risks. What follows is
a list of the securities and techniques utilized by the Funds, as well as the
risks inherent in their use. Fixed income securities are primarily influenced by
market, credit and prepayment risks, although certain securities may be subject
to additional risks. For a more complete discussion, see the Statement of
Additional Information. Following the table is a more complete discussion of
risk.
<TABLE>
<CAPTION>
FUND NAME FUND CODE
- ----------------------------------------------------------------------------------------------------------------------
<S> <C>
The One Group(R) Intermediate Tax-Free Bond Fund 1
The One Group(R) Municipal Income Fund 2
The One Group(R) Arizona Municipal Bond Fund 3
The One Group(R) West Virginia Municipal Bond Fund 4
The One Group(R) Louisiana Municipal Bond Fund 5
The One Group(R) Ohio Municipal Bond Fund 6
The One Group(R) Kentucky Municipal Bond Fund 7
</TABLE>
<TABLE>
<CAPTION>
INSTRUMENT FUND CODE RISK TYPE
- -------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
U.S. Treasury Obligations: Bills, notes, bonds, STRIPS, and 1-7 Market
CUBES.
Treasury Receipts: TRS, TIGRS, and CATS. 1-7 Market
U.S. Government Agency Securities: Securities issued by agencies 1-7 Market
and instrumentalities of the U.S. Government. These include Credit
Ginnie Mae, Fannie Mae and Freddie Mac.
Certificates of Deposit: Negotiable instruments with a stated 1-7 Market
maturity. Credit
Liquidity
Time Deposits: Non-negotiable receipts issued by a bank in 1-7 Liquidity
exchange for the deposit of funds. Credit
Market
Repurchase Agreements: The purchase of a security and the 1-7 Credit
simultaneous commitment to return the security to the seller at Market
an agreed upon price on an agreed upon date. This is treated as Liquidity
a loan.
Reverse Repurchase Agreement: The sale of a security and the 1-7 Market
simultaneous commitment to buy the security back at an agreed Leverage
upon price on an agreed upon date. This is treated as a
borrowing by a Fund.
Securities Lending: The lending of up to 331/3% of a Fund's total 1-7 Credit
assets. In return the Fund will receive cash, other securities, Market
and/or letters of credit as collateral. Leverage
When-Issued Securities and Forward Commitments: Purchase or 1-7 Market
contract to purchase securities at a fixed price for delivery at Leverage
a future date. Liquidity
</TABLE>
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<TABLE>
<CAPTION>
INSTRUMENT FUND CODE RISK TYPE
- -------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Investment Company Securities: Shares of other mutual funds, 1-7 Market
including money market funds of The One Group and shares of
other investment companies for which Banc One Investment Advisors serves as
investment advisor or administrator. Banc One Investment Advisors will waive
certain fees when investing in funds for which it serves as investment advisor.
Call and Put Options: A call option gives the buyer the right to 1-7 Management
buy, and obligates the seller of the option to sell, a security Liquidity
at a specified price. A put option gives the buyer the right to Credit
sell, and obligates the seller of the option to buy, a security Market
at a specified price. The Funds will sell only covered call and Leverage
secured put options.
Futures and Related Options: A contract providing for the future 1-7 Management
sale and purchase of a specified amount of a specified security, Market
class of securities, or an index at a specified time in the Credit
future and at a specified price. Liquidity
Leverage
Bankers' Acceptances: Bills of exchange or time drafts drawn on 1-7 Credit
and accepted by a commercial bank. Maturities are generally six Liquidity
months or less. Market
Commercial Paper: Secured and unsecured short-term promissory 1-7 Credit
notes issued by corporations and other entities. Maturities Liquidity
generally vary from a few days to nine months. Market
Restricted Securities: Securities not registered under the 1-7 Liquidity
Securities Act of 1933, such as privately placed commercial Market
paper and Rule 144A securities.
Variable and Floating Rate Instruments: Obligations with 1-7 Market
interest rates which are reset daily, weekly, quarterly or some Credit
other period and which may be payable to the Fund on demand. Liquidity
Mortgage-Backed Securities: Debt obligations secured by real 1-7 Pre-payment
estate loans and pools of loans. These include collateralized Market
mortgage obligations ("CMOs"), and Real Estate Mortgage Credit
Investment Conduits ("REMICs"). Regulatory
Demand Features: Securities that are subject to puts and standby 1-7 Market
commitments to purchase the securities at a fixed price (usually Liquidity
with accrued interest) within a fixed period of time following Management
demand by a Fund.
Mortgage Dollar Rolls: A transaction in which a Fund sells 1-7 Pre-payment
securities for delivery in a current month and simultaneously Market
contracts with the same party to repurchase similar but not Regulatory
identical securities on a specified future date.
Swaps, Caps and Floors: A Fund may enter into these transactions 1-7 Management
to manage its exposure to changing interest rates and other Credit
factors. Swaps involve an exchange of obligations by two Liquidity
parties. Caps and floors entitle a purchaser to a principal Market
amount from the seller of the cap or floor to the extent that a
specified index exceeds or falls below a predetermined interest.
New Financial Products: New options and futures contracts and 1-7 Management
other financial products continue to be developed and the Fund Credit
may invest in such options, contracts and products. Market
Liquidity
Structured Instruments: Debt securities issued by agencies and 1-7 Market
instrumentalities of the U.S. government, banks, municipalities, Liquidity
</TABLE>
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<TABLE>
<CAPTION>
INSTRUMENT FUND CODE RISK TYPE
- -------------------------------------------------------------------------------------------------------------------
<S> <C>
corporations and other businesses whose interest and/or Management
principal payments are indexed to foreign currency exchange Credit
rates, interest rates, or one or more other referenced indices. Foreign Investment
Municipal Securities: Securities issued by a state or political 1-7 Credit
subdivision to obtain funds for various public purposes. Political
Municipal securities include private activity bonds and Tax
industrial development bonds, as well as General Obligation Market
Notes, Anticipation Notes, Bond Tax Anticipation Notes, Revenue Anticipation
Notes, Project Notes, other short-term tax-exempt obligations, municipal leases,
participations in pools of municipal securities, and obligations of municipal
housing authorities and single family revenue bonds.
Stripped Mortgage-Backed Securities: Derivative multi-class 1-7 Pre-payment
mortgage securities which are usually structured with two Market
classes of shares that receive different proportions of the Credit
interest and principal from a pool of mortgage assets. These Regulatory
include IO's and PO's.
Asset-Backed Securities: Securities secured by company 1-7 Pre-payment
receivables, home equity loans, truck and auto loans, leases, Market
credit card receivables and other securities backed by other Credit
types of receivables or other assets.
Zero-Coupon Debt Securities: Bonds and other debt that pay no 1-7 Credit
interest, but are issued at a discount from their value at Market
maturity. When held to maturity, their entire return equals the differences
between their issue price and their maturity value.
Inverse Floating Rate Instruments: Leveraged floating rate debt 1-7 Credit
instruments with interest rates that reset in the opposite Market
direction from the market rate of interest to which the inverse Leverage
floater is indexed.
Loan Participations and Assignments: Participations in, or 1-7 Market
assignments of municipal securities, including municipal leases. Credit
Political
Liquidity
Tax
</TABLE>
INVESTMENT RISKS
Below is a more complete discussion of the types of risks inherent in the
securities and investment techniques listed above. Because of these risks, the
value of the securities held by the Funds may fluctuate, as will the value of
your investment in the Funds. Certain investments are more susceptible to these
risks than others.
o Credit Risk. The risk that the issuer of a security, or the
counterparty to a contract, will default or otherwise be unable to
honor a financial obligation. Credit risk is generally higher for
non-investment grade securities. The price of a security can be
adversely affected prior to actual default as its credit status
deteriorates and the probability of default rises.
o Leverage Risk. The risk associated with securities or practices that
multiply small index or market movements into large changes in value.
Leverage is often associated with investments in derivatives, but also
may be embedded directly in the characteristics of other securities.
o Hedged. When a derivative (a security whose value is based on another
security or index) is used as a hedge against an opposite position that
the fund also holds, any loss generated by the derivative should be
substantially offset by gains on the hedged investment, and vice versa.
While hedging can reduce or eliminate losses, it can also reduce or
eliminate gains. Hedges are sometimes subject to imperfect matching
between the derivative and underlying security, and there can be no
assurance that a Fund's hedging transactions will be effective.
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o Speculative. To the extent that a derivative is not used as a hedge,
the fund is directly exposed to the risks of that derivative. Gains or
losses from speculative positions in a derivative may be substantially
greater than the derivative's original cost.
o Liquidity Risk. The risk that certain securities may be difficult or
impossible to sell at the time and the price that normally prevails in
the market. The seller may have to lower the price, sell other
securities instead or forego an investment opportunity, any of which
could have a negative effect on fund management or performance. This
includes the risk of missing out on an investment opportunity because
the assets necessary to take advantage of it are tied up in less
advantageous investments.
o Management Risk. The risk that a strategy used by a fund's management
may fail to produce the intended result. This includes the risk that
changes in the value of a hedging instrument will not match those of
the asset being hedged. Incomplete matching can result in unanticipated
risks.
o Market Risk. The risk that the market value of a security may move up
and down, sometimes rapidly and unpredictably. These fluctuations may
cause a security to be worth less than the price originally paid for
it, or less than it was worth at an earlier time. Market risk may
affect a single issuer, industry, sector of the economy or the market
as a whole. There is also the risk that the current interest rate may
not accurately reflect existing market rates. For fixed income
securities, market risk is largely, but not exclusively, influenced by
changes in interest rates. A rise in interest rates typically causes a
fall in values, while a fall in rates typically causes a rise in
values. Finally, key information about a security or market may be
inaccurate or unavailable. This is particularly relevant to investments
in foreign securities.
o Political Risk. The risk of losses attributable to unfavorable
governmental or political actions, seizure of foreign deposits, changes
in tax or trade statutes, and governmental collapse and war.
o Foreign Investment Risk. Risk associated with higher transaction costs,
delayed settlements, currency controls and adverse economic
developments. This also includes the risk that fluctuations in the
exchange rates between the U.S. dollar and foreign currencies may
negatively affect an investment. Adverse changes in exchange rates may
erode or reverse any gains produced by foreign currency denominated
investments and may widen any losses. Exchange rate volatility also may
affect the ability of an issuer to repay U.S. dollar denominated debt,
thereby increasing credit risk.
o Pre-Payment Risk. The risk that the principal repayment of a security
will occur at an unexpected time, especially that the repayment of a
mortgage or asset-backed security occurs either significantly sooner or
later than expected. Changes in pre-payment rates can result in greater
price and yield volatility. Pre-payments generally accelerate when
interest rates decline.
When mortgage and other obligations are pre-paid, a Fund may have to reinvest in
securities with a lower yield. Further, with early prepayment, a Fund may fail
to recover any premium paid, resulting in an unexpected capital loss.
o Tax Risk. The risk that the issuer of the securities will fail to
comply with certain requirements of the Internal Revenue Code, which
would cause adverse tax consequences.
o Regulatory Risk. The risk associated with Federal and state laws which
may restrict the remedies that a mortgage lender has when a borrower
defaults on mortgage loans. These laws include restrictions on
foreclosures, redemption rights after foreclosure, Federal and state
bankruptcy and debtor relief laws, restrictions on "due on sale"
clauses, and state usury laws.
INVESTMENT POLICIES
Each Fund's investment objective and the investment policies summarized below
are fundamental. This means that they cannot be changed without the consent of a
majority of the outstanding shares of the Funds. In addition to the fundamental
policies mentioned earlier, the following fundamental policies apply to each
Fund as specified. The full text of the fundamental policies can be found in the
Statement of Additional Information.
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INVESTMENT POLICIES FOR SPECIFIC FUNDS
The Intermediate Tax-Free Bond Fund and the Municipal Income Fund may not:
1. Purchase the securities of an issuer if as a result more than 5% of its
total assets would be invested in the securities of that issuer, or the
Fund would own more than 10% of the outstanding voting securities of
that issuer. This does not include securities issued or guaranteed by
the United States, its agencies or instrumentalities, and repurchase
agreements involving these securities. This restriction applies to 75%
of a Fund's total assets.
2. Concentrate in a particular industry or group of industries. This does
not include Municipal Securities or governmental guarantees of
Municipal Securities, and with respect to the Municipal Income Fund,
housing authority obligations. Private activity bonds that are backed
only by the assets and revenues of a non-governmental issuer are not
Municipal Securities for purposes of this restriction.
The Arizona Municipal Bond Fund, the West Virginia Municipal Bond Fund, the
Louisiana Municipal Bond Fund, the Ohio Municipal Bond Fund and the Kentucky
Municipal Bond Fund may not:
1. Purchase the securities of an issuer if as a result more than 25% of
its total assets would be invested in the securities of that issuer.
This restriction applies with respect to 50% of a Fund's total assets.
With respect to the remaining 50% of its total assets, a Fund may not
purchase the securities of an issuer if as a result more than 5% of its
total assets would be invested in the securities of that issuer. This
restriction does not apply to securities issued or guaranteed by the
United States, its agencies, or instrumentalities, securities of
regulated investment companies, and repurchase agreement involving such
securities.
2. Concentrate their investment in the securities of one or more issuers
conducting their principal business in a particular industry or group
of industries. This does not include:
o Obligations issued or guaranteed by the U.S. government or
its agencies and instrumentalities and repurchase agreements
involving such securities;
o Municipal Securities; and
o Ohio Municipal Securities, Kentucky Municipal Securities,
Arizona Municipal Securities, West Virginia Municipal
Securities, and Louisiana Municipal Securities or
governmental guarantees of such securities. With respect to
the Arizona Municipal Bond Fund and the West Virginia
Municipal Bond Fund, private activity bonds that are backed
only by the assets and revenues of a non-governmental issuer
are not Arizona Municipal Securities or West Virginia
Municipal Securities for purposes of this restriction.
INVESTMENT POLICIES FOR ALL FUNDS
None of the Funds may 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.
Additional investment policies are set forth in the Statement of Additional
Information.
TEMPORARY DEFENSIVE POSITION
For temporary defensive purposes, each 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 Arizona Municipal Bond Fund, the West Virginia Municipal Bond Fund, the
Louisiana Municipal Bond Fund and the Ohio Municipal Bond Fund also may invest
up to 20% of their total assets in securities other than Arizona, West Virginia,
Louisiana and Ohio Municipal Securities, respectively. The Kentucky Municipal
Bond Fund may invest up to 35% of its total assets in securities other than
Kentucky Municipal Securities.
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While the Funds are engaged in a temporary defensive position, they will not be
pursuing their investment objectives. Therefore, the Funds will pursue a
temporary defensive position only when market conditions warrant.
PORTFOLIO TURNOVER
Portfolio turnover 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 Funds and may result in additional tax consequences to you. The portfolio
turnover rate for each Fund for the fiscal year ended June 30, 1998 is shown on
the Financial Highlights. To the extent portfolio turnover results in short-term
capital gains, such gains will generally be taxed at ordinary income tax rates.
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APPENDIX
DESCRIPTION OF RATINGS
The following is a summary of published ratings by major credit rating agencies.
Credit ratings evaluate only the safety of principal and interest payments, not
the market value risk of lower quality securities. Credit rating agencies may
fail to change credit ratings to reflect subsequent events on a timely basis.
Although Banc One Investment Advisors considers security ratings when making
investment decisions, it also performs its own investment analysis and does not
rely solely on the ratings assigned by credit agencies.
Unrated securities will be treated as non-investment grade securities unless
Banc One Investment Advisors determines that such securities are the equivalent
of investment grade securities. Securities that have received different ratings
from more than one agency are considered investment grade if at least one agency
has rated the security investment grade.
DESCRIPTION OF COMMERCIAL PAPER RATINGS
DUFF & PHELPS CREDIT RATING CO. ("DUFF")
D-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 obligations.
D-1 Very high certainty of timely payment. Liquidity factors are
excellent and supported by good fundamental protection
factors. Risk factors are minor.
D-1- High certainty of timely payment. Liquidity factors are
strong and supported by good fundamental protection factors.
Risk factors are very small.
STANDARD & POOR'S CORPORATION ("S&P")
A-1 Highest category of commercial paper. Capacity to meet
financial commitment is strong. Obligations designated with a
plus sign (+) indicate that capacity to meet financial
commitment is extremely strong.
A-2 Issues somewhat more susceptible to adverse effects of
changes in circumstances and economic conditions than
obligations in higher rating categories. However, the
capacity to meet financial commitments is satisfactory.
FITCH IBCA LIMITED ("FITCH")
F1 Highest capacity for timely repayment. Those issues rated F1+
possess a particularly strong credit feature.
F2 Satisfactory capacity for timely repayment although such
capacity may be susceptible to adverse changes in business,
economic or financial conditions.
MOODY'S INVESTORS SERVICE ("MOODY'S")
PRIME-1 Superior ability for repayment.
PRIME-2 Strong ability for repayment.
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DESCRIPTION OF BANK RATINGS
MOODY'S
These ratings represent Moody's opinion of a bank's intrinsic safety and
soundness.
A These banks possess exceptional intrinsic financial strength.
Typically they will be major financial institutions with
highly valuable and defensible business franchises, strong
financial fundamentals, and a very attractive and stable
operating environment.
B These banks possess strong intrinsic financial strength.
Typically, they will be important institutions with valuable
and defensible business franchises, good financial
fundamentals, and an attractive and stable operating
environment.
C These banks possess good intrinsic financial strength.
Typically, they will be institutions with valuable and
defensible business franchises. These banks will demonstrate
either acceptable financial fundamentals within a stable
operating environment, or better than average financial
fundamentals within an unstable operating environment.
S&P
S&P's credit rating is a current opinion of an obligor's overall financial
capacity (its creditworthiness) to pay its financial obligation.
AAA The highest rating assigned by S&P. The obligor's capacity to
meet its financial commitment on the obligation is extremely
strong.
AA The obligor's capacity to meet its financial commitments on
the obligation is very strong.
A The obligation is somewhat more susceptible to the adverse
effects of changes in circumstances and economic conditions
than obligations in higher rated categories. However, the
obligor's capacity to meet its financial commitment on the
obligation is still strong.
DESCRIPTION OF INSURANCE RATINGS
MOODY'S
These ratings represent Moody's opinions of the ability of insurance companies
to pay punctually senior policyholder claims and obligations.
AA Insurance companies rated in this category offer exceptional
financial security. While the financial strength of these
companies is likely to change, such changes as can be
visualized are most unlikely to impair their fundamentally
strong position.
A These insurance companies offer excellent financial security.
Together with the Aaa group, they constitute what are
generally known as high grade companies. They are rated lower
than Aaa companies because long-term risks appear somewhat
larger.
A Insurance companies rated in this category offer good
financial security. However, elements may be present which
suggest a susceptibility to impairment sometime in the
future.
S&P
S&P's credit rating is a current opinion of the creditworthiness of an obligor
with respect to a specific financial obligation, a specific class of financial
obligations, or a specific financial program.
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AAA This is the highest rating assigned by S&P. The obligor's
capacity to meet its financial commitment on the obligation
is extremely strong.
AA The obligor's capacity to meet its financial commitments on
the obligation is very strong.
A An obligation rated A is somewhat more susceptible to the
adverse effects of changes in circumstances and economic
conditions than obligations in higher rated categories.
However, the obligor's capacity to meet its financial
commitment on the obligation is still strong.
DESCRIPTION OF MUNICIPAL BOND RATINGS
(INCLUDING MORTGAGE AND ASSET-BACKED SECURITIES)
S&P
INVESTMENT GRADE
AAA The highest rating. The rating indicates an extremely strong
capacity to meet its financial commitment.
AA Differs from AAA issues only in a small degree. The obligor's
capacity to meet its financial commitment is very strong.
A These bonds are somewhat more susceptible to the adverse
effects of changes in circumstances and economic conditions
than debt in higher rated categories. However, capacity to
meet its financial commitment on the obligations is still
strong.
BBB Exhibits adequate protection parameters. However, adverse
economic conditions or changing circumstances are more likely
to lead to a weakened capacity to meet its financial
commitment on the obligations.
SPECULATIVE GRADE
BB Less vulnerable to non-payment than other speculative issues.
However, these bonds face major ongoing uncertainties or
exposure to adverse business, financial or economic
conditions which could lead to inadequate capacity to meet
financial commitment on the obligation.
B More vulnerable to non-payment than obligations rated BB, but
currently has the capacity to meet its financial commitment
on the obligation. Adverse business, financial or economic
conditions will likely impair capacity or willingness to meet
its financial commitment on the obligation.
CCC Currently vulnerable to non-payment, and is dependent upon
favorable business, financial, and economic conditions to
meet its financial commitment on the obligation. In the event
of adverse business, financial, or economic conditions, they
are not likely to have the capacity to meet its financial
commitment on the obligation.
CC Currently highly vulnerable to non-payment.
C This rating may be used to cover a situation where a
bankruptcy petition has been filed, or similar action has
been taken, but payments on this obligation are being
continued.
D Bonds in payment default.
Ratings from AA to CCC may be modified by a plus (+) or minus (-) to show
relative standing within the major rating categories.
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MOODY'S
INVESTMENT GRADE
aa 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 an exceptionally
stable, margin and principal is secure.
a High quality by all standards. Margins of protection may not
be as large as in Aaa securities, fluctuation of protective
elements may be greater, or there may be other elements
present that make the long-term risks appear somewhat larger
than in Aaa securities.
A These bonds possess many favorable investment attributes and
are to be considered as upper-medium grade obligations.
Factors giving security to principal and interest are
considered adequate, but elements may be present which
suggest a susceptibility to impairment sometime in the
future.
Baa These bonds are considered 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.
NON-INVESTMENT GRADE
Ba These bonds have speculative elements; their future cannot be
considered as well assured. The protection of interest and
principal payments may be very moderate and thereby not well
safeguarded during good and bad times over the future.
B These bonds lack the characteristics of a desirable
investment (i.e., potentially low assurance of timely
interest and principal payments or maintenance of other
contract terms over any long period of time may be small).
Caa Bonds in this category have poor standing and may be in
default. These bonds carry an element of danger with respect
to principal and interest payments.
Ca Speculative to a high degree and could be in default or have
other marked shortcomings. Ca is the lowest rating.
DESCRIPTION OF MUNICIPAL NOTE RATINGS
MOODY'S
MIG1 & VMIG1 Short-term municipal securities rated MIG1 or VMIG1 are of
the best quality. They have strong protection from
established cash flows, superior liquidity support or
demonstrated broad-based access to the market for
refinancing.
MIG2 & VMIG2 These Short-term municipal securities rated MIG2 or VMIG2 are
of high quality. Margins of protection are ample although not
so large as in the preceding group.
MIG3 & VMIG3 Favorable quality. All security elements are accounted for,
but the undeniable strength of the preceding grades is
lacking. Liquidity and cash flow protection may be narrow and
marketing access for refinancing is likely to be less well
established.
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S&P
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.
SP-1 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.
SP-3 Speculative capacity to pay principal and interest.
DESCRIPTION OF PREFERRED STOCK RATINGS
MOODY'S
aaa Top-quality preferred stock. This rating indicates good
asset protection and the least risk of dividend impairment
within the universe of preferred stocks.
aa High-grade preferred stock. This rating indicates that there
is a reasonable assurance the earnings and asset protection
will remain relatively well maintained in the foreseeable
future.
aa Upper-medium grade preferred stock. While risks are judged
to be somewhat greater than in the "aaa" and "aa"
classification, earnings and asset protection are,
nevertheless, expected to be maintained at adequate levels.
baa Medium-grade preferred stock, neither highly protected nor
poorly secured. Earnings and asset protection appear
adequate at present but may be questionable over any great
length of time.
S&P
S&P's preferred stock rating is an assessment of the capacity and willingness of
an issuer to pay preferred stock dividends and any applicable sinking fund
obligations.
AAA Highest rating. This rating indicates an extremely strong
capacity to pay the preferred stock obligations.
AA High-quality, fixed-income security. The capacity to pay
preferred stock obligations is very strong, although not as
overwhelming as for issues rated "AAA."
A Backed by a sound capacity to pay the preferred stock
obligations, although it is somewhat more susceptible to the
adverse effects of changes in circumstances and economic
conditions.
BBB Backed by an adequate capacity to pay the preferred stock
obligations. Whereas the issuer normally exhibits adequate
protection parameters, adverse economic conditions or
changing circumstances are more likely to lead to a weakened
capacity to make payments for a preferred stock in this
category than for issues in the "A" category.
SHORT-TERM DEBT RATINGS
Thompson Bank Watch, Inc. ("TBW") assigns ratings to specific debt instruments
with original maturities of one year or less. The TBW Short-Term ratings
specifically assess the likelihood of an untimely payment of principal and
interest.
TBW-1 Very high degree of likelihood that principal and interest
will be paid on a timely basis.
74
<PAGE> 260
TBW-2 While degree of safety regarding timely repayment of
principal and interest is strong, the relative degree is not
as high as for issues rated TBW-1.
TBW-3 Lowest investment grade category. While more susceptible to
adverse developments than obligations with higher ratings,
capacity to service principal and interest in a timely
fashion is considered adequate.
TBW-4 Non-investment grade and, therefore, speculative.
75
<PAGE> 261
Investment Advisor and Sub-Administrator
Banc One Investment Advisors Corporation
1111 Polaris Parkway
P.O. Box 710211
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 8528
Boston, MA 02266-8528
Legal Counsel
Ropes & Gray
One Franklin Square
1301 K Street, N.W.
Suite 800 East
Washington, D.C. 20005
Independent Accountants
PricewaterhouseCoopers, LLP
100 East Broad Street
Columbus, OH 43215
THE STATEMENT OF ADDITIONAL INFORMATION CONTAINS MORE DETAILED INFORMATION ABOUT
THE FUNDS. THE CURRENT STATEMENT OF ADDITIONAL INFORMATION HAS BEEN FILED WITH
THE SECURITIES AND EXCHANGE COMMISSION AND IS AVAILABLE WITHOUT CHARGE BY
CALLING 1-800-480-4111 OR BY WRITING TO THE ONE GROUP SERVICES COMPANY AT 3435
STELZER ROAD, COLUMBUS, OHIO 43219. THE STATEMENT OF ADDITIONAL INFORMATION IS
INCORPORATED INTO THIS PROSPECTUS BY REFERENCE. THE SEC MAINTAINS A WEB SITE
(www.sec.gov) THAT CONTAINS THE STATEMENT OF ADDITIONAL INFORMATION, MATERIALS
INCORPORATED BY REFERENCE AND OTHER INFORMATION REGARDING THE ONE GROUP(R).
76
<PAGE> 262
THE ONE GROUP(R) FAMILY OF MUTUAL FUNDS
THE ONE GROUP INVESTOR FUNDS
COMBINED PROSPECTUS
OCTOBER , 1998
THE ONE GROUP(R) INVESTOR GROWTH FUND
THE ONE GROUP(R) INVESTOR GROWTH & INCOME FUND
THE ONE GROUP(R) INVESTOR BALANCED FUND
THE ONE GROUP(R) INVESTOR CONSERVATIVE GROWTH FUND
This prospectus describes four mutual funds that invest in other mutual funds.
The funds in this prospectus pursue a variety of investment objectives,
including growth, total return, capital appreciation, and current income. The
information in this prospectus is important. Please read it carefully before you
invest, and save it for future reference.
PLEASE REMEMBER THAT SHARES OF THE FUNDS: o ARE NOT DEPOSITS OR
OBLIGATIONS OF, OR GUARANTEED BY BANC ONE CORPORATION OR ITS AFFILIATES; o ARE
NOT INSURED OR GUARANTEED BY THE FEDERAL DEPOSIT INSURANCE CORPORATION OR BY ANY
FEDERAL OR STATE GOVERNMENTAL AGENCY; o INVOLVE INVESTMENT RISK, INCLUDING THE
POSSIBLE LOSS OF THE PRINCIPAL AMOUNT INVESTED.
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE
SECURITIES AND EXCHANGE COMMISSION NOR HAS THE COMMISSION PASSED UPON THE
ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A
CRIMINAL OFFENSE.
<PAGE> 263
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Page
----
<S> <C>
A BRIEF PREVIEW OF THE FUNDS 1
ABOUT THE FUNDS 3
The One Group(R) Investor Growth Fund 3
The One Group(R) Investor Growth & Income Fund 9
The One Group(R) Investor Balanced Fund 15
The One Group(R) Investor Conservative Growth Fund 22
MORE ABOUT THE FUNDS 29
HOW TO DO BUSINESS WITH THE ONE GROUP 31
Purchasing Fund Shares 31
Sales Charges 34
Sales Charge Reductions and Waivers 36
Exchanging Fund Shares 39
Redeeming Fund Shares 40
SHAREHOLDER INFORMATION 44
Voting Rights 44
Dividend Policies 45
Tax Treatment of the Funds 46
Tax Treatment of Shareholders 46
Shareholder Inquiries 46
ORGANIZATION AND MANAGEMENT OF THE FUNDS 47
The Funds 47
The Board of Trustees 47
The Advisor 47
The Distributor 47
The Administrator and Sub-Administrator 47
The Transfer Agent, Custodian and Sub-Custodian 47
DETAILS ABOUT THE FUNDS' INVESTMENT PRACTICES AND POLICIES 48
Investment Practices 48
Investment Policies 51
APPENDIX A: DETAILS ABOUT THE UNDERLYING FUNDS' INVESTMENT PRACTICES
AND POLICIES 53
APPENDIX B: DESCRIPTION OF RATINGS 60
</TABLE>
<PAGE> 264
A BRIEF PREVIEW OF THE FUNDS
WHAT ARE THE GOALS OF THE ONE GROUP INVESTOR FUNDS?
The Funds are designed for a variety of investment objectives, including total
return, capital appreciation, current income, and long-term capital growth. Each
Fund pursues a different objective and involves different risks. Please read
about each Fund before investing.
WHAT ARE THE FUNDS' INVESTMENT STRATEGIES?
The Funds normally will invest in a diversified group of One Group mutual funds,
which invest primarily in equity, fixed income and money market instruments.
Shares are available for long-term investors, including tax-advantaged
retirement accounts; the Funds should not be used for short-term trading
purposes. The Funds' investment return is diversified by its investment in the
underlying mutual funds which invest in growth and income stocks, foreign
securities, debt securities, and cash or cash equivalents. The underlying mutual
funds in which the Funds will invest have the following characteristics:
The One Group(R) Prime Money Market Fund Money Market
The One Group(R) Limited Volatility Bond Fund Fixed Income
The One Group(R) Intermediate Bond Fund Fixed Income
The One Group(R) Income Bond Fund Fixed Income
The One Group(R) Government Bond Fund Fixed Income
The One Group(R) Ultra Short-Term Income Fund Fixed Income
The One Group(R) High Yield Bond Fund Fixed Income
The One Group(R) Disciplined Value Fund Equity
The One Group(R) International Equity Index Fund Equity
The One Group(R) Large Company Growth Fund Equity
The One Group(R) Large Company Value Fund Equity
The One Group(R) Growth Opportunities Fund Equity
The One Group(R) Value Growth Fund Equity
The One Group(R) Small Capitalization Fund Equity
The One Group(R) Income Equity Fund Equity
The One Group(R) Equity Index Fund Equity
WHAT ARE THE MAIN RISKS OF INVESTING IN THE FUNDS?
The investments of each Fund are concentrated in the underlying funds, so each
Fund's investment performance is directly related to the performance of the
underlying funds. Each Fund's net asset value will fluctuate with changes in the
equity and bond markets and the value of the mutual funds in which it invests.
In addition, as a matter of fundamental policy, each Fund must allocate its
investments among the underlying funds. As a result, the Funds do not have the
same flexibility to invest as a mutual fund without such constraints. An
investment in the Funds is not a deposit of BANC ONE CORPORATION or its
affiliates and is not insured or guaranteed by the Federal Deposit Insurance
Corporation or any other government agency. For more information about risks,
please read "More About the Funds" and "Investment Risks."
WHAT CLASSES OF SHARES ARE AVAILABLE?
The Funds currently offer four classes of Shares: Class A, Class B, Class C and
Class I. Class A, Class B and Class C shares are offered to the general public.
Class I 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. The section called
1
<PAGE> 265
"How To Do Business With The One Group" will provide more information. Class I
shares are not available to Individual Retirement Accounts ("IRA").
HOW DO I PURCHASE AND REDEEM SHARES?
You may buy and redeem shares of the Funds on any day that the Funds are open
for business. Purchase and redemption procedures are explained in greater detail
in "How To Do Business With The One Group." For additional information, call The
One Group Services Company at 1-800-480-4111.
HOW ARE DIVIDENDS PAID?
Generally, dividends are declared monthly and distributed 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 you elect
to take the payment in cash. For a more detailed discussion of dividends, see
"Dividend Policies."
WHO MANAGES THE FUNDS?
Banc One Investment Advisors Corporation ("Banc One Investment Advisors"), an
indirect subsidiary of BANC ONE CORPORATION, serves as the advisor of the Funds.
Banc One Investment Advisors is paid a fee for its services. Banc One Investment
Advisors also serves as the advisor to the underlying mutual funds, for which it
receives a fee.
2
<PAGE> 266
THE ONE GROUP(R) INVESTOR GROWTH FUND
INVESTMENT OBJECTIVE
The Fund seeks long-term capital appreciation by investing primarily in a
diversified group of The One Group mutual funds which invest primarily in equity
securities.
INVESTMENT STRATEGY
The Fund invests 80% to 100% of its total assets in nine mutual funds of The One
Group which invest primarily in equity securities, up to 20% of its total assets
in six mutual funds of The One Group that invest primarily in fixed income
securities, and up to 10% of its total assets in one money market fund of The
One Group. The Fund also may hold cash and cash equivalents.
PORTFOLIO SECURITIES
The Fund will invest in the underlying mutual funds within the following range:
The One Group(R) Prime Money Market Fund 0-10%
The One Group(R) Limited Volatility Bond Fund 0-20%
The One Group(R) Intermediate Bond Fund 0-20%
The One Group(R) Income Bond Fund 0-20%
The One Group(R) High Yield Bond Fund 0-20%
The One Group(R) Government Bond Fund 0-20%
The One Group(R) Ultra Short-Term Income Fund 0-20%
The One Group(R) Disciplined Value Fund 0-40%
The One Group(R) International Equity Index Fund 0-40%
The One Group(R) Large Company Growth Fund 0-48%
The One Group(R) Large Company Value Fund 0-55%
The One Group(R) Growth Opportunities Fund 0-40%
The One Group(R) Value Growth Fund 0-50%
The One Group(R) Small Capitalization Fund 0-40%
The One Group(R) Income Equity Fund 0-50%
The One Group(R) Equity Index Fund 0-50%
RISK CONSIDERATIONS
The Fund's investments are concentrated in other mutual funds, so the Fund's
investment performance is directly related to the performance of those mutual
funds. In addition, as a matter of fundamental policy, the Fund must allocate
its investments primarily among the mutual funds. As a result, the Fund's
investment flexibility is limited. The Fund may invest in a mutual fund which
invests in medium or lower grade bonds, which can be volatile. Medium and lower
grade bonds are speculative. See "Special Risk Considerations."
SHAREHOLDER EXPENSES
<TABLE>
<CAPTION>
SHAREHOLDER TRANSACTION EXPENSES(1) CLASS A CLASS B CLASS C CLASS I
- ------------------------------------ ------- ------- ------- -------
<S> <C> <C> <C> <C>
Maximum Sales Charge Imposed on Purchases
(as a percentage of offering price) 4.50% none none none
</TABLE>
3
<PAGE> 267
<TABLE>
<CAPTION>
SHAREHOLDER TRANSACTION EXPENSES(1) CLASS A CLASS B CLASS C CLASS I
- ------------------------------------ ------- ------- ------- -------
<S> <C> <C> <C> <C>
Maximum Sales Charge Imposed on Purchases
Maximum Contingent Deferred Sales Charge
(as a percentage of original purchase price or
redemption proceeds, as applicable) none(2) 5.00% 1.00% none
Redemption Fees none none none none
Exchange Fees none none none none
ANNUAL OPERATING EXPENSES
(as a percentage of average daily net assets)(3)
Investment Advisory Fees .05% .05% .05% .05%
12b-1 Fees (after fee waiver)(4) .25% 1.00% 1.00% none
Other Expenses .15% .15% .15% .15%
Total Operating Expenses (after fee waivers)(5) .45% 1.20% 1.20% .20%
</TABLE>
(1) If you buy or sell shares through a Shareholder Servicing Agent, you
may be charged separate transaction fees by the Shareholder Servicing
Agent. In addition, a $10.00 sub-minimum account fee may be applicable
and a $7.00 charge will be deducted from redemption amounts paid by
wire.
(2) Except for purchases of $1 million or more. Please see "Sales Charges."
(3) Expense information has been restated to reflect current fees.
(4) Due to 12b-1 fees, long-term Class A, Class B, and Class C shareholders
may pay more than the equivalent of the maximum front-end sales charges
permitted by the rules of the National Association of Securities
Dealers. Without the voluntary waiver, 12b-1 fees would be .35% for
Class A.
(5) Without the voluntary reduction of 12b-1 fees, Total Operating Expenses
would be .55% for Class A shares.
The Fund will indirectly pay a portion of the expenses incurred by the
underlying funds. The following chart provides the expense ratio for each
underlying fund in which the Fund invests (based on the current fund
prospectus). Some of these expense ratios may include a voluntary reduction of
investment advisory fees.
<TABLE>
<CAPTION>
EXPENSE
NAME OF UNDERLYING FUND RATIO
- ----------------------- -----
<S> <C>
The One Group(R) Prime Money Market Fund .52%
The One Group(R) Limited Volatility Bond Fund .62%
The One Group(R) Intermediate Bond Fund .62%
The One Group(R) Income Bond Fund .62%
The One Group(R) High Yield Bond Fund .95%
The One Group(R) Government Bond Fund .69%
The One Group(R) Ultra Short-Term Income Fund .55%
The One Group(R) Disciplined Value Fund 1.00%
The One Group(R) International Equity Index Fund .95%
The One Group(R) Large Company Growth Fund 1.00%
The One Group(R) Large Company Value Fund 1.00%
The One Group(R) Growth Opportunities Fund 1.00%
The One Group(R) Value Growth Fund 1.00%
The One Group(R) Small Capitalization Fund 1.05%
The One Group(R) Income Equity Fund 1.00%
The One Group(R) Equity Index Fund .50%
</TABLE>
4
<PAGE> 268
After combining the total operating expenses of the Fund with those of the
underlying funds, the estimated average weighted expense ratio for Class A
shares is 1.32%, for Class B shares is 2.07%, for Class C shares is 2.07%, and
for Class I shares is 1.07%.
EXAMPLE
An investor would pay the following expenses on a $1,000 investment in the Fund,
assuming: (1) payment of the maximum sales charges; (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 $85 $114 $197
Class A (without fee waiver) $59 $89 $121 $212
Class B $71 $95 $131 $221
Class B (without fee waiver) $71 $96 $133 $228
Class C $31 $65 $111 $240
Class C (without fee waiver) $31 $66 $113 $244
Class I $11 $34 $ 59 $131
Class I (without fee waiver) $11 $35 $ 61 $135
</TABLE>
Assuming no redemption at the end of each time period, 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 $58 $85 $114 $197
Class A (without fee waiver) $59 $89 $121 $212
Class B $21 $65 $111 $221
Class B (without fee waiver) $21 $66 $113 $228
Class C $21 $65 $111 $240
Class C (without fee waiver) $21 $66 $ 13 $244
Class I $11 $34 $ 59 $131
Class I (without fee waiver) $11 $35 $ 61 $135
</TABLE>
Class B shares automatically convert to Class A shares after eight (8) years.
Therefore, the "10 Years" examples above reflect the conversion.
These examples are designed to assist you in understanding the costs and
expenses that may be directly or indirectly paid by investors in the Fund. THE
EXAMPLES SHOULD NOT BE CONSIDERED A REPRESENTATION OF PAST OR FUTURE EXPENSES
AND ACTUAL EXPENSES MAY BE GREATER OR LESS THAN THOSE SHOWN.
5
<PAGE> 269
THE ONE GROUP(R) INVESTOR GROWTH FUND FINANCIAL HIGHLIGHTS
The Financial Highlights are intended to help you understand the Fund's
financial performance for the past 10 years, or since inception if less than 10
years. The total returns in the table represent the rate a shareholder would
have earned on an investment in the Fund (assuming reinvestment of all dividends
and distributions). This information has been derived from financial statements
audited by PricewaterhouseCoopers, LLP, whose report, along with the Fund's
financial statements, is incorporated by reference in the Statement of
Additional Information, which is available upon request.
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 10, 1996
JUNE 30, 1998 THROUGH
------------- JUNE 30, 1997 (a)
CLASS I -----------------
<S> <C>
NET ASSET VALUE, BEGINNING OF PERIOD $ 10.00
-------
Investment Activities
Net investment income 0.09
Net realized and unrealized gains (losses) from investments 1.25
-------
Total from Investment Activities 1.34
Distributions
From net investment income (0.09)
-------
Total Distributions (0.09)
-------
NET ASSET VALUE, END OF PERIOD $ 11.25
-------
Total Return 13.50%(b)
RATIOS/SUPPLEMENTARY DATA:
Net Assets at end of period (000) $31,318
Ratio of expenses to average net assets 0.20%(c)
Ratio of net investment income to average net assets 1.70%(c)
Ratio of expenses to average net assets* 0.77%(c)
Ratio of net investment income to average net assets* 1.13%(c)
Portfolio turnover(d) 18.49%
</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) Not annualized. (c) Annualized.
(d) Portfolio turnover is calculated on the basis of the Fund as a whole
without distinguishing among the classes of shares issued.
6
<PAGE> 270
THE ONE GROUP(R) INVESTOR GROWTH FUND FINANCIAL HIGHLIGHTS
<TABLE>
<CAPTION>
DECEMBER 10, 1996
YEAR ENDED THROUGH
CLASS A JUNE 30, 1998 JUNE 30, 1997 (a)
------- ------------- -----------------
<S> <C>
NET ASSET VALUE, BEGINNING OF PERIOD $10.00
------
Investment Activities
Net investment income 0.07
Net realized and unrealized gains (losses) from investments 1.21
------
Total from Investment Activities 1.28
Distributions
From net investment income (0.07)
------
Total Distributions (0.07)
------
NET ASSET VALUE, END OF PERIOD $11.21
------
Total Return (Excludes Sales Charge) 12.84%(b)
RATIOS/SUPPLEMENTARY DATA:
Net Assets at end of period (000) $4,439
Ratio of expenses to average net assets 0.46%(c)
Ratio of net investment income to average net assets 1.82%(c)
Ratio of expenses to average net assets* 1.62%(c)
Ratio of net investment income to average net assets* 0.66%(c)
Portfolio turnover(d) 18.49%
</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) Not annualized. (c) Annualized.
(d) Portfolio turnover is calculated on the basis of the Fund as a whole
without distinguishing among the classes of shares issued.
7
<PAGE> 271
THE ONE GROUP(R) INVESTOR GROWTH FUND FINANCIAL HIGHLIGHTS
<TABLE>
<CAPTION>
DECEMBER 10, 1996
YEAR ENDED THROUGH
CLASS B JUNE 30, 1998 JUNE 30, 1997(a)
------- ------------- ----------------
<S> <C>
NET ASSET VALUE, BEGINNING OF PERIOD $10.00
Investment Activities
Net investment income 0.04
Net realized and unrealized gains (losses) from investments 1.34
------
Total from Investment Activities 1.38
Distributions
From net investment income (0.04)
------
Total Distributions (0.04)
------
NET ASSET VALUE, END OF PERIOD $11.34
Total Return (Excludes Sales Charge) 13.88% (b)
RATIOS/SUPPLEMENTARY DATA:
Net Assets at end of period (000) $7,651
Ratio of expenses to average net assets 1.20% (c)
Ratio of net investment income to average net assets 0.97% (c)
Ratio of expenses to average net assets* 2.18% (c)
Ratio of net investment income to average net assets* (0.01%)(c)
Portfolio turnover(d) 18.49%
</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) Not annualized. (c) Annualized.
(d) Portfolio turnover is calculated on the basis of the Fund as a whole
without distinguishing among the classes of shares issued.
8
<PAGE> 272
THE ONE GROUP(R) INVESTOR GROWTH & INCOME FUND
INVESTMENT OBJECTIVE
The Fund seeks long-term capital appreciation and growth of income by investing
primarily in a diversified group of The One Group mutual funds which invest
primarily in equity securities.
INVESTMENT STRATEGY
The Fund invests 60% to 80% of its total assets in nine mutual funds of The One
Group which invest primarily in equity securities, 20% to 40% of its total
assets in six mutual funds of The One Group that invest primarily in fixed
income securities, and up to 10% of its total assets in one money market fund of
The One Group. The Fund also may hold cash and cash equivalents.
PORTFOLIO SECURITIES
The Fund will invest in the underlying mutual funds within the following ranges:
The One Group(R) Prime Money Market Fund 0-10%
The One Group(R) Limited Volatility Bond Fund 0-30%
The One Group(R) Intermediate Bond Fund 0-30%
The One Group(R) Income Bond Fund 0-30%
The One Group(R) High Yield Bond Fund 0-30%
The One Group(R) Government Bond Fund 0-30%
The One Group(R) Ultra Short-Term Income Fund 0-30%
The One Group(R) Disciplined Value Fund 0-40%
The One Group(R) International Equity Index Fund 0-40%
The One Group(R) Large Company Growth Fund 0-50%
The One Group(R) Large Company Value Fund 0-60%
The One Group(R) Growth Opportunities Fund 0-40%
The One Group(R) Value Growth Fund 0-60%
The One Group(R) Small Capitalization Fund 0-40%
The One Group(R) Income Equity Fund 0-60%
The One Group(R) Equity Index Fund 0-60%
RISK CONSIDERATIONS
The Fund's investments are concentrated in other mutual funds, so the Fund's
investment performance is directly related to the performance of those mutual
funds. In addition, as a matter of fundamental policy, the Fund must allocate
its investments primarily among the mutual funds. As a result, the Fund's
investment flexibility is limited. The Fund may invest in a mutual fund which
invests in medium or lower grade bonds, which can be volatile. Medium and lower
grade bonds are speculative. See "Special Risk Considerations."
SHAREHOLDER EXPENSES
<TABLE>
<CAPTION>
SHAREHOLDER TRANSACTION EXPENSES(1) CLASS A CLASS B CLASS C CLASS I
- ------------------------------------ ------- ------- ------- -------
<S> <C> <C> <C> <C>
Maximum Sales Charge Imposed on Purchases
(as a percentage of offering price) 4.50% none none none
Maximum Contingent Deferred Sales Charge
(as a percentage of original purchase
price or redemption proceeds, as applicable) none(2) 5.00% 1.00% none
</TABLE>
9
<PAGE> 273
<TABLE>
<CAPTION>
SHAREHOLDER TRANSACTION EXPENSES(1) CLASS A CLASS B CLASS C CLASS I
- ------------------------------------ ------- ------- ------- -------
<S> <C> <C> <C> <C>
Redemption Fees none none none none
Exchange Fees none none none none
ANNUAL OPERATING EXPENSES
(as a percentage of average daily net assets)(3)
Investment Advisory Fees .05% .05% .05% .05%
12b-1 Fees (after fee waiver)(4) .25% 1.00% 1.00% none
Other Expenses .15% .15% .15% .15%
Total Operating Expenses (after fee waivers)(5) .45% 1.20% 1.20% .20%
</TABLE>
(1) If you buy or sell shares through a Shareholder Servicing Agent, you
may be charged separate transaction fees by the Shareholder Servicing
Agent. In addition, a $10.00 sub-minimum account fee may be applicable
and a $7.00 charge will be deducted from redemption amounts paid by
wire.
(2) Except for purchases of $1 million or more. Please see "Sales Charges."
(3) Expense information has been restated to reflect current fees.
(4) Due to 12b-1 fees, long-term Class A, Class B, and Class C shareholders
may pay more than the equivalent of the maximum front-end sales charges
permitted by the rules of the National Association of Securities
Dealers. Without the voluntary waiver, 12b-1 fees would be .35% for
Class A.
(5) Without the voluntary reduction of 12b-1 fees, Total Operating Expenses
would be .55% for Class A shares.
The Fund will indirectly pay a portion of the expenses incurred by the
underlying funds. The following chart provides the expense ratio for each
underlying fund (based on the current fund prospectus). Some of these expense
ratios may include a voluntary reduction of investment advisory fees.
EXPENSE
NAME OF UNDERLYING FUND RATIO
----------------------- -----
The One Group(R) Prime Money Market Fund .52%
The One Group(R) Limited Volatility Bond Fund .62%
The One Group(R) Intermediate Bond Fund .62%
The One Group(R) Income Bond Fund .62%
The One Group(R) High Yield Bond Fund .95%
The One Group(R) Government Bond Fund .69%
The One Group(R) Ultra Short-Term Income Fund .55%
The One Group(R) Disciplined Value Fund 1.00%
The One Group(R) International Equity Index Fund .95%
The One Group(R) Large Company Growth Fund 1.00%
The One Group(R) Large Company Value Fund 1.00%
The One Group(R) Growth Opportunities Fund 1.00%
The One Group(R) Value Growth Fund 1.00%
The One Group(R) Small Capitalization Fund 1.05%
The One Group(R) Income Equity Fund 1.00%
The One Group(R) Equity Index Fund .50%
After combining the total operating expenses of the Fund with those of the
underlying funds, the estimated average weighted expense ratio for Class A
shares is 1.30%, for Class B shares is 2.05%, for Class C shares is 2.05%, and
for Class I shares is 1.05%.
10
<PAGE> 274
EXAMPLE
An investor would pay the following expenses on a $1,000 investment in the Fund,
assuming: (1) payment of the maximum sales charges; (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
Class A (without fee waiver) $59 $89 $121 $212
Class B $71 $94 $130 $219
Class B (without fee waiver) $71 $96 $133 $228
Class C $31 $64 $110 $238
Class C (without fee waiver) $31 $66 $113 $244
Class I $11 $33 $ 58 $128
Class I (without fee waiver) $11 $35 $ 61 $135
</TABLE>
Assuming no redemption at the end of each time period, 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 $58 $84 $113 $195
Class A (without fee waiver) $59 $89 $121 $212
Class B $21 $64 $110 $219
Class B (without fee waiver) $21 $66 $113 $228
Class C $21 $64 $110 $238
Class C (without fee waiver) $21 $66 $113 $244
Class I $11 $33 $ 58 $128
Class I (without fee waiver) $11 $35 $ 61 $135
</TABLE>
Class B shares automatically convert to Class A shares after eight (8) years.
Therefore, the "10 Years" examples above reflect the conversion.
These examples are designed to assist you in understanding the costs and
expenses that may be directly or indirectly paid by investors in the Fund. THE
EXAMPLES SHOULD NOT BE CONSIDERED A REPRESENTATION OF PAST OR FUTURE EXPENSES
AND ACTUAL EXPENSES MAY BE GREATER OR LESS THAN THOSE SHOWN.
11
<PAGE> 275
THE ONE GROUP(R) INVESTOR GROWTH & INCOME FUND FINANCIAL HIGHLIGHTS
The Financial Highlights are intended to help you understand the Fund's
financial performance for the past 10 years, or since inception if less than 10
years. The total returns in the table represent the rate a shareholder would
have earned on an investment in the Fund (assuming reinvestment of all dividends
and distributions). This information has been derived from financial statements
audited by PricewaterhouseCoopers, LLP, whose report, along with the Fund's
financial statements, is incorporated by reference in the Statement of
Additional Information, which is available upon request.
<TABLE>
<CAPTION>
DEC. 10, 1996
YEAR ENDED THROUGH
CLASS I JUNE 30, 1998 JUNE 30, 1997(a)
- ------- ------------- -----------------
<S> <C>
NET ASSET VALUE, BEGINNING OF PERIOD $ 10.00
-------
Investment Activities
Net investment income 0.15
Net realized and unrealized gains from investments 0.93
Total from Investment Activities 1.08
Distributions
From net investment income (0.15)
-------
Total Distributions (0.15)
-------
NET ASSET VALUE, END OF PERIOD $ 10.93
-------
Total Return 10.87%(b)
RATIOS/SUPPLEMENTARY DATA:
Net Assets at end of period (000) $43,660
Ratio of expenses to average net assets 0.20%(c)
Ratio of net investment income to average net assets 2.78%(c)
Ratio of expenses to average net assets* 0.66%(c)
Ratio of net investment income to average net assets* 2.32%(c)
Portfolio turnover(d) 18.07%
</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) Not annualized. (c) Annualized.
(d) Portfolio turnover is calculated on the basis of the Fund as a whole
without distinguishing among the classes of shares issued.
12
<PAGE> 276
THE ONE GROUP(R) INVESTOR GROWTH & INCOME FUND HIGHLIGHTS
<TABLE>
<CAPTION>
DEC. 10, 1996
YEAR ENDED THROUGH
CLASS A JUNE 30, 1998 JUNE 30, 1997(a)
- ------- --------------- ----------------
<S> <C>
NET ASSET VALUE, BEGINNING OF PERIOD $10.00
------
Investment Activities
Net investment income 0.12
Net realized and unrealized gains from investments 1.02
Total from Investment Activities 1.14
Distributions
From net investment income (0.12)
------
Total Distributions (0.12)
------
NET ASSET VALUE, END OF PERIOD $11.02
------
Total Return (Excludes Sales Charge) 11.50%(b)
RATIOS/SUPPLEMENTARY DATA:
Net Assets at end of period (000) $4,262
Ratio of expenses to average net assets 0.46%(c)
Ratio of net investment income to average net assets 2.67%(c)
Ratio of expenses to average net assets* 1.26%(c)
Ratio of net investment income to average net assets* 1.87%(c)
Portfolio turnover(d) 18.07%
</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) Not annualized. (c) Annualized.
(d) Portfolio turnover is calculated on the basis of the Fund as a whole
without distinguishing among the classes of shares issued.
<TABLE>
<CAPTION>
DEC. 10, 1996
YEAR ENDED THROUGH
CLASS B JUNE 30, 1998 JUNE 30, 1997(a)
- ------- ------------- ----------------
<S> <C>
NET ASSET VALUE, BEGINNING OF PERIOD $10.00
------
Investment Activities
Net investment income 0.09
Net realized and unrealized gains (losses) from investments 1.00
------
Total from Investment Activities 1.09
Distributions
From net investment income (0.09)
------
Total Distributions (0.09)
------
NET ASSET VALUE, END OF PERIOD $11.00
------
Total Return (Excludes Sales Charge) 11.02%(b)
RATIOS/SUPPLEMENTARY DATA:
Net Assets at end of period (000) $8,896
Ratio of expenses to average net assets 1.21%(c)
Ratio of net investment income to average net assets 1.94%(c)
Ratio of expenses to average net assets* 1.89%(c)
</TABLE>
13
<PAGE> 277
<TABLE>
<CAPTION>
DEC. 10, 1996
YEAR ENDED THROUGH
CLASS B JUNE 30, 1998 JUNE 30, 1997(a)
- ------- ------------- ----------------
<S> <C>
Ratio of net investment income to average net assets* 1.26%(c)
Portfolio turnover(d) 18.07%
</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) Not annualized. (c) Annualized.
(d) Portfolio turnover is calculated on the basis of the Fund as a whole
without distinguishing among the classes of shares issued.
14
<PAGE> 278
THE ONE GROUP(R) INVESTOR BALANCED FUND
INVESTMENT OBJECTIVE
The Fund seeks high total return consistent with the preservation of capital by
investing primarily in a diversified group of The One Group mutual funds which
invest primarily in equity and fixed income securities.
INVESTMENT STRATEGY
The Fund invests 40% to 60% of its total assets in nine mutual funds of The One
Group which invest primarily in equity securities, 40% to 60% of its total
assets in five mutual funds of The One Group which invest primarily in fixed
income securities, and up to 10% of its total assets in one money market fund of
The One Group. The Fund also may hold cash and cash equivalents.
PORTFOLIO SECURITIES
The Fund will invest in the underlying mutual funds within the following range:
The One Group(R) Prime Money Market Fund 0-10%
The One Group(R) Limited Volatility Bond Fund 0-50%
The One Group(R) Intermediate Bond Fund 0-50%
The One Group(R) Income Bond Fund 0-50%
The One Group(R) Government Bond Fund 0-50%
The One Group(R) Ultra Short-Term Income Fund 0-50%
The One Group(R) Disciplined Value Fund 0-30%
The One Group(R) International Equity Index Fund 0-30%
The One Group(R) Large Company Growth Fund 0-40%
The One Group(R) Large Company Value Fund 0-50%
The One Group(R) Growth Opportunities Fund 0-30%
The One Group(R) Value Growth Fund 0-40%
The One Group(R) Small Capitalization Fund 0-30%
The One Group(R) Income Equity Fund 0-40%
The One Group(R) Equity Index Fund 0-40%
RISK CONSIDERATIONS
The Fund's investments are concentrated in other mutual funds, so the Fund's
investment performance is directly related to the performance of those mutual
funds. In addition, as a matter of fundamental policy, the Fund must allocate
its investments primarily among the mutual funds. As a result, the Fund's
investment flexibility is limited. The Fund may invest in a mutual fund which
invests in medium or lower grade bonds, which can be volatile. See "Special Risk
Considerations."
15
<PAGE> 279
SHAREHOLDER EXPENSES
<TABLE>
<CAPTION>
SHAREHOLDER TRANSACTION EXPENSES(1) CLASS A CLASS B CLASS C CLASS I
- ----------------------------------- ------- ------- ------- -------
<S> <C> <C> <C> <C>
Maximum Sales Charge Imposed on Purchases
(as a percentage of offering price) 4.50% none none none
Maximum Contingent Deferred Sales Charge
(as a percentage of original purchase
price or redemption proceeds, as
applicable) none(2) 5.00% 1.00% none
Redemption Fees none none none none
Exchange Fees none none none none
ANNUAL OPERATING EXPENSES
(as a percentage of average daily
net assets)(3)
Investment Advisory Fees .05% .05% .05% .05%
12b-1 Fees (after fee waiver)(4) .25% 1.00% 1.00% none
Other Expenses .15% .15% .15% .15%
Total Operating Expenses (after fee
waivers)(5) .45% 1.20% 1.20% .20%
</TABLE>
(1) If you buy or sell shares through a Shareholder Servicing Agent, you
may be charged separate transaction fees by the Shareholder Servicing
Agent. In addition, a $10.00 sub-minimum account fee may be applicable
and a $7.00 charge will be deducted from redemption amounts paid by
wire.
(2) Except for purchases of $1 million or more. Please see "Sales Charges."
(3) Expense information has been restated to reflect current fees.
(4) Due to 12b-1 fees, long term Class A, Class B, and Class C shareholders
may pay more than the equivalent of the maximum front-end sales charges
permitted by the rules of the National Association of Securities
Dealers. Without the voluntary waiver, 12b-1 fees would be .35% for
Class A.
(5) Without the voluntary reduction of 12b-1 fees, Total Operating Expenses
would be .55% for Class A shares.
The Fund will indirectly pay a portion of the expenses incurred by the
underlying funds. The following chart provides the expense ratio for each
underlying fund in which the Fund invests (based on the current fund
prospectus). Some of these expense ratios may include a voluntary reduction of
investment advisory fees.
16
<PAGE> 280
EXPENSE
NAME OF UNDERLYING FUND RATIO
- ----------------------- -----
The One Group(R) Prime Money Market Fund .52%
The One Group(R) Limited Volatility Bond Fund .62%
The One Group(R) Intermediate Bond Fund .62%
The One Group(R) Income Bond Fund .62%
The One Group(R) Government Bond Fund .69%
The One Group(R) Ultra Short-Term Income Fund .55%
The One Group(R) Disciplined Value Fund 1.00%
The One Group(R) International Equity Index Fund .95%
The One Group(R) Large Company Growth Fund 1.00%
The One Group(R) Large Company Value Fund 1.00%
The One Group(R) Growth Opportunities Fund 1.00%
The One Group(R) Value Growth Fund 1.00%
The One Group(R) Small Capitalization Fund 1.05%
The One Group(R) Income Equity Fund 1.00%
The One Group(R) Equity Index Fund .50%
After combining the total operating expenses of the Fund with those of the
underlying funds, the estimated average weighted expense ratio for Class A
shares is 1.25%, for Class B shares is 2.00%, for Class C shares is 2.00%, and
for Class I shares is 1.00%.
EXAMPLE
An investor would pay the following expenses on a $1,000 investment in the Fund,
assuming: (1) payment of the maximum sales charges; (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 $57 $83 $111 $189
Class A (without fee waiver) $59 $88 $119 $208
Class B $70 $93 $128 $213
Class B (without fee waiver) $71 $95 $131 $223
Class C $30 $63 $108 $233
Class C (without fee waiver) $31 $65 $111 $240
Class I $10 $32 $ 55 $122
Class I (without fee waiver) $11 $34 $ 59 $131
</TABLE>
Assuming no redemption at the end of the time period, 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 $57 $83 $111 $189
Class A (without fee waiver) $59 $88 $119 $208
Class B $20 $63 $108 $213
Class B (without fee waiver) $21 $65 $111 $223
Class C $20 $63 $108 $233
Class C (without fee waiver) $21 $65 $111 $240
Class I $10 $32 $ 55 $122
Class I (without fee waiver) $11 $34 $ 59 $131
</TABLE>
17
<PAGE> 281
Class B shares automatically convert to Class A shares after eight (8) years.
Therefore, the "10 Years" examples above reflect the conversion.
These examples are designed to assist you in understanding the costs and
expenses that may be directly or indirectly paid by investors in the Fund. THE
EXAMPLES SHOULD NOT BE CONSIDERED A REPRESENTATION OF PAST OR FUTURE EXPENSES
AND ACTUAL EXPENSES MAY BE GREATER OR LESS THAN THOSE SHOWN.
18
<PAGE> 282
THE ONE GROUP(R) INVESTOR BALANCED FUND FINANCIAL HIGHLIGHTS
The Financial Highlights are intended to help you understand the Fund's
financial performance for the past 10 years, or since inception if less than 10
years. The total returns in the table represent the rate a shareholder would
have earned on an investment in the Fund (assuming reinvestment of all dividends
and distributions). This information has been derived from financial statements
audited by PricewaterhouseCoopers, LLP, whose report, along with the Fund's
financial statements, is incorporated by reference in the Statement of
Additional Information, which is available upon request.
<TABLE>
<CAPTION>
DEC. 10, 1996
YEAR ENDED THROUGH,
CLASS I JUNE 30, 1998 JUNE 30, 1997(a)
- ------- ------------- ----------------
<S> <C>
NET ASSET VALUE, BEGINNING OF PERIOD $ 10.00
Investment Activities
Net investment income 0.21
Net realized and unrealized gains from investments 0.63
Total from Investment Activities 0.84
Distributions
From net investment income (0.21)
-------
Total Distributions (0.21)
-------
NET ASSET VALUE, END OF PERIOD $ 10.63
=======
Total Return 8.48%(b)
RATIOS/SUPPLEMENTARY DATA:
Net Assets at end of period (000) $72,155
Ratio of expenses to average net assets 0.20%(c)
Ratio of net investment income to average net assets 3.84%(c)
Ratio of expenses to average net assets* 0.56%(c)
Ratio of net investment income to average net assets* 3.48%(c)
Portfolio turnover(d) 12.20%
</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) Not annualized. (c) Annualized.
(d) Portfolio turnover is calculated on the basis of the Fund as a whole
without distinguishing among the classes of shares issued.
19
<PAGE> 283
THE ONE GROUP(R) INVESTOR BALANCED FUND FINANCIAL HIGHLIGHTS
<TABLE>
<CAPTION>
DEC. 10, 1996
YEAR ENDED THROUGH,
CLASS A JUNE 30, 1998 JUNE 30, 1997(a)
------- ------------- ----------------
<S> <C>
NET ASSET VALUE, BEGINNING OF PERIOD $10.00
------
Investment Activities
Net investment income 0.17
Net realized and unrealized gains from investments 0.66
Total from Investment Activities 0.83
Distributions
From net investment income (0.17)
------
Total Distributions (0.17)
------
NET ASSET VALUE, END OF PERIOD $10.66
======
Total Return (Excludes Sales Charge) 8.41%(b)
RATIOS/SUPPLEMENTARY DATA:
Net Assets at end of period (000) $2,176
Ratio of expenses to average net assets 0.47%(c)
Ratio of net investment income to average net assets 3.78%(c)
Ratio of expenses to average net assets* 1.12%(c)
Ratio of net investment income to average net assets* 3.13%(c)
Portfolio turnover(d) 12.20%
</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) Not annualized. (c) Annualized.
(d) Portfolio turnover is calculated on the basis of the Fund as a whole
without distinguishing among the classes of shares issued.
<TABLE>
<CAPTION>
DEC. 10, 1996
YEAR ENDED THROUGH,
CLASS B JUNE 30, 1998 JUNE 30, 1997(a)
------- ------------- ----------------
<S> <C>
NET ASSET VALUE, BEGINNING OF PERIOD $10.00
-------
Investment Activities
Net investment income 0.16
Net realized and unrealized gains from investments 0.65
Total from Investment Activities 0.81
Distributions
From net investment income (0.16)
-------
Total Distributions (0.16)
-------
NET ASSET VALUE, END OF PERIOD $10.65
=======
Total Return (Excludes Sales Charge) 8.22%(b)
RATIOS/SUPPLEMENTARY DATA:
Net Assets at end of period (000) $5,672
Ratio of expenses to average net assets 1.22%(c)
Ratio of net investment income to average net assets 2.93%(c)
</TABLE>
20
<PAGE> 284
<TABLE>
<CAPTION>
DEC. 10, 1996
YEAR ENDED THROUGH,
CLASS B JUNE 30, 1998 JUNE 30, 1997(a)
------- ------------- ----------------
<S> <C>
Ratio of expenses to average net assets* 1.73%(c)
Ratio of net investment income to average net assets* 2.42%(c)
Portfolio turnover(d) 12.20%
</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) Not annualized. (c) Annualized.
(d) Portfolio turnover is calculated on the basis of the Fund as a whole
without distinguishing among the classes of shares issued.
21
<PAGE> 285
THE ONE GROUP(R) INVESTOR CONSERVATIVE GROWTH FUND
INVESTMENT OBJECTIVE
The Fund seeks income and capital appreciation by investing primarily in a
diversified group of The One Group mutual funds which invest primarily in equity
and fixed income securities.
INVESTMENT STRATEGY
The Fund invests 20% to 40% of its total assets in nine mutual funds of The One
Group which invest primarily in equity securities, 60% to 80% of its total
assets in five mutual funds of The One Group which invest primarily in fixed
income securities, and up to 10% of its total assets in one money market fund of
The One Group. The Fund also may hold cash and cash equivalents.
PORTFOLIO SECURITIES
The Fund will invest in the underlying mutual funds within the following range:
The One Group(R) Prime Money Market Fund 0-10%
The One Group(R) Limited Volatility Bond Fund 0-70%
The One Group(R) Intermediate Bond Fund 0-70%
The One Group(R) Income Bond Fund 0-70%
The One Group(R) Government Bond Fund 0-70%
The One Group(R) Ultra Short-Term Income Fund 0-70%
The One Group(R) Disciplined Value Fund 0-20%
The One Group(R) International Equity Index Fund 0-20%
The One Group(R) Large Company Growth Fund 0-20%
The One Group(R) Large Company Value Fund 0-20%
The One Group(R) Growth Opportunities Fund 0-20%
The One Group(R) Value Growth Fund 0-20%
The One Group(R) Small Capitalization Fund 0-20%
The One Group(R) Income Equity Fund 0-20%
The One Group(R) Equity Index Fund 0-20%
RISK CONSIDERATIONS
The Fund's investments are concentrated in other mutual funds, so the Fund's
investment performance is directly related to the performance of those mutual
funds. In addition, as a matter of fundamental policy, the Fund must allocate
its investments primarily among the mutual funds. As a result, the Fund's
investment flexibility is limited. The Fund may invest in a mutual fund which
invests in medium or lower grade bonds, which can be volatile. See "Special Risk
Considerations."
22
<PAGE> 286
SHAREHOLDER EXPENSES
<TABLE>
<CAPTION>
SHAREHOLDERS TRANSACTION EXPENSES(1) CLASS A CLASS B CLASS C CLASS I
- ------------------------------------ ------- ------- ------- -------
<S> <C> <C> <C> <C>
Maximum Sales Charge Imposed on Purchases
(as a percentage of offering price) 4.50% none none none
Maximum Contingent Deferred Sales Charge
(as a percentage of original purchase
price or redemption proceeds, as
applicable) none(2) 5.00% 1.00% none
Redemption Fees none none none none
Exchange Fees none none none none
ANNUAL OPERATING EXPENSES)
(as a percentage of average daily
net assets)(3)
Investment Advisory Fees .05% .05% .05% .05%
12b-1 Fees (after fee waiver)(4) .25% 1.00% 1.00% none
Other Expenses .15% .15% .15% .15%
Total Operating Expenses (after fee
waivers)(5) .45% 1.20% 1.20% .20%
</TABLE>
(1) If you buy or sell shares through a Shareholder Servicing Agent, you
may be charged separate transaction fees by the Shareholder Servicing
Agent. In addition, a $10.00 sub-minimum account fee may be applicable
and a $7.00 charge will be deducted from redemption amounts paid by
wire.
(2) Except for purchases of $1 million or more. Please see "Sales Charges."
(3) Expense information has been restated to reflect current fees.
(4) Due to 12b-1 fees, long term Class A, Class B, and Class C shareholders
may pay more than the equivalent of the maximum front-end sales charges
permitted by the rules of the National Association of Securities
Dealers. Without the voluntary waiver, 12b-1 fees would be .35% for
Class A.
(5) Without the voluntary reduction of 12b-1 fees, Total Operating Expenses
would be .55% for Class A shares.
The Fund will indirectly pay a portion of the expenses incurred by the
underlying funds. The following chart provides the expense ratio for each
underlying fund in which the Fund invests (based on the current fund
prospectus). Some of these expense ratios may include a voluntary reduction of
investment advisory fees.
23
<PAGE> 287
EXPENSE
NAME OF UNDERLYING FUND RATIO
- ----------------------- -----
The One Group(R) Prime Money Market Fund .52%
The One Group(R) Limited Volatility Bond Fund .62%
The One Group(R) Intermediate Bond Fund .62%
The One Group(R) Income Bond Fund .62%
The One Group(R) Government Bond Fund .69%
The One Group(R) Ultra Short-Term Income Fund .55%
The One Group(R) Disciplined Value Fund 1.00%
The One Group(R) International Equity Index Fund .95%
The One Group(R) Large Company Growth Fund 1.00%
The One Group(R) Large Company Value Fund 1.00%
The One Group(R) Growth Opportunities Fund 1.00%
The One Group(R) Value Growth Fund 1.00%
The One Group(R) Small Capitalization Fund 1.05%
The One Group(R) Income Equity Fund 1.00%
The One Group(R) Equity Index Fund .50%
After combining the total operating expenses of the Fund with those of the
underlying funds, the estimated average weighted expense ratio for Class A
shares is 1.18%, for Class B shares is 1.93%, for Class C shares is 1.93%, and
for Class I shares is .93%.
EXAMPLE
An investor would pay the following expenses on a $1,000 investment in the Fund,
assuming: (1) payment of the maximum sales charges; (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 $56 $81 $107 $182
Class A (without fee waiver) $59 $87 $118 $204
Class B $70 $91 $124 $206
Class B (without fee waiver) $71 $94 $130 $220
Class C $30 $61 $104 $225
Class C (without fee waiver) $31 $64 $110 $237
Class I $ 9 $30 $ 51 $114
Class I (without fee waiver) $11 $33 $ 57 $127
</TABLE>
Assuming no redemption at the end of each time period, 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 $56 $81 $107 $182
Class A (without fee waiver) $59 $87 $118 $204
Class B $20 $61 $104 $206
Class B (without fee waiver) $21 $64 $110 $220
Class C $20 $61 $104 $225
Class C (without fee waiver) $21 $64 $110 $237
Class I $ 9 $30 $ 51 $114
Class I (without fee waiver) $11 $33 $ 57 $127
</TABLE>
24
<PAGE> 288
Class B shares automatically convert to Class A shares after eight (8) years.
Therefore, the "10 Years" examples above reflect the conversion.
These examples are designed to assist you in understanding the costs and
expenses that may be directly or indirectly paid by investors in the Fund. THE
EXAMPLES SHOULD NOT BE CONSIDERED A REPRESENTATION OF PAST OR FUTURE EXPENSES
AND ACTUAL EXPENSES MAY BE GREATER OR LESS THAN THOSE SHOWN.
25
<PAGE> 289
THE ONE GROUP(R) INVESTOR CONSERVATIVE GROWTH FUND FINANCIAL HIGHLIGHTS
The Financial Highlights are intended to help you understand the Fund's
financial performance for the past 10 years, or since inception if less than 10
years. The total returns in the table represent the rate a shareholder would
have earned on an investment in the Fund (assuming reinvestment of all dividends
and distributions). This information has been derived from financial statements
audited by PricewaterhouseCoopers, LLP, whose report, along with the Fund's
financial statements, is incorporated by reference in the Statement of
Additional Information, which is available upon request.
<TABLE>
<CAPTION>
DEC. 10, 1996
YEAR ENDED THROUGH,
CLASS I JUNE 30, 1998 JUNE 30, 1997(a)
- ------- ------------- ----------------
<S> <C>
NET ASSET VALUE, BEGINNING OF PERIOD $ 10.00
-------
Investment Activities
Net investment income 0.26
Net realized and unrealized gains (losses) from investments 0.33
-------
Total from Investment Activities 0.59
Distributions
From net investment income (0.26)
-------
Total Distributions (0.26)
-------
NET ASSET VALUE, END OF PERIOD $ 10.33
=======
Total Return 6.00%(b)
RATIOS/SUPPLEMENTARY DATA:
Net Assets at end of period (000) $15,038
Ratio of expenses to average net assets 0.20%(c)
Ratio of net investment income to average net assets 4.92%(c)
Ratio of expenses to average net assets* 1.46%(c)
Ratio of net investment income to average net assets* 3.66%(c)
Portfolio turnover(d) 28.46%
</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) Not annualized. (c) Annualized.
(d) Portfolio turnover is calculated on the basis of the Fund as a whole
without distinguishing among the classes of shares issued.
26
<PAGE> 290
THE ONE GROUP(R) INVESTOR CONSERVATIVE GROWTH FUND FINANCIAL HIGHLIGHTS
<TABLE>
<CAPTION>
DEC. 10, 1996
YEAR ENDED THROUGH,
CLASS A JUNE 30, 1998 JUNE 30, 1997(a)
------- ------------- ----------------
<S> <C>
NET ASSET VALUE, BEGINNING OF PERIOD $10.00
------
Investment Activities
Net investment income 0.22
Net realized and unrealized gains (losses) from investments 0.32
------
Total from Investment Activities 0.54
Distributions
From net investment income (0.22)
------
Total Distributions (0.22)
------
NET ASSET VALUE, END OF PERIOD $10.32
======
Total Return (Excludes Sales Charge) 5.46%(b)
RATIOS/SUPPLEMENTARY DATA:
Net Assets at end of period (000) $1,299
Ratio of expenses to average net assets 0.47%(c)
Ratio of net investment income to average net assets 4.76%(c)
Ratio of expenses to average net assets* 3.05%(c)
Ratio of net investment income to average net assets* 2.18%(c)
Portfolio turnover(d) 28.46%
</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) Not annualized. (c) Annualized.
(d) Portfolio turnover is calculated on the basis of the Fund as a whole
without distinguishing among the classes of shares issued.
<TABLE>
<CAPTION>
DEC. 10, 1996
YEAR ENDED THROUGH,
CLASS B JUNE 30, 1998 JUNE 30, 1997(a)
------- ------------- ----------------
<S> <C>
NET ASSET VALUE, BEGINNING OF PERIOD $10.00
------
Investment Activities
Net investment income 0.19
Net realized and unrealized gains (losses) from investments 0.33
------
Total from Investment Activities 0.52
Distributions
From net investment income (0.19)
------
Total Distributions (0.19)
------
NET ASSET VALUE, END OF PERIOD $10.33
======
Total Return (Excludes Sales Charge) 5.30%(b)
RATIOS/SUPPLEMENTARY DATA:
Net Assets at end of period (000) $2,616
Ratio of expenses to average net assets 1.21%(c)
Ratio of net investment income to average net assets 4.06%(c)
Ratio of expenses to average net assets* 3.52%(c)
</TABLE>
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<PAGE> 291
<TABLE>
<CAPTION>
DEC. 10, 1996
YEAR ENDED THROUGH,
CLASS B JUNE 30, 1998 JUNE 30, 1997(a)
------- ------------- ----------------
<S> <C>
Ratio of net investment income to average net assets* 1.75%(c)
Portfolio turnover(d) 28.46%
</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) Not annualized. (c) Annualized.
(d) Portfolio turnover is calculated on the basis of the Fund as a whole
without distinguishing among the classes of shares issued.
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<PAGE> 292
MORE ABOUT THE FUNDS
ILLIQUID INVESTMENTS
Each Fund may invest up to 15% of its net assets in illiquid investments. A
security is illiquid if it cannot be sold at approximately the value assessed by
the Fund within seven (7) days. Banc One Investment Advisors will follow
guidelines adopted by The One Group Board of Trustees in determining whether an
investment is illiquid.
TEMPORARY DEFENSIVE POSITION
Banc One Investment Advisors may decide that because of market conditions the
Funds should temporarily be invested in instruments other than the underlying
mutual funds. Therefore, the Funds are permitted for temporary defensive
purposes to invest up to 100% of their assets in short-term fixed income
securities. These securities include obligations of the U.S. Government and its
agencies and instrumentalities, commercial paper, bank certificates of deposit,
repurchase agreements, bankers' acceptances, variable amount master demand notes
and bank money market deposit accounts.
To the extent that the Funds are engaged in a temporary defensive position, they
will not be pursuing their investment objective.
SPECIAL RISK CONSIDERATIONS
Equity Funds Because equity funds invest primarily in equity securities, which
fluctuate in value, the funds' shares will fluctuate in value. In addition,
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.
Fixed-Income Funds Investments in fixed income securities (for example, bonds)
will increase or decrease in value based on changes in interest rates. If rates
increase, the value of a Fund's investments generally declines. On the other
hand, if rates fall, the value of the investments generally increases. The value
of your investment in a Fund will increase and decrease as the value of a Fund's
investments increase and decrease. While securities with longer duration and
maturities tend to produce higher yields, they also are subject to greater
fluctuations in value when interest rates change. Usually changes in the value
of fixed income securities will not affect cash income generated, but may affect
the value of your investment.
Index Funds An index fund's investment objective is to track the performance of
a specified index. Therefore, securities may be purchased, retained and sold by
an index fund at times when an actively managed fund would not do so. As a
result, you can expect greater risk of loss (and a correspondingly greater
prospect of gain) from changes in the value of securities that are heavily
weighted in the index than would be the case if the funds were not fully
invested in such securities. Because of this, an index fund's share price can be
volatile and you should be able to handle sudden, and sometimes substantial,
fluctuation in the value of your investment.
International Funds Funds investing in foreign securities are subject to special
risks. These risks may include future unfavorable political and economic
developments, possible withholding taxes, seizure of foreign deposits, currency
controls, higher transaction costs, and delayed settlements of transactions.
Securities of some foreign companies are less liquid, and their prices more
volatile, than securities of comparable U.S. companies. Additionally, there may
be less public information available about foreign issuers. Finally, since the
funds may invest in securities denominated in foreign currencies, changes in
exchange rates may affect the value of investments in the funds.
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<PAGE> 293
Small Capitalization Funds 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 other
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 funds may be volatile and the net asset value of shares
of the funds may fluctuate.
High Yield Bond Funds. High yield securities that are rated below investment
grade or are unrated are commonly known as "junk bonds." These securities are
considered speculative investments by major credit rating agencies. High yield
bonds involve a greater risk of default and price volatility than U.S.
government bonds and other high quality fixed-income securities. These debt
instruments generally offer a higher current yield than that available from
higher grade issuers, but typically involve greater risk. The yields on these
bonds will fluctuate over time. Low rated and unrated securities are especially
subject to adverse changes in general economic conditions and to changes in the
financial condition of their issuers. During periods of economic downturns or
rising interest rates, issuers of these instruments may experience financial
stress that could adversely affect their ability to make payments of principal
and interest and increase the possibility of default.
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<PAGE> 294
HOW TO DO BUSINESS WITH THE ONE GROUP
PURCHASING FUND SHARES
WHERE CAN I BUY SHARES?
You may purchase Fund shares from the following sources:
o The One Group Services Company, and
o Shareholder Servicing Agents. These include investment advisors,
brokers, financial planners, banks, insurance companies, retirement or
401(k) plan sponsors, or other intermediaries. Shares purchased this
way will be held for you by the Shareholder Servicing Agent.
WHEN CAN I BUY SHARES?
o Purchases may be made on any business day. This includes any day that
the Funds are open for business, other than weekends, days on which the
New York Stock Exchange ("NYSE") is closed, and the following holidays:
New Years Day, Martin Luther King, Jr. Day, Presidents' Day, Good
Friday, Memorial Day, Independence Day, Labor Day, Thanksgiving, and
Christmas.
o Purchase requests received by The One Group Services Company before
4:00 p.m. Eastern Time ("ET"), will be effective that day. On occasion,
the NYSE will close before 4 p.m. ET. When that happens, purchase
requests received after the NYSE closes will be effective the following
business day.
o Purchase orders may be canceled by the Fund's Custodian, State Street
Bank and Trust Company, if it does not receive "federal funds" by 4:00
p.m. ET (i) on the business day after the order is placed if you are
buying Class I shares, and (ii) on the third business day if you are
purchasing Class A, Class B and Class C shares.
o If your shares are held by a Shareholder Servicing Agent, it is the
responsibility of the Shareholder Servicing Agent to send your purchase
or redemption order to the Fund. Your Shareholder Servicing Agent may
have an earlier cut-off time for purchase and redemption requests.
o The One Group Services Company can reject a purchase order if it does
not think that it is in the best interests of a Fund and/or its
shareholders to accept the order.
o Shares are electronically recorded. Therefore, certificates will not be
issued.
WHAT KIND OF SHARES CAN I BUY?
The One Group offers the following classes of shares:
o Class A, Class B and Class C shares are available to the general
public.
o Class I shares are available to institutional investors and any
organization authorized to act in a fiduciary, advisory, custodial or
agency capacity. We will refer to these entities as "Intermediaries."
o If you intend to hold your shares for six or more years, Class B shares
may be appropriate for you. If you intend to hold your shares for less
than six years, you may want to consider Class A or Class C shares.
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<PAGE> 295
The One Group Fund Direct IRA. The One Group offers a retirement plan and, in
1999, may offer an education plan. These plans allow participants to defer taxes
while their retirement and education savings grow. The education IRA requires a
minimum investment of $500. Call The One Group Services Company at
1-800-480-4111 for an Adoption Agreement.
HOW MUCH DO SHARES COST?
o Shares are sold at net asset value ("NAV") plus a sales charge, if any.
o Each class of shares in each Fund has a different NAV. This is
primarily because each class has different distribution expenses.
o NAV per share is calculated by dividing the total market value of a
Fund's investments and other assets allocable to a class (minus class
expenses) by the number of outstanding shares in that class.
o A Fund's NAV changes every day. NAV is calculated each business day
following the close of the NYSE at 4:00 p.m. ET. On occasion, the NYSE
will close before 4:00 p.m ET. When that happens, NAV will be
calculated as of the time the NYSE closes.
HOW DO I OPEN AN ACCOUNT?
1. Read the prospectus carefully, and select the Fund or Funds most
appropriate for you.
2. Decide how much you want to invest.
o The minimum initial investment is $1,000 ($100 for employees
of BANC ONE CORPORATION and its affiliates).
o Subsequent investments must be at least $100 ($25 for
employees of BANC ONE CORPORATION and its affiliates).
o You may purchase no more than $250,000 of Class B shares at
one time.
o The One Group Services Company may waive these minimums.
3. Complete the Account Application Form. Be sure to sign up for all of
the Account privileges that you plan to take advantage of. Doing so now
means that you will not have to complete additional paperwork later.
4. Send the completed application and a personal check (unless you choose
to pay by wire or bank transfer) payable to "The One Group" to:
State Street Bank and Trust Company
c/o The One Group
P.O. Box 8528
Boston, MA 02266-8528
Contributions to Fund Direct IRAs should be made payable to "State
Street Bank and Trust Company for the Benefit of (your name)."
5. All checks should be in U.S. dollars. Third party checks will not be
accepted. Redemptions from a Fund will not be permitted for ten (10)
calendar days if purchases are made by check or under the Systematic
Investment Plan (see below).
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<PAGE> 296
6. If you purchase shares through a Shareholder Servicing Agent, you may
be required to complete additional forms or follow additional
procedures. You should contact your Shareholder Servicing Agent
regarding purchases, exchanges and redemptions.
7. If you have any questions, contact your Shareholder Servicing Agent or
call The One Group Services Company at 1-800-480-4111.
CAN I PURCHASE SHARES OVER THE TELEPHONE?
Yes. Simply select this option on your Account Application Form and then:
o Contact your Shareholder Servicing Agent or The One Group Services
Company at 1-800-480-4111 to relay your purchase instructions.
o Send a personal check made payable to "The One Group" to State Street
Bank and Trust Company (see address above), authorize a bank transfer,
or initiate a wire transfer to the following wire address:
State Street Bank & Trust Company
Attn: Custody & Shareholder Services
ABA 011 000 028
DDA 99034167
FBO The One Group Fund (ex: The One Group Investor Balanced Fund - A)
Your Account Number (ex: 123456789)
Your Account Registration (ex: John Smith & Mary Smith, JTWROS)
o The One Group uses reasonable procedures to confirm that instructions
given by telephone are genuine. These procedures include recording
telephone instructions and asking for personal identification. If these
procedures are followed, The One Group will not be responsible for any
loss, liability, cost or expense of acting upon unauthorized or
fraudulent instructions; you bear the risk of loss.
o You may revoke your right to make purchases over the telephone by
sending a letter to:
State Street Bank and Trust Company
c/o The One Group
P.O. Box 8528
Boston, MA 02266-8528
CAN I AUTOMATICALLY INVEST ON A SYSTEMATIC BASIS?
Yes. After your Account is established, you may purchase additional Class A,
Class B and Class C shares by making automatic monthly investments from your
bank account. The minimum initial investment is still $1,000, but minimum
automatic additions are only $25. The One Group Services Company may waive these
minimums. To establish a Systematic Investment Plan:
o Select the "Systematic Investment Plan" option on the Account
Application Form.
o Provide the necessary information about the bank account from which
your investments will be made.
o Shares purchased under a Systematic Investment Plan may not be redeemed
for ten (10) calendar days.
o The One Group currently does not charge for this service, but may
impose a charge in the future. However, your bank may impose a charge
for debiting your bank account.
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<PAGE> 297
o You may revoke your right to make systematic investments by calling The
One Group Services Company at 1-800-480-4111 or by sending a letter to:
State Street Bank and Trust Company
c/o The One Group
P.O. Box 8528
Boston, MA 02266-8528
Conversion Feature
Your Class B shares automatically convert to Class A shares after eight years
(measured from the end of the month in which they were purchased).
o After conversion, your shares will be subject to the lower distribution
and shareholder servicing fees charged on Class A shares.
o You will not be assessed any sales charges or fees for conversion of
shares, nor will you be subject to any Federal income tax.
o Because the share price of the Class A shares may be higher than that
of the Class B shares at the time of conversion, you may receive fewer
Class A shares; however, the dollar value will be the same.
o If you have exchanged Class B shares of one Fund for Class B shares of
another, the time you held the shares in each Fund will be added
together.
Sales Charges
The One Group Services Company compensates Shareholder Servicing Agents who sell
shares of The One Group. Compensation comes from sales charges, 12b-1 fees and
payment by The One Group Services Company from its own resources. The One Group
Services Company, at its own expense, also will provide promotional incentives
in the form of travel expenses, lodging and bonuses to licensed individuals who
sell shares of the Funds, as well as vacation trips (including lodging at luxury
resorts), tickets to entertainment events, and merchandise. Occasionally, cash
incentives will be paid to select Shareholder Servicing Agents. Those
Shareholder Servicing Agents who may receive special incentives include Banc One
Securities Corporation, The Advisors Group, United Planners Financial Services
of America, Inc., The Legend Group, and Rosewood Retirement Advisory Services,
LLC.
Class A Shares
This table shows the amount of sales charge you pay and the commissions paid to
Shareholder Servicing Agents.
<TABLE>
<CAPTION>
SALES CHARGE
SALES CHARGE AS A COMMISSION
AS A % OF THE % OF YOUR AS A % OF
AMOUNT OF PURCHASE OFFERING PRICE INVESTMENT OFFERING PRICE
- ------------------ --------------- ---------- --------------
<S> <C> <C> <C>
Less than $100,000 4.50% 4.71% 4.05%
$100,000-$249,999 3.50% 3.63% 3.05%
$250,000-$499,999 2.50% 2.56% 2.05%
$500,000-$999,999 2.00% 2.04% 1.60%
$1,000,000* 0.00% 0.00% 0.00%
</TABLE>
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<PAGE> 298
* If you purchase $1 million or more of Class A shares and are not assessed a
sales charge at the time of purchase, you will be charged the equivalent of
1% of the purchase price if you redeem any or all of the Class A shares
within one year of purchase.
CLASS B SHARES
Class B shares are offered at NAV, without any up-front sales charges. However,
if you redeem these shares within six years of the purchase date, you will be
assessed a Contingent Deferred Sales Charge ("CDSC") according to the following
schedule:
CDSC AS A % OF
DOLLAR AMOUNT
YEARS SINCE PURCHASE SUBJECT TO CHANGE
-------------------- -----------------
0-1 5.00%
1-2 4.00%
2-3 3.00%
3-4 3.00%
4-5 2.00%
5-6 1.00%
more than 6 0.00%
The One Group Services Company pays a commission of 4.00% of the original
purchase price to Shareholder Servicing Agents who sell Class B shares.
CLASS C SHARES
Class C shares are offered at NAV, without any up-front sales charge. However,
if you redeem your shares within one year of the purchase date, you will be
assessed a CDSC as follows:
CDSC AS A %
OF DOLLAR AMOUNT
YEARS SINCE PURCHASE SUBJECT TO CHARGE
-------------------- -----------------
0-1 1.00%
After first year None
Shareholder Servicing Agents selling Class C shares receive a commission of
1.00% of the original purchase price from The One Group Services Company.
How the CDSC is Calculated
o The Fund assumes that all purchases made in a given month were made on
the first day of the month.
o The CDSC is based on the current market value or the original cost of
the shares, whichever is less.
o A sales charge is not imposed on increases in NAV above the initial
purchase price, nor is a sales charge assessed on shares acquired
through reinvestment of dividends or capital gains distributions.
o To keep your CDSC as low as possible, the Fund first will redeem any
shares in your account that carry no CDSC, starting with Class A
Shares. After that, the Fund will redeem the shares you have held for
the longest time and thus have the lowest CDSC.
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<PAGE> 299
o If you exchange Class B or Class C shares of an unrelated mutual fund
for Class B or Class C shares of The Group in connection with a fund
reorganization, the CDSC applicable to your original shares (including
the period of time you have held those shares) will be applied to The
One Group shares you receive in the reorganization.
12B-1 FEES
12b-1 fees are paid by The One Group to The One Group Services Company as
compensation for its services and expenses. The One Group Services Company in
turn pays all or part of the 12b-1 fee to Shareholder Servicing Agents that sell
shares of The One Group.
o The 12b-1 fees vary by share class as follows:
1. Class A shares pay a 12b-1 fee of .35% of the average daily
net assets of the Fund, which is currently being waived to
.25%.
2. Class B and Class C shares pay a 12b-1 fee of 1.00% of the
average daily net assets of the Fund. This will cause expenses
for Class B and Class C shares to be higher and dividends to
be lower than for Class A shares.
3. There are no 12b-1 fees for Class I shares.
o 12b-1 fees, together with the CDSC, help The One Group Services Company
sell Class B and Class C shares without an "up-front" sales charge by
defraying the costs of advancing brokerage commissions and other
expenses paid to Shareholder Servicing Agents.
o The One Group Services Company may use up to .25% of the fees for
shareholder servicing and up to .75% for distribution. During the last
fiscal year, The One Group Services Company received 12b-1 fees
totaling .25%, 1.00% and 1.00% of the average daily net assets of Class
A, Class B and Class C shares, respectively.
o The One Group Services Company may pay 12b-1 fees to its affiliates and
to Banc One Investment Advisors and its affiliates (or any sub-advisor)
for brokerage and other agency transactions.
SALES CHARGE REDUCTIONS AND WAIVERS
REDUCING YOUR CLASS A SALES CHARGES
There are several ways you can reduce the sales charges you pay on Class A
shares:
1. Right of Accumulation: You may add the market value of any Class A,
Class B or Class C shares of a Fund (except a money market fund) that
you (and your spouse and minor children) already own to the amount of
your next Class A purchase for purposes of calculating the sales
charge. An Intermediary also may take advantage of this option.
2. Letter of Intent: With an initial investment of $2,000, you may
purchase Class A shares of one or more funds over the next 13 months
and pay the same sales charge that you would have paid if all shares
were purchased at once. A percentage of your investment will be held in
escrow until the full amount covered by the Letter of Intent has been
invested.
To take advantage of the accumulation privilege or letter of intent, complete
the appropriate section of your fund application, or contact your Shareholder
Servicing Agent. To determine if you are eligible for the accumulation
36
<PAGE> 300
privilege, contact The One Group Services Company at 1-800-480-4111. These
programs may be terminated or amended at any time.
WAIVER OF THE CLASS A SALES CHARGE
No sales charge is imposed on Class A shares of the Funds if the shares were:
1. Bought with the reinvestment of dividends and capital gains
distributions.
2. Acquired in exchange for other Fund shares if a comparable sales charge
has been paid for the exchanged shares.
3. Bought by officers, directors or trustees, retirees and employees (and
their spouses and immediate family members) of:
o The One Group.
o BANC ONE CORPORATION and its subsidiaries and affiliates.
o The One Group Services Company and its subsidiaries and
affiliates.
o State Street Bank and Trust Company and its subsidiaries and
affiliates.
o Broker/dealers who have entered into dealer agreements with
The One Group and their subsidiaries and affiliates.
o An investment sub-advisor of a fund of The One Group and such
sub-advisor's subsidiaries and affiliates.
4. Bought by:
o Affiliates of BANC ONE CORPORATION and certain accounts (other
than IRA Accounts) for which an Intermediary acts in a
fiduciary, advisory, agency, custodial or similar capacity.
o Accounts to which a bank or broker-dealer charges an asset
allocation fee, provided the bank or broker-dealer has an
agreement with The One Group Services Company.
o Retirement and deferred compensation plans and trusts used to
fund those plans, including, but not limited to, those defined
in sections 401(a), 403(b) or 457 of the Internal Revenue Code
and "rabbi trusts."
o Shareholder Servicing Agents who have a dealer arrangement
with The One Group Services Company, 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 Shareholder Servicing
Agents who place trades for their own accounts if the accounts
are linked to the master account of such Shareholder Servicing
Agent on the books and record of the broker or agent.
5. Bought with proceeds from the sale of Class I shares of a Fund of The
One Group or acquired in an exchange of Class I shares of a Fund for
Class A shares of the same Fund, but only if the purchase is made
within 60 days of the sale or distribution.
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<PAGE> 301
6. Bought with proceeds from the sale of shares of a mutual fund,
including a Fund of The One Group, for which a sales charge was paid,
but only if the purchase is made within 60 days of the sale or
distribution.
7. Bought in an IRA with the proceeds of a distribution from an employee
benefit plan, but only if the purchase is made within 60 days of the
sale or distribution and, at the time of the distribution, the employee
benefit plan had plan assets invested in a Fund of The One Group.
8. Bought with assets of The One Group.
9. Bought in connection with plans of reorganizations of a Fund, such as
mergers, asset acquisitions and exchange offers to which a Fund is a
party.
The waivers described in (5), (6) and (7) above will not continue indefinitely
and may be discontinued at any time without notice.
WAIVER OF THE CLASS B SALES CHARGE
No sales charge is imposed on redemptions of Class B shares of the Funds:
1. Provided that you withdraw no more than 10% of the account value
annually. You do not have to participate in the Systematic Withdrawal
Plan to take advantage of this waiver.
2. If you buy the shares in connection with certain retirement plans, such
as 401(k) and similar qualified plans.
3. If you are the shareholder (or a joint shareholder), or a participant
or beneficiary of certain retirement plans and you die or become
disabled (as defined by the Tax Code), but only if the redemption is
made within one year of such death or disability.
4. That represent a minimum required distribution from an IRA Account or
other qualifying retirement plan, but only if you are at least age
70-1/2.
5. Exchanged in connection with plans of reorganizations of a Fund, such
as mergers, asset acquisitions and exchange offers to which a Fund is a
party.
6. Acquired in exchange for Class B shares of other Funds of The One
Group.
WAIVER OF THE CLASS C SALES CHARGE
No sales charge is imposed on redemptions of Class C shares of the Funds:
1. Provided that you withdraw no more than 10% of the account value
annually. You do not have to participate in the Systematic Withdrawal
Plan to take advantage of this waiver.
2. If you buy the shares in connection with certain retirement plans, such
as 401(k) and similar qualified plans.
3. If you are the shareholder (or a joint shareholder), or a participant
or beneficiary of certain retirement plans and you die or become
disabled (as defined by the Tax Code), but only if the redemption is
made within one year of such death or disability.
4. That represent a minimum required distribution from an IRA Account or
other qualifying retirement plan, but only if you are at least
age 70-1/2.
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<PAGE> 302
5. Exchanged in connection with plans of reorganizations of a Fund, such
as mergers, asset acquisitions and exchange offers to which a Fund is a
party.
6. Acquired in exchange for Class C shares of other Funds of The One
Group.
7. If The One Group Services Company receives notice before you invest
indicating that your Shareholder Servicing Agent, due to the type of
account that you have, is waiving its commission.
To take advantage of any of these sales charge waivers, you must qualify for
such waiver in advance. To see if you qualify, contact The One Group Services
Company at 1-800-480-4111, or your Shareholder Servicing Agent.
EXCHANGING FUND SHARES
WHAT ARE MY EXCHANGE PRIVILEGES?
You may make the following exchanges:
o Class I shares of a Fund may be exchanged for Class A shares of that
Fund or for Class A or Class I shares of another Fund of The One Group.
o Class A shares of a Fund may be exchanged for Class I shares of that
Fund or for Class A or Class I shares of another Fund of The One Group,
but only if you are eligible to purchase those shares.
o Class B shares of a Fund may be exchanged for Class B shares of another
Fund of The One Group.
o Class C shares of a Fund may be exchanged for Class C shares of another
Fund of The One Group.
The One Group Funds offer a Systematic Exchange Privilege which allows you to
automatically exchange shares of one fund to another on a monthly or quarterly
basis. This privilege is useful in Dollar Cost Averaging. To participate in this
privilege, please select it on your account application. To learn more about it,
please call The One Group Services Company at 1-800-480-4111.
The One Group does not charge a fee for this privilege. In addition, The One
Group may change the terms and conditions of your exchange privileges upon 60
days written notice.
WHEN ARE EXCHANGES PROCESSED?
Exchanges are processed the same business day they are received, provided:
o State Street Bank and Trust Company receives the request by 4:00 p.m.
ET.
o You have provided The One Group with all of the information necessary
to process the exchange.
o You have received a current prospectus of the Fund or Funds in which
you wish to invest.
o You have contacted your Shareholder Servicing Agent, if necessary.
DO I PAY A SALES CHARGE ON AN EXCHANGE?
Generally, you will not pay a sales charge on an exchange. However:
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<PAGE> 303
o You will pay a sales charge if you own Class I shares of a Fund and you
want to exchange those shares for Class A shares, unless you qualify
for a sales charge waiver (see above).
o You will pay a sales charge if you bought Class A shares of a Fund:
1. That does not charge a sales charge and you want to exchange
them for shares of a Fund that does, in which case you would
pay the sales charge applicable to the Fund into which you are
exchanging.
2. That charged a lower sales charge than the Fund into which you
are exchanging, in which case you would pay the difference
between that Fund's sales charge and all other sales charges
you have already paid.
o If you exchange Class B or Class C shares of a Fund, you will not pay a
sales charge at the time of the exchange, however:
1. Your new Class B or Class C shares will be subject to the
higher CDSC of either the Fund from which you exchanged, the
Fund into which you exchanged, or any Fund from which you
previously exchanged.
2. The current holding period for your exchanged Class B or Class
C shares is carried over to your new shares.
ARE EXCHANGES TAXABLE?
Generally:
o An exchange between classes of shares of the same Fund is not taxable
for Federal income tax purposes.
o An exchange between Funds is considered a sale and generally results in
a capital gain or loss for Federal income tax purposes.
o You should talk to your tax advisor before making an exchange.
ARE THERE LIMITS ON EXCHANGES?
Yes. The exchange privilege is not intended as a way for you to speculate on
short-term movements in the market. Therefore:
o To prevent disruptions in the management of the Funds, The One Group
limits excessive exchange activity.
o Exchange activity is excessive if it EXCEEDS TWO SUBSTANTIVE EXCHANGE
REDEMPTIONS (WITHIN 30 DAYS OF EACH OTHER) WITHIN A TWELVE MONTH
PERIOD.
o In addition, The One Group reserves the right to reject any exchange
request (even those that are not excessive) if the Fund reasonably
believes that the exchange will result in excessive transaction costs
or otherwise adversely affect other shareholders.
REDEEMING FUND SHARES
WHEN CAN I REDEEM SHARES?
o You may redeem all or some of your shares on any day that the Funds are
open for business.
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o Redemption requests received by The One Group Services Company before
4:00 p.m. ET (or when the NYSE closes) will be effective that day.
HOW DO I REDEEM SHARES?
o Unless you have selected the telephone option on your Account
Application Form, you must send a written redemption request to your
Shareholder Servicing Agent, if applicable, or to State Street Bank and
Trust Company at the following address:
The One Group
c/o State Street Bank and Trust Company
P.O. Box 8528
Boston, MA 02266-8528
o All requests for redemptions from IRA accounts must be in writing.
o You may request redemption forms by calling The One Group Services
Company at 1-800-480-4111.
o State Street Bank and Trust Company may require that the signature on
your redemption request be guaranteed by a commercial bank, a member of
a domestic stock exchange, or a member of the Securities Transfer
Association Medallion Program or the Stock Exchange Medallion Program,
unless:
1. the redemption is for $50,000 worth of shares or less;
2. the redemption is payable to the shareholder of record;
3. the redemption check is mailed to the shareholder at the
record address; or
4. the redemption is payable by wire or bank transfer (ACH) to a
pre-existing bank account.
o On the Account Application Form you may elect to have the redemption
proceeds mailed or wired to:
1. a designated commercial bank or
2. State Street Bank and Trust Company or your Shareholder
Servicing Agent.
o State Street Bank and Trust Company may charge you a wire redemption
fee. The current charge is $7.00.
o Your redemption proceeds will be paid within seven days after receipt
of the redemption request.
WHAT WILL MY SHARES BE WORTH?
o If you own Class A and Class I shares and the Fund receives your
redemption request by 4:00 p.m. ET (or when the NYSE closes), you will
receive that day's NAV.
o If you own Class B and Class C shares and the Fund receives your
redemption request by 4:00 p.m. ET (or when the NYSE closes), you will
receive that day's NAV, minus the amount of any applicable CDSC.
CAN I REDEEM BY TELEPHONE?
Yes, if you selected this option on your Account Application Form.
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o Call your Shareholder Servicing Agent or State Street Bank and Trust
Company at 1-800-480-4111 to relay your redemption request.
o Your redemption proceeds will be mailed or wired to the commercial bank
account you designated on your Account Application Form.
o State Street Bank and Trust Company may charge you a wire redemption
fee. The current charge is $7.00.
o The One Group uses reasonable procedures to confirm that instructions
given by telephone are genuine. These procedures include recording
telephone instructions and asking for personal identification. If these
procedures are followed, The One Group will not be responsible for any
loss, liability, cost or expense of acting upon unauthorized or
fraudulent instructions; you bear the risk of loss.
o REDEMPTIONS FROM YOUR IRA ACCOUNT MAY NOT BE MADE BY TELEPHONE.
CAN I REDEEM ON A SYSTEMATIC BASIS?
If you have an account value of at least $10,000, you may elect to receive
monthly, quarterly or annual payments of not less than $100 each.
o Select the "Systematic Withdrawal Plan" option on the Account
Application Form.
o Specify the amount you wish to receive and the frequency of the
payments.
o You may designate a person other than yourself as the payee.
o There is no charge for this service.
o If you select this option, please keep in mind that:
1. It may not be in your best interest to buy additional Class A
shares while participating in a Systematic Withdrawal Plan.
This is because Class A shares have an up-front sales charge.
2. If you own Class B or Class C shares, you or your designated
payee may receive systematic payments provided the payments
are limited to no more than 10% of your account value
annually, measured from the date the redemption request is
received.
3. If you are age 70 1/2, you may elect to receive payments to
the extent that the payment represents a minimum required
distribution from an IRA or other qualifying retirement plan.
4. If the amount of the systematic payment exceeds the income
earned by your account since the previous payment under the
Systematic Withdrawal Plan, payments will be made by redeeming
some of your shares. This will reduce the amount of your
investment.
ADDITIONAL INFORMATION REGARDING REDEMPTIONS
o All redemptions will be for cash.
o If you redeem shares for which you paid by check, and The One Group has
not yet received payment on the check, The One Group will delay
forwarding your redemption proceeds for 10 or more days until payment
has been collected from your bank.
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o Because of the high cost of handling small investments, The One Group
charges a sub-minimum account fee. Accounts under $1,000 that are not
participating in a Systematic Investment Plan will be assessed an
annual fee of $10.00. The sub-minimum account fee will not apply to IRA
accounts and the accounts of employees of BANC ONE CORPORATION and its
affiliates.
o The One Group may suspend your ability to redeem when:
1. Trading on the NYSE is restricted.
2. The NYSE is closed (other than weekend and holiday closings).
3. The SEC has permitted a suspension.
4. An emergency exists.
The Statement of Additional Information offers more detail about this
process.
o You generally will recognize a gain or loss on a redemption for Federal
income tax purposes. You should talk to your tax adviser before making
a redemption.
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SHAREHOLDER INFORMATION
VOTING RIGHTS
The Funds do not hold annual shareholder meetings, but may hold special
meetings. The special meetings are held, for example, to elect or remove
Trustees, change a Fund's fundamental investment objective, or approve an
investment advisory contract.
As a Fund shareholder, you have one vote for each share that you own. Each Fund,
and each class of shares within each Fund, vote separately on matters relating
solely to that Fund or class, or which affect that Fund or class differently.
However, all shareholders will have equal voting rights on matters that affect
all shareholders equally.
Banc One Corporation (100 East Broad Street, Columbus, Ohio, 43271), through its
affiliates, may be deemed for purposes of the Investment Company Act of 1940, to
control the Funds. This is because as of July 30,1998, BANC ONE CORPORATION or
its affiliates possessed the power to vote substantially all of the Class I
shares of the Funds.
On that same date, the following shareholders owned 25% or more of the Class C
shares of the Funds. As a consequence, they are considered to be controlling
persons of Class C shares of the Funds.
<TABLE>
<CAPTION>
PERCENTAGE OF TYPE OF
NAME AND ADDRESS FUND/CLASS OWNERSHIP OWNERSHIP
- ---------------- ---------- --------- ---------
<S> <C> <C> <C>
Bank One TTEE Investor Growth 5.68% Record
Harrison Holding Corp 401K Fund
C/O Banc One Investment Mgmt Class A
Retirement Services - Daily R K
190 Heatherdown Drive
Westerville OH 43081-2868
Strafe & Co. Investor Growth 69.73% Record
C/O Bank One Trust Co Fund I
Attn Mutual Funds Class
100 E Broad Street
Columbus OH 43215-3607
Strafe & Co Investor Growth & 81.94% Record
C/O Bank One Trust Co Income Fund
Attn Mutual Funds Class I
100 E Broad Street
Columbus OH 43215-3607
Strafe & Co Investor Balanced 88.52% Record
C/O Bank One Trust Co Fund
Attn Mutual Funds Class I
100 E Broad Street
Columbus OH 43215-3607
Strafe & Co Investor 85.27% Record
C/O Bank One Trust Co Conservative
Attn Mutual Funds Growth Fund
100 E Broad Street Class I
Columbus OH 43215-3607
</TABLE>
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DIVIDEND POLICIES
DIVIDENDS
The Funds generally declare dividends monthly. Dividends are distributed on the
first Business Day of each month. Capital gains, if any, for all Funds are
distributed at least annually.
The Funds pay dividends and distributions on a per-share basis. This means that
the value of your shares will be reduced by the amount of the payment. If you
purchase shares shortly before the record date for a dividend or the
distribution of capital gains, you will pay the full price for the shares and
receive some portion of the price back as a taxable dividend or distribution.
Dividends payable on Class I shares will be more than those payable on
other classes of shares. This is because Class A, Class B and Class C shares
have higher distribution expenses.
DIVIDEND REINVESTMENT
You automatically will receive all income dividends and capital gain
distributions in additional shares of the same Fund and class, unless you have
elected to take such payment in cash. The price of the shares is the NAV
determined immediately following the dividend record date. Reinvested dividends
and distributions receive the same tax treatment as dividends and distributions
paid in cash.
If you want to change the way in which you receive dividends and distributions,
you must write to State Street Bank & Trust Company at P.O. Box 8528, Boston, MA
02266-8528, at least 15 days prior to the distribution. The change is effective
upon receipt by State Street.
SPECIAL DIVIDEND RULES FOR CLASS B SHARES
Class B shares received as dividends and capital gains distributions will be
accounted for separately. Each time any Class B shares (other than those in the
sub-account) convert to Class A shares, a percentage of the Class B shares in
the sub-account will also convert to Class A shares. (See "Conversion Feature.")
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TAX TREATMENT OF THE FUNDS
TAX STATUS OF THE FUND
Each Fund intends to qualify as a "regulated investment company" for Federal
income tax purposes. If the Funds qualify, as they have in the past, they will
pay no federal income tax on the earnings they distribute to shareholders.
TAX TREATMENT OF SHAREHOLDERS
TAXATION OF SHAREHOLDER TRANSACTIONS
A sale, exchange, or redemption of shares of the Funds generally will produce
either a taxable gain or a loss. You are responsible for any tax liabilities
generated by your transactions.
TAXATION OF DISTRIBUTIONS
Dividends you receive from a Fund, whether reinvested or received in cash, will
be taxable to you. Dividends from a Fund's net investment income (including, for
this purpose, net short-term capital gains) will be taxable as ordinary income
and dividends from a Fund's long-term capital gains will be taxable to you as
such, regardless of how long you have held the shares.
Dividends paid in January, but declared in October, November or December of the
previous year, will be considered to have been paid the previous December.
TAXATION OF RETIREMENT PLANS
Distributions by the Funds to qualified retirement plans will not be taxable.
However, if shares are held by a plan that ceases to qualify for tax-exempt
treatment or by an individual who has received shares as a distribution from a
retirement plan, the distributions will be taxable to the plan or individual as
described in "Taxation of Distributions." If you are considering purchasing
shares with qualified retirement plan assets, you should consult your tax
advisor for a more complete explanation of the Federal, state, local and (if
applicable) foreign tax consequences of making such an investment.
TAX INFORMATION
The Form 1099 that is mailed to you every January details your dividends and
their federal tax category. Even though the Funds provide you with this
information, you are responsible for verifying your tax liability with your tax
professional. For additional tax information see the Statement of Additional
Information. Please note that this tax discussion is general in nature; no
attempt has been made to present a complete explanation of the Federal, state,
local or foreign tax treatment of the Funds or their shareholders.
SHAREHOLDER INQUIRIES
If you have any questions or need additional information, please write The One
Group Services Company at 3435 Stelzer Road, Columbus, OH 43219 or call
1-800-480-4111.
REPORTING
In March and September you will receive a financial report from The One
Group. In addition, The One Group will periodically send you proxy
statements and other reports.
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<PAGE> 310
ORGANIZATION AND MANAGEMENT OF THE FUNDS
THE FUNDS
Each Fund is a series of The One Group, an open-end management investment
company. The One Group currently consists of 40 separate Funds. Four of the
Funds are described in this prospectus; the other Funds are described in
separate prospectuses. Each Fund described in this prospectus is diversified.
Each Fund is supervised by the Board of Trustees.
THE BOARD OF TRUSTEES
The Trustees oversee the management and administration of the Funds. The
Trustees are responsible for making major decisions about each Fund's investment
objectives and policies, but delegate the day-to-day administration of the Funds
to the officers of The One Group.
THE ADVISOR
Banc One Investment Advisors makes the day-to-day investment decisions for the
Funds and continuously reviews, supervises and administers the Funds' investment
programs. Banc One Investment Advisors has served as investment advisor to The
One Group since 1993. Prior to that time, The One Group was advised by
affiliates of Banc One Investment Advisors. In addition to The One Group, Banc
One Investment Advisors serves as investment advisor to other mutual funds and
individual, corporate, charitable and retirement accounts. As of June 30, 1998,
Banc One Investment Advisors, an indirect, wholly-owned subsidiary of BANC ONE
CORPORATION, managed over $59 billion in assets. For the fiscal year ended June
30, 1998, the Funds paid investment advisory fees of less than 0.01% of the
average daily net assets of The One Group Investor Conservative Growth Fund, and
0.025% , 0.014% and 0.024% of the average daily net assets of The One Group
Investor Growth Fund, The One Group Investor Growth and Income Fund, and The One
Group Investor Balanced Fund, respectively.
No single person is responsible for managing the assets of the Funds. Rather,
investment decisions for the Funds are made by committee. Banc One Investment
Advisors also serves as the advisor to the underlying mutual funds, for which it
receives a fee.
THE DISTRIBUTOR
The One Group Services Company, 3435 Stelzer Road, Columbus, Ohio 43219, a
wholly-owned subsidiary of The BISYS Group, Inc., markets the Funds and
distributes shares through selling brokers, financial institutions, investment
advisors, and other financial representatives.
THE ADMINISTRATOR AND SUB-ADMINISTRATOR
The One Group Services Company also serves as the Funds' administrator. The One
Group Services Company is responsible for responding to shareholder inquiries
and requests for information, as well as providing regulatory compliance and
reporting. For these services, The One Group Services Company receives an annual
fee of .10% of each Fund's average daily net assets, on the first $500,000,000
in Fund assets. The fee declines to .075% on net assets between $500,000,000 and
$1 billion, and to .05% on assets over $1 billion. The fee is calculated daily
and paid monthly. Banc One Investment Advisors, the Sub-Administrator, provides
office space, equipment, and facilities, as well as legal and regulatory
support.
THE TRANSFER AGENT, CUSTODIAN AND SUB-CUSTODIAN
State Street Bank and Trust Company, P.O. Box 8528, Boston, MA 02266-8528, or
your Shareholder Servicing Agent, if appropriate, handles shareholder
recordkeeping and statementing, distributes dividends, and processes buy and
sell requests. As the Funds' custodian, State Street holds the Funds' assets,
settles all portfolio trades and assists in calculating the Funds' net asset
values. Bank One Trust Company, N.A. serves as sub-custodian in connection with
The One Group's securities lending activities under an agreement with State
Street Bank and Trust Company. Bank One Trust Company, N.A. is paid a fee for
this service.
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<PAGE> 311
YEAR 2000
Preparing for the Year 2000 is a high priority for The One Group Family of
Mutual Funds. Both The One Group Services Company and Banc One Investment
Advisors have formed dedicated teams to help them successfully achieve Year 2000
compliance. In addition, these teams are responsible for assessing the readiness
of all other service providers to The One Group. Year 2000 remediation efforts
are directed toward both information technology and non-information technology
systems. Non-information technology systems include elevators, photocopy
machines, and facsimile machines, and should have no significant impact on the
delivery of services to The One Group.
Banc One Investment Advisors has identified 49 information technology systems
and interfaces that provide service and support to The One Group. Each system is
assigned a priority rating: high, medium or low. Systems rated "high" are those
which are essential to the operation of The One Group. Each system rated "high"
is scheduled to be Year 2000 compliant by December 31, 1998. All systems will be
tested for compliance throughout 1999.
Many, if not all, of the systems are owned or operated by third party servicers
(for example, The One Group's Custodian). Consequently, remediation efforts must
be made by those servicers. Banc One Investment Advisors and The One Group
Services Company have, and will continue to, monitor the remediation progress of
the service providers. This process involves documentation, on-site visits, and
review of remediation plans and test results. Both Banc One Investment Advisors
and The One Group Services Company have budgeted in excess of $700,000 in fiscal
year 1998 and over $1 million in fiscal year 1998 toward the remediation effort
for all systems and interfaces. Neither The One Group nor its shareholders will
bear any of the direct remediation expenses.
Neither The One Group Services Company nor Banc One Investment Advisors
currently anticipate that the move to Year 2000 will have a material impact on
their ability to continue to provide the Funds with service at current levels.
Likewise, The One Group currently anticipates that the more to Year 2000 will
not have a material impact on its operations.
DETAILS ABOUT THE FUNDS' INVESTMENT PRACTICES AND POLICIES
INVESTMENT PRACTICES
The following is a brief description of the principal investment policies of the
underlying funds.
THE ONE GROUP(R) PRIME MONEY MARKET FUND
The One Group(R) Prime Money Market Fund seeks current income with liquidity and
stability of principal. The fund intends to comply with the regulations of the
Securities and Exchange Commission 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
fund. Under these regulations, the fund 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 are treated as having a
maturity of 397 days or less.
THE ONE GROUP(R) LIMITED VOLATILITY BOND FUND
The One Group(R) Limited Volatility Bond Fund seeks current income consistent
with preservation of capital through investment in high and medium-grade
fixed-income securities. The Fund normally invests at least 80% of total assets
in debt securities of all types with short to intermediate maturities. Debt
securities include bonds, notes and other obligations. At least 65% of the
Fund's total assets will consist of bonds rated in one of the three highest
investment grade categories at the time of investment, or if unrated, determined
by Banc One Investment Advisors to be of comparable quality, and at least 65% of
total assets will consist of obligations issued by the U.S. government or its
agencies and instrumentalities, some of which may be subject to repurchase
agreements. Many investments will satisfy both requirements. Under normal market
conditions, it is anticipated that the fund's average weighted maturity will
range between one and five years. The fund may also purchase taxable or
tax-exempt municipal securities. Up to 20% of the fund's total assets may be
invested in preferred stocks.
THE ONE GROUP(R) INTERMEDIATE BOND FUND
The One Group(R) Intermediate Bond Fund seeks current income consistent with the
preservation of capital through investments in high and medium-grade
fixed-income securities with intermediate maturities. The fund will normally
invest at least 80% of total assets in debt securities of all types. Debt
securities include bonds, notes and other obligations. At least 65% of the
fund's total assets will consist of bonds rated in one of the three highest
investment grade categories at the time of investment, or if unrated, determined
by Banc One Investment Advisors to be of comparable quality, and at least 50% of
total assets will consist of obligations issued by the U.S. government or its
agencies and instrumentalities, some of which may be subject to repurchase
agreements. Many investments will satisfy both requirements. The Fund also may
invest in more speculative debt securities if they present attractive
opportunities and are rated in the lowest investment grade category. The fund
may also purchase taxable or tax-exempt municipal securities. Under normal
market conditions, it is anticipated that the fund's average weighted maturity
will range between three and ten years. Up to 20% of the fund's total assets may
be invested in preferred stocks.
THE ONE GROUP(R) INCOME BOND FUND
The One Group(R) Income Bond Fund seeks a high level of current income by
investing primarily in a diversified portfolio of high, medium and low grade
debt securities. The Fund normally will invest at least 70% of its total assets
in debt securities of all types rated as investment grade at the time of
investment or, if unrated, determined by Banc One Investment Advisors to be of
comparable quality. In addition, up to 30% of the Fund's total assets may be
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invested in convertible securities, preferred stock, loan participations and
debt securities rated below investment grade or, if unrated, determined by Banc
One Investment Advisors to be of comparable quality. Securities rated below
investment grade are called "high yield bonds," "non-investment grade bonds" and
"junk bonds." These securities are rated in the fifth or lower rating
categories, for example, BB or lower by Standard & Poor's Corporation ("S&P")
and Ba or lower by Moody's Investors Service, Inc. ("Moody's"), and are
considered to have speculative characteristics. Even though it may invest in
debt securities in all rating categories, the Fund will not invest more than 20%
of its total assets in securities rated below the fifth rating category. As a
matter of fundamental policy, at least 65% of the Fund's total assets will
consist of bonds. The Fund also may purchase taxable or tax-exempt municipal
securities.
Under normal market conditions, it is anticipated that the Fund's average
weighted maturity will range between five and twenty years. The Fund may shorten
its effective weighted average maturity to as little as two years if deemed
appropriate for temporary defensive purposes.
THE ONE GROUP(R) HIGH YIELD BOND FUND
The Fund seeks a high level of current income by investing primarily in a
diversified portfolio of debt securities which are rated below investment grade
or unrated. Capital appreciation is a secondary objective. The Fund invests in
all types of high yield, high risk debt securities. The Fund also may invest in
convertible securities, preferred stock, common stock, and loan participations.
The Fund's weighted average maturity will normally range between five and ten
years, although the Fund may shorten its weighted average maturity to as little
as two years if deemed appropriate for temporary defensive purposes. The Fund
normally invests at least 80% of the Fund's total assets in debt securities
which are rated below investment grade or unrated, although the Fund may invest
up to 100% of the Fund's total assets in such securities. Securities rated below
investment grade are called "high yield bonds," "non-investment grade bonds,"
"below investment grade bonds" and "junk bonds." These securities are rated in
the fifth or lower rating categories (for example, BB or lower by Standard &
Poor's Corporation and Ba or lower by Moody's Investors Service, Inc.), and are
considered to be speculative. The Fund also may invest up to 20% of its total
assets in other securities, including investment grade debt securities. As a
matter of fundamental policy, at least 65% of the Fund's total assets will
consist of bonds.
THE ONE GROUP(R) GOVERNMENT BOND FUND
The One Group(R) Government Bond Fund seeks a high level of current income with
liquidity and safety of principal. The Fund will limit its investments to
securities issued by the U.S. Government and its agencies and instrumentalities
or related to securities issued by the U.S. Government and its agencies and
instrumentalities. 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 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 taxable or tax-exempt municipal securities.
THE ONE GROUP(R) ULTRA SHORT-TERM INCOME FUND
The One Group(R) Ultra Short-Term Income Fund seeks a high level of current
income consistent with low volatility of principal by investing in a diversified
portfolio of short-term investment grade securities. The Fund normally invests
at least 80% of its total assets in debt securities of all types, including
money market instruments. In addition, up to 20% of the fund's total assets may
be invested in other securities, including preferred stock. The fund will invest
in adjustable rate mortgage pass-through securities and other securities
representing an interest in or collateralized by mortgages with periodic
interest rate resets, some of which may be subject to repurchase agreements.
These securities often are issued or guaranteed by the U.S. government, its
agencies or instrumentalities. However, the Fund also may purchase
mortgage-backed securities that are issued by non-governmental entities. Such
securities may or may not have private insurer guarantees as to timely payments.
The fund also may purchase mortgage and interest rate swaps and interest rate
floors and caps. The fund also may employ other investment techniques to enhance
returns, such as loans of fund securities, mortgage dollar rolls, repurchase
agreements, options contracts and reverse repurchase agreements. The Fund will
maintain a maximum duration of approximately two years.
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<PAGE> 313
THE ONE GROUP(R) DISCIPLINED VALUE FUND
The One Group(R) Disciplined Value Fund seeks capital appreciation with the
secondary goal of achieving current income by investing primarily in equity
securities. The Fund will invest mainly in equity securities with below-market
average price-to-earnings and price-to-book value ratios. The issuer's soundness
and earnings prospects also will be considered. If Banc One Investment Advisors
determines that a company's fundamentals are declining or that the company's
ability to pay dividends has been impaired, it likely will eliminate the Fund's
holding of the company's stock. The Fund normally invests at least 80% of the
value of its total assets in equity securities consisting of common stocks and
debt securities and preferred stocks that are convertible into common stocks.
The fund also may enter into options and futures transactions. The balance of
the fund's assets will be held in cash equivalents.
THE ONE GROUP(R) INTERNATIONAL EQUITY INDEX FUND
The One Group(R) International Equity Index Fund seeks to provide investment
results that correspond to the aggregate price and dividend performance of the
securities in the Gross Domestic Product Weighted Morgan Stanley Capital
International Europe, Australia and Far East Index ("MSCI EAFE GDP Index" or
"EAFE GDP Index").(1) The Fund normally will invest at least 65% of the value of
its total assets in foreign equity securities, which are representative of the
Index and secondarily in stock index futures. The Fund's investments will
consist of common stocks (including sponsored and unsponsored American
Depository Receipts) and preferred stocks, securities convertible into common
stocks (only if they are listed on registered exchanges or actively traded in
the over-the-counter market), warrants and depository receipts. No more than 10%
of the fund's net assets will be held in cash or cash equivalents. The fund may
invest up to 10% of its net assets in securities of emerging international
markets. A substantial portion of the fund's assets will be denominated in
foreign currencies.
THE ONE GROUP(R) LARGE COMPANY GROWTH FUND
The One Group(R) Large Company Growth Fund seeks long-term capital appreciation
and growth of income by investing primarily in equity securities. The Fund will
normally invest at least 65%, of the value of its total assets in equity
securities consisting of common stocks, warrants and any rights to purchase
common stocks. To achieve its objective, the Fund will invest primarily in
equity securities of large, well established companies with weighted average
capitalization in excess of the market median capitalization of the Standard &
Poor's 500 Composite Stock Price Index ("S&P 500 Index").(2) The fund may invest
the remainder of its assets in any combination of nonconvertible fixed income
securities, repurchase agreements, options and futures contracts, securities
issued by the U.S. government and its agencies and instrumentalities, and cash
equivalents.
THE ONE GROUP(R) LARGE COMPANY VALUE FUND
The One Group(R) Large Company Value Fund seeks capital appreciation with the
incidental goal of achieving current income by investing primarily in equity
securities. The Fund will invest in equity securities of large capitalization
companies that are believed to be selling below their long-term investment
values. The average weighted market capitalization of the companies in which the
Fund invests will normally exceed the median market capitalization of the S&P
500 Index. In addition, the Fund may invest in stock of companies which have
"breakup" values well in excess of current market values or which have uniquely
undervalued corporate assets. The Fund normally will 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 remainder of the fund's assets will be held in cash equivalents.
THE ONE GROUP(R) GROWTH OPPORTUNITIES FUND
The One Group(R) Growth Opportunities Fund seeks growth of capital and,
secondarily, current income by investing primarily in equity securities. The
Fund invests in securities that have the potential to produce above-average
earnings growth per share over a one-to-three year period. Typically, the Fund
acquires shares of established companies with a history of above-average growth,
as well as those companies expected to enter periods of above-average growth.
Not all the securities purchased by the Fund will pay dividends. The Fund also
invests in smaller companies in emerging growth industries. At least 80% of the
value of its total assets will be invested in equity securities consisting of
common stocks and debt securities and preferred stocks that are convertible into
common stocks. The fund also may enter into options and futures transactions.
The remainder of the fund's assets will be held in cash equivalents.
- ------------
(1) "MSCI EAFE GDP Index" is a registered service mark of Morgan Stanley Capital
International, which does not sponsor and is in no way affiliated with the fund.
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THE ONE GROUP(R) VALUE GROWTH FUND
The One Group(R) Value Growth Fund seeks long-term capital growth and growth of
income with a secondary objective of providing a moderate level of current
income. The Fund invests primarily in common stocks of overlooked or undervalued
companies that have the potential for earnings growth over time. The Fund uses a
multi-style approach, meaning that it may invest across varied capitalization
levels targeting both value and growth oriented companies. Because the Fund
seeks return over the long term, Banc One Investment Advisors will not attempt
to time the market. The Fund normally will 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 cash and cash
equivalents.
THE ONE GROUP(R) SMALL CAPITALIZATION FUND
The One Group(R) Small Capitalization Fund seeks long-term capital growth
primarily by investing in a portfolio of equity securities of
small-capitalization and emerging growth companies. The Fund invests primarily
in a portfolio of common stocks, debt securities, preferred stocks, convertible
securities, warrants and other equity securities of small capitalization
companies. Generally, Banc One Investment Advisors selects a portfolio of
companies with a capitalization equivalent to the median market capitalization
of the S&P Small-Cap 600 Index(3), 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. At least 65% of the
value of the Fund's total assets normally will be invested in securities with
the characteristics described above. 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 ONE GROUP(R) INCOME EQUITY FUND
The One Group(R) Income Equity Fund seeks current income through regular payment
of dividends with the secondary goal of achieving capital appreciation by
investing primarily in equity securities. The Fund attempts to keep its yield
above the S&P 500 Index by investing 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 also may be purchased. The Fund normally invests 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 also may enter into options and futures
transactions. The balance of the Fund's assets will be held in cash equivalents.
THE ONE GROUP(R) EQUITY INDEX FUND
The One Group(R) Equity Index Fund seeks investment results that correspond to
the aggregate price and dividend performance of the securities in the S&P 500
Index. The Fund normally invests in many of the stocks which comprise the S&P
500 Index and secondarily in stock index futures. Cash reserves will not
normally exceed 10% of the fund's net assets. The Advisor generally selects
stocks for the Fund in the order of their weightings in the S&P 500 Index
beginning with the heaviest weighted stocks. The percentage of the Fund's assets
to be invested in each stock is approximately the same as the percentage it
represents in the S&P 500 Index.
Details about each underlying fund's investment practices and the risks
associated with those practices can be found in Appendix B.
INVESTMENT POLICIES
Each Fund's investment objective and the investment policies summarized below
are fundamental. This means that they cannot be changed without the consent of a
majority of the outstanding shares of the Funds. The full text of the
fundamental policies can be found in the Statement of Additional Information.
(2) "Standard & Poor's 500" is a registered trademark of Standard & Poor's
Corporation, which does not sponsor and is in no way affiliated with
the Fund.
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(3) "Standard & Poor's Small-Cap 600" is a registered trademark of Standard
& Poor's Corporation, which does not sponsor and is in no way
affiliated with the Fund.
Each Fund may not:
1. Purchase an issuer's securities if as a result more then 5% of its
total assets would be invested in the securities of that issuer or the
Fund would own more than 10% of the outstanding voting securities of
any of that issuer. This does not include securities issued or
guaranteed by the United States, its agencies or instrumentalities,
securities of other registered investment companies and repurchase
agreements involving these securities. This restriction applies with
respect to 75% of a Fund's total assets.
2. Concentrate its investments in the securities of one or more issuers
conducting their principal business in a particular industry or group
of industries. This does not include obligations issued or guaranteed
by the U.S. government or its agencies and instrumentalities and
repurchase agreements involving such 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.
Additional investment policies can be found in the Statement of Additional
Information.
PORTFOLIO TURNOVER
Portfolio turnover 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 Funds and may result in additional tax consequences to
you. To the extent portfolio turnover results in short-term capital gains, such
gains will generally be taxed at ordinary income tax rates. The portfolio
turnover rate for each Fund for the fiscal year ended June 30, 1998 is shown on
the Financial Highlights.
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APPENDIX A
INVESTMENT PRACTICES
The underlying funds invest in a variety of securities and employ a number of
investment techniques. Each security and technique involves certain risks. What
follows is a list of the securities and techniques utilized by the Funds, as
well as the risks inherent in their use. For a more complete discussion, see the
Statement of Additional Information. Following the table is a more complete
discussion of risk.
FUND NAME FUND CODE
- --------- ---------
The One Group(R) Prime Money Market Fund 1
The One Group(R) Limited Volatility Bond Fund 2
The One Group(R) Intermediate Bond Fund 3
The One Group(R) Income Bond Fund 4
The One Group(R) High Yield Bond Fund 5
The One Group(R) Government Bond Fund 6
The One Group(R) Ultra Short-Term Income Fund 7
The One Group(R) Disciplined Value Fund 8
The One Group(R) International Equity Index Fund 9
The One Group(R) Large Company Growth Fund 10
The One Group(R) Large Company Value Fund 11
The One Group(R) Growth Opportunities Fund 12
The One Group(R) Value Growth Fund 13
The One Group(R) Small Capitalization Fund 14
The One Group(R) Income Equity Fund 15
The One Group(R) Equity Index Fund 16
<TABLE>
<CAPTION>
INSTRUMENT FUND CODE RISK TYPE
- ---------- --------- ---------
<S> <C> <C>
U.S. Treasury Obligations: Bills, notes, bonds, STRIPS, and 1-16 Market
CUBES.
Treasury Receipts: TRS, TIGRs, and CATS. 1-16 Market
U.S. Government Agency Securities: Securities issued by agencies 1-16 Market
and instrumentalities of the U.S. Government. These include Credit
Ginnie Mae, Fannie Mae, and Freddie Mac.
Certificates Of Deposit: Negotiable instruments with a stated 1-5, 7-16 Market
maturity. Credit
Liquidity
Time Deposits: Non-negotiable receipts issued by a bank in 1-5, 7-16 Liquidity
exchange for the deposit of funds. Credit
Market
Common Stock: Shares of ownership of a company. 5, 7-16 Market
Repurchase Agreements: The purchase of a security and the 1-16 Credit
simultaneous commitment to return the security to the seller at Market
an agreed upon price on an agreed upon date. This is treated as Liquidity
a loan.
Reverse Repurchase Agreement: The sale of a security and the 1-16 Market
simultaneous commitment to buy the security back at an agreed Leverage
upon price on an agreed upon date. This is treated as a
borrowing by a Fund.
</TABLE>
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<TABLE>
<CAPTION>
INSTRUMENT FUND CODE RISK TYPE
- ---------- --------- ---------
<S> <C> <C>
Securities Lending: The lending of up to 33 1/3% of a Fund's 1-16 Credit
total assets. In return the Fund will receive cash, other securities, Market
and/or letters of credit. Leverage
When-Issued Securities And Forward Commitments: Purchase or 1-16 Market
contract to purchase securities at a fixed price for delivery at Leverage
a future date. Liquidity
Investment Company Securities: Shares of other mutual funds, 1-5, 7-16 Market
including money market funds of The One Group and shares of
other investment companies for which Banc One Investment Advisors serves as
investment advisor or administrator. Banc One Investment Advisors will waive
certain fees when investing in funds for which it serves as investment advisor.
Convertible Securities: Bonds or preferred stock that convert to 3-5, 7-16 Market
common stock. Credit
Call And Put Options: A call option gives the buyer the right to 3-16 Management
buy, and obligates the seller of the option to sell, a security Liquidity
at a specified price. A put option gives the buyer the right to Credit
sell, and obligates the seller of the option to buy, a security Market
at a specified price. The Funds will sell only covered call and Leverage
secured put options.
Futures And Related Options: A contract providing for the future 2-16 Management
sale and purchase of a specified amount of a specified security, Market
class of securities, or an index at a specified time in the Credit
future and at a specified price. Liquidity
Leverage
Real Estate Investment Trusts ("REITs"): Pooled investment 2-16 Liquidity
vehicles which invest primarily in income producing real estate Management
or real estate related loans or interest. Market
Pre-payment
Tax
Regulatory
Bankers' Acceptances: Bills of exchange or time drafts drawn on 1-5, 7, 8, Credit
and accepted by a commercial bank. Maturities are generally six 10-16 Liquidity
months or less. Market
Commercial Paper: Secured and unsecured short-term promissory 1-5, 7, 8, Credit
notes issued by corporations and other entities. Maturities 10-16 Liquidity
generally vary from a few days to nine months. Market
Foreign Securities: Stocks or debt issued by foreign companies, as well 1-5, 7-15 Market
as commercial paper of foreign issuers and obligations of Political
foreign banks, overseas branches of U.S. banks and supranational Liquidity
entities. Includes American Depository Receipts. Foreign
Investment
Restricted Securities: Securities not registered under the 1-5, 7-15 Liquidity
Securities Act of 1933, such as privately placed commercial Market
paper and Rule 144A securities.
Variable And Floating Rate Instruments: Obligations with 1-8, 10-15 Market
interest rates which are reset daily, weekly, quarterly or some Credit
other period and which may be payable to the Fund on demand. Liquidity
Warrants: Securities, typically issued with preferred stock or 1, 4, 5, 9-11, Market
bonds, that give the holder the right to buy a proportionate 13, 14, 16 Credit
amount of common stock at a specified price.
</TABLE>
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<TABLE>
<CAPTION>
INSTRUMENT FUND CODE RISK TYPE
- ---------- --------- ---------
<S> <C> <C>
Preferred Stock: A class of stock that generally pays a dividend 2-5, 9, 11, Market
at a specified rate and has preference over common stock in the 14, 15
payment of dividends and in liquidation.
Mortgage-Backed Securities: Debt obligations secured by real 1-7 Pre-payment
estate loans and pools of loans. These include collateralized Market
mortgage obligations ("CMOs"), Real Estate Investment Conduits Credit
("REMICs"), and Stripped Mortgage-Backed Securities ("SMBS"). Regulatory
Demand Features: Securities that are subject to puts and standby 1-5, 7 Market
commitments to purchase the securities at a fixed price (usually Liquidity
with accrued interest) within a fixed period of time following Management
demand by a Fund.
Asset-Backed Securities: Securities secured by company 1-5, 7 Pre-payment
receivables, home equity loans, truck and auto loans, leases, Market
credit card receivables and other securities backed by other Credit
types of receivable or other assets.
Mortgage Dollar Rolls: A transaction in which a Fund sells 2-7 Pre-payment
securities for delivery in a current month and simultaneously Market
contracts with the same party to repurchase similar but not Regulatory
identical securities on a specified future date.
Adjustable Rate Mortgage Loans ("ARMS"): Loans in a mortgage 2-7 Pre-payment
pool which provide for a fixed initial mortgage interest rate Market
for a specified period of time, after which the rate may be Credit
subject to periodic adjustments. Regulatory
Corporate Debt Securities: Corporate bonds and non-convertible 3-5, 7 Market
debt securities. Credit
Swaps, Caps And Floors: A Fund may enter into these transactions 2-16 Market
to manage its exposure to changing interest rates and other Management
factors. Swaps involve an exchange of obligations by two Credit
parties. Caps and floors entitle a purchaser to a principal Liquidity
amount from the seller of the cap or floor to the extent that a
specified index exceeds or falls below a predetermined interest
rate or amount.
New Financial Products: New options and futures contracts, and 3-16 Management
other financial products continue to be developed and the Fund Credit
may invest in such options, contracts and products. Market
Liquidity
Structured Instruments: Debt securities issued by agencies and 3-7 Market
instrumentalities of the U.S. government, banks, municipalities, Liquidity
corporations and other businesses whose interest and/or Management
principal payments are indexed to foreign currency exchange Credit
rates, interest rates, or one or more other referenced indices. Foreign
Investment
Municipal Securities: Securities issued by a state or political 2-5, 7 Market
subdivision to obtain funds for various public purposes. Credit
Municipal securities include private activity bonds and Political
industrial development bonds, as well as General Obligation Tax
Notes, Tax Anticipation Notes, Bond Anticipation Notes, Revenue Anticipation
Notes, Project Notes, other short-term tax-exempt obligations, municipal
leases, and obligations of municipal housing authorities and single family
revenue bonds.
Obligations Of Supranational Agencies: Obligations of 9 Credit
supranational agencies who are chartered to promote economic Foreign
development and are supported by various governments and Investment
governmental agencies.
</TABLE>
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<TABLE>
<CAPTION>
INSTRUMENT FUND CODE RISK TYPE
- ---------- --------- ---------
<S> <C> <C>
Currency Futures and Related Options: The Fund may engage in 9 Management
transactions in financial futures and related options, which are Liquidity
generally described above. The Fund will enter into these Credit
transactions in foreign currencies and for hedging purposes Market
only. Political
Leverage
Foreign
Investment
Forward Foreign Exchange Transactions: Contractual agreement to 9 Management
purchase or sell one specified currency for another currency at Liquidity
a specified future date and price. The Fund will enter into Credit
forward foreign exchange transactions for hedging purposes only. Market
Political
Leverage
Foreign
Investment
Zero Coupon Debt Securities: Bonds and other debt that pay no 2-5, 7 Credit
interest, but are issued at a discount from their value at Market
maturity. When held to maturity, their entire returns equals the Zero Coupon
difference between their issue price and their maturity value.
Zero-Fixed-Coupon Debt Securities: Zero-coupon debt securities 2-5, 7 Credit
which convert on a specified date to interest-bearing debt Market
securities. Zero Coupon
Stripped Mortgage-Backed Securities: Derivative multi-class 3-7 Pre-payment
mortgage securities which are usually structured with two Market
classes of shares that receive different proportions of the Credit
interest and principal from a pool of mortgage assets. These Regulatory
include IOs and POs. The Funds only invest in Stripped Mortgage
Backed securities issued or guaranteed by the U.S. government,
its agencies or instrumentalities.
Inverse Floating Rate Instruments: Leveraged floating rate debt 3-7 Market
instruments with interest rates that reset in the opposite Leverage
direction from the market rate of interest to which the inverse Credit
floater is indexed.
Loan Participations And Assignments: Participations in, or 2-5, 7 Credit
assignments of all or a portion of loans to corporations or to Political
governments of the less developed countries ("LDCs"). Foreign
Investment
Market
Liquidity
Fixed Rate Mortgage Loans: Investments in fixed rate mortgage 2-5, 7 Credit
loans or mortgage pools which bear simple interest at fixed Pre-payment
annual rates and have original terms ranging from 5 to 40 years. Regulatory
Market
Short-Term Funding Agreements: Investments in short-term funding 1-5, 7 Credit
agreements issued by banks and highly rated U.S. insurance Liquidity
companies such as Guaranteed Investment Contracts (GICs) and Market
Bank Investment Contracts (BICs).
Standard & Poor's Depository Receipts ("SPDRs"): SPDRs represent 8,10-16 Market
ownership in a long-term unit investment trust that holds a portfolio
common stocks designed to track the price performance and dividend
yield of the S&P 500 Index. A SPDR entitles a holder to receive proportionate
quarterly cash distributions corresponding to the dividends that accrue to the
S&P 500 Index stocks in the underlying portfolio, less trust expenses.
</TABLE>
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<TABLE>
<CAPTION>
INSTRUMENT FUND CODE RISK TYPE
- ---------- --------- ---------
<S> <C> <C>
Participation Interests: Investments in municipal securities, 1 Credit
including municipal leases, from financial institutions such as Market
commercial and investment banks, savings and loan associations Tax
and insurance companies. These interest may take the form of participations,
beneficial interests in trusts, partnership interests or any other form of
indirect ownership that allows the Funds to treat the income from the
investment as exempt from Federal Income Tax.
</TABLE>
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INVESTMENT RISKS
Below is a more complete discussion of the types of risks inherent in the
securities and investment techniques listed above. Because of these risks, the
value of the securities held by the underlying funds may fluctuate, as will the
value of the Fund's investments in the underlying funds. Ultimately, the value
of your investment will be affected. Certain investments are more susceptible
to these risks than others.
o Credit Risk. The risk that the issuer of a security, or the
counterparty to a contract, will default or otherwise become unable to
honor a financial obligation. Credit risk is generally higher for
non-investment grade securities. The price of a security can be
adversely affected prior to actual default as its credit status
deteriorates and the probability of default rises.
o Leverage Risk. The risk associated with securities or practices that
multiply small index or market movements into large changes in value.
Leverage is often associated with investments in derivatives, but also
may be embedded directly in the characteristics of other securities.
o Hedged. When a derivative (a security whose value is based on
another security or index) is used as a hedge against an
opposite position that the fund also holds, any loss generated
by the derivative should be substantially offset by gains on
the hedged investment, and vice versa. While hedging can
reduce or eliminate losses, it can also reduce or eliminate
gains. Hedges are sometimes subject to imperfect matching
between the derivative and underlying security, and there can
be no assurance that a Fund's hedging transactions will be
effective.
o Speculative. To the extent that a derivative is not used as a
hedge, the fund is directly exposed to the risks of that
derivative. Gains or losses from speculative positions in a
derivative may be substantially greater than the derivative's
original cost.
o Liquidity Risk. The risk that certain securities may be difficult or
impossible to sell at the time and the price that normally prevails in
the market. The seller may have to lower the price, sell other
securities instead or forego an investment opportunity, any of which
could have a negative effect on fund management or performance. This
includes the risk of missing out on an investment opportunity because
the assets necessary to take advantage of it are tied up in less
advantageous investments.
o Management Risk. The risk that a strategy used by a fund's management
may fail to produce the intended result. This includes the risk that
changes in the value of a hedging instrument will not match those of
the asset being hedged. Incomplete matching can result in unanticipated
risks.
o Market Risk. The risk that the market value of a security may move up
and down, sometimes rapidly and unpredictably. These fluctuations may
cause a security to be worth less than the price originally paid for
it, or less than it was worth at an earlier time. Market risk may
affect a single issuer, industry, sector of the economy or the market
as a whole. There is also the risk that the current interest rate may
not accurately reflect existing market rates. For fixed income
securities, market risk is largely, but not exclusively, influenced by
changes in interest rates. A rise in interest rates typically causes a
fall in values, while a fall in rates typically causes a rise in
values. Finally, key information about a security or market may be
inaccurate or unavailable. This is particularly relevant to investments
in foreign securities.
o Political Risk. The risk of losses attributable to unfavorable
governmental or political actions, seizures of foreign deposits,
changes in tax or trade statutes, and governmental collapse and war.
o Foreign Investment Risk. The risk associated with higher transaction
costs, delayed settlements, currency controls and adverse economic
developments. This also includes the risk that fluctuations in the
exchange rates between the U.S. dollar and foreign currencies may
negatively affect an investment. Adverse changes in exchange rates may
erode or reverse any gains produced by foreign currency denominated
investments and may widen any losses. Exchange rate volatility also may
affect the ability of an issuer to repay U.S. dollar denominated debt,
thereby increasing credit risk.
o Pre-Payment Risk. The risk that the principal repayment of a security
will occur at an unexpected time, especially that the repayment of a
mortgage or asset-backed security occurs either significantly sooner or
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later than expected. Changes in pre-payment rates can result in greater
price and yield volatility. Pre-payments generally accelerate when
interest rates decline. When mortgage and other obligations are
pre-paid, a Fund may have to reinvest in securities with a lower yield.
Further, with early prepayment, a Fund may fail to recover any premium
paid, resulting in an unexpected capital loss.
o Tax Risk. The risk that the issuer of the securities will fail to
comply with certain requirements of the Internal Revenue Code, which
would cause adverse tax consequences.
o Regulatory Risk. The risk associated with Federal and state laws which
may restrict the remedies that a mortgage lender has when a borrower
defaults on mortgage loans. These laws include restrictions on
foreclosures, redemption rights after foreclosure, Federal and state
bankruptcy and debtor relief laws, restrictions on "due on sale"
clauses, and state usury laws.
o Zero coupon risk. The risk associated with changes in interest rates.
The market prices of securities structured as zero coupon or
pay-in-kind securities are generally affected to a greater extent by
interest rate changes. These securities tend to be more volatile than
securities which pay interest periodically. This risk is similar to
Market Risk, which is described above.
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APPENDIX B
DESCRIPTION OF RATINGS
The following is a summary of published ratings by major credit rating agencies.
Credit ratings evaluate only the safety of principal and interest payments, not
the market value risk of lower quality securities. Credit rating agencies may
fail to change credit ratings to reflect subsequent events on a timely basis.
Although Banc One Investment Advisors considers security ratings when making
investment decisions, it also performs its own investment analysis and does not
rely solely on the ratings assigned by credit agencies.
Unrated securities will be treated as non-investment grade securities unless
Banc One Investment Advisors determines that such securities are the equivalent
of investment grade securities. Securities that have received different ratings
from more than one agency are considered investment grade if at least one agency
has rated the security investment grade.
DESCRIPTION OF COMMERCIAL PAPER RATINGS
Duff & Phelps Credit Rating Co. ("Duff")
- ----------------------------------------
D-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 obligations.
D-1 Very high certainty of timely payment. Liquidity factors are
excellent and supported by good fundamental protection
factors. Risk factors are minor.
D-1- High certainty of timely payment. Liquidity factors are strong
and supported by good fundamental protection factors. Risk
factors are very small.
D-2 Good certainty of timely payment. Liquidity facts and company
fundamentals are sound. Although ongoing funding needs may
enlarge total financing requirements, access to capital
markets is good. Risk factors are small.
D-3 Satisfactory liquidity and other protection factors qualify
issues as to investment grade. Risk factors are larger and
subject to more variation. Nevertheless, timely payment is
expected.
D-4 Speculative investment characteristics. Liquidity is not
sufficient to insure against disruption in debt service.
Operating factors and market access may be subject to a high
degree of variation.
D-5 Issuer failed to meet scheduled principal and/interest
payments.
Standard & Poor's Corporation ("S&P")
- -------------------------------------
A-1 Highest category of commercial paper. Capacity to meet
financial commitment is strong. Obligations designated with a
plus sign (+) indicate that capacity to meet financial
commitment is extremely strong.
A-2 Issues somewhat more susceptible to adverse effects of changes
in circumstances and economic conditions than obligations in
higher rating categories. However, the capacity to meet
financial commitments is satisfactory.
A-3 Exhibits adequate protection parameters. However, adverse
economic conditions or changing circumstances are more likely
to lead to a weakened capacity of the obligor to meet its
financial commitment on the obligation.
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B Regarded as having significant speculative characteristics.
The obligor currently has the capacity to meet its financial
commitment on the obligation; however, it faces major ongoing
uncertainties which could lead to the obligor's inadequate
capacity to meet its financial commitment on the obligation.
C Currently vulnerable to nonpayment and is dependent upon
favorable business, financial, and economic conditions for the
obligor to meet its financial commitment on the obligation.
D In payment default. The D rating category is used when
payments on an obligation are not made on the date due even if
the applicable grace period has not expired, unless Standard &
Poor's believes that such payments will be made during such
grace period. The D rating also will be used upon the filing
of a bankruptcy petition or the taking of a similar action if
payments on an obligation are jeopardized.
Fitch IBCA Limited ("Fitch")
- ----------------------------
F1 Highest capacity for timely repayment. Those issues rated F1+
possess a particularly strong credit feature.
F2 Satisfactory capacity for timely repayment although such
capacity may be susceptible to adverse changes in business,
economic or financial conditions.
F3 Adequate capacity for timely repayment, but more susceptible
to adverse changes business, economic or financial conditions
than for obligations in higher categories.
B Capacity for timely repayment is uncertain and is susceptible
to adverse changes in business, economic or financial
conditions.
C High risk of default or which are currently in default.
Moody's Investors Service ("Moody's")
- -------------------------------------
Prime-1 Superior ability for repayment.
Prime-2 Strong ability for repayment.
Prime-3 Acceptable ability for repayment. 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.
Not Prime Does not fall within any of the Prime rating categories.
DESCRIPTION OF BANK RATINGS
Moody's
- -------
These ratings represent Moody's opinion of a bank's intrinsic safety and
soundness.
A These banks possess exceptional intrinsic financial strength. Typically
they will be major financial institutions with highly valuable and
defensible business franchises, strong financial fundamentals, and a
very attractive and stable operating environment.
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B These banks possess strong intrinsic financial strength. Typically,
they will be important institutions with valuable and defensible
business franchises, good financial fundamentals, and an attractive and
stable operating environment.
C These banks possess good intrinsic financial strength. Typically, they
will be institutions with valuable and defensible business franchises.
These banks will demonstrate either acceptable financial fundamentals
within a stable operating environment, or better than average financial
fundamentals within an unstable operating environment.
D These banks possess adequate financial strength, but may be limited by
one or more of the following factors: a vulnerable or developing
business franchise; weak financial fundamentals; or an unstable
operating environment.
E These banks possess very weak intrinsic financial strength, require
periodic outside support or suggest an eventual need for outside
assistance. Such institutions may be limited by one or more of the
following factors: a business franchise of questionable value;
financial fundamentals that are seriously deficient in one or more
respects; or a highly unstable operating environment.
DESCRIPTION OF TAXABLE BOND RATINGS
S&P
S&P's credit rating is a current opinion of an obligor's overall financial
capacity (its creditworthiness) to pay its financial obligation.
AAA The highest rating assigned by S&P. The obligor's capacity to meet its
financial commitment on the obligation is extremely strong.
AA The obligor's capacity to meet its financial commitments on the
obligation is very strong.
A The obligation is somewhat more susceptible to the adverse effects of
changes in circumstances and economic conditions than obligations in
higher rated categories. However, the obligor's capacity to meet its
financial commitment on the obligation is still strong.
BBB Exhibits adequate protection parameters. However, adverse economic
conditions or changing circumstances are more likely to lead to a
weakened capacity of the obligor to meet its financial commitment on
the obligation.
Obligations rated BB, B, CCC, CC, and C are regarded as having significant
speculative characteristics. BB indicates the least degree of speculation and C
the highest. While such obligations will likely have some quality and
protective characteristics, these may be outweighed by large uncertainties or
major exposures to adverse conditions.
BB Less vulnerable to nonpayment than other speculative issues.
However, such issues face major ongoing uncertainties or
exposure to adverse business, financial, or economic
conditions which could lead to the obligor's inadequate
capacity to meet its financial commitment on the obligation.
B More vulnerable to nonpayment than obligations rated BB, but
the obligor currently has the capacity to meet its financial
commitment on the obligation. Adverse business, financial, or
economic conditions will likely impair the obligor's capacity
or willingness to meet its financial commitment on the
obligation.
CCC Currently vulnerable to nonpayment, and dependent upon
favorable business, financial, and economic conditions for the
obligor to meet its financial commitment on the obligation. In
the event of adverse business, financial, or economic
conditions, the obligor is not likely to have the capacity to
meet its financial commitment on the obligation.
CC Currently highly vulnerable to nonpayment.
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C Used to cover a situation where a bankruptcy petition has been
filed or similar action has been taken, but payments on this
obligation are being continued.
D In payment default. Used when payments on an obligation are
not made on the date due even if the applicable grace period
has not expired, unless Standard & Poor's believes that such
payments will be made during such grace period. Also used upon
the filing of a bankruptcy petition or the taking of a similar
action if payments on an obligation are jeopardized.
Moody's
- -------
Investment Grade
Aaa 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 an exceptionally stable, margin and principal is secure.
High quality by all standards. Margins of protection may not be as
large as in Aaa securities, fluctuation of protective elements may be
greater, or there may be other elements present that make the long-term
risks appear somewhat larger than in Aaa securities.
A These bonds possess many favorable investment attributes and are to be
considered as upper-medium grade obligations. Factors giving security
to principal and interest are considered adequate, but elements may be
present which suggest a susceptibility to impairment sometime in the
future.
Baa These bonds are considered 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.
Non-Investment Grade
Ba These bonds have speculative elements; their future cannot be
considered as well assured. The protection of interest and principal
payments may be very moderate and thereby not well safeguarded during
good and bad times over the future.
B These bonds lack the characteristics of a desirable investment (i.e.,
potentially low assurance of timely interest and principal payments or
maintenance of other contract terms over any long period of time may be
small).
Caa Bonds in this category have poor standing and may be in default. These
bonds carry an element of danger with respect to principal and interest
payments.
Ca Speculative to a high degree and could be in default or have other
marked shortcomings. C is the lowest rating.
Fitch
- -----
Investment Grade
AAA Highest rating category. The obligor's capacity for timely repayment of
principal and interest is extremely strong.
AA The obligor's capacity for timely repayment is very strong.
63
<PAGE> 327
A Bonds and preferred stock considered to be investment grade and of high
credit quality. The obligor's ability for timely repayment is strong.
However, adverse changes in business, economic, or financial conditions
are more likely to affect the capacity for timely repayment than
obligations in higher rated categories.
BBB The obligor's capacity for timely repayment of principal and interest
is adequate. However, adverse changes in business, economic or
financial conditions and circumstances, are more likely to affect the
capacity for timely repayment than for obligations in higher rated
categories.
BB Obligations for which capacity for timely repayment of principal and
interest is uncertain. These obligations are speculative to some degree
and capacity for timely repayment remains susceptible over time to
adverse changes in business, financial or economic conditions.
B The Obligor's capacity for timely repayment of principal and interest
is uncertain. Timely repayment of principal and interest is not
sufficiently protected against adverse changes in business, economic or
financial conditions and these obligations are far more speculative
than those in higher rated categories.
CCC Obligations for which there is a current perceived possibility of
default. Timely repayment of principal and interest is dependent on
favorable business, economic, or financial conditions and these
obligations are far more speculative than those in higher rated
categories.
CC Obligations which are highly speculative or which have a high risk of
default.
C Obligations which are currently in default.
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<PAGE> 328
DESCRIPTION OF INSURANCE RATINGS
Moody's
- -------
These ratings represent Moody's opinions of the ability of insurance companies
to pay punctually senior policyholder claims and obligations.
Aaa Insurance companies rated in this category offer exceptional financial
security. While the financial strength of these companies is likely to
change, such changes as can be visualized are most unlikely to impair
their fundamentally strong position.
Aa These insurance companies offer excellent financial security. Together
with the Aaa group, they constitute what are generally known as high
grade companies. They are rated lower than Aaa companies because
long-term risks appear somewhat larger.
A Insurance companies rated in this category offer good financial
security. However, elements may be present which suggest a
susceptibility to impairment sometime in the future.
Baa Insurance companies rated in this category offer adequate financial
security. However, certain protective elements may be lacking or may be
characteristically unreliable over any great length of time.
BA Insurance companies rated in this category offer questionable financial
security. Often the ability of these companies to meet policyholder
obligations may be very moderate and thereby not well safeguarded int
he future.
B Insurance companies rated in this company offer poor financial
security. Assurance of punctual payment of policyholder obligations
over any long period of time is small.
Caa Insurance companies rated in this category offer very poor financial
security. They may be in default on their policyholder obligations or
there may be present elements of danger with respect to punctual
payment of policyholder obligations and claims.
Ca Insurance companies rated in this category offer extremely poor
financial security. Such companies are often in default on their
policyholder obligations or have other marked shortcomings.
C Insurance companies rated in this category are the lowest rated class
of insurance company and can be regarded as having extremely poor
prospects of ever offering financial security.
S&P
- ---
An insurer rated 'BBB' or higher is regarded as having financial security
characteristics that outweigh any vulnerabilities, and is highly likely to have
the ability to meet financial commitments.
AAA EXTREMELY STRONG financial security characteristics. 'AAA' is the
highest Insurer Financial Strength Rating assigned by Standard &
Poor's.
AA VERY STRONG financial security characteristics, differing only slightly
from those rated higher.
A STRONG financial security characteristics, but Is somewhat more likely
to be affected by adverse business conditions than are insurers with
higher ratings.
BBB GOOD financial security characteristics, but is more likely to be
affected by adverse business conditions than are higher rated insurers.
65
<PAGE> 329
An insurer rated 'BB' or lower is regarded as having vulnerable characteristics
that may outweigh its strength. 'BB' indicates the least degree of
vulnerability within the range; 'CC' the highest.
BB MARGINAL financial security characteristics. Positive attributes exist,
but adverse business conditions could lead to insufficient ability to
meet financial commitments.
B WEAK financial security characteristics. Adverse business conditions
will likely impair its ability to meet financial commitments.
CCC VERY WEAK financial security characteristics, and is dependent on
favorable business conditions to meet financial commitments.
CC EXTREMELY WEAK financial security characteristics and is likely not to
meet some of its financial commitments.
R An insurer rated 'R' has experienced a REGULATORY ACTION regarding
solvency. The rating does not apply to insurers subject only to
nonfinancial actions such as market conduct violations.
NR NOT RATED, which implies no opinion about the insurer's financial
security.
Plus (+) or minus (-)
Following ratings from 'AA' to 'CCC' show relative standing within the major
rating categories.
DESCRIPTION OF MUNICIPAL NOTE RATINGS
Moody's
- -------
MIG1 & VMIG1 Short-term municipal securities rated MIG1 or VMIG1
are of the best quality. They have strong protection
from established cash flows, superior liquidity
support or demonstrated broad-based access to the
market for refinancing.
MIG2 & VMIG2 These Short-term municipal securities rated are of
high quality. Margins of protection are ample
although not so large as in the preceding group.
MIG3 & VMIG3 Favorable quality. All security elements are
accounted for, but the undeniable strength of the
preceding grades is lacking. Liquidity and cash flow
protection may be narrow and marketing access for
refinancing is likely to be less well established.
MIG4 & VMIG4 This denotes adequate quality protection commonly
regarded as required of an investment security is
present and although not distinctly or predominantly
speculative, there is a specific risk.
SG This denotes speculative quality. Our instruments in
this category each margins of protection.
S&P
- ---
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.
SP-1 Strong capacity to pay principal and interest. Those issues determined
to possess overwhelming safety characteristics will be given a plus (+)
designation.
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<PAGE> 330
SP-2 Satisfactory capacity to pay principal and interest.
SP-3 Speculative capacity to pay principal and interest.
DESCRIPTION OF PREFERRED STOCK RATINGS
Moody's
- -------
aaa Top-quality preferred stock. This rating indicates good asset
protection and the least risk of dividend impairment within the
universe of preferred stocks.
aa High-grade preferred stock. This rating indicates that there is a
reasonable assurance the earnings and asset protection will remain
relatively well maintained in the foreseeable future.
a Upper-medium grade preferred stock. While risks are judged to be
somewhat greater than in the "aaa" and "aa" classification, earnings
and asset protection are, nevertheless, expected to be maintained at
adequate levels.
baa Medium-grade preferred stock, neither highly protected nor poorly
secured. Earnings and asset protection appear adequate at present but
may be questionable over any great length of time.
ba Considered to have speculative elements and its future cannot be
considered well assured. Earnings and asset protection may be very
moderate and not well safeguarded during adverse periods. Uncertainty
of position characterizes preferred stocks in this class.
b Lacks the characteristics of a desirable investment. Assurance of
dividend payments and maintenance of other terms of the issue over any
long period of time may be small.
caa Likely to be in arrears on dividend payments. This rating designation
does not purport to indicate the future status of payments.
ca Speculative in a high degree and is likely to be in arrears on
dividends with little likelihood of eventual payments.
c Lowest rated class of preferred or preference stock. Issues so rated
can thus be regarded as having extremely poor prospects of ever
attaining any real investment standing.
Note: Moody's applies numerical modifiers 1, 2, and 3 in each rating
classification; 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.
S&P
- ---
S&P's preferred stock rating is an assessment of the capacity and willingness
of an issuer to pay preferred stock dividends and any applicable sinking fund
obligations.
AAA Highest rating. This rating indicates an extremely strong capacity to
pay the preferred stock obligations.
AA High-quality, fixed-income security. The capacity to pay preferred
stock obligations is very strong, although not as overwhelming as for
issues rated "AAA."
A Backed by a sound capacity to pay the preferred stock obligations,
although it is somewhat more susceptible to the adverse effects of
changes in circumstances and economic conditions.
67
<PAGE> 331
BBB Backed by an adequate capacity to pay the preferred stock obligations.
Whereas the issuer normally exhibits adequate protection parameters,
adverse economic conditions or changing circumstances are more likely
to lead to a weakened capacity to make payments for a preferred stock
in this category than for issues in the "A" category.
CCC Regarded, on balance, as predominantly speculative with respect to the
issuer's capacity to pay preferred stock obligations. BB indicates the
lowest degree of speculation and CCC the highest. While such issues
will likely have some quality and protective characteristics, these are
outweighed by large uncertainties or major risk exposures to adverse
conditions.
CC In arrears on dividends or sinking fund payments, but that is currently
paying.
C Nonpaying issue.
D Nonpaying issue with the issuer in default on debt instruments.
N.R. No rating has been requested, insufficient information on which to base
a rating, or Standard & Poor's does not rate a particular type of
obligation as a matter of policy.
Plus (+) or minus (-)
To provide more detailed indications of preferred stock quality, ratings from
AA to CCC may be modified by the addition of a plus or minus sign to show
relative standing within the major rating categories.
SHORT-TERM DEBT RATINGS
Thompson Bank Watch, Inc. ("TBW") ratings apply only to the unsecured
commercial paper and other senior short-term and deposit obligations of
entities to which the ratings have been assigned. The TBW Short-Term ratings
specifically assess the likelihood of an untimely payment of principal and
interest.
TBW-1 Very high degree of likelihood that principal and interest
will be paid on a timely basis.
TBW-2 While degree of safety regarding timely repayment of principal
and interest is strong, the relative degree is not as high as
for issues rated TBW-1.
TBW-3 Lowest investment grade category. While more susceptible to
adverse developments than obligations with higher ratings,
capacity to service principal and interest in a timely fashion
is considered adequate.
TBW-4 Non-investment grade and, therefore, speculative.
DESCRIPTION OF MUNICIPAL BOND RATINGS
(INCLUDING FOREIGN, MORTGAGE AND ASSET-BACKED SECURITIES)
S&P
- ---
INVESTMENT GRADE
AAA The highest rating. The rating indicates an extremely strong
capacity to meet its financial commitment.
AA Differs from AAA issues only in a small degree. The obligor's
capacity to meet its financial commitment is very strong.
68
<PAGE> 332
A These bonds are somewhat more susceptible to the adverse
effects of changes in circumstances and economic conditions
than debt in higher rated categories. However, capacity to
meet its financial commitment on the obligation is still
strong.
BBB Exhibits adequate protection parameters. However, adverse
economic conditions or changing circumstances are more likely
to lead to a weakened capacity to meet its financial
commitment on the obligations.
SPECULATIVE GRADE
BB Less vulnerable to non-payment than other speculative issues.
However, these bonds face major ongoing uncertainties or
exposure to adverse business, financial or economic conditions
which could lead to inadequate capacity to meet financial
commitment on the obligations.
B More vulnerable to non-payment than obligations rated BB, but
currently has the capacity to meet its financial commitment on
the obligation. Adverse business, financial or economic
conditions will likely impair capacity or willingness to meet
its financial commitment on the obligation.
CCC Currently vulnerable to non-payment, and is dependent upon
favorable business, financial, and economic conditions to meet
its financial commitment on the obligation. In the event of
adverse business, financial, or economic conditions, they are
not likely to have the capacity to meet its financial
commitment on the obligation.
CC Currently highly vulnerable to non-payment.
C This rating may be used to cover a situation where a
bankruptcy petition has been filed, or similar action has been
taken, but payments on this obligation are being continued.
D Bonds in payment default.
Ratings from AA to CCC may be modified by a plus (+) or minus (-) to show
relative standing within the major rating categories.
MOODY'S
- -------
INVESTMENT GRADE
Aaa 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 an exceptionally stable,
margin and principal is secure.
Aa High quality by all standards. Margins of protection may not
be as large as in Aaa securities, fluctuation of protective
elements may be greater, or there may be other elements
present that make the long-term risks appear somewhat larger
than in Aaa securities.
A These bonds possess many favorable investment attributes and
are to be considered as upper-medium grade obligations.
Factors giving security to principal and interest are
considered adequate, but elements may be present which suggest
a susceptibility to impairment sometime in the future.
Baa These bonds are considered 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.
69
<PAGE> 333
NON-INVESTMENT GRADE
Ba These bonds have speculative elements; their future cannot be
considered as well assured. The protection of interest and
principal payments may be very moderate and thereby not well
safeguarded during good and bad times over the future.
B These bonds lack the characteristics of a desirable investment
(i.e., potentially low assurance of timely interest and
principal payments or maintenance of other contract terms over
any long period of time may be small).
Caa Bonds in this category have poor standing and may be in
default. These bonds carry an element of danger with respect
to principal and interest payments.
Ca Speculative to a high degree and could be in default or have
other marked shortcomings. Ca is the lowest rating.
SHORT-TERM DEBT RATINGS
Thompson Bank Watch, Inc. ("TBW") assigns ratings to specific debt instruments
with original maturities of one year or less. The TBW Short-Term ratings
specifically assess the likelihood of an untimely payment of principal and
interest.
TBW-1 Very high degree of likelihood that principal and interest
will be paid on a timely basis.
TBW-2 While degree of safety regarding timely repayment of principal
and interest is strong, the relative degree is not as high as
for issues rated TBW-1.
TBW-3 Lowest investment grade category. While more susceptible to
adverse developments than obligations with higher ratings,
capacity to service principal and interest in a timely fashion
is considered adequate.
TBW-4 Non-investment grade and, therefore, speculative.
70
<PAGE> 334
INVESTMENT ADVISOR AND SUB-ADMINISTRATOR
Banc One Investment Advisors Corporation
1111 Polaris Parkway
P.O. Box 710211
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 8528
Boston, MA 02266-8528
LEGAL COUNSEL
Ropes & Gray
One Franklin Square
1301 K Street, N.W.
Suite 800 East
Washington, D.C. 20005
INDEPENDENT ACCOUNTANTS
PricewaterhouseCoopers, LLP
100 East Broad Street
Columbus, OH 43215
THE STATEMENT OF ADDITIONAL INFORMATION CONTAINS MORE DETAILED INFORMATION ABOUT
THE FUNDS. THE CURRENT STATEMENT OF ADDITIONAL INFORMATION HAS BEEN FILED WITH
THE SECURITIES AND EXCHANGE COMMISSION AND IS AVAILABLE WITHOUT CHARGE BY
CALLING 1-800-480-4111 OR BY WRITING TO THE ONE GROUP SERVICES COMPANY AT 3435
STELZER ROAD, COLUMBUS, OHIO 43219. THE STATEMENT OF ADDITIONAL INFORMATION IS
INCORPORATED INTO THIS PROSPECTUS BY REFERENCE. THE SEC MAINTAINS A WEB SITE
(WWW.SEC.GOV) THAT CONTAINS THE STATEMENT OF ADDITIONAL INFORMATION, MATERIALS
INCORPORATED BY REFERENCE AND OTHER INFORMATION REGARDING THE ONE GROUP(R).
71
<PAGE> 335
THE ONE GROUP(R) FAMILY OF MUTUAL FUNDS
MONEY MARKET FUNDS
COMBINED PROSPECTUS
OCTOBER , 1998
THE ONE GROUP(R) PRIME MONEY MARKET FUND
THE ONE GROUP(R) MUNICIPAL MONEY MARKET FUND
THE ONE GROUP(R) OHIO MUNICIPAL MONEY MARKET FUND
THE ONE GROUP(R) U.S. TREASURY SECURITIES MONEY MARKET FUND
This prospectus describes four money market mutual funds with a variety
of investment objectives, including current income, interest income exempt from
Federal Income Tax, and interest income exempt from Federal Income Tax and Ohio
Personal Income Tax. The information in this prospectus is important. Please
read it carefully before you invest, and save it for future reference.
PLEASE REMEMBER THAT SHARES OF THE FUNDS: O ARE NOT DEPOSITS OR
OBLIGATIONS OF, OR GUARANTEED BY BANC ONE CORPORATION OR ITS AFFILIATES; O ARE
NOT INSURED OR GUARANTEED BY THE FEDERAL DEPOSIT INSURANCE CORPORATION OR BY ANY
FEDERAL OR STATE GOVERNMENTAL AGENCY; O INVOLVE INVESTMENT RISK, INCLUDING THE
POSSIBLE LOSS OF THE PRINCIPAL AMOUNT INVESTED.
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE
SECURITIES AND EXCHANGE COMMISSION NOR HAS THE COMMISSION PASSED UPON THE
ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A
CRIMINAL OFFENSE.
<PAGE> 336
TABLE OF CONTENTS
<TABLE>
<S> <C>
A BRIEF PREVIEW OF THE FUNDS 1
ABOUT THE FUNDS 3
The One Group(R) Prime Money Market Fund 3
The One Group(R) Municipal Money Market Fund 9
The One Group(R) Ohio Municipal Money Market Fund 13
The One Group(R) U.S. Treasury Securities Money Market Fund 16
MORE ABOUT THE FUNDS 20
HOW TO DO BUSINESS WITH THE ONE GROUP 21
Purchasing Fund Shares 21
Sales Charges 24
Sales Charge Reductions and Waivers 26
Exchanging Fund Shares 27
Redeeming Fund Shares 28
SHAREHOLDER INFORMATION 31
Voting Rights 31
Dividend Policies 33
Tax Treatment of the Funds 34
Tax Treatment of Shareholders 34
Shareholder Inquiries 35
ORGANIZATION AND MANAGEMENT OF THE FUNDS 36
The Funds 36
The Board of Trustees 36
The Advisor 36
The Distributor 36
The Administrator and Sub-Administrator 36
The Transfer Agent, Custodian and Sub-Custodian 36
DETAILS ABOUT THE FUNDS' INVESTMENT PRACTICES AND POLICIES 38
Investment Practices 38
Investment Risks 40
Investment Policies 41
APPENDIX: DESCRIPTION OF RATINGS 43
</TABLE>
<PAGE> 337
A BRIEF PREVIEW OF THE FUNDS
WHAT ARE THE GOALS OF THE ONE GROUP MONEY MARKET FUNDS?
The Funds are designed for a variety of investment objectives, including current
income, interest income exempt from Federal Income Tax, and interest income
exempt from Federal Income Tax and Ohio Personal Income Tax. Each Fund pursues a
different objective and involves different risks. All of the Funds will use
their best efforts to maintain a constant net asset value of $1.00 per share,
although there is no guarantee that the Funds will be able to do so. Please read
about each Fund before investing.
WHAT ARE THE FUNDS' INVESTMENT STRATEGIES?
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. The Funds intend to comply with Rule 2a-7 under
the Investment Company Act of 1940.
WHAT ARE THE MAIN RISKS OF INVESTING IN THE FUNDS?
The Funds invest in securities that are backed by "credit enhancements" such as
letters of credit. The value of investments in the Funds could decrease if the
credit quality of the credit enhancement provider declines. The Prime Money
Market Fund invests in mortgage-related securities which have significantly
greater price and yield volatility than traditional fixed income securities. In
addition, the Prime Money Market Fund invests in U.S. dollar denominated foreign
securities which may expose the Fund to risks that are different from
investments in U.S. Securities. The Ohio Municipal Money Market Fund is a
non-diversified fund which expose investors to special risks. An investment in
the Funds is not a deposit of BANC ONE CORPORATION or its affiliates and is not
insured or guaranteed by the Federal Deposit Insurance Corporation or any other
government agency. For more information about risks, please read "More About the
Funds" and "Investment Risks."
WHAT CLASSES OF SHARES ARE AVAILABLE?
Each Fund currently offers Class A, Class C and Class I shares. Class A
and Class C shares are offered to the general public. Class I 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. Class I shares are not available to Individual
Retirement Accounts ("IRA").
The Prime Money Market Fund and the U.S. Treasury Securities Money Market Fund
also offer Class B and Service Class shares. Class B shares are offered to the
general public. Service Class shares are offered to entities purchasing such
shares on behalf of investors requiring additional administrative or accounting
services such as sweep processing. The section called "How To Do Business With
The One Group" will provide more information.
HOW DO I PURCHASE AND REDEEM SHARES?
You may buy and redeem shares of the Funds on any day that the Funds are open
for business. Class C Shares are not available for purchase in all of the Funds.
Purchase and redemption procedures are explained in greater detail in "How To Do
Business With The One Group." For additional information, call The One Group
Services Company at 1-800-480-4111.
1
<PAGE> 338
HOW ARE DIVIDENDS PAID?
Generally, dividends are declared on each business day and are distributed
periodically. Any capital gains are distributed at least annually. Distributions
are paid in additional shares of the same class unless you elect to take the
payment in cash. For a more detailed discussion of dividends, see "Dividend
Policies."
WHO MANAGES THE FUNDS?
Banc One Investment Advisors Corporation ("Banc One Investment Advisors"), an
indirect subsidiary of BANC ONE CORPORATION, serves as the advisor of the Funds.
Banc One Investment Advisors is paid a fee for its services. A more detailed
discussion regarding Banc One Investment Advisors, its services and compensation
can be found in the Prospectus under the headings "The Advisor" and "Expense
Summary."
2
<PAGE> 339
THE ONE GROUP(R) PRIME MONEY MARKET FUND
INVESTMENT OBJECTIVE
The Fund is a diversified money market fund that seeks current income with
liquidity and stability of principal.
PORTFOLIO SECURITIES
The Fund invests exclusively in high quality money market instruments. These
instruments include U.S. Treasury obligations, obligations issued or guaranteed
by U.S. agencies or instrumentalities, mortgage-backed securities, commercial
paper, bank obligations and deposit notes. The Fund also may invest in
commercial paper issued by foreign issuers. The Fund may invest up to 10% of its
net assets in illiquid investments such as certain restricted securities and
private placements. The Fund also engages in securities lending. For a list of
all of the securities in which the Fund may invest, please read "Investment
Policies."
RISK CONSIDERATIONS
The Fund invests in securities that are backed by "credit enhancements" such as
letters of credit. The value of your investment in the Fund could decrease if
the value of the securities in the portfolio decreases in response to declining
credit quality of a credit enhancement provider. The Fund also invests in U.S.
dollar denominated foreign investments which involve risks that are different
from investments in U.S. companies. In addition, the Fund invests in
mortgage-related securities which have significantly greater price and yield
volatility than traditional fixed-income securities. Before you invest, please
read "More About the Funds" and "Investment Risks."
3
<PAGE> 340
SHAREHOLDER EXPENSES
<TABLE>
<CAPTION>
Service
SHAREHOLDER TRANSACTION EXPENSES)(1) CLASS A CLASS B CLASS C CLASS CLASS I
- ------------------------------------ ------- ------- ------- ----- -----
<S> <C> <C> <C> <C> <C>
Maximum Sales Charge Imposed on
Purchases (as a percentage of
offering price) none none none none none
Maximum Contingent Deferred Sales
Charge (as a percentage of
original purchase price or
redemption proceeds, as
applicable) none 5.00% 1.00% none none
Redemption Fees none none none none none
Exchange Fees none none none none none
ANNUAL OPERATING EXPENSES(2)
(as a percentage of average daily
net assets)
Investment Advisory Fees .35% .35% .35% .35% .35%
12b-1 Fees (after fee waiver)(3) .25% 1.00% 1.00% .55% none
Other Expenses .17% .17% .17% .17% .17%
Total Fund Operating Expenses
(after fee waivers)(4) .77% 1.52% 1.52% 1.07% .52%
</TABLE>
(1) If you buy or sell shares through a Shareholder Servicing Agent, you
may be charged separate transaction fees by the Shareholder Servicing
Agent. In addition, a $10.00 sub-minimum account fee may be applicable
and a $7.00 charge will be deducted from redemption amounts paid by
wire.
(2) Expense information has been restated to reflect current fees.
(3) Due to 12b-1 fees, long-term Class A, Class B, Class C and Service
Class shareholders may pay more than the equivalent of the maximum
front-end sales charges permitted under the rules of the National
Association of Securities Dealers. Without the voluntary waiver of
fees, 12b-1 fees would be .75% for Service Class shares.
(4) Without a voluntary reduction of 12b-1 fees, Total Operating Expenses
would be 1.27% for Service Class shares.
4
<PAGE> 341
EXAMPLE
An investor would pay the following expenses on a $1,000 investment in the Fund,
assuming: (1) payment of the maximum sales charge; (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 8 25 43 95
Class B 65 78 103 161
Class C 25 48 83 181
Class I 5 17 29 65
</TABLE>
Assuming no redemption at the end of each time period, 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 8 25 43 95
Class B 15 48 83 161
Class C 15 48 83 181
Class I 5 17 29 65
</TABLE>
Class B shares automatically convert to Class A shares after eight years.
Therefore, the "10 years" examples above reflect this conversion.
Because of the nature of the shares, shareholders are not expected to remain in
Service Class shares for more than a very limited period of time. However, a
shareholder investing in the Service Class shares on a continual basis for a
period of one month would pay $1, three months would pay $3, one year would pay
$11. Without the voluntary fee reduction, that shareholder would pay $1 after
one month, $3 after three months, and $13 after one year.
These examples are designed to assist you in understanding the various costs and
expenses that may be directly or indirectly paid by investors in the Fund. THESE
EXAMPLES SHOULD NOT BE CONSIDERED A REPRESENTATION OF PAST OR FUTURE EXPENSES
AND ACTUAL EXPENSES MAY BE GREATER OR LESS THAN THOSE SHOWN.
5
<PAGE> 342
THE ONE GROUP(R) PRIME MONEY MARKET FUND FINANCIAL HIGHLIGHTS
The Financial Highlights are intended to help you understand the Fund's
financial performance for the past 10 years, or since inception if less than 10
years. The total returns in the table represent the rate a shareholder would
have earned on an investment in the Fund (assuming reinvestment of all dividends
and distributions). This information has been derived from financial statements
audited by PricewaterhouseCoopers, LLP, whose report, along with the Fund's
financial statements, is incorporated by reference in the Statement of
Additional Information, which is available upon request.
<TABLE>
<CAPTION>
YEARS ENDED JUNE 30,
--------------------
Class I 1998 1997 1996 1995 1994 1993 1992
------- ---- ---- ---- ---- ---- ---- ----
<S> <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
Investment Activities
Net investment income 0.051 0.054 0.052 0.031 0.030 0.045
---------- ---------- ---------- ---------- -------- --------
Less: Distributions
Net investment income (0.051) (0.054) (0.052) (0.031) (0.030) (0.045)
---------- ---------- ---------- ---------- -------- --------
NET ASSET VALUE, END OF PERIOD $ 1.000 $ 1.000 $ 1.000 $ 1.000 $ 1.000 $ 1.000
========== ========== ========== ========== ======== ========
Total Return 5.20% 5.49% 5.34% 3.19% 3.09% 4.64%
RATIOS/SUPPLEMENTARY DATA:
Net Assets at end of period
(000) $2,563,768 $2,186,562 $1,965,416 $1,600,876 $979,275 $946,504
Ratio of expenses to average
net assets 0.48% 0.44% 0.41% 0.40% 0.44% 0.59%
Ratio of net investment
income to average net
assets 5.08% 5.34% 5.27% 3.18% 3.05% 4.49%
Ratio of expenses to average
net assets* 0.56% 0.55% 0.57% 0.59% 0.62% 0.76%
Ratio of net investment
income average net assets* 5.00% 5.23% 5.12% 2.99% 2.87% 4.32%
</TABLE>
<TABLE>
<CAPTION>
Class I 1991 1990
- ------- ---- ----
<S> <C> <C>
NET ASSET VALUE, BEGINNING
OF PERIOD $ 1.000 $ 1.000
Investment Activities
Net investment income 0.069 0.080
-------- --------
Less: Distributions
Net investment income (0.069) (0.080)
-------- --------
NET ASSET VALUE, END OF PERIOD $ 1.000 $ 1.000
======== ========
Total Return 7.12% 8.33%
RATIOS/SUPPLEMENTARY DATA:
Net Assets at end of period
(000) $760,726 $562,680
Ratio of expenses to average
net assets 0.68% 0.64%
Ratio of net investment income
to average net assets 6.86% 8.02%
Ratio of expenses to average
net assets* 0.83% 0.79%
Ratio of net investment income
average net assets* 6.71% 7.87%
</TABLE>
* During the period certain fees were voluntarily reduced. If such voluntary
fee reductions had not occurred, the ratios would have been as indicated.
6
<PAGE> 343
<TABLE>
<CAPTION>
YEARS ENDED JUNE 30,
--------------------
CLASS A 1998 1997 1996 1995 1994 1993 1992(a)
------- ---- ---- ---- ---- ---- ---- -------
<S> <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
-------- -------- -------- ------- ------- -------
Investment Activities
Net investment income 0.048 0.051 0.050 0.027 0.030 0.013
-------- -------- -------- ------- ------- -------
Less: Distributions
Net investment income (0.048) (0.051) (0.050) (0.027) (0.030) (0.013)
-------- -------- -------- ------- ------- -------
NET ASSET VALUE, END OF PERIOD $ 1.000 $ 1.000 $ 1.000 $ 1.000 $ 1.000 $ 1.000
======== ======== ======== ======= ======= =======
Total Return 4.94% 5.22% 5.08% 2.93% 2.83% 3.51%(b)
RATIOS/SUPPLEMENTARY DATA:
Net Assets at end of period
(000) $332,646 $315,374 $201,968 $74,759 $61,106 $ 511
Ratio of expenses to average
net assets 0.73% 0.69% 0.67% 0.65% 0.65% 0.79%(b)
Ratio of net investment income
to average net assets 4.83% 5.09% 5.02% 2.92% 2.67% 3.40%(b)
Ratio of expenses to average
net assets* 0.91% 0.90% 0.92% 0.90% 0.99% 0.94%(b)
Ratio of net investment income
to average net assets* 4.65% 4.88% 4.77% 2.67% 2.33% 3.25%(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)
Class A Shares commenced offering on February 18, 1992. (b) Annualized.
7
<PAGE> 344
<TABLE>
<CAPTION>
YEARS ENDED JUNE 30, 1998
-------------------------
NOVEMBER 21,
TO
CLASS B JUNE 30, 1997(a)
------- ---------------
<S> <C>
NET ASSET VALUE, BEGINNING OF PERIOD $ 1.000
-------
Investment Activities
Net investment income 0.026
-------
Less: Distributions
Net investment income (0.026)
-------
NET ASSET VALUE, END OF PERIOD $ 1.000
=======
Total Return (excludes sales charge) 2.63%(b)
RATIOS/SUPPLEMENTARY DATA:
Net Assets at end of period (000) $ 618
Ratio of expenses to average net assets 1.51%(c)
Ratio of net investment income to average net assets 4.16%(c)
Ratio of expenses to average net assets* 1.59%(c)
Ratio of net investment income to average net assets* 4.08%(c)
</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) Not annualized. (c) Annualized.
8
<PAGE> 345
THE ONE GROUP(R) MUNICIPAL MONEY MARKET FUND
INVESTMENT OBJECTIVE
The Fund is a diversified fund that seeks as high a level of current interest
income exempt from Federal income tax as is consistent with capital preservation
and stability of principal.
PORTFOLIO SECURITIES
As a matter of fundamental policy, the Fund will invest at least 80% of its
total assets in municipal securities. These are securities issued by or on
behalf of the states, territories and possessions of the United States,
including the District of Columbia, and their political subdivisions, agencies,
instrumentalities and authorities. These municipal securities produce interest
that, in the opinion of bond counsel for the issuer, is exempt from Federal
income tax. However, the Fund may invest as much as 100% of its assets in
municipal securities that produce income that is subject to the Federal
alternative minimum tax. If you are subject to the Federal alternative minimum
tax, please read the section of this prospectus entitled "Tax Treatment of
Shareholders" before you invest. The Fund also may invest up to 20% of its total
assets in other types of securities, such as taxable money market instruments,
including repurchase agreements. For a list of all the securities in which the
Fund may invest, please read "Investment Practices."
RISK CONSIDERATIONS
The Fund invests in securities that are backed by "credit enhancements" such as
letters of credit. The value of your investment in the Fund could decrease if
the value of the securities in the portfolio decreases in response to declining
credit quality of a credit enhancement provider. In addition, the Fund invests
in mortgage-related securities which have significantly greater price and yield
volatility than traditional fixed-income securities. Before you invest, please
read "More Information about the Funds" and "Investment Risks."
9
<PAGE> 346
SHAREHOLDER EXPENSES
<TABLE>
<CAPTION>
SHAREHOLDER TRANSACTION EXPENSES(1) CLASS A CLASS C CLASS I
- ----------------------------------- ------- ------- -------
<S> <C> <C> <C>
Maximum Sales Charge Imposed on Purchases (as a
percentage of offering price) none none none
Maximum Contingent Deferred Sales Charge (as a
percentage of original purchase price or
redemption proceeds, as applicable) none 1.00% 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 waiver)(3) .27% .27% .27%
12b-1 Fees(4) .25% 1.00% none
Other Expenses .20% .20% .20%
Total Fund Operating Expenses (after fee waiver)(5) .72% 1.47% .47%
</TABLE>
(1) If you buy or sell shares through a Shareholder Servicing Agent, you
may be charged separate transaction fees by the Shareholder Servicing
Agent. In addition, a $10.00 sub-minimum account fee may be applicable
and a $7.00 charge will be deducted from redemption amounts paid by
wire.
(2) Expense information has been restated to reflect current fees.
(3) Without a fee waiver, Investment Advisory Fees would be .35% for all
classes of shares.
(4) Due to 12b-1 fees, long-term Class A and Class C shareholders may pay
more than the equivalent of the maximum front-end sales charges
permitted under the rules of the National Association of Securities
Dealers.
(5) Total Operating Expenses have been revised to reflect fee waivers.
Without a voluntary reduction of Investment Advisory fees, Total
Operating Expenses would be .80% for Class A shares, 1.55% for Class C
shares and .55% for Class I shares.
10
<PAGE> 347
EXAMPLE
An investor would pay the following expenses on a $1,000 investment in the Fund,
assuming: (1) payment of the maximum sales charge; (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 7 23 40 89
Class A (without fee waiver) 8 26 44 99
Class C 25 46 80 176
Class C (without fee waiver) 26 49 84 185
Class I 5 15 26 59
Class I (without fee waiver) 6 18 31 69
</TABLE>
Assuming no redemption at the end of each time period, 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 7 23 40 89
Class A (without fee waiver) 8 26 44 99
Class C 15 46 80 176
Class C (without fee waiver) 16 49 84 185
Class I 5 15 26 59
Class I (without fee waiver) 6 18 31 69
</TABLE>
These examples are designed to assist you in understanding the various costs and
expenses that may be directly or indirectly paid by investors in the Fund. THESE
EXAMPLES SHOULD NOT BE CONSIDERED A REPRESENTATION OF PAST OR FUTURE EXPENSES
AND ACTUAL EXPENSES MAY BE GREATER OR LESS THAN THOSE SHOWN.
11
<PAGE> 348
THE ONE GROUP(R) MUNICIPAL MONEY MARKET FUND FINANCIAL HIGHLIGHTS
The Financial Highlights are intended to help you understand the Fund's
financial performance for the past 10 years, or since inception if less than 10
years. The total returns in the table represent the rate a shareholder would
have earned on an investment in the Fund (assuming reinvestment of all dividends
and distributions). This information has been derived from financial statements
audited by PricewaterhouseCoopers, LLP, whose report, along with the Fund's
financial statements, is incorporated by reference in the Statement of
Additional Information, which is available upon request.
<TABLE>
<CAPTION>
YEARS ENDED JUNE 30,
--------------------
Class I 1998 1997 1996 1995 1994 1993 1992 1991 1990
------- ---- ---- ---- ---- ---- ---- ---- ---- ----
<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
-------- -------- -------- -------- -------- -------- -------- --------
Investment Activities
Net investment income 0.031 0.033 0.032 0.021 0.021 0.034 0.050 0.057
-------- -------- -------- -------- -------- -------- -------- --------
Less: Distributions
Net investment income (0.031) (0.033) (0.032) (0.021) (0.021) (0.034) (0.050) (0.057)
-------- -------- -------- -------- -------- -------- -------- --------
NET ASSET VALUE, END OF PERIOD $ 1.000 $ 1.000 $ 1.000 $ 1.000 $ 1.000 $ 1.000 $ 1.000 $ 1.000
======== ======== ======== ======== ======== ======== ======== ========
Total Return 3.19% 3.34% 3.28% 2.16% 2.15% 3.47% 5.17% 5.82%
RATIOS/SUPPLEMENTARY DATA:
Net Assets at end of period (000) $467,420 $459,807 $437,743 $352,702 $175,277 $170,961 $166,200 $145,712
Ratio of expenses to average net
assets 0.43% 0.41% 0.41% 0.40% 0.46% 0.43% 0.32% 0.36%
Ratio of net investment income to
average net assets 3.16% 3.29% 3.26% 2.13% 2.12% 3.41% 5.04% 5.66%
Ratio of expenses to average net
assets* 0.55% 0.59% 0.59% 0.60% 0.66% 0.80% 0.67% 0.76%
Ratio of net investment income to
average net assets* 3.04% 3.11% 3.08% 1.93% 1.92% 3.04% 4.69% 5.26%
</TABLE>
* During the period certain fees were voluntarily reduced. If such voluntary
fee reductions had not occurred, the ratios would have been as indicated.
<TABLE>
<CAPTION>
YEARS ENDED JUNE 30,
--------------------
CLASS A 1998 1997 1996 1995 1994 1993 1992(a)
------- ---- ---- ---- ---- ---- ---- -------
<S> <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
-------- -------- -------- -------- -------- -------
Investment Activities
Net investment income 0.029 0.030 0.030 0.021 0.019 0.009
-------- -------- -------- -------- -------- -------
Less: Distributions
Net investment income (0.029) (0.030) (0.030) (0.021) (0.019) (0.009)
-------- -------- -------- -------- -------- -------
NET ASSET VALUE, END OF PERIOD $ 1.000 $ 1.000 $ 1.000 $ 1.000 $ 1.000 $ 1.000
======== ======== ======== ======== ======== =======
Total Return 2.97% 3.08% 3.02% 1.96% 1.89% 2.48%(b)
RATIOS/SUPPLEMENTARY DATA:
Net Assets at end of period
(000) $ 48,185 $ 50,720 $ 56,518 $ 41,595 $ 18,932 $ 122
Ratio of expenses to average
net assets 0.68% 0.66% 0.66% 0.65% 0.66% 0.84%(b)
Ratio of net investment income
to average net assets 2.91% 3.04% 3.01% 1.92% 1.82% 2.44%(b)
Ratio of expenses to average
net assets* 0.90% 0.94% 0.94% 0.91% 1.01% 0.99%(b)
Ratio of net investment income
to average net assets* 2.69% 2.76% 2.73% 1.66% 1.47% 2.29%(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)
Class A shares commenced offering on February 18, 1992. (b) Annualized.
12
<PAGE> 349
THE ONE GROUP(R) OHIO MUNICIPAL MONEY MARKET FUND
INVESTMENT OBJECTIVE
The Fund is a non-diversified money market fund that seeks as high a level of
current interest income exempt from Federal income tax and Ohio personal income
tax as is consistent with capital preservation and stability of principal.
PORTFOLIO SECURITIES
The Fund will invest at least 80% of its total assets in Ohio municipal
securities. These are securities issued by or on behalf of the State of Ohio and
its political subdivisions, agencies, instrumentalities and authorities. Ohio
municipal securities produce interest that, in the opinion of bond counsel for
the issuer, is exempt from both Federal income tax and Ohio personal income tax.
The Fund also may invest up to 20% of its total assets in non-Ohio municipal
securities, i.e., municipal securities issued by states, territories and
possessions of the United States, including the District of Columbia, other than
Ohio, as well as their political subdivisions, agencies, instrumentalities and
authorities that produce interest exempt from Federal income tax. The Fund has
the ability to invest as much as 100% of its assets in non-Ohio municipal
securities that produce income that is subject to the Federal alternative
minimum tax. If you are subject to the Federal alternative minimum tax, please
read the section of this prospectus entitled "Tax Treatment of Shareholders"
before you invest. Finally, the Fund also may invest up to 20% of its total
assets in other types of securities, such as taxable money market instruments,
including repurchase agreements. For a list of all the securities in which the
Fund may invest, please read "Investment Practices."
RISK CONSIDERATIONS
Because of the relatively small number of issuers of Ohio municipal securities,
the Fund's performance is effected to a greater extent by the success of one or
a few issuers than is the performance of a diversified fund. In addition, the
Fund invests in mortgage-related securities which have significantly greater
price and yield volatility than traditional fixed-income securities. Before you
invest, please read "More About the Funds" and "Investment Risks."
SHAREHOLDER EXPENSES
<TABLE>
<CAPTION>
SHAREHOLDER TRANSACTION EXPENSES(1) CLASS A CLASS C CLASS I
- ----------------------------------- ------- ------- -------
<S> <C> <C> <C>
Maximum Sales Charge Imposed on Purchases
(as a percentage of offering price) none none none
Maximum Contingent Deferred Sales Charge
(as a percentage of original purchase price
or redemption proceeds, as applicable) none 1.00% 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 waiver)(3) .27% .27% .27%
12b-1 Fees(4) .25% 1.00% none
Other Expenses .18% .18% .18%
Total Fund Operating Expenses (after fee
waivers)(5) .70% 1.45% .45%
</TABLE>
(1) If you buy or sell shares through a Shareholder Servicing Agent, you
may be charged separate transaction fees by the Shareholder Servicing
Agent. In addition, a $10.00 sub-minimum account fee may be applicable
and a $7.00 charge will be deducted from redemption amounts paid by
wire.
(2) Expense information has been restated to reflect current fees.
(3) Without a fee waiver, Investment Advisory Fees would be .30% for all
classes of shares.
(4) Due to 12b-1 fees, long-term Class A and Class C shareholders may pay
more than the equivalent of the maximum front-end sales charges
permitted under the rules of the National Association of Securities
Dealers.
(5) Total Operating Expenses have been revised to reflect fee waivers.
Without a voluntary reduction of Investment Advisory Fees, Total
Operating Expenses would be .73% for Class A shares, 1.48% for Class C
shares and .48% for Class I shares.
13
<PAGE> 350
EXAMPLE
An investor would pay the following expenses on a $1,000 investment in the Fund,
assuming: (1) payment of the maximum sales charge; (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 7 22 39 87
Class A (without fee waivers) 7 23 41 91
Class C 25 46 79 174
Class C (without fee waivers) 25 47 81 177
Class I 5 14 25 57
Class I (without fee waivers) 5 15 27 60
</TABLE>
Assuming no redemption at the end of each time period, 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 7 22 39 87
Class A (without fee waivers) 7 23 41 91
Class C 15 46 79 174
Class C (without fee waiver) 15 47 81 177
Class I 5 14 25 57
Class I (without fee waivers) 5 15 27 60
</TABLE>
These examples are designed to assist you in understanding the various costs and
expenses that may be directly or indirectly paid by investors in the Fund. THESE
EXAMPLES SHOULD NOT BE CONSIDERED A REPRESENTATION OF PAST OR FUTURE EXPENSES
AND ACTUAL EXPENSES MAY BE GREATER OR LESS THAN THOSE SHOWN.
14
<PAGE> 351
THE ONE GROUP(R) OHIO MUNICIPAL MONEY MARKET FUND FINANCIAL HIGHLIGHTS
The Financial Highlights are intended to help you understand the Fund's
financial performance for the past 10 years, or since inception if less than 10
years. The total returns in the table represent the rate a shareholder would
have earned on an investment in the Fund (assuming reinvestment of all dividends
and distributions). This information has been derived from financial statements
audited by PricewaterhouseCoopers, LLP, whose report, along with the Fund's
financial statements, is incorporated by reference in the Statement of
Additional Information, which is available upon request.
<TABLE>
<CAPTION>
YEARS ENDED JUNE 30, JUNE 9,
-------------------- JUNE 30, 1993 TO
Class I 1998 1997 1996 1995 1994 1993(a)
------- ---- ---- ---- ---- ---- -------
<S> <C> <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 0.032 0.033 0.032 0.022 0.013
------- ------- ------- ------- -------
Less: Distributions
Net investment income (0.032) (0.032) (0.032) (0.022) (0.013)
In excess of net investment income -- (0.001) -- -- --
Total Distributions (0.032) (0.033) (0.032) (0.022) (0.013)
------- ------- ------- ------- -------
NET ASSET VALUE, END OF PERIOD $ 1.000 $ 1.000 $ 1.000 $ 1.000 $ 1.000
======= ======= ======= ======= =======
Total Return 3.22% 3.34% 3.20% 2.25% 2.14%(b)
RATIOS/SUPPLEMENTARY DATA:
Net Assets at end of period (000) $56,442 $55,915 $51,806 $55,375 $ 3,500
Ratio of expenses to average net
assets 0.40% 0.41% 0.41% 0.34% 0.08%(b)
Ratio of net investment income to
average net assets 3.17% 3.19% 3.13% 2.29% 2.07%(b)
Ratio of expenses to average net
assets* 0.53% 0.71% 0.60% 0.57% 0.51%(b)
Ratio of net investment income to
average net assets* 3.04% 2.89% 2.94% 2.06% 1.64%(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.
<TABLE>
<CAPTION>
YEARS ENDED JUNE 30, JUNE 9,
-------------------- JUNE 30, 1993 TO
CLASS A 1998 1997 1996 1995 1994 1993(a)
------- ---- ---- ---- ---- ---- -------
<S> <C> <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 0.029 0.030 0.029 0.021 0.009
------- ------- ------- ------- -------
Less: Distributions
Net investment income (0.029) (0.029) (0.029) (0.021) (0.009)
In excess of net investment income -- (0.001) -- -- --
------- ------- ------- ------- -------
Total Distributions (0.029) (0.030) (0.029) (0.021) (0.009)
------- ------- ------- ------- -------
NET ASSET VALUE, END OF PERIOD $ 1.000 $ 1.000 $ 1.000 $ 1.000 $ 1.000
======= ======= ======= ======= =======
Total Return 2.96% 3.08% 2.98% 2.09% 2.34%(b)
RATIOS/SUPPLEMENTARY DATA:
Net Assets at end of period (000) $30,479 $41,132 $35,790 $37,356 $25,125
Ratio of expenses to average net
assets 0.65% 0.66% 0.63% 0.44% 0.26%(b)
Ratio of net investment income to
average net assets 2.90% 2.94% 2.91% 2.05% 2.03%(b)
Ratio of expenses to average net
assets* 0.88% 1.06% 0.95% 0.94% 0.92%(b)
Ratio of net investment income to
average net assets* 2.67% 2.54% 2.59% 1.55% 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.
15
<PAGE> 352
THE ONE GROUP(R) U.S. TREASURY SECURITIES MONEY MARKET FUND
INVESTMENT OBJECTIVE
The Fund is a diversified money market fund that seeks current income with
liquidity and stability of principal.
PORTFOLIO SECURITIES
The Fund will invest exclusively in short-term U.S. Treasury obligations
including repurchase agreements collateralized by such Treasury obligations and
when-issued securities. The Fund also engages in securities lending. For a list
of all the securities in which the Fund may invest, please read "Investment
Practices."
RISK CONSIDERATIONS
Before you invest, please read "More About the Funds" and "Investment Risks."
SHAREHOLDER EXPENSES
<TABLE>
<CAPTION>
SERVICE
SHAREHOLDER TRANSACTION EXPENSES(1) CLASS A CLASS B CLASS C CLASS CLASS I
- ----------------------------------- ------- ------- ------- ----- -------
<S> <C> <C> <C> <C> <C>
Maximum Sales Charge Imposed on Purchases
(as a percentage of offering price) none none none none none
Maximum Contingent Deferred Sales Charge
(as a percentage of original purchase
price or redemption proceeds, as
applicable) none 5.00% 1.00% none none
Redemption Fees none none none none none
Exchange Fees none none none none none
ANNUAL OPERATING EXPENSES(2)
(as a percentage of average daily
net assets)
Investment Advisory Fees .35% .35% .35% .35% .35%
12b-1 Fees (after fee waiver)(3) .25% 1.00% 1.00% .55% none
Other Expenses .17% .17% .17% .17% .17%
Total Fund Operating Expenses
(after fee waivers)(4) .77% 1.52% 1.52% 1.07% .52%
</TABLE>
(1) If you buy or sell shares through a Shareholder Servicing Agent, you
may be charged separate transaction fees by the Shareholder Servicing
Agent. In addition, a $10.00 sub-minimum account fee may be applicable
and a $7.00 charge will be deducted from redemption amounts paid by
wire.
(2) Expense information has been restated to reflect current fees.
(3) Due to 12b-1 fees, long-term Class A, Class B and Class C shareholders
may pay more than the equivalent of the maximum front-end sales charges
permitted under the rules of the National Association of Securities
Dealers. Without the voluntary waiver of fees, 12b-1 fees would be .75%
for Service Class shares.
(4) Total Operating Expenses have been revised to reflect fee waivers.
Without a voluntary reduction of 12b-1 fees, Total Operating Expenses
would be 1.27% for Service Class shares.
16
<PAGE> 353
EXAMPLE
An investor would pay the following expenses on a $1,000 investment in the Fund,
assuming: (1) payment of the maximum sales charge; (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 8 25 43 95
Class B 65 78 103 161
Class C 25 48 83 181
Class I 5 17 29 65
</TABLE>
Assuming no redemption at the end of each time period, 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 8 25 43 95
Class B 15 48 83 161
Class C 15 48 83 181
Class I 5 17 29 65
</TABLE>
Because of the nature of the shares, shareholders are not expected to remain in
Service Class shares for more than a very limited period of time. However, a
shareholder investing in the Service Class shares on a continual basis for a
period of one month would pay $1, three months would pay $3, and one year would
pay $11. Without the voluntary fee reduction, that shareholder would pay $1
after one month, $3 after three months, and $13 after one year.
Class B shares automatically convert to Class A shares after eight (8) years.
Therefore, the "10 years" examples above reflect this conversion.
These examples are designed to assist you in understanding the various costs and
expenses that may be directly or indirectly paid by investors in the Fund. THESE
EXAMPLES SHOULD NOT BE CONSIDERED A REPRESENTATION OF PAST OR FUTURE EXPENSES
AND ACTUAL EXPENSES MAY BE GREATER OR LESS THAN THOSE SHOWN.
17
<PAGE> 354
THE ONE GROUP(R) U.S. TREASURY SECURITIES MONEY MARKET FUND FINANCIAL HIGHLIGHTS
The Financial Highlights are intended to help you understand the Fund's
financial performance for the past 10 years, or since inception if less than 10
years. The total returns in the table represent the rate a shareholder would
have earned on an investment in the Fund (assuming reinvestment of all dividends
and distributions). This information has been derived from financial statements
audited by PricewaterhouseCoopers, LLP, whose report, along with the Fund's
financial statements, is incorporated by reference in the Statement of
Additional Information, which is available upon request.
<TABLE>
<CAPTION>
YEARS ENDED JUNE 30,
--------------------
Class I 1998 1997 1996 1995 1994 1993 1992
------- ---- ---- ---- ---- ---- ---- ----
<S> <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
---------- ---------- ---------- -------- -------- --------
Investment Activities
Net investment income 0.050 0.052 0.050 0.030 0.029 0.043
---------- ---------- ---------- -------- -------- --------
Less: Distributions
Net investment income (0.050)(a) (0.052) (0.050) (0.030) (0.029) (0.043)
---------- ---------- ---------- -------- -------- --------
NET ASSET VALUE, END OF PERIOD $ 1.000 $ 1.000 $ 1.000 $ 1.000 $ 1.000 $ 1.000
========== ========== ========== ======== ======== ========
Total Return 5.07% 5.34% 5.07% 3.01% 2.89% 4.40%
RATIOS/SUPPLEMENTARY DATA:
Net Assets at end of period
(000) $2,243,376 $1,844,590 $1,178,091 $969,326 $492,862 $410,146
Ratio of expenses to
average net assets 0.46% 0.42% 0.41% 0.40% 0.45% 0.55%
Ratio of net investment
income to average net
assets 4.95% 5.17% 4.96% 3.02% 2.85% 4.25%
Ratio of expenses to average
net assets* 0.57% 0.56% 0.59% 0.58% 0.67% 0.77%
Ratio of net investment
income to average net
assets* 4.84% 5.03% 4.78% 2.84% 2.63% 4.04%
</TABLE>
<TABLE>
<CAPTION>
1991 1990
---- ----
<S> <C> <C>
NET ASSET VALUE, BEGINNING OF PERIOD $ 1.000 $ 1.000
-------- --------
Investment Activities
Net investment income 0.062 0.078
-------- --------
Less: Distributions
Net investment income (0.062) (0.078)
-------- --------
NET ASSET VALUE, END OF PERIOD $ 1.000 $ 1.000
======== ========
Total Return 6.63% 8.10%
RATIOS/SUPPLEMENTARY DATA:
Net Assets at end of period (000) $339,987 $119,544
Ratio of expenses to average net assets 0.60% 0.59%
Ratio of net investment income to average net assets 6.20% 7.82%
Ratio of expenses to average net assets* 0.80% 0.79%
Ratio of net investment income to average net assets* 6.00% 7.62%
</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)
Includes $.000002 short term capital gain.
18
<PAGE> 355
<TABLE>
<CAPTION>
YEARS ENDED JUNE 30,
--------------------
CLASS A 1998 1997 1996 1995 1994 1993 1992(b)
- ------- ---- ---- ---- ---- ---- ---- -------
<S> <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
------- ------- ------- ------- ------- -------
Investment Activities
Net investment income 0.047 0.050 0.047 0.027 0.026 0.012
------- ------- ------- ------- ------- -------
Less: Distributions
Net investment income (0.047)(a) (0.050) (0.047) (0.027) (0.026) (0.012)
------- ------- ------- ------- ------- -------
NET ASSET VALUE, END OF PERIOD $ 1.000 $ 1.000 $ 1.000 $ 1.000 $ 1.000 $ 1.000
======= ======= ======= ======= ======= =======
Total Return 4.81% 5.08% 4.81% 2.76% 2.63% 3.38%(c)
Ratios/Supplementary Data
Net Assets at end of period (000) $530,164 $110,864 $98,723 $53,423 $30,759 $ 6
Ratio of expenses to average net assets 0.72% 0.67% 0.66% 0.63% 0.65% 0.59%(c)
Ratio of net investment income to average
net assets 4.71% 4.92% 4.71% 2.81% 2.52% 2.51%(c)
Ratio of expenses to average net assets* 0.93% 0.91% 0.94% 0.87% 1.02% 0.71%(c)
Ratio of net investment income to average
net assets* 4.50% 4.68% 4.43% 2.57% 2.15% 2.39%(c)
</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)
Includes $.000002 short term capital gain. (b) Class A Shares commenced
offering on February 18, 1992. (c) Annualized.
<TABLE>
<CAPTION>
NOVEMBER 21, 1996
YEAR ENDED TO
CLASS B JUNE 30, 1998 JUNE 30, 1997(a)
- ------- ------------- -----------------
<S> <C> <C>
NET ASSET VALUE, BEGINNING OF PERIOD $ 1.000
-------
Investment Activities
Net investment income 0.024
Less: Distributions
Net investment income (0.024)(b)
-------
NET ASSET VALUE, END OF PERIOD $ 1.000
=======
Total Return (excludes sales charge) 2.44%(c)
RATIOS/SUPPLEMENTARY DATA:
Net Assets at end of period (000) $ 49
Ratio of expenses to average net assets 1.48%(d)
Ratio of net investment income to average net assets 3.97%(d)
Ratio of expenses to average net assets* 1.59%(d)
Ratio of net investment income to average net assets* 3.86%(d)
</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) Includes $.000002 short term
capital gain. (c) Not annualized. (d) Annualized.
CLASS C
19
<PAGE> 356
MORE ABOUT THE FUNDS
PORTFOLIO QUALITY
Securities will be purchased by the Funds only if Banc One Investment Advisors
determine that they present minimal credit risk under guidelines adopted by the
Board of Trustees. In addition, unless a more specific rating is specified, all
investments of the Funds must be rated in one of the two highest rating
categories described in "Description of Ratings" in the Appendix. If an
investment is unrated, Banc One Investment Advisors must determine that it is of
comparable quality to a rated security. Banc One Investment Advisors will look
at a security's rating at the time of investment. For more information about
ratings, please see "Description of Ratings" in the Appendix.
ILLIQUID INVESTMENTS
Each Fund may invest up to 10% of its net assets in illiquid investments. A
security is illiquid if it cannot be sold at approximately the value assessed by
the Fund within seven (7) days. Banc One Investment Advisors will follow
guidelines adopted by The One Group Board of Trustees in determining whether an
investment is illiquid.
SPECIAL RISK CONSIDERATIONS
Net Asset Value: There is no assurance that the Funds will meet their investment
objectives or be able to maintain a net asset value of $1.00 per share on a
continuous basis.
Non-Diversified Funds: The Ohio Municipal Money Market Fund is a
"non-diversified" fund. "Non-diversified" means that the Fund may invest a
significantly greater portion of its assets in the securities of a single issuer
than can a "diversified" fund. In addition, the Fund's investments are
concentrated geographically. These concentrations increase the risk of loss to
the Fund if the issuer of a security fails to make interest or principal
payments or if the market value of a security declines. Investment in the Fund
may entail more risks than an investment in another type of money market fund.
The Ohio Economy: The Ohio Municipal Money Market Fund's investments are
concentrated in the State of Ohio. While Ohio's economy has become increasingly
diversified, it continues to rely to a significant degree on durable goods
manufacturing, such as automobiles, tires, steel and household appliances. These
industries tend to be cyclical. Agriculture also is an important part of the
Ohio economy, and the state has several programs that provide financial
assistance to farmers. Although obligations issued by the state and its
political subdivisions are payable from specific sources or taxes, future
economic difficulties and the impact on state and local government finances may
negatively affect the market value of the Ohio municipal securities held by the
Ohio Municipal Money Market Fund.
Fixed Income Securities: Investments in fixed income securities (for example,
bonds) will increase or decrease in value based on changes in interest rates. If
rates increase, the value of a Fund's investments generally declines. On the
other hand, if rates fall, the value of the investments generally increases. The
value of your investment in a Fund will increase and decrease as the value of a
Fund's investments increase and decrease. While securities with longer duration
and maturities tend to produce higher yields, they also are subject to greater
fluctuations in value when interest rates change. Usually changes in the value
of fixed income securities will not affect cash income generated, but may affect
the value of your investment.
Derivatives: Some of the Funds invest in securities that are considered to be
derivatives. "Derivatives" are securities that derive their value from the
performance of underlying assets or securities. These securities may be more
volatile than other securities. These include mortgage-backed securities,
including collateralized mortgage obligations and Real Estate Mortgage
Investment Conduits (CMOs and REMICs) and asset-backed securities. Derivatives
present, to varying degrees, market, credit, leverage, liquidity, and management
risks. The Fund's use of derivatives may cause the Fund to recognize higher
amounts of short-term capital gains (generally taxed at ordinary income tax
rates) than it would if the Fund did not use such instruments. For a more
detailed discussion of these risks, please read "Investment Risks."
20
<PAGE> 357
HOW TO DO BUSINESS WITH THE ONE GROUP
PURCHASING FUND SHARES
WHERE CAN I BUY SHARES?
You may purchase Fund shares from the following sources:
o The One Group Services Company, and
o Shareholder Servicing Agents. These include investment advisors,
brokers, financial planners, banks, insurance companies, retirement or
401(k) plan sponsors, or other intermediaries. Shares purchased this
way will be held for you by the Shareholder Servicing Agent.
WHEN CAN I BUY SHARES?
o Purchases may be made on any business day. This includes any day that
the Funds are open for business, other than weekends, days on which the
New York Stock Exchange ("NYSE") is closed, and the following holidays:
New Year's Day, Martin Luther King, Jr. Day, Presidents' Day, Good
Friday, Memorial Day, Independence Day, Labor Day, Columbus Day,
Veterans Day, Thanksgiving, and Christmas.
o Purchase requests will be effective on the day received by The One
Group Services Company and you will be eligible to receive dividends
declared the same day, if such purchase orders are received by The One
Group Services Company:
(i) before 11:00 a.m., Eastern Time ("ET"), for the Ohio
Municipal Money Market Fund;
(ii) before 12:00 noon, ET, for the Municipal Money Market
Fund; and
(ii) before 2:00 p.m., ET, for the Prime Money Market Fund
and the U.S. Treasury Securities Money Market Fund.
In addition, the Fund's custodian, State Street Bank and Trust Company,
must receive "federal funds" before 4:00 p.m., ET on such day. If State
Street Bank and Trust Company does not receive federal funds by the
cut-off time, the purchase order will not be effective until the next
business day on which federal funds are timely received by State Street
Bank and Trust Company.
o On occasion, the NYSE will close before 4 p.m. ET. When that happens,
purchase requests received after the NYSE closes will be effective the
following business day.
o If your shares are held by a Shareholder Servicing Agent, it is the
responsibility of the Shareholder Servicing Agent to send your purchase
or redemption order to the Fund. Your Shareholder Servicing Agent may
have an earlier cut-off time for purchase and redemption requests.
o The One Group Services Company can reject a purchase order if it does
not think that it is in the best interests of a Fund and/or its
shareholders to accept the order.
o Shares are electronically recorded. Therefore, certificates will not be
issued.
WHAT KIND OF SHARES CAN I BUY?
The One Group offers the following classes of shares:
o Class A, Class B and Class C shares are available to the general
public.
o Class I shares are available to institutional investors and any
organization authorized to act in a fiduciary, advisory, custodial or
agency capacity. We will refer to these entities as "Intermediaries."
o Service Class shares are available to Intermediaries purchasing shares
on behalf of investors requiring additional administrative or
accounting services such as sweep processing.
o If you intend to hold your shares six or more years, Class B shares may
be appropriate for you. If you intend to hold your shares for less than
six years, you may want to consider Class A or Class C shares.
21
<PAGE> 358
The One Group Fund Direct IRA. The One Group offers a retirement plan and, in
1999, may offer an education plan. These plans allow participants to defer taxes
while their retirement and education savings grow. The education IRA requires a
minimum investment of $500. Call The One Group Services Company at
1-800-480-4111 for an Adoption Agreement.
HOW MUCH DO SHARES COST?
o Shares are sold at net asset value ("NAV").
o NAV per share is calculated by dividing the total market value of a
Fund's investment and other assets allocable to a class (minus class
expenses) by the number of outstanding shares in that class. The Funds
use their best efforts to maintain their NAV at $1.00, although there
is no guarantee that they will be able to do so.
o NAV is calculated each business day as of 11:00 a.m. and following the
close of the NYSE at 4:00 p.m., ET, for the Ohio Municipal Money Market
Fund; as of 12:00 noon and 4:00 p.m., ET, for the Municipal Money
Market Fund, and as of 2:00 p.m. and 4:00 p.m., ET, for the Prime Money
Market Fund and the U.S. Treasury Securities Money Market Fund. On
occasion, the NYSE will close before 4:00 p.m ET. When that happens,
NAV will be calculated as of the time the NYSE closes.
HOW DO I OPEN AN ACCOUNT?
1. Read the prospectus carefully, and select the Fund or Funds most
appropriate for you.
2. Decide how much you want to invest. The minimum initial investment is
$1,000 ($100 for employees of BANC ONE CORPORATION and its affiliates).
o Subsequent investments must be at least $100 ($25 for
employees of BANC ONE CORPORATION and its affiliates).
o The One Group Services Company may waive these minimums.
3. Complete the Account Application Form. Be sure to sign up for all of
the Account privileges that you plan to take advantage of. Doing so now
means that you will not have to complete additional paperwork later.
4. Send the completed application and a personal check (unless you choose
to pay by wire or bank transfer) payable to "The One Group" to:
State Street Bank and Trust Company
c/o The One Group
P.O. Box 8528
Boston, MA 02266-8528
Contributions to Fund Direct IRAs should be made payable to
"State Street Bank and Trust Company for the Benefit of (your
name)."
5. All checks should be in U.S. dollars. Third party checks will not be
accepted. Redemptions from a Fund will not be permitted for ten (10)
calendar days if purchases are made by check or under the Systematic
Investment Plan (see below).
6. If you purchase shares through a Shareholder Servicing Agent, you may
be required to complete additional forms or follow additional
procedures. You should contact your Shareholder Servicing Agent
regarding purchases, exchanges and redemptions.
7. If you have any questions, contact your Shareholder Servicing Agent or
call The One Group Services Company at 1-800-480-4111.
CAN I PURCHASE SHARES OVER THE TELEPHONE?
Yes. Simply select this option on your Account Application Form and then:
o Contact your Shareholder Servicing Agent or The One Group Services
Company at 1-800-480-4111 to relay your purchase instructions.
22
<PAGE> 359
o Send a personal check payable to "The One Group" to State Street Bank
and Trust Company (see address above), authorize a bank transfer, or
initiate a wire transfer to the following wire address:
State Street Bank & Trust Company
Attn: Custody & Shareholder Services
ABA 011 000 028
DDA 99034167
FBO The One Group Fund (ex: The One Group Prime Money Market Fund - A)
Your Account Number (ex: 123456789)
Your Account Registration (ex: John Smith & Mary Smith, JTWROS)
o The One Group uses reasonable procedures to confirm that instructions
given by telephone are genuine. These procedures include recording
telephone instructions and asking for personal identification. If these
procedures are followed, The One Group will not be responsible for any
loss, liability, cost or expense of acting upon unauthorized or
fraudulent instructions; you bear the risk of loss.
o You may revoke your right to make purchases over the telephone by
sending a letter to:
State Street Bank and Trust Company
c/o The One Group
P.O. Box 8528
Boston, MA 02266-8528
CAN I AUTOMATICALLY INVEST ON A SYSTEMATIC BASIS?
Yes. After your Account is established, you may purchase additional Class A,
Class B and Class C shares by making automatic monthly investments from your
bank account. The minimum initial investment is still $1,000, but minimum
automatic additions are only $25. The One Group Services Company may waive these
minimums. To establish a Systematic Investment Plan:
o Select the "Systematic Investment Plan" option on the Account
Application Form.
o Provide the necessary information about the bank account from which
your investments will be made.
o Shares purchased under a Systematic Investment Plan may not be redeemed
for ten (10) calendar days.
o The One Group currently does not charge for this service, but may
impose a charge in the future. However, your bank may impose a charge
for debiting your bank account.
o You may revoke your right to make systematic investments by calling The
One Group Services Company at 1-800-480-4111 or by sending a letter
to:
State Street Bank and Trust Company
c/o The One Group
P.O. Box 8528
Boston, MA 02266-8528
23
<PAGE> 360
MAY I WRITE CHECKS ON MY ACCOUNT?
Class A and Class C shareholders may write checks for $250 or more.
o Checks may be payable to any person and your account will continue to earn
dividends until the check clears.
o Checks are free, but your bank or the payee may charge you for stop
payment orders, insufficient funds, or other valid reasons.
o You can not use this option to close your account because of the
difficulty of determining the exact value of your account.
o You must wait ten (10) calendar days before you can write a check
against shares purchased by a check.
TO SELECT THIS OPTION:
o Select the "Check Writing" option on the Account Application Form.
o Complete, sign and return a signature card and other forms sent to you
by State Street Bank and Trust Company. You will receive a supply of
checks that will be drawn on State Street Bank and Trust Company.
CONVERSION FEATURE.
Your Class B shares automatically convert to Class A shares after eight years
(measured from the end of the month in which they were purchased).
o After conversion, your shares will be subject to the lower distribution
and shareholder servicing fees charged on Class A shares.
o You will not be assessed any sales charges or fees for conversion of
shares, nor will you be subject to any tax.
o If you have exchanged Class B shares of one Fund for Class B shares of
another, the time you held the shares in each Fund will be added
together.
SALES CHARGES
The One Group Services Company compensates Shareholder Servicing Agents who sell
shares of The One Group. Compensation comes from sales charges, 12b-1 fees and
payments by The One Group Services Company from its own resources. The One Group
Services Company, at its own expense, also will provide promotional incentives
in the form of travel expenses, lodging and bonuses to licensed individuals who
sell shares of the Funds, as well as vacation trips (including lodging at luxury
resorts), tickets to entertainment events, and merchandise. Occasionally, cash
incentives will be paid to select Shareholder Servicing Agents. Those
Shareholder Servicing Agents who may receive special incentives include Banc One
Securities Corporation, The Advisors Group, United Planners Financial Services
of America, Inc., The Legend Group, and Rosewood Retirement Advisory Services,
LLC.
CLASS B SHARES.
Class B shares are offered at NAV, without any up-front sales charges. However,
if you redeem these shares within six years of the purchase date, you will be
assessed a Contingent Deferred Sales Charge ("CDSC") according to the following
schedule:
24
<PAGE> 361
CDSC AS A % OF
YEARS DOLLAR AMOUNT
SINCE PURCHASE SUBJECT TO CHARGE
-------------- -----------------
0-1 5.00%
1-2 4.00%
2-3 3.00%
3-4 3.00%
4-5 2.00%
5-6 1.00%
more than 6 0.00%
The One Group Services Company pays a commission of 4.00% of the original
purchase price to Shareholder Servicing Agents who sell Class B shares.
CLASS C SHARES
Class C shares are offered at NAV, without any up-front sales charge. However,
if you redeem your shares within one year of the purchase date, you will be
assessed a CDSC as follows:
CDSC AS A % OF
YEARS DOLLAR AMOUNT
SINCE PURCHASE SUBJECT TO CHARGE
-------------- -----------------
0-1 1.00%
After first year none
The One Group Services Company pays a commission of 1.00% of the original
purchase price to Shareholder Servicing Agents who sell Class C shares.
How the CDSC is Calculated
o The Fund assumes that all purchases made in a given month were made on
the first day of the month.
o The CDSC is based on the net amount redeemed.
o A sales charge is not assessed on shares acquired through reinvestment
of dividends or capital gains distributions.
o To keep your CDSC as low as possible, the Fund first will redeem any
shares in your account that carry no CDSC, starting with Class A
Shares. After that, the Fund will redeem the shares you have held for
the longest time and thus have the lowest CDSC.
o If you exchange Class B or Class C shares of an unrelated mutual fund
for Class B or Class C shares of The Group in connection with a fund
reorganization, the CDSC applicable to your original shares (including
the period of time you have held those shares) will be applied to The
One Group shares you receive in the reorganization.
12B-1 FEES
12b-1 fees are paid by The One Group to The One Group Services Company as
compensation for its services and expenses. The One Group Services Company in
turn pays all or part of the 12b-1 fee to brokers and other Shareholder
Servicing Agents that sell shares of The One Group.
o The 12b-1 fees vary by share class as follows:
1. Class A shares pay a 12b-1 fee of .25% of the average daily
net assets of the Fund.
2. Class B and Class C shares pay a 12b-1 fee of 1.00% of the
average daily net assets of the Fund. This will cause expenses
for Class B and Class C shares to be higher and dividends to
be lower than for Class A shares.
3. Service Class shares pay a 12b-1 fee of .75% of the average
daily net assets of the Fund, which is currently being waived
to .55%.
25
<PAGE> 362
4. There are no 12b-1 fees for Class I shares.
o 12b-1 fees, together with the CDSC, help The One Group Services Company
sell Class B and Class C shares without an "up-front" sales charge by
defraying the costs of advancing brokerage commissions and other
expenses paid to Shareholder Servicing Agents.
o The One Group Services Company may use up to .25% of the fees for
shareholder servicing and up to .75% for distribution. During the last
fiscal year, The One Group Services Company received 12b-1 fees
totaling .25% and 1.00% of the average daily net assets of Class A and
Class B shares, respectively.
o The One Group Services Company may pay 12b-1 fees to its affiliates and
to Banc One Investment Advisors and its affiliates (or any sub-advisor)
for brokerage and other agency transactions.
SALES CHARGE REDUCTIONS AND WAIVERS
WAIVER OF THE CLASS B SALES CHARGE
No sales charge is imposed on redemptions of Class B shares of the Funds:
1. Provided that you withdraw no more than 10% of the account
value annually. You do not have to participate in the
Systematic Withdrawal Plan to take advantage of this waiver.
2. If you buy the shares in connection with certain retirement
plans, such as 401(k) and similar qualified plans.
3. If you are the shareholder (or a joint shareholder), or a
participant or beneficiary of certain retirement plans and you
die or become disabled (as defined by the Tax Code), but only
if the redemption is made within one year of such death or
disability.
4. That represent a minimum required distributions from an IRA
Account or other qualifying retirement plan, but only if you
are at least age 70 1/2.
5. Exchanged in connection with plans of reorganizations of a
Fund, such as mergers, asset acquisitions and exchange offers
to which a Fund is a party.
6. Acquired in exchange for Class B shares of other Funds of The
One Group.
WAIVER OF THE CLASS C SALES CHARGE
No sales charge is imposed on redemptions of Class C shares of the Funds:
1. Provided that you withdraw no more than 10% of the account
value annually. You do not have to participate in the
Systematic Withdrawal Plan to take advantage of this waiver.
2. If you buy the shares in connection with certain retirement
plans, such as 401(k) and similar qualified plans.
3. If you are the shareholder (or a joint shareholder), or a
participant or beneficiary of certain retirement plans and you
die or become disabled (as defined by the Tax Code), but only
if the redemption is made within one year of such death or
disability.
4. That represent a minimum required distributions from an IRA
Account or other qualifying retirement plan, but only if you
are at least age 70 1/2.
5. Exchanged in connection with plans of reorganizations of a
Fund, such as mergers, asset acquisitions and exchange offers
to which a Fund is a party.
6. Acquired in exchange for Class C shares of other Funds of The
One Group.
7. If The One Group Services Company receives notice before you
invest indicating that your Shareholder Servicing Agent, due
to the type of account that you have, is waiving its
commission.
26
<PAGE> 363
To take advantage of any of these sales charge waivers, you must qualify for
such waiver in advance. To see if you qualify, contact The One Group Services
Company at 1-800-480-4111 or your Shareholder Servicing Agent.
EXCHANGING FUND SHARES
WHAT ARE MY EXCHANGE PRIVILEGES?
You may make the following exchanges:
o Class I shares of a Fund may be exchanged for Class A shares of
that Fund or for Class A or Class I shares of another Fund of
The One Group.
o Class A shares of a Fund may be exchanged for Class I shares of
that Fund or for Class A or Class I shares of another Fund of
The One Group, but only if you are eligible to purchase those shares.
o Class B shares of a Fund may be exchanged for Class B shares of another
Fund of The One Group.
o Class C shares of a Fund may be exchanged for Class C shares of another
Fund of The One Group.
o Service Class shares do not have exchange privileges.
The One Group Funds offer a Systematic Exchange Privilege which allows you to
automatically exchange shares of one fund to another on a monthly or quarterly
basis. This privilege is useful in Dollar Cost Averaging. To participate in this
privilege, please select it on your account application. To learn more about it,
please call The One Group Services Company at 1-800-480-4111.
The One Group may change the terms and conditions of your exchange privileges
upon 60 days written notice. The One Group does not charge a fee for this
privilege.
WHEN ARE EXCHANGES PROCESSED?
Exchanges are processed the same business day they are received, provided:
o State Street Bank and Trust Company receives the request by:
(i) 11:00 a.m. ET, for the Ohio Municipal Money Market Fund,
(ii) 12:00 noon ET, for the Municipal Money Market Fund, and
(iii) 2:00 p.m. ET, for the Prime Money Market Fund and the U.S.
Treasury Securities Money Market Fund.
o You have provided The One Group with all of the information necessary
to process the exchange.
o You have received a current prospectus of the Fund or Funds in which
you wish to invest.
o You have contacted your Shareholder Servicing Agent, if necessary.
DO I PAY A SALES CHARGE ON AN EXCHANGE?
Generally, you will not pay a sales charge on an exchange. However:
o You will pay a sales charge if you own Class I shares of a Fund
and you want to exchange those shares for Class A shares, unless you
qualify for a sales charge waiver (see above).
o You will pay a sales charge if you bought Class A shares of a Fund:
1. That does not charge a sales charge and you want to exchange
them for shares of a Fund that does, in which case you would
pay the sales charge applicable to the Fund into which you are
exchanging.
2. That charged a lower sales charge than the Fund into which you
are exchanging, in which case you would pay the difference
between that Fund's sales charge and all other sales charges
you have already paid.
27
<PAGE> 364
o If you exchange Class B or Class C shares of a Fund, you will not pay a
sales charge at the time of the exchange, however:
1. Your new Class B or Class C shares will be subject to the
higher CDSC of either the Fund from which you exchanged, the
Fund into which you exchanged, or any Fund from which you
previously exchanged.
2. The current holding period for your exchanged Class B or Class
C shares is carried over to your new shares.
ARE EXCHANGES TAXABLE?
Generally:
o An exchange between classes of shares of the same Fund is not taxable
for Federal income tax purposes.
o An exchange between Funds is considered a sale and generally results in
a capital gain or loss for Federal income tax purposes.
o You should talk to your tax advisor before making an exchange.
ARE THERE LIMITS ON EXCHANGES?
Yes. The exchange privilege is not intended as a way for you to speculate on
short-term movements in the market. Therefore:
o To prevent disruptions in the management of the Funds, The One Group
limits excessive exchange activity.
o Exchange activity is excessive if it EXCEEDS TWO SUBSTANTIVE EXCHANGE
REDEMPTIONS (WITHIN 30 DAYS OF EACH OTHER) WITHIN A TWELVE MONTH
PERIOD.
o In addition, The One Group reserves the right to reject any exchange
request (even those that are not excessive) if the Fund reasonably
believes that the exchange will result in excessive transaction costs
or otherwise adversely affect other shareholders.
REDEEMING FUND SHARES
WHEN CAN I REDEEM SHARES?
o You may redeem all or some of your shares on any day that the Funds are
open for business.
o Redemption requests received by The One Group Services Company before
4:00 p.m. ET (or when the NYSE closes), will be effective that day.
HOW DO I REDEEM SHARES?
o Unless you have selected the telephone option on your Account
Application Form, you must send a written redemption request to your
Shareholder Servicing Agent, if applicable, or to State Street Bank and
Trust Company at the following address:
State Street Bank and Trust Company
c/o The One Group
P.O. Box 8528
Boston, MA 02266-8528
o All requests for redemptions from IRA accounts must be in writing.
o You may request redemption forms by calling The One Group Services
Company at 1-800-480-4111.
o State Street Bank and Trust Company may require that the signature on
your redemption request be guaranteed by a commercial bank, a member of
a domestic stock exchange, or a member of the Securities Transfer
Association Medallion Program or the Stock Exchange Medallion Program,
unless:
28
<PAGE> 365
1. the redemption is for $50,000 worth of shares or less;
2. the redemption is payable to the shareholder of record;
3. the redemption check is mailed to the shareholder at the record
address; or
4. the redemption is payable by wire or bank transfer (ACH) to a
pre-existing bank account.
o On the Account Application Form you may elect to have the redemption
proceeds mailed or wired to:
1. a designated commercial bank; or
2. State Street Bank and Trust Company or your Shareholder Servicing
Agent.
o State Street Bank and Trust Company may charge you a wire redemption
fee. The current charge is $7.00.
o Your redemption proceeds will ordinarily be paid within seven days
after receipt of the redemption request. However, the Funds will
attempt to honor requests for next day payment on redemptions, if the
request is received before:
(i) 11:00 a.m. ET, for the Ohio Municipal Money Market Fund,
(ii) 12:00 noon ET, for the Municipal Money Market Fund, and
(iii) 2:00 p.m. ET, for the Prime Money Market Fund and the U.S.
Treasury Securities Money Market Fund.
o The Funds also will attempt to honor requests for payments in two
business days, if the redemption request is received after the times
listed above.
WHAT WILL MY SHARES BE WORTH?
o The NAV of shares of the Funds are expected to remain constant at $1.00
per share, although there is no assurance that this will always be the
case.
o If you own Class A, Service Class or Class I shares, you will
receive the NAV calculated after your redemption request is received.
Please read "How Much Do Shares Cost?"
o If you own Class B or Class C shares, you will receive the NAV
calculated after your redemption request is received, minus the amount
of any applicable CDSC.
CAN I REDEEM BY TELEPHONE?
Yes, if you selected this option on your Account Application Form.
o Call your Shareholder Servicing Agent or State Street Bank and Trust
Company at 1-800-480-4111 to relay your redemption request.
o Your redemption proceeds will be mailed or wired to the commercial bank
account you designated on your Account Application Form.
o State Street Bank and Trust Company may charge you a wire redemption
fee. The current charge is $7.00.
o The One Group uses reasonable procedures to confirm that instructions
given by telephone are genuine. These procedures include recording
telephone instructions and asking for personal identification. If these
procedures are followed, The One Group will not be responsible for any
loss, liability, cost or expense of acting upon unauthorized or
fraudulent instructions; you bear the risk of loss.
o REDEMPTIONS FROM YOUR IRA ACCOUNT MAY NOT BE MADE BY TELEPHONE.
29
<PAGE> 366
CAN I REDEEM ON A SYSTEMATIC BASIS?
If you have an account value of at least $10,000 you may elect to receive
monthly, quarterly or annual payments of not less than $100 each.
o Select the "Systematic Withdrawal Plan" option on the Account
Application Form.
o Specify the amount you wish to receive and the frequency of the
payments.
o You may designate a person other than yourself as the payee.
o There is no charge for this service.
o If you select this option, please keep in mind that:
1. If you own Class B or Class C shares, you or your designated payee
may receive systematic payments provided the payments are limited
to no more than 10% of your account value annually, measured from
the date the redemption request is received.
2. If you are age 70-1/2, you may elect to receive payments to the
extent that the payment represents a minimum required distribution
from an IRA or other qualifying retirement plan. You also may
elect to receive payments of less than $100 each.
3. If the amount of the systematic payment exceeds the income earned
by your account since the previous payment under the Systematic
Withdrawal Plan, payments will be made by redeeming some of your
shares.
This will reduce the amount of your investment.
ADDITIONAL INFORMATION REGARDING REDEMPTIONS
o All redemptions will be for cash. The redemption price of shares is
expected to remain constant at $1.00 per share, although there is no
assurance that this will always be the case.
o If you redeem shares for which you paid by check, and The One Group has
not yet received payment on the check, The One Group will delay
forwarding your redemption proceeds for 10 or more days until payment
has been collected from your bank.
o Because of the high cost of handling small investments, The One Group
charges a sub-minimum account fee. Accounts under $1,000 that are not
participating in a Systematic Investment Plan will be assessed an
annual fee of $10.00. The sub-minimum account fee will not apply to IRA
accounts and the accounts of employees of BANC ONE CORPORATION and its
affiliates.
o The One Group may suspend your ability to redeem when: 1) Trading on
the NYSE is restricted; 2) the NYSE is closed (other than weekend and
holiday closings); 3) the SEC has permitted a suspension; or 4) an
emergency exists. The Statement of Additional Information offers more
details about this process.
o You generally will recognize a gain or loss on a redemption for Federal
income tax purposes. You should talk to your tax advisor before making
a redemption.
30
<PAGE> 367
SHAREHOLDER INFORMATION
VOTING RIGHTS
The Funds do not hold annual shareholder meetings, but may hold special
meetings. The special meetings are held, for example, to elect or remove
Trustees, change a Fund's fundamental investment objective, or approve an
investment advisory contract.
As a Fund shareholder, you have one vote for each share that you own. Each Fund,
and each class of shares within each Fund, vote separately on matters relating
solely to that Fund or class, or which affect that Fund or class differently.
However, all shareholders will have equal voting rights on matters that affect
all shareholders equally.
BANC ONE CORPORATION (100 East Broad Street, Columbus, Ohio, 43271), through its
affiliates, may be deemed for purposes of The Investment Company Act of 1940, to
control the Funds. This is because as of July 30, 1998, BANC ONE CORPORATION or
its affiliates possessed the power to vote substantially all of the Class I
Class shares of the Funds. On the same date, the following shareholders owned
25% or more of Class A, Class B, or Class C shares of the Funds. As a
consequence, they are considered to be controlling persons of those classes of
the Funds.
<TABLE>
<CAPTION>
NAME AND PERCENTAGE OF TYPE OF
ADDRESS FUND/CLASS OWNERSHIP OWNERSHIP
- ------- ---------- --------- ---------
<S> <C> <C> <C>
Dean Witter FBO Prime Money Market 55.38% Record
Banc One Securities Fund
PO Box 250 Class A
Church Street Station
New York, NY 10013-0250
BISYS Fund Services Inc Prime Money Market 34.99% Record
FBO Bank One Corporate Sweep Fund
Attn Mike Bryan Class A
3435 Stelzer Road Suite 1000
Columbus OH 43219-6004
Strafe & Co Prime Money Market 90.15% Record
Bank One Trust Co., NA Fund
Department 0393 S.T.I.F. Class I
Columbus OH 43271-0001
BISYS Fund Services Inc US Treasury Securities 38.66% Record
FBO Bank One Corporate Sweep Money Market Fund
Attn Mike Bryan Class A
3435 Stelzer Road Suite 1000
Columbus OH 43219-6004
Dean Witter FBO US Treasury Securities 29.27% Record
Banc One Securities Money Market Fund
PO Box 250 Class A
Church Street Station
New York NY 10013-0250
BISYS Fund Services Inc US Treasury Securities 26.40% Record
FBO Bank One Texas Sweep Money Market Fund
Attn Mike Bryan Class A
3435 Stelzer Road Suite 1000
Columbus OH 43219-6004
The One Group Services Company US Treasury Securities 86.96% Beneficial
C/O Fund Administration Money Market Fund
3435 Stelzer Road Class C
Columbus OH 43219-6004
Strafe & Co (N) US Treasury Securities 80.94% Record
Bank One Ohio Trust Co., NA Money Market Fund
Department 0393 S.T.I.F. Class I
Columbus OH 43271-0001
</TABLE>
31
<PAGE> 368
<TABLE>
<CAPTION>
NAME AND PERCENTAGE OF TYPE OF
ADDRESS FUND/CLASS OWNERSHIP OWNERSHIP
- ------- ---------- --------- ---------
<S> <C> <C> <C>
Dean Witter FBO Municipal Money 58.27% Record
Banc One Securities Market Fund
PO Box 250 Class A
Church Street Station
New York NY 10013-0250
BISYS Fund Services Inc Municipal Money 38.79% Record
FBO Bank One Corporate Sweep Market Fund
Attn Mike Bryan Class A
3435 Stelzer Road Suite 1000
Columbus OH 43219-6004
Strafe & Co (D) Municipal Money 96.77% Record
Bank One Ohio Trust Co., NA Market Fund
Department 0393 S.T.I.F. Class I
Columbus OH 43271-0001
Dean Witter FBO Ohio Municipal Money 99.10% Record
Banc One Securities Market Fund
PO Box 250 Class A
Church Street Station
New York NY 10013-0250
Strafe & Co Ohio Municipal Money 97.33% Record
C/O Bank One Trust Co Market Fund
Attn Mutual Funds Class I
100 E Broad Street
Columbus OH 43215-3607
</TABLE>
32
<PAGE> 369
DIVIDEND POLICIES
DIVIDENDS
The Funds generally declare dividends on each business day. Dividends are
distributed on the first business day of each month. Capital gains, if any, for
all Funds are distributed at least annually.
Dividends payable on Class I shares will be more than those payable on
other classes of shares. This is because Class A, Class B, Class C and Service
Class shares have higher distribution expenses.
DIVIDEND REINVESTMENT
You automatically will receive all income dividends and capital gain
distributions in additional shares of the same Fund and class, unless you have
elected to take such payment in cash. The price of the shares is the NAV
determined immediately following the dividend record date. Reinvested dividends
and distributions receive the same tax treatment as dividends and distributions
paid in cash.
If you want to change the way in which you receive dividends and distributions,
you must write to State Street Bank & Trust Company at P.O. Box 8528, Boston, MA
02266-8528, at least 15 days prior to the distribution. The change is effective
upon receipt by State Street.
SPECIAL DIVIDEND RULES FOR CLASS B SHARES
Class B shares received as dividends and capital gains distributions will be
accounted for separately. Each time any Class B shares (other than those in the
sub-account) convert to Class A shares, a percentage of the Class B shares in
the sub-account will also convert to Class A shares. (See "Conversion Feature.")
33
<PAGE> 370
TAX TREATMENT OF THE FUNDS
TAX STATUS OF THE FUND
Each Fund intends to qualify as a "regulated investment company" for Federal
income tax purposes. If the Funds qualify, as they have in the past, they will
pay no federal income tax on the earnings they distribute to shareholders.
TAX TREATMENT OF SHAREHOLDERS
TAXATION OF SHAREHOLDER TRANSACTIONS
A sale, exchange, or redemption of Fund shares will generally produce either a
taxable gain or a loss. You are responsible for any tax liabilities generated by
your transactions.
TAXATION OF DISTRIBUTIONS -- PRIME MONEY MARKET FUND AND U.S. TREASURY
SECURITIES MONEY MARKET FUND
Each Fund will distribute substantially all of its net investment income
(including, for this purpose, net short-term capital gain) to investors on at
least an annual basis. Dividends you receive from a Fund, whether reinvested or
received in cash, will be taxable to you. Dividends from a Fund's net investment
income will be taxable as ordinary income and dividends from a Fund's long-term
capital gains will be taxable to you as such, regardless of how long you have
held the shares.
Dividends paid in January, but declared in October, November or December of the
previous year, will be considered to have been paid the previous December.
TAXATION OF DIVIDENDS -- THE OHIO MUNICIPAL MONEY MARKET FUND AND THE MUNICIPAL
MONEY MARKET FUND
Each Fund will distribute substantially all of its net investment income
(including, for this purpose, net short-term capital gain) to investors on at
least an annual basis. These Funds may pay "exempt-interest dividends" if at
least 50% of the value of Fund assets at the end of each quarter of the Fund's
taxable year consists of obligations the interest on which is excludable from
gross income. Exempt-interest dividends are generally excludable from an
investor's gross income for regular Federal income tax purposes. However, the
receipt of exempt-interest dividends may cause recipients of 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
individuals and corporate shareholders. Corporate shareholders will be required
to take the interest on municipal securities into account in determining their
alternative minimum taxable income.
OHIO TAXATION OF DIVIDENDS FROM THE OHIO MUNICIPAL MONEY MARKET FUND
Dividends received from the Ohio Municipal Money Market Fund that result from
interest on Ohio municipal securities are exempt from the Ohio personal income
tax. Some Ohio statutes provide that interest on and gain from the sale of Ohio
municipal securities is exempt from all taxation in Ohio. Dividends that are
attributable to interest on or gain from the sale of certain obligations issued
under such statutes should be exempt from Ohio personal income tax. Ohio
municipalities may not impose income taxes on dividends on any intangible
property (including such property of the Fund) unless the intangible income was
not exempt from municipal income taxation before April 2, 1986 and the tax was
approved in an election held on November 8, 1988. Corporate shareholders will be
required to include the interest on Ohio municipal securities in their
alternative minimum-taxable income. In addition, corporate shareholders must
include the Fund shares in the corporation's tax base for purposes of the Ohio
franchise tax net worth computation, but not for the net income computation.
Information in this paragraph is based on current statutes and regulations as
well as current policies of the Ohio Department of Taxation, all of which may
change.
TAXATION OF RETIREMENT PLANS
Distributions by the Funds to qualified retirement plans will not be taxable.
However, if shares are held by a plan that ceases to qualify for tax-exempt
treatment or by an individual who has received shares as a distribution from a
retirement plan, the distributions will be taxable to the plan or individual as
described in "Taxation of Distributions." If you are considering purchasing
shares with qualified retirement plan assets, you should consult your tax
advisor for a more complete explanation of the Federal, state, local and (if
applicable) foreign tax consequences of making such an investment.
34
<PAGE> 371
TAX INFORMATION
The Form 1099 that is mailed to you every January details your dividends and
their federal tax category. Even though the Funds provide you with this
information, you are responsible for verifying your tax liability with your tax
professional. For additional tax information see the Statement of Additional
Information. Please note that this tax discussion is general in nature; no
attempt has been made to present a complete explanation of the Federal, state,
local or foreign tax treatment of the Funds or their shareholders.
SHAREHOLDER INQUIRIES
If you have any questions or need additional information, please write The One
Group Services Company at 3435 Stelzer Road, Columbus, OH 43219 or call
1-800-480-4111.
REPORTING
In September and March you will receive a financial report from The One
Group. In addition, The One Group will periodically send you proxy
statements and other reports.
35
<PAGE> 372
ORGANIZATION AND MANAGEMENT OF THE FUNDS
THE FUNDS
Each Fund is a series of The One Group, an open-end management investment
company. The One Group currently consists of 40 separate Funds. Four of the
Funds are described in this prospectus; the other Funds are described in
separate prospectuses. Each Fund is supervised by the Board of Trustees.
THE BOARD OF TRUSTEES
The Trustees oversee the management and administration of the Funds. The
Trustees are responsible for making major decisions about each Fund's investment
objectives and policies, but delegate the day-to-day administration of the Funds
to the officers of The One Group.
THE ADVISOR
Banc One Investment Advisors makes the day-to-day investment decisions for the
Funds and continuously reviews, supervises and administers the Funds' investment
programs. Banc One Investment Advisors has served as investment advisor to The
One Group since 1993. Prior to that time, The One Group was advised by
affiliates of Banc One Investment Advisors. In addition to The One Group, Banc
One Investment Advisors serves as investment advisor to other mutual funds and
individual, corporate, charitable and retirement accounts. As of June 30, 1998,
Banc One Investment Advisors, an indirect, wholly-owned subsidiary of BANC ONE
CORPORATION, managed over $59 billion in assets.
For the fiscal year ended June 30, 1998, the Funds paid investment advisory fees
at the following rate:
<TABLE>
<CAPTION>
ANNUAL RATE
AS PERCENTAGE
OF AVERAGE DAILY
FUND NET ASSETS
- ----------------------------------------------------------------------------------------------------
<S> <C>
The One Group(R) Prime Money Market Fund .32%
The One Group(R) Municipal Money Market Fund .25%
The One Group(R) Ohio Municipal Money Market Fund .24%
The One Group(R) U.S. Treasury Securities Money Market Fund .30%
</TABLE>
THE DISTRIBUTOR
The One Group Services Company, 3435 Stelzer Road, Columbus, Ohio 43219, a
wholly-owned subsidiary of The BISYS Group, Inc., markets the Funds and
distributes shares through selling brokers, financial institutions, investment
advisors, and other financial representatives.
THE ADMINISTRATOR AND SUB-ADMINISTRATOR
The One Group Services Company also serves as the Funds' administrator. The One
Group Services Company is responsible for responding to shareholder inquiries
and requests for information, as well as providing regulatory compliance and
reporting. For these services, The One Group Services Company receives a fee
based on the total assets of The One Group. For the first $1.5 billion in One
Group assets, The One Group Services Company receives an annual fee of .20% of
each Fund's average daily net assets. The annual rate declines to .18% on assets
up to $2 billion, and to .16% when assets exceed $2 billion. The fee is
calculated daily and paid monthly. Some Funds are not included in the
calculations. Banc One Investment Advisors, the Sub-Administrator, provides
office space, equipment, and facilities, as well as legal and regulatory
support.
THE TRANSFER AGENT, CUSTODIAN AND THE SUB-CUSTODIAN
State Street Bank and Trust Company, P.O. Box 8528, Boston, MA 02266-8528 or
your Shareholder Servicing Agent, if appropriate, handles shareholder record
keeping and statements, distributes dividends, and processes buy and sell
requests. As the Funds' custodian, State Street holds the Funds' assets, settles
all portfolio trades and assists in calculating the Funds' net asset values.
Bank One Trust Company, N.A. serves as sub-custodian in connection with the
Funds' securities lending activities under an agreement with State Street Bank
and Trust Company. Bank One Trust Company, N.A. is paid a fee for this service.
36
<PAGE> 373
YEAR 2000
Preparing for the Year 2000 is a high priority for The One Group Family of
Mutual Funds. Both The One Group Services Company and Banc One Investment
Advisors have formed dedicated teams to help them successfully achieve Year 2000
compliance. In addition, these teams are responsible for assessing the readiness
of all other service providers to The One Group. Year 2000 remediation efforts
are directed toward both information technology and non-information technology
systems. Non-information technology systems include elevators, photocopy
machines, and facsimile machines, and should have no significant impact on the
delivery of services to The One Group.
Banc One Investment Advisors has identified 49 information technology systems
and interfaces that provide service and support to The One Group. Each system is
assigned a priority rating: high, medium or low. Systems rated "high" are those
which are essential to the operation of The One Group. Each system rated "high"
is scheduled to be Year 2000 compliant by December 31, 1998. All systems will be
tested for compliance throughout 1999.
Many, if not all, of the systems are owned or operated by third party servicers
(for example, The One Group's Custodian). Consequently, remediation efforts must
be made by those servicers. Banc One Investment Advisors and The One Group
Services Company have, and will continue to, monitor the remediation progress of
the service providers. This process involves documentation, on-site visits, and
review of remediation plans and test results. Both Banc One Investment Advisors
and The One Group Services Company have budgeted in excess of $700,000 in fiscal
year 1998 and over $1 million in fiscal year 1998 toward the remediation effort
for all systems and interfaces. Neither The One Group nor its shareholders will
bear any of the direct remediation expenses.
Neither The One Group Services Company nor Banc One Investment Advisors
currently anticipate that the move to Year 2000 will have a material impact on
their ability to continue to provide the Funds with service at current levels.
Likewise, The One Group currently anticipates that the more to Year 2000 will
not have a material impact on its operations.
37
<PAGE> 374
DETAILS ABOUT THE FUNDS' INVESTMENT PRACTICES AND POLICIES
INVESTMENT PRACTICES
The Funds invest in a variety of securities and employ a number of investment
techniques. Each security and technique involves certain risks. What follows is
a list of the securities and techniques utilized by the Funds, as well as the
risks inherent in their use. Fixed income securities are primarily influenced by
market, credit and prepayment risks, although certain securities may be subject
to additional risks. For a more complete discussion, see the Statement of
Additional Information. Following the table is a more complete discussion of
risk.
<TABLE>
<CAPTION>
FUND FUND CODE
- --------------------------------------------------------------------------------------
<S> <C>
The One Group(R) Prime Money Market Fund 1
The One Group(R) Municipal Money Market Fund 2
The One Group(R) Ohio Municipal Money Market Fund 3
The One Group(R) U.S. Treasury Securities Money Market Fund 4
</TABLE>
<TABLE>
<CAPTION>
INSTRUMENT FUND CODE RISK TYPE
- ---------- --------- ---------
<S> <C> <C>
U.S. Treasury Obligations: Bills, notes, bonds, STRIPS, and 1-4 Market
CUBES. The U.S. Treasury Securities Money Market Fund does not
buy STRIPS and CUBES.
Treasury Receipts: TRS, TIGRS, and CATS. 1-3 Market
U.S. Government Agency Securities: Securities issued by agencies 1-3 Market
and instrumentalities of the U.S. Government. These include Credit
Ginnie Mae, Fannie Mae, and Freddie Mac.
Certificates of Deposit: Negotiable instruments with a stated 1-3 Market
maturity. Credit
Liquidity
Time Deposits: Non-negotiable receipts issued by a bank in 1-3 Liquidity
exchange for the deposit of funds. Credit
Market
Repurchase Agreements: The purchase of a security and the 1-3 Credit
simultaneous commitment to return the security to the seller at Market
an agreed upon price on an agreed upon date. This is treated as Liquidity
a loan.
Reverse Repurchase Agreement: The sale of a security and the 1-2 Market
simultaneous commitment to buy the security back at an agreed Leverage
upon price on an agreed upon date. This is treated as a
borrowing by a Fund.
Securities Lending: The lending of up to 33% of the securities 1-3 Credit
owned by a Fund. In return the Fund will receive cash and/or Market
other securities as collateral. Leverage
When-Issued Securities and Forward Commitments: Purchase or 1-3 Market
contract to purchase securities at a fixed price for delivery at Leverage
a future date. Liquidity
</TABLE>
38
<PAGE> 375
<TABLE>
<CAPTION>
INSTRUMENT FUND CODE RISK TYPE
- ---------- --------- ---------
<S> <C> <C>
Investment Company Securities: Shares of other mutual funds, 1-3 Market
including money market funds of The One Group and shares of
other investment companies for which Banc One Investment Advisors serves as
investment advisor or administrator. Banc One Investment Advisors will waive
certain fees when investing in funds for which it serves as investment advisor.
Bankers' Acceptances: Bills of exchange or time drafts drawn on 1-3 Credit
and accepted by a commercial bank. Maturities are generally six Liquidity
months or less. Market
Commercial Paper: Secured and unsecured short-term promissory 1-3 Credit
notes issued by corporations and other entities. Maturities Liquidity
generally vary from a few days to nine months. Market
Foreign Securities: Commercial paper of foreign issuers and 1 Market
obligations of foreign banks, overseas branches of U.S. banks Political
and supranational entities. Liquidity
Foreign
Investment
Restricted Securities: Securities not registered under the 1-3 Liquidity
Securities Act of 1933, such as privately placed commercial Market
paper and Rule 144A securities.
Variable and Floating Rate Instruments: Obligations with 1-3 Market
interest rates which are reset daily, weekly, quarterly or some Credit
other period and which may be payable to the Fund on demand. Liquidity
Mortgage-Backed Securities: Debt obligations secured by real 1-3 Pre-payment
estate loans and pools of loans. These include collateralized Market
mortgage obligations ("CMOs") and Real Estate Mortgage Credit
Investment Conduits ("REMICs"). Regulatory
Demand Features: Securities that are subject to puts and standby 1-3 Market
commitments to purchase the securities at a fixed price (usually Liquidity
with accrued interest) within a fixed period of time following Management
demand by a Fund.
Municipal Securities: Securities issued by a state or political 1-3 Market
subdivision to obtain funds for various public purposes. Credit
Municipal securities include private activity bonds and Political
industrial development bonds, as well as General Obligation Tax
Notes, Tax Anticipation Notes, Bond Anticipation Notes, Revenue Anticipation
Notes, Project Notes, other short-term tax-exempt obligations, municipal leases,
and obligations of municipal housing authorities and single family revenue
bonds.
Short-Term Funding Agreements: Agreements issued by banks and 1 Market
highly rated insurance companies such as Guaranteed Investment Credit
Contracts ("GICs") and Bank Investment Contracts ("BICs"). Liquidity
Participation Interests: Interests in municipal securities, 1-3 Credit
including municipal leases, from financial institutions such as Tax
commercial and investment banks, savings and loan associations Market
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 Funds to treat the income from the investment
as exempt from Federal Income Tax.
Asset-Backed Securities: Securities secured by company 1, 2 Pre-payment
receivables, home equity loans, truck and auto loans, leases, Market
credit card receivables and other securities backed by other Credit
types of receivables or other assets. Regulatory
</TABLE>
39
<PAGE> 376
INVESTMENT RISKS
Below is a more complete discussion of the types of risks inherent in the
securities and investment techniques listed above. Because of these risks, the
value of the securities held by the Funds may fluctuate, as will the value of
your investment in the Funds. Certain investments are more susceptible to these
risks than others.
o Credit Risk. The risk that the issuer of a security, or the
counterparty to a contract, will default or otherwise become unable to
honor a financial obligation. Credit risk is generally higher for
non-investment grade securities. The price of a security can be
adversely affected prior to actual default as its credit status
deteriorates and the probability of default rises.
o Leverage Risk. The risk associated with securities or practices (such
as borrowing) that multiply small index or market movements into large
changes in value.
o Liquidity Risk. The risk that certain securities may be difficult or
impossible to sell at the time and the price that normally prevails in
the market. The seller may have to lower the price, sell other
securities instead or forego an investment opportunity, any of which
could have a negative effect on fund management or performance. This
includes the risk of missing out on an investment opportunity because
the assets necessary to take advantage of it are tied up in less
advantageous investments.
o Management Risk. The risk that a strategy used by a fund's management
may fail to produce the intended result. This includes the risk that
changes in the value of a hedging instrument will not match those of
the asset being hedged. Incomplete matching can result in unanticipated
risks.
o Market Risk. The risk that the market value of a security may move up
and down, sometimes rapidly and unpredictably. These fluctuations may
cause a security to be worth less than the price originally paid for
it, or less than it was worth at an earlier time. Market risk may
affect a single issuer, industry, sector of the economy or the market
as a whole. For fixed income securities, market risk is largely, but
not exclusively, influenced by changes in interest rates. A rise in
interest rates typically causes a fall in values, while a fall in rates
typically causes a rise in values. Finally, key information about a
security or market may be inaccurate or unavailable. This is
particularly relevant to investments in foreign securities.
o Political Risk. The risk of losses attributable to unfavorable
governmental or political actions, seizure of foreign deposits, changes
in tax or trade statutes, and governmental collapse and war.
o Foreign Investment Risk. Risks associated with higher transaction
costs, delayed settlements, currency controls, and adverse economic
developments. This also includes the risk that fluctuations in the
exchange rates between the U.S. dollar and foreign currencies may
negatively affect an investment. Adverse changes in exchange rates may
erode or reverse any gains produced by foreign currency denominated
investments and may widen any losses. Exchange rate volatility also may
affect the ability of an issuer to repay U.S. dollar denominated debt,
thereby increasing credit risk.
o Pre-Payment Risk. The risk that the principal repayment of a security
will occur at an unexpected time, especially that the repayment of a
mortgage or asset-backed security occurs either significantly sooner or
later than expected. Changes in pre-payment rates can result in greater
price and yield volatility. Pre-payments generally accelerate when
interest rates decline. When mortgage and other obligations are
pre-paid, a Fund may have to reinvest in securities with a lower yield.
Further, with early repayment, a Fund may fail to recoup any premium
paid, resulting in an unexpected capital loss.
o Tax Risk. The risk that the issuer of the securities will fail to
comply with certain requirements of the Internal Revenue Code, which
would cause adverse tax consequences.
o Regulatory Risk. The risk associated with Federal and state laws which
may restrict the remedies that a mortgage lender has when a borrower
defaults on mortgage loans. These laws include restrictions on
foreclosures, redemption rights after foreclosure, Federal and state
bankruptcy and debtor relief laws, restrictions on "due on sale"
clauses, and state usury laws.
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INVESTMENT POLICIES
Each Fund's investment objective and the investment policies summarized below
are fundamental. This means that they cannot be changed without the consent of a
majority of the outstanding shares of the Funds. In addition to the fundamental
policies mentioned earlier, the following fundamental policies apply to each
Fund as specified. The full text of the fundamental policies can be found in the
Statement of Additional Information.
FUNDAMENTAL POLICIES OF EACH FUND
Each Fund:
1. Will use its best efforts to maintain a constant net asset value of
$1.00 per share, although there is no guarantee that the Funds will be
able to do so.
2. Will not 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.
FUNDAMENTAL POLICIES OF SPECIFIC FUNDS
The Prime Money Market Fund:
1. Will not concentrate its investments in the securities of one or more
issuers conducting their principal business in a particular industry or
group of industries. This does not include 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,
municipal securities or governmental guarantees of municipal
securities. In addition, private activity bonds backed only by the
revenues and assets of a non-governmental user will not be deemed to be
municipal securities.
The Prime Money Market Fund, the Municipal Money Market Fund and the U.S.
Treasury Securities Money Market Fund:
1. Will not purchase an issuer's securities if as a result more than 5% of
a Fund's total assets would be invested in the securities of that
issuer or the Fund would own more than 10% of the outstanding voting
securities of that issuer. This does not include securities issued or
guaranteed by the United States, its agencies or instrumentalities, and
repurchase agreements involving these securities. This restriction
applies with respect to 75% of a Fund's total assets. The Funds may
invest the remaining 25% of their total assets without restriction.
The U.S. Treasury Securities Money Market Fund:
1. Will invest only in U.S. Treasury obligations and repurchase agreements
collateralized by such obligations.
The Ohio Municipal Money Market Fund:
1. Will not purchase an issuer's securities if as a result more than 25%
of its total assets would be invested in the securities of that issuer
or the Fund would own more than 10% of the outstanding voting
securities of that issuer. This does not include securities issued or
guaranteed by the United States, its agencies or instrumentalities,
securities of registered investment companies, and repurchase
agreements involving these securities. This restriction applies with
respect to 50% of the Fund's total assets. With respect to the
remaining 50% of its total assets, the Fund will not purchase an
issuer's securities if as a result more than 5% of its total assets
would be invested in the securities of that issuer.
2. Will not concentrate its investments in the securities of one or more
issuers conducting their principal business in a particular industry or
group of industries. This does not include municipal securities or
governmental guarantees of municipal securities. In addition, private
activity bonds backed only by the assets and revenues of a
non-governmental user will not be deemed to be Ohio municipal
securities.
The Municipal Money Market Fund:
1. Will not concentrate its investments in the securities of one or more
issuers conducting their principal business in a particular industry or
group of industries. This does not include municipal securities or
governmental guarantees of municipal securities. In addition, private
activity bonds backed only by the revenues and assets of a
non-governmental user will not be deemed to be municipal securities.
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<PAGE> 378
Additional investment policies can be found in the Statement of Additional
Information.
TEMPORARY DEFENSIVE POSITION
Sometimes the Ohio Municipal Money Market Fund and the Municipal Money Market
Fund may temporarily invest up to 100% of their total assets in securities that
are not municipal securities, such as taxable money market instruments
(including repurchase agreements) and may hold uninvested cash pending
investment. While the Funds are engaged in a temporary defensive position, they
will not be pursuing their investment objectives. Therefore, the Funds will
pursue a temporary defensive position only when market conditions warrant.
42
<PAGE> 379
APPENDIX
DESCRIPTION OF RATINGS
The following is a summary of published ratings by major credit rating agencies.
Credit ratings evaluate only the safety of principal and interest payments, not
the market value risk of lower quality securities. Credit rating agencies may
fail to change credit ratings to reflect subsequent events on a timely basis.
Although Banc One Investment Advisors considers security ratings when making
investment decisions, it also performs its own investment analysis and does not
rely solely on the ratings assigned by credit agencies.
Unrated securities will be treated as non-investment grade securities unless
Banc One Investment Advisors determines that such securities are the equivalent
of investment grade securities. Securities that have received different ratings
from more than one agency are considered investment grade if at least one agency
has rated the security investment grade.
DESCRIPTION OF COMMERCIAL PAPER RATINGS
DUFF & PHELPS CREDIT RATING CO. ("DUFF")
D-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 obligations.
D-1 Very high certainty of timely payment. Liquidity factors are
excellent and supported by good fundamental protection
factors. Risk factors are minor.
D-1- High certainty of timely payment. Liquidity factors are strong
and supported by good fundamental protection factors. Risk
factors are very small.
STANDARD & POOR'S CORPORATION ("S&P")
A-1 Highest category of commercial paper. Capacity to meet
financial commitment is strong. Obligations designated with a
plus sign (+) indicate that capacity to meet financial
commitment is extremely strong.
A-2 Issues somewhat more susceptible to adverse effects of changes
in circumstances and economic conditions than obligations in
higher rating categories. However, the capacity to meet
financial commitments is satisfactory.
FITCH IBCA LIMITED ("FITCH")
F1 Highest capacity for timely repayment. Those issues rated F1+
possess a particularly strong credit feature.
F2 Satisfactory capacity for timely repayment although such
capacity may be susceptible to adverse changes in business,
economic or financial conditions.
MOODY'S INVESTORS SERVICE ("MOODY'S")
PRIME-1 Superior ability for repayment.
PRIME-2 Strong ability for repayment.
DESCRIPTION OF BANK RATINGS
MOODY'S
These ratings represent Moody's opinion of a bank's intrinsic safety and
soundness.
A These banks possess exceptional intrinsic financial strength.
Typically they will be major financial institutions with
highly valuable and defensible business franchises, strong
financial fundamentals, and a very attractive and stable
operating environment.
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<PAGE> 380
B These banks possess strong intrinsic financial strength.
Typically, they will be important institutions with valuable
and defensible business franchises, good financial
fundamentals, and an attractive and stable operating
environment.
C These banks possess good intrinsic financial strength.
Typically, they will be institutions with valuable and
defensible business franchises. These banks will demonstrate
either acceptable financial fundamentals within a stable
operating environment, or better than average financial
fundamentals within an unstable operating environment.
S&P
S&P's credit rating is a current opinion of an obligor's overall financial
capacity (its creditworthiness) to pay its financial obligation.
AAA The highest rating assigned by S&P. The obligor's capacity to
meet its financial commitment on the obligation is extremely
strong.
AA The obligor's capacity to meet its financial commitments on
the obligation is very strong.
A The obligation is somewhat more susceptible to the adverse
effects of changes in circumstances and economic conditions
than obligations in higher rated categories. However, the
obligor's capacity to meet its financial commitment on the
obligation is still strong.
DESCRIPTION OF INSURANCE RATINGS
MOODY'S
These ratings represent Moody's opinions of the ability of insurance companies
to pay punctually senior policyholder claims and obligations.
Aaa Insurance companies rated in this category offer exceptional
financial security. While the financial strength of these
companies is likely to change, such changes as can be
visualized are most unlikely to impair their fundamentally
strong position.
Aa These insurance companies offer excellent financial security.
Together with the Aaa group, they constitute what are
generally known as high grade companies. They are rated lower
than Aaa companies because long-term risks appear somewhat
larger.
A Insurance companies rated in this category offer good
financial security. However, elements may be present which
suggest a susceptibility to impairment sometime in the future.
S&P
S&P's credit rating is a current opinion of the creditworthiness of an obligor
with respect to a specific financial obligation, a specific class of financial
obligations, or a specific financial program.
AAA This is the highest rating assigned by S&P. The obligor's
capacity to meet its financial commitment on the obligation is
extremely strong.
AA The obligor's capacity to meet its financial commitments on
the obligation is very strong.
A An obligation rated A is somewhat more susceptible to the
adverse effects of changes in circumstances and economic
conditions than obligations in higher rated categories.
However, the obligor's capacity to meet its financial
commitment on the obligation is still strong.
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<PAGE> 381
DESCRIPTION OF CORPORATE/MUNICIPAL BOND RATINGS
S&P
INVESTMENT GRADE
AAA The highest rating. The rating indicates an extremely strong
capacity to meet its financial commitment.
AA Differs from AAA issues only in a small degree. The obligor's
capacity to meet its financial commitment is very strong.
A These bonds are somewhat more susceptible to the adverse
effects of changes in circumstances and economic conditions
than debt in higher rated categories. However, capacity to
meet its financial commitment on the obligations is still
strong.
BBB Exhibits adequate protection parameters. However, adverse
economic conditions or changing circumstances are more likely
to lead to a weakened capacity to meet its financial
commitment on the obligations.
SPECULATIVE GRADE
BB Less vulnerable to non-payment than other speculative issues.
However, these bonds face major ongoing uncertainties or
exposure to adverse business, financial or economic conditions
which could lead to inadequate capacity to meet financial
commitment on the obligation.
B More vulnerable to non-payment than obligations rated BB, but
currently has the capacity to meet its financial commitment on
the obligation. Adverse business, financial or economic
conditions will likely impair capacity or willingness to meet
its financial commitment on the obligation.
CCC Currently vulnerable to non-payment, and is dependent upon
favorable business, financial, and economic conditions to meet
its financial commitment on the obligation. In the event of
adverse business, financial, or economic conditions will
likely impair the capacity to meet its financial commitment on
the obligation.
CC Currently highly vulnerable to non-payment.
C This rating may be used to cover a situation where a
bankruptcy petition has been filed, or similar action has been
taken, but payments on this obligation are being continued.
D Bonds in payment default.
Ratings from AA to CCC may be modified by a plus (+) or minus (-) to show
relative standing within the major rating categories.
MOODY'S
INVESTMENT GRADE
Aaa 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 an exceptionally stable,
margin and principal is secure.
Aa High quality by all standards. Margins of protection may not
be as large as in Aaa securities or fluctuation of protective
elements may be greater, or there may be other elements
present that make the long-term risks appear somewhat larger
than in Aaa securities.
A These bonds 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.
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<PAGE> 382
Baa These bonds are considered 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.
NON-INVESTMENT GRADE
Ba These bonds have speculative elements; their future cannot be
considered as well assured. The protection of interest and
principal payments may be very moderate and thereby not well
safeguarded during good and bad times over the future.
B These bonds lack the characteristics of a desirable investment
(i.e., potentially low assurance of timely interest and
principal payments or maintenance of other contract terms over
any long period of time may be small).
Caa Bonds in this category have poor standing and may be in
default. These bonds carry an element of danger with respect
to principal and interest payments.
Ca Speculative to a high degree and could be in default or have
other marked shortcomings. Ca is the lowest rating.
DESCRIPTION OF MUNICIPAL NOTE RATINGS
MOODY'S MIG1 & VMIG1 Short-term municipal securities rated MIG1 or are of
the best VMIG1 quality. They have strong protection
from established cash flows, superior liquidity
support or demonstrated broad-based access to the
market for refinancing.
MIG2 & VMIG2 These Short-term municipal securities are of high
quality. Margins of protection are ample although not
so large as in the preceding group.
MIG3 & VMIG3 Favorable quality. All security elements are
accounted for, but the undeniable strength of the
preceding grades is lacking. Liquidity and cash flow
protection may be narrow and marketing access for
refinancing is likely to be less well established.
S&P
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.
SP-1 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.
SP-3 Speculative capacity to pay principal and interest.
DESCRIPTION OF PREFERRED STOCK RATINGS
MOODY'S
aaa Top-quality preferred stock. This rating indicates good asset
protection and the least risk of dividend impairment within
the universe of preferred stocks.
aa High-grade preferred stock. This rating indicates that there
is a reasonable assurance the earnings and asset protection
will remain relatively well maintained in the foreseeable
future.
a Upper-medium grade preferred stock. While risks are judged to
be somewhat greater than in the "aaa" and "aa" classification,
earnings and asset protection are, nevertheless, expected to
be maintained at adequate levels.
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<PAGE> 383
baa Medium-grade preferred stock, neither highly protected nor
poorly secured. Earnings and asset protection appear adequate
at present but may be questionable over any great length of
time.
S&P
S&P's preferred stock rating is an assessment of the capacity and willingness of
an issuer to pay preferred stock dividends and any applicable sinking fund
obligations.
AAA Highest rating. This rating indicates an extremely strong
capacity to pay the preferred stock obligations.
AA High-quality, fixed-income security. The capacity to pay
preferred stock obligations is very strong, although not as
overwhelming as for issues rated "AAA."
A Backed by a sound capacity to pay the preferred stock
obligations, although it is somewhat more susceptible to the
adverse effects of changes in circumstances and economic
conditions.
BBB Backed by an adequate capacity to pay the preferred stock
obligations. Whereas the issuer normally exhibits adequate
protection parameters, adverse economic conditions or changing
circumstances are more likely to lead to a weakened capacity
to make payments for a preferred stock in this category than
for issues in the "A" category.
SHORT-TERM DEBT RATINGS
Thompson Bank Watch, Inc. ("TBW") assigns ratings to specific debt instruments
with original maturities of one year or less. The TBW Short-Term ratings
specifically assess the likelihood of an untimely payment of principal and
interest.
TBW-1 Very high degree of likelihood that principal and
interest will be paid on a timely basis.
TBW-2 While degree of safety regarding timely repayment of
principal and interest is strong, the relative degree
is not as high as for issues rated TBW-1.
TBW-3 Lowest investment grade category. While more
susceptible to adverse developments than obligations
with higher ratings, capacity to service principal
and interest in a timely fashion is considered
adequate.
TBW-4 Non-investment grade and, therefore, speculative.
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<PAGE> 384
Investment Advisor and Sub-Administrator
Banc One Investment Advisors Corporation
1111 Polaris Parkway
P.O. Box 710211
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 8528
Boston, MA 02266-8528
Legal Counsel
Ropes & Gray
One Franklin Square
1301 K Street, N.W.
Suite 800 East
Washington, D.C. 20005
Independent Accountants
PricewaterhouseCoopers, LLP
100 East Broad Street
Columbus, OH 43215
THE STATEMENT OF ADDITIONAL INFORMATION CONTAINS MORE DETAILED INFORMATION ABOUT
THE FUNDS. THE CURRENT STATEMENT OF ADDITIONAL INFORMATION HAS BEEN FILED WITH
THE SECURITIES AND EXCHANGE COMMISSION AND IS AVAILABLE WITHOUT CHARGE BY
CALLING 1-800-480-4111 OR BY WRITING TO THE ONE GROUP SERVICES COMPANY AT 3435
STELZER ROAD, COLUMBUS, OHIO 43219. THE STATEMENT OF ADDITIONAL INFORMATION IS
INCORPORATED INTO THIS PROSPECTUS BY REFERENCE. THE SEC MAINTAINS A WEB SITE
(WWW.SEC.GOV) THAT CONTAINS THE STATEMENT OF ADDITIONAL INFORMATION, MATERIALS
INCORPORATED BY REFERENCE AND OTHER INFORMATION REGARDING THE ONE GROUP(R).
48
<PAGE> 385
THE ONE GROUP(R) FAMILY OF MUTUAL FUNDS
INSTITUTIONAL MONEY MARKET FUNDS
COMBINED PROSPECTUS
OCTOBER , 1998
THE ONE GROUP(R) GOVERNMENT MONEY MARKET FUND
THE ONE GROUP(R) TREASURY ONLY MONEY MARKET FUND
This prospectus describes two money market mutual funds. The Funds are offered
only to certain institutional and accredited investors. The information in this
prospectus is important. Please read it carefully before you invest, and save it
for future reference.
PLEASE REMEMBER THAT SHARES OF THE FUNDS: - ARE NOT DEPOSITS OR
OBLIGATIONS OF, OR GUARANTEED BY BANC ONE CORPORATION OR ITS AFFILIATES; - ARE
NOT INSURED OR GUARANTEED BY THE FEDERAL DEPOSIT INSURANCE CORPORATION OR BY ANY
FEDERAL OR STATE GOVERNMENTAL AGENCY; - INVOLVE INVESTMENT RISK, INCLUDING THE
POSSIBLE LOSS OF THE PRINCIPAL AMOUNT INVESTED.
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION NOR HAS THE COMMISSION PASSED UPON THE ACCURACY OR ADEQUACY
OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.
<PAGE> 386
TABLE OF CONTENTS
A BRIEF PREVIEW OF THE FUNDS 1
ABOUT THE FUNDS 2
The One Group(R) Government Money Market Fund 2
The One Group(R)Treasury Only Money Market Fund 5
MORE ABOUT THE FUNDS 6
HOW TO DO BUSINESS WITH THE ONE GROUP 7
Purchasing Fund Shares 7
Exchanging Fund Shares 9
Redeeming Fund Shares 10
SHAREHOLDER INFORMATION 12
Voting Rights 12
Dividend Policies 12
Tax Treatment of the Funds 12
Tax Treatment of Shareholders 12
Shareholder Inquiries 13
ORGANIZATION & MANAGEMENT OF THE FUNDS 14
The Funds 14
The Board of Trustees 14
The Advisor 14
The Distributor 14
The Administrator and Sub-Administrator 14
The Transfer Agent, Custodian and Sub-Custodian 14
DETAILS ABOUT THE FUNDS' INVESTMENT PRACTICES AND
POLICIES 15
Investment Practices 15
Investment Risks 16
Investment Policies 16
APPENDIX: DESCRIPTION OF RATINGS 18
<PAGE> 387
A BRIEF PREVIEW OF THE FUNDS
WHAT ARE THE GOALS OF THE FUNDS?
The Funds are designed to produce high current income with liquidity and
stability of principal. Each Fund will use its best efforts to maintain a
constant net asset value of $1.00 per share, although there is no guarantee that
each Fund will be able to do so. Please read about each Fund before investing.
WHAT ARE THE FUNDS' INVESTMENT STRATEGIES?
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. The Funds intend to comply with Rule 2a-7 under
The Investment Company Act of 1940. An investment in the Funds is not a deposit
of BANC ONE CORPORATION or its affiliates and is not insured or guaranteed by
the Federal Deposit Insurance Corporation or any other government agency.
WHAT ARE THE MAIN RISKS OF INVESTING IN THE FUNDS?
The Funds invest in securities that are backed by "credit enhancements" such as
letters of credit. The value of investments in the Funds could decrease if the
credit quality of the credit enhancement provider declines. The Government Money
Market Fund invests in mortgage-related securities which have significantly
greater price and yield volatility than traditional fixed income securities. For
more information about risks, please read "More About the Funds" and "Investment
Risks."
WHO CAN BUY SHARES?
The Funds are offered only to institutional and other accredited investors. For
more details, please see the section of this prospectus entitled "Purchasing
Fund Shares."
HOW DO I PURCHASE AND REDEEM SHARES?
You may buy and redeem shares of the Funds on any day that the Funds are open
for business. Purchase and redemption procedures are explained in greater detail
in "How To Do Business With The One Group." For additional information, call The
One Group Services Company at 1-800-480-4111.
HOW ARE DIVIDENDS PAID?
Generally, dividends are declared on each business day and are distributed
periodically. Any capital gains are distributed at least annually. Distributions
are paid in additional shares of the same class unless you elect to take the
payment in cash. For a more detailed discussion of dividends, see "Dividend
Policies."
WHO MANAGES THE FUNDS?
Banc One Investment Advisors Corporation ("Banc One Investment Advisors"), an
indirect subsidiary of BANC ONE CORPORATION, serves as the advisor of the Funds.
Banc One Investment Advisors is paid a fee for its services. A more detailed
discussion regarding Banc One Investment Advisors, its services and compensation
can be found in the Prospectus under the headings "The Advisor" and "Expense
Summary."
1
<PAGE> 388
THE ONE GROUP(R) GOVERNMENT MONEY MARKET FUND
INVESTMENT OBJECTIVE
The Fund seeks high current income with liquidity and stability of principal.
PORTFOLIO SECURITIES
The Fund invests exclusively in securities that are issued or guaranteed by the
U.S. government or by select U.S. government agencies and instrumentalities,
some of which are subject to repurchase agreements, as well as variable and
floating rate instruments, mortgage-backed securities, and puts. The Fund may
invest in other money market funds if those funds have similar investment
policies and objectives and invest only in securities with short-term ratings
that are equal to or higher than those in which the Fund invests. The Fund also
engages in securities lending. For a list of all the securities in which the
Fund may invest, please read "Investment Practices."
RISK CONSIDERATIONS
The Fund invests in securities that are backed by "credit enhancements" such as
letters of credit. The value of your investment in the Fund could decrease if
the value of the securities in the portfolio decreases in response to declining
credit quality of a credit enhancement provider. In addition, the Fund invests
in mortgage-related securities which have significantly greater price and yield
volatility than traditional fixed-income securities. Before you invest, please
read "More About the Funds" and "Investment Risks."
<TABLE>
SHAREHOLDER EXPENSES
<S> <C>
SHAREHOLDER TRANSACTION EXPENSES (1)
Maximum Sales Charge Imposed on Purchases
(as a percentage of offering price) none
ANNUAL OPERATING EXPENSES
(as a percentage of average daily net assets)(2)
Investment Advisory Fees .08%
Other Expenses .10%
----
Total Fund Operating Expenses .18%
<FN>
(1) If you buy or sell shares through a Shareholder Servicing Agent, you
may be charged separate transaction fees by the Shareholder Servicing
Agent.
(2) Expense information has been restated to reflect current fees.
</TABLE>
EXAMPLE
An investor would pay the following expenses on a $1,000 investment in the 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>
$ 2 $ 6 $10 $ 23
</TABLE>
These examples are designed to assist you in understanding the various costs and
expenses that may be directly or indirectly paid by investors in the Fund. THESE
EXAMPLES SHOULD NOT BE CONSIDERED A REPRESENTATION OF PAST OR FUTURE EXPENSES
AND ACTUAL EXPENSES MAY BE GREATER OR LESS THAN THOSE SHOWN.
2
<PAGE> 389
THE ONE GROUP(R) GOVERNMENT MONEY MARKET FUND FINANCIAL HIGHLIGHTS
The Financial Highlights are intended to help you understand the Fund's
financial performance for the past 10 years, or since inception if less than 10
years. The total returns in the table represent the rate a shareholder would
have earned on an investment in the Fund (assuming reinvestment of all dividends
and distributions). This information has been derived from financial statements
audited by PricewaterhouseCoopers, LLP, whose report, along with the Fund's
financial statements, is incorporated by reference in the Statement of
Additional Information, which is available upon request.
<TABLE>
<CAPTION>
JUNE 14,
YEARS ENDED JUNE 30, 1993 TO
-------------------- JUNE 30,
1998 1997 1996 1995 1994 1993(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 0.053 0.055 0.053 0.033 0.001
------- ------- ------- ------- -------
Distributions:
Net investment income (0.053) (0.055) (0.053) (0.033) (0.001)
------- ------- ------- ------- -------
NET ASSET VALUE, END OF PERIOD $ 1.000 $ 1.000 $ 1.000 $ 1.000 $ 1.000
------- ------- ------- ------- -------
Total Return 5.43% 5.61% 5.41% 3.40% 3.28%(b)
RATIOS/SUPPLEMENTARY DATA:
Net Assets at end of period (000) $ 1,083,438 $ 855,613 $ 720,699 $ 692,253 $ 244,991
Ratio of expenses to average net
assets 0.14% 0.18% 0.21% 0.11% 0.07%(b)
Ratio of net investment income to
average net assets 5.31% 5.46% 5.28% 3.41% 3.13%(b)
Ratio of expenses to average net
assets* 0.14% 0.18% 0.22% 0.20% 0.33%(b)
Ratio of net investment income to
average net assets* 5.31% 5.46% 5.27% 3.32% 2.87%(b)
<FN>
* 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.
</TABLE>
3
<PAGE> 390
THE ONE GROUP(R) TREASURY ONLY MONEY MARKET FUND
INVESTMENT OBJECTIVE
The Fund seeks high current income with liquidity and stability of principal
with the added assurance of a Fund that does not purchase securities that are
subject to repurchase agreements.
PORTFOLIO SECURITIES
The Fund invests exclusively in U.S. Treasury bills, notes, bonds and other U.S.
obligations issued or guaranteed by the U.S. Treasury. The Fund also engages in
securities lending. For a list of all the securities in which the Fund may
invest, please read "Investment Practices."
RISK CONSIDERATIONS
Before you invest, please read "More About the Funds" and "Investment Risks."
<TABLE>
<CAPTION>
SHAREHOLDER EXPENSES
<S> <C>
SHAREHOLDER TRANSACTION EXPENSES (1)
Maximum Sales Charge Imposed on Purchases
(as a percentage of offering price) None
ANNUAL OPERATING EXPENSES
(as a percentage of average daily net assets) (2)
Investment Advisory Fees .08%
Other Expenses .10%
----
Total Fund Operating Expenses .18%
<FN>
(1) If you buy or sell shares through a Shareholder Servicing Agent, you
may be charged separate transaction fees by the Shareholder Servicing
Agent. In addition, a $7.00 charge is deducted from redemption amounts
paid by wire.
(2) Expense information has been restated to reflect current fees.
</TABLE>
EXAMPLE
An investor would pay the following expenses on a $1,000 investment in the 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>
$ 2 $ 6 $10 $ 23
</TABLE>
These examples are designed to assist you in understanding the various costs and
expenses that may be directly or indirectly paid by investors in the Fund. THESE
EXAMPLES SHOULD NOT BE CONSIDERED A REPRESENTATION OF PAST OR FUTURE EXPENSES
AND ACTUAL EXPENSES MAY BE GREATER OR LESS THAN THOSE SHOWN.
4
<PAGE> 391
THE ONE GROUP(R) TREASURY ONLY MONEY MARKET FUND FINANCIAL HIGHLIGHTS
The Financial Highlights are intended to help you understand the Fund's
financial performance for the past 10 years, or since inception if less than 10
years. The total returns in the table represent the rate a shareholder would
have earned on an investment in the Fund (assuming reinvestment of all dividends
and distributions). This information has been derived from financial statements
audited by PricewaterhouseCoopers, LLP, whose report, along with the Fund's
financial statements, is incorporated by reference in the Statement of
Additional Information, which is available upon request.
<TABLE>
<CAPTION>
APRIL 16,
YEARS ENDED JUNE 30, 1993 TO
-------------------- JUNE 30,
1998 1997 1996 1995 1994 1993(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 0.051 0.052 0.051 0.032 0.006
---------- --------- --------- --------- --------
Distributions:
Net investment income (0.051) (0.052) (0.051) (0.032) (0.006)
---------- --------- --------- --------- --------
NET ASSET VALUE, END OF PERIOD $ 1.000 $ 1.000 $ 1.000 $ 1.000 $ 1.000
---------- --------- --------- --------- --------
Total Return 5.24% 5.38% 5.22% 3.23% 2.96%(b)
RATIOS/SUPPLEMENTARY DATA:
Net Assets at end of period (000) $ 480,860 $ 415,961 $ 288,697 $ 217,725 $ 60,330
Ratio of expenses to average
net assets 0.15% 0.17% 0.20% 0.15% 0.07%(b)
Ratio of net investment income to average
net assets 5.12% 5.23% 5.14% 3.23% 2.95%(b)
Ratio of expenses to average net assets* 0.15% 0.17% 0.21% 0.22% 0.33%(b)
Ratio of net investment income to average
net assets* 5.12% 5.23% 5.13% 3.16% 2.69%(b)
<FN>
* 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.
</TABLE>
5
<PAGE> 392
MORE ABOUT THE FUNDS
PORTFOLIO QUALITY
Securities will be purchased by the Funds only if Banc One Investment Advisors
determines that they present minimal credit risk under guidelines adopted by the
Board of Trustees. In addition, unless a more specific rating is specified, all
investments of the Funds must be rated in one of the two highest rating
categories described in "Description of Ratings" in the Appendix. If an
investment is unrated, Banc One Investment Advisors must determine that it is of
comparable quality to a rated security. Banc One Investment Advisors will look
at a security's rating at the time of investment. For more information about
ratings, please see "Description of Ratings" in the Appendix.
ILLIQUID INVESTMENTS
Each Fund may invest up to 10% of its net assets in illiquid investments. A
security is illiquid if it cannot be sold at approximately the value assessed by
the Fund within seven (7) days. Banc One Investment Advisors will follow
guidelines adopted by The One Group Board of Trustees in determining whether an
investment is illiquid.
SPECIAL RISK CONSIDERATIONS
Net Asset Value: There is no assurance that the Funds will meet their investment
objectives or be able to maintain a net asset value of $1.00 per share on a
continuous basis.
Portfolio Turnover: The Funds attempt to increase yield by taking advantage of
short-term market variations. This policy is expected to result in high
portfolio turnover. However, this should not adversely affect the Funds because
they usually do not pay brokerage commissions when purchasing U.S. government
securities. High Portfolio turnover may result in additional tax consequences to
you.
Fixed Income Securities: The value of the securities held by the Funds will
increase or decrease based on changes in interest rates. If rates increase, the
value of the Funds' investments generally decline. On the other hand, if rates
fall, the value of the investments generally increases. The value of your
investment in a Fund will increase or decrease as the value of a Fund's
investments increase and decrease. While securities with longer duration and
maturities tend to produce higher yields, they also are subject to greater
fluctuations in value when interest rates change. Usually changes in the value
of fixed income securities will not affect cash income generated, but may affect
the value of your investment.
Derivatives: The Government Money Market Fund invests in securities that are
considered to be derivatives. "Derivatives"' are securities that derive their
value from the performance of underlying assets or securities. These securities
may be more volatile than other securities. These include mortgage-backed
securities, including collateralized mortgage obligations and Real Estate
Mortgage Investment Conduits (CMOs and REMICs). Derivatives present, to varying
degrees, market, credit, regulatory and pre-payment risks. The Fund's use of
derivatives may cause the Fund to recognize higher amounts of short-term capital
gains (generally taxed at ordinary income tax rates) than it would if the Fund
did not use such instruments. For a more detailed discussion of these risks,
please read "Investment Risks."
6
<PAGE> 393
HOW TO DO BUSINESS WITH THE ONE GROUP
PURCHASING FUND SHARES
WHERE CAN I BUY SHARES?
You may purchase Fund shares from the following sources:
- - The One Group Services Company, and
- - Shareholder Servicing Agents. These include investment advisors,
brokers, financial planners, banks, insurance companies, retirement or
401(k) plan sponsors, or other intermediaries. Shares purchased this
way will be held for you by the Shareholder Servicing Agent.
WHO MAY PURCHASE FUND SHARES?
Fund shares may be purchased by:
- - Commercial and retail institutional investors, including affiliates of
BANC ONE CORPORATION, that have opened accounts with the Fund's
transfer agent, State Street Bank and Trust Company, either directly or
through a Shareholder Servicing Agent.
- - Individuals with a net worth, or joint net worth with their spouse, at
the time of purchase in excess of $1 million.
- - Individuals with annual income, or joint annual income with their
spouse, at the time of purchase in excess of $200,000.
- - If you have questions about eligibility, please call The One Group
Services Company at 1-800-480-4111.
WHEN CAN I BUY SHARES?
- - Purchases may be made on any business day. This includes any day that
the Funds are open for business, other than weekends, days on which the
New York Stock Exchange ("NYSE") is closed, and the following holidays:
New Years Day, Martin Luther King, Jr. Day, Presidents' Day, Good
Friday, Memorial Day, Independence Day, Labor Day, Columbus Day,
Veterans Day, Thanksgiving, and Christmas.
- - Purchase requests will be effective on the day received by The One
Group Services Company and you will be eligible to receive dividends
declared the same day, if (i) such purchase orders are received by The
One Group Services Company before 4:00 p.m., Eastern Time ("ET") for
the Government Money Market Fund and 2:00 p.m. ET for the Treasury Only
Money Market Fund, and (ii) the Fund's custodian, State Street Bank and
Trust Company, receives "federal funds" before 4:00 p.m., ET. If State
Street Bank and Trust Company does not receive federal funds by the
cut-off time, the purchase order will not be effective until the next
business day on which federal funds are timely received by State Street
Bank and Trust Company. On occasion, the NYSE will close before 4:00
p.m. ET. When that happens, purchase requests received after the NYSE
closes will be effective the following business day.
- - If your shares are held by a Shareholder Servicing Agent, it is the
responsibility of the Shareholder Servicing Agent to send your purchase
or redemption order to the Fund. Your Shareholder Servicing Agent may
have an earlier cut-off time for purchase and redemption requests.
- - The One Group Services Company can reject a purchase order if it does
not think that it is in the best interests of a Fund and/or
shareholders to accept the order.
- - Shares are electronically recorded. Therefore, certificates will not be
issued.
HOW MUCH DO SHARES COST?
- - Shares are sold at net asset value ("NAV").
7
<PAGE> 394
- - NAV per share is calculated by dividing the total market value of a
Fund's investments and other assets (minus expenses) by the number of
outstanding shares. The Funds use their best efforts to maintain their
NAV at $1.00, although there is no guarantee that they will be able to
do so.
- - NAV is calculated each business day as of 2:00 p.m. ET and following
the close of the NYSE at 4:00 p.m. ET. On occasion, the NYSE will close
before 4:00 p.m. ET. When that happens, NAV will be calculated as of
the time the NYSE closes.
HOW DO I OPEN AN ACCOUNT?
1. Read the prospectus carefully, and select the Fund or Funds most
appropriate for you.
2. Decide how much you want to invest.
- The minimum initial investment is $1,000,000.
- Subsequent investments must be at least $5,000.
- The One Group Services Company may waive these minimums.
3. Complete the Account Application Form. Be sure to sign up for all of
the Account privileges that you plan to take advantage of. Doing so now
means that you will not have to complete additional paperwork later.
4. Send the completed application and a personal check (unless you choose
to pay by wire or bank transfer) payable to "The One Group" to:
State Street Bank and Trust Company
c/o The One Group
P.O. Box 8528
Boston, MA 02266-8528
5. All checks should be in U.S. dollars. Third party checks will not be
accepted. Redemptions from a Fund will not be permitted for ten (10)
calendar days if purchases are made by check.
6. If you purchase shares through a Shareholder Servicing Agent, you may
be required to complete additional forms or follow additional
procedures. You should contact your Shareholder Servicing Agent
regarding purchases, exchanges and redemptions.
7. If you have any questions, contact your Shareholder Servicing Agent or
call The One Group Services Company at 1-800-480-4111.
CAN I PURCHASE SHARES OVER THE TELEPHONE?
Yes. Simply select this option on your Account Application Form and then:
- - Contact your Shareholder Servicing Agent or The One Group Services
Company at 1-800-480-4111 to relay your purchase instructions.
- - Authorize a bank transfer or initiate a wire transfer payable to "The
One Group" to State Street Bank and Trust Company to the following wire
address:
State Street Bank & Trust Company
Attn: Custody & Shareholder Services
ABA 011 000 028
DDA 99034167
FBO The One Group Fund (ex: The One Group Government Money Market Fund)
Your Account Number (ex: 123456789)
Your Account Registration (ex: John Smith & Mary Smith, JTWROS)
- - The One Group uses reasonable procedures to confirm that instructions
given by telephone are genuine. These procedures include recording
telephone instructions and asking for personal identification. If these
procedures
8
<PAGE> 395
are followed, The One Group will not be responsible for any loss,
liability, cost or expense of acting upon unauthorized or fraudulent
instructions; you bear the risk of loss.
- - You may revoke your right to make purchases over the telephone by
sending a letter to:
State Street Bank and Trust Company
c/o The One Group
P.O. Box 8528
Boston, MA 02266-8528
EXCHANGING FUND SHARES
WHAT ARE MY EXCHANGE PRIVILEGES?
- - You may exchange your shares for shares of the other Fund described in
this prospectus. You may also exchange your shares for shares of any
institutional money market fund that The One Group may offer.
- - The One Group may change the terms and conditions of your exchange
privileges upon 60 days written notice.
- - The One Group Funds offer a Systematic Exchange Privilege which allows
you to automatically exchange shares of one fund to another on a
monthly or quarterly basis. This privilege is useful in Dollar Cost
Averaging. To participate in this privilege, please select it on your
account application. To learn more about it, please call The One Group
Services Company at 1-800-480-4111.
- - The One Group does not charge a fee for this privilege.
WHEN ARE EXCHANGES PROCESSED?
Exchanges are processed the same business day they are received, provided:
- - State Street Bank and Trust Company receives the request by 12:30 p.m.
ET.
- - You have provided The One Group with all of the information necessary
to process the exchange.
- - You have received a current prospectus of the Fund or Funds in which
you wish to invest.
- - You have contacted your Shareholder Servicing Agent, if necessary.
ARE EXCHANGES TAXABLE?
Generally:
- - An exchange between Funds is considered a sale and may result in
a capital gain or loss for Federal income tax purposes.
- - You should talk to your tax advisor before making an exchange.
ARE THERE LIMITS ON EXCHANGES?
Yes. The exchange privilege is not intended as a way for you to speculate on
short term movements in the market. Therefore:
- - To prevent disruptions in the management of the Funds, The One Group
limits excessive exchange activity.
- - Exchange activity is excessive if it EXCEEDS TWO SUBSTANTIVE EXCHANGE
REDEMPTIONS (WITHIN 30 DAYS OF EACH OTHER) WITHIN A TWELVE MONTH
PERIOD.
- - In addition, The One Group reserves the right to reject any exchange
request (even those that are not excessive) if the Fund reasonably
believes that the exchange will result in excessive transaction costs
or otherwise adversely affect other shareholders.
9
<PAGE> 396
REDEEMING FUND SHARES
WHEN CAN I REDEEM SHARES?
- - You may redeem all or some of your shares on any day that the Funds are
open for business.
- - Redemption requests received by The One Group Services Company before
4:00 p.m. ET (or when the NYSE closes), will be effective that day.
HOW DO I REDEEM SHARES?
- - Unless you have selected the telephone option on your Account
Application Form, you must send a written redemption request to your
Shareholder Servicing Agent, if applicable, or to State Street Bank and
Trust Company at the following address:
State Street Bank and Trust Company
c/o The One Group
P.O. Box 8528
Boston, MA 02266-8528
- - You may request redemption forms by calling The One Group Services
Company at 1-800-480-4111.
- - State Street Bank and Trust Company may require that the signature on
your redemption request be guaranteed by a commercial bank, a member of
a domestic stock exchange, or a member of the Securities Transfer
Association Medallion Program or the Stock Exchange Medallion Program,
unless:
1. the redemption is for $50,000 worth of shares or less;
2. the redemption is payable to the shareholder of record;
3. the redemption check is mailed to the shareholder at the
record address; or
4. the redemption is payable by wire or bank transfer (ACH) to a
pre-existing bank account.
- - On the Account Application Form you may elect to have the redemption
proceeds mailed or wired to:
1. designated commercial bank; or
2. State Street Bank and Trust Company or your Shareholder
Servicing Agent.
- - Your redemption proceeds will ordinarily be paid within seven days
after receipt of the redemption request. However, the Funds will
attempt to honor requests for next day payment on redemptions, if the
request is received before 12:30 p.m., ET.
- - The Funds will attempt to honor requests for payments in two business
days, if the redemption request is received after the time listed
above.
WHAT WILL MY SHARES BE WORTH?
- - The NAV 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.
- - You will receive the NAV calculated after your redemption
request is received. Please read "How Much Do Shares Cost?"
CAN I REDEEM BY TELEPHONE?
Yes, if you selected this option on your Account Application Form.
10
<PAGE> 397
- - Call your Shareholder Servicing Agent or State Street Bank and Trust
Company at 1-800-480-4111 to relay your redemption request.
- - Your redemption proceeds will be mailed or wired to the commercial bank
account you designated on your Account Application Form.
- - State Street Bank and Trust Company may charge a wire redemption fee.
The current charge is $7.00.
- - The One Group uses reasonable procedures to confirm that instructions
given by telephone are genuine. These procedures include recording
telephone instructions and asking for personal identification. If these
procedures are followed, The One Group will not be responsible for any
loss, liability, cost or expense of acting upon unauthorized or
fraudulent instructions; you bear the risk of loss.
ADDITIONAL INFORMATION REGARDING REDEMPTIONS
- - All redemptions will be for cash. The redemption price of shares is
expected to remain constant at $1.00 per share, although there is no
assurance that this will always be the case.
- - If you redeem shares for which you paid by check, and The One Group has
not yet received payment on the check, The One Group will delay
forwarding your redemption proceeds for 10 or more days until payment
has been collected from your bank.
- - The One Group may suspend your ability to redeem when:
1. Trading on the NYSE is restricted.
2. The NYSE is closed (other than weekend and holiday closings).
3. The SEC has permitted a suspension.
4. An emergency exists.
The Statement of Additional Information offers more details about this
process.
- - You generally will recognize a gain or loss on a redemption for Federal
income tax purposes. You should talk to your tax adviser before making
a redemption.
11
<PAGE> 398
SHAREHOLDER INFORMATION
VOTING RIGHTS
The Funds do not hold annual shareholder meetings, but may hold special
meetings. The special meetings are held, for example, to elect or remove
Trustees, change a Fund's fundamental investment objective, or approve an
investment advisory contract.
As a Fund shareholder, you have one vote for each share that you own. Each Fund
votes separately on matters relating solely to that Fund, or which affect that
Fund differently. However, all shareholders will have equal voting rights on
matters that affect all shareholders equally.
Banc One Corporation (100 East Broad Street, Columbus, Ohio, 43271), through its
affiliates, may be deemed for purposes of the Investment Company Act of 1940, to
control the Treasury Only Money Market Fund and Government Money Market Fund.
This is because as of June 30, 1998, BANC ONE CORPORATION or its affiliates
possessed the power to vote substantially all of the shares of the Funds.
DIVIDEND POLICIES
DIVIDENDS
The Funds generally declare dividends on each business day. Dividends are
distributed on the first business day of each month. Capital gains, if any, for
all Funds are distributed at least annually.
DIVIDEND REINVESTMENT
You automatically will receive all income dividends and capital gain
distributions in additional shares of the same Fund, unless you have elected to
take such payment in cash. The price of the shares is the NAV determined
immediately following the dividend record date. Reinvested dividends and
distributions receive the same tax treatment as dividends and distributions paid
in cash.
If you want to change the way in which you receive dividends and distributions,
you must write to State Street Bank & Trust Company at P.O. Box 8528, Boston, MA
02266-8528, at least 15 days prior to the distribution. The change is effective
upon receipt by State Street.
TAX TREATMENT OF THE FUNDS
TAX STATUS OF THE FUND
Each Fund intends to qualify as a "regulated investment company" for Federal
income tax purposes. If the Funds qualify, as they have in the past, they will
pay no federal income tax on the earnings they distribute to shareholders.
TAX TREATMENT OF SHAREHOLDERS
TAXATION OF SHAREHOLDER TRANSACTIONS
A sale, exchange, or redemption of Fund shares will generally produce either a
taxable gain or a loss. You are responsible for any tax liabilities generated by
your transactions.
TAXATION OF DISTRIBUTIONS
Each Fund will distribute substantially all of its net investment income
(including, for this purpose, net short-term capital gain) to investors on at
least an annual basis. Dividends you receive from a Fund, whether reinvested or
received in cash, will be taxable to you. Dividends from a Fund's net investment
income will be taxable as ordinary income and dividends from a Fund's long-term
capital gains will be taxable to you as such, regardless of how long you have
held the shares.
Dividends paid in January, but declared in October, November or December of the
previous year, will be considered to have been paid the previous December.
12
<PAGE> 399
TAX INFORMATION
The Form 1099 that is mailed to you every January details your dividends and
their federal tax category. Even though the Funds provide you with this
information, you are responsible for verifying your tax liability with your tax
professional. For additional tax information see the Statement of Additional
Information. Please note that this tax discussion is general in nature; no
attempt has been made to present a complete explanation of the Federal, state,
local or foreign tax treatment of the Funds or their shareholders.
SHAREHOLDER INQUIRIES
If you have any questions or need additional information, please write The One
Group Services Company at 3435 Stelzer Road, Columbus, OH 43219 or call
1-800-480-4111.
Reporting
In March and September you will receive a financial report from The One Group.
In addition, The One Group will periodically send you proxy statements and other
reports.
13
<PAGE> 400
ORGANIZATION AND MANAGEMENT OF THE FUNDS
THE FUNDS
Each Fund is a series of The One Group, an open-end management investment
company. The One Group currently consists of 40 separate Funds. Two of the Funds
are described in this prospectus; the other Funds are described in separate
prospectuses. Each Fund described in this prospectus is diversified. Each Fund
is supervised by the Board of Trustees.
THE BOARD OF TRUSTEES
The Trustees oversee the management and administration of the Funds. The
Trustees are responsible for making major decisions about each Fund's investment
objectives and policies, but delegate the day-to-day administration of the Funds
to the officers of The One Group.
THE ADVISOR
Banc One Investment Advisors makes the day-to-day investment decisions for the
Funds and continuously reviews, supervises and administers the Funds' investment
programs. Banc One Investment Advisors has served as investment advisor to The
One Group since 1993. Prior to that time, The One Group was advised by
affiliates of Banc One Investment Advisors. In addition to The One Group, Banc
One Investment Advisors serves as investment advisor to other mutual funds and
individual, corporate, charitable and retirement accounts. As of June 30, 1998,
Banc One Investment Advisors, an indirect, wholly-owned subsidiary of BANC ONE
CORPORATION, managed over $59 billion in assets. For the fiscal year ended June
30, 1998, the Funds paid investment advisory fees of .08% of each Fund's average
daily net assets.
THE DISTRIBUTOR
The One Group Services Company, 3435 Stelzer Road, Columbus, Ohio 43219, a
wholly-owned subsidiary of The BISYS Group, Inc., markets the Funds and
distributes shares through selling brokers, financial institutions, investment
advisors, and other financial representatives.
THE ADMINISTRATOR AND SUB-ADMINISTRATOR
The One Group Services Company also serves as the Funds' administrator. The One
Group Services Company is responsible for responding to shareholder inquiries
and requests for information, as well as providing regulatory compliance and
reporting. For these services, The One Group Services Company receives an annual
fee of .05% of each Fund's average daily net assets. The fee is calculated daily
and paid monthly. Banc One Investment Advisors, the Sub-Administrator, provides
office space, equipment, and facilities, as well as legal and regulatory
support.
THE TRANSFER AGENT, CUSTODIAN, AND SUB-CUSTODIAN
State Street Bank and Trust Company, P.O. Box 8528, Boston, MA 02266-8528, or
your Shareholder Servicing Agent, if appropriate, handles shareholder record
keeping and statements, distributes dividends, and processes buy and sell
requests. As the Funds' custodian, State Street holds the Funds' assets, settles
all portfolio trades and assists in calculating the Funds' net asset values.
Bank One Trust Company, N.A. serves as sub-custodian in connection with the
Funds' securities lending activities under an agreement with State Street Bank
and Trust Company. Bank One Trust Company, N.A. is paid a fee for this service.
YEAR 2000
Preparing for the Year 2000 is a high priority for The One Group Family of
Mutual Funds. Both The One Group Services Company and Banc One Investment
Advisors have formed dedicated teams to help them successfully achieve Year 2000
compliance. In addition, these teams are responsible for assessing the readiness
of all other service providers to The One Group. Year 2000 remediation efforts
are directed toward both information technology and non-information technology
systems. Non-information technology systems include elevators, photocopy
machines, and facsimile machines, and should have no significant impact on the
delivery of services to The One Group.
Banc One Investment Advisors has identified 49 information technology systems
and interfaces that provide service and support to The One Group. Each system is
assigned a priority rating: high, medium or low. Systems rated "high" are those
which are essential to the operation of The One Group. Each system rated "high"
is scheduled to be Year 2000 compliant by December 31, 1998. All systems will be
tested for compliance throughout 1999.
Many, if not all, of the systems are owned or operated by third party servicers
(for example, The One Group's Custodian). Consequently, remediation efforts must
be made by those servicers. Banc One Investment Advisors and The One Group
Services Company have, and will continue to, monitor the remediation progress of
the service providers. This process involves documentation, on-site visits, and
review of remediation plans and test results. Both Banc One Investment Advisors
and The One Group Services Company have budgeted in excess of $700,000 in fiscal
year 1998 and over $1 million in fiscal year 1998 toward the remediation effort
for all systems and interfaces. Neither The One Group nor its shareholders will
bear any of the direct remediation expenses.
Neither The One Group Services Company nor Banc One Investment Advisors
currently anticipate that the move to Year 2000 will have a material impact on
their ability to continue to provide the Funds with service at current levels.
Likewise, The One Group currently anticipates that the more to Year 2000 will
not have a material impact on its operations.
14
<PAGE> 401
DETAILS ABOUT THE FUNDS' INVESTMENT PRACTICES AND POLICIES
INVESTMENT PRACTICES
The Funds invest in a variety of securities and employ a number of investment
techniques. Each security and technique involves certain risks. What follows is
a list of the securities and techniques utilized by the Funds, as well as the
risks inherent in their use. Fixed income securities are primarily influenced by
market, credit and prepayment risks, although certain securities may be subject
to additional risks. For a more complete discussion, please see the Statement of
Additional Information. Following the table is a more complete discussion of
risk.
<TABLE>
<CAPTION>
FUND NAME FUND CODE
--------- ---------
<S> <C>
The One Group(R) Government Money Market Fund 1
The One Group(R) Treasury Only Money Market Fund 2
INSTRUMENT FUND CODE RISK TYPE
- ---------- --------- ---------
U.S. TREASURY OBLIGATIONS: Bills, notes, and bonds. 1-2 Market
U.S. GOVERNMENT AGENCY SECURITIES: Securities issued 1 Market
by agencies and instrumentalities of the U.S. Government. Credit
These include Ginnie Mae, Fannie Mae, and Freddie Mac.
REPURCHASE AGREEMENTS: The purchase of a security and 1 Credit
the simultaneous commitment to return the security to Market
the seller at an agreed upon price on an agreed upon Liquidity
date. This is treated as a loan.
PUT OPTIONS: A put option gives the buyer the right 1 Liquidity
to sell, and obligates the seller to buy, a security Management
at a specified price. The Fund will sell only secured Market
put options. Credit
Leverage
SECURITIES LENDING: The lending of up to 33 1/3 % of the 1-2 Credit
Fund's total assets. In return the Fund will receive cash, other Market
securities, and/or letters of credit. Leverage
WHEN-ISSUED SECURITIES AND FORWARD COMMITMENTS: 1-2 Market
Purchase or contract to purchase securities at a Leverage
fixed price for delivery at a future date. Liquidity
INVESTMENT COMPANY SECURITIES: Shares of other 1 Market
mutual funds, including money market funds of The
One Group and shares of other investment companies
for which Banc One Investment Advisors serves as
investment advisor or administrator. Banc One
Investment Advisors will waive certain fees when
investing in funds for which it serves as
investment advisor.
VARIABLE AND FLOATING RATE INSTRUMENTS: Obligations 1 Market
with interest rates which are reset daily, weekly, Credit
quarterly or some other period and which may be Liquidity
payable to the Fund on demand.
MORTGAGE-BACKED SECURITIES: Debt obligations secured 1 Pre-Payment
by real estate loans and pools of loans. These include Market
collateralized mortgage obligations ("CMOs") and Real Credit
Estate Mortgage Investment Conduits ("REMICs"). Regulatory
</TABLE>
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INVESTMENT RISKS
Below is a more complete discussion of the types of risks inherent in the
securities and investment techniques listed above. Because of these risks, the
value of the securities in the Funds may fluctuate, as will the value of your
investment in the Funds. Certain investments are more susceptible to these risks
than others.
- - Credit Risk. The risk that the issuer of a security, or the
counterparty to a contract, will default or otherwise become unable to
honor a financial obligation. Credit risk is generally higher for
non-investment grade securities. The price of a security can be
adversely affected prior to actual default as its credit status
deteriorates and the probability of default rises.
- - Leverage Risk. The risk associated with securities or practices that
multiply small index or market movements into large changes in value.
Leverage is often associated with investments in derivatives, but also
may be embedded directly in the characteristics of other securities.
- - Liquidity Risk. The risk that certain securities may be difficult or
impossible to sell at the time and the price that normally prevails in
the market. The seller may have to lower the price, sell other
securities instead or forego an investment opportunity, any of which
could have a negative effect on fund management or performance. This
includes the risk of missing out on an investment opportunity because
the assets necessary to take advantage of it are tied up in less
advantageous investments.
- - Management Risk. The risk that a strategy used by a fund's management
may fail to produce the intended result. This includes the risk that
changes in the value of a hedging instrument will not match those of
the asset being hedged. Incomplete matching can result in unanticipated
risks.
- - Market Risk. The risk that the market value of a security may move up
and down, sometimes rapidly and unpredictably. These fluctuations may
cause a security to be worth less than the price originally paid for
it, or less than it was worth at an earlier time. Market risk may
affect a single issuer, industry, sector of the economy or the market
as a whole. There also is the risk that the current interest rate may
not accurately reflect existing market rates. For fixed income
securities, market risk is largely, but not exclusively, influenced by
changes in interest rates. A rise in interest rates typically causes a
fall in values, while a fall in rates typically causes a rise in
values. Finally, key information about a security or market may be
inaccurate or unavailable.
- - Pre-Payment Risk. The risk that the principal repayment of a security
will occur at an unexpected time, especially that the repayment of a
mortgage or asset-backed security occurs either significantly sooner or
later than expected. Changes in pre-payment rates can result in greater
price and yield volatility. Pre-payments generally accelerate when
interest rates decline. When mortgage and other obligations are
pre-paid, a Fund may have to reinvest in securities with a lower yield.
Further, with early repayment, a Fund may fail to recover any premium
paid, resulting in an unexpected capital loss.
- - Regulatory Risk. The risk associated with Federal and state laws which
may restrict the remedies that a mortgage lender has when a borrower
defaults on mortgage loans. These laws include restrictions on
foreclosures, redemption rights after foreclosure, Federal and state
bankruptcy and debtor relief laws, restrictions on "due on sale"
clauses, and state usury laws.
INVESTMENT POLICIES
Each Fund's investment objective and the investment policies summarized below
are fundamental. This means that they cannot be changed without the consent of a
majority of the outstanding shares of the Funds. The full text of the
fundamental policies can be found in the Statement of Additional Information.
FUNDAMENTAL POLICIES OF EACH FUND
Each Fund:
1. Will use its best efforts to maintain a constant net asset value of
$1.00 per share, although there is no guarantee that the Funds will be
able to do so.
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2. Will not purchase the securities of an issuer if as a result more than
5% of its total assets would be invested in the securities of that
issuer or the Fund would own more than 10% of the outstanding voting
securities of that issuer. This does not include securities issued or
guaranteed by the United States, its agencies or instrumentalities, and
repurchase agreements involving these securities. This restriction
applies with respect to 75% of a Fund's total assets. The Funds may
invest the remaining 25% of their total assets without restriction.
3. Will not purchase securities while borrowings (including reverse
repurchase agreements) exceed 5% of the respective Fund's assets.
4. Will not borrow money or issue senior securities, except that the Funds
may borrow from banks for temporary purposes in amounts not exceeding
10% of their total assets at the time of the borrowing.
5. Will not mortgage, pledge or hypothecate any assets, except in
connection with borrowing specified in 4 above and in amounts not in
excess of the lesser of the dollar amount borrowed or 10% of the value
of the respective Fund's total assets at the time of its borrowing.
FUNDAMENTAL POLICIES OF SPECIFIC FUNDS
The Treasury Only Money Market Fund:
1. Will not purchase securities other than U.S. Treasury bills, notes and
other U.S. obligations issued or guaranteed by the U.S. Treasury.
2. Will not invest in any securities subject to repurchase agreements.
The Government Money Market Fund:
1. Will not purchase securities other than those issued or guaranteed by
the U.S. government or its agencies or instrumentalities, some of which
may be subject to repurchase agreements.
Additional investment policies can be found in the Statement of Additional
Information.
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APPENDIX
DESCRIPTION OF RATINGS
The following is a summary of published ratings by major credit rating agencies.
Credit ratings evaluate only the safety of principal and interest payments, not
the market value risk of lower quality securities. Credit rating agencies may
fail to change credit ratings to reflect subsequent events on a timely basis.
Although Banc One Investment Advisors considers security ratings when making
investment decisions, it also performs its own investment analysis and does not
rely solely on the ratings assigned by credit agencies.
Unrated securities will be treated as non-investment grade securities unless
Banc One Investment Advisors determines that such securities are the equivalent
of investment grade securities. Securities that have received different ratings
from more than one agency are considered investment grade if at least one agency
has rated the security investment grade.
DESCRIPTION OF COMMERCIAL PAPER RATINGS
DUFF & PHELPS CREDIT RATING CO. ("DUFF")
D-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 obligations.
D-1 Very high certainty of timely payment. Liquidity factors are
excellent and supported by good fundamental protection
factors. Risk factors are minor.
D-1- High certainty of timely payment. Liquidity factors are strong
and supported by good fundamental protection factors. Risk
factors are very small.
STANDARD & POOR'S CORPORATION ("S&P")
A-1 Highest category of commercial paper. Capacity to meet
financial commitment is strong. Obligations designated with a
plus sign (+) indicate that capacity to meet financial
commitment is extremely strong.
A-2 Issues somewhat more susceptible to adverse effects of changes
in circumstances and economic conditions than obligations in
higher rating categories. However, the capacity to meet
financial commitments is satisfactory.
FITCH IBCA LIMITED ("FITCH")
F1 Highest capacity for timely repayment. Those issues rated F1+
possess a particularly strong credit feature.
F2 Satisfactory capacity for timely repayment although such
capacity may be susceptible to adverse changes in business,
economic or financial conditions.
MOODY'S INVESTORS SERVICE ("MOODY'S")
PRIME-1 Superior ability for repayment.
PRIME-2 Strong ability for repayment.
DESCRIPTION OF BANK RATINGS
MOODY'S
These ratings represent Moody's opinion of a bank's intrinsic
safety and soundness.
A These banks possess exceptional intrinsic financial strength.
Typically they will be major financial institutions with
highly valuable and defensible business franchises, strong
financial fundamentals, and a very attractive and stable
operating environment.
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B These banks possess strong intrinsic financial strength.
Typically, they will be important institutions with valuable
and defensible business franchises, good financial
fundamentals, and an attractive and stable operating
environment.
C These banks possess good intrinsic financial strength.
Typically, they will be institutions with valuable and
defensible business franchises. These banks will demonstrate
either acceptable financial fundamentals within a stable
operating environment, or better than average financial
fundamentals within an unstable operating environment.
S&P
S&P's credit rating is a current opinion of an obligor's overall financial
capacity (its creditworthiness) to pay its financial obligation.
AAA The highest rating assigned by S&P. The obligor's capacity to
meet its financial commitment on the obligation is extremely
strong.
AA The obligor's capacity to meet its financial commitments on
the obligation is very strong.
A The obligation is somewhat more susceptible to the adverse
effects of changes in circumstances and economic conditions
than obligations in higher rated categories. However, the
obligor's capacity to meet its financial commitment on the
obligation is still strong.
DESCRIPTION OF INSURANCE RATINGS
MOODY'S
These ratings represent Moody's opinions of the ability of insurance companies
to pay punctually senior policyholder claims and obligations.
Aaa Insurance companies rated in this category offer exceptional
financial security. While the financial strength of these
companies is likely to change, such changes as can be
visualized are most unlikely to impair their fundamentally
strong position.
Aa These insurance companies offer excellent financial security.
Together with the Aaa group, they constitute what are
generally known as high grade companies. They are rated lower
than Aaa companies because long-term risks appear somewhat
larger.
A Insurance companies rated in this category offer good
financial security. However, elements may be present which
suggest a susceptibility to impairment sometime in the future.
S&P
S&P's credit rating is a current opinion of the creditworthiness of an obligor
with respect to a specific financial obligation, a specific class of financial
obligations, or a specific financial program.
AAA This is the highest rating assigned by S&P. The obligor's
capacity to meet its financial commitment on the obligation is
extremely strong.
AA The obligor's capacity to meet its financial commitments on
the obligation is very strong.
A An obligation rated A is somewhat more susceptible to the
adverse effects of changes in circumstances and economic
conditions than obligations in higher rated categories.
However, the obligor's capacity to meet its financial
commitment on the obligation is still strong.
DESCRIPTION OF CORPORATE/MUNICIPAL BOND RATINGS
S&P
INVESTMENT GRADE
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AAA The highest rating. The rating indicates an extremely strong
capacity to meet its financial commitment.
AA Differs from AAA issues only in a small degree. The obligor's
capacity to meet its financial commitment is very strong.
A These bonds are somewhat more susceptible to the adverse
effects of changes in circumstances and economic conditions
than debt in higher rated categories. However, capacity to
meet its financial commitment on the obligation is still
strong.
BBB Exhibits adequate protection parameters. However, adverse
economic conditions or changing circumstances are more likely
to lead to a weakened capacity to meet its financial
commitment on the obligation.
SPECULATIVE GRADE
BB Less vulnerable to non-payment than other speculative issues.
However, these bonds face major ongoing uncertainties or
exposure to adverse business, financial or economic conditions
which could lead to inadequate capacity to meet financial
commitment on the obligation.
B More vulnerable to non-payment than obligations rated BB, but
currently has the capacity to meet its financial commitment on
the obligation. Adverse business, financial or economic
conditions will likely impair capacity or willingness to meet
its financial commitment on the obligation.
CCC Currently vulnerable to non-payment, and is dependent upon
favorable business, financial, and economic conditions to meet
its financial commitment on the obligation. In the event of
adverse business, financial, or economic conditions, they are
not likely to have the capacity to meet its financial
commitment on the obligation.
CC Currently highly vulnerable to non-payment.
C This rating may be used to cover a situation where a
bankruptcy petition has been filed, or similar action has been
taken, but payments on this obligation are being continued.
D Bonds in payment default.
Ratings from AA to CCC may be modified by a plus (+) or minus (-) to show
relative standing within the major rating categories.
MOODY'S
INVESTMENT GRADE
Aaa 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 an exceptionally stable,
margin and principal is secure.
Aa High quality by all standards. Margins of protection may not
be as large as in Aaa securities, fluctuation of protective
elements may be greater, or there may be other elements
present that make the long-term risks appear somewhat larger
than in Aaa securities.
A These bonds possess many favorable investment attributes and
are to be considered as upper-medium grade obligations.
Factors giving security to principal and interest are
considered adequate, but elements may be present which suggest
a susceptibility to impairment sometime in the future.
Baa These bonds are considered 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.
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NON-INVESTMENT GRADE
Ba These bonds have speculative elements; their future cannot be
considered as well assured. The protection of interest and
principal payments may be very moderate and thereby not well
safeguarded during good and bad times over the future.
B These bonds lack the characteristics of a desirable investment
(i.e., potentially low assurance of timely interest and
principal payments or maintenance of other contract terms over
any long period of time may be small).
Caa Bonds in this category have poor standing and may be in
default. These bonds carry an element of danger with respect
to principal and interest payments.
Ca Speculative to a high degree and could be in default or have
other marked shortcomings. Ca is the lowest rating.
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DESCRIPTION OF MUNICIPAL NOTE RATINGS
MOODY'S
MIG1 & VMIG1 Short-term municipal securities rated MIG1 or VMIG1 are of the
best quality. They have strong protection from established
cash flows, superior liquidity support or demonstrated
broad-based access to the market for refinancing.
MIG2 & VMIG2 These Short-term municipal securities are of high quality.
Margins of protection are ample although not so large as in
the preceding group.
MIG3 & VMIG3 Favorable quality. All security elements are accounted for,
but the undeniable strength of the preceding grades is
lacking. Liquidity and cash flow protection may be narrow and
marketing access for refinancing is likely to be less well
established.
S&P
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.
SP-1 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.
SP-3 Speculative capacity to pay principal and interest.
DESCRIPTION OF PREFERRED STOCK RATINGS
MOODY'S
aaa Top-quality preferred stock. This rating indicates good asset
protection and the least risk of dividend impairment within
the universe of preferred stocks.
aa High-grade preferred stock. This rating indicates that there
is a reasonable assurance the earnings and asset protection
will remain relatively well maintained in the foreseeable
future.
a Upper-medium grade preferred stock. While risks are judged to
be somewhat greater than in the "aaa" and "aa" classification,
earnings and asset protection are, nevertheless, expected to
be maintained at adequate levels.
baa Medium-grade preferred stock, neither highly protected nor
poorly secured. Earnings and asset protection appear adequate
at present but may be questionable over any great length of
time.
S&P
S&P's preferred stock rating is an assessment of the capacity and willingness of
an issuer to pay preferred stock dividends and any applicable sinking fund
obligations.
AAA Highest rating. This rating indicates an extremely strong
capacity to pay the preferred stock obligations.
AA High-quality, fixed-income security. The capacity to pay
preferred stock obligations is very strong, although not as
overwhelming as for issues rated "AAA."
A Backed by a sound capacity to pay the preferred stock
obligations, although it is somewhat more susceptible to the
adverse effects of changes in circumstances and economic
conditions.
BBB Backed by an adequate capacity to pay the preferred stock
obligations. Whereas the issuer normally exhibits adequate
protection parameters, adverse economic conditions or changing
circumstances are more likely to lead to a weakened capacity
to make payments for a preferred stock in this category than
for issues in the "A" category.
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SHORT-TERM DEBT RATINGS
Thompson Bank Watch, Inc. ("TBW") assigns ratings to specific debt instruments
with original maturities of one year or less. The TBW Short-Term ratings
specifically assess the likelihood of an untimely payment of principal and
interest.
TBW-1 Very high degree of likelihood that principal and interest will be paid on
a timely basis.
TBW-2 While degree of safety regarding timely repayment of principal and
interest is strong, the relative degree is not as high as for
issues rated TBW-1.
TBW-3 Lowest investment grade category. While more susceptible to adverse
developments than obligations with higher ratings, capacity to
service principal and interest in a timely fashion is considered
adequate.
TBW-4 Non-investment grade and, therefore, speculative.
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INVESTMENT ADVISOR AND SUB-ADMINISTRATOR
Banc One Investment Advisors Corporation
1111 Polaris Parkway
P.O. Box 710211
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 8528
Boston, MA 02266-8528
LEGAL COUNSEL
Ropes & Gray One Franklin Square
1301 K Street, N.W.
Suite 800 East
Washington, D.C. 20005
INDEPENDENT ACCOUNTANTS
PricewaterhouseCoopers, LLP
100 East Broad Street
Columbus, OH 43215
THE STATEMENT OF ADDITIONAL INFORMATION CONTAINS MORE DETAILED INFORMATION ABOUT
THE FUNDS. THE CURRENT STATEMENT OF ADDITIONAL INFORMATION HAS BEEN FILED WITH
THE SECURITIES AND EXCHANGE COMMISSION AND IS AVAILABLE WITHOUT CHARGE BY
CALLING 1-800-480-4111 OR BY WRITING TO THE ONE GROUP SERVICES COMPANY AT 3435
STELZER ROAD, COLUMBUS, OHIO 43219. THE STATEMENT OF ADDITIONAL INFORMATION IS
INCORPORATED INTO THIS PROSPECTUS BY REFERENCE. THE SEC MAINTAINS A WEB SITE
(WWW.SEC.GOV) THAT CONTAINS THE STATEMENT OF ADDITIONAL INFORMATION, MATERIALS
INCORPORATED BY REFERENCE AND OTHER INFORMATION REGARDING THE ONE GROUP(R).
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THE ONE GROUP(R)
FAMILY OF MUTUAL FUNDS
3435 Stelzer Road
Columbus, Ohio 43219-3035
(800) 480-4111
October , 1998
THE ONE GROUP(R) INSTITUTIONAL PRIME MONEY MARKET FUND
This Prospectus describes The One Group Institutional Prime Money Market Fund
This Fund is offered only to certain institutional and accredited investors. The
information in this prospectus is important. Please read it carefully before you
invest, and save it for future reference.
PLEASE REMEMBER THAT SHARES OF THE FUND: O ARE NOT DEPOSITS OR
OBLIGATIONS OF, OR GUARANTEED BY BANC ONE CORPORATION OR ITS AFFILIATES; O ARE
NOT INSURED OR GUARANTEED BY THE FEDERAL DEPOSIT INSURANCE CORPORATION OR BY ANY
RAL OR STATE GOVERNMENTAL AGENCY; O INVOLVE INVESTMENT RISK, INCLUDING THE
POSSIBLE LOSS OF THE PRINCIPAL AMOUNT INVESTED.
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE
SECURITIES AND EXCHANGE COMMISSION NOR HAS THE COMMISSION PASSED UPON THE
ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A
CRIMINAL OFFENSE.
PROSPECTUS
<PAGE> 412
TABLE OF CONTENTS
A BRIEF PREVIEW OF THE FUND 3
ABOUT THE FUND 4
MORE ABOUT THE FUND 5
HOW TO DO BUSINESS WITH THE ONE GROUP 5
Purchasing Fund Shares 5
Exchanging Fund Shares 7
Redeeming Fund Shares 8
SHAREHOLDER INFORMATION 9
Voting Rights 9
Dividend Policies 9
Tax Treatment of the Fund 9
Tax Treatment of Shareholders 10
Shareholder Inquiries 10
ORGANIZATION & MANAGEMENT OF THE FUND 10
The Fund 10
The Board of Trustees 10
The Advisor 10
The Distributor 11
The Administrator and Sub-Administrator 11
The Transfer Agent, Custodian and Sub-Custodian 11
DETAILS ABOUT THE FUND'S INVESTMENT PRACTICES AND POLICIES 11
Investment Practices 11
Investment Risks 13
Investment Policies 14
APPENDIX: DESCRIPTION OF RATINGS 15
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[CLOCK] A BRIEF PREVIEW OF THE FUND
WHAT ARE THE GOALS OF THE ONE GROUP INSTITUTIONAL PRIME MONEY MARKET FUND? The
Fund seeks high current income consistent with the preservation of capital and
maintenance of liquidity. The Fund will use its best efforts to maintain a
constant net asset value of $1.00 per share, although there is no guarantee that
the Fund will be able to do so. Please read about the Fund before investing.
WHAT IS THE FUND'S INVESTMENT STRATEGY? The Fund 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. The Fund intends to comply with Rule 2a-7 under the Investment Company Act
of 1940.
WHAT ARE THE MAIN RISKS OF INVESTING IN THE FUND? The Fund invests in securities
that are backed by "credit enhancements" such as letters of credit. The value of
investments in the Fund could decrease if the credit quality of the credit
enhancement provider declines. The Fund invests in mortgage related securities
which have significantly greater price and yield volatility than traditional
fixed income securities. In addition, the Fund invests in U.S. dollar
denominated foreign securities which may expose the Fund to risks that are
different from investments in U.S. Securities. An investment in the Fund is not
a deposit of BANC ONE CORPORATION or its affiliates and is not insured or
guaranteed by the Federal Deposit Insurance Corporation or any other government
agency. For more information about risks, please read "More About the Fund" and
"Investment Risks."
WHO CAN BUY SHARES? The Fund currently offers shares only to institutional and
other accredited investors. For more details, please see the section of this
prospectus entitled "Purchasing Fund Shares."
HOW DO I PURCHASE AND REDEEM SHARES? You may buy and redeem shares of the Fund
on any day that the Fund is open for business. Purchase and redemption
procedures are explained in greater detail in "How To Do Business With The One
Group." For additional information, call The One Group Services Company at
1-800-480-4111.
HOW ARE DIVIDENDS PAID? Generally, dividends are declared on each business day
and are distributed periodically. Any capital gains are distributed at least
annually. Distributions are paid in additional shares of the same class unless
you elect to take the payment in cash.
For a more detailed discussion of dividends, see "Dividend Policies."
WHO MANAGES THE FUND? Banc One Investment Advisors Corporation ("Banc One
Investment Advisors"), an indirect subsidiary of BANC ONE CORPORATION, serves as
the advisor of the Fund. Banc One Investment Advisors is paid a fee for its
services. A more detailed discussion regarding Banc One Investment Advisors, its
services and compensation can be found in the Prospectus under the headings "The
Advisor" and "Expense Summary."
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THE ONE GROUP INSTITUTIONAL PRIME MONEY MARKET FUND
INVESTMENT OBJECTIVE: The Fund is a diversified money market
fund that seeks current income with liquidity and stability of
principal.
PORTFOLIO SECURITIES: The Fund invests exclusively in high quality money market
instruments. These instruments include U.S. Treasury obligations, obligations
issued or guaranteed by U.S. agencies or instrumentalities, mortgage-backed
securities, commercial paper, bank obligations and deposit notes. The Fund also
may invest in commercial paper issued by foreign issuers. The Fund may invest up
to 10% of its net assets in illiquid investments such as certain restricted
securities and private placements. The Fund also engages in securities lending.
For a list of all of the securities in which the Fund may invest, please read
"Investment Practices."
RISK CONSIDERATIONS: The Fund invests in securities that are
backed by "credit enhancements" such as letters of credit. The
value of your investment in the Fund could decrease if the value
of the securities in the portfolio decreases in response to declining
credit quality of a credit enhancement provider. The Fund also
invests in U.S. dollar denominated foreign investments which
involve risks that are different from investments in U.S.
companies. In addition, the Fund invests in mortgage-related
securities which have significantly greater price and yield
volatility than traditional fixed-income securities. Before you
invest, please read "More About the Fund" and "Investment
Risks."
- --------------------------------------------------------------------------------
SHAREHOLDER EXPENSES
SHAREHOLDER TRANSACTION EXPENSES(1)
Maximum Sales Charge Imposed on Purchases none
(as a percentage of offering price)
Maximum Contingent Deferred Sales Charge none
(as a percentage of original purchase price
or redemption proceeds, as applicable)
Redemption Fees none
Exchange Fees none
ANNUAL OPERATING EXPENSE
(as a percentage of average daily net assets)
Investment Advisory Fees .10%
Other Expenses(2) .10%
Total Fund Operating Expenses (after fee waiver) .20%
(1) If you buy or sell shares through a Shareholder Servicing Agent, you
may be charged separate transaction fees by the Shareholder Servicing
Agent.
(2) Other Expenses are based on estimated amounts for the current fiscal
year.
EXAMPLE: An investor would pay the following expenses on a $1,000 investment in
the Fund, assuming: (1) payment of the maximum sales charge; (2) 5% annual
return; and (3) redemption at the end of each time period.
1 YEAR 3 YEARS
------ -------
$2 $6
These examples are designed to assist you in understanding the various costs and
expenses that may be directly or indirectly paid by investors in the Fund. THESE
EXAMPLES SHOULD NOT BE CONSIDERED A REPRESENTATION OF PAST OR FUTURE EXPENSES
AND ACTUAL EXPENSES MAY BE GREATER OR LESS THAN THOSE SHOWN.
FINANCIAL HIGHLIGHTS
This section normally would include Financial Highlights for the Fund. Because
the Fund had not begun operations as of June 30, 1998, that are no Financial
Highlights for the Fund.
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MORE ABOUT THE FUND
PORTFOLIO QUALITY
Securities will be purchased by the Fund only if Banc One Investment Advisors
determine that they present minimal credit risk under guidelines adopted by the
Board of Trustees. In addition, unless a more specific rating is specified, all
investments of the Fund must be rated in one of the two highest rating
categories described in "Description of Ratings" in the Appendix. If an
investment is unrated, Banc One Investment Advisors must determine that it is of
comparable quality to a rated security. Banc One Investment Advisors will look
at a security's rating at the time of investment. For more information about
ratings, please see "Description of Ratings" in the Appendix.
ILLIQUID INVESTMENTS
The Fund may invest up to 10% of its net assets in illiquid investments. A
security is illiquid if it cannot be sold at approximately the value assessed by
the Fund within seven (7) days. Banc One Investment Advisors will follow
guidelines adopted by The One Group Board of Trustees in determining whether an
investment is illiquid.
SPECIAL RISK CONSIDERATIONS
NET ASSET VALUE: There is no assurance that the Fund will meet its investment
objectives or be able to maintain a net asset value of $1.00 per share on a
continuous basis.
FIXED INCOME SECURITIES: The value of fixed income securities (for example,
bonds) will increase or decrease based on changes in interest rates. If rates
increase, the value of a Fund's investments generally declines. On the other
hand, if rates fall, the value of the investments generally increases. The value
of your investment in a Fund will increase or decrease as the value of the
Fund's investments increase and decrease. While securities with longer duration
and maturities tend to produce higher yields, they are also subject to greater
fluctuations in value when interest rates change. Usually changes in the value
of fixed income securities will not affect cash income generated, but may affect
the value of your investment.
DERIVATIVES: The Fund may invest in securities that are considered to be
derivatives. "Derivatives" are securities that derive their value from the
performance of underlying assets or securities. These securities may be more
volatile than other securities. These include mortgage-backed securities,
including collateralized mortgage obligations and Real Estate Mortgage
Investment Conduits (CMOs and REMICs) and asset-backed securities. Derivatives
may be riskier than traditional investments. Derivatives present, to varying
degrees, market, credit, leverage, liquidity, and management risks. The Fund's
use of derivatives may cause the Fund to recognize higher amounts of short-term
capital gains (generally taxed at ordinary income tax rates) than it would if
the Fund did not use such instruments. For a more detailed discussion of these
risks, please read "Investment Risks."
HOW TO DO BUSINESS WITH THE ONE GROUP
PURCHASING FUND SHARES
WHERE CAN I BUY SHARES? You may purchase Fund shares from the following sources:
* The One Group Services Company, and
* Shareholder Servicing Agents. These include investment advisors, brokers,
financial planners, banks, insurance companies, retirement or 401(k) plan
sponsors, or other intermediaries. Shares purchased this way will be held
for you by the Shareholder Servicing Agent.
WHO MAY PURCHASE FUND SHARES? Fund shares may be purchased by:
* Commercial and retail institutional investors, including affiliates of BANC
ONE CORPORATION, that have opened accounts with the Fund's transfer agent,
State Street Bank and Trust Company, either directly or through a
Shareholder Servicing Agent.
* Individuals with a net worth, or joint net worth with their spouse, at the
time of purchase in excess of $1 million.
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* Individuals with annual income, or joint annual income with their spouse,
at the time of purchase in excess of $200,000.
* If you have questions about eligibility, please call The One Group Services
Company at 1-800-480-4111.
WHEN CAN I BUY SHARES?
* Purchases may be made on any business day. This includes any day that the
Fund is open for business, other than weekends, days on which the New York
Stock Exchange ("NYSE") is closed, and the following holidays: New Years
Day, Martin Luther King, Jr. Day, Presidents' Day, Good Friday, Memorial
Day, Independence Day, Labor Day, Columbus Day, Veterans Day, Thanksgiving,
and Christmas.
* Purchase requests will be effective on the day received by The One Group
Services Company and you will be eligible to receive dividends declared the
same day, if (i) such purchase orders are received by The One Group
Services Company before 4:00 p.m., Eastern Time ("ET"), and (ii) the Fund's
custodian, State Street Bank and Trust Company, receives "federal funds"
before 4:00 p.m., ET on such day. If State Street Bank and Trust Company
does not receive federal funds by the cut-off time, the purchase order will
not be effective until the next Business Day on which federal funds are
timely received by State Street Bank and Trust Company.
* On occasion, the NYSE will close before 4 p.m. ET. When that happens,
purchase requests received after the NYSE closes will be effective the
following business day.
* If your shares are held by a Shareholder Servicing Agent, it is the
responsibility of the Shareholder Servicing Agent to send your purchase or
redemption order to the Fund. Your Shareholder Servicing Agent may have an
earlier cut-off time for purchase and redemption requests.
* The One Group Services Company can reject a purchase order if it does not
think that it is in the best interests of the Fund and/or its shareholders
to accept the order.
* Shares are electronically recorded. Therefore, certificates will not be
issued.
HOW MUCH DO SHARES COST?
* Shares are sold at net asset value ("NAV").
* NAV per share is calculated by dividing the total market value of the
Fund's investment and other assets (minus expenses) by the number of
outstanding shares. The Fund uses its best efforts to maintain its NAV at
$1.00, although there is no guarantee that it will be able to do so.
* NAV is calculated each business day as of 2:00 p.m. and following the close
of the NYSE at 4:00 p.m., ET. On occasion, the NYSE will close before 4:00
p.m ET. When that happens, NAV will be calculated as of the time the NYSE
closes.
HOW DO I OPEN AN ACCOUNT?
1. Read the prospectus carefully.
2. Decide how much you want to invest. o The minimum initial investment is
$1,000,000. o Subsequent investments must be at least $5,000. o The One
Group Services Company may waive these minimums.
3. Complete the Account Application Form. Be sure to sign up for all of the
Account privileges that you plan to take advantage of. Doing so now means
that you will not have to complete additional paperwork later.
4. Send the completed application and a personal check (unless you choose to
pay by wire or bank transfer) payable to "The One Group" to:
State Street Bank and Trust Company
c/o The One Group
P.O. Box 8528
Boston, MA 02266-8528
5. All checks should be in U.S. dollars. Third party checks will not be
accepted. Redemptions from the Fund will not be permitted for ten (10)
calendar days if purchases are made by check.
6
<PAGE> 417
6. If you purchase shares through a Shareholder Servicing Agent, you may be
required to complete additional forms or follow additional procedures. You
should contact your Shareholder Servicing Agent regarding purchases,
exchanges and redemptions.
7. If you have any questions, contact your Shareholder Servicing Agent or call
The One Group Services Company at 1-800-480-4111.
CAN I PURCHASE SHARES OVER THE TELEPHONE?
Yes. Simply select this option on your Account Application Form and then:
* Contact your Shareholder Servicing Agent or The One Group Services Company
at 1-800-480-4111 to relay your purchase instructions.
* Authorize a bank transfer or initiate a wire transfer payable to "The One
Group" to State Street Bank and Trust Company at the following wire
address:
State Street Bank & Trust Company
Attn: Custody & Shareholder Services
ABA 011 000 028
DDA 99034167
FBO The One Group Fund (ex: The One Group Institutional Prime Money Market
Fund)
Your Account Number (ex: 123456789)
Your Account Registration (ex: John Smith & Mary Smith, JTWROS)
* The One Group uses reasonable procedures to confirm that instructions given
by telephone are genuine. These procedures include recording telephone
instructions and asking for personal identification. If these procedures
are followed, The One Group will not be responsible for any loss,
liability, cost or expense of acting upon unauthorized or fraudulent
instructions; you bear the risk of loss.
* You may revoke your right to make purchases over the telephone or by
sending a letter to:
State Street Bank and Trust Company
c/o The One Group
P.O. Box 8528
Boston, MA 02266-8528
EXCHANGING FUND SHARES
WHAT ARE MY EXCHANGE PRIVILEGES?
* You may exchange your shares for shares of any other institutional Money
Market Fund of The One Group. o The One Group may change the terms and
conditions of your exchange privileges upon 60 days written notice.
* The One Group Funds offer a Systematic Exchange Privilege which allows you
to automatically exchange shares of one fund to another on a monthly or
quarterly basis. This privilege is useful in Dollar Cost Averaging. To
participate in this privilege, please select it on your account
application. To learn more about it, please call The One Group Services
Company at 1-800-480-4111.
* The One Group does not charge a fee for this privilege.
WHEN ARE EXCHANGES PROCESSED?
Exchanges are processed the same business day they are received, provided:
* State Street Bank and Trust Company receives the request by 12:30 p.m., ET.
* You have provided The One Group with all of the information necessary to
process the exchange.
* You have received a current prospectus of the Fund or Funds in which you
wish to invest. o You have contacted your Shareholder Servicing Agent, if
necessary.
ARE EXCHANGES TAXABLE?
Generally:
* An exchange between Funds is considered a sale and generally results in a
capital gain or loss for Federal income tax purposes.
7
<PAGE> 418
* You should talk to your tax advisor before making an exchange.
ARE THERE LIMITS ON EXCHANGES?
Yes. The exchange privilege is not intended as a way for you to speculate on
short-term movements in the market.
Therefore:
* To prevent disruptions in the management of the Funds, The One Group limits
excessive exchange activity.
* Exchange activity is excessive if it EXCEEDS TWO SUBSTANTIVE EXCHANGE
REDEMPTIONS (WITHIN 30 DAYS OF EACH OTHER) WITHIN A TWELVE MONTH PERIOD.
* In addition, The One Group reserves the right to reject any exchange
request (even those that are not excessive) if the Fund reasonably believes
that the exchange will result in excessive transaction cost or otherwise
adversely affect other shareholders.
REDEEMING FUND SHARES
WHEN CAN I REDEEM SHARES?
* You may redeem all or some of your shares on any day that the Fund is open
for business.
* Redemption requests received by The One Group Services Company before 4:00
p.m., ET (or when the NYSE closes), will be effective that day.
HOW DO I REDEEM SHARES?
o Unless you have selected the telephone option on your Account Application
Form, you must send a written redemption request to your Shareholder
Servicing Agent, if applicable, or to State Street Bank and Trust Company
at the following address:
State Street Bank and Trust Company
c/o The One Group
P.O. Box 8528
Boston, MA 02266-8528
* You may request redemption forms by calling The One Group Services Company
at 1-800-480-4111.
* State Street Bank and Trust Company may require that the signature on your
redemption request be guaranteed by a commercial bank, a member of a
domestic stock exchange, or a member of the Securities Transfer Association
Medallion Program or the Stock Exchange Medallion Program, unless:
1. the redemption is for $50,000 worth of shares or less;
2. the redemption is payable to the shareholder of record;
3. the redemption check is mailed to the shareholder at the record
address; or
4. the redemption is payable by wire or bank transfer (ACH) to a
pre-existing bank account.
* On the Account Application Form you may elect to have the redemption
proceeds mailed or wired to:
1. a designated commercial bank; or
2. State Street Bank and Trust Company or your Shareholder Servicing
Agent.
* Your redemption proceeds will ordinarily be paid within seven days after
receipt of the redemption request. However, the Fund will attempt to honor
requests for next day payment on redemptions, if the request is received
before 2:00 p.m., ET.
* The Funds also will attempt to honor requests for payments in two business
days, if the redemption request is received after the time listed above.
WHAT WILL MY SHARES BE WORTH?
* The NAV of shares of the Fund is expected to remain constant at $1.00 per
share, although there is no assurance that this will always be the case.
* You will receive the NAV calculated after your redemption request is
received. Please read "How Much Do Shares Cost?"
CAN I REDEEM BY TELEPHONE?
Yes, if you selected this option on your Account Application Form.
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<PAGE> 419
* Call your Shareholder Servicing Agent or State Street Bank and Trust
Company at 1-800-480-4111 to relay your redemption request.
* Your redemption proceeds will be mailed or wired to the commercial bank
account you designated on your Account Application Form.
* State Street Bank and Trust Company may charge you a wire redemption fee.
The current charge is $7.00.
* The One Group uses reasonable procedures to confirm that instructions given
by telephone are genuine. These procedures include recording telephone
instructions and asking for personal identification. If these procedures
are followed, The One Group will not be responsible for any loss,
liability, cost or expense of acting upon unauthorized or fraudulent
instructions; you bear the risk of loss.
ADDITIONAL INFORMATION REGARDING REDEMPTIONS
* All redemptions will be for cash. The redemption price of shares is
expected to remain constant at $1.00 per share, although there is no
assurance that this will always be the case.
* If you redeem shares for which you paid by check, and The One Group has not
yet received payment on the check, The One Group will delay forwarding your
redemption proceeds for 10 or more days until payment has been collected
from your bank.
* The One Group may suspend your ability to redeem when:
1. Trading on the NYSE is restricted.
2. The NYSE is closed (other than weekend and holiday closings).
3. The SEC has permitted a suspension.
4. An emergency exists.
The Statement of Additional Information offers more details about this
process.
* You generally will recognize a gain or loss on a redemption for Federal
income tax purposes. You should talk to your tax advisor before making a
redemption.
SHAREHOLDER INFORMATION
VOTING RIGHTS
The Fund does not hold annual shareholder meetings, but may hold special
meetings. The special meetings are held, for example, to elect or remove
Trustees, change the Fund's fundamental investment objective, or approve an
investment advisory contract.
As a Fund shareholder, you have one vote for each share that you own. The Fund,
and each class of shares within the Fund, vote separately on matters relating
solely to the Fund or class, or which affect the Fund or class differently from
the other funds of The One Group. However, all shareholders will have equal
voting rights on matters that affect all shareholders equally.
DIVIDEND POLICIES
DIVIDENDS: The Fund generally declares dividends on each business day. Dividends
are distributed on the first business day of each month. Capital gains, if any,
for the Fund are distributed at least annually.
DIVIDEND REINVESTMENT: You automatically will receive all income dividends and
capital gain distributions in additional shares of the same Fund, unless you
have elected to take such payment in cash. The price of the shares is the NAV
determined immediately following the dividend record date. Reinvested dividends
and distributions receive the same tax treatment as dividends and distributions
paid in cash.
If you want to change the way in which you receive dividends and distributions,
you must write to State Street Bank & Trust Company at P.O. Box 8528, Boston, MA
02266-8528, at least 15 days prior to the distribution. The change is effective
upon receipt by State Street.
TAX TREATMENT OF THE FUND
TAX STATUS OF THE FUND
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<PAGE> 420
The Fund intends to qualify as a "regulated investment company" for Federal
income tax purposes. If the Fund qualifies, it will pay no federal income tax on
the earnings it distributes to shareholders.
TAX TREATMENT OF SHAREHOLDERS
TAXATION OF SHAREHOLDER TRANSACTIONS
A sale, exchange, or redemption of Fund shares will generally produce either a
taxable gain or a loss. You are responsible for any tax liabilities generated by
your transactions.
TAXATION OF DISTRIBUTIONS
The Fund will distribute substantially all of its net investment income
(including, for this purpose, net short-term capital gain) to investors on at
least an annual basis. Dividends you receive from the Fund, whether reinvested
or received in cash, will be taxable to you. Dividends from the Fund's net
investment income will be taxable as ordinary income and dividends from the
Fund's long-term capital gains will be taxable to you as such, regardless of how
long you have held the shares.
Dividends paid in January, but declared in October, November or December of the
previous year, will be considered to have been paid the previous December.
TAX INFORMATION: The Form 1099 that is mailed to you every January details your
dividends and their federal tax category. Even though the Fund provides you with
this information, you are responsible for verifying your tax liability with your
tax professional. For additional tax information see the Statement of Additional
Information. Please note that this tax discussion is general in nature; 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.
SHAREHOLDER INQUIRIES
If you have any questions or need additional information, please write The One
Group Services Company at 3435 Stelzer Road, Columbus, OH 43219 or call
1-800-480-4111.
BOX: REPORTING: In March and September you will receive a financial report from
The One Group. In addition, The One Group will periodically send you proxy
statements and other reports.
ORGANIZATION & MANAGEMENT OF THE FUNDS
THE FUND
The Fund is a series of The One Group, an open-end management investment
company. The One Group currently consists of 40 separate Funds. The other 39
Funds are described in separate prospectuses. The Fund described in this
prospectus is diversified. Each Fund is supervised by the Board of Trustees.
THE BOARD OF TRUSTEES
The Trustees oversee the management and administration of the Fund. The Trustees
are responsible for making major decisions about the Fund's investment
objectives and policies, but delegate the day-to-day administration of the Fund
to the officers of The One Group.
THE ADVISOR
Banc One Investment Advisors makes the day-to-day investment decisions for the
Fund and continuously reviews, supervises and administers the Fund's investment
program. Banc One Investment Advisors has served as investment advisor to The
One Group since 1993. Prior to that time, The One Group was advised by
affiliates of Banc One Investment Advisors. In addition to The One Group, Banc
One Investment Advisors serves as investment advisor to other mutual funds and
individual, corporate, charitable and retirement accounts. As of June 30, 1998,
Banc One Investment Advisors, an indirect, wholly-owned subsidiary of BANC ONE
CORPORATION, managed over $59 billion in assets.
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<PAGE> 421
THE DISTRIBUTOR
The One Group Services Company, 3435 Stelzer Road, Columbus, Ohio 43219, a
wholly-owned subsidiary of The BISYS Group, Inc., markets the Fund and
distributes shares through selling brokers, financial institutions, investment
advisors, and other financial representatives.
THE ADMINISTRATOR AND SUB-ADMINISTRATOR
The One Group Services Company also serves as the Fund's administrator. The One
Group Services Company is responsible for responding to shareholder inquiries
and requests for information, as well as providing regulatory compliance and
reporting. For these services, The One Group Services Company receives an annual
fee of .05% of the Fund's average daily assets. The fee is calculated daily and
paid monthly. Banc One Investment Advisors, the Sub- Administrator, provides
office space, equipment, and facilities, as well as legal and regulatory
support.
THE TRANSFER AGENT, CUSTODIAN AND THE SUB-CUSTODIAN
State Street Bank and Trust Company, P.O. Box 8528, Boston, MA 02266-8528 or
your Shareholder Servicing Agent, if appropriate, handles shareholder
recordkeeping and statements, distributes dividends, and processes buy and sell
requests. As the Fund's custodian, State Street holds the Fund's assets, settles
all portfolio trades and assists in calculating the Fund's net asset values.
Bank One Trust Company, N.A. serves as sub-custodian in connection with the
Fund's securities lending activities under an agreement with State Street Bank
and Trust Company. Bank One Trust Company, N.A. is paid a fee for this service.
YEAR 2000
Preparing for the Year 2000 is a high priority for The One Group Family of
Mutual Funds. Both The One Group Services Company and Banc One Investment
Advisors have formed dedicated teams to help them successfully achieve Year 2000
compliance. In addition, these teams are responsible for assessing the readiness
of all other service providers to The One Group. Year 2000 remediation efforts
are directed toward both information technology and non-information technology
systems. Non-information technology systems include elevators, photocopy
machines, and facsimile machines, and should have no significant impact on the
delivery of services to The One Group.
Banc One Investment Advisors has identified 49 information technology systems
and interfaces that provide service and support to The One Group. Each system is
assigned a priority rating: high, medium or low. Systems rated "high" are those
which are essential to the operation of The One Group. Each system rated "high"
is scheduled to be Year 2000 compliant by December 31, 1998. All systems will be
tested for compliance throughout 1999.
Many, if not all, of the systems are owned or operated by third party servicers
(for example, The One Group's Custodian). Consequently, remediation efforts must
be made by those servicers. Banc One Investment Advisors and The One Group
Services Company have, and will continue to, monitor the remediation progress of
the service providers. This process involves documentation, on-site visits, and
review of remediation plans and test results. Both Banc One Investment Advisors
and The One Group Services Company have budgeted in excess of $700,000 in fiscal
year 1998 and over $1 million in fiscal year 1998 toward the remediation effort
for all systems and interfaces. Neither The One Group nor its shareholders will
bear any of the direct remediation expenses.
Neither The One Group Services Company nor Banc One Investment Advisors
currently anticipate that the move to Year 2000 will have a material impact on
their ability to continue to provide the Funds with service at current levels.
Likewise, The One Group currently anticipates that the more to Year 2000 will
not have a material impact on its operations.
DETAILS ABOUT THE FUND'S INVESTMENT PRACTICES AND POLICIES
INVESTMENT PRACTICES
The Fund invests in a variety of securities and employs a number of investment
techniques. Each security and technique involves certain risks. What follows is
a list of the securities and techniques utilized by the Fund, as well as the
risks inherent in their use. Fixed income securities are primarily influenced by
market, credit and prepayment risks, although certain securities may be subject
to additional risks. For a more complete discussion, see the Statement of
Additional Information. Following the table is a more complete discussion of
risk.
<TABLE>
<CAPTION>
Instrument Risk Type
- ------------------------------------------------------------------------------------------------------------------------
<S> <C>
U.S. TREASURY OBLIGATIONS: Bills, notes, bonds, STRIPS, and CUBES. Market
TREASURY RECEIPTS: TRS, TIGRs, and CATS. Market
U.S. GOVERNMENT AGENCY SECURITIES: Securities issued by agencies and instrumentalities of the Market
U.S. Government. These include Ginnie Mae, Fannie Mae, and Freddie Mac. Credit
CERTIFICATES OF DEPOSIT: Negotiable instruments with a stated maturity. Market
Credit
Liquidity
TIME DEPOSITS: Non-negotiable receipts issued by a bank in exchange for the deposit of funds. Liquidity
Credit
Market
REPURCHASE AGREEMENTS: The purchase of a security and the simultaneous commitment to return Credit
the security to the seller at an agreed upon price on an agreed upon date. This is treated as a loan. Market
Liquidity
</TABLE>
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<TABLE>
<CAPTION>
<S> <C>
REVERSE REPURCHASE AGREEMENT: The sale of a security and the simultaneous commitment to Market
buy the security back at an agreed upon price on an agreed upon date. This is treated as a Leverage
borrowing by a Fund.
SECURITIES LENDING: The lending of up to 33 1/3% of the Fund's total assets. In return the Fund Credit
will receive cash, other securities and/or letters of credit as collateral. Market
Leverage
WHEN-ISSUED SECURITIES AND FORWARD COMMITMENTS: Purchase or contract to purchase securities Market
at a fixed price for delivery at a future date. Leverage
Liquidity
INVESTMENT COMPANY SECURITIES: Shares of other mutual funds, including money
market funds Market of The One Group and shares of other investment companies
for which Banc One Investment Advisors serves as investment advisor or
administrator. Banc One Investment Advisors will waive certain fees when
investing in funds for which it serves as investment advisor.
BANKERS' ACCEPTANCES: Bills of exchange or time drafts drawn on and accepted by a Credit
commercial bank. Maturities are generally six months or less. Liquidity
Market
COMMERCIAL PAPER: Secured and unsecured short-term promissory notes issued by corporations Credit
and other entities. Maturities generally vary from a few days to nine months. Liquidity
Market
FOREIGN SECURITIES: Commercial paper of foreign issuers and obligations of foreign Market
banks, overseas branches of U.S. banks and supranational entities. Political
Liquidity
Foreign
Investment
RESTRICTED SECURITIES: Securities not registered under the Securities Act of 1933, such as Liquidity
privately placed commercial paper and Rule 144A securities. Market
VARIABLE AND FLOATING RATE NOTES: Obligations with interest rates which are reset Market
daily, weekly, quarterly or some other period and which may be payable to the Fund on demand. Credit
Liquidity
MORTGAGE-BACKED SECURITIES: Debt obligations secured by real estate loans and pools of loans. Pre-Payment
These include collateralized mortgage obligations ("CMOs") and Real Estate Mortgage Investment Market
Conduits ("REMICs"). Credit
Regulatory
DEMAND FEATURES: Securities that are subject to puts and standby commitments to purchase Market
the securities at a fixed price (usually with accrued interest) within a fixed period of time following Liquidity
demand by a Fund. Management
MUNICIPAL SECURITIES: Securities issued by a state or political subdivision to obtain funds for Market
various public purposes. Municipal securities include private activity bonds and industrial Credit
development bonds, as well as General Obligation Notes, Tax Anticipation Notes, Bond Political
Anticipation Notes, Revenue Anticipation Notes, Project Notes, other short-term tax-exempt Tax
obligations, municipal leases, and obligations of municipal housing authorities and single
family revenue bonds.
SHORT-TERM FUNDING AGREEMENTS: Agreements issued by banks and highly rated insurance companies Market
such as Guaranteed Investment Contracts ("GICs") and Bank Investment Contracts ("BICs"). Credit
Liquidity
PARTICIPATION INTERESTS: Interests in municipal securities, including municipal leases, from Credit
financial institutions such as commercial and investment banks, savings and loan associations and Tax
insurance companies. These interests may take the form of participations, beneficial interests in a trust, Market
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.
ASSET-BACKED SECURITIES: Securities secured by company receivables, home equity loans, truck Pre-Payment
and auto loans, leases, credit card receivables and other securities backed by other types of Market
receivables or other assets. Credit
Regulatory
</TABLE>
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<PAGE> 423
INVESTMENT RISKS
Below is a more complete discussion of the types of risks inherent in the
securities and investment techniques listed above. Because of these risks, the
value of the securities held by the Fund may fluctuate, as will the value of
your investment in the Fund. Certain investments are more susceptible to these
risks than others.
* CREDIT RISK. The risk that the issuer of a security, or the counterparty to
a contract, will default or otherwise become unable to honor a financial
obligation. Credit risk is generally higher for non-investment grade
securities. The price of a security can be adversely affected prior to
actual default as its credit status deteriorates and the probability of
default rises.
* LEVERAGE RISK. The risk associated with securities or practices (such as
borrowing) that multiply small index or market movements into large changes
in value. Leverage is often associated with investments in derivatives, but
also may be embedded directly in the characteristics of other securities.
* LIQUIDITY RISK. The risk that certain securities may be difficult or
impossible to sell at the time and the price that normally prevails in the
market. The seller may have to lower the price, sell other securities
instead or forego an investment opportunity, any of which could have a
negative effect on fund management or performance. This includes the risk
of missing out on an investment opportunity because the assets necessary to
take advantage of it are tied up in less advantageous investments.
* MANAGEMENT RISK. The risk that a strategy used by a fund's management may
fail to produce the intended result. This includes the risk that changes in
the value of a hedging instrument will not match those of the asset being
hedged. Incomplete matching can result in unanticipated risks.
* MARKET RISK. The risk that the market value of a security may move up and
down, sometimes rapidly and unpredictably. These fluctuations may cause a
security to be worth less than the price originally paid for it, or less
than it was worth at an earlier time. Market risk may affect a single
issuer, industry, sector of the economy or the market as a whole. There
also is the risk that the current interest rate may not accurately reflect
existing market rates. For fixed income securities, market risk is largely,
but not exclusively, influenced by changes in interest rates. A rise in
interest rates typically causes a fall in values, while a fall in rates
typically causes a rise in values. Finally, key information about a
security or market may be inaccurate or unavailable.
* POLITICAL RISK. The risk of losses attributable to unfavorable governmental
or political actions, seizure of foreign deposits, changes in tax or trade
statutes, and governmental collapse and war.
* FOREIGN INVESTMENT RISK. Risks associated with higher transaction costs,
delayed settlements, currency controls, and adverse economic developments.
This also includes the risk that fluctuations in the exchange rates between
the U.S. dollar and foreign currencies may negatively affect an investment.
Adverse changes in exchange rates may erode or reverse any gains produced
by foreign currency denominated investments and may widen any losses.
Exchange rate volatility also may affect the ability of an issuer to repay
U.S. dollar denominated debt, thereby increasing credit risk.
* PRE-PAYMENT RISK. The risk that the principal repayment of a security will
occur at an unexpected time, especially that the repayment of a mortgage or
asset-backed security occurs either significantly sooner or later than
expected. Changes in pre-payment rates can result in greater price and
yield volatility. Pre-payments generally accelerate when interest rates
decline. When mortgage and other obligations are pre-paid, a Fund may have
to reinvest in securities with a lower yield. Further, with early
repayment, a Fund may fail to recoup any premium paid, resulting in an
unexpected capital loss.
* TAX RISK. The risk that the issuer of the securities will fail to comply
with certain requirements of the Internal Revenue Code, which would cause
adverse tax consequences.
* REGULATORY RISK. The risk associated with Federal and state laws which may
restrict the remedies that a mortgage lender has when a borrower defaults
on mortgage loans. These laws include restrictions on foreclosures,
redemption
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<PAGE> 424
rights after foreclosure, Federal and state bankruptcy and debtor relief
laws, restrictions on "due on sale" clauses, and state usury laws.
INVESTMENT POLICIES
The Fund's investment objective and the investment policies summarized below are
fundamental. This means that they cannot be changed without the consent of a
majority of the outstanding shares of the Fund. In addition to the fundamental
policies mentioned earlier, the following fundamental policies apply to the Fund
as specified. The full text of the fundamental policies can be found in the
Statement of Additional Information.
The Fund:
1. Will use its best efforts to maintain a constant net asset value of $1.00 per
share, although there is no guarantee that the Fund will be able to do so.
2. Will not 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.
3. Will not concentrate its investments in the securities of one or more issuers
conducting their principal business in a particular industry or group of
industries. This does not include obligations issued or guaranteed by the U.S.
government or its agencies and instrumentalities, domestic bank certificates of
deposit or banker's acceptances, and repurchase agreements involving such
securities, municipal securities or governmental guarantees of municipal
securities. In addition, private activity bonds backed only by the revenues and
assets of a non-governmental user will not be deemed to be municipal securities.
4. Will not purchase an issuer's securities if as a result more than 5% of its
total assets would be invested in the securities of that issuer or the Fund
would own more than 10% of the outstanding voting securities of any that issuer.
This does not include securities issued or guaranteed by the United States, its
agencies or instrumentalities, and repurchase agreements involving these
securities. This restriction applies with respect to 75% of the Fund's total
assets. The Fund may invest the remaining 25% of its total assets without
restriction.
Additional investment policies can be found in the Statement of Additional
Information.
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<PAGE> 425
APPENDIX A
DESCRIPTION OF RATINGS
The following is a summary of published ratings by major credit rating agencies.
Credit ratings evaluate only the safety of principal and interest payments, not
the market value risk of lower quality securities. Credit rating agencies may
fail to change credit ratings to reflect subsequent events on a timely basis.
Although Banc One Investment Advisors considers security ratings when making
investment decisions, it also performs its own investment analysis and does not
rely solely on the ratings assigned by credit agencies.
Unrated securities will be treated as non-investment grade securities unless
Banc One Investment Advisors determines that such securities are the equivalent
of investment grade securities. Securities that have received different ratings
from more than one agency are considered investment grade if at least one agency
has rated the security investment grade.
DESCRIPTION OF COMMERCIAL PAPER RATINGS
DUFF & PHELPS CREDIT RATING CO. ("DUFF")
D-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
obligations.
D-1 Very high certainty of timely payment. Liquidity factors are excellent
and supported by good fundamental protection factors. Risk factors are
minor.
D-1- High certainty of timely payment. Liquidity factors are strong and
supported by good fundamental protection factors. Risk factors are
very small.
STANDARD & POOR'S CORPORATION ("S&P")
A-1 Highest category of commercial paper. Capacity to meet financial
commitment is strong. Obligations designated with a plus sign (+)
indicate that capacity to meet financial commitment is extremely
strong.
A-2 Issues somewhat more susceptible to adverse effects of changes in
circumstances and economic conditions than obligations in higher
rating categories. However, the capacity to meet financial commitments
is satisfactory.
FITCH LIMITED ("FITCH")
F1 Highest capacity for timely repayment. Those issues rated F1+ possess
a particularly strong credit feature.
F2 Satisfactory capacity for timely repayment although such capacity may
be susceptible to adverse changes in business, economic or financial
conditions.
MOODY'S INVESTORS SERVICE ("MOODY'S")
Prime-1 Superior ability for repayment.
Prime-2 Strong ability for repayment.
15
<PAGE> 426
DESCRIPTION OF BANK RATINGS
MOODY'S
These ratings represent Moody's opinion of a bank's intrinsic safety and
soundness.
A These banks possess exceptional intrinsic financial strength. Typically
they will be major financial institutions with highly valuable and
defensible business franchises, strong financial fundamentals, and a
very attractive and stable operating environment.
B These banks possess strong intrinsic financial strength. Typically,
they will be important institutions with valuable and defensible
business franchises, good financial fundamentals, and an attractive and
stable operating environment.
C These banks possess good intrinsic financial strength. Typically, they
will be institutions with valuable and defensible business franchises.
These banks will demonstrate either acceptable financial fundamentals
within a stable operating environment, or better than average financial
fundamentals within an unstable operating environment.
S&P
S&P's credit rating is a current opinion of an obligor's overall financial
capacity (its creditworthiness) to pay its financial obligation.
AAA The highest rating assigned by S&P. The obligor's capacity to meet its
financial commitment on the obligation is extremely strong.
AA The obligor's capacity to meet its financial commitments on the
obligation is very strong.
A The obligation is somewhat more susceptible to the adverse effects of
changes in circumstances and economic conditions than obligations in
higher rated categories. However, the obligor's capacity to meet its
financial commitment on the obligation is still strong.
DESCRIPTION OF INSURANCE RATINGS
MOODY'S
These ratings represent Moody's opinions of the ability of insurance companies
to pay punctually senior policyholder claims and obligations.
Aaa Insurance companies rated in this category offer exceptional financial
security. While the financial strength of these companies is likely to
change, such changes as can be visualized are most unlikely to impair
their fundamentally strong position.
Aa These insurance companies offer excellent financial security. Together
with the Aaa group, they constitute what are generally known as high
grade companies. They are rated lower than Aaa companies because
long-term risks appear somewhat larger.
A Insurance companies rated in this category offer good financial
security. However, elements may be present which suggest a
susceptibility to impairment sometime in the future.
S&P
S&P's credit rating is a current opinion of the creditworthiness of an obligor
with respect to a specific financial obligation, a specific class of financial
obligations, or a specific financial program.
16
<PAGE> 427
AAA This is the highest rating assigned by S&P. The obligor's capacity to
meet its financial commitment on the obligation is extremely strong.
AA The obligor's capacity to meet its financial commitments on the obligation is
very strong.
A An obligation rated A is somewhat more susceptible to the adverse
effects of changes in circumstances and economic conditions than
obligations in higher rated categories. However, the obligor's capacity
to meet its financial commitment on the obligation is still strong.
DESCRIPTION OF CORPORATE/MUNICIPAL BOND RATINGS
S&P
INVESTMENT GRADE
AAA The highest rating. The rating indicates an extremely strong capacity
to meet its financial commitment.
AA Differs from AAA issues only in a small degree. The obligor's capacity
to meet its financial commitment is very strong.
A These bonds are somewhat more susceptible to the adverse effects of
changes in circumstances and economic conditions than debt in higher
rated categories. However, capacity to meet its financial commitment on
the obligations is still strong.
BBB Exhibits adequate protection parameters. However, adverse economic
conditions or changing circumstances are more likely to lead to a
weakened capacity to meet its financial commitment on the obligations.
SPECULATIVE GRADE
BB Less vulnerable to non-payment than other speculative issues. However,
these bonds face major ongoing uncertainties or exposure to adverse
business, financial or economic conditions which could lead to
inadequate capacity to meet financial commitment on the obligation.
B More vulnerable to non-payment than obligations rated BB, but currently
has the capacity to meet its financial commitment on the obligation.
Adverse business, financial or economic conditions will likely impair
capacity or willingness to meet its financial commitment on the
obligation.
CCC Currently vulnerable to non-payment, and is dependent upon favorable
business, financial, and economic conditions to meet its financial
commitment on the obligation. In the event of adverse business,
financial, or economic conditions, they are not likely to have the
capacity to meet its financial commitment on the obligation.
CC Currently highly vulnerable to non-payment.
C This rating may be used to cover a situation where a bankruptcy
petition has been filed, or similar action has been taken, but payments
on this obligation are being continued.
D Bonds in payment default.
Ratings from AA to CCC may be modified by a plus (+) or minus (-) to show
relative standing within the major rating categories.
17
<PAGE> 428
MOODY'S
INVESTMENT GRADE
Aaa 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 an exceptionally stable, margin and principal is secure.
Aa High quality by all standards. Margins of protection may not be as
large as in Aaa securities or fluctuation of protective elements may be
greater, or there may be other elements present that make the long-term
risks appear somewhat larger than in Aaa securities.
A These bonds possess many favorable investment attributes and are to be
considered as upper-medium grade obligations. Factors giving security
to principal and interest are considered adequate, but elements may be
present which suggest a susceptibility to impairment sometime in the
future.
Baa These bonds are considered 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.
NON-INVESTMENT GRADE
Ba These bonds have speculative elements; their future cannot be
considered as well assured. The protection of interest and principal
payments may be very moderate and thereby not well safeguarded during
good and bad times over the future.
B These bonds lack the characteristics of a desirable investment (i.e.,
potentially low assurance of timely interest and principal payments or
maintenance of other contract terms over any long period of time may be
small).
Caa Bonds in this category have poor standing and may be in default. These
bonds carry an element of danger with respect to principal and interest
payments.
Ca Speculative to a high degree and could be in default or have other marked
shortcomings. C is the lowest rating.
DESCRIPTION OF MUNICIPAL NOTE RATINGS
MOODY'S
MIG1& VMIG1 Short-term municipal securities rated MIG1 or VMIG1
are of the best quality. They have strong protection from
established cash flows, superior liquidity support or
demonstrated broad-based access to the market for
refinancing.
MIG2 & VMIG2 These Short-term municipal securities are of high quality.
Margins of protection are ample although not so large as
in the preceding group.
MIG3 & VMIG3 Favorable quality. All security elements are accounted for,
but the undeniable strength of the preceding grades is
lacking. Liquidity and cash flow protection may be narrow
and marketing access for refinancing is likely to be less
well established.
S&P
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.
SP-1 Strong capacity to pay principal and interest. Those issues determined
to possess overwhelming safety characteristics will be given a plus (+)
designation.
18
<PAGE> 429
SP-2 Satisfactory capacity to pay principal and interest.
SP-3 Speculative capacity to pay principal and interest.
DESCRIPTION OF PREFERRED STOCK RATINGS
MOODY'S
aaa Top-quality preferred stock. This rating indicates good asset
protection and the least risk of dividend impairment within the
universe of preferred stocks.
aa High-grade preferred stock. This rating indicates that there is a
reasonable assurance the earnings and asset protection will remain
relatively well maintained in the foreseeable future.
a Upper-medium grade preferred stock. While risks are judged to be
somewhat greater than in the "aaa" and "aa" classification, earnings
and asset protection are, nevertheless, expected to be maintained at
adequate levels.
baa Medium-grade preferred stock, neither highly protected nor poorly
secured. Earnings and asset protection appear adequate at present but
may be questionable over any great length of time.
S&P
S&P's preferred stock rating is an assessment of the capacity and willingness of
an issuer to pay preferred stock dividends and any applicable sinking fund
obligations.
AAA Highest rating. This rating indicates an extremely strong capacity to
pay the preferred stock obligations.
AA High-quality, fixed-income security. The capacity to pay preferred
stock obligations is very strong, although not as overwhelming as for
issues rated "AAA."
A Backed by a sound capacity to pay the preferred stock obligations,
although it is somewhat more susceptible to the adverse effects of
changes in circumstances and economic conditions.
BBB Backed by an adequate capacity to pay the preferred stock obligations.
Whereas the issuer normally exhibits adequate protection parameters,
adverse economic conditions or changing circumstances are more likely
to lead to a weakened capacity to make payments for a preferred stock
in this category than for issues in the "A" category.
SHORT-TERM DEBT RATINGS
Thompson Bank Watch, Inc. ("TBW") assigns ratings to specific debt instruments
with original maturities of one year or less. The TBW Short-Term ratings
specifically assess the likelihood of an untimely payment of principal and
interest.
TBW-1 Very high degree of likelihood that principal and interest will be paid
on a timely basis.
TBW-2 While degree of safety regarding timely repayment of principal and
interest is strong, the relative degree is not as high as for issues
rated TBW-1.
TBW-3 Lowest investment grade category. While more susceptible to adverse
developments than obligations with higher ratings, capacity to service
principal and interest in a timely fashion is considered adequate.
TBW-4 Non-investment grade and, therefore, speculative.
19
<PAGE> 430
[THIS PAGE INTENTIONALLY LEFT BLANK]
20
<PAGE> 431
[THIS PAGE INTENTIONALLY LEFT BLANK]
21
<PAGE> 432
Investment Adviser and Sub-Administrator
Banc One Investment Advisors Corporation
1111 Polaris Parkway
P.O. Box 710211
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 8528
Boston, MA 02266-8528
Legal Counsel
Ropes & Gray
One Franklin Square
1301 K Street, N.W.
Suite 800 East
Washington, D.C. 20005
Independent Accountants
PricewaterhouseCoopers, LLP
100 East Broad Street
Columbus, OH 43215
The Statement of Additional Information contains more detailed information about
the Funds. The current Statement of Additional Information has been filed with
the Securities and Exchange Commission and is available without charge by
calling 1-800-480-4111 or by writing to The One Group Services Company at 3435
Stelzer Road, Columbus, Ohio 43219. The Statement of Additional Information is
incorporated into this prospectus by reference. The SEC maintains a Web site
(www.sec.gov) that contains the Statement of Additional Information, materials
incorporated by reference and other information regarding The One Group(R).
TOG-F-107
0092855.01
22
<PAGE> 433
THE ONE GROUP(R) FAMILY OF MUTUAL FUNDS
THE ONE GROUP(R) EQUITY INDEX FUND
OCTOBER , 1998
The information in this prospectus is important. Please read it
carefully before you invest, and save it for future reference.
PLEASE REMEMBER THAT SHARES OF THE FUNDS: O ARE NOT DEPOSITS OR
OBLIGATIONS OF, OR GUARANTEED BY BANC ONE CORPORATION OR ITS AFFILIATES;
O ARE NOT INSURED OR GUARANTEED BY THE FEDERAL DEPOSIT INSURANCE
CORPORATION OR BY ANY FEDERAL OR STATE GOVERNMENTAL AGENCY; O INVOLVE
INVESTMENT RISK, INCLUDING THE POSSIBLE LOSS OF THE PRINCIPAL AMOUNT
INVESTED.
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES
AND EXCHANGE COMMISSION NOR HAS THE COMMISSION PASSED UPON THE ACCURACY
OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A
CRIMINAL OFFENSE.
<PAGE> 434
TABLE OF CONTENTS
A BRIEF PREVIEW OF THE FUND 1
ABOUT THE FUND 2
MORE ABOUT THE FUND 8
HOW TO DO BUSINESS WITH THE ONE GROUP 9
Purchasing Fund Shares 9
Sales Charges 11
Sales Charge Reductions and Waivers 13
Exchanging Fund Shares 15
Redeeming Fund Shares 17
SHAREHOLDER INFORMATION 19
Voting Rights 19
Dividend Policies 20
Tax Treatment of the Fund 21
Tax Treatment of Shareholders 21
Shareholder Inquiries 21
ORGANIZATION AND MANAGEMENT OF THE ONE GROUP 22
The Funds 22
The Board of Trustees 22
The Advisor 22
The Distributor 22
The Administrator and Sub-Administrator 22
The Transfer Agent, Custodian and Sub-Custodian 23
DETAILS ABOUT THE ONE GROUP EQUITY INDEX FUND'S INVESTMENT PRACTICES
AND POLICIES 24
Investment Practices 24
Investment Risks 27
Investment Policies 28
APPENDIX: DESCRIPTION OF RATINGS 30
<PAGE> 435
A BRIEF PREVIEW OF THE FUND
WHAT IS THE GOAL OF THE ONE GROUP EQUITY INDEX FUND?
The Fund is designed to seek investment results that correspond to the aggregate
price and dividend performance of securities in the Standard & Poor's 500
Composite Stock Price Index ("S&P 500") Index.*
WHAT ARE THE FUND'S INVESTMENT STRATEGIES?
The Fund normally will invest in a variety of equity securities, primarily
common stocks, that are included in the S&P 500 Index and, secondarily, in stock
index futures. The Fund also may lend its securities.
WHAT ARE THE MAIN RISKS OF INVESTING IN THE FUND?
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, as with
all equity investments, you may lose money by investing in the Fund. The Fund
may invest in derivative securities. These securities may expose the Fund to
special risks. An investment in the Funds is not a deposit of BANC ONE
CORPORATION or its affiliates and is not insured or guaranteed by the Federal
Deposit Insurance Corporation or any other government agency. For more
information about risks, please read "More About the Fund" and "Investment
Risks."
WHAT CLASSES OF SHARES ARE AVAILABLE?
The Fund currently offers four classes of Shares: Class A, Class B, Class C and
Class I. Class A, Class B and Class C shares are offered to the general public.
Class I 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. The section called "How To Do Business
With The One Group" will provide more information. Class I shares are not
available to Individual Retirement Accounts ("IRA").
HOW DO I PURCHASE AND REDEEM SHARES?
You may buy and redeem shares of the Fund on any day that the Fund is open for
business. Purchase and redemption procedures are explained in greater detail in
"How To Do Business With The One Group." For additional information, call The
One Group Services Company at 1-800-480-4111.
HOW ARE DIVIDENDS PAID?
Generally, dividends are declared on the last business day of each month and are
distributed periodically 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 you elect to take the payment in cash. For a
more detailed discussion of dividends, see "Dividend Policies."
WHO MANAGES THE FUND?
Banc One Investment Advisors Corporation ("Banc One Investment Advisors"), an
indirect subsidiary of BANC ONE CORPORATION, serves as the advisor of the Fund.
Banc One Investment Advisors is paid a fee for its services. A more detailed
discussion regarding Banc One Investment Advisors, its services and compensation
can be found in the Prospectus under the headings "The Advisor" and "Expense
Summary."
* "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.
1
<PAGE> 436
THE ONE GROUP(R) EQUITY INDEX FUND
INVESTMENT OBJECTIVE
The Fund seeks investment results that correspond to the aggregate price and
dividend performance of securities in the S&P 500 Index.*
INVESTMENT STRATEGY
The Fund invests primarily in stocks included in the S&P 500 Index and,
secondarily in stock index futures. Banc One Investment Advisors will seek to
achieve a correlation between the performance of the Fund and that of the S&P
500 Index. To implement this strategy, Banc One Investment Advisors generally
selects stocks in the order of their weightings in the S&P 500 Index beginning
with the heaviest weighted stocks. The Fund will attempt to achieve a
correlation between the performance of its portfolio and that of the S&P 500
Index of at least 0.95, without taking into account expenses. Perfect
correlation would be 1.00.
PORTFOLIO SECURITIES
The percentage of a stock that the Fund holds will be approximately the same
percentage that the stock represents in the S&P 500 Index. In addition, the Fund
may hold up to 10% of its net assets in cash or cash equivalents. For a list of
all the securities in which the Fund may invest, please read "Investment
Practices."
RISK CONSIDERATIONS
The Fund invests in equity securities, which may increase or decrease in value.
Therefore, the value of your investment in the Fund may increase or decrease in
value. Because the Fund's investments are tied to an index, fluctuations in the
index will affect the value of your investment in the Fund. Before you invest,
please read "More About the Funds" and "Investment Risks."
FUND MANAGEMENT
The Fund is managed by a team of portfolio managers, research analysts, and
other investment management professionals. Each team member makes
recommendations about the securities in the Fund. The research analysts provide
in-depth industry analysis and recommendations, while the portfolio managers
determine strategy, industry weightings, Fund holdings, and cash positions.
* "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.
2
<PAGE> 437
SHAREHOLDER EXPENSES
<TABLE>
<CAPTION>
SHAREHOLDER TRANSACTION EXPENSES(1) CLASS A CLASS B CLASS C CLASS I
- ----------------------------------- ------- ------- ------- -------
<S> <C> <C> <C> <C>
Maximum Sales Charge Imposed on Purchases
(as a percentage of offering price) 4.50% none none none
Maximum Contingent Deferred Sales Charge
(as a percentage of original purchase
price or redemption proceeds, as
applicable) none(2) 5.00% 1.00% none
Redemption Fees none none none none
Exchange Fees none none none none
ANNUAL OPERATING EXPENSES (3)
(as a percentage of average daily net assets)
Investment Advisory Fees (after fee
waiver) (4) .25% .25% .25% .25%
12b-1 Fees (after fee waiver) (5) .25% 1.00% 1.00% none
Other Expenses .25% .25% .25% .25%
Total Fund Operating Expenses (after fee
waivers) (6) .75% 1.50% 1.50% .50%
</TABLE>
(1) If you buy or sell shares through an account with a Shareholder
Servicing Agent, you may be charged separate transaction fees by the
Shareholder Servicing Agent. In addition, a $10.00 sub-minimum
account fee may be applicable and a $7.00 charge will be deducted
from the redemption amounts paid by wire.
(2) Except for purchases of $1 million or more. Please see
"Sales Charges."
(3) Expense information has been restated to reflect current fees.
(4) Without the fee waiver, Investment Advisory Fees would be .30% for
all classes of shares.
(5) Due to 12b-1 fees, long-term Class A, Class B and Class C
shareholders may pay more than the equivalent of the maximum
front-end sales charges permitted by the rules of the National
Association of Securities Dealers. Without the voluntary waiver,
12b-1 fees would be .35% for Class A shares.
(6) Without the voluntary reduction of Investment Advisory fees, 12b-1
fees, Total Operating Expenses would be .90% for Class A shares,
1.55% for Class B shares, 1.55% for Class C shares and .55 % for
Class I shares.
EXAMPLE
An investor would pay the following expenses on a $1,000 investment in the Fund,
assuming: (1) payment of the maximum sales charge; (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 $52 $68 $ 85 $134
Class A (without fee waivers) $54 $72 $ 93 $151
Class B $65 $77 $102 $159
Class B (without fee waivers) $66 $79 $104 $167
Class C $25 $47 $ 82 $179
Class C (without fee waivers) $26 $49 $ 84 $185
Class I $ 5 $16 $ 28 $ 63
Class I (without fee waiver) $ 6 $18 $ 31 $ 69
</TABLE>
3
<PAGE> 438
Assuming no redemption at the end of each time period, 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 52 68 85 134
54 72 95 151
Class A (without fee waivers) 15 47 82 159
Class B 16 49 84 167
Class B (without fee waivers) 15 47 82 179
Class C 16 49 84 185
Class C (without fee waivers) 5 16 28 63
Class I 6 18 31 69
Class I (without fee waivers)
</TABLE>
Class B shares automatically convert to Class A shares after eight (8) years.
Therefore, the "10 years" examples above reflect this conversion.
These examples are designed to assist you in understanding the various costs and
expenses that may be directly or indirectly paid by investors in the Fund. THESE
EXAMPLES SHOULD NOT BE CONSIDERED A REPRESENTATION OF PAST OR FUTURE EXPENSES
AND ACTUAL EXPENSES MAY BE GREATER OR LESS THAN THOSE SHOWN.
4
<PAGE> 439
THE ONE GROUP(R) EQUITY INDEX FUND FINANCIAL HIGHLIGHTS
The Financial Highlights are intended to help you understand the Fund's
financial performance for the past 10 years, or since inception if less than 10
years. The total returns in the table represent the rate a shareholder would
have earned on an investment in the Fund (assuming reinvestment of all dividends
and distributions). This information has been derived from financial statements
audited by PricewaterhouseCoopers, LLP, whose report, along with the Fund's
financial statements, is incorporated by reference in the Statement of
Additional Information, which is available upon request.
<TABLE>
<CAPTION>
YEAR ENDED JUNE 30,
-------------------
CLASS I 1998 1997 1996 1995 1994 1993 1992(b)
------- ---- ---- ---- ---- ---- ---- -------
<S> <C> <C> <C> <C> <C> <C>
NET ASSET VALUE, BEGINNING OF PERIOD $ 16.66 $ 14.03 $ 11.59 $ 11.92 $ 10.92 $ 10.00
--------- ----------- ----------- ----------- ----------- -----------
Investment Activities
Net investment income 0.35 0.33 0.32 0.29 0.30 0.26
Net realized and unrealized
gains (losses) from
investments 5.27 3.16 2.59 (0.20) 1.13 0.95
--------- ----------- ----------- ----------- ----------- -----------
Total from Investment Activities 5.62 3.49 2.91 0.09 1.43 1.21
--------- ----------- ----------- ----------- ----------- -----------
Distributions
From net investment income (0.33) (0.33) (0.29) (0.29) (0.30) (0.26)
In excess of net investment
income -- (0.01) (0.02) (0.04) -- --
From net realized gains (0.15) (0.52) (0.16) (0.09) (0.13) (0.03)
--------- ----------- ----------- ----------- ----------- -----------
Total Distributions (0.48) (0.86) (0.47) (0.42) (0.43) (0.29)
--------- ----------- ----------- ----------- ----------- -----------
NET ASSET VALUE, END OF PERIOD $ 21.80 $ 16.66 $ 14.03 $ 11.59 $ 11.92 $ 10.92
========= =========== =========== =========== =========== ===========
Total Return 34.30% 25.47% 25.79% 0.63% 13.04% 12.14%(c)
RATIOS/SUPPLEMENTARY DATA:
Net Assets at end of period(000) $ 480,819 $ 321,058 $ 234,895 $ 165,370 $ 96,446 $ 62,150
Ratio of expenses to average
net assets 0.30% 0.30% 0.33% 0.46% 0.50% 0.73%(c)
Ratio of net investment income
to average net assets 1.87% 2.18% 2.57% 2.44% 2.46% 2.43%(c)
Ratio of expenses to average
net assets * 0.61% 0.59% 0.66% 0.59% 0.87% 1.16%(c)
Ratio of net investment income
to average net assets * 1.56% 1.89% 2.24% 2.31% 2.09% 2.00%(c)
Portfolio turnover(a) 5.81% 9.08% 2.71% 11.81% 2.71% 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) Portfolio turnover is calculated on the basis of the Fund
as a whole without distinguishing among the classes of shares issued.
(b) The Fund commenced operations on July 2, 1991. (c) Annualized.
5
<PAGE> 440
<TABLE>
<CAPTION>
YEAR ENDED JUNE 30,
-------------------
CLASS A 1998 1997 1996 1995 1994 1993 1992(b)
------- ---- ---- ---- ---- ---- ---- -------
<S> <C> <C> <C> <C> <C> <C>
NET ASSET VALUE, BEGINNING OF PERIOD $ 16.67 $ 14.02 $ 11.59 $ 11.91 $ 10.92 $ 10.94
Investment Activities
Net investment income 0.29 0.27 0.29 0.28 0.30 0.08
Net realized and unrealized
gains (losses) from
investments 5.28 3.18 2.58 (0.20) 1.10 --
---------- ---------- ---------- ---------- ---------- ----------
Total from Investment Activities 5.57 3.45 2.87 0.08 1.40 0.08
---------- ---------- ---------- ---------- ---------- ----------
Distributions
From net investment income (0.28) (0.27) (0.28) (0.27) (0.28) (0.10)
In excess of net investment
income -- (0.01) -- (0.04) -- --
From net realized gains (0.15) (0.52) (0.16) (0.09) (0.13) --
---------- ---------- ---------- ---------- ---------- ----------
Total Distributions (0.43) (0.80) (0.44) (0.40) (0.41) (0.10)
---------- ---------- ---------- ---------- ---------- ----------
NET ASSET VALUE, END OF PERIOD $ 21.81 $ 16.67 $ 14.02 $ 11.59 $ 11.91 $ 10.92
========== ========== ========== ========== ========== ==========
Total Return (Excludes Sales
Charge) 33.94% 25.16% 25.43% 0.56% 12.75% 1.32%(c)
RATIOS/SUPPLEMENTARY DATA:
Net Assets at end of period(000) $ 98,338 $ 32,186 $ 3,003 $ 1,416 $ 512 $ 5
Ratio of expenses to average
net assets 0.55% 0.55% 0.56% 0.62% 0.52% 1.09%(c)
Ratio of net investment income
to average net assets 1.59% 1.93% 2.38% 2.37% 2.51% 1.97%(c)
Ratio of expenses to average
net assets * 0.95% 0.94% 1.01% 0.94% 0.99% 1.27%(c)
Ratio of net investment income
to average net assets * 1.19% 1.54% 1.94% 2.05% 2.04% 1.79%(c)
Portfolio turnover(a) 5.81% 9.08% 2.71% 11.81% 2.71% 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) Portfolio turnover is calculated on the basis of the Fund
as a whole without distinguishing among the classes of shares issued.
(b) Class A Shares commenced offering on February 18, 1992. (c)
Annualized.
6
<PAGE> 441
<TABLE>
<CAPTION>
YEAR ENDED JUNE 30,
-------------------
CLASS B 1998 1997 1996 1995 1994(a)
------- ---- ---- ---- ---- -------
<S> <C> <C> <C> <C>
NET ASSET VALUE, BEGINNING OF PERIOD $ 16.68 $ 14.05 $ 11.61 $ 12.39
Investment Activities
Net investment income 0.16 0.16 0.18 0.09
Net realized and unrealized
gains (losses) from
investments 5.27 3.16 2.61 (0.78)
----------- ----------- ----------- -----------
Total from Investment Activities 5.43 3.32 2.79 (0.69)
----------- ----------- ----------- -----------
Distributions
From net investment income (0.16) (0.16) (0.19) (0.09)
In excess of net investment income -- (0.01) -- --
From net realized gains (0.15) (0.52) (0.16) --
----------- ----------- ----------- -----------
Total Distributions (0.31) (0.69) (0.35) (0.09)
----------- ----------- ----------- -----------
NET ASSET VALUE, END OF PERIOD $ 21.80 $ 16.68 $ 14.05 $ 11.61
=========== =========== =========== ===========
Total Return (Excludes Sales
Charge) 32.93% 24.05% 24.58% (5.57)%(b)
RATIOS/SUPPLEMENTARY DATA:
Net Assets at end of period
(000) $ 168,699 $ 38,538 $ 1,408 $ 248
Ratio of expenses to average
net assets 1.30% 1.30% 1.34% 1.10%(c)
Ratio of net investment income
to average net assets 0.83% 1.18% 1.60% 2.08%(c)
Ratio of expenses to average
net assets* 1.61% 1.59% 1.67% 1.15%(c)
Ratio of net investment income
to average net assets* 0.52% 0.89% 1.27% 2.03%(c)
Portfolio turnover(d) 5.81% 9.08% 2.71% 11.81%
</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 Shares commenced offering on January 14, 1994.
(b) Not annualized. (c) Annualized. (d) Portfolio turnover is calculated
on the basis of the Fund as a whole without distinguishing among the
classes of shares issued.
7
<PAGE> 442
MORE ABOUT THE FUND
ILLIQUID INVESTMENTS
The Fund may invest up to 15% of its net assets in illiquid investments. A
security is illiquid if it cannot be sold at approximately the value assessed by
the Fund within seven (7) days. Banc One Investment Advisors will follow
guidelines adopted by The One Group Board of Trustees in determining whether an
investment is illiquid.
SPECIAL RISK CONSIDERATIONS
Derivatives: The Fund invests in securities that are considered to be
"derivatives." "Derivatives" are securities that derive their value from the
performance of underlying assets or securities. These include:
- - options, futures contracts, and options on futures contracts
- - warrants
- - swap, cap and floor transactions
- - new financial products
These securities may be more volatile than other investments. Derivatives
present, to varying degrees, market, credit, leverage, liquidity, and management
risks. The Fund's use of derivatives may cause the Fund to recognize higher
amounts of short-term capital gains (generally taxed at ordinary income tax
rates) than it would if the Fund did not use such instruments. For a more
detailed discussion of these risks, please read "Investment Risks."
Index Funds: An index fund's investment objective is to track the performance of
a specified index. Therefore, securities may be purchased, retained and sold by
an index fund at times when an actively managed fund would not do so. As a
result, you can expect greater risk of loss (and a correspondingly greater
prospect of gain) from changes in the value of securities that are heavily
weighted in the index than would be the case if the funds were not fully
invested in such securities. Because of this, an index fund's share price can be
volatile and you should be able to handle sudden, and sometimes substantial,
fluctuations in the value of your investment.
8
<PAGE> 443
HOW TO DO BUSINESS WITH THE ONE GROUP
PURCHASING FUND SHARES
WHERE CAN I BUY SHARES?
You may purchase Fund shares from the following sources:
- - The One Group Services Company, and
- - Shareholder Servicing Agents. These include investment advisors, brokers,
financial planners, banks, insurance companies, retirement or 401(k) plan
sponsors, or other intermediaries. Shares purchased this way will be held
for you by the Shareholder Servicing Agent.
WHEN CAN I BUY SHARES?
- - Purchases may be made on any business day. This includes any day that the
Funds are open for business, other than weekends, days on which the New
York Stock Exchange ("NYSE") is closed, and the following holidays: New
Years Day, Martin Luther King, Jr. Day, Presidents' Day, Good Friday,
Memorial Day, Independence Day, Labor Day, Thanksgiving, and Christmas.
- - Purchase requests received by The One Group Services Company before 4
p.m. Eastern Time ("ET") will be effective that day. On occasion, the
NYSE will close before 4 p.m. ET. When that happens, purchase requests
received after the NYSE closes will be effective the following business
day.
- - Purchase orders may be canceled by the Fund's Custodian, State Street
Bank and Trust Company, if it does not receive "federal funds" by 4:00
p.m. ET (i) on the business day after the order is placed if you are
buying Class I shares, and (ii) on the third business day if you are
purchasing Class A, Class B or Class C shares.
- - If your shares are held by a Shareholder Servicing Agent, it is the
responsibility of the Shareholder Servicing Agent to send your purchase
or redemption order to the Fund. Your Shareholder Servicing Agent may
have an earlier cut-off time for purchase and redemption requests.
- - The One Group Services Company can reject a purchase order if it does not
think that it is in the best interests of the Fund and/or its
shareholders to accept the order.
- - Shares are electronically recorded. Therefore, certificates will not be
issued.
WHAT KIND OF SHARES CAN I BUY?
The One Group offers the following classes of shares:
- - Class A, Class B and Class C shares are available to the general public.
- - Class I shares are available to institutional investors and any
organization authorized to act in a fiduciary, advisory, custodial or
agency capacity. We will refer to these entities as "Intermediaries."
- - If you intend to hold your shares for six or more years, Class B shares
may be appropriate for you. If you intend to hold your shares for less
than six years, you may want to consider Class A or Class C shares.
The One Group Fund Direct IRA. The One Group offers a retirement plan
and, in 1999, may offer an education plan. These plans allow participants
to defer taxes while their retirement and education savings grow. The
education IRA requires a minimum investment of $500. Call The One Group
Services Company at 1-800-480-4111 for an Adoption Agreement.
HOW MUCH DO SHARES COST?
- - Shares are sold at net asset value ("NAV") plus a sales charge, if any.
- - Each class of shares in the Fund has a different NAV. This is primarily
because each class has different distribution expenses.
9
<PAGE> 444
- - NAV per share is calculated by dividing the total market value of the
Fund's investments and other assets allocable to a class (minus class
expenses) by the number of outstanding shares in that class.
- - The Fund's NAV changes every day. NAV is calculated each business day
following the close of the NYSE at 4:00 p.m. ET. On occasion, the NYSE
will close before 4 p.m. ET. When that happens, NAV will be calculated as
of the time the NYSE closes.
HOW DO I OPEN AN ACCOUNT?
1. Read the prospectus carefully, and select the share class most
appropriate for you.
2. Decide how much you want to invest.
- The minimum initial investment is $1,000 ($100 for employees of BANC
ONE CORPORATION and its affiliates).
- Subsequent investments must be at least $100 ($25 for employees of
BANC ONE CORPORATION and its affiliates).
- You may purchase no more than $250,000 of Class B shares at one time.
- The One Group Services Company may waive these minimums.
3. Complete the Account Application Form. Be sure to sign up for all of the
Account privileges that you plan to take advantage of. Doing so now means
that you will not have to complete additional paperwork later.
4. Send the completed application and a personal check (unless you choose to
pay by wire or bank transfer) payable to "The One Group" to:
State Street Bank and Trust Company
c/o The One Group
P.O. Box 8528
Boston, MA 02266-8528
Contributions to Fund Direct IRAs should be made payable to "State Street
Bank and Trust Company for the Benefit of (your name)."
5. All checks should be in U.S. dollars. Third party checks will not be
accepted. Redemptions from the Fund will not be permitted for ten (10)
calendar days if purchases are made by check or under the Systematic
Investment Plan (see below).
6. If you purchase shares through a Shareholder Servicing Agent, you may be
required to complete additional forms or follow additional procedures.
You should contact your Shareholder Servicing Agent regarding purchases,
exchanges and redemptions.
7. If you have any questions, contact your Shareholder Servicing Agent or
call The One Group Services Company at 1-800-480-4111.
CAN I PURCHASE SHARES OVER THE TELEPHONE?
Yes. Simply select this option on your Account Application Form and then:
- - Contact your Shareholder Servicing Agent or The One Group Services
Company at 1-800-480-4111 to relay your purchase instructions.
- - Send a personal check made payable to "The One Group" to State Street
Bank and Trust Company (see address above), authorize a bank transfer, or
initiate a wire transfer to the following wire address:
State Street Bank & Trust Company
Attn: Custody & Shareholder Services
ABA 011 000 028
DDA 99034167
10
<PAGE> 445
FBO The One Group Fund (ex: The One Group Equity Index Fund - A)
Your Account Number (ex: 123456789)
Your Account Registration (ex: John Smith & Mary Smith, JTWROS)
- - The One Group uses reasonable procedures to confirm that instructions
given by telephone are genuine. These procedures include recording
telephone instructions and asking for personal identification. If these
procedures are followed, The One Group will not be responsible for any
loss, liability, cost or expense of acting upon unauthorized or
fraudulent instructions; you bear the risk of loss.
- - You may revoke your right to make purchases over the telephone by
sending a letter to:
State Street Bank and Trust Company
c/o The One Group
P.O. Box 8528
Boston, MA 02266-8528
CAN I AUTOMATICALLY INVEST ON A SYSTEMATIC BASIS?
Yes. After your Account is established, you may purchase additional Class A,
Class B and Class C shares by making automatic monthly investments from your
bank account. The minimum initial investment is still $1,000, but minimum
automatic additions are only $25. The One Group Services Company may waive these
minimums. To establish a Systematic Investment Plan:
- - Select the "Systematic Investment Plan" option on the Account
Application Form.
- - Provide the necessary information about the bank account from which your
investments will be made.
- - Shares purchased under a Systematic Investment Plan may not be redeemed
for ten (10) calendar days.
- - The One Group currently does not charge for this service, but may impose
a charge in the future. However, your bank may impose a charge for
debiting your bank account.
- - You may revoke your right to make systematic investments by calling The
One Group Services Company at 1-800-480-1111 or by sending a letter to:
State Street Bank and Trust Company
c/o The One Group
P.O. Box 8528
Boston, MA 02266-8528
CONVERSION FEATURE
Your Class B shares automatically convert to Class A shares after eight years
(measured from the end of the month in which they were purchased).
- - After conversion, your shares will be subject to the lower distribution
and shareholder servicing fees charged on Class A shares.
- - You will not be assessed any sales charges or fees for conversion of
shares, nor will you be subject to any Federal income tax.
- - Because the share price of the Class A shares may be higher than that of
the Class B shares at the time of conversion, you may receive fewer Class
A shares; however, the dollar value will be the same.
- - If you have exchanged Class B shares of one Fund for Class B shares of
another, the time you held the shares in each Fund will be added
together.
SALES CHARGES
The One Group Services Company compensates Shareholder Servicing Agents who sell
shares of The One Group. Compensation comes from sales charges, 12b-1 fees and
payments by The One Group Services Company from its own
11
<PAGE> 446
resources. The One Group Services Company, at its own expense, also will provide
promotional incentives in the form of travel expenses, lodging and bonuses to
licensed individuals who sell shares of the Funds, as well as vacation trips
(including lodging at luxury resorts), tickets to entertainment events, and
merchandise. Occasionally, cash incentives will be paid to select Shareholder
Servicing Agents. Those Shareholder Servicing Agents who may receive special
incentives include Banc One Securities Corporation, The Advisors Group, United
Planners Financial Services of America, Inc., The Legend Group, and Rosewood
Retirement Advisory Services, LLC.
CLASS A SHARES
This table shows the amount of sales charge you pay and the commissions paid to
Shareholder Servicing Agents.
<TABLE>
<CAPTION>
Sales Charge Sales Charge Commission as
as a % of the as a % of the a % of the
Amount of Purchase Offering Price Your Investment Offering Price
- ------------------ -------------- --------------- --------------
<S> <C> <C> <C> <C>
Less than $100,000 4.50% 4.71% 4.05%
$100,000-$249,999 3.50% 3.63% 3.05%
$250,000-$499,999 2.50% 2.56% 2.05%
$500,000-$999,999 2.00% 2.04% 1.60%
$1,000,000* 0.00% 0.00% 0.00%
</TABLE>
* If you purchase $1 million or more of Class A shares and are not
assessed a sales charge at the time of purchase, you will be charged
the equivalent of 1% of the purchase price if you redeem any or all of
the Class A shares within one year of purchase.
CLASS B SHARES
Class B shares are offered at NAV, without any up-front sales charges. However,
if you redeem these shares within six years of the purchase date, you will be
assessed a Contingent Deferred Sales Charge ("CDSC") according to the following
schedule:
<TABLE>
<CAPTION>
CDSC AS A %
OF DOLLAR AMOUNT
YEARS SINCE PURCHASE SUBJECT TO CHARGE
-------------------- -----------------
<S> <C> <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%
more than 6 0.00%
</TABLE>
The One Group Services Company pays a commission of 4.00% of the original
purchase price to Shareholder Servicing Agents who sell Class B shares.
CLASS C SHARES
Class C shares are offered at NAV, without any up-front sales charge. However,
if you redeem your shares within one year of the purchase date, you will be
assessed a CDSC as follows:
<TABLE>
<CAPTION>
CDSC AS A % OF DOLLAR
YEARS SINCE PURCHASE AMOUNT SUBJECT TO CHARGE
-------------------- ------------------------
<S> <C> <C>
0-1 1.00%
After first year none
</TABLE>
Shareholder Servicing Agents selling Class C shares receive a commission of
1.00% of the original purchase price from The One Group Services Company.
How the CDSC is Calculated
- - The Fund assumes that all purchases made in a given month were made on
the first day of the month.
12
<PAGE> 447
- - The CDSC is based on the current market value or the original cost of
the shares, whichever is less.
- - A sales charge is not imposed on increases in NAV above the initial
purchase price, nor is a sales charge assessed on shares acquired
through reinvestment of dividends or capital gains distributions.
- - To keep your CDSC as low as possible, the Fund first will redeem any
shares in your account that carry no CDSC, starting with Class A Shares.
After that, the Fund will redeem the shares you have held for the
longest time and thus have the lowest CDSC.
- - If you exchange Class B or Class C shares of an unrelated mutual fund
for Class B or Class C shares of The Group in connection with a fund
reorganization, the CDSC applicable to your original shares (including
the period of time you have held those shares) will be applied to The
One Group shares you receive in the reorganization.
12B-1 FEES
12b-1 fees are paid by The One Group to The One Group Services Company as
compensation for its services and expenses. The One Group Services Company in
turn pays all or part of the 12b-1 fee to Shareholder Servicing Agents that sell
shares of The One Group.
- - The 12b-1 fees vary by share class as follows:
1. Class A shares pay a 12b-1 fee of .35% of the average daily net
assets of the Fund, which is currently being waived to .25%.
2. Class B and Class C shares pay a 12b-1 fee of 1.00% of the
average daily net assets of the Fund. This will cause expenses
for Class B and Class C shares to be higher and dividends to be
lower than for Class A shares.
3. There are no 12b-1 fees for Class I shares.
- - 12b-1 fees, together with the CDSC, help The One Group Services Company
sell Class B and Class C shares without an "up-front" sales charge by
defraying the costs of advancing brokerage commissions and other
expenses paid to Shareholder Servicing Agents.
- - The One Group Services Company may use up to .25% of the fees for
shareholder servicing and up to .75% for distribution. During the last
fiscal year, The One Group Services Company received 12b-1 fees totaling
.25% and 1.00% of the average daily net assets of Class A and Class B
shares, respectively.
- - The One Group Services Company may pay 12b-1 fees to its affiliates and
to Banc One Investment Advisors and its affiliates (or any sub-advisor)
for brokerage and other agency transactions.
SALES CHARGE REDUCTIONS AND WAIVERS
REDUCING YOUR CLASS A SALES CHARGES
There are several ways you can reduce the sales charges you pay on Class A
shares:
1. Right of Accumulation: You may add the market value of any Class A,
Class B or Class C shares of a Fund of The One Group (except a money
market fund) that you (and your spouse and minor children) already own
to the amount of your next Class A purchase for purposes of
calculating the sales charge. An Intermediary also may take advantage
of this option.
2. Letter of Intent: With an initial investment of $2,000, you may
purchase Class A shares of one or more funds in The One Group over the
next 13 months and pay the same sales charge that you would have paid
if all shares were purchased at once. A percentage of your investment
will be held in escrow until the full amount covered by the Letter of
Intent has been invested.
To take advantage of the accumulation privilege or letter of intent, complete
the appropriate section of your fund application, or contact your investment
representative. To determine if you are eligible for the accumulation privilege,
contact The One Group Services Company at 1-800-480-4111. These programs may be
terminated or amended at any time.
13
<PAGE> 448
WAIVER OF THE CLASS A SALES CHARGE
No sales charge is imposed on Class A shares of the Fund if the shares were:
1. Bought with the reinvestment of dividends and capital gains
distributions.
2. Acquired in exchange for other Fund shares if a comparable sales
charge has been paid for the exchanged shares.
3. Bought by officers, directors or trustees, retirees and employees (and
their spouses and immediate family members) of:
- The One Group.
- BANC ONE CORPORATION and its subsidiaries and affiliates.
- The One Group Services Company and its subsidiaries and
affiliates.
- State Street Bank and Trust Company and its subsidiaries and
affiliates.
- Broker/dealers who have entered into dealer agreements with
The One Group and their subsidiaries and affiliates.
- An investment sub-advisor of a fund of The One Group and such
sub-advisor's subsidiaries and affiliates.
4. Bought by:
- Affiliates of BANC ONE CORPORATION and certain accounts
(other than IRA Accounts) for which an Intermediary acts in a
fiduciary, advisory, agency, custodial or similar capacity.
- 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 One Group Services Company.
- Retirement and deferred compensation plans and trusts used to
fund those plans, including, but not limited to, those
defined in sections 401(a), 403(b) or 457 of the Internal
Revenue Code and "rabbi trusts."
- Shareholder Servicing Agents who have a dealer arrangement
with The One Group Services Company, 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 Shareholder Servicing
Agents who place trades for their own accounts if the
accounts are linked to the master account of such Shareholder
Servicing Agent.
5. Bought with proceeds from the sale of Class I shares of a Fund of The
One Group or acquired in an exchange of Class I shares of a Fund for
Class A shares of the same Fund, but only if the purchase is made
within 60 days of the sale or distribution.
6. Bought with proceeds from the sale of shares of a mutual fund,
including a Fund of The One Group, for which a sales charge was paid,
but only if the purchase is made within 60 days of the sale or
distribution.
7. Bought in an IRA with the proceeds of a distribution from an employee
benefit plan, but only if the purchase is made within 60 days of the
sale or distribution and, at the time of the distribution, the
employee benefit plan had plan assets invested in a Fund of The One
Group.
8. Bought with assets of The One Group.
9. Bought in connection with plans of reorganizations of the Fund, such
as mergers, asset acquisitions and exchange offers to which the Fund
is a party.
The waivers described in (5), (6) and (7) above will not continue indefinitely
and may be discontinued at any time without notice.
14
<PAGE> 449
WAIVER OF THE CLASS B SALES CHARGE
No sales charge is imposed on redemptions of Class B shares of the Fund:
1. Provided that you withdraw no more than 10% of your account value
annually. You do not have to participate in the Systematic Withdrawal
Plan to take advantage of this waiver.
2. If you buy the shares in connection with certain retirement plans,
such as 401(k) and similar qualified plans.
3. If you are the shareholder (or a joint shareholder), or a participant
or beneficiary of certain retirement plans and you die or become
disabled (as defined by the Tax Code), but only if the redemption is
made within one year of such death or disability.
4. That represent a minimum required distribution from an IRA Account or
other qualifying retirement plan, but only if you are at least age 70
1/2.
5. Exchanged in connection with plans of reorganizations of a Fund, such
as mergers, asset acquisitions and exchange offers to which a Fund is
a party.
6. Acquired in exchange for Class B shares of other Funds of The One
Group.
WAIVER OF THE CLASS C SALES CHARGE
No sales charge is imposed on redemptions of Class C shares of the Fund:
1. Provided that you withdraw no more than 10% of the account value
annually. You do not have to participate in the Systematic Withdrawal
Plan to take advantage of this waiver.
2. If you buy the shares in connection with certain retirement plans,
such as 401(k) and similar qualified plans.
3. If you are the shareholder (or a joint shareholder), or a participant
or beneficiary of certain retirement plans and you die or become
disabled (as defined by the Tax Code), but only if the redemption is
made within one year of death or disability.
4. That represent a minimum required distribution from an IRA Account or
other qualifying retirement plan, but only if you are at least age 70
1/2.
5. Exchanged in connection with plans of reorganizations of a Fund, such
as mergers, asset acquisitions and exchange offers to which a Fund is
a party.
6. Acquired in exchange for Class C shares of other Funds of The One
Group.
7. If The One Group Services Company receives notice before you invest
indicating that your Shareholder Servicing Agent, due to the type of
account that you have, is waiving its commission.
To take advantage of any of these sales charge waivers, you must qualify for
such waiver in advance. To see if you qualify, contact The One Group Services
Company at 1-800-480-4111 or your Shareholder Servicing Agent.
EXCHANGING FUND SHARES
WHAT ARE MY EXCHANGE PRIVILEGES?
You may make the following exchanges:
- - Class I shares of the Fund may be exchanged for Class A shares of that
Fund or for Class A or Class I shares of another Fund of The One
Group.
- - Class A shares of the Fund may be exchanged for Class I shares of that
Fund or for Class A or Class I shares of another Fund of The One
Group, but only if you are eligible to purchase those shares.
- - Class B shares of the Fund may be exchanged for Class B shares of
another Fund of The One Group.
15
<PAGE> 450
- - Class C shares of the Fund may be exchanged for Class C shares of
another Fund of The One Group. The One Group Funds offer a Systematic
Exchange Privilege which allows you to automatically exchange shares
of one fund to another on a monthly or quarterly basis. This privilege
is useful in Dollar Cost Averaging. To participate in this privilege,
please select it on your account application. To learn more about it,
please call The One Group Services Company at 1-800-480-4111.
The One Group does not charge a fee for this privilege. In addition, The One
Group may change the terms and conditions of your exchange privileges upon 60
days written notice.
WHEN ARE EXCHANGES PROCESSED?
Exchanges are processed the same business day they are received, provided:
- - State Street Bank and Trust Company receives the request by 4:00 p.m.,
ET.
- - You have provided The One Group with all of the information necessary
to process the exchange.
- - You have received a current prospectus of the Fund or Funds in which
you wish to invest.
- - You have contacted your Shareholder Servicing Agent, if necessary.
DO I PAY A SALES CHARGE ON AN EXCHANGE?
Generally, you will not pay a sales charge on an exchange. However:
- - You will pay a sales charge if you own Class I shares of the Fund and
you want to exchange those shares for Class A shares, unless you
qualify for a sales charge waiver (see above).
[/R]
- - You will pay a sales charge if you bought Class A shares of a Fund:
1. That does not charge a sales charge and you want to exchange
them for shares of a Fund that does, in which case you would
pay the sales charge applicable to the Fund into which you
are exchanging.
2. That charged a lower sales charge than the Fund into which
you are exchanging, in which case you would pay the
difference between that Fund's sales charge and all other
sales charges you have already paid.
- - If you exchange Class B or Class C shares of the Fund, you will not
pay a sales charge at the time of the exchange, however:
1. Your new Class B or Class C shares will be subject to the
higher CDSC of either the Fund from which you exchanged, the
Fund into which you exchanged, or any Fund from which you
previously exchanged.
2. The current holding period for your exchanged Class B or
Class C shares is carried over to your new shares.
ARE EXCHANGES TAXABLE?
Generally:
- - An exchange between classes of shares of the same Fund is not taxable
for Federal income tax purposes.
- - An exchange between Funds is considered a sale and generally results
in a capital gain or loss for Federal income tax purposes.
- - You should talk to your tax advisor before making an exchange.
ARE THERE LIMITS ON EXCHANGES?
Yes. The exchange privilege is not intended as a way for you to speculate on
short term movements in the market. Therefore:
16
<PAGE> 451
- - To prevent disruptions in the management of the Funds, The One Group
limits excessive exchange activity.
- - Exchange activity is excessive if it EXCEEDS TWO SUBSTANTIVE EXCHANGE
REDEMPTIONS (WITHIN 30 DAYS OF EACH OTHER) WITHIN A TWELVE MONTH
PERIOD.
- - In addition, The One Group reserves the right to reject any exchange
request (even those that are not excessive) if the Fund reasonably
believes that the exchange will result in excessive transaction costs
or otherwise adversely affect other shareholders.
REDEEMING FUND SHARES
WHEN CAN I REDEEM SHARES?
You may redeem all or some of your shares on any day that the Fund is open for
business.
- - Redemption requests received by The One Group Services Company before
4:00 p.m. ET (or when the NYSE closes) will be effective that day.
HOW DO I REDEEM SHARES?
- - Unless you have selected the telephone option on your Account
Application Form, you must send a written redemption request to your
Shareholder Servicing Agent, if applicable, or to State Street Bank
and Trust Company at the following address:
The One Group
c/o State Street Bank and Trust Company
P.O. Box 8528
Boston, MA 02266-8528
- - All requests for redemptions from IRA accounts must be in writing.
- - You may request redemption forms by calling The One Group Services
Company at 1-800-480-4111.
- - State Street Bank and Trust Company may require that the signature on
your redemption request be guaranteed by a commercial bank, a member
of a domestic stock exchange, or a member of the Securities Transfer
Association Medallion Program or the Stock Exchange Medallion Program,
unless:
1. the redemption is for $50,000 worth of shares or less;
2. the redemption is payable to the shareholder of record;
3. the redemption check is mailed to the shareholder at the
record address; or
4. the redemption is payable by wire or bank transfer (ACH) to a
pre-existing bank account.
- - On the Account Application Form you may elect to have the redemption
proceeds mailed or wired to:
1. a designated commercial bank; or
2. State Street Bank and Trust Company or your Shareholder
Servicing Agent.
- - State Street Bank and Trust Company may charge you a wire redemption
fee. The current charge is $7.00.
- - Your redemption proceeds will be paid within seven days after receipt
of the redemption request.
WHAT WILL MY SHARES BE WORTH?
- - If you own Class A and Class I shares and the Fund receives your
redemption request by 4:00 p.m. ET (or when the NYSE closes), you will
receive that day's NAV.
- - If you own Class B or Class C shares and the Fund receives your
redemption request by 4:00 p.m. ET (or when the NYSE closes), you will
receive that day's NAV, minus the amount of any applicable CDSC.
17
<PAGE> 452
CAN I REDEEM BY TELEPHONE?
Yes, if you selected this option on your Account Application Form.
- - Call your Shareholder Servicing Agent or State Street Bank and Trust
Company at 1-800-480-4111 to relay your redemption request.
- - Your redemption proceeds will be mailed or wired to the commercial
bank account you designated on your Account Application Form.
- - State Street Bank and Trust Company may charge you a wire redemption
fee. The current charge is $7.00.
- - The One Group uses reasonable procedures to confirm that instructions
given by telephone are genuine. These procedures include recording
telephone instructions and asking for personal identification. If
these procedures are followed, The One Group will not be responsible
for any loss, liability, cost or expense of acting upon unauthorized
or fraudulent instructions; you bear the risk of loss.
- - REDEMPTIONS FROM YOUR IRA ACCOUNT MAY NOT BE MADE BY TELEPHONE.
CAN I REDEEM ON A SYSTEMATIC BASIS?
If you have an account value of at least $10,000, you may elect to receive
monthly, quarterly or annual payments of not less than $100 each.
- - Select the "Systematic Withdrawal Plan" option on the Account
Application Form.
- - Specify the amount you wish to receive and the frequency of the
payments.
- - You may designate a person other than yourself as the payee.
- - There is no charge for this service.
- - If you select this option, please keep in mind that:
1. It may not be in your best interest to buy additional Class A
shares while participating in a Systematic Withdrawal Plan.
This is because Class A shares have an up-front sales charge.
2. If you own Class B or Class C shares, you or your designated
payee may receive systematic payments provided the payments
are limited to no more than 10% of your account value
annually, measured from the date the redemption request is
received.
3. If you are age 70 1/2, you may elect to receive payments to
the extent that the payment represents a minimum required
distribution from an IRA or other qualifying retirement plan.
4. If the amount of the systematic payment exceeds the income
earned by your account since the previous payment under the
Systematic Withdrawal Plan, payments will be made by
redeeming some of your shares. This will reduce the amount of
your investment.
ADDITIONAL INFORMATION REGARDING REDEMPTIONS
- - All redemptions will be for cash.
- - If you redeem shares for which you paid by check, and The One Group
has not yet received payment on the check, The One Group will delay
forwarding your redemption proceeds for 10 or more days until payment
has been collected from your bank.
- - Because of the high cost of handling small investments, The One Group
charges a sub-minimum account fee. Accounts under $1,000 that are not
participating in a Systematic Investment Plan will be assessed an
annual fee of $10.00. The sub-minimum account fee will not apply to
IRA accounts and the accounts of employees of BANC ONE CORPORATION and
its affiliates.
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<PAGE> 453
- - The One Group may suspend your ability to redeem when:
1. Trading on the NYSE is restricted.
2. The NYSE is closed (other than weekend and holiday
closings).
3. The SEC has permitted a suspension.
4. An emergency exists.
The Statement of Additional Information offers more details about this
process.
- - You generally will recognize a gain or loss on a redemption for
Federal income tax purposes. You should talk to your tax advisor
before making a redemption.
SHAREHOLDER INFORMATION
VOTING RIGHTS
The Fund does not hold annual shareholder meetings, but may hold special
meetings. The special meetings are held, for example, to elect or remove
Trustees, change the Fund's fundamental investment objective, or approve an
investment advisory contract.
As a Fund shareholder, you have one vote for each share that you own. The Fund,
and each class of shares within the Fund, votes separately on matters relating
solely to the Fund or class, or which affect the Fund or class differently than
other Funds of The One Group. However, all shareholders will have equal voting
rights on matters that affect all shareholders of The One Group equally.
BANC ONE CORPORATION (100 East Broad Street, Columbus, Ohio, 43271), through its
affiliates, may be deemed for purposes of the Investment Company Act of 1940, to
control the Fund. This is because as of July 30, 1998, BANC ONE CORPORATION or
its affiliates possessed the power to vote substantially all of the Class I
shares of the Fund.
On the same date, the following shareholders owned 25% or more of Class A and
Class C shares of the Fund. As a consequence, they are considered to be
controlling persons of these classes of the Fund.
19
<PAGE> 454
<TABLE>
<CAPTION>
PERCENTAGE OF TYPE OF
NAME AND ADDRESS FUND/CLASS OWNERSHIP OWNERSHIP
- ---------------- ---------- --------- ---------
<S> <C> <C> <C>
Dean Witter For The Benefit Of Income Equity 71.70% Record
McKee Char TR/Lynn A Hammond & Fund
Clare W White Co-TTEES Class C
Church St Station B PO Box 250
New York NY 10013-0250
Banc One Securities Corp Fbo Equity Index Fund 32.30% Beneficial
The One Investment Solution Class A
733 Greencrest Dr
Westerville OH 43081-4903
Banc One Securities Corp Fbo Equity Index Fund 62.48% Beneficial
The One Investment Solution Class C
733 Greencrest Dr
Westerville OH 43081-4903
</TABLE>
DIVIDEND POLICIES
DIVIDENDS
The Fund generally declares dividends on the last business day of each month.
Dividends are distributed on the first business day of the next month. Capital
gains, if any, for the Fund are distributed at least annually.
The Fund pays dividends and distributions on a per-share basis. This means that
the value of your shares will be reduced by the amount of the payment. If you
purchase shares shortly before the record date for a dividend or the
distribution of capital gains, you will pay the full price for the shares and
receive some portion of the price back as a taxable dividend or distribution.
Dividends payable on Class I shares will be more than those payable on other
classes of shares. This is because Class A, Class B and Class C shares have
higher distribution expenses.
DIVIDEND REINVESTMENT
You automatically will receive all income dividends and capital gain
distributions in additional shares of the same Fund and class, unless you have
elected to take such payment in cash. The price of the shares is the NAV
determined immediately following the dividend record date. Reinvested dividends
and distributions receive the same tax treatment as dividends and distributions
paid in cash.
If you want to change the way in which you receive dividends and distributions,
you must write to State Street Bank & Trust Company at P.O. Box 8528, Boston,
MA 02266-8528, at least 15 days prior to the distribution. The change is
effective upon receipt by State Street.
SPECIAL DIVIDEND RULES FOR CLASS B SHARES
Class B shares received as dividends and capital gains distributions will be
accounted for separately. Each time any Class B shares (other than those in the
sub-account) convert to Class A shares, a percentage of the Class B shares in
the sub-account will also convert to Class A shares. (See "Conversion Feature.")
20
<PAGE> 455
TAX TREATMENT OF THE FUND
TAX STATUS OF THE FUND
The Fund intends to qualify as a "regulated investment company" for Federal
income tax purposes. If the Fund qualifies, as it has in the past, it will pay
no federal income tax on the earnings it distributes to shareholders.
TAX TREATMENT OF SHAREHOLDERS
TAXATION OF SHAREHOLDER TRANSACTIONS
A sale, exchange, or redemption of Fund shares generally will produce either a
taxable gain or a loss. You are responsible for any tax liabilities generated
by your transactions.
TAXATION OF DISTRIBUTIONS
The Fund will distribute substantially all of its net investment income
(including, for this purpose, net short-term capital gains) on at least an
annual basis. Dividends you receive from the Fund, whether reinvested or
received in cash, will be taxable to you. Dividends from the Fund's net
investment income will be taxable as ordinary income and dividends from the
Fund's long-term capital gains will be taxable to you as such, regardless of
how long you have held the shares.
Dividends paid in January, but declared in October, November or December of the
previous year, will be considered to have been paid the previous December.
TAXATION OF RETIREMENT PLANS
Distributions by the Fund to qualified retirement plans will not be taxable.
However, if shares are held by a plan that ceases to qualify for tax-exempt
treatment or by an individual who has received shares as a distribution from a
retirement plan, the distributions will be taxable to the plan or individual as
described in "Taxation of Distributions." If you are considering purchasing
shares with qualified retirement plan assets, you should consult your tax
advisor for a more complete explanation of the Federal, state, local and (if
applicable) foreign tax consequences of making such an investment.
TAX INFORMATION
The Form 1099 that is mailed to you every January details your dividends and
their federal tax category. Even though the Fund provides you with this
information, you are responsible for verifying your tax liability with your tax
professional. For additional tax information see the Statement of Additional
Information. Please note that this tax discussion is general in nature; 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.
SHAREHOLDER INQUIRIES
If you have any questions or need additional information, please write The One
Group Services Company at 3435 Stelzer Road, Columbus, OH 43219 or call
1-800-480-4111.
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<PAGE> 456
REPORTING
In March and September you will receive a financial report from The
One Group. In addition, The One Group will periodically send you proxy
statements and other reports.
ORGANIZATION AND MANAGEMENT OF THE ONE GROUP
THE ONE GROUP
The Fund is a series of The One Group, an open-end management investment
company. The One Group currently consists of 40 separate Funds. Only The One
Group Equity Index Fund is described in this prospectus; the other Funds are
described in separate prospectuses. The Fund described in this prospectus is
diversified and is supervised by the Board of Trustees.
THE BOARD OF TRUSTEES
The Trustees oversee the management and administration of the Funds. The
Trustees are responsible for making major decisions about each Fund's
investment objectives and policies, but delegate the day-to-day administration
of the Funds to the officers of The One Group.
THE ADVISOR
Banc One Investment Advisors makes the day-to-day investment decisions for the
Funds and continuously reviews, supervises and administers the Funds'
investment programs. Banc One Investment Advisors has served as investment
advisor to The One Group since 1993. Prior to that time, The One Group was
advised by affiliates of Banc One Investment Advisors. In addition to The One
Group, Banc One Investment Advisors serves as investment advisor to other
mutual funds and individual, corporate, charitable and retirement accounts. As
of June 30, 1998, Banc One Investment Advisors, an indirect, wholly-owned
subsidiary of BANC ONE CORPORATION, managed over $59 billion in assets.
For the fiscal year ended June 30, 1998, the Fund paid advisory fees at an
annual rate of 0.10% of the average daily net assets of the Fund.
THE DISTRIBUTOR
The One Group Services Company, 3435 Stelzer Road, Columbus, Ohio 43219, a
wholly-owned subsidiary of The BISYS Group, Inc., markets the Funds and
distributes shares through selling brokers, financial institutions, investment
advisors, and other financial representatives.
THE ADMINISTRATOR AND SUB-ADMINISTRATOR
The One Group Services Company also serves as the Funds' administrator. The One
Group Services Company is responsible for responding to shareholder inquiries
and requests for information, as well as providing regulatory compliance and
reporting. For these services, The One Group Services Company receives a fee
based on the total assets of The One Group. For the first $1.5 billion in One
Group assets, The One Group Services Company receives an annual fee of .20% of
each Fund's average daily net assets. The annual rate declines to .18% on
assets up to $2 billion, and to .16% when assets exceed $2 billion. The fee is
calculated daily and paid monthly. Some Funds are not included in the
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<PAGE> 457
calculations. Banc One Investment Advisors, the Sub-Administrator, provides
office space, equipment, and facilities, as well as legal and regulatory
support.
THE TRANSFER AGENT, CUSTODIAN AND SUB-CUSTODIAN
State Street Bank and Trust Company, P.O. Box 8528, Boston, MA 02266-8528, or
your Shareholder Servicing Agent, if appropriate, handles shareholder
recordkeeping and statementing, distributes dividends, and processes buy and
sell requests. As the Funds' custodian, State Street holds the Funds' assets,
settles all portfolio trades and assists in calculating the Funds' net asset
values. Bank One Trust Company, N.A. serves as sub-custodian in connection with
the Funds' securities lending activities under an agreement with State Street
Bank and Trust Company. Bank One Trust Company, N.A. is paid a fee by the Funds
for this service.
YEAR 2000
Preparing for the Year 2000 is a high priority for The One Group Family of
Mutual Funds. Both The One Group Services Company and Banc One Investment
Advisors have formed dedicated teams to help them successfully achieve Year 2000
compliance. In addition, these teams are responsible for assessing the readiness
of all other service providers to The One Group. Year 2000 remediation efforts
are directed toward both information technology and non-information technology
systems. Non-information technology systems include elevators, photocopy
machines, and facsimile machines, and should have no significant impact on the
delivery of services to The One Group.
Banc One Investment Advisors has identified 49 information technology systems
and interfaces that provide service and support to The One Group. Each system is
assigned a priority rating: high, medium or low. Systems rated "high" are those
which are essential to the operation of The One Group. Each system rated "high"
is scheduled to be Year 2000 compliant by December 31, 1998. All systems will be
tested for compliance throughout 1999.
Many, if not all, of the systems are owned or operated by third party servicers
(for example, The One Group's Custodian). Consequently, remediation efforts must
be made by those servicers. Banc One Investment Advisors and The One Group
Services Company have, and will continue to, monitor the remediation progress of
the service providers. This process involves documentation, on-site visits, and
review of remediation plans and test results. Both Banc One Investment Advisors
and The One Group Services Company have budgeted in excess of $700,000 in fiscal
year 1998 and over $1 million in fiscal year 1998 toward the remediation effort
for all systems and interfaces. Neither The One Group nor its shareholders will
bear any of the direct remediation expenses.
Neither The One Group Services Company nor Banc One Investment Advisors
currently anticipate that the move to Year 2000 will have a material impact on
their ability to continue to provide the Funds with service at current levels.
Likewise, The One Group currently anticipates that the more to Year 2000 will
not have a material impact on its operations.
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<PAGE> 458
DETAILS ABOUT THE FUND'S INVESTMENT PRACTICES AND POLICIES
INVESTMENT PRACTICES
The Fund invests in a variety of securities and employs a number of investment
techniques. Each security and technique involves certain risks. What follows is
a list of the securities and techniques utilized by the Fund, as well as the
risks inherent in their use. Equity securities are subject mainly to market
risk, although certain securities may be subject to additional risks. For a
more complete discussion, see the Statement of Additional Information.
Following the table is a more complete discussion of risk.
<TABLE>
<CAPTION>
INSTRUMENT RISK TYPE
---------- ---------
<S> <C>
COMMON STOCK: Shares of ownership of a company. Market
REPURCHASE AGREEMENTS: The purchase of a security and the Credit
simultaneous commitment to return the security to the seller at Market
an agreed upon price on an agreed upon date. This is treated as Liquidity
a loan.
REVERSE REPURCHASE AGREEMENT: The sale of a security and the Market
simultaneous commitment to buy the security back at an agreed Leverage
upon price on an agreed upon date. This is treated as a
borrowing by the Fund.
SECURITIES LENDING: The lending of up to 331/3% of the Fund's Credit
total assets. In return the Fund will receive cash, other securities, and/or Market
letters of credit as collateral. Leverage
WHEN-ISSUED SECURITIES AND FORWARD COMMITMENTS: Purchase or Market
contract to purchase securities at a fixed price for delivery at Leverage
a future date. Liquidity
INVESTMENT COMPANY SECURITIES: Shares of other mutual funds, Market
including money market funds of The One Group and shares of
other investment companies for which Banc One Investment Advisors serves as
investment advisor or administrator. Banc One Investment Advisors will waive
certain fees when investing in funds for which it serves as investment advisor.
CONVERTIBLE SECURITIES: Bonds or preferred stock that convert to Market
common stock. Credit
CALL AND PUT OPTIONS: A call option gives the buyer the right to Management
buy, and obligates the seller of the option to sell, a security Liquidity at a
specified price. A put option gives the buyer the right to Credit sell, and
obligates the seller of the option to buy, a security Market at a specified
price. The Fund will sell only covered call and Leverage secured put options.
FUTURES AND RELATED OPTIONS: A contract providing for the future Management
sale and purchase of a specified amount of a specified security, Market
class of securities, or an index at a specified time in the Credit
future and at a specified price. Liquidity
Leverage
</TABLE>
24
<PAGE> 459
<TABLE>
<CAPTION>
<S> <C>
REAL ESTATE INVESTMENT TRUSTS ("REITs"): Pooled investment Liquidity
vehicles which invest primarily in income producing real estate Management
or real estate related loans or interest. Market
Regulatory
Tax
Pre-payment
BANKERS' ACCEPTANCES: Bills of exchange or time drafts drawn Credit
on and accepted by a commercial bank. Maturities are generally Liquidity
six months or less. Market
COMMERCIAL PAPER: Secured and unsecured short-term promissory Credit
notes issued by corporations and other entities. Maturities Liquidity
generally vary from a few days to nine months. Market
U.S. TREASURY OBLIGATIONS: Bills, notes, Market
bonds, STRIPS, and CUBES.
TREASURY RECEIPTS: TRS, TIGRs, and CATS. Market
U.S. GOVERNMENT AGENCY SECURITIES: Securities Market
issued by agencies and instrumentalities of the U.S. Government. Credit
These include Ginnie Mae, Fannie Mae, and Freddie Mac.
CERTIFICATES OF DEPOSIT: Negotiable instruments with a stated Market
maturity. Credit
Liquidity
TIME DEPOSITS: Non-negotiable receipts issued by a bank in Liquidity
exchange for the deposit of funds. Credit
Market
RESTRICTED SECURITIES: Securities not registered under the Securities Act of 1933, Liquidity
such as privately placed commercial paper and Rule 144A securities Market
PREFERRED STOCK: A class of stock that generally pays a Market
dividend at a specified rate and has preference over common stock
in the payment of dividends and in liquidation.
SWAPS, CAPS AND FLOORS: The Fund may enter into these transactions Management
to manage its exposure to changing interest rates and other Credit
factors. Swaps involve an exchange of obligations by two Liquidity
parties. Caps and floors entitle a purchaser to a principal Market
amount from the seller of the cap or floor to the extent
that a specified index exceeds or falls below a predetermined
interest rate or amount.
NEW FINANCIAL PRODUCTS: New options and futures contracts and Management
other financial products, continue to be developed and the Fund Credit
may invest in such options, contracts and products. Market
Liquidity
Standard & Poor's Depository Receipts ("SPDRs"): SPDRs represent Market
ownership in a long-term unit investment trust that holds a portfolio common
stocks designed to track the price performance and dividend yield of the S&P
500 Index. A SPDR entitles a holder to receive proportionate quarterly cash
distributions corresponding to the dividends that accrue to the S&P 500 Index
stocks in the underlying portfolio, less trust expenses.
</TABLE>
25
<PAGE> 460
<TABLE>
<CAPTION>
<S> <C>
Variable and Floating Rate Instruments: Obligations with Market
interest rates which are reset daily, weekly, quarterly or some Credit
other period and which may be payable to the Fund on demand. Liquidity
Warrants: Securities, typically issued with preferred stock or Market
bonds, that give the holder the right to buy a proportionate Credit
amount of common stock at a specified price.
</TABLE>
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<PAGE> 461
INVESTMENT RISKS
Below is a more complete discussion of the types of risks inherent in the
securities and investment techniques listed above. Because of these risks, the
value of the securities held by the Fund may fluctuate, as will the value of
your investment in the Fund. Certain investments are more susceptible to these
risks than others.
- Credit Risk. The risk that the issuer of a security, or the
counterparty to a contract, will default or otherwise become unable to
honor a financial obligation. Credit risk is generally higher for
non-investment grade securities. The price of a security can be
adversely affected prior to actual default as its credit status
deteriorates and the probability of default rises.
- Leverage Risk. The risk associated with securities or practices that
multiply small index or market movements into large changes in value.
Leverage is often associated with investments in derivatives, but also
may be embedded directly in the characteristics of other securities.
- Hedged. When a derivative (a security whose value is based on
another security or index) is used as a hedge against an
opposite position that the Fund also holds, any loss
generated by the derivative should be substantially offset by
gains on the hedged investment, and vice versa. While hedging
can reduce or eliminate losses, it can also reduce or
eliminate gains. Hedges are sometimes subject to imperfect
matching between the derivative and underlying security, and
there can be no assurance that the Fund's hedging
transactions will be effective.
- Speculative. To the extent that a derivative is not used as a
hedge, the Fund is directly exposed to the risks of that
derivative. Gains or losses from speculative positions in a
derivative may be substantially greater than the derivative's
original cost.
- Liquidity Risk. The risk that certain securities may be difficult or
impossible to sell at the time and the price that would normally
prevail in the market. The seller may have to lower the price, sell
other securities instead or forego an investment opportunity, any of
which could have a negative effect on fund management or performance.
This includes the risk of missing out on an investment opportunity
because the assets necessary to take advantage of it are tied up in
less advantageous investments.
- Management Risk. The risk that a strategy used by the Fund's management
may fail to produce the intended result. This includes the risk that
changes in the value of a hedging instrument will not match those of
the asset being hedged. Incomplete matching can result in unanticipated
risks.
- Market Risk. The risk that the market value of a security may move up
and down, sometimes rapidly and unpredictably. These fluctuations may
cause a security to be worth less than the price originally paid for
it, or less than it was worth at an earlier time. Market risk may
affect a single issuer, industry, sector of the economy or the market
as a whole. There is also the risk that the current interest rate may
not accurately reflect existing market rates. For fixed income
securities, market risk is largely, but not exclusively, influenced by
changes in interest rates. A rise in interest rates typically causes a
fall in values, while a fall in rates typically causes a rise in
values. Finally, key information about a security or market may be
inaccurate or unavailable. This is particularly relevant to
investments in foreign securities.
- Pre-Payment Risk. The risk that the principal repayment of a security
will occur at an unexpected time, especially that the repayment of a
mortgage or asset-backed security occurs either significantly sooner or
later than expected. Changes in pre-payment rates can result in greater
price and yield volatility. Pre-payments generally accelerate when
interest rates decline.
27
<PAGE> 462
When mortgage and other obligations are pre-paid, the Fund may have to
reinvest in securities with a lower yield. Further, with early
prepayment, the Fund may fail to recover any premium paid, resulting in
an unexpected capital loss.
- Tax Risk. The risk that the issuer of the securities will fail to
comply with certain requirements of the Internal Revenue Code, which
would cause adverse tax consequences.
- Regulatory Risk. The risk associated with Federal and state laws which
may restrict the remedies that a mortgage lender has when a borrower
defaults on mortgage loans. These laws include restrictions on
foreclosures, redemption rights after foreclosure, Federal and state
bankruptcy and debtor relief laws, restrictions on "due on sale"
clauses, and state usury laws.
INVESTMENT POLICIES
The Fund's investment objective and the investment policies summarized below
are fundamental. This means that they cannot be changed without the consent of
a majority of the outstanding shares of the Fund. The full text of the
fundamental policies can be found in the Statement of Additional Information.
The Fund may not:
1. Purchase an issuer's securities if as a result more than 5% of its
total assets would be invested in the securities of that issuer or the
Fund would own more than 10% of the outstanding voting securities of
that issuer. This does not include securities issued or guaranteed by
the United States, its agencies or instrumentalities, and repurchase
agreements involving these securities. This restriction applies with
respect to 75% of the Fund's total assets.
2. Concentrate its investments in the securities of one or more issuers
conducting their principal business in a particular industry or group
of industries. This does not include obligations issued or guaranteed
by the U.S. government or its agencies and instrumentalities and
repurchase agreements involving such securities.
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.
4. Invest more than 10% of its total assets in securities issued or
guaranteed by the United States, its agencies or instrumentalities.
Additional investment policies can be found in the Statement of Additional
Information.
TEMPORARY DEFENSIVE POSITION
Sometimes Banc One Investment Advisors decides that the Fund should temporarily
be invested in cash and cash equivalents. Cash equivalents include:
- Securities issued by the U.S. Government, its agencies and
instrumentalities
- Repurchase Agreements
- Certificates of Deposit
28
<PAGE> 463
- Bankers' Acceptances
- Commercial Paper (rated in one of the two highest rating categories)
- Variable Rate Master Demand Notes
- Bank Money Market Deposit Accounts
The Fund may temporarily invest only 10% of its total assets in cash and cash
equivalents.
While the Fund is engaged in a temporary defensive position, it will not be
pursuing its investment objective. Therefore, the Fund will pursue a temporary
defensive position only when market conditions warrant.
PORTFOLIO TURNOVER
Portfolio turnover 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 you. To the extent
portfolio turnover results in short-term capital gains, such gains will
generally be taxed at ordinary income tax rates. The portfolio turnover rate
for the Fund for the fiscal year ended June 30, 1998 is shown on the Financial
Highlights.
29
<PAGE> 464
APPENDIX
DESCRIPTION OF RATINGS
The following is a summary of published ratings by major credit rating
agencies. Credit ratings evaluate only the safety of principal and interest
payments, not the market value risk of lower quality securities. Credit rating
agencies may fail to change credit ratings to reflect subsequent events on a
timely basis. Although Banc One Investment Advisors considers security ratings
when making investment decisions, it also performs its own investment analysis
and does not rely solely on the ratings assigned by credit agencies.
Unrated securities will be treated as non-investment grade securities unless
Banc One Investment Advisors determines that such securities are the equivalent
of investment grade securities. Securities that have received different ratings
from more than one agency are considered investment grade if at least one
agency has rated the security investment grade.
DESCRIPTION OF COMMERCIAL PAPER RATINGS
DUFF & PHELPS CREDIT RATING CO. ("DUFF")
D-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 obligations.
D-1 Very high certainty of timely payment. Liquidity factors are
excellent and supported by good fundamental protection
factors. Risk factors are minor.
D-1- High certainty of timely payment. Liquidity factors are
strong and supported by good fundamental protection factors.
Risk factors are very small.
STANDARD & POOR'S CORPORATION ("S&P")
A-1 Highest category of commercial paper. Capacity to meet
financial commitment is strong. Obligations designated with a
plus sign (+) indicate that capacity to meet financial
commitment is extremely strong.
A-2 Issues somewhat more susceptible to adverse effects of
changes in circumstances and economic conditions than
obligations in higher rating categories. However, the
capacity to meet financial commitments is satisfactory.
FITCH'S IBCA LIMITED ("FITCH")
F1 Highest capacity for timely repayment. Those issues rated A1+
possess a particularly strong credit feature.
F2 Satisfactory capacity for timely repayment although such
capacity may be susceptible to adverse changes in business,
economic or financial conditions.
MOODY'S INVESTORS SERVICE ("MOODY'S")
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<PAGE> 465
PRIME-1 Superior ability for repayment.
PRIME-2 Strong ability for repayment.
DESCRIPTION OF PREFERRED STOCK RATINGS
MOODY'S
aaa Top-quality preferred stock. This rating indicates good asset
protection and the least risk of dividend impairment within
the universe of preferred stocks.
aa High-grade preferred stock. This rating indicates that there
is a reasonable assurance the earnings and asset protection
will remain relatively well maintained in the foreseeable
future.
a Upper-medium grade preferred stock. While risks are judged to
be somewhat greater than in the "aaa" and "aa"
classification, earnings and asset protection are,
nevertheless, expected to be maintained at adequate levels.
baa Medium-grade preferred stock, neither highly protected nor
poorly secured. Earnings and asset protection appear adequate
at present but may be questionable over any great length of
time.
S&P
S&P's preferred stock rating is an assessment of the capacity and willingness
of an issuer to pay preferred stock dividends and any applicable sinking fund
obligations.
AAA Highest rating. This rating indicates an extremely strong
capacity to pay the preferred stock obligations.
AA High-quality, fixed-income security. The capacity to pay
preferred stock obligations is very strong, although not as
overwhelming as for issues rated "AAA."
A Backed by a sound capacity to pay the preferred stock
obligations, although it is somewhat more susceptible to the
adverse effects of changes in circumstances and economic
conditions.
BBB Backed by an adequate capacity to pay the preferred stock
obligations. Whereas the issuer normally exhibits adequate
protection parameters, adverse economic conditions or
changing circumstances are more likely to lead to a weakened
capacity to make payments for a preferred stock in this
category than for issues in the "A" category.
SHORT-TERM DEBT RATINGS
Thompson Bank Watch, Inc. ("TBW") assigns ratings to specific debt instruments
with original maturities of one year or less. The TBW Short-Term ratings
specifically assess the likelihood of an untimely payment of principal and
interest.
31
<PAGE> 466
TBW-1 Very high degree of likelihood that principal and interest
will be paid on a timely basis.
TBW-2 While degree of safety regarding timely repayment of
principal and interest is strong, the relative degree is not
as high as for issues rated TBW-1.
TBW-3 Lowest investment grade category. While more susceptible to
adverse developments than obligations with higher ratings,
capacity to service principal and interest in a timely
fashion is considered adequate.
TBW-4 Non-investment grade and, therefore, speculative.
32
<PAGE> 467
Investment Advisor and Sub-Administrator
Banc One Investment Advisors Corporation
1111 Polaris Parkway
P.O. Box 710211
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 8528
Boston, MA 02266-8528
Legal Counsel
Ropes & Gray
One Franklin Square
1301 K Street, N.W.
Suite 800 East
Washington, D.C. 20005
Independent Accountants
PricewaterhouseCoopers, LLP
100 East Broad Street
Columbus, OH 43215
THE STATEMENT OF ADDITIONAL INFORMATION CONTAINS MORE DETAILED INFORMATION
ABOUT THE FUND. THE CURRENT STATEMENT OF ADDITIONAL INFORMATION HAS BEEN FILED
WITH THE SECURITIES AND EXCHANGE COMMISSION AND IS AVAILABLE WITHOUT CHARGE BY
CALLING 1-800-480-4111 OR BY WRITING TO THE ONE GROUP SERVICES COMPANY AT 3435
STELZER ROAD, COLUMBUS, OHIO 43219. THE STATEMENT OF ADDITIONAL INFORMATION IS
INCORPORATED INTO THIS PROSPECTUS BY REFERENCE. THE SEC MAINTAINS A WEBSITE
(WWW.SEC.GOV) THAT CONTAINS THE STATEMENT OF ADDITIONAL INFORMATION, MATERIALS
INCORPORATED BY REFERENCE AND OTHER INFORMATION REGARDING THE ONE GROUP(R).
TOG -F- ____
33
<PAGE> 468
THE ONE GROUP(R)
FAMILY OF MUTUAL FUNDS
3435 Stelzer Road
Columbus, Ohio 43219-3035
(800) 480-4111
October , 1998
THE ONE GROUP INVESTOR FIXED INCOME FUND
This prospectus describes a mutual fund that invests in other mutual funds. The
mutual fund in this prospectus seeks current income with liquidity and stability
of principal by investing in one or more professionally managed portfolios of
securities. The information in this prospectus is important.
Please read it carefully before you invest, and save it for future reference.
PLEASE REMEMBER THAT SHARES OF THE FUNDS: O ARE NOT DEPOSITS OR
OBLIGATIONS OF, OR GUARANTEED BY BANC ONE CORPORATION OR ITS AFFILIATES; O ARE
NOT INSURED OR GUARANTEED BY THE FEDERAL DEPOSIT INSURANCE CORPORATION OR BY ANY
FEDERAL OR STATE GOVERNMENTAL AGENCY; O INVOLVE INVESTMENT RISK, INCLUDING THE
POSSIBLE LOSS OF THE PRINCIPAL AMOUNT INVESTED.
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE
SECURITIES AND EXCHANGE COMMISSION NOR HAS THE COMMISSION PASSED UPON THE
ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A
CRIMINAL OFFENSE.
<PAGE> 469
TABLE OF CONTENTS
A BRIEF PREVIEW OF THE FUND 3
ABOUT THE FUND 4
MORE ABOUT THE FUND 7
HOW TO DO BUSINESS WITH THE ONE GROUP 7
Purchasing Fund Shares 7
Sales Charges 11
Sales Charge Reductions and Waivers 13
Exchanging Fund Shares 16
Redeeming Fund Shares 18
SHAREHOLDER INFORMATION 21
Voting Rights 21
Dividend Policies 21
Tax Treatment of the Fund 22
Tax Treatment of Shareholders 22
Shareholder Inquiries 22
ORGANIZATION & MANAGEMENT OF THE FUND 23
The Fund 23
The Board of Trustees 23
The Advisor 23
The Distributor 23
The Administrator and Sub-Administrator 23
The Transfer Agent, Custodian and Sub-Custodian 23
DETAILS ABOUT THE FUND'S INVESTMENT PRACTICES AND POLICIES 24
Investment Practices 24
Investment Policies 26
APPENDIX A: DETAILS ABOUT THE UNDERLYING FUNDS' INVESTMENT PRACTICES AND
POLICIES 28
APPENDIX B: DESCRIPTION OF RATINGS 34
<PAGE> 470
[LOGO-(CLOCK)] A BRIEF PREVIEW OF THE FUND
WHAT ARE THE GOALS OF THE ONE GROUP FIXED INCOME FUND? The Fund's goal is to
seek current income with liquidity and stability of principal.
WHAT IS THE FUND'S INVESTMENT STRATEGY? The Fund normally will invest in a
diversified group of One Group mutual funds, which invest primarily in equity
and fixed income instruments. Shares are available for long-term investors,
including tax-advantaged retirement accounts; the Funds should not be used for
short-term trading purposes. The Fund's investment return is diversified by its
investment in the underlying mutual funds which invest in growth and income
stocks, foreign securities, and cash or cash equivalents. The underlying mutual
funds in which the Fund will invest have the following characteristics:
The One Group(R) Prime Money Market Fund Money Market
The One Group(R) Limited Volatility Bond Fund Fixed Income
The One Group(R) Intermediate Bond Fund Fixed Income
The One Group(R) Income Bond Fund Fixed Income
The One Group(R) Government Bond Fund Fixed Income
The One Group(R) Ultra Short-Term Income Fixed Income
WHAT ARE THE MAIN RISKS OF INVESTING IN THE FUND? The Fund's investments are
concentrated in the underlying funds, so the Fund's investment performance is
directly related to the performance of the underlying funds. The Fund's net
asset value will fluctuate with changes in the bond markets and the value of the
mutual funds in which it invests. In addition, as a matter of fundamental
policy, the Fund must allocate its investments among the underlying funds. As a
result, the Fund does not have the same flexibility to invest as a mutual fund
without such constraints. An investment in the Funds is not a deposit of BANC
ONE CORPORATION or its affiliates and is not insured or guaranteed by the
Federal Deposit Insurance Corporation or any other government agency. For more
information about risks, please read "More About the Fund" and "Investment
Risks."
WHAT CLASSES OF SHARES ARE AVAILABLE? The Fund currently offers four classes of
Shares: Class A, Class B, Class C and Class I. Class A, Class B and Class C
shares are offered to the general public. Class I 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. The section called "How To Do Business With The One Group"
will provide more information. Class I shares are not available to Individual
Retirement Accounts ("IRA").
HOW DO I PURCHASE AND REDEEM SHARES? You may buy and redeem shares of the Fund
on any day that the Funds are open for business. Purchase and redemption
procedures are explained in greater detail in "How To Do Business With The One
Group." For additional information, call The One Group Services Company at
1-800-480- 4111.
HOW ARE DIVIDENDS PAID? Generally, dividends are declared monthly and
distributed 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 you elect to take the payment in cash. For a more detailed
discussion of dividends, see "Dividend Policies."
WHO MANAGES THE FUNDS? Banc One Investment Advisors Corporation ("Banc One
Investment Advisors"), an indirect subsidiary of BANC ONE CORPORATION, serves as
the advisor of the Fund. Banc One Investment
- 3 -
<PAGE> 471
Advisors is paid a fee for its services. Banc One Investment Advisors also
serves as the advisor to the underlying mutual funds, for which it receives a
fee.
THE ONE GROUP(R) INVESTOR FIXED INCOME FUND
INVESTMENT OBJECTIVE: The Fund seeks current income with liquidity and stability
of principal by investing primarily in a diversified group of The One Group
mutual funds which invest primarily in fixed income securities.
INVESTMENT STRATEGY: The Fund invests 90% to 100% of its total assets in five
mutual funds of The One Group which invest primarily in fixed income securities,
and up to 10% of its assets in one money market fund of The One Group.
PORTFOLIO SECURITIES: The Fund will invest in the
underlying mutual funds within the following range:
The One Group(R) Prime
Money Market Fund 0 - 10%
The One Group(R) Limited
Volatility Bond Fund 0 - 90%
The One Group(R) Intermediate Bond Fund 0 - 90%
The One Group(R) Income Bond Fund 0 - 90%
The One Group(R) Government Fund 0 - 90%
The One Group(R) Ultra Short-Term 0 - 90%
RISK CONSIDERATIONS: The Fund's investments are concentrated in other mutual
funds, so the Fund's investment performance is directly related to the
performance of those mutual funds. In addition, as a matter of fundamental
policy, the Fund must allocate its investments primarily among the mutual funds.
As a result, the Fund's investment flexibility is limited.
See "Special Risk Considerations."
- -------------------------------------------------------------------------------
<TABLE>
<CAPTION>
SHAREHOLDER EXPENSES
CLASS A CLASS B CLASS C CLASS I
------- ------- ------- -------
<S> <C> <C> <C>
SHAREHOLDER TRANSACTION EXPENSES(1)
Maximum Sales Charge Imposed on Purchases
(as a percentage of offering price) 4.50% none none none
Maximum Contingent Deferred Sales Charge(2)
(as a percentage of original purchase price or redemption
proceeds, as applicable) none(2) 5.00% 1.00% none
Redemption Fees none none none none
Exchange Fees none none none none
ANNUAL OPERATING EXPENSES
(as a percentage of average daily net assets)
Investment Advisory Fees(after fee waiver)(3) .01% .01% .01% .01%
12b-1 Fees (after fee waiver)(4) .25% 1.00% 1.00% none
Other Expenses(after fee waiver)(5) .19% .19% .19% .19%
TOTAL OPERATING EXPENSES (after fee waivers)(6) .45% 1.20% 1.20% .20%
</TABLE>
(1) If you buy or sell shares through a Shareholder Servicing Agent, you
may be charged separate transaction fees by the Shareholder
Servicing Agent. In addition, a $10.00 sub-minimum account fee may
be applicable and a $7.00 charge will be deducted from redemption
amounts paid by wire.
(2) Except for purchases of $1 million or more. Please see "Sales
Charges."
- 4 -
<PAGE> 472
(3) Without the waiver, Investment Advisory fees would be .05% for all
classes of shares.
(4) Due to 12b-1 fees, long-term Class A, Class B, and Class C
shareholders may pay more than the equivalent of the maximum
front-end sales charges permitted by the rules of the National
Association of Securities Dealers. Without the voluntary waiver,
12b-1 fees would be .35% for Class A.
(5) Other Expenses are based on estimated amounts for the current
fiscal year. Without the fee waiver and reimbursement, Other
Expenses are estimated to be .29%.
(6) Without the voluntary reduction of fees, Total Operating Expenses
would be .69% for Class A shares, 1.34% for Class B shares, 1.34%
for Class C shares, and .34% for Class I shares.
The Fund will indirectly pay a portion of the expenses incurred by the
underlying funds. The following chart provides the expense ratio for the
Fiduciary Class of each underlying fund in which the Fund invests (based on the
current fund prospectus). Some of these expense ratios may include a voluntary
reduction of investment advisory fees.
<TABLE>
<CAPTION>
NAME OF UNDERLYING FUND EXPENSE RATIO
----------------------- -------------
<S> <C>
The One Group(R) Prime Money Market Fund .50%
The One Group(R) Limited Volatility bond Fund .62%
The One Group(R) Intermediate Bond Fund .67%
The One Group(R) Income Bond Fund .61%
The One Group(R) Government Fund .69%
The One Group(R) Ultra Short-Term Income Fund .60%
</TABLE>
After combining the total operating expenses of the Fund with those of the
underlying funds, the estimated average weighted expense ratio for Class A
shares is 1.09%, for Class B shares is 1.84%, for Class C shares is 1.84%, and
for Class I shares is .84%.
EXAMPLE: An investor would pay the following expenses on a $1,000 investment in
the Fund, assuming: (1) payment of the maximum sales charges; (2) 5% annual
return; and (3) redemption at the end of each time period.
- 5 -
<PAGE> 473
1 YEAR 3 YEARS
------ -------
Class A
Class A (without fee waiver)
Class B
Class B (without fee waiver)
Class C
Class C (without fee waiver)
Class I
Fiduciary Class I (without fee waiver)
Assuming no redemption at the end of each time period, the dollar amounts in the
above example would be as follows:
1 YEAR 3 YEARS
------ -------
Class A
Class A (without fee waiver)
Class B
Class B (without fee waiver)
Class C
Class C (without fee waiver)
Class I
Class I (without fee waiver)
These examples are designed to assist you in understanding the costs and
expenses that may be directly or indirectly paid by investors in the Fund. THE
EXAMPLES SHOULD NOT BE CONSIDERED A REPRESENTATION OF PAST OR FUTURE EXPENSES
AND ACTUAL EXPENSES MAY BE GREATER OR LESS THAN THOSE SHOWN.
FINANCIAL HIGHLIGHTS
This section would include Financial Highlights for the Fund. Because the Fund
had not begun operations until after June 30, 1998, there are no financial
statements for the Fund.
- 6 -
<PAGE> 474
MORE ABOUT THE FUND
ILLIQUID INVESTMENTS
The Fund may invest up to 15% of its net assets in illiquid investments. A
security is illiquid if it cannot be sold at approximately the value assessed by
the Fund within seven (7) days. Banc One Investment Advisors will follow
guidelines adopted by The One Group Board of Trustees in determining whether an
investment is illiquid.
TEMPORARY DEFENSIVE POSITION
Sometimes Banc One Investment Advisors decides that because of market conditions
the Fund should temporarily be invested in instruments other than the underlying
mutual funds. Therefore, the Fund is permitted for temporary defensive purposes
to invest up to 100% of their assets in short-term fixed income securities.
These securities include obligations of the U.S. Government and its agencies and
instrumentalities, commercial paper, bank certificates of deposit, repurchase
agreements, banker's acceptances, variable amount master demand notes and bank
money market deposit accounts. The Fund also may hold cash for liquidity
purposes.
To the extent that the Fund is engaged in a temporary defensive position, it
will not be pursuing its investment objective.
SPECIAL RISK CONSIDERATIONS
SPECIAL RISKS OF INVESTING IN FIXED-INCOME FUNDS
Investments in fixed income securities (for example, bonds) will increase or
decrease based on changes in interest rates. If rates increase, the value of a
Fund's investments generally declines. On the other hand, if rates fall, the
value of the investments generally increases. The value of your investment in a
Fund will increase and decrease as the value of a Fund's investments increase
and decrease. While securities with longer duration and maturities tend to
produce higher yields, they are also subject to greater fluctuations in value
when interest rates change. Usually changes in the value of fixed income
securities will not affect cash income generated, but may affect the value of
your investment.
HOW TO DO BUSINESS WITH THE ONE GROUP
PURCHASING FUND SHARES
WHERE CAN I BUY SHARES?
You may purchase Fund shares from the following sources:
- - The One Group Services Company, and
- - Shareholder Servicing Agents. These include investment advisors,
brokers, financial planners, banks, insurance companies, retirement or
401(k) plan sponsors, or other intermediaries. Shares purchased this way
will be held for you by the Shareholder Servicing Agent.
- 7 -
<PAGE> 475
WHEN CAN I BUY SHARES?
- - Purchases may be made on any business day. This includes any day that
the Funds are open for business, other than weekends, days on which the
New York Stock Exchange ("NYSE") is closed, and the following holidays:
New Years Day, Martin Luther King, Jr. Day, Presidents' Day, Good
Friday, Memorial Day, Independence Day, Labor Day, Thanksgiving, and
Christmas.
- - Purchase requests received by The One Group Services Company before 4:00
p.m. Eastern Time ("ET"), will be effective that day. On occasion, the
NYSE will close before 4 p.m. ET. When that happens, purchase requests
received after the NYSE closes will be effective the following business
day.
- - Purchase orders may be canceled by the Fund's Custodian, State Street
Bank and Trust Company, if it does not receive "federal funds" by 4:00
p.m. ET (i) on the business day after the order is placed if you are
buying Class I shares, and (ii) on the third business day if you
are purchasing Class A, Class B and Class C shares.
- - If your shares are held by a Shareholder Servicing Agent, it is the
responsibility of the Shareholder Servicing Agent to send your purchase
or redemption order to the Fund. Your Shareholder Servicing Agent may
have an earlier cut-off time for purchase and redemption requests.
- - The One Group Services Company can reject a purchase order if it does
not think that it is in the best interests of a Fund and/or its
shareholders to accept the order.
- - Shares are electronically recorded. Therefore, certificates will not be
issued.
WHAT KIND OF SHARES CAN I BUY?
The One Group offers the following classes of shares:
- - Class A, Class B and Class C shares are available to the general public.
- - Class I shares are available to institutional investors and any
organization authorized to act in a fiduciary, advisory, custodial or
agency capacity. We will refer to these entities as "Intermediaries."
- - If you intend to hold your shares for six or more years, Class B shares
may be appropriate for you. If you intend to hold your shares for less
than six years, you may want to consider Class A or Class C shares.
The One Group Fund Direct IRA. The One Group offers a retirement plan and, in
1999, may offer an education plan. These plans allow participants to defer taxes
while their retirement and education savings grow. The education IRA requires a
minimum investment of $500. Call The One Group Services Company at
1-800-480-4111 for an Adoption Agreement.
HOW MUCH DO SHARES COST?
- - Shares are sold at net asset value ("NAV") plus a sales charge, if any.
- - Each class of shares in each Fund has a different NAV. This is primarily
because each class has different distribution expenses.
- 8 -
<PAGE> 476
- - NAV per share is calculated by dividing the total market value of a
Fund's investments and other assets allocable to a class (minus class
expenses) by the number of outstanding shares in that class.
- - A Fund's NAV changes every day. NAV is calculated each business day
following the close of the NYSE at 4:00 p.m. ET. On occasion, the NYSE
will close before 4:00 p.m ET. When that happens, NAV will be calculated
as of the time the NYSE closes.
HOW DO I OPEN AN ACCOUNT?
1. Read the prospectus carefully, and select the Fund or Funds most
appropriate for you.
2. Decide how much you want to invest.
- The minimum initial investment is $1,000 ($100 for employees of
BANC ONE CORPORATION and its affiliates).
- Subsequent investments must be at least $100 ($25 for employees
of BANC ONE CORPORATION and its affiliates).
- You may purchase no more than $250,000 of Class B shares at one
time.
- The One Group Services Company may waive these minimums.
3. Complete the Account Application Form. Be sure to sign up for all of the
Account privileges that you plan to take advantage of. Doing so now
means that you will not have to complete additional paperwork later.
4. Send the completed application and a personal check (unless you choose
to pay by wire or bank transfer) payable to "The One Group" to:
State Street Bank and Trust Company
c/o The One Group
P.O. Box 8528
Boston, MA 02266-8528
Contributions to Fund Direct IRAs should be made payable to "State
Street Bank and Trust Company for the Benefit of (your name)."
5. All checks should be in U.S. dollars. Third party checks will not be
accepted. Redemptions from a Fund will not be permitted for ten (10)
calendar days if purchases are made by check or under the Systematic
Investment Plan (see below).
6. If you purchase shares through a Shareholder Servicing Agent, you may be
required to complete additional forms or follow additional procedures.
You should contact your Shareholder Servicing Agent regarding purchases,
exchanges and redemptions.
7. If you have any questions, contact your Shareholder Servicing Agent or
call The One Group Services Company at 1-800-480-4111.
- 9 -
<PAGE> 477
CAN I PURCHASE SHARES OVER THE TELEPHONE?
Yes. Simply select this option on your Account Application Form and then:
- - Contact your Shareholder Servicing Agent or The One Group Services
Company at 1-800-480-4111 to relay your purchase instructions.
- - Send a personal check made payable to "The One Group" to State Street
Bank and Trust Company (see address above), authorize a bank transfer or
initiate a wire transfer to the following wire address:
State Street Bank & Trust Company
Attn: Custody & Shareholder Services
ABA 011 000 028
DDA 99034167
FBO The One Group Fund (ex: The One Group Prime Money Market Fund - A)
Your Account Number (ex: 123456789)
Your Account Registration (ex: John Smith & Mary Smith, JTWROS)
- - The One Group uses reasonable procedures to confirm that instructions
given by telephone are genuine. These procedures include recording
telephone instructions and asking for personal identification. If these
procedures are followed, The One Group will not be responsible for any
loss, liability, cost or expense of acting upon unauthorized or
fraudulent instructions; you bear the risk of loss.
- - You may revoke your right to make purchases over the telephone by
sending a letter to:
State Street Bank and Trust Company
c/o The One Group
P.O. Box 8528
Boston, MA 02266-8528
CAN I AUTOMATICALLY INVEST ON A SYSTEMATIC BASIS?
Yes. After your Account is established, you may purchase additional Class A,
Class B and Class C shares by making automatic monthly investments from your
bank account. The minimum initial investment is still $1,000, but minimum
automatic additions are only $25. The One Group Services Company may waive these
minimums.
To establish a Systematic Investment Plan:
- - Select the "Systematic Investment Plan" option on the Account
Application Form.
- - Provide the necessary information about the bank account from which your
investments will be made.
- - Shares purchased under a Systematic Investment Plan may not be redeemed
for ten (10) calendar days.
- - The One Group currently does not charge for this service, but may impose
a charge in the future. However, your bank may impose a charge for
debiting your bank account.
- - You may revoke your right to make systematic investments by sending a
letter to:
- 10 -
<PAGE> 478
State Street Bank and Trust Company
c/o The One Group
P.O. Box 8528
Boston, MA 02266-8528
CONVERSION FEATURE
Your Class B shares automatically convert to Class A shares after eight years
(measured from the end of the month in which they were purchased).
- - After conversion, your shares will be subject to the lower distribution
and shareholder servicing fees charged on Class A shares.
- - You will not be assessed any sales charges or fees for conversion of
shares, nor will you be subject to any Federal income tax.
- - Because the share price of the Class A shares may be higher than that of
the Class B shares at the time of conversion, you may receive fewer
Class A shares; however, the dollar value will be the same.
- - If you have exchanged Class B shares of one Fund for Class B shares of
another, the time you held the shares in each Fund will be added
together.
SALES CHARGES
The One Group Services Company compensates Shareholder Servicing Agents who sell
shares of The One Group. Compensation comes from sales charges, 12b-1 fees and
payment by The One Group Services Company from its own resources. The One Group
Services Company, at its own expense, also will provide promotional incentives
in the form of travel expenses, lodging and bonuses to licensed individuals who
sell shares of the Funds, as well as vacation trips (including lodging at luxury
resorts), tickets to entertainment events, and merchandise. Occasionally, cash
incentives will be paid to select Shareholder Servicing Agents. Those
Shareholder Servicing Agents who may receive special incentives include Banc One
Securities Corporation, The Advisors Group, United Planners Financial Services
of America, Inc., The Legend Group, and Rosewood Retirement Advisory Services,
LLC.
CLASS A SHARES
This table shows the amount of sales charge you pay and the commissions paid to
Shareholder Servicing Agents.
<TABLE>
<CAPTION>
SALES CHARGE SALES CHARGE
AS A % OF THE AS A COMMISSION
OFFERING % OF YOUR AS A % OF
AMOUNT OF PURCHASE PRICE INVESTMENT OFFERING PRICE
- ------------------ ----- ---------- --------------
<S> <C> <C> <C> <C>
Less than $100,000 4.50% 4.71% 4.05%
$100,000-$249,999 3.50% 3.63% 3.05%
$250,000-$499,999 2.50% 2.56% 2.05%
$500,000-$999,999 2.00% 2.04% 1.60%
$1,000,000* 0.00% 0.00% 0.00%
</TABLE>
- 11 -
<PAGE> 479
* If you purchase $1 million or more of Class A shares and are not
assessed a sales charge at the time of purchase, you will be charged the
equivalent of 1% of the purchase price if you redeem any or all of the
Class A shares within one year of purchase.
CLASS B SHARES
Class B shares are offered at NAV, without any up-front sales charges. However,
if you redeem these shares within six years of the purchase date, you will be
assessed a Contingent Deferred Sales Charge ("CDSC") according to the following
schedule:
<TABLE>
<CAPTION>
CDSC AS A % OF
DOLLAR AMOUNT
YEARS SINCE PURCHASE SUBJECT TO CHANGE
-------------------- -----------------
<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%
more than 6 0.00%
</TABLE>
The One Group Services Company pays a commission of 4.00% of the original
purchase price to Shareholder Servicing Agents who sell Class B shares.
CLASS C SHARES
Class C shares are offered at NAV, without any up-front sales charge. However,
if you redeem your shares within one year of the purchase date, you will be
assessed a CDSC as follows:
CDSC AS A %
OF DOLLAR AMOUNT
YEARS SINCE PURCHASE SUBJECT TO CHARGE
-------------------- -----------------
0-1 1.00%
After first year None
Shareholder Servicing Agents selling Class C shares receive a commission of
1.00% of the original purchase price from The One Group Services Company.
How the CDSC is Calculated
- - The Fund assumes that all purchases made in a given month were made on
the first day of the month.
- - The CDSC is based on the current market value or the original cost of
the shares, whichever is less.
- - A sales charge is not imposed on increases in NAV above the initial
purchase price, nor is a sales charge assessed on shares acquired
through reinvestment of dividends or capital gains distributions.
- 12 -
<PAGE> 480
- - To keep your CDSC as low as possible, the Fund first will redeem any
shares in your account that carry no CDSC, starting with Class A Shares.
After that, the Fund will redeem the shares you have held for the
longest time and thus have the lowest CDSC.
- - If you exchange Class B or Class C shares of an unrelated mutual fund
for Class B or Class C shares of The Group in connection with a fund
reorganization, the CDSC applicable to your original shares (including
the period of time you have held those shares) will be applied to The
One Group shares you receive in the reorganization.
12B-1 FEES
12b-1 fees are paid by The One Group to The One Group Services Company as
compensation for its services and expenses. The One Group Services Company in
turn pays all or part of the 12b-1 fee to Shareholder Servicing Agents that sell
shares of The One Group.
- - The 12b-1 fees vary by share class as follows:
1. Class A shares pay a 12b-1 fee of .35% of the average daily net
assets of the Fund, which is currently being waived to .25%.
2. Class B and Class C shares pay a 12b-1 fee of 1.00% of the
average daily net assets of the Fund. This will cause expenses
for Class B and Class C shares to be higher and dividends to be
lower than for Class A shares.
3. There are no 12b-1 fees for Fiduciary Class shares.
- - 12b-1 fees, together with the CDSC, help The One Group Services Company
sell Class B and Class C shares without an "up-front" sales charge by
defraying the costs of advancing brokerage commissions and other
expenses paid to Shareholder Servicing Agents.
- - The One Group Services Company may use up to .25% of the fees for
shareholder servicing and up to .75% for distribution. During the last
fiscal year, The One Group Services Company received 12b-1 fees totaling
.25%, 1.00% and 1.00% of the average daily net assets of Class A, Class
B and Class C shares, respectively.
- - The One Group Services Company may pay 12b-1 fees to its affiliates and
to Banc One Investment Advisors and its affiliates (or any sub-advisor)
for brokerage and other agency transactions.
SALES CHARGE REDUCTIONS AND WAIVERS
REDUCING YOUR CLASS A SALES CHARGES
There are several ways you can reduce the sales charges you pay on Class A
shares:
1. Right of Accumulation: You may add the market value of any Class A,
Class B or Class C shares of a Fund (except a money market fund) that
you (and your spouse and minor children) already own to the amount of
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your next Class A purchase for purposes of calculating the sales charge.
An Intermediary also may take advantage of this option.
2. Letter of Intent: With an initial investment of $2,000, you may purchase
Class A shares of one or more funds over the next 13 months and pay the
same sales charge that you would have paid if all shares were purchased
at once. A percentage of your investment will be held in escrow until
the full amount covered by the Letter of Intent has been invested.
To take advantage of the accumulation privilege or letter of intent, complete
the appropriate section of your fund application, or contact your Shareholder
Servicing Agent. To determine if you are eligible for the accumulation
privilege, contact The One Group Services Company at 1-800-480-4111. These
programs may be terminated or amended at any time.
WAIVER OF THE CLASS A SALES CHARGE
No sales charge is imposed on Class A shares of the Funds if the shares were:
1. Bought with the reinvestment of dividends and capital gains
distributions.
2. Acquired in exchange for other Fund shares if a comparable sales charge
has been paid for the exchanged shares.
3. Bought by officers, directors or trustees, retirees and employees (and
their spouses and immediate family members) of:
- The One Group.
- BANC ONE CORPORATION and its subsidiaries and affiliates.
- The One Group Services Company and its subsidiaries and
affiliates.
- State Street Bank and Trust Company and its subsidiaries and
affiliates.
- Broker/dealers who have entered into dealer agreements with The
One Group and their subsidiaries and affiliates.
- An investment sub-advisor of a fund of The One Group and such
sub-advisor's subsidiaries and affiliates.
4. Bought by:
- Affiliates of BANC ONE CORPORATION and certain accounts (other
than IRA Accounts) for which an Intermediary acts in a fiduciary,
advisory, agency, custodial or similar capacity.
- Accounts to which a bank or broker-dealer charges an asset
allocation fee, provided the bank or broker-dealer has an
agreement with The One Group Services Company.
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<PAGE> 482
- Retirement and deferred compensation plans and trusts used to
fund those plans, including, but not limited to, those defined in
sections 401(a), 403(b) or 457 of the Internal Revenue Code and
"rabbi trusts."
- Shareholder Servicing Agents who have a dealer arrangement with
The One Group Services Company, 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 Shareholder Servicing Agents who place trades
for their own accounts if the accounts are linked to the master
account of such Shareholder Servicing Agent on the books and
record of the broker or agent.
5. Bought with proceeds from the sale of Class I shares of a Fund of The
One Group or acquired in an exchange of Fiduciary Class shares of a Fund
for Class A shares of the same Fund, but only if the purchase is made
within 60 days of the sale or distribution.
6. Bought with proceeds from the sale of shares of a mutual fund, including
a Fund of The One Group, for which a sales charge was paid, but only if
the purchase is made within 60 days of the sale or distribution.
7. Bought in an IRA with the proceeds of a distribution from an employee
benefit plan, but only if the purchase is made within 60 days of the
sale or distribution and, at the time of the distribution, the employee
benefit plan had plan assets invested in a Fund of The One Group.
8. Bought with assets of The One Group.
9. Bought in connection with plans of reorganizations of a Fund, such as
mergers, asset acquisitions and exchange offers to which a Fund is a
party.
The waivers described in (5), (6) and (7) above will not continue indefinitely
and may be discontinued at any time without notice.
WAIVER OF THE CLASS B SALES CHARGE
No sales charge is imposed on redemptions of Class B shares of the Funds:
1. Provided that you withdraw no more than 10% of the account value
annually. You do not have to participate in the Systematic Withdrawal
Plan to take advantage of this waiver.
2. If you buy the shares in connection with certain retirement plans, such
as 401(k) and similar qualified plans.
3. If you are the shareholder (or a joint shareholder), or a participant or
beneficiary of certain retirement plans and you die or become disabled
(as defined by the Tax Code), but only if the redemption is made within
one year of such death or disability.
4. That represent a minimum required distribution from an IRA Account or
other qualifying retirement plan, but only if you are at least age
70-1/2.
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<PAGE> 483
5. Exchanged in connection with plans of reorganizations of a Fund, such as
mergers, asset acquisitions and exchange offers to which a Fund is a
party.
6. Acquired in exchange for Class B shares of other Funds of The One Group.
WAIVER OF THE CLASS C SALES CHARGE
No sales charge is imposed on redemptions of Class C shares of the Funds:
1. Provided that you withdraw no more than 10% of the account value
annually. You do not have to participate in the Systematic Withdrawal
Plan to take advantage of this waiver.
2. If you buy the shares in connection with certain retirement plans, such
as 401(k) and similar qualified plans.
3. If you are the shareholder (or a joint shareholder), or a participant or
beneficiary of certain retirement plans and you die or become disabled
(as defined by the Tax Code), but only if the redemption is made within
one year of such death or disability.
4. That represent a minimum required distribution from an IRA Account or
other qualifying retirement plan, but only if you are at least age 70
1/2.
5. Exchanged in connection with plans of reorganizations of a Fund, such as
mergers, asset acquisitions and exchange offers to which a Fund is a
party.
6. Acquired in exchange for Class C shares of other Funds of The One Group.
7. If The One Group Services Company receives notice before you invest
indicating that your Shareholder Servicing Agent, due to the type of
account that you have, is waiving its commission.
To take advantage of any of these sales charge waivers, you must qualify for
such waiver in advance. To see if you qualify, contact The One Group Services
Company at 1-800-480-4111, or your Shareholder Servicing Agent.
EXCHANGING FUND SHARES
WHAT ARE MY EXCHANGE PRIVILEGES?
You may make the following exchanges:
- - Class I shares of a Fund may be exchanged for Class A shares of that
Fund or for Class A or Class I shares of another Fund of The One Group.
- - Class A shares of a Fund may be exchanged for Class I shares of that
Fund or for Class A or Class I shares of another Fund of The One Group,
but only if you are eligible to purchase those shares.
- - Class B shares of a Fund may be exchanged for Class B shares of another
Fund of The One Group.
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<PAGE> 484
- - Class C shares of a Fund may be exchanged for Class C shares of another
Fund of The One Group.
The One Group Funds offer a Systematic Exchange Privilege which allows you to
automatically exchange shares of one fund to another on a monthly or quarterly
basis. This privilege is useful in Dollar Cost Averaging. To participate in this
privilege, please select it on your account application. To learn more about it,
please call The One Group Services Company at 1-800-480-4111.
The One Group does not charge a fee for this privilege. In addition, The One
Group may change the terms and conditions of your exchange privileges upon 60
days written notice.
WHEN ARE EXCHANGES PROCESSED?
Exchanges are processed the same business day they are received, provided:
- - State Street Bank and Trust Company receives the request by 4:00 p.m.
ET.
- - You have provided The One Group with all of the information necessary to
process the exchange.
- - You have received a current prospectus of the Fund or Funds in which you
wish to invest.
- - You have contacted your Shareholder Servicing Agent, if necessary.
DO I PAY A SALES CHARGE ON AN EXCHANGE?
Generally, you will not pay a sales charge on an exchange. However:
- - You will pay a sales charge if you own Class I shares of a Fund and you
want to exchange those shares for Class A shares, unless you qualify for
a sales charge waiver (see above).
- - You will pay a sales charge if you bought Class A shares of a Fund:
1. That does not charge a sales charge and you want to exchange them
for shares of a Fund that does, in which case you would pay the
sales charge applicable to the Fund into which you are
exchanging.
2. That charged a lower sales charge than the Fund into which you
are exchanging, in which case you would pay the difference
between that Fund's sales charge and all other sales charges you
have already paid.
- - If you exchange Class B or Class C shares of a Fund, you will not pay a
sales charge at the time of the exchange, however:
1. Your new Class B or Class C shares will be subject to the higher
CDSC of either the Fund from which you exchanged, the Fund into
which you exchanged, or any Fund from which you previously
exchanged.
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<PAGE> 485
2. The current holding period for your exchanged Class B or Class C
shares is carried over to your new shares.
ARE EXCHANGES TAXABLE?
Generally:
- - An exchange between classes of shares of the same Fund is not taxable
for Federal income tax purposes.
- - An exchange between Funds is considered a sale and generally results in
a capital gain or loss for Federal income tax purposes.
- - You should talk to your tax advisor before making an exchange.
ARE THERE LIMITS ON EXCHANGES?
Yes. The exchange privilege is not intended as a way for you to speculate on
short-term movements in the market. Therefore:
- - To prevent disruptions in the management of the Funds, The One Group
limits excessive exchange activity.
- - Exchange activity is excessive if it EXCEEDS TWO SUBSTANTIVE EXCHANGE
REDEMPTIONS (WITHIN 30 DAYS OF EACH OTHER) WITHIN A TWELVE MONTH PERIOD.
- - In addition, The One Group reserves the right to reject any exchange
request (even those that are not excessive) if the Fund reasonably
believes that the exchange will result in excessive transaction costs or
otherwise adversely affect other shareholders.
REDEEMING FUND SHARES
WHEN CAN I REDEEM SHARES?
- - You may redeem all or some of your shares on any day that the Funds are
open for business.
- - Redemption requests received by The One Group Services Company before
4:00 p.m. ET (or when the NYSE closes) will be effective that day.
HOW DO I REDEEM SHARES?
- - Unless you have selected the telephone option on your Account
Application Form, you must send a written redemption request to your
Shareholder Servicing Agent, if applicable, or to State Street Bank and
Trust Company at the following address:
The One Group
c/o State Street Bank and Trust Company
P.O. Box 8528
Boston, MA 02266-8528
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<PAGE> 486
- - All requests for redemptions from IRA accounts must be in writing.
- - You may request redemption forms by calling The One Group Services
Company at 1-800-480-4111.
- - State Street Bank and Trust Company may require that the signature on
your redemption request be guaranteed by a commercial bank, a member of
a domestic stock exchange, or a member of the Securities Transfer
Association Medallion Program or the Stock Exchange Medallion Program,
unless:
1. the redemption is for $50,000 worth of shares or less;
2. the redemption is payable to the shareholder of record;
3. the redemption check is mailed to the shareholder at the record
address; or
4. the redemption is payable by wire or bank transfer (ACH) to a
pre-existing bank account.
- - On the Account Application Form you may elect to have the redemption
proceeds mailed or wired to:
1. a designated commercial bank or
2. State Street Bank and Trust Company or your Shareholder Servicing
Agent.
- - State Street Bank and Trust Company may charge you a wire redemption
fee. The current charge is $7.00.
- - Your redemption proceeds will be paid within seven days after receipt of
the redemption request.
WHAT WILL MY SHARES BE WORTH?
- - If you own Class A and Class I shares and the Fund receives your
redemption request by 4:00 p.m. ET (or when the NYSE closes), you will
receive that day's NAV.
- - If you own Class B and Class C shares and the Fund receives your
redemption request by 4:00 p.m. ET (or when the NYSE closes), you will
receive that day's NAV, minus the amount of any applicable CDSC.
CAN I REDEEM BY TELEPHONE?
Yes, if you selected this option on your Account Application Form.
- - Call your Shareholder Servicing Agent or State Street Bank and Trust
Company at 1-800-480-4111 to relay your redemption request.
- - Your redemption proceeds will be mailed or wired to the commercial bank
account you designated on your Account Application Form.
- - State Street Bank and Trust Company may charge you a wire redemption
fee. The current charge is $7.00.
- - The One Group uses reasonable procedures to confirm that instructions
given by telephone are genuine. These procedures include recording
telephone instructions and asking for personal identification. If these
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<PAGE> 487
procedures are followed, The One Group will not be responsible for any
loss, liability, cost or expense of acting upon unauthorized or
fraudulent instructions; you bear the risk of loss.
- - REDEMPTIONS FROM YOUR IRA ACCOUNT MAY NOT BE MADE BY TELEPHONE.
CAN I REDEEM ON A SYSTEMATIC BASIS?
If you have an account value of at least $10,000, you may elect to receive
monthly, quarterly or annual payments of not less than $100 each.
- - Select the "Systematic Withdrawal Plan" option on the Account
Application Form.
- - Specify the amount you wish to receive and the frequency of the
payments.
- - You may designate a person other than yourself as the payee.
- - There is no charge for this service.
- - If you select this option, please keep in mind that:
1. It may not be in your best interest to buy additional Class A
shares while participating in a Systematic Withdrawal Plan. This
is because Class A shares have an up-front sales charge.
2. If you own Class B or Class C shares, you or your designated
payee may receive systematic payments provided the payments are
limited to no more than 10% of your account value annually,
measured from the date the redemption request is received.
3. If you are age 70 1/2, you may elect to receive payments to the
extent that the payment represents a minimum required
distribution from an IRA or other qualifying retirement plan.
4. If the amount of the systematic payment exceeds the income earned
by your account since the previous payment under the Systematic
Withdrawal Plan, payments will be made by redeeming some of your
shares. This will reduce the amount of your investment.
ADDITIONAL INFORMATION REGARDING REDEMPTIONS
- - All redemptions will be for cash.
- - If you redeem shares for which you paid by check, and The One Group has
not yet received payment on the check, The One Group will delay
forwarding your redemption proceeds for 10 or more days until payment
has been collected from your bank.
- - Because of the high cost of handling small investments, The One Group
charges a sub-minimum account fee. Accounts under $1,000 that are not
participating in a Systematic Investment Plan will be assessed an annual
fee of $10.00. The sub-minimum account fee will not apply to IRA
accounts and the accounts of employees of BANC ONE CORPORATION and its
affiliates.
- - The One Group may suspend your ability to redeem when:
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<PAGE> 488
1. Trading on the NYSE is restricted.
2. The NYSE is closed (other than weekend and holiday closings).
3. The SEC has permitted a suspension.
4. An emergency exists.
The Statement of Additional Information offers more detail about this
process.
- - You generally will recognize a gain or loss on a redemption for Federal
income tax purposes. You should talk to your tax adviser before making a
redemption.
SHAREHOLDER INFORMATION
VOTING RIGHTS
The Fund does not hold annual shareholder meetings, but may hold special
meetings. The special meetings are held, for example, to elect or remove
Trustees, change the Fund's fundamental investment objective, or approve an
investment advisory contract.
As a Fund shareholder, you have one vote for each share that you own. The Fund,
and each class of shares within the Fund, vote separately on matters relating
solely to the Fund or class, or which affect the Fund or class differently from
other funds of The One Group. However, all shareholders will have equal voting
rights on matters that affect all shareholders equally.
DIVIDEND POLICIES
DIVIDENDS: The Fund generally declares dividends monthly. Dividends are
distributed on the first Business Day of each month. Capital gains, if any, for
all Funds are distributed at least annually.
The Fund pays dividends and distributions on a per-share basis. This means that
the value of your shares will be reduced by the amount of the payment. If you
purchase shares shortly before the record date for a dividend or the
distribution of capital gains, you will pay the full price for the shares and
receive some portion of the price back as a taxable dividend or distribution.
Dividends payable on Class I shares will be more than those payable on other
classes of shares. This is because Class A, Class B and Class C shares have
higher distribution expenses.
DIVIDEND REINVESTMENT: You automatically will receive all income dividends and
capital gain distributions in additional shares of the same Fund and class,
unless you have elected to take such payment in cash. The price of the shares is
the NAV determined immediately following the dividend record date. Reinvested
dividends and distributions receive the same tax treatment as dividends and
distributions paid in cash.
If you want to change the way in which you receive dividends and distributions,
you must write to State Street Bank & Trust Company at P.O. Box 8528, Boston, MA
02266-8528, at least 15 days prior to the distribution. The change is effective
upon receipt by State Street.
SPECIAL DIVIDEND RULES FOR CLASS B SHARES: Class B shares received as dividends
and capital gains distributions will be accounted for separately. Each time any
Class B shares (other than those in the sub-account) convert to
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<PAGE> 489
Class A shares, a percentage of the Class B shares in the sub-account will also
convert to Class A shares. (See "Conversion Feature")
TAX TREATMENT OF THE FUND
TAX STATUS OF THE FUND: The Fund intends to qualify as a "regulated investment
company" for Federal income tax purposes. If the Funds qualify, as they have in
the past, they will pay no federal income tax on the earnings they distribute to
shareholders.
TAX TREATMENT OF SHAREHOLDERS
TAXATION OF SHAREHOLDER TRANSACTIONS: A sale, exchange, or redemption of shares
of the Fund generally will produce either a taxable gain or a loss. You are
responsible for any tax liabilities generated by your transactions.
TAXATION OF DISTRIBUTIONS: Dividends you receive from the Fund, whether
reinvested or received in cash, will be taxable to you. Dividends from the
Fund's net investment income, including for this purpose net short-term capital
gain, will be taxable as ordinary income and dividends from the Fund's long-term
capital gains will be taxable to you as such, regardless of how long you have
held the shares.
Dividends paid in January, but declared in October, November or December of the
previous year, will be considered to have been paid the previous December.
TAXATION OF RETIREMENT PLANS: Distributions by the Fund to qualified retirement
plans will not be taxable. However, if shares are held by a plan that ceases to
qualify for tax-exempt treatment or by an individual who has received shares as
a distribution from a retirement plan, the distributions will be taxable to the
plan or individual as described in "Taxation of Distributions." If you are
considering purchasing shares with qualified retirement plan assets, you should
consult your tax advisor for a more complete explanation of the Federal, state,
local and (if applicable) foreign tax consequences of making such an investment.
TAX INFORMATION: The Form 1099 that is mailed to you every January details your
dividends and their federal tax category. Even though the Fund provides you with
this information, you are responsible for verifying your tax liability with your
tax professional. For additional tax information see the Statement of Additional
Information. Please note that this tax discussion is general in nature; no
attempt has been made to present a complete explanation of the Federal, state,
local or foreign tax treatment of the Funds or their shareholders.
SHAREHOLDER INQUIRIES
If you have any questions or need additional information, please write The One
Group Services Company at 3435 Stelzer Road, Columbus, OH 43219 or call
1-800-480-4111.
BOX: REPORTING: In March and September you will receive a financial report from
The One Group. In addition, The One Group will periodically send you proxy
statements and other reports.
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<PAGE> 490
ORGANIZATION & MANAGEMENT OF THE FUND
THE FUNDS: The Fund is a series of The One Group, an open-end management
investment company. The One Group currently consists of 40 separate Funds. The
Fund described in this prospectus is diversified. Other Funds are described in
separate prospectuses. Each Fund is supervised by the Board of Trustees.
THE BOARD OF TRUSTEES: The Trustees oversee the management and administration of
the Fund. The Trustees are responsible for making major decisions about the
Fund's investment objectives and policies, but delegate the day-to-day
administration of the Fund to the officers of The One Group.
THE ADVISOR: Banc One Investment Advisors makes the day-to-day investment
decisions for the Fund and continuously reviews, supervises and administers the
Fund's investment program. Banc One Investment Advisors has served as investment
advisor to The One Group since 1993. Prior to that time, The One Group was
advised by affiliates of Banc One Investment Advisors. In addition to The One
Group, Banc One Investment Advisors serves as investment advisor to other mutual
funds and individual, corporate, charitable and retirement accounts. As of June
30, 1998, Banc One Investment Advisors, an indirect, wholly-owned subsidiary of
BANC ONE CORPORATION, managed over $59 billion in assets.
No single person is responsible for managing the assets of the Fund. Rather,
investment decisions for the Fund are made by committee. Banc One Investment
Advisors also serves as the advisor to the underlying mutual funds, for which it
receives a fee.
THE DISTRIBUTOR: The One Group Services Company, 3435 Stelzer Road, Columbus,
Ohio 43219, a wholly-owned subsidiary of The BISYS Group, Inc., markets the Fund
and distributes shares through selling brokers, financial institutions,
investment advisors, and other financial representatives.
THE ADMINISTRATOR AND SUB-ADMINISTRATOR: The One Group Services Company also
serves as the Fund's administrator. The One Group Services Company is
responsible for responding to shareholder inquiries and requests for
information, as well as providing regulatory compliance and reporting. For these
services, The One Group Services Company receives an annual fee of .10% of the
Fund's average daily net assets, on the first $500,000,000 in Fund assets. The
fee declines to .075% on net assets between $500,000,000 and $1 billion, and to
.05% on assets over $1 billion. The fee is calculated daily and paid monthly.
Banc One Investment Advisors, the Sub-Administrator provides office space,
equipment, and facilities, as well as legal and regulatory support.
THE TRANSFER AGENT, CUSTODIAN AND SUB-CUSTODIAN: State Street Bank and Trust
Company, P.O. Box 8528, Boston, MA 02266-8528, or your Shareholder Servicing
Agent, if appropriate, handles shareholder recordkeeping and statementing,
distributes dividends, and processes buy and sell requests. As the Fund's
custodian, State Street holds the Fund's assets, settles all portfolio trades
and assists in calculating the Fund's net asset values. Bank One Trust Company,
N.A. serves as sub-custodian in connection with The One Group's securities
lending activities under an agreement with State Street Bank and Trust Company.
Bank One Trust Company, N.A. is paid a fee for this service.
YEAR 2000
Preparing for the Year 2000 is a high priority for The One Group Family of
Mutual Funds. Both The One Group Services Company and Banc One Investment
Advisors have formed dedicated teams to help them successfully achieve Year 2000
compliance. In addition, these teams are responsible for assessing the readiness
of all other service providers to The One Group. Year 2000 remediation efforts
are directed toward both information technology and non-information technology
systems. Non-information technology systems include elevators, photocopy
machines, and facsimile machines, and should have no significant impact on the
delivery of services to The One Group.
Banc One Investment Advisors has identified 49 information technology systems
and interfaces that provide service and support to The One Group. Each system is
assigned a priority rating: high, medium or low. Systems rated "high" are those
which are essential to the operation of The One Group. Each system rated "high"
is scheduled to be Year 2000 compliant by December 31, 1998. All systems will be
tested for compliance throughout 1999.
Many, if not all, of the systems are owned or operated by third party servicers
(for example, The One Group's Custodian). Consequently, remediation efforts must
be made by those servicers. Banc One Investment Advisors and The One Group
Services Company have, and will continue to, monitor the remediation progress of
the service providers. This process involves documentation, on-site visits, and
review of remediation plans and test results. Both Banc One Investment Advisors
and The One Group Services Company have budgeted in excess of $700,000 in fiscal
year 1998 and over $1 million in fiscal year 1998 toward the remediation effort
for all systems and interfaces. Neither The One Group nor its shareholders will
bear any of the direct remediation expenses.
Neither The One Group Services Company nor Banc One Investment Advisors
currently anticipate that the move to Year 2000 will have a material impact on
their ability to continue to provide the Funds with service at current levels.
Likewise, The One Group currently anticipates that the more to Year 2000 will
not have a material impact on its operations.
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<PAGE> 491
DETAILS ABOUT THE FUND'S INVESTMENT PRACTICES AND POLICIES
INVESTMENT PRACTICES
The following is a brief description of the principal investment policies of the
underlying funds.
THE ONE GROUP(R) PRIME MONEY MARKET FUND
The One Group(R) Prime Money Market Fund seeks current income with liquidity and
stability of principal. The fund intends to comply with the regulations of the
Securities and Exchange Commission 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
fund. Under these regulations, the fund 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 are treated as having a
maturity of 397 days or less.
THE ONE GROUP(R) LIMITED VOLATILITY BOND FUND
The One Group(R) Limited Volatility Bond Fund seeks current income consistent
with preservation of capital through investment in high and medium-grade
fixed-income securities. The fund normally invests at least 80% of total assets
in debt securities of all types with short to intermediate maturities. Debt
securities include bonds, notes and other obligations. At least 65% of the
Fund's total assets will consist of bonds rated in one of the three highest
investment grade categories at the time of investment, or if unrated, determined
by Banc One Investment Advisors to be of comparable quality, and at least 65% of
total assets will consist of obligations issued by the U.S. government or its
agencies and instrumentalities, some of which may be subject to repurchase
agreements. Many investments will satisfy both requirements. Under normal market
conditions, it is anticipated that the fund's average weighted maturity will
range between one and five years. The fund may also purchase taxable or
tax-exempt municipal securities. Up to 20% of the fund's total assets may be
invested in preferred stocks.
THE ONE GROUP(R) INTERMEDIATE BOND FUND
The One Group(R) Intermediate Bond Fund seeks current income consistent with the
preservation of capital through investments in high and medium-grade
fixed-income securities with intermediate maturities. The fund will normally
invest at least 80% of total assets in debt securities of all types. Debt
securities include bonds, notes and other obligations. At least 65% of the
fund's total assets will consist of bonds rated in one of the three highest
investment grade categories at the time of investment, or if unrated, determined
by Banc One Investment Advisors to be of comparable quality, and at least 50% of
total assets will consist of obligations issued by the U.S. government or its
agencies and instrumentalities, some of which may be subject to repurchase
agreements. Many investments will satisfy both requirements. The Fund also may
invest in more speculative debt securities if they present attractive
opportunities and are rated in the lowest investment grade category. The fund
may also purchase taxable or tax-exempt municipal securities. Under normal
market conditions, it is anticipated that the fund's average weighted maturity
will range between three and ten years. Up to 20% of the fund's total assets may
be invested in preferred stocks.
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<PAGE> 492
THE ONE GROUP(R) INCOME BOND FUND
The One Group(R) Income Bond Fund seeks a high level of current income by
investing primarily in a diversified portfolio of high, medium and low grade
debt securities. The Fund normally will invest at least 70% of its total assets
in debt securities of all types rated as investment grade at the time of
investment or, if unrated, determined by Banc One Investment Advisors to be of
comparable quality. In addition, up to 30% of the Fund's total assets may be
invested in convertible securities, preferred stock, loan participations and
debt securities rated below investment grade or, if unrated, determined by Banc
One Investment Advisors to be of comparable quality. Securities rated below
investment grade are called "high yield bonds," "non-investment grade bonds" and
"junk bonds." These securities are rated in the fifth or lower rating
categories, for example, BB or lower by Standard & Poor's Corporation ("S&P")
and Ba or lower by Moody's Investors Service, Inc. ("Moody's"), and are
considered to have speculative characteristics. Even though it may invest in
debt securities in all rating categories, the Fund will not invest more than 20%
of its total assets in securities rated below the fifth rating category. As a
matter of fundamental policy, at least 65% of the fund's total assets will
consist of bonds. The fund also may purchase taxable or tax-exempt municipal
securities.
Under normal market conditions, it is anticipated that the fund's average
weighted maturity will range between five and twenty years. The fund may shorten
its effective weighted average maturity to as little as two years if deemed
appropriate for temporary defensive purposes.
THE ONE GROUP(R) GOVERNMENT BOND FUND
The One Group(R) Government Bond Fund seeks a high level of current income with
liquidity and safety of principal. The fund will limit its investments to
securities issued by the U.S. Government and its agencies and instrumentalities
or related to securities issued by the U.S. Government and its agencies and
instrumentalities. 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 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 taxable or tax-exempt municipal securities.
THE ONE GROUP(R) ULTRA SHORT-TERM INCOME FUND
The One Group(R) Ultra Short-Term Income Fund seeks a high level of current
income consistent with low volatility of principal by investing in a diversified
portfolio of short-term investment grade securities. The fund normally invests
at least 80% of its total assets in debt securities of all types, including
money market instruments. In addition, up to 20% of the fund's total assets may
be invested in other securities, including preferred stock. The fund will invest
in adjustable rate mortgage pass-through securities and other securities
representing an interest in or collateralized by mortgages with periodic
interest rate resets, some of which may be subject to repurchase agreements.
These securities often are issued or guaranteed by the U.S. government, its
agencies or instrumentalities. However, the fund also may purchase
mortgage-backed securities that are issued by non-governmental entities. Such
securities may or may not have private insurer guarantees as to timely payments.
The fund also may purchase mortgage and interest rate swaps and interest rate
floors and caps. The fund also may
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<PAGE> 493
employ other investment techniques to enhance returns, such as loans of fund
securities, mortgage dollar rolls, repurchase agreements, options contracts and
reverse repurchase agreements.
The Fund will maintain a maximum duration of approximately two years.
Details about each underlying fund's investment practices and the risks
associated with those practices, can be found n Appendix B.
INVESTMENT POLICIES
The Fund's investment objective and the investment policies summarized below are
fundamental. This means that they cannot be changed without the consent of a
majority of the outstanding shares of the Fund. The full text of the fundamental
policies can be found in the Statement of Additional Information.
The Fund may not:
1. Purchase an issuer's securities if as a result more then 5% of its total
assets would be invested in the securities of that issuer. This does not include
securities issued or guaranteed by the United States, its agencies or
instrumentalities, securities of other registered investment companies and
repurchase agreements involving these securities. In addition, a Fund may not
own more than 10% of the outstanding voting securities of any one issuer.
This restriction applies with respect to 75% of a Fund's total assets.
2. Concentrate its investments in the securities of one or more issuers
conducting their principal business in a particular industry or group of
industries. This does not include obligations issued or guaranteed by the U.S.
government or its agencies and instrumentalities and repurchase agreements
involving such 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.
Additional investment policies can be found in the Statement of Additional
Information.
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<PAGE> 494
PORTFOLIO TURNOVER
Portfolio turnover 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 Funds and may result in additional tax consequences to
you. It is estimated that the Fund's portfolio turnover rate will not exceed
15%. To the extent portfolio turnover results in short-term capital gains, such
gains generally will be taxed at ordinary income tax rates.
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<PAGE> 495
APPENDIX A
DETAILS ABOUT THE UNDERLYING FUNDS' INVESTMENT PRACTICES AND POLICIES
INVESTMENT PRACTICES
The underlying funds invest in a variety of securities and employ a number of
investment techniques. Each security and technique involves certain risks. What
follows is a list of the securities and techniques utilized by the Funds, as
well as the risks inherent in their use. For a more complete discussion, see the
Statement of Additional Information. Following the table is a more complete
discussion of risk.
<TABLE>
<S> <C>
The One Group(R) Prime Money Market Fund 1
The One Group(R) Limited Volatility Bond Fund 2
The One Group(R) Intermediate Bond Fund 3
The One Group(R) Income Bond Fund 4
The One Group(R) Government Bond Fund 5
The One Group(R) Ultra-Short Term Income Fund 6
</TABLE>
<TABLE>
<CAPTION>
Instrument Fund Risk Type
- -----------------------------------------------------------------------------------------------------------------------------------
<S> <C>
U.S. TREASURY OBLIGATIONS: Bills, notes, bonds, STRIPS, and CUBES. 1-6 Market
TREASURY RECEIPTS: TRS, TIGRS, and CATS. 1-6 Market
U.S. GOVERNMENT AGENCY SECURITIES: Securities issued by agencies and instrumentalities of the 1-6 Market
U.S. Government. These include Ginnie Mae, Fannie Mae, and Freddie Mac. Credit
CERTIFICATES OF DEPOSIT: Negotiable instruments with a stated maturity. 1-4, 6 Market
Credit
Liquidity
TIME DEPOSITS: Non-negotiable receipts issued by a bank in exchange for the deposit of funds. 1-4,6 Liquidity
Credit
Market
REPURCHASE AGREEMENTS: The purchase of a security and the simultaneous commitment to return 1-6 Credit
the security to the seller at an agreed upon price on an agreed upon date. This is treated as a loan. Market
Liquidity
REVERSE REPURCHASE AGREEMENT: The sale of a security and the simultaneous commitment to 1-6 Market
buy the security back at an agreed upon price on an agreed upon date. This is treated as a Leverage
borrowing by a Fund.
SECURITIES LENDING: The lending of up to 1/3 of the Fund's total assets. 1-6 Credit
In return the Fund will receive cash, other securities, and/or letters of credit as collateral. Market
Leverage
</TABLE>
- 28 -
<PAGE> 496
<TABLE>
<S> <C> <C>
WHEN-ISSUED SECURITIES AND FORWARD COMMITMENTS: Purchase or contract to purchase securities 1-6 Market
at a fixed price for delivery at a future date. Leverage
Liquidity
INVESTMENT COMPANY SECURITIES: Shares of other mutual funds, including money
market funds of The One Group and shares of other investment companies for which 1-4,6 Market
Banc One Investment Advisors serves as investment advisor or administrator.
Banc One Investment Advisors will waive certain fees when investing in funds
for which it serves as investment advisor.
CONVERTIBLE SECURITIES: Bonds or preferred stock that convert to common stock. 3,4,6 Market
Credit
CALL AND PUT OPTIONS: A call option gives the buyer the right to buy, and obligates the seller 3-6 Management
of the option to sell, a security at a specified price. A put option gives the buyer the right to sell, Liquidity
and obligates the seller of the option to buy, a security at a specified price. The Funds will sell only Credit
covered call and secured put options. Market
Leverage
FUTURES AND RELATED OPTIONS: A contract providing for the future sale and purchase of a specified 3-6 Management
amount of a specified security, class of securities, or an index at a specified time in the future and Market
at a specified price. Credit
Liquidity
Leverage
REAL ESTATE INVESTMENT TRUSTS ("REITS"): Pooled investment vehicles which invest primarily 2-6 Liquidity
in income producing real estate or real estate related loans or interest. Management
Market
Pre-payment
Tax
Regulatory
BANKERS' ACCEPTANCES: Bills of exchange or time drafts drawn on and accepted by a 1-4, 6 Credit
commercial bank. Maturities are generally six months or less. Liquidity
Market
COMMERCIAL PAPER: Secured and unsecured short-term promissory notes issued by corporations 1-4, 6 Credit
and other entities. Maturities generally vary from a few days to nine months. Liquidity
Market
FOREIGN SECURITIES: Stocks issued by foreign companies, as well as commercial paper of foreign 1-4, 6 Market
issuers and obligations of foreign banks, overseas branches of U.S. banks and supranational Political
entities. Includes American Depository Receipts. Liquidity
Foreign
Investment
RESTRICTED SECURITIES: Securities not registered under the Securities Act of 1933, such as 1-4, 6 Liquidity
privately placed commercial paper and Rule 144A securities. Market
VARIABLE AND FLOATING RATE NOTES: Obligations with interest rates which are reset 1-6 Market
</TABLE>
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<PAGE> 497
<TABLE>
<S> <C> <C>
daily, weekly, quarterly or some other period and which may be payable to the Fund on demand. Credit
Liquidity
WARRANTS: Securities, typically issued with preferred stock or bonds, that give the holder the right 4 Market
to buy a proportionate amount of common stock at a specified price. Credit
PREFERRED STOCK: A class of stock that generally pays a dividend at a specified rate and has preference 2-4, 6 Market
over common stock in the payment of dividends and in liquidation.
MORTGAGE-BACKED SECURITIES: Debt obligations secured by real estate loans and pools of loans. 1-6 Pre-payment
These include collateralized mortgage obligations ("CMOs"), Real Estate Investment Conduits Market
("REMICs"), and Stripped Mortgage-Backed Securities ("SMBS"). Credit
Regulatory
DEMAND FEATURES: Securities that are subject to puts and standby commitments to purchase 1-4,6 Market
the securities at a fixed price (usually with accrued interest) within a fixed period of time Liquidity
following demand by a Fund. Management
ASSET-BACKED SECURITIES: Securities secured by company receivables, home equity loans, truck 1-4,6 Pre-payment
and auto loans, leases, credit card receivables and other securities backed by other types of Market
receivable or other assets. Credit
MORTGAGE DOLLAR ROLLS: A transaction in which a Fund sells securities for delivery in a current 2-6 Pre-payment
month and simultaneously contracts with the same party to repurchase similar but not identical Market
securities on a specified future date. Regulatory
ADJUSTABLE RATE MORTGAGE LOANS ("ARMS"): Loans in a mortgage pool which provide for 2-6 Pre-payment
a fixed initial mortgage interest rate for a specified period of time, after which the rate may be Market
subject to periodic adjustments. Credit
Regulatory
CORPORATE DEBT SECURITIES: Corporate bonds and non-convertible debt securities 3,4,6 Market
Credit
SWAPS, CAPS AND FLOORS: A Fund may enter into these transactions to manage its exposure 3-6 Market
to changing interest rates and other factors. Swaps involve an exchange of obligations by two Management
parties. Caps and floors entitle a purchaser to a principal amount from the seller of the cap Credit
or floor to the extent that a specified index exceeds or falls below a predetermined interest Liquidity
rate or amount.
NEW FINANCIAL PRODUCTS: New options and futures contracts, and other financial products 3-6 Management
continue to be developed and the Fund may invest in such options, contracts and products. Credit
Market
Liquidity
STRUCTURED INSTRUMENTS: Debt securities issued by agencies and instrumentalities of the 3-6 Market
U.S. government, banks, municipalities, corporations and other businesses whose interest Liquidity
and/or principal payments are indexed to foreign currency exchange rates, interest rates, Management
</TABLE>
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<PAGE> 498
<TABLE>
<S> <C> <C>
or one or more other references indices. Credit
Foreign
Investment
MUNICIPAL SECURITIES: Securities issued by a state or political subdivision to obtain funds for 1-4, 6 Market
various public purposes. Municipal securities include private activity bonds and industrial Credit
development bonds, as well as General Obligation Notes, Tax Anticipation Notes, Bond Political
Anticipation Notes, Revenue Anticipation Notes, Project Notes, other short-term tax-exempt Tax
obligations, municipal leases, and obligations of municipal housing authorities and single
family revenue bonds.
ZERO COUPON DEBT SECURITIES: Bonds and other debt that pay no interest, but are issued at 2-4,6 Credit
a discount from their value at maturity. When held to maturity, their entire returns equals Market
the difference between their issue price and their maturity value.
ZERO-FIXED-COUPON DEBT SECURITIES: Zero-coupon debt securities which convert on a specified 2-4,6 Credit
date to interest-bearing debt securities. Market
STRIPPED MORTGAGE-BACKED SECURITIES: Derivative multi-class mortgage securities which are 3-6 Pre-payment
usually structured with two classes of shares that receive different proportions of the interest Market
and interest from a pool of mortgage assets. These include IOs and POs. The Funds only invest Credit
in Stripped Mortgage Backed securities issued or guaranteed by the U.S. government, its agencies Regulatory
or instrumentalities.
INVERSE FLOATING RATE INSTRUMENTS: Leveraged floating rate debt instruments with interest 3-6 Market
rates that reset in the opposite direction from the market rate of interest to which the inverse floater Leverage
is indexed. Credit
LOAN PARTICIPATIONS AND ASSIGNMENTS: Participations in, or assignments of all or a portion of loans 2-4,6 Credit
to corporations or to governments of the less developed countries ("LDC's"). Political
Foreign
Investment
Market
Liquidity
FIXED RATE MORTGAGE LOANS: Investments in fixed rate mortgage loans or mortgage pools which 2-4,6 Credit
bear simple interest at fixed annual rates and have original terms ranging from 5 to 40 years. Pre-payment
Regulatory
Market
SHORT-TERM FUNDING AGREEMENTS: Investments in short-term funding agreements issued 1-4,6 Credit
by banks and highly rated U.S. insurance companies such as GIC's and BIC's. Liquidity
Market
PARTICIPATION INTERESTS: Investments in municipal securities, including municipal leases, from 1 Credit
financial institutions such as commercial and investment banks, savings and loan Market
associations and insurance companies. These interest may take the form of participations, Tax
beneficial interests in a trusts, partnership interests or any other form of indirect
ownership that allows the Funds to treat the income from the investment as exempt from
Federal Income Tax.
</TABLE>
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<PAGE> 499
SPDRS:
INVESTMENT RISKS
Below is a more complete discussion of the types of risks inherent in the
securities and investment techniques listed above. Because of these risks, the
value of the securities held by the underlying funds may fluctuate, as will
value of the Fund's investments in the underlying funds. Ultimately, the value
of your investment will be affected. Certain investments are more susceptible
to these risks than others.
- - CREDIT RISK. The risk that the issuer of a security, or the counterparty to
a contract, will default or otherwise become unable to honor a financial
obligation. Credit risk is generally higher for non-investment grade
securities. The price of a security can be adversely affected prior to
actual default as its credit status deteriorates and the probability of
default rises.
- - LEVERAGE RISK. Associated with securities or practices that multiply small
index or market movements into large changes in value. Leverage is often
associated with investments in derivatives, but also may be embedded
directly in the characteristics of other securities.
- Hedged. When a derivative (a security whose value is based on another
security or index) is used as a hedge against an opposite position that
the fund also holds, any loss generated by the derivative should be
substantially offset by gains on the hedged investment, and vice versa.
While hedging can reduce or eliminate losses, it can also reduce or
eliminate gains. Hedges are sometimes subject to imperfect matching
between the derivative and underlying security, and there can be no
assurance that a Fund's hedging transactions will be effective.
- Speculative. To the extent that a derivative is not used as a hedge, the
fund is directly exposed to the risks of that derivative. Gains or losses
from speculative positions in a derivative may be substantially greater
than the derivative's original cost.
- - LIQUIDITY RISK. The risk that certain securities may be difficult or
impossible to sell at the time and the price that normally prevails in the
market. The seller may have to lower the price, sell other securities
instead or forego an investment opportunity, any of which could have a
negative effect on fund management or performance. This includes the risk of
missing out on an investment opportunity because the assets necessary to
take advantage of it are tied up in less advantageous investments.
- - MANAGEMENT RISK. The risk that a strategy used by a fund's management may
fail to produce the intended result. This includes the risk that changes in
the value of a hedging instrument will not match those of the asset being
hedged. Incomplete matching can result in unanticipated risks.
- - MARKET RISK. The risk that the market value of a security may move up
and down, sometimes rapidly and unpredictably. These fluctuations may
cause a security to be worth less than the price originally paid for it,
or less than it was worth at an earlier time. Market risk may affect a
single issuer, industry, sector of the economy or the market as a whole.
There is also the risk that the current interest rate may not accurately
reflect existing market rates. For fixed income securities, market risk
is largely, but not exclusively, influenced by changes in interest
rates. A rise in interest rates typically causes a fall in values, while
a fall in rates typically causes a rise in values. Finally, key
information about a security or market may be inaccurate or unavailable.
This is particularly relevant to investments in foreign securities.
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<PAGE> 500
- - POLITICAL RISK. The risk of losses attributable to unfavorable governmental
or political actions, seizures of foreign deposits, changes in tax or trade
statutes, and governmental collapse and war.
- - FOREIGN INVESTMENT RISK. The risk associated with higher transaction costs,
delayed settlements, currency controls and adverse economic developments.
This also includes the risk that fluctuations in the exchange rates between
the U.S. dollar and foreign currencies may negatively affect an investment.
Adverse changes in exchange rates may erode or reverse any gains produced by
foreign currency denominated investments and may widen any losses. Exchange
rate volatility also may affect the ability of an issuer to repay U.S.
dollar denominated debt, thereby increasing credit risk.
- - PRE-PAYMENT RISK. The risk that the principal repayment of a security will
occur at an unexpected time, especially that the repayment of a mortgage or
asset-backed security occurs either significantly sooner or later than
expected. Changes in pre-payment rates can result in greater price and yield
volatility. Pre-payments generally accelerate when interest rates decline.
When mortgage and other obligations are pre-paid, a Fund may have to
reinvest in securities with a lower yield. Further, with early prepayment, a
Fund may fail to recover any premium paid, resulting in an unexpected
capital loss.
- - TAX RISK. The risk that the issuer of the securities will fail to comply
with certain requirements of the Internal Revenue Code, which would cause
adverse tax consequences.
- - REGULATORY RISK. The risk associated with Federal and state laws which may
restrict the remedies that a mortgage lender has when a borrower defaults on
mortgage loans. These laws include restrictions on foreclosures, redemption
rights after foreclosure, Federal and state bankruptcy and debtor relief
laws, restrictions on "due on sale" clauses, and state usury laws.
- 33 -
<PAGE> 501
APPENDIX B
DESCRIPTION OF RATINGS
The following is a summary of published ratings by major credit rating agencies.
Credit ratings evaluate only the safety of principal and interest payments, not
the market value risk of lower quality securities. Credit rating agencies may
fail to change credit ratings to reflect subsequent events on a timely basis.
Although Banc One Investment Advisors considers security ratings when making
investment decisions, it also performs its own investment analysis and does not
rely solely on the ratings assigned by credit agencies.
Unrated securities will be treated as non-investment grade securities unless
Banc One Investment Advisors determines that such securities are the equivalent
of investment grade securities. Securities that have received different ratings
from more than one agency are considered investment grade if at least one agency
has rated the security investment grade.
DESCRIPTION OF COMMERCIAL PAPER RATINGS
Duff & Phelps Credit Rating Co. ("Duff")
- ----------------------------------------
D-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
obligations.
D-1 Very high certainty of timely payment. Liquidity factors are excellent
and supported by good fundamental protection factors. Risk factors are
minor.
D-1- High certainty of timely payment. Liquidity factors are strong and
supported by good fundamental protection factors. Risk factors are very
small.
Standard & Poor's Corporation ("S&P")
- -------------------------------------
A-1 Highest category of commercial paper. Capacity to meet financial
commitment is strong. Obligations designated with a plus sign (+)
indicate that capacity to meet financial commitment is extremely strong.
A-2 Issues somewhat more susceptible to adverse effects of changes in
circumstances and economic conditions than obligations in higher rating
categories. However, the capacity to meet financial commitments is
satisfactory.
Fitch IBCA Limited ("Fitch")
- ----------------------------
A1 Highest capacity for timely repayment. Those issues rated A1+ possess a
particularly strong credit feature.
A2 Satisfactory capacity for timely repayment although such capacity may be
susceptible to adverse changes in business, economic or financial
conditions.
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<PAGE> 502
Moody's Investors Service ("Moody's")
- -------------------------------------
Prime-1 Superior ability for repayment.
Prime-2 Strong ability for repayment.
DESCRIPTION OF BANK RATINGS
Moody's
- -------
These ratings represent Moody's opinion of a bank's intrinsic safety and
soundness.
A These banks possess exceptional intrinsic financial strength. Typically
they will be major financial institutions with highly valuable and
defensible business franchises, strong financial fundamentals, and a
very attractive and stable operating environment.
B These banks possess strong intrinsic financial strength. Typically, they
will be important institutions with valuable and defensible business
franchises, good financial fundamentals, and an attractive and stable
operating environment.
C These banks possess good intrinsic financial strength. Typically, they
will be institutions with valuable and defensible business franchises.
These banks will demonstrate either acceptable financial fundamentals
within a stable operating environment, or better than average financial
fundamentals within an unstable operating environment.
S&P
S&P's credit rating is a current opinion of an obligor's overall financial
capacity (its creditworthiness) to pay its financial obligation.
AAA The highest rating assigned by S&P. The obligor's capacity to meet its
financial commitment on the obligation is extremely strong.
AA The obligor's capacity to meet its financial commitments on the
obligation is very strong.
A The obligation is somewhat more susceptible to the adverse effects of
changes in circumstances and economic conditions than obligations in
higher rated categories. However, the obligor's capacity to meet its
financial commitment on the obligation is still strong.
DESCRIPTION OF INSURANCE RATINGS
Moody's
- -------
These ratings represent Moody's opinions of the ability of insurance companies
to pay punctually senior policyholder claims and obligations.
- 35 -
<PAGE> 503
Aaa Insurance companies rated in this category offer exceptional financial
security. While the financial strength of these companies is likely to
change, such changes as can be visualized are most unlikely to impair
their fundamentally strong position.
Aa These insurance companies offer excellent financial security. Together
with the Aaa group, they constitute what are generally known as high
grade companies. They are rated lower than Aaa companies because
long-term risks appear somewhat larger.
A Insurance companies rated in this category offer good financial
security. However, elements may be present which suggest a
susceptibility to impairment sometime in the future.
S&P
- ---
S&P's credit rating is a current opinion of the creditworthiness of an obligor
with respect to a specific financial obligation, a specific class of financial
obligations, or a specific financial program.
AAA This is the highest rating assigned by S&P. The obligor's capacity to
meet its financial commitment on the obligation is extremely strong.
AA The obligor's capacity to meet its financial commitments on the
obligation is very strong.
A An obligation rated A is somewhat more susceptible to the adverse
effects of changes in circumstances and economic conditions than
obligations in higher rated categories. However, the obligor's capacity
to meet its financial commitment on the obligation is still strong.
DESCRIPTION OF CORPORATE/MUNICIPAL BOND RATINGS
S&P
- ---
Investment Grade
AAA The highest rating. The rating indicates an extremely strong capacity to
meet its financial commitment.
AA Differs from AAA issues only in a small degree. The obligor's capacity
to meet its financial commitment is very strong.
A These bonds are somewhat more susceptible to the adverse effects of
changes in circumstances and economic conditions than debt in higher
rated categories. However, capacity to meet its commitment on the
obligation is still strong.
BBB Exhibits adequate protection parameters. However, adverse economic
conditions or changing circumstances are more likely to lead to a
weakened capacity to meet its financial commitment on the obligation.
Speculative Grade
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<PAGE> 504
BB Less vulnerable to non-payment than other speculative issues. However,
these bonds face major ongoing uncertainties or exposure to adverse
business, financial or economic conditions which could lead to
inadequate capacity to meet financial commitment on the obligation.
B More vulnerable to non-payment than obligations rated BB, but currently
has the capacity to meet its financial commitment on the obligation.
Adverse business, financial or economic conditions will likely impair
capacity or willingness to meet its financial commitment on the
obligation.
CCC Currently vulnerable to non-payment, and is dependent upon favorable
business, financial, and economic conditions to meet its financial
commitment on the obligation. In the event of adverse business,
financial, or economic conditions, they are not likely to have the
capacity to meet its financial commitment on the obligation.
CC Currently highly vulnerable to non-payment.
C This rating may be used to cover a situation where a bankruptcy petition
has been filed, or similar action has been taken, but payments on this
obligation are being continued.
D Bonds in payment default.
Ratings from AA to CCC may be modified by a plus (+) or minus (-) to show
relative standing within the major rating categories.
Moody's
- -------
Investment Grade
Aaa 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 an exceptionally stable, margin and principal is secure.
Aa High quality by all standards. Margins of protection may not be as large
as in Aaa securities, fluctuation of protective elements may be greater,
or there may be other elements present that make the long-term risks
appear somewhat larger than in Aaa securities.
A These bonds possess many favorable investment attributes and are to be
considered as upper-medium grade obligations. Factors giving security to
principal and interest are considered adequate, but elements may be
present which suggest a susceptibility to impairment sometime in the
future.
Baa These bonds are considered 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.
Non-Investment Grade
Ba These bonds have speculative elements; their future cannot be considered
as well assured. The protection of interest and principal payments may
be very moderate and thereby not well safeguarded during good and bad
times over the future.
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<PAGE> 505
B These bonds lack the characteristics of a desirable investment (i.e.,
potentially low assurance of timely interest and principal payments or
maintenance of other contract terms over any long period of time may be
small).
Caa Bonds in this category have poor standing and may be in default. These
bonds carry an element of danger with respect to principal and interest
payments.
Ca Speculative to a high degree and could be in default or have other
marked shortcomings. C is the lowest rating.
DESCRIPTION OF MUNICIPAL NOTE RATINGS
Moody's
- -------
MIG1 & VMIG1 Short-term municipal securities rated MIG1 or VMIG1 are
of the best quality. They have strong protection from
established cash flows, superior liquidity support or
demonstrated broad-based access to the market for
refinancing.
MIG2 & VMIG2 These Short-term municipal securities rated are of high
quality. Margins of protection are ample although not so
large as in the preceding group.
MIG3 & VMIG3 Favorable quality. All security elements are accounted
for, but the undeniable strength of the preceding grades
is lacking. Liquidity and cash flow protection may be
narrow and marketing access for refinancing is likely to
be less well established.
S&P
- ---
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.
SP-1 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.
SP-3 Speculative capacity to pay principal and interest.
DESCRIPTION OF PREFERRED STOCK RATINGS
Moody's
- -------
aaa Top-quality preferred stock. This rating indicates good asset protection
and the least risk of dividend impairment within the universe of
preferred stocks.
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<PAGE> 506
aa High-grade preferred stock. This rating indicates that there is a
reasonable assurance the earnings and asset protection will remain
relatively well maintained in the foreseeable future.
a Upper-medium grade preferred stock. While risks are judged to be
somewhat greater than in the "aaa" and "aa" classification, earnings and
asset protection are, nevertheless, expected to be maintained at
adequate levels.
baa Medium-grade preferred stock, neither highly protected nor poorly
secured. Earnings and asset protection appear adequate at present but
may be questionable over any great length of time.
S&P
- ---
S&P's preferred stock rating is an assessment of the capacity and willingness of
an issuer to pay preferred stock dividends and any applicable sinking fund
obligations.
AAA Highest rating. This rating indicates an extremely strong capacity to
pay the preferred stock obligations.
AA High-quality, fixed-income security. The capacity to pay preferred
stock obligations is very strong, although not as overwhelming as for
issues rated "AAA."
A Backed by a sound capacity to pay the preferred stock obligations,
although it is somewhat more susceptible to the adverse effects of
changes in circumstances and economic conditions.
BBB Backed by an adequate capacity to pay the preferred stock obligations.
Whereas the issuer normally exhibits adequate protection parameters,
adverse economic conditions or changing circumstances are more likely to
lead to a weakened capacity to make payments for a preferred stock in
this category than for issues in the "A" category.
SHORT-TERM DEBT RATINGS
Thompson Bank Watch, Inc. ("TBW") ratings apply only to the unsecured commercial
paper and other senior short-term and deposit obligations of entities to which
the ratings have been assigned. The TBW Short-Term ratings specifically assess
the likelihood of an untimely payment of principal and interest.
TBW-1 Very high degree of likelihood that principal and interest will
be paid on a timely basis.
TBW-2 While degree of safety regarding timely repayment of principal
and interest is strong, the relative degree is not as high as
for issues rated TBW-1.
TBW-3 Lowest investment grade category. While more susceptible to
adverse developments than obligations with higher ratings,
capacity to service principal and interest in a timely fashion
is considered adequate.
TBW-4 Non-investment grade and, therefore, speculative.
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<PAGE> 508
[THIS PAGE INTENTIONALLY LEFT BLANK]
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<PAGE> 509
[THIS PAGE INTENTIONALLY LEFT BLANK]
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<PAGE> 510
Investment Adviser and Sub-Administrator
Banc One Investment Advisors Corporation
1111 Polaris Parkway
P.O. Box 710211
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 8528
Boston, MA 02266-8528
Legal Counsel
Ropes & Gray
One Franklin Square
1301 K Street, N.W.
Suite 800 East
Washington, D.C. 20005
PricewaterhouseCoopers LLP
Coopers & Lybrand L.L.P.
100 East Broad Street
Columbus, OH 43215
The Statement of Additional Information contains more detailed information about
the Funds. The current Statement of Additional Information has been filed with
the Securities and Exchange Commission and is available without charge by
calling 1-800-480-4111 or by writing to The One Group Services Company at 3435
Stelzer Road, Columbus, Ohio 43219. The Statement of Additional Information is
incorporated into this prospectus by reference. The SEC maintains a Web site
(www.sec.gov) that contains the Statement of Additional Information, materials
incorporated by reference and other information regarding The One Group(R).
TOG-F-107
- 43 -
<PAGE> 511
THE ONE GROUP(R)
FAMILY OF MUTUAL FUNDS
3435 Stelzer Road
Columbus, Ohio 43219-3035
(800) 480-4111
October , 1998
THE ONE GROUP INVESTOR AGGRESSIVE GROWTH FUND
This prospectus describes a mutual fund that invests in other mutual funds. The
mutual fund in this prospectus seeks capital appreciation by investing in one or
more professionally managed portfolios of securities. The information in this
prospectus is important. Please read it carefully before you invest, and save it
for future reference.
PLEASE REMEMBER THAT SHARES OF THE FUNDS: O ARE NOT DEPOSITS OR
OBLIGATIONS OF, OR GUARANTEED BY BANC ONE CORPORATION OR ITS AFFILIATES; O ARE
NOT INSURED OR GUARANTEED BY THE FEDERAL DEPOSIT INSURANCE CORPORATION OR BY ANY
FEDERAL OR STATE GOVERNMENTAL AGENCY; O INVOLVE INVESTMENT RISK, INCLUDING THE
POSSIBLE LOSS OF THE PRINCIPAL AMOUNT INVESTED.
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE
SECURITIES AND EXCHANGE COMMISSION NOR HAS THE COMMISSION PASSED UPON THE
ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A
CRIMINAL OFFENSE.
<PAGE> 512
TABLE OF CONTENTS
A BRIEF PREVIEW OF THE FUND 3
ABOUT THE FUND 5
MORE ABOUT THE FUND 8
HOW TO DO BUSINESS WITH THE ONE GROUP 9
Purchasing Fund Shares 9
Sales Charges 13
Sales Charge Reductions and Waivers 15
Exchanging Fund Shares 18
Redeeming Fund Shares 20
SHAREHOLDER INFORMATION 22
Voting Rights 22
Dividend Policies 23
Tax Treatment of the Fund 23
Tax Treatment of Shareholders 23
Shareholder Inquiries 24
ORGANIZATION & MANAGEMENT OF THE FUND 25
The Fund 25
The Board of Trustees 25
The Advisor 25
The Distributor 25
The Administrator and Sub-Administrator 25
The Transfer Agent, Custodian and Sub-Custodian 25
DETAILS ABOUT THE FUND'S INVESTMENT PRACTICES AND POLICIES 26
Investment Practices 26
Investment Policies 28
APPENDIX A: DETAILS ABOUT THE UNDERLYING FUNDS' INVESTMENT PRACTICES AND
POLICIES 30
APPENDIX B: DESCRIPTION OF RATINGS 36
<PAGE> 513
[logo-(CLOCK)] A BRIEF PREVIEW OF THE FUND
WHAT ARE THE GOALS OF THE ONE GROUP INVESTOR AGGRESSIVE GROWTH FUND? The Fund's
goal is to seek capital appreciation. Please read about the Fund before
investing.
WHAT IS THE FUND'S INVESTMENT STRATEGY? The Fund normally will invest in a
diversified group of One Group mutual funds, which invest primarily in equity
and money market instruments. Shares are available for long-term investors,
including tax-advantaged retirement accounts; the Funds should not be used for
short-term trading purposes. The Fund's investment return is diversified by its
investment in the underlying mutual funds which invest in growth and income
stocks, foreign securities, and cash or cash equivalents. The underlying mutual
funds in which the Fund will invest have the following characteristics:
The One Group(R)Prime Money Market Fund Money Market
The One Group(R)Disciplined Value Fund Equity
The One Group(R)International Equity Index Fund Equity
The One Group(R)Large Company Growth Fund Equity
The One Group(R)Large Company Value Fund Equity
The One Group(R)Growth Opportunities Fund Equity
The One Group(R)Value Growth Fund Equity
The One Group(R)Small Capitalization Fund Equity
The One Group(R)Income Equity Fund Equity
The One Group(R)Equity Index Fund Equity
WHAT ARE THE MAIN RISKS OF INVESTING IN THE FUND? The Fund's investments are
concentrated in the underlying funds, so the Fund's investment performance is
directly related to the performance of the underlying funds. The Fund's net
asset value will fluctuate with changes in the equity markets and the value of
the mutual funds in which it invests. In addition, as a matter of fundamental
policy, the Fund must allocate its investments among the underlying funds. As a
result, the Fund does not have the same flexibility to invest as a mutual fund
without such constraints. An investment in the Funds is not a deposit of BANC
ONE CORPORATION or its affiliates and is not insured or guaranteed by the
Federal Deposit Insurance Corporation or any other government agency. For more
information about risks, please read "More About the Fund" and "Investment
Risks."
WHAT CLASSES OF SHARES ARE AVAILABLE? The Fund currently offers four classes of
Shares: Class A, Class B, Class C and Class I. Class A, Class B and Class C
shares are offered to the general public. Class I 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. The section called "How To Do Business With The One Group"
will provide more information. Class I shares are not available to Individual
Retirement Accounts ("IRA").
HOW DO I PURCHASE AND REDEEM SHARES? You may buy and redeem shares of the Fund
on any day that the Funds are open for business. Purchase and redemption
procedures are explained in greater detail in "How To Do Business With The One
Group." For additional information, call The One Group Services Company at
1-800-480-4111.
HOW ARE DIVIDENDS PAID? Generally, dividends are declared monthly and
distributed on the first business day of each month. Any capital gains are
distributed at least annually. Distributions are paid in additional shares of
the
- 3 -
<PAGE> 514
same class unless you elect to take the payment in cash. For a more detailed
discussion of dividends, see "Dividend Policies."
WHO MANAGES THE FUNDS? Banc One Investment Advisors Corporation ("Banc One
Investment Advisors"), an indirect subsidiary of BANC ONE CORPORATION, serves as
the advisor of the Fund. Banc One Investment Advisors is paid a fee for its
services. Banc One Investment Advisors also serves as the advisor to the
underlying mutual funds, for which it receives a fee.
- 4 -
<PAGE> 515
THE ONE GROUP(R) INVESTOR AGGRESSIVE GROWTH FUND
INVESTMENT OBJECTIVE: The Fund seeks capital appreciation by investing primarily
in a diversified group of The One Group mutual funds which invest primarily in
equity securities.
INVESTMENT STRATEGY: The Fund invests 90% to 100% of its total assets in nine
mutual funds of The One Group which invest primarily in equity securities, and
up to 10% of its assets in one money market fund of The One Group.
PORTFOLIO SECURITIES: The Fund will invest in the underlying
mutual funds within the following range:
The One Group(R) Prime Money Market Fund 0 - 10%
The One Group(R) Disciplined Value Fund 0 - 40%
The One Group(R) International Equity Index Fund 0 - 40%
The One Group(R) Large Company Growth Fund 0 - 50%
The One Group(R) Large Company Value Fund 0 - 55%
The One Group(R) Growth Opportunities Fund 0 - 40%
The One Group(R) Value Growth Fund 0 - 50%
The One Group(R) Small Capitalization Fund 0 - 40%
The One Group(R) Income Equity Fund 0 - 50%
The One Group(R) Equity Index Fund 0 - 50%
RISK CONSIDERATIONS: The Fund's investments are concentrated
in other mutual funds, so the Fund's investment performance is
directly related to the performance of those mutual funds. In
addition, as a matter of fundamental policy, the Fund must
allocate its investments primarily among the mutual funds. As a
result, the Fund's investment flexibility is limited. See "Special
Risk Considerations."
- -------------------------------------------------------------------------------
SHAREHOLDER EXPENSES
<TABLE>
<CAPTION>
CLASS A CLASS B CLASS C CLASS I
<S> <C> <C> <C> <C>
SHAREHOLDER TRANSACTION EXPENSES(1)
Maximum Sales Charge Imposed on Purchases
(as a percentage of offering price) 4.50% none none none
Maximum Contingent Deferred Sales Charge
(as a percentage of original purchase price or redemption
proceeds, as applicable) none(2) 5.00% 1.00% none
Redemption Fees none none none none
Exchange Fees none none none none
ANNUAL OPERATING EXPENSES
(as a percentage of average daily net assets)
Investment Advisory Fees(after fee waiver)(3) .01% .01% .01% .01%
12b-1 Fees (after fee waiver)(4) .25% 1.00% 1.00% none
Other Expenses(after fee waiver)(5) .19% .19% .19% .19%
TOTAL OPERATING EXPENSES (after fee waivers)(6) .45% 1.20% 1.20% .20%
</TABLE>
(1) If you buy or sell shares through a Shareholder Servicing Agent, you
may be charged separate transaction fees by the Shareholder
Servicing Agent. In addition, a $7.00 charge is deducted from
redemption amounts paid by wire.
(2) Except for purchases of $1 million or more. Please see "Sales
Charges."
(3) Without the waiver, Investment Advisory fees would be .05% for all
classes of shares.
(4) Due to 12b-1 fees, long-term Class A, Class B, and Class C
shareholders may pay more than the equivalent of the maximum
front-end sales charges permitted by the rules of the National
Association of Securities Dealers. Without the voluntary waiver,
12b-1 fees would be .35% for Class A.
- 5 -
<PAGE> 516
(5) Other Expenses are based on estimated amounts for the current fiscal
year. Without the waiver and reimbursement, Other Expenses would be
.29%.
(6) Without the voluntary reduction of fees, Total Operating Expenses
would be .69% for Class A shares, 1.34% for Class B shares, 1.34% for
Class C shares, and .34% for Class I shares.
The Fund will indirectly pay a portion of the expenses incurred by the
underlying funds. The following chart provides the expense ratio for the Class I
of each underlying fund in which the Fund invests (based on the current fund
prospectus). Some of these expense ratios may include a voluntary reduction of
investment advisory fees.
<TABLE>
<CAPTION>
NAME OF UNDERLYING FUND EXPENSE RATIO
----------------------- -------------
<S> <C>
The One Group(R)Prime Money Market Fund .50%
The One Group(R)Disciplined Value Fund 1.00%
The One Group(R)International Equity Index Fund 1.36%
The One Group(R)Large Company Growth Fund .97%
The One Group(R)Large Company Value Fund .98%
The One Group(R)Growth Opportunities Fund 1.00%
The One Group(R)Value Growth Fund 1.05%
The One Group(R)Small Capitalization Fund 1.06%
The One Group(R)Income Equity Fund 1.01%
The One Group(R)Equity Index Fund .39%
</TABLE>
After combining the total operating expenses of the Fund with those of the
underlying funds, the estimated average weighted expense ratio for Class A
shares is 1.39%, for Class B shares is 2.14%, for Class C shares is 2.14%, and
for Class I shares is 1.14%.
EXAMPLE: An investor would pay the following expenses on a $1,000 investment in
the Fund, assuming: (1) payment of the maximum sales charges; (2) 5% annual
return; and (3) redemption at the end of each time period.
1 YEAR 3 YEARS
------ -------
Class A
Class A (without fee waiver)
Class B
Class B (without fee waiver)
Class C
Class C (without fee waiver)
Class I
Class I (without fee waiver)
Assuming no redemption at the end of each time period, the dollar amounts in the
above example would be as follows:
1 YEAR 3 YEARS
------ -------
Class A
Class A (without fee waiver)
Class B
Class B (without fee waiver)
Class C
- 6 -
<PAGE> 517
Class C (without fee waiver)
Class I
Class I (without fee waiver)
These examples are designed to assist you in understanding the costs and
expenses that may be directly or indirectly paid by investors in the Fund. THE
EXAMPLES SHOULD NOT BE CONSIDERED A REPRESENTATION OF PAST OR FUTURE EXPENSES
AND ACTUAL EXPENSES MAY BE GREATER OR LESS THAN THOSE SHOWN.
FINANCIAL HIGHLIGHTS
This section would include Financial Highlights for the Fund. Because the Fund
had not begun operations until after June 30, 1998, there are no financial
statements for the Fund.
- 7 -
<PAGE> 518
MORE ABOUT THE FUND
ILLIQUID INVESTMENTS
The Fund may invest up to 15% of its net assets in illiquid investments. A
security is illiquid if it cannot be sold at approximately the value assessed by
the Fund within seven (7) days. Banc One Investment Advisors will follow
guidelines adopted by The One Group Board of Trustees in determining whether an
investment is illiquid.
TEMPORARY DEFENSIVE POSITION
Sometimes Banc One Investment Advisors decides that because of market conditions
the Fund should temporarily be invested in instruments other than the underlying
mutual funds. Therefore, the Fund is permitted for temporary defensive purposes
to invest up to 100% of their assets in short-term fixed income securities.
These securities include obligations of the U.S. Government and its agencies and
instrumentalities, commercial paper, bank certificates of deposit, repurchase
agreements, banker's acceptances, variable amount master demand notes and bank
money market deposit accounts. The Fund also may hold cash for liquidity
purposes.
To the extent that the Fund is engaged in a temporary defensive position, they
will not be pursuing its investment objective.
SPECIAL RISK CONSIDERATIONS
SPECIAL RISKS OF INVESTING IN EQUITY FUNDS
Because equity funds invest primarily in equity securities, which fluctuate in
value, the funds' shares will fluctuate in value. In addition, 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.
SPECIAL RISKS OF INVESTING IN FIXED-INCOME FUNDS
Investments in fixed income securities (for example, bonds) will increase or
decrease based on changes in interest rates. If rates increase, the value of a
Fund's investments generally declines. On the other hand, if rates fall, the
value of the investments generally increases. The value of your investment in a
Fund will increase and decrease as the value of a Fund's investments increase
and decrease. While securities with longer duration and maturities tend to
produce higher yields, they are also subject to greater fluctuations in value
when interest rates change. Usually changes in the value of fixed income
securities will not affect cash income generated, but may affect the value of
your investment.
SPECIAL RISKS OF INVESTING IN INDEX FUNDS
An index fund's investment objective is to track the performance of a specified
index. Therefore, securities may be purchased, retained and sold by an index
fund at times when an actively managed fund would not do so. As a result, you
can expect greater risk of loss (and a correspondingly greater prospect of gain)
from changes in the value of securities that are heavily weighted in the index
than would be the case if the funds were not fully invested in such securities.
Because of this, an index fund's share price can be volatile and you should be
able to handle sudden, and sometimes substantial, fluctuation in the value of
your investment.
- 8 -
<PAGE> 519
SPECIAL RISKS OF INVESTING IN INTERNATIONAL FUNDS
Funds investing in foreign securities are subject to special risks. These risks
may include future unfavorable political and economic developments, possible
withholding taxes, seizure of foreign deposits, currency controls, higher
transaction costs, and delayed settlements of transactions. Securities of some
foreign companies are less liquid, and their prices more volatile, than
securities of comparable U.S. companies. Additionally, there may be less public
information available about foreign issuers. Finally, since the funds may invest
in securities denominated in foreign currencies, changes in exchange rates may
affect the value of investments in the funds.
SPECIAL RISKS OF SMALL CAPITALIZATION FUNDS
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 other 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 funds may be
volatile and the net asset value of shares of the funds may fluctuate.
HOW TO DO BUSINESS WITH THE ONE GROUP
PURCHASING FUND SHARES
WHERE CAN I BUY SHARES?
You may purchase Fund shares from the following sources:
- - The One Group Services Company, and
- - Shareholder Servicing Agents. These include investment advisors,
brokers, financial planners, banks, insurance companies, retirement or
401(k) plan sponsors, or other intermediaries. Shares purchased this
way will be held for you by the Shareholder Servicing Agent.
WHEN CAN I BUY SHARES?
- - Purchases may be made on any business day. This includes any day that
the Funds are open for business, other than weekends, days on which
the New York Stock Exchange ("NYSE") is closed, and the following
holidays: New Years Day, Martin Luther King, Jr. Day, Presidents' Day,
Good Friday, Memorial Day,
Independence Day, Labor Day, Thanksgiving, and Christmas.
- - Purchase requests received by The One Group Services Company before 4:00
p.m. Eastern Time ("ET"), will be effective that day. On occasion, the
NYSE will close before 4 p.m. ET. When that happens, purchase requests
received after the NYSE closes will be effective the following business
day.
- - Purchase orders may be canceled by the Fund's Custodian, State Street
Bank and Trust Company, if it does not receive "federal funds" by 4:00
p.m. ET (i) on the business day after the order is placed if you are
buying Class I shares, and (ii) on the third business day if you are
purchasing Class A, Class B and Class C shares.
- 9 -
<PAGE> 520
- - If your shares are held by a Shareholder Servicing Agent, it is the
responsibility of the Shareholder Servicing Agent to send your purchase
or redemption order to the Fund. Your Shareholder Servicing Agent may
have an earlier cut-off time for purchase and redemption requests.
- - The One Group Services Company can reject a purchase order if it does
not think that it is in the best interests of a Fund and/or its
shareholders to accept the order.
- - Shares are electronically recorded. Therefore, certificates will not be
issued.
WHAT KIND OF SHARES CAN I BUY?
The One Group offers the following classes of shares:
- - Class A, Class B and Class C shares are available to the general public.
- - Class I shares are available to institutional investors and any
organization authorized to act in a fiduciary, advisory, custodial or
agency capacity. We will refer to these entities as "Intermediaries."
- - If you intend to hold your shares for six or more years, Class B shares
may be appropriate for you. If you intend to hold your shares for less
than six years, you may want to consider Class A or Class C shares.
The One Group Fund Direct IRA. The One Group offers a retirement plan and, in
1999, may offer an education plan. These plans allow participants to defer taxes
while their retirement and education savings grow. The education IRA requires a
minimum investment of $500. Call The One Group Services Company at
1-800-480-4111 for an Adoption Agreement.
HOW MUCH DO SHARES COST?
- - Shares are sold at net asset value ("NAV") plus a sales charge, if any.
- - Each class of shares in each Fund has a different NAV. This is primarily
because each class has different distribution expenses.
- - NAV per share is calculated by dividing the total market value of a
Fund's investments and other assets allocable to a class (minus class
expenses) by the number of outstanding shares in that class.
- - A Fund's NAV changes every day. NAV is calculated each business day
following the close of the NYSE at 4:00 p.m. ET. On occasion, the NYSE
will close before 4:00 p.m ET. When that happens, NAV will be calculated
as of the time the NYSE closes.
HOW DO I OPEN AN ACCOUNT?
1. Read the prospectus carefully, and select the Fund or Funds most appropriate
for you.
2. Decide how much you want to invest.
- The minimum initial investment is $1,000 ($100 for employees of
BANC ONE CORPORATION and its affiliates).
- 10 -
<PAGE> 521
- Subsequent investments must be at least $100 ($25 for employees
of BANC ONE CORPORATION and its affiliates).
- You may purchase no more than $250,000 of Class B shares at one
time.
- The One Group Services Company may waive these minimums.
3. Complete the Account Application Form. Be sure to sign up for all of the
Account privileges that you plan to take advantage of. Doing so now
means that you will not have to complete additional paperwork later.
4. Send the completed application and a personal check (unless you choose
to pay by wire or bank transfer) payable to "The One Group" to:
State Street Bank and Trust Company
c/o The One Group
P.O. Box 8528
Boston, MA 02266-8528
Contributions to Fund Direct IRAs should be made payable to "State
Street Bank and Trust Company for the Benefit of (your name)."
5. All checks should be in U.S. dollars. Third party checks will not be
accepted. Redemptions from a Fund will not be permitted for ten (10)
calendar days if purchases are made by check or under the Systematic
Investment Plan (see below).
6. If you purchase shares through a Shareholder Servicing Agent, you may be
required to complete additional forms or follow additional procedures.
You should contact your Shareholder Servicing Agent regarding purchases,
exchanges and redemptions.
7. If you have any questions, contact your Shareholder Servicing Agent or
call The One Group Services Company at 1-800-480-4111.
CAN I PURCHASE SHARES OVER THE TELEPHONE?
Yes. Simply select this option on your Account Application Form and then:
- - Contact your Shareholder Servicing Agent or The One Group Services
Company at 1-800-480-4111 to relay your purchase instructions.
- - Send a personal check made payable to "The One Group" to State Street
Bank and Trust Company (see address above), authorize a bank transfer or
initiate a wire transfer to the following wire address:
State Street Bank & Trust Company
Attn: Custody & Shareholder Services
ABA 011 000 028
DDA 99034167
FBO The One Group Fund (ex: The One Group Prime Money Market Fund - A)
Your Account Number (ex: 123456789)
- 11 -
<PAGE> 522
Your Account Registration (ex: John Smith & Mary Smith, JTWROS)
- - The One Group uses reasonable procedures to confirm that instructions
given by telephone are genuine. These procedures include recording
telephone instructions and asking for personal identification. If these
procedures are followed, The One Group will not be responsible for any
loss, liability, cost or expense of acting upon unauthorized or
fraudulent instructions; you bear the risk of loss.
- - You may revoke your right to make purchases over the telephone by
sending a letter to:
State Street Bank and Trust Company
c/o The One Group
P.O. Box 8528
Boston, MA 02266-8528
CAN I AUTOMATICALLY INVEST ON A SYSTEMATIC BASIS?
Yes. After your Account is established, you may purchase additional Class A,
Class B and Class C shares by making automatic monthly investments from your
bank account. The minimum initial investment is still $1,000, but minimum
automatic additions are only $25. The One Group Services Company may waive these
minimums.
To establish a Systematic Investment Plan:
- - Select the "Systematic Investment Plan" option on the Account
Application Form.
- - Provide the necessary information about the bank account from which your
investments will be made.
- - Shares purchased under a Systematic Investment Plan may not be redeemed
for ten (10) calendar days.
- - The One Group currently does not charge for this service, but may impose
a charge in the future. However, your bank may impose a charge for
debiting your bank account.
- - You may revoke your right to make systematic investments by sending a
letter to:
State Street Bank and Trust Company
c/o The One Group
P.O. Box 8528
Boston, MA 02266-8528
CONVERSION FEATURE
Your Class B shares automatically convert to Class A shares after eight years
(measured from the end of the month in which they were purchased).
- - After conversion, your shares will be subject to the lower distribution
and shareholder servicing fees charged on Class A shares.
- - You will not be assessed any sales charges or fees for conversion of
shares, nor will you be subject to any Federal income tax.
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<PAGE> 523
- - Because the share price of the Class A shares may be higher than that of
the Class B shares at the time of conversion, you may receive fewer
Class A shares; however, the dollar value will be the same.
- - If you have exchanged Class B shares of one Fund for Class B shares of
another, the time you held the shares in each Fund will be added
together.
SALES CHARGES
The One Group Services Company compensates Shareholder Servicing Agents who sell
shares of The One Group. Compensation comes from sales charges, 12b-1 fees and
payment by The One Group Services Company from its own resources. The One Group
Services Company, at its own expense, also will provide promotional incentives
in the form of travel expenses, lodging and bonuses to licensed individuals who
sell shares of the Funds, as well as vacation trips (including lodging at luxury
resorts), tickets to entertainment events, and merchandise. Occasionally, cash
incentives will be paid to select Shareholder Servicing Agents. Those
Shareholder Servicing Agents who may receive special incentives include Banc One
Securities Corporation, The Advisors Group, United Planners Financial Services
of America, Inc., The Legend Group, and Rosewood Retirement Advisory Services,
LLC.
CLASS A SHARES
This table shows the amount of sales charge you pay and the commissions paid to
Shareholder Servicing Agents.
<TABLE>
<CAPTION>
SALES CHARGE SALES CHARGE
AS A % OF THE AS A COMMISSION
OFFERING % OF YOUR AS A % OF
AMOUNT OF PURCHASE PRICE INVESTMENT OFFERING PRICE
- ------------------ ----- ---------- --------------
<S> <C> <C> <C> <C>
Less than $100,000 4.50% 4.71% 4.05%
$100,000-$249,999 3.50% 3.63% 3.05%
$250,000-$499,999 2.50% 2.56% 2.05%
$500,000-$999,999 2.00% 2.04% 1.60%
$1,000,000* 0.00% 0.00% 0.00%
</TABLE>
* If you purchase $1 million or more of Class A shares and are not
assessed a sales charge at the time of purchase, you will be charged the
equivalent of 1% of the purchase price if you redeem any or all of the
Class A shares within one year of purchase.
CLASS B SHARES
Class B shares are offered at NAV, without any up-front sales charges. However,
if you redeem these shares within six years of the purchase date, you will be
assessed a Contingent Deferred Sales Charge ("CDSC") according to the following
schedule:
<TABLE>
<CAPTION>
CDSC AS A % OF
DOLLAR AMOUNT
YEARS SINCE PURCHASE SUBJECT TO CHANGE
-------------------- -----------------
<S> <C> <C>
0-1 5.00%
</TABLE>
- 13 -
<PAGE> 524
<TABLE>
<S> <C> <C>
1-2 4.00%
2-3 3.00%
3-4 3.00%
4-5 2.00%
5-6 1.00%
more than 6 0.00%
</TABLE>
The One Group Services Company pays a commission of 4.00% of the original
purchase price to Shareholder Servicing Agents who sell Class B shares.
CLASS C SHARES
Class C shares are offered at NAV, without any up-front sales charge. However,
if you redeem your shares within one year of the purchase date, you will be
assessed a CDSC as follows:
<TABLE>
<CAPTION>
CDSC AS A %
OF DOLLAR AMOUNT
YEARS SINCE PURCHASE SUBJECT TO CHARGE
-------------------- -----------------
<S> <C> <C>
0-1 1.00%
After first year None
</TABLE>
Shareholder Servicing Agents selling Class C shares receive a commission of
1.00% of the original purchase price from The One Group Services Company.
How the CDSC is Calculated
- - The Fund assumes that all purchases made in a given month were made on
the first day of the month.
- - The CDSC is based on the current market value or the original cost of
the shares, whichever is less.
- - A sales charge is not imposed on increases in NAV above the initial
purchase price, nor is a sales charge assessed on shares acquired
through reinvestment of dividends or capital gains distributions.
- - To keep your CDSC as low as possible, the Fund first will redeem any
shares in your account that carry no CDSC, starting with Class A Shares.
After that, the Fund will redeem the shares you have held for the
longest time and thus have the lowest CDSC.
- - If you exchange Class B or Class C shares of an unrelated mutual fund
for Class B or Class C shares of The Group in connection with a fund
reorganization, the CDSC applicable to your original shares (including
the period of time you have held those shares) will be applied to The
One Group shares you receive in the reorganization.
12B-1 FEES
12b-1 fees are paid by The One Group to The One Group Services Company as
compensation for its services and expenses. The One Group Services Company in
turn pays all or part of the 12b-1 fee to Shareholder Servicing Agents that sell
shares of The One Group.
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- - The 12b-1 fees vary by share class as follows:
1. Class A shares pay a 12b-1 fee of .35% of the average daily net
assets of the Fund, which is currently being waived to .25%.
2. Class B and Class C shares pay a 12b-1 fee of 1.00% of the
average daily net assets of the Fund. This will cause expenses
for Class B and Class C shares to be higher and dividends to be
lower than for Class A shares.
3. There are no 12b-1 fees for Class I shares.
- - 12b-1 fees, together with the CDSC, help The One Group Services Company
sell Class B and Class C shares without an "up-front" sales charge by
defraying the costs of advancing brokerage commissions and other
expenses paid to Shareholder Servicing Agents.
- - The One Group Services Company may use up to .25% of the fees for
shareholder servicing and up to .75% for distribution. During the last
fiscal year, The One Group Services Company received 12b-1 fees totaling
.25%, 1.00% and 1.00% of the average daily net assets of Class A, Class
B and Class C shares, respectively.
- - The One Group Services Company may pay 12b-1 fees to its affiliates and
to Banc One Investment Advisors and its affiliates (or any sub-advisor)
for brokerage and other agency transactions.
SALES CHARGE REDUCTIONS AND WAIVERS
REDUCING YOUR CLASS A SALES CHARGES
There are several ways you can reduce the sales charges you pay on Class A
shares:
1. Right of Accumulation: You may add the market value of any Class A,
Class B or Class C shares of a Fund (except a money market fund) that
you (and your spouse and minor children) already own to the amount of
your next Class A purchase for purposes of calculating the sales charge.
An Intermediary also may take advantage of this option.
2. Letter of Intent: With an initial investment of $2,000, you may purchase
Class A shares of one or more funds over the next 13 months and pay the
same sales charge that you would have paid if all shares were purchased
at once. A percentage of your investment will be held in escrow until
the full amount covered by the Letter of Intent has been invested.
To take advantage of the accumulation privilege or letter of intent, complete
the appropriate section of your fund application, or contact your Shareholder
Servicing Agent. To determine if you are eligible for the accumulation
privilege, contact The One Group Services Company at 1-800-480-4111. These
programs may be terminated or amended at any time.
WAIVER OF THE CLASS A SALES CHARGE
No sales charge is imposed on Class A shares of the Funds if the shares were:
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1. Bought with the reinvestment of dividends and capital gains
distributions.
2. Acquired in exchange for other Fund shares if a comparable sales charge
has been paid for the exchanged shares.
3. Bought by officers, directors or trustees, retirees and employees (and
their spouses and immediate family members) of:
- The One Group.
- BANC ONE CORPORATION and its subsidiaries and affiliates.
- The One Group Services Company and its subsidiaries and
affiliates.
- State Street Bank and Trust Company and its subsidiaries and
affiliates.
- Broker/dealers who have entered into dealer agreements with The
One Group and their subsidiaries and affiliates.
- An investment sub-advisor of a fund of The One Group and such
sub-advisor's subsidiaries and affiliates.
4. Bought by:
- Affiliates of BANC ONE CORPORATION and certain accounts (other
than IRA Accounts) for which an Intermediary acts in a
fiduciary, advisory, agency, custodial or similar capacity.
- Accounts to which a bank or broker-dealer charges an asset
allocation fee, provided the bank or broker-dealer has an
agreement with The One Group Services Company.
- Retirement and deferred compensation plans and trusts used to
fund those plans, including, but not limited to, those defined
in sections 401(a), 403(b) or 457 of the Internal Revenue Code
and "rabbi trusts."
- Shareholder Servicing Agents who have a dealer arrangement with
The One Group Services Company, 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 Shareholder Servicing Agents who place trades
for their own accounts if the accounts are linked to the master
account of such Shareholder Servicing Agent on the books and
record of the broker or agent.
5. Bought with proceeds from the sale of Class I shares of a Fund of The
One Group or acquired in an exchange of Class I shares of a Fund for
Class A shares of the same Fund, but only if the purchase is made within
60 days of the sale or distribution.
6. Bought with proceeds from the sale of shares of a mutual fund, including
a Fund of The One Group, for which a sales charge was paid, but only if
the purchase is made within 60 days of the sale or distribution.
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<PAGE> 527
7. Bought in an IRA with the proceeds of a distribution from an employee
benefit plan, but only if the purchase is made within 60 days of the
sale or distribution and, at the time of the distribution, the employee
benefit plan had plan assets invested in a Fund of The One Group.
8. Bought with assets of The One Group.
9. Bought in connection with plans of reorganizations of a Fund, such as
mergers, asset acquisitions and exchange offers to which a Fund is a
party.
The waivers described in (5), (6) and (7) above will not continue indefinitely
and may be discontinued at any time without notice.
WAIVER OF THE CLASS B SALES CHARGE
No sales charge is imposed on redemptions of Class B shares of the Funds:
1. Provided that you withdraw no more than 10% of the account value
annually. You do not have to participate in the Systematic Withdrawal
Plan to take advantage of this waiver.
2. If you buy the shares in connection with certain retirement plans, such
as 401(k) and similar qualified plans.
3. If you are the shareholder (or a joint shareholder), or a participant or
beneficiary of certain retirement plans and you die or become disabled
(as defined by the Tax Code), but only if the redemption is made within
one year of such death or disability.
4. That represent a minimum required distribution from an IRA Account or
other qualifying retirement plan, but only if you are at least age 70
1/2.
5. Exchanged in connection with plans of reorganizations of a Fund, such as
mergers, asset acquisitions and exchange offers to which a Fund is a
party.
6. Acquired in exchange for Class B shares of other Funds of The One Group.
WAIVER OF THE CLASS C SALES CHARGE
No sales charge is imposed on redemptions of Class C shares of the Funds:
1. Provided that you withdraw no more than 10% of the account value
annually. You do not have to participate in the Systematic Withdrawal
Plan to take advantage of this waiver.
2. If you buy the shares in connection with certain retirement plans, such
as 401(k) and similar qualified plans.
3. If you are the shareholder (or a joint shareholder), or a participant or
beneficiary of certain retirement plans and you die or become disabled
(as defined by the Tax Code), but only if the redemption is made within
one year of such death or disability.
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<PAGE> 528
4. That represent a minimum required distribution from an IRA Account or
other qualifying retirement plan, but only if you are at least age 70
1/2.
5. Exchanged in connection with plans of reorganizations of a Fund, such as
mergers, asset acquisitions and exchange offers to which a Fund is a
party.
6. Acquired in exchange for Class C shares of other Funds of The One Group.
7. If The One Group Services Company receives notice before you invest
indicating that your Shareholder Servicing Agent, due to the type of
account that you have, is waiving its commission.
To take advantage of any of these sales charge waivers, you must qualify for
such waiver in advance. To see if you qualify, contact The One Group Services
Company at 1-800-480-4111, or your Shareholder Servicing Agent.
EXCHANGING FUND SHARES
WHAT ARE MY EXCHANGE PRIVILEGES?
You may make the following exchanges:
- - Class I shares of a Fund may be exchanged for Class A shares of that
Fund or for Class A or Class I shares of another Fund of The One Group.
- - Class A shares of a Fund may be exchanged for Class I shares of that
Fund or for Class A or Class I shares of another Fund of The One Group,
but only if you are eligible to purchase those shares.
- - Class B shares of a Fund may be exchanged for Class B shares of another
Fund of The One Group.
- - Class C shares of a Fund may be exchanged for Class C shares of another
Fund of The One Group.
The One Group Funds offer a Systematic Exchange Privilege which allows you to
automatically exchange shares of one fund to another on a monthly or quarterly
basis. This privilege is useful in Dollar Cost Averaging. To participate in this
privilege, please select it on your account application. To learn more about it,
please call The One Group Services Company at 1-800-480-4111.
The One Group does not charge a fee for this privilege. In addition, The One
Group may change the terms and conditions of your exchange privileges upon 60
days written notice.
WHEN ARE EXCHANGES PROCESSED?
Exchanges are processed the same business day they are received, provided:
- - State Street Bank and Trust Company receives the request by 4:00 p.m.
ET.
- - You have provided The One Group with all of the information necessary to
process the exchange.
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<PAGE> 529
- - You have received a current prospectus of the Fund or Funds in which you
wish to invest.
- - You have contacted your Shareholder Servicing Agent, if necessary.
DO I PAY A SALES CHARGE ON AN EXCHANGE?
Generally, you will not pay a sales charge on an exchange. However:
- - You will pay a sales charge if you own Class I shares of a Fund and you
want to exchange those shares for Class A shares, unless you qualify for
a sales charge waiver (see above).
- - You will pay a sales charge if you bought Class A shares of a Fund:
1. That does not charge a sales charge and you want to exchange them
for shares of a Fund that does, in which case you would pay the
sales charge applicable to the Fund into which you are
exchanging.
2. That charged a lower sales charge than the Fund into which you
are exchanging, in which case you would pay the difference
between that Fund's sales charge and all other sales charges you
have already paid.
- - If you exchange Class B or Class C shares of a Fund, you will not pay a
sales charge at the time of the exchange, however:
1. Your new Class B or Class C shares will be subject to the higher
CDSC of either the Fund from which you exchanged, the Fund into
which you exchanged, or any Fund from which you previously
exchanged.
2. The current holding period for your exchanged Class B or Class C
shares is carried over to your new shares.
ARE EXCHANGES TAXABLE?
Generally:
- - An exchange between classes of shares of the same Fund is not taxable
for Federal income tax purposes.
- - An exchange between Funds is considered a sale and generally results in
a capital gain or loss for Federal income tax purposes.
- - You should talk to your tax advisor before making an exchange.
ARE THERE LIMITS ON EXCHANGES?
Yes. The exchange privilege is not intended as a way for you to speculate on
short-term movements in the market. Therefore:
- - To prevent disruptions in the management of the Funds, The One Group
limits excessive exchange activity.
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<PAGE> 530
- - Exchange activity is excessive if it EXCEEDS TWO SUBSTANTIVE EXCHANGE
REDEMPTIONS (WITHIN 30 DAYS OF EACH OTHER) WITHIN A TWELVE MONTH PERIOD.
- - In addition, The One Group reserves the right to reject any exchange
request (even those that are not excessive) if the Fund reasonably
believes that the exchange will result in excessive transaction costs or
otherwise adversely affect other shareholders.
REDEEMING FUND SHARES
WHEN CAN I REDEEM SHARES?
- - You may redeem all or some of your shares on any day that the Funds are
open for business.
- - Redemption requests received by The One Group Services Company before
4:00 p.m. ET (or when the NYSE closes) will be effective that day.
HOW DO I REDEEM SHARES?
- - Unless you have selected the telephone option on your Account
Application Form, you must send a written redemption request to your
Shareholder Servicing Agent, if applicable, or to State Street Bank and
Trust Company at the following address:
The One Group
c/o State Street Bank and Trust Company
P.O. Box 8528
Boston, MA 02266-8528
- - All requests for redemptions from IRA accounts must be in writing.
- - You may request redemption forms by calling The One Group Services
Company at 1-800-480-4111.
- - State Street Bank and Trust Company may require that the signature on
your redemption request be guaranteed by a commercial bank, a member of
a domestic stock exchange, or a member of the Securities Transfer
Association Medallion Program or the Stock Exchange Medallion Program,
unless:
1. the redemption is for $50,000 worth of shares or less;
2. the redemption is payable to the shareholder of record;
3. the redemption check is mailed to the shareholder at the record
address; or
4. the redemption is payable by wire or bank transfer (ACH) to a
pre-existing bank account.
- - On the Account Application Form you may elect to have the redemption
proceeds mailed or wired to:
1. a designated commercial bank or
2. State Street Bank and Trust Company or your Shareholder
Servicing Agent.
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<PAGE> 531
- - State Street Bank and Trust Company may charge you a wire redemption
fee. The current charge is $7.00.
- - Your redemption proceeds will be paid within seven days after receipt of
the redemption request.
WHAT WILL MY SHARES BE WORTH?
- - If you own Class A and Class I shares and the Fund receives your
redemption request by 4:00 p.m. ET (or when the NYSE closes), you will
receive that day's NAV.
- - If you own Class B and Class C shares and the Fund receives your
redemption request by 4:00 p.m. ET (or when the NYSE closes), you will
receive that day's NAV, minus the amount of any applicable CDSC.
CAN I REDEEM BY TELEPHONE?
Yes, if you selected this option on your Account Application Form.
- - Call your Shareholder Servicing Agent or State Street Bank and Trust
Company at 1-800-480-4111 to relay your redemption request.
- - Your redemption proceeds will be mailed or wired to the commercial bank
account you designated on your Account Application Form.
- - State Street Bank and Trust Company may charge you a wire redemption
fee. The current charge is $7.00.
- - The One Group uses reasonable procedures to confirm that instructions
given by telephone are genuine. These procedures include recording
telephone instructions and asking for personal identification. If these
procedures are followed, The One Group will not be responsible for any
loss, liability, cost or expense of acting upon unauthorized or
fraudulent instructions; you bear the risk of loss.
o REDEMPTIONS FROM YOUR IRA ACCOUNT MAY NOT BE MADE BY TELEPHONE.
CAN I REDEEM ON A SYSTEMATIC BASIS?
If you have an account value of at least $10,000, you may elect to receive
monthly, quarterly or annual payments of not less than $100 each.
- - Select the "Systematic Withdrawal Plan" option on the Account
Application Form.
- - Specify the amount you wish to receive and the frequency of the
payments.
- - You may designate a person other than yourself as the payee.
- - There is no charge for this service.
- - If you select this option, please keep in mind that:
1. It may not be in your best interest to buy additional Class A
shares while participating in a Systematic Withdrawal Plan. This
is because Class A shares have an up-front sales charge.
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<PAGE> 532
2. If you own Class B or Class C shares, you or your designated
payee may receive systematic payments provided the payments are
limited to no more than 10% of your account value annually,
measured from the date the redemption request is received.
3. If you are age 70 1/2, you may elect to receive payments to the
extent that the payment represents a minimum required
distribution from an IRA or other qualifying retirement plan.
4. If the amount of the systematic payment exceeds the income earned
by your account since the previous payment under the Systematic
Withdrawal Plan, payments will be made by redeeming some of your
shares. This will reduce the amount of your investment.
ADDITIONAL INFORMATION REGARDING REDEMPTIONS
- - All redemptions will be for cash.
- - If you redeem shares for which you paid by check, and The One Group has
not yet received payment on the check, The One Group will delay
forwarding your redemption proceeds for 10 or more days until payment
has been collected from your bank.
- - Because of the high cost of handling small investments, The One Group
charges a sub-minimum account fee. Accounts under $1,000 that are not
participating in a Systematic Investment Plan will be assessed an annual
fee of $10.00. The sub-minimum account fee will not apply to IRA
accounts and the accounts of employees of BANC ONE CORPORATION and its
affiliates.
- - The One Group may suspend your ability to redeem when:
1. Trading on the NYSE is restricted.
2. The NYSE is closed (other than weekend and holiday closings).
3. The SEC has permitted a suspension.
4. An emergency exists.
The Statement of Additional Information offers more detail about this
process.
- - You generally will recognize a gain or loss on a redemption for Federal
income tax purposes. You should talk to your tax adviser before making a
redemption.
SHAREHOLDER INFORMATION
VOTING RIGHTS
The Fund does not hold annual shareholder meetings, but may hold special
meetings. The special meetings are held, for example, to elect or remove
Trustees, change the Fund's fundamental investment objective, or approve an
investment advisory contract.
As a Fund shareholder, you have one vote for each share that you own. The Fund,
and each class of shares within the Fund, vote separately on matters relating
solely to the Fund or class, or which affect the Fund or class differently from
other funds of The One Group. However, all shareholders will have equal voting
rights on matters that affect all shareholders equally.
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<PAGE> 533
DIVIDEND POLICIES
DIVIDENDS: The Fund generally declares dividends monthly. Dividends are
distributed on the first Business Day of each month. Capital gains, if any, for
all Funds are distributed at least annually.
The Fund pays dividends and distributions on a per-share basis. This means that
the value of your shares will be reduced by the amount of the payment. If you
purchase shares shortly before the record date for a dividend or the
distribution of capital gains, you will pay the full price for the shares and
receive some portion of the price back as a taxable dividend or distribution.
Dividends payable on Class I shares will be more than those payable on other
classes of shares. This is because Class A, Class B and Class C shares have
higher distribution expenses.
DIVIDEND REINVESTMENT: You automatically will receive all income dividends and
capital gain distributions in additional shares of the same Fund and class,
unless you have elected to take such payment in cash. The price of the shares is
the NAV determined immediately following the dividend record date. Reinvested
dividends and distributions receive the same tax treatment as dividends and
distributions paid in cash.
If you want to change the way in which you receive dividends and distributions,
you must write to State Street Bank & Trust Company at P.O. Box 8528, Boston, MA
02266-8528, at least 15 days prior to the distribution. The change is effective
upon receipt by State Street.
SPECIAL DIVIDEND RULES FOR CLASS B SHARES: Class B shares received as dividends
and capital gains distributions will be accounted for separately. Each time any
Class B shares (other than those in the sub-account) convert to Class A shares,
a percentage of the Class B shares in the sub-account will also convert to Class
A shares. (See "Conversion Feature")
TAX TREATMENT OF THE FUND
TAX STATUS OF THE FUND: The Fund intends to qualify as a "regulated investment
company" for Federal income tax purposes. If the Funds qualify, as they have in
the past, they will pay no federal income tax on the earnings they distribute to
shareholders.
TAX TREATMENT OF SHAREHOLDERS
TAXATION OF SHAREHOLDER TRANSACTIONS: A sale, exchange, or redemption of shares
of the Fund generally will produce either a taxable gain or a loss. You are
responsible for any tax liabilities generated by your transactions.
TAXATION OF DISTRIBUTIONS: Dividends you receive from the Fund, whether
reinvested or received in cash, will be taxable to you. Dividends from the
Fund's net investment income, including for this purpose net short-term capital
gain, will be taxable as ordinary income and dividends from the Fund's long-term
capital gains will be taxable to you as such, regardless of how long you have
held the shares.
Dividends paid in January, but declared in October, November or December of the
previous year, will be considered to have been paid the previous December.
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<PAGE> 534
TAXATION OF RETIREMENT PLANS: Distributions by the Fund to qualified retirement
plans will not be taxable. However, if shares are held by a plan that ceases to
qualify for tax-exempt treatment or by an individual who has received shares as
a distribution from a retirement plan, the distributions will be taxable to the
plan or individual as described in "Taxation of Distributions." If you are
considering purchasing shares with qualified retirement plan assets, you should
consult your tax advisor for a more complete explanation of the Federal, state,
local and (if applicable) foreign tax consequences of making such an investment.
TAX INFORMATION: The Form 1099 that is mailed to you every January details your
dividends and their federal tax category. Even though the Fund provides you with
this information, you are responsible for verifying your tax liability with your
tax professional. For additional tax information see the Statement of Additional
Information. Please note that this tax discussion is general in nature; no
attempt has been made to present a complete explanation of the Federal, state,
local or foreign tax treatment of the Funds or their shareholders.
SHAREHOLDER INQUIRIES
If you have any questions or need additional information, please write The One
Group Services Company at 3435 Stelzer Road, Columbus, OH 43219 or call
1-800-480-4111.
BOX: REPORTING: In March and September you will receive a financial report from
The One Group. In addition, The One Group will periodically send you proxy
statements and other reports.
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<PAGE> 535
ORGANIZATION & MANAGEMENT OF THE FUND
THE FUNDS: The Fund is a series of The One Group, an open-end management
investment company. The One Group currently consists of 40 separate Funds. The
Fund described in this prospectus is diversified. Other Funds are described in
separate prospectuses. Each Fund is supervised by the Board of Trustees.
THE BOARD OF TRUSTEES: The Trustees oversee the management and administration of
the Fund. The Trustees are responsible for making major decisions about the
Fund's investment objectives and policies, but delegate the day-to-day
administration of the Fund to the officers of The One Group.
THE ADVISOR: Banc One Investment Advisors makes the day-to-day investment
decisions for the Fund and continuously reviews, supervises and administers the
Fund's investment program. Banc One Investment Advisors has served as investment
advisor to The One Group since 1993. Prior to that time, The One Group was
advised by affiliates of Banc One Investment Advisors. In addition to The One
Group, Banc One Investment Advisors serves as investment advisor to other mutual
funds and individual, corporate, charitable and retirement accounts. As of June
30, 1998, Banc One Investment Advisors, an indirect, wholly-owned subsidiary of
BANC ONE CORPORATION, managed over $59 billion in assets.
No single person is responsible for managing the assets of the Fund. Rather,
investment decisions for the Fund are made by committee. Banc One Investment
Advisors also serves as the advisor to the underlying mutual funds, for which it
receives a fee.
THE DISTRIBUTOR: The One Group Services Company, 3435 Stelzer Road, Columbus,
Ohio 43219, a wholly-owned subsidiary of The BISYS Group, Inc., markets the Fund
and distributes shares through selling brokers, financial institutions,
investment advisors, and other financial representatives.
THE ADMINISTRATOR AND SUB-ADMINISTRATOR: The One Group Services Company also
serves as the Fund's administrator. The One Group Services Company is
responsible for responding to shareholder inquiries and requests for
information, as well as providing regulatory compliance and reporting. For these
services, The One Group Services Company receives an annual fee of .10% of the
Fund's average daily net assets, on the first $500,000,000 in Fund assets. The
fee declines to .075% on net assets between $500,000,000 and $1 billion, and to
.05% on assets over $1 billion. The fee is calculated daily and paid monthly.
Banc One Investment Advisors, the Sub-Administrator provides office space,
equipment, and facilities, as well as legal and regulatory support.
THE TRANSFER AGENT, CUSTODIAN AND SUB-CUSTODIAN: State Street Bank and Trust
Company, P.O. Box 8528, Boston, MA 02266-8528, or your Shareholder Servicing
Agent, if appropriate, handles shareholder recordkeeping and statementing,
distributes dividends, and processes buy and sell requests. As the Fund's
custodian, State Street holds the Fund's assets, settles all portfolio trades
and assists in calculating the Fund's net asset values. Bank One Trust Company,
N.A. serves as sub-custodian in connection with The One Group's securities
lending activities under an agreement with State Street Bank and Trust Company.
Bank One Trust Company, N.A. is paid a fee for this service.
YEAR 2000
Preparing for the Year 2000 is a high priority for The One Group Family of
Mutual Funds. Both The One Group Services Company and Banc One Investment
Advisors have formed dedicated teams to help them successfully achieve Year 2000
compliance. In addition, these teams are responsible for assessing the readiness
of all other service providers to The One Group. Year 2000 remediation efforts
are directed toward both information technology and non-information technology
systems. Non-information technology systems include elevators, photocopy
machines, and facsimile machines, and should have no significant impact on the
delivery of services to The One Group.
Banc One Investment Advisors has identified 49 information technology systems
and interfaces that provide service and support to The One Group. Each system is
assigned a priority rating: high, medium or low. Systems rated "high" are those
which are essential to the operation of The One Group. Each system rated "high"
is scheduled to be Year 2000 compliant by December 31, 1998. All systems will be
tested for compliance throughout 1999.
Many, if not all, of the systems are owned or operated by third party servicers
(for example, The One Group's Custodian). Consequently, remediation efforts must
be made by those servicers. Banc One Investment Advisors and The One Group
Services Company have, and will continue to, monitor the remediation progress of
the service providers. This process involves documentation, on-site visits, and
review of remediation plans and test results. Both Banc One Investment Advisors
and The One Group Services Company have budgeted in excess of $700,000 in fiscal
year 1998 and over $1 million in fiscal year 1998 toward the remediation effort
for all systems and interfaces. Neither The One Group nor its shareholders will
bear any of the direct remediation expenses.
Neither The One Group Services Company nor Banc One Investment Advisors
currently anticipate that the move to Year 2000 will have a material impact on
their ability to continue to provide the Funds with service at current levels.
Likewise, The One Group currently anticipates that the more to Year 2000 will
not have a material impact on its operations.
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<PAGE> 536
Banc One Investment Advisors anticipates that the move to Year 2000 will have a
material impact on its ability to continue to provide the Funds with service at
current levels.
DETAILS ABOUT THE FUND'S INVESTMENT PRACTICES AND POLICIES
INVESTMENT PRACTICES
The following is a brief description of the principal investment policies of the
underlying funds.
THE ONE GROUP(R) PRIME MONEY MARKET FUND
The One Group(R) Prime Money Market Fund seeks current income with liquidity and
stability of principal. The fund intends to comply with the regulations of the
Securities and Exchange Commission 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
fund. Under these regulations, the fund 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 are treated as having a
maturity of 397 days or less.
THE ONE GROUP(R) DISCIPLINED VALUE FUND
The One Group(R) Disciplined Value Fund seeks capital appreciation with the
secondary goal of achieving current income by investing primarily in equity
securities. The fund will invest mainly in equity securities with below-market
average price-to-earnings and price-to-book value ratios. The issuer's soundness
and earnings prospects also will be considered. If Banc One Investment Advisors
determines that a company's fundamentals are declining or that the company's
ability to pay dividends has been impaired, it likely will eliminate the Fund's
holding of the company's stock. The fund normally invests at least 80% of the
value of its total assets in equity securities consisting of common stocks and
debt securities and preferred stocks that are convertible into common stocks.
The fund also may enter into options and futures transactions. The balance of
the fund's assets will be held in cash equivalents.
THE ONE GROUP(R) INTERNATIONAL EQUITY INDEX FUND
The One Group(R) International Equity Index Fund seeks to provide investment
results that correspond to the aggregate price and dividend performance of the
securities in the Gross Domestic Product Weighted Morgan Stanley Capital
International Europe, Australia and Far East Index ("MSCI EAFE GDP Index" or
"EAFE GDP Index").(1) The fund normally will invest at least 65% of the value of
its total assets in foreign equity securities, which are representative of the
Index and secondarily in stock index futures. The Fund's investments will
consist of common stocks (including sponsored and unsponsored American
Depository Receipts) and preferred stocks, securities convertible into common
stocks (only if they are listed on registered exchanges or actively traded in
the over-the-counter market), warrants and depository receipts. No more than 10%
of the fund's net assets will be held in cash or cash equivalents. The fund may
invest up to 10% of its net assets in securities of emerging international
markets. A substantial portion of the fund's assets will be denominated in
foreign currencies.
THE ONE GROUP(R) LARGE COMPANY GROWTH FUND
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<PAGE> 537
The One Group(R) Large Company Growth Fund seeks long-term capital appreciation
and growth of income by investing primarily in equity securities. The fund will
normally invest at least 65%, of the value of its total assets in equity
securities consisting of common stocks, warrants and any rights to purchase
common stocks. To achieve its objective, the Fund will invest primarily in
equity securities of large, well established companies with weighted average
capitalization in excess of the market median capitalization of the Standard &
Poor's 500 Composite Stock Price Index ("S&P 500 Index").(2) The fund may invest
the remainder of its assets in any combination of nonconvertible fixed income
securities, repurchase agreements, options and futures contracts, securities
issued by the U.S. government and its agencies and instrumentalities, and cash
equivalents.
THE ONE GROUP(R) LARGE COMPANY VALUE FUND
The One Group(R) Large Company Value Fund seeks capital appreciation with the
incidental goal of achieving current income by investing primarily in equity
securities. The fund will invest in equity securities of large capitalization
companies that are believed to be selling below their long-term investment
values. The average weighted market capitalization of the companies in which the
fund invests will normally exceed the median market capitalization of the S&P
500 Index. In addition, the fund may invest in stock of companies which have
"breakup" values well in excess of current market values or which have uniquely
undervalued corporate assets. The Fund normally will 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 remainder of the fund's assets will be held in cash equivalents
THE ONE GROUP(R) GROWTH OPPORTUNITIES FUND
The One Group(R) Growth Opportunities Fund seeks growth of capital and,
secondarily, current income by investing primarily in equity securities. The
fund invests in securities that have the potential to produce above-average
earnings growth per share over a one-to-three year period. Typically, the fund
acquires shares of established companies with a history of above-average growth,
as well as those companies expected to enter periods of above-average growth.
Not all the securities purchased by the Fund will pay dividends. The fund also
invests in smaller companies in emerging growth industries. At least 80% of the
value of its total assets will be invested in equity securities consisting of
common stocks and debt securities and preferred stocks that are convertible into
common stocks. The fund also may enter into options and futures transactions.
The remainder of the fund's assets will be held in cash equivalents.
THE ONE GROUP(R) VALUE GROWTH FUND
The One Group(R) Value Growth Fund seeks long-term capital growth and growth of
income with a secondary objective of providing a moderate level of current
income. The fund invests primarily in common stocks, debt securities, preferred
stocks, convertible securities, warrants, and other equity securities of
overlooked or undervalued companies that show the potential for growth of
earnings over time. Although the fund expects to invest in securities that pay a
moderate level of income, it may also invest in non-income producing securities.
The fund normally will 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 cash and cash equivalents.
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<PAGE> 538
(1) "MSCI EAFE GDP Index" is a registered service mark of Morgan Stanley Capital
International, which does not sponsor and is in no way affiliated with the
fund.
(2) "Standard & Poor's 500" is a registered trademark of Standard & Poor's
Corporation, which does not sponsor and is in no way affiliated with the
Fund.
THE ONE GROUP(R) SMALL CAPITALIZATION FUND
The One Group(R) Small Capitalization Fund seeks long-term capital growth
primarily by investing in a portfolio of equity securities of
small-capitalization and emerging growth companies. The fund invests primarily
in a portfolio of common stocks, debt securities, preferred stocks, convertible
securities, warrants and other equity securities of small capitalization
companies. Generally, Banc One Investment Advisors selects a portfolio of
companies with a capitalization equivalent to the median market capitalization
of the S&P Small-Cap 600 Index(3), although the fund may occasionally hold
securities of companies whose market capitalizations are considerably larger if
doing so contributes to the funds investment objective. At least 65% of the
value of the fund's total assets normally will be invested in securities with
the characteristics described above. 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 ONE GROUP(R) INCOME EQUITY FUND
The One Group(R) Income Equity Fund seeks current income through regular payment
of dividends with the secondary goal of achieving capital appreciation by
investing primarily in equity securities. The fund attempts to keep its yield
above the S&P 500 Index by investing 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 also may be purchased. The fund normally invests 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 also may enter into options and futures
transactions. The balance of the fund's assets will be held in cash equivalents.
THE ONE GROUP(R) EQUITY INDEX FUND
The One Group(R) Equity Index Fund seeks investment results that correspond to
the aggregate price and dividend performance of the securities in the S&P 500
Index. The fund normally invests in many of the stocks which comprise the S&P
500 Index and secondarily in stock index futures. Cash reserves will not
normally exceed 10% of the fund's net assets. The Advisor generally selects
stocks for the fund in the order of their weightings in the S&P 500 Index
beginning with the heaviest weighted stocks. The percentage of the fund's assets
to be invested in each stock is approximately the same as the percentage it
represents in the S&P 500 Index.
Details about each underlying fund's investment practices and the risks
associated with those practices, can be found in Appendix B.
INVESTMENT POLICIES
The Fund's investment objective and the investment policies summarized below are
fundamental. This means that they cannot be changed without the consent of a
majority of the outstanding shares of the Fund. The full text of the fundamental
policies can be found in the Statement of Additional Information.
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<PAGE> 539
The Fund may not:
1. Purchase an issuer's securities if as a result more then 5% of its total
assets would be invested in the securities of that issuer or the Fund would own
more than 10% of the outstanding voting securities of that issuer. This does not
include securities issued or guaranteed by the United States, its agencies or
instrumentalities, securities of other registered investment companies and
repurchase agreements involving these securities. In addition, a Fund may not
own more than 10% of the outstanding voting securities of any one issuer. This
restriction applies with respect to 75% of a Fund's total assets.
2. Concentrate its investments in the securities of one or more issuers
conducting their principal business in a particular industry or group of
industries. This does not include obligations issued or guaranteed by the U.S.
government or its agencies and instrumentalities and repurchase agreements
involving such 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.
Additional investment policies can be found in the Statement of Additional
Information.
PORTFOLIO TURNOVER
Portfolio turnover 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 Funds and may result in additional tax consequences to
you. It is estimated that the Fund's portfolio turnover rate will not exceed
15%. To the extent portfolio turnover results in short-term capital gains, such
gains generally will be taxed at ordinary income tax rates.
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<PAGE> 540
(3) "Standard & Poor's Small-Cap 600" is a registered trademark of Standard &
Poor's Corporation, which does not sponsor and is in no way affiliated with
the Fund.
APPENDIX A
DETAILS ABOUT THE UNDERLYING FUNDS' INVESTMENT PRACTICES AND POLICIES
INVESTMENT PRACTICES
The underlying funds invest in a variety of securities and employ a number of
investment techniques. Each security and technique involves certain risks. What
follows is a list of the securities and techniques utilized by the Funds, as
well as the risks inherent in their use. For a more complete discussion, see the
Statement of Additional Information. Following the table is a more complete
discussion of risk.
The One Group(R)Prime Money Market Fund 1
The One Group(R)Disciplined Value Fund 2
The One Group(R)International Equity Index Fund 3
The One Group(R)Large Company Growth Fund 4
The One Group(R)Large Company Value Fund 5
The One Group(R)Growth Opportunities Fund 6
The One Group(R)Value Growth Fund 7
The One Group(R)Small Capitalization Fund 8
The One Group(R)Income Equity Fund 9
The One Group(R)Equity Index Fund 10
<TABLE>
<CAPTION>
Instrument Fund Risk Type
- -----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
U.S. TREASURY OBLIGATIONS: Bills, notes, bonds, STRIPS, and CUBES. 1-10 Market
TREASURY RECEIPTS: TRS, TIGRS, and CATS. 1-10 Market
U.S. GOVERNMENT AGENCY SECURITIES: Securities issued by agencies and instrumentalities of the 1-10 Market
U.S. Government. These include Ginnie Mae, Fannie Mae, and Freddie Mac. Credit
CERTIFICATES OF DEPOSIT: Negotiable instruments with a stated maturity. 1-10 Market
Credit
Liquidity
TIME DEPOSITS: Non-negotiable receipts issued by a bank in exchange for the deposit of funds. 1-10 Liquidity
Credit
Market
COMMON STOCK: Shares of ownership of a company. 2-10 Market
</TABLE>
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<PAGE> 541
<TABLE>
<S> <C> <C>
REPURCHASE AGREEMENTS: The purchase of a security and the simultaneous commitment to return 1-10 Credit
the security to the seller at an agreed upon price on an agreed upon date. This is treated as a loan. Market
Liquidity
REVERSE REPURCHASE AGREEMENT: The sale of a security and the simultaneous commitment to 1-10 Market
buy the security back at an agreed upon price on an agreed upon date. This is treated as a Leverage
borrowing by a Fund.
SECURITIES LENDING: The lending of up to 33 1/3% of the Funds's total assets. 1-10 Credit
In return the Fund will receive cash, other securities, and/or letters of credit as collateral. Market
Leverage
WHEN-ISSUED SECURITIES AND FORWARD COMMITMENTS: Purchase or contract to purchase securities 1-10 Market
at a fixed price for delivery at a future date. Leverage
Liquidity
INVESTMENT COMPANY SECURITIES: Shares of other mutual funds, including money
market funds 1-10 Market of The One Group and shares of other investment
companies for which Banc One Investment Advisors serves as investment advisor or
administrator. Banc One Investment Advisors will waive certain fees when
investing in funds for which it serves as investment advisor.
CONVERTIBLE SECURITIES: Bonds or preferred stock that convert to common stock. 2-10 Market
Credit
</TABLE>
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<PAGE> 542
<TABLE>
<S> <C> <C>
CALL AND PUT OPTIONS: A call option gives the buyer the right to buy, and obligates the seller 2-10 Management
of the option to sell, a security at a specified price. A put option gives the buyer the right to sell, Liquidity
and obligates the seller of the option to buy, a security at a specified price. The Funds will sell only Credit
covered call and secured put options. Market
Leverage
FUTURES AND RELATED OPTIONS: A contract providing for the future sale and purchase of a specified 2-10 Management
amount of a specified security, class of securities, or an index at a specified time in the future and Market
at a specified price. Credit
Liquidity
Leverage
REAL ESTATE INVESTMENT TRUSTS ("REITS"): Pooled investment vehicles which invest primarily 2-10 Liquidity
in income producing real estate or real estate related loans or interest. Management
Market
Pre-payment
Tax
Regulatory
BANKERS' ACCEPTANCES: Bills of exchange or time drafts drawn on and accepted by a 1,2,4-10 Credit
commercial bank. Maturities are generally six months or less. Liquidity
Market
COMMERCIAL PAPER: Secured and unsecured short-term promissory notes issued by corporations 1,2,4-10 Credit
and other entities. Maturities generally vary from a few days to nine months. Liquidity
Market
FOREIGN SECURITIES: Stocks issued by foreign companies, as well as commercial paper of foreign 1-10 Market
issuers and obligations of foreign banks, overseas branches of U.S. banks and supranational Political
entities. Includes American Depository Receipts. Liquidity
Foreign
Investment
RESTRICTED SECURITIES: Securities not registered under the Securities Act of 1933, such as 1-10 Liquidity
privately placed commercial paper and Rule 144A securities. Market
VARIABLE AND FLOATING RATE NOTES: Obligations with interest rates which are reset 1,2,4-10 Market
daily, weekly, quarterly or some other period and which may be payable to the Fund on demand. Credit
Liquidity
WARRANTS: Securities, typically issued with preferred stock or bonds, that give the holder the right 3,4,5,7,8 Market
to buy a proportionate amount of common stock at a specified price. Credit
PREFERRED STOCK: A class of stock that generally pays a dividend at a specified rate and has preference 2-10 Market
over common stock in the payment of dividends and in liquidation.
MORTGAGE-BACKED SECURITIES: Debt obligations secured by real estate loans and pools of loans. 1 Pre-payment
These include collateralized mortgage obligations ("CMOs"), Real Estate Investment Conduits Market
("REMICs"), and Stripped Mortgage-Backed Securities ("SMBS"). Credit
</TABLE>
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<PAGE> 543
<TABLE>
<S> <C> <C>
Regulatory
DEMAND FEATURES: Securities that are subject to puts and standby commitments to purchase 1 Market
the securities at a fixed price (usually with accrued interest) within a fixed period of time Liquidity
following demand by a Fund. Management
ASSET-BACKED SECURITIES: Securities secured by company receivables, home equity loans, truck 1 Pre-payment
and auto loans, leases, credit card receivables and other securities backed by other types of Market
receivable or other assets. Credit
SWAPS, CAPS AND FLOORS: A Fund may enter into these transactions to manage its exposure 2-10 Market
to changing interest rates and other factors. Swaps involve an exchange of obligations by two Management
parties. Caps and floors entitle a purchaser to a principal amount from the seller of the cap Credit
or floor to the extent that a specified index exceeds or falls below a predetermined interest Liquidity
rate or amount.
NEW FINANCIAL PRODUCTS: New options and futures contracts and other financial products 2-10 Management
continue to be developed and the Funds may invest in such options, contracts and products. Credit
Market
Liquidity
OBLIGATIONS OF SUPRANATIONAL AGENCIES: Obligations of supranational agencies who are 3 Credit
chartered to promote economic development and are supported by various governments and Foreign
governmental agencies. Investment
CURRENCY FUTURES AND RELATED OPTIONS: The Fund may engage in transactions in financial 3 Management
futures and related options, which are generally described above. The Fund will enter into Liquidity
these transactions in foreign currencies and for hedging purposes only. Credit
Market
Political
Leverage
Foreign
Investment
FORWARD FOREIGN EXCHANGE TRANSACTIONS: Contractual agreement to purchase or sell one 3 Management
specified currency for another currency at a specified future date and price. The Fund will enter Liquidity
into forward foreign exchange transactions for hedging purposes only. Credit
Market
Political
Leverage
Foreign
Investment
SHORT-TERM FUNDING AGREEMENTS: Investments in short-term funding agreements issued 1 Credit
by banks and highly rated U.S. insurance companies such as GIC's and BIC's. Liquidity
Market
PARTICIPATION INTERESTS: Investments in municipal securities, including municipal leases, from 1 Credit
financial institutions such as commercial and investment banks, savings and loan associations and Market
insurance companies. These interest may take the form of participations, beneficial interests in a trusts, Tax
</TABLE>
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<PAGE> 544
<TABLE>
<S> <C> <C>
partnership interests or any other form of indirect ownership that allows the
Funds to treat the income from the investment as exempt from Federal Income Tax.
Standard & Poor's Depository Receipts ("SPDRs"): SPDRs represent 8,10 Market
ownership in a long-term unit investment trust that holds a portfolio
common stocks designed to track the price performance and dividend
yield of the S&P 500 Index. A SPDR entitles a holder to receive proportionate
quarterly cash distributions corresponding to the dividends that accrue to the
S&P 500 Index stocks in the underlying portfolio, less trust expenses.
Municipal Securities: Securities issued by a state or political 1 Market
subdivision to obtain funds for various public purposes. Credit
Municipal securities include private activity bonds and Political
industrial development bonds, as well as General Obligation Tax
Notes, Tax Anticipation Notes, Bond Anticipation Notes, Revenue Anticipation
Notes, Project Notes, other short-term tax-exempt obligations, municipal leases,
and obligations of municipal housing authorities and single family revenue
bonds.
</TABLE>
INVESTMENT RISKS
Below is a more complete discussion of the types of risks inherent in the
securities and investment techniques listed above. Because of these risks, the
value of the securities held by the underlying funds may fluctuate, as will
value of the Fund's investments in the underlying funds. Ultimately, the value
of your investment will be affected.
Certain investments are more susceptible to these risks than others.
- - CREDIT RISK. The risk that the issuer of a security, or the counterparty to
a contract, will default or otherwise become unable to honor a financial
obligation. Credit risk is generally higher for non-investment grade
securities. The price of a security can be adversely affected prior to
actual default as its credit status deteriorates and the probability of
default rises.
- - LEVERAGE RISK. Associated with securities or practices that multiply small
index or market movements into large changes in value. Leverage is often
associated with investments in derivatives, but also may be embedded
directly in the characteristics of other securities.
- Hedged. When a derivative (a security whose value is based on another
security or index) is used as a hedge against an opposite position that
the fund also holds, any loss generated by the derivative should be
substantially offset by gains on the hedged investment, and vice versa.
While hedging can reduce or eliminate losses, it can also reduce or
eliminate gains. Hedges are sometimes subject to imperfect matching
between the derivative and underlying security, and there can be no
assurance that a Fund's hedging transactions will be effective.
- Speculative. To the extent that a derivative is not used as a hedge, the
fund is directly exposed to the risks of that derivative. Gains or losses
from speculative positions in a derivative may be substantially greater
than the derivative's original cost.
- - LIQUIDITY RISK. The risk that certain securities may be difficult or
impossible to sell at the time and the price that normally prevails in the
market. The seller may have to lower the price, sell other securities
instead or
- 34 -
<PAGE> 545
forego an investment opportunity, any of which could have a negative effect
on fund management or performance. This includes the risk of missing out on
an investment opportunity because the assets necessary to take advantage of
it are tied up in less advantageous investments.
- - MANAGEMENT RISK. The risk that a strategy used by a fund's management may
fail to produce the intended result. This includes the risk that changes in
the value of a hedging instrument will not match those of the asset being
hedged. Incomplete matching can result in unanticipated risks.
- - MARKET RISK. The risk that the market value of a security may move up and
down, sometimes rapidly and unpredictably. These fluctuations may cause a
security to be worth less than the price originally paid for it, or less
than it was worth at an earlier time. Market risk may affect a single
issuer, industry, sector of the economy or the market as a whole. There is
also the risk that the current interest rate may not accurately reflect
existing market rates. For fixed income securities, market risk is largely,
but not exclusively, influenced by changes in interest rates. A rise in
interest rates typically causes a fall in values, while a fall in rates
typically causes a rise in values. Finally, key information about a security
or market may be inaccurate or unavailable. This is particularly relevant to
investments in foreign securities.
- - POLITICAL RISK. The risk of losses attributable to unfavorable governmental
or political actions, seizures of foreign deposits, changes in tax or trade
statutes, and governmental collapse and war.
- - FOREIGN INVESTMENT RISK. The risk associated with higher transaction costs,
delayed settlements, currency controls and adverse economic developments.
This also includes the risk that fluctuations in the exchange rates between
the U.S. dollar and foreign currencies may negatively affect an investment.
Adverse changes in exchange rates may erode or reverse any gains produced by
foreign currency denominated investments and may widen any losses. Exchange
rate volatility also may affect the ability of an issuer to repay U.S.
dollar denominated debt, thereby increasing credit risk.
- - PRE-PAYMENT RISK. The risk that the principal repayment of a security will
occur at an unexpected time, especially that the repayment of a mortgage or
asset-backed security occurs either significantly sooner or later than
expected. Changes in pre-payment rates can result in greater price and yield
volatility. Pre-payments generally accelerate when interest rates decline.
When mortgage and other obligations are pre-paid, a Fund may have to
reinvest in securities with a lower yield. Further, with early prepayment, a
Fund may fail to recover any premium paid, resulting in an unexpected
capital loss.
- - TAX RISK. The risk that the issuer of the securities will fail to comply
with certain requirements of the Internal Revenue Code, which would cause
adverse tax consequences.
- - REGULATORY RISK. The risk associated with Federal and state laws which may
restrict the remedies that a mortgage lender has when a borrower defaults on
mortgage loans. These laws include restrictions on foreclosures, redemption
rights after foreclosure, Federal and state bankruptcy and debtor relief
laws, restrictions on "due on sale" clauses, and state usury laws.
- 35 -
<PAGE> 546
APPENDIX B
DESCRIPTION OF RATINGS
The following is a summary of published ratings by major credit rating agencies.
Credit ratings evaluate only the safety of principal and interest payments, not
the market value risk of lower quality securities. Credit rating agencies may
fail to change credit ratings to reflect subsequent events on a timely basis.
Although Banc One Investment Advisors considers security ratings when making
investment decisions, it also performs its own investment analysis and does not
rely solely on the ratings assigned by credit agencies.
Unrated securities will be treated as non-investment grade securities unless
Banc One Investment Advisors determines that such securities are the equivalent
of investment grade securities. Securities that have received different ratings
from more than one agency are considered investment grade if at least one agency
has rated the security investment grade.
DESCRIPTION OF COMMERCIAL PAPER RATINGS
Duff & Phelps Credit Rating Co. ("Duff")
- ----------------------------------------
D-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 obligations.
D-1 Very high certainty of timely payment. Liquidity factors are
excellent and supported by good fundamental protection factors.
Risk factors are minor.
D-1- High certainty of timely payment. Liquidity factors are strong
and supported by good fundamental protection factors. Risk
factors are very small.
D-2 Good certainty of timely payment. Liquidity facts and company
fundamentals are sound. Although ongoing funding needs may
enlarge total financing requirements, access to capital markets
is good.
Risk factors are small.
D-3 Satisfactory liquidity and other protection factors qualify
issues as to investment grade. Risk factors are larger and
subject to more variation. Nevertheless, timely payment is
expected.
D-4 Speculative investment characteristics. Liquidity is not
sufficient to insure against disruption in debt service.
Operating factors and market access may be subject to a high
degree of variation.
D-5 Issuer failed to meet scheduled principal and/interest payments.
Standard & Poor's Corporation ("S&P")
- -------------------------------------
A-1 Highest category of commercial paper. Capacity to meet financial
commitment is strong. Obligations designated with a plus sign (+)
indicate that capacity to meet financial commitment is extremely
strong.
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<PAGE> 547
A-2 Issues somewhat more susceptible to adverse effects of changes in
circumstances and economic conditions than obligations in higher
rating categories. However, the capacity to meet financial
commitments is satisfactory.
A-3 Exhibits adequate protection parameters. However, adverse
economic conditions or changing circumstances are more likely to
lead to a weakened capacity of the obligor to meet its financial
commitment on the obligation.
B Regarded as having significant speculative characteristics. The
obligor currently has the capacity to meet its financial
commitment on the obligation; however, it faces major ongoing
uncertainties which could lead to the obligor's inadequate
capacity to meet its financial commitment on the obligation.
C Currently vulnerable to nonpayment and is dependent upon
favorable business, financial, and economic conditions for the
obligor to meet its financial commitment on the obligation.
D In payment default. The D rating category is used when payments
on an obligation are not made on the date due even if the
applicable grace period has not expired, unless Standard & Poor's
believes that such payments will be made during such grace
period. The D rating also will be used upon the filing of a
bankruptcy petition or the taking of a similar action if payments
on an obligation are jeopardized.
Fitch's IBCA Limited ("Fitch")
A1 Highest capacity for timely repayment. Those issues rated A1+
possess a particularly strong credit feature.
A2 Satisfactory capacity for timely repayment although such capacity
may be susceptible to adverse changes in business, economic or
financial conditions.
A3 Adequate capacity for timely repayment, but more susceptible to
adverse changes business, economic or financial conditions than
for obligations in higher categories.
B Capacity for timely repayment is susceptible to adverse changes
in business, economic or financial conditions.
C High risk of default or which are currently in default.
Moody's Investors Service ("Moody's")
Prime-1 Superior ability for repayment.
Prime-2 Strong ability for repayment.
Prime-3 Acceptable ability for repayment. The effect of industry
characteristics and market compositions may be more pronounced.
Variability in earnings and profitability may result in changes
in the
- 37 -
<PAGE> 548
level of debt protection measurements and may require relatively
high financial leverage. Adequate alternate liquidity is
maintained.
Not Prime Does not fall within any of the Prime rating categories.
DESCRIPTION OF BANK RATINGS
Moody's
These ratings represent Moody's opinion of a bank's intrinsic safety and
soundness.
A These banks possess exceptional intrinsic financial strength. Typically
they will be major financial institutions with highly valuable and
defensible business franchises, strong financial fundamentals, and a
very attractive and stable operating environment.
B These banks possess strong intrinsic financial strength. Typically, they
will be important institutions with valuable and defensible business
franchises, good financial fundamentals, and an attractive and stable
operating environment.
C These banks possess good intrinsic financial strength. Typically, they
will be institutions with valuable and defensible business franchises.
These banks will demonstrate either acceptable financial fundamentals
within a stable operating environment, or better than average financial
fundamentals within an unstable operating environment.
D These banks possess adequate financial strength, but may be limited by
one or more of the following factors: a vulnerable or developing
business franchise; weak financial fundamentals; or an unstable
operating environment.
E These banks possess very weak intrinsic financial strength, require
periodic outside support or suggest an eventual need for outside
assistance. Such institutions may be limited by one or more of the
following factors: a business franchise of questionable value; financial
fundamentals that are seriously deficient in one or more respects; or a
highly unstable operating environment.
DESCRIPTION OF TAXABLE BOND RATINGS
S&P
S&P's credit rating is a current opinion of an obligor's overall financial
capacity (its creditworthiness) to pay its financial obligation.
AAA The highest rating assigned by S&P. The obligor's capacity to meet its
financial commitment on the obligation is extremely strong.
AA The obligor's capacity to meet its financial commitments on the
obligation is very strong.
A The obligation is somewhat more susceptible to the adverse effects of
changes in circumstances and economic conditions than obligations in
higher rated categories. However, the obligor's capacity to meet its
financial commitment on the obligation is still strong.
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<PAGE> 549
BBB Exhibits adequate protection parameters. However, adverse economic
conditions or changing circumstances are more likely to lead to a
weakened capacity of the obligor to meet its financial commitment on the
obligation.
Obligations rated BB, B, CCC, CC, and C are regarded as having significant
speculative characteristics. BB indicates the least degree of speculation and C
the highest. While such obligations will likely have some quality and protective
characteristics, these may be outweighed by large uncertainties or major
exposures to adverse conditions.
BB Less vulnerable to nonpayment than other speculative issues. However,
such issues face major ongoing uncertainties or exposure to adverse
business, financial, or economic conditions which could lead to the
obligor's inadequate capacity to meet its financial commitment on
the obligation.
B More vulnerable to nonpayment than obligations rated BB, but the obligor
currently has the capacity to meet its financial commitment on the
obligation. Adverse business, financial, or economic conditions will
likely impair the obligor's capacity or willingness to meet its
financial commitment on the obligation.
CCC Currently vulnerable to nonpayment, and dependent upon favorable
business, financial, and economic conditions for the obligor to meet its
financial commitment on the obligation. In the event of adverse
business, financial, or economic conditions, the obligor is not likely
to have the capacity to meet its financial commitment on the obligation.
CC Currently highly vulnerable to nonpayment.
C Used to cover a situation where a bankruptcy petition has been filed or
similar action has been taken, but payments on this obligation are being
continued.
D In payment default. Used when payments on an obligation are not made on
the date due even if the applicable grace period has not expired, unless
Standard & Poor's believes that such payments will be made during such
grace period. Also used upon the filing of a bankruptcy petition or the
taking of a similar action if payments on an obligation are jeopardized.
Moody's
Investment Grade
Aaa 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 an exceptionally stable, margin and principal is secure.
Aa High quality by all standards. Margins of protection may not be as large
as in Aaa securities, fluctuation of protective elements may be greater,
or there may be other elements present that make the long-term risks
appear somewhat larger than in Aaa securities.
A These bonds 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.
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Baa These bonds are considered 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.
Non-Investment Grade
Ba These bonds have speculative elements; their future cannot be considered
as well assured. The protection of interest and principal payments may
be very moderate and thereby not well safeguarded during good and bad
times over the future.
B These bonds lack the characteristics of a desirable investment (i.e.,
potentially low assurance of timely interest and principal payments or
maintenance of other contract terms over any long period of time may be
small).
Caa Bonds in this category have poor standing and may be in default. These
bonds carry an element of danger with respect to principal and interest
payments.
Ca Speculative to a high degree and could be in default or have other
marked shortcomings. C is the lowest rating.
Fitch
Investment Grade
AAA Highest rating category. The obligor's capacity for timely repayment of
principal and interest is extremely strong.
AA The obligor's capacity for timely repayment is very strong.
A Bonds and preferred stock considered to be investment grade and of high
credit quality. The obligor's ability for timely repayment is strong.
However, adverse changes in business, economic, or financial conditions
are more likely to affect the capacity for timely repayment than
obligations in higher rated categories.
BBB The obligor's capacity for timely repayment of principal and interest is
adequate. However, adverse changes in business, economic or financial
conditions and circumstances, are more likely to affect the capacity for
timely repayment than for obligations in higher rated categories.
B The Obligor's capacity for timely repayment of principal and interest is
uncertain. Timely repayment of principal and interest is not
sufficiently protected against adverse changes in business, economic or
financial conditions and these obligations are far more speculative than
those in higher rated categories.
CCC Obligations for which there is a current perceived possibility of
default. Timely repayment of principal and interest is dependent on
favorable business, economic, or financial conditions and these
obligations are far more speculative than those in higher rated
categories.
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<PAGE> 551
CC Obligations which are highly speculative or which have a high risk of
default.
C Obligations which are currently in default.
DESCRIPTION OF INSURANCE RATINGS
Moody's
- -------
These ratings represent Moody's opinions of the ability of insurance companies
to pay punctually senior policyholder claims and obligations.
Aaa Insurance companies rated in this category offer exceptional financial
security. While the financial strength of these companies is likely to
change, such changes as can be visualized are most unlikely to impair
their fundamentally strong position.
Aa These insurance companies offer excellent financial security. Together
with the Aaa group, they constitute what are generally known as high
grade companies. They are rated lower than Aaa companies because
long-term risks appear somewhat larger.
A Insurance companies rated in this category offer good financial
security. However, elements may be present which suggest a
susceptibility to impairment sometime in the future.
Baa Insurance companies rated in this category offer adequate financial
security. However, certain protective elements may be lacking or may be
characteristically unreliable over any great length of time.
Ba Insurance companies rated in this category offer questionable financial
security. Often the ability of these companies to meet policyholder
obligations may be very moderate and thereby not well safeguarded int he
future.
B Insurance companies rated in this company offer poor financial security.
Assurance of punctual payment of policyholder obligations over any long
period of time is small.
Caa Insurance companies rated in this category offer very poor financial
security. They may be in default on their policyholder obligations or
there may be present elements of danger with respect to punctual payment
of policyholder obligations and claims.
Ca Insurance companies rated in this category offer extremely poor
financial security. Such companies are often in default on their
policyholder obligations or have other marked shortcomings.
C Insurance companies rated in this category are the lowest rated class of
insurance company and can be regarded as having extremely poor prospects
of ever offering financial security.
S & P
An insurer rated 'BBB' or higher is regarded as having financial security
characteristics that outweigh any vulnerabilities, and is highly likely to have
the ability to meet financial commitments.
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<PAGE> 552
AAA EXTREMELY STRONG financial security characteristics. 'AAA' is the
highest Insurer Financial Strength Rating assigned by Standard & Poor's.
AA VERY STRONG financial security characteristics, differing only slightly
from those rated higher.
A STRONG financial security characteristics, but Is somewhat more likely
to be affected by adverse business conditions than are insurers with
higher ratings.
BBB GOOD financial security characteristics, but is more likely to be
affected by adverse business conditions than are higher rated insurers.
An insurer rated 'BB' or lower is regarded as having vulnerable characteristics
that may outweigh its strength. 'BB' indicates the least degree of vulnerability
within the range; 'CC' the highest.
BB MARGINAL financial security characteristics. Positive attributes exist,
but adverse business conditions could lead to insufficient ability to
meet financial commitments.
B WEAK financial security characteristics. Adverse business conditions
will likely impair its ability to meet financial commitments.
CCC VERY WEAK financial security characteristics, and is dependent on
favorable business conditions to meet financial commitments.
CC EXTREMELY WEAK financial security characteristics and is likely not to
meet some of its financial commitments.
R An insurer rated 'R' has experienced a REGULATORY ACTION regarding
solvency. The rating does not apply to insurers subject only to
nonfinancial actions such as market conduct violations.
NR NOT RATED, which implies no opinion about the insurer's financial
security.
Plus (+) or minus (-)
Following ratings from 'AA' to 'CCC' show relative standing within the major
rating categories.
DESCRIPTION OF MUNICIPAL NOTE RATINGS
Moody's
MIG1 & VMIG1 Short-term municipal securities rated MIG1
or VMIG1 are of the best quality. They have strong
protection from established cash flows, superior
liquidity support or demonstrated broad-based
access to the market for refinancing.
MIG2 & VMIG2 These Short-term municipal securities
rated are of high quality. Margins of protection
are ample although not so large as in the
preceding group.
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<PAGE> 553
MIG3 & VMIG3 Favorable quality. All security elements are
accounted for, but the undeniable strength of the preceding
grades is lacking. Liquidity and cash flow protection may be
narrow and marketing access for refinancing is likely to be
less well established.
MIG4 & VMIG4 This denotes adequate quality protection commonly regarded
as required of an investment security is present and
although not distinctly or predominantly speculative, there
is a specific risk.
SG This denotes speculative quality. Our instruments in this
category each margins of protection.
S&P
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.
SP-1 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.
SP-3 Speculative capacity to pay principal and interest.
Description of Preferred Stock Ratings
Moody's
aaa Top-quality preferred stock. This rating indicates good asset protection
and the least risk of dividend impairment within the universe of
preferred stocks.
aa High-grade preferred stock. This rating indicates that there is a
reasonable assurance the earnings and asset protection will remain
relatively well maintained in the foreseeable future.
a Upper-medium grade preferred stock. While risks are judged to be
somewhat greater than in the "aaa" and "aa" classification, earnings and
asset protection are, nevertheless, expected to be maintained at
adequate levels.
baa Medium-grade preferred stock, neither highly protected nor poorly
secured. Earnings and asset protection appear adequate at present but
may be questionable over any great length of time.
ba Considered to have speculative elements and its future cannot be
considered well assured. Earnings and asset protection may be very
moderate and not well safeguarded during adverse periods. Uncertainty of
position characterizes preferred stocks in this class.
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<PAGE> 554
b Lacks the characteristics of a desirable investment. Assurance of
dividend payments and maintenance of other terms of the issue over any
long period of time may be small.
caa Likely to be in arrears on dividend payments. This rating designation
does not purport to indicate the future status of payments.
ca Speculative in a high degree and is likely to be in arrears on dividends
with little likelihood of eventual payments.
c Lowest rated class of preferred or preference stock. Issues so rated can
thus be regarded as having extremely poor prospects of ever attaining
any real investment standing.
Note: Moody's applies numerical modifiers 1, 2, and 3 in each rating
classification; 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.
S&P
- ---
S&P's preferred stock rating is an assessment of the capacity and willingness of
an issuer to pay preferred stock dividends and any applicable sinking fund
obligations.
AAA Highest rating. This rating indicates an extremely strong capacity to
pay the preferred stock obligations.
AA High-quality, fixed-income security. The capacity to pay preferred stock
obligations is very strong, although not as overwhelming as for issues
rated "AAA."
A Backed by a sound capacity to pay the preferred stock obligations,
although it is somewhat more susceptible to the adverse effects of
changes in circumstances and economic conditions.
BBB Backed by an adequate capacity to pay the preferred stock obligations.
Whereas the issuer normally exhibits adequate protection parameters,
adverse economic conditions or changing circumstances are more likely to
lead to a weakened capacity to make payments for a preferred stock in
this category than for issues in the "A" category.
BB, B
CCC Regarded, on balance, as predominantly speculative with respect to the
issuer's capacity to pay preferred stock obligations. BB indicates the
lowest degree of speculation and CCC the highest. While such issues will
likely have some quality and protective characteristics, these are
outweighed by large uncertainties or major risk exposures to adverse
conditions.
CC In arrears on dividends or sinking fund payments, but that is currently
paying.
C Nonpaying issue.
D Nonpaying issue with the issuer in default on debt instruments.
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<PAGE> 555
N.R. No rating has been requested, insufficient information on which to base
a rating, or Standard & Poor's does not rate a particular type of
obligation as a matter of policy.
Plus (+) or minus (-)
To provide more detailed indications of preferred stock quality, ratings from AA
to CCC may be modified by the addition of a plus or minus sign to show relative
standing within the major rating categories.
SHORT-TERM DEBT RATINGS
Thompson Bank Watch, Inc. ("TBW") ratings apply only to the unsecured commercial
paper and other senior short-term and deposit obligations of entities to which
the ratings have been assigned. The TBW Short-Term ratings specifically assess
the likelihood of an untimely payment of principal and interest.
TBW-1 Very high degree of likelihood that principal and interest will be paid
on a timely basis.
TBW-2 While degree of safety regarding timely repayment of principal and
interest is strong, the relative degree is not as high as for issues
rated TBW-1.
TBW-3 Lowest investment grade category. While more susceptible to adverse
developments than obligations with higher ratings, capacity to service
principal and interest in a timely fashion is considered adequate.
TBW-4 Non-investment grade and, therefore, speculative.
DESCRIPTION OF MUNICIPAL BOND RATINGS
(INCLUDING FOREIGN, MORTGAGE AND ASSET-BACKED SECURITIES)
S&P
INVESTMENT GRADE
AAA The highest rating. The rating indicates an extremely strong
capacity to meet its financial commitment.
AA Differs from AAA issues only in a small degree. The obligor's
capacity to meet its financial commitment is very strong.
A These bonds are somewhat more susceptible to the adverse effects
of changes in circumstances and economic conditions than debt in
higher rated categories. However, capacity to meet its financial
commitment on the obligation is still strong.
BBB Exhibits adequate protection parameters. However, adverse
economic conditions or changing circumstances are more likely to
lead to a weakened capacity to meet its financial commitment on
the obligations.
SPECULATIVE GRADE
- 45 -
<PAGE> 556
BB Less vulnerable to non-payment than other speculative issues.
However, these bonds face major ongoing uncertainties or exposure
to adverse business, financial or economic conditions which could
lead to inadequate capacity to meet financial commitment on the
obligations.
B More vulnerable to non-payment than obligations rated BB, but
currently has the capacity to meet its financial commitment on
the obligation. Adverse business, financial or economic
conditions will likely impair capacity or willingness to meet its
financial commitment on the obligation.
CCC Currently vulnerable to non-payment, and is dependent upon
favorable business, financial, and economic conditions to meet
its financial commitment on the obligation. In the event of
adverse business, financial, or economic conditions, they are not
likely to have the capacity to meet its financial commitment on
the obligation.
CC Currently highly vulnerable to non-payment.
C This rating may be used to cover a situation where a bankruptcy
petition has been filed, or similar action has been taken, but
payments on this obligation are being continued.
D Bonds in payment default.
Ratings from AA to CCC may be modified by a plus (+) or minus (-) to show
relative standing within the major rating categories.
MOODY'S
INVESTMENT GRADE
Aaa 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 an exceptionally stable, margin and
principal is secure.
Aa High quality by all standards. Margins of protection may not be
as large as in Aaa securities, fluctuation of protective elements
may be greater, or there may be other elements present that make
the long-term risks appear somewhat larger than in Aaa
securities.
A These bonds possess many favorable investment attributes and are
to be considered as upper-medium grade obligations. Factors
giving security to principal and interest are considered
adequate, but elements may be present which suggest a
susceptibility to impairment sometime in the future.
Baa These bonds are considered 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.
NON-INVESTMENT GRADE
- 46 -
<PAGE> 557
Ba These bonds have speculative elements; their future cannot be
considered as well assured. The protection of interest and
principal payments may be very moderate and thereby not well
safeguarded during good and bad times over the future.
B These bonds lack the characteristics of a desirable investment
(i.e., potentially low assurance of timely interest and principal
payments or maintenance of other contract terms over any long
period of time may be small).
Caa Bonds in this category have poor standing and may be in default.
These bonds carry an element of danger with respect to principal
and interest payments.
Ca Speculative to a high degree and could be in default or have
other marked shortcomings. Ca is the lowest rating.
SHORT-TERM DEBT RATINGS
Thompson Bank Watch, Inc. ("TBW") assigns ratings to specific debt instruments
with original maturities of one year or less. The TBW Short-Term ratings
specifically assess the likelihood of an untimely payment of principal and
interest.
TBW-1 Very high degree of likelihood that principal and interest
will be paid on a timely basis.
TBW-2 While degree of safety regarding timely repayment of
principal and interest is strong, the relative degree is not
as high as for issues rated TBW-1.
TBW-3 Lowest investment grade category. While more susceptible to
adverse developments than obligations with higher ratings,
capacity to service principal and interest in a timely
fashion is considered adequate.
TBW-4 Non-investment grade and, therefore, speculative.
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Investment Adviser and Sub-Administrator
Banc One Investment Advisors Corporation
1111 Polaris Parkway
P.O. Box 710211
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 8528
Boston, MA 02266-8528
Legal Counsel
Ropes & Gray
One Franklin Square
1301 K Street, N.W.
Suite 800 East
Washington, D.C. 20005
PricewaterhouseCoopers LLP
Coopers & Lybrand L.L.P.
100 East Broad Street
Columbus, OH 43215
The Statement of Additional Information contains more detailed information about
the Funds. The current Statement of Additional Information has been filed with
the Securities and Exchange Commission and is available without charge by
calling 1-800-480-4111 or by writing to The One Group Services Company at 3435
Stelzer Road, Columbus, Ohio 43219. The Statement of Additional Information is
incorporated into this prospectus by reference. The SEC maintains a Web site
(www.sec.gov) that contains the Statement of Additional Information, materials
incorporated by reference and other information regarding The One Group(R).
TOG-F-107
- 51 -
<PAGE> 562
THE ONE GROUP(R)
FAMILY OF MUTUAL FUNDS
3435 Stelzer Road
Columbus, Ohio 43219-3035
(800) 480-4111
October __, 1998
THE ONE GROUP(R) TAX-EXEMPT MONEY MARKET FUND
THE ONE GROUP(R) TREASURY MONEY MARKET FUND
This Prospectus describes two money market mutual funds. The Funds are offered
only to certain institutional and accredited investors. The information in this
prospectus is important. Please read it carefully before you invest, and save it
for future reference.
PLEASE REMEMBER THAT SHARES OF THE FUNDS: O ARE NOT DEPOSITS OR
OBLIGATIONS OF, OR GUARANTEED BY BANC ONE CORPORATION OR ITS AFFILIATES; O ARE
NOT INSURED OR GUARANTEED BY THE FEDERAL DEPOSIT INSURANCE CORPORATION OR BY ANY
FEDERAL OR STATE GOVERNMENTAL AGENCY; O INVOLVE INVESTMENT RISK, INCLUDING THE
POSSIBLE LOSS OF THE PRINCIPAL AMOUNT INVESTED.
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE
SECURITIES AND EXCHANGE COMMISSION NOR HAS THE COMMISSION PASSED UPON
THE ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO
THE CONTRARY IS A CRIMINAL OFFENSE.
COMBINED PROSPECTUS
<PAGE> 563
TABLE OF CONTENTS
A BRIEF PREVIEW OF THE FUNDS 3
ABOUT THE FUNDS 4
The One Group(R) Tax-Exempt Money Market Fund 4
The One Group(R) Treasury Money Market Fund 5
MORE ABOUT THE FUNDS 6
HOW TO DO BUSINESS WITH THE ONE GROUP 6
Purchasing Fund Shares 6
Exchanging Fund Shares 8
Redeeming Fund Shares 9
SHAREHOLDER INFORMATION 10
Voting Rights 10
Dividend Policies 10
Tax Treatment of the Funds 10
Tax Treatment of Shareholders 10
Shareholder Inquiries 12
ORGANIZATION & MANAGEMENT OF THE FUNDS 12
The Funds 12
The Board of Trustees 12
The Advisor 12
The Distributor 12
The Administrator and Sub-Administrator 12
The Transfer Agent, Custodian and Sub-Custodian 12
DETAILS ABOUT THE FUNDS' INVESTMENT PRACTICES AND POLICIES 14
Investment Practices 14
Investment Risks 15
Investment Policies 16
APPENDIX: DESCRIPTION OF RATINGS 18
2
<PAGE> 564
[LOGO-(CLOCK)] A BRIEF PREVIEW OF THE FUNDS
WHAT ARE THE GOALS OF THE FUNDS? The Funds are designed for a variety of
investment objectives including high current income and current interest income
exempt from Federal income tax. Each Fund pursues a different objective and
involves different risks. Each of the Funds will use their best efforts to
maintain a constant net asset value of $1.00 per share, although there is no
guarantee that the Funds will be able to do so. Please read about each Fund
before investing.
WHAT ARE THE FUNDS' INVESTMENT STRATEGIES? 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. The Funds intend to comply with Rule 2a-7 under The Investment Company Act
of 1940. An investment in the Funds is not a deposit of BANC ONE CORPORATION or
its affiliates and is not insured or guaranteed by the Federal Deposit Insurance
Corporation or any other government agency.
WHAT ARE THE MAIN RISKS OF INVESTING IN THE FUNDS? The Funds invest in
securities that are backed by "credit enhancements" such as letters of credit.
The value of investments in the Funds could decrease if the credit quality of
the credit enhancement provider declines.
For more information about risks, please read "More About the Funds" and
"Investment Risks."
WHO CAN BUY SHARES? The Funds are offered only to institutional and other
accredited investors. For more details, please see the section of this
prospectus entitled "Purchasing Fund Shares."
HOW DO I PURCHASE AND REDEEM SHARES? You may buy and redeem shares of the Funds
on any day that the Funds are open for business. Purchase and redemption
procedures are explained in greater detail in "How To Do Business With The One
Group." For additional information, call The One Group Services Company at
1-800-480-4111.
HOW ARE DIVIDENDS PAID? Generally, dividends are declared on each business day
and are distributed periodically. Any capital gains are distributed at least
annually. Distributions are paid in additional shares unless you elect to take
the payment in cash. For a more detailed discussion of dividends, see "Dividend
Policies."
WHO MANAGES THE FUNDS? Banc One Investment Advisors Corporation ("Banc One
Investment Advisors"), an indirect subsidiary of BANC ONE CORPORATION, serves as
the advisor of the Funds. Banc One Investment Advisors is paid a fee for its
services. A more detailed discussion regarding Banc One Investment Advisors, its
services and compensation can be found in the Prospectus under the headings "The
Advisor" and "Expense Summary."
3
<PAGE> 565
THE ONE GROUP TAX-EXEMPT MONEY MARKET FUND
INVESTMENT OBJECTIVE: The Fund seeks as high a level of current interest income
free of Federal income tax as is consistent with the preservation of capital,
maintenance of liquidity and relative stability of principal.
PORTFOLIO SECURITIES: As a matter of fundamental policy, the Fund invests at
least 80% of its total assets in municipal securities of states, territories and
possessions of the United States, including the District of Columbia, and their
respective authorities, political subdivisions, agencies and instrumentalities,
the interest on which is exempt from Federal income tax and not treated as a
preference item for individuals for purposes of the Federal alternative minimum
tax ("Municipal Securities"). Municipal Securities include general obligation
bonds, revenue bonds and notes. The Fund may invest up to 20% of its assets in
obligations, the interest on which is either subject to Federal income tax or
treated as a preference item for individuals for purposes of the Federal
alternative minimum tax ("Taxable Obligations"). Taxable Obligations include
obligations of the U.S. government, its agencies or instrumentalities (some of
which may be subject to repurchase agreements), certificates of deposit and
bankers' acceptances, private activity bonds, and commercial paper. For a list
of all the securities in which the Fund may invest, please read "Investment
Practices."
RISK CONSIDERATIONS: The Fund invests in securities that are backed by "credit
enhancements" such as letters of credit. The value of your investment in the
Fund could decrease if the value of the securities in the portfolio decreases
in response to declining credit quality of a credit enhancement provider.
The Fund also invests in U.S. dollar denominated foreign investments which
involve risks that are different from investments in U.S. companies. In
addition, the Fund invests in mortgage-related securities which have
significantly greater price and yield volatility than traditional fixed-income
securities. Before you invest, please read "More About the Funds" and
"Investment Risks."
- -------------------------------------------------------------------------------
SHAREHOLDER EXPENSES
SHAREHOLDER TRANSACTION EXPENSES (1)
Maximum Sales Charge Imposed on Purchases none
(as a percentage of offering price)
ANNUAL OPERATING EXPENSE
(as a percentage of average daily net assets)
Investment Advisory Fees ___%
Other Expenses (2) ___%
Total Fund Operating Expenses ___%
(1) If you buy or sell shares through a Shareholder Servicing Agent,
you may be charged separate transaction fees by the Shareholder
Servicing Agent. In addition, a $7.00 charge is deducted from
redemption amounts paid by wire.
(2) Other Expenses are based on estimated amounts for the current fiscal year.
EXAMPLE: An investor would pay the following expenses on a $1,000 investment in
the Fund, assuming: (1) 5% annual return; and (2) redemption at the end of each
time period.
1 YEAR 3 YEARS
------ -------
These examples are designed to assist you in understanding the various costs and
expenses that may be directly or indirectly paid by investors in the Fund. THESE
EXAMPLES SHOULD NOT BE CONSIDERED A REPRESENTATION OF PAST OR FUTURE EXPENSES
AND ACTUAL EXPENSES MAY BE GREATER OR LESS THAN THOSE SHOWN.
4
<PAGE> 566
THE ONE GROUP TREASURY MONEY MARKET FUND
INVESTMENT OBJECTIVE: The Fund seeks high current income with
liquidity and stability of principal.
PORTFOLIO SECURITIES: The Fund invests exclusively in U.S.
Treasury bills, notes, and other U.S. Treasury obligations issued
or guaranteed by the U.S. government. U.S. Treasury obligations
purchased by the Fund may be subject to repurchase agreements.
Additionally, the Fund may engage in securities lending. For a
list of all the securities in which the Fund may invest, please read
"Investment Practices."
RISK CONSIDERATIONS: Before you invest, please read "More
About the Funds" and "Investment Risks."
- ------------------------------------------------------------------------------
SHAREHOLDER EXPENSES
SHAREHOLDER TRANSACTION EXPENSES (1)
Maximum Sales Charge Imposed on Purchases none
(as a percentage of offering price)
ANNUAL OPERATING EXPENSE
(as a percentage of average daily net assets)
Investment Advisory Fees ___%
Other Expenses (2) ___%
Total Fund Operating Expenses ___%
(1) If you buy or sell shares through a Shareholder Servicing Agent, you may
be charged separate transaction fees by the Shareholder Servicing Agent.
(2) Other Expenses are based on estimated amounts for the current fiscal
year.
EXAMPLE: An investor would pay the following expenses on a $1,000 investment in
the Fund, assuming: (1) 5% annual return; and (2) redemption at the end of each
time period.
1 YEAR 3 YEARS
------ -------
These examples are designed to assist you in understanding the various costs and
expenses that may be directly or indirectly paid by investors in the Fund. THESE
EXAMPLES SHOULD NOT BE CONSIDERED A REPRESENTATION OF PAST OR FUTURE EXPENSES
AND ACTUAL EXPENSES MAY BE GREATER OR LESS THAN THOSE SHOWN.
5
<PAGE> 567
MORE ABOUT THE FUNDS
PORTFOLIO QUALITY
Securities will be purchased by the Funds only if Banc One Investment Advisors
determine that they present minimal credit risk. In addition, unless a more
specific rating is specified, all investments of the Funds must be rated in one
of the two highest rating categories described in "Description of Ratings" in
the Appendix. If an investment is unrated, Banc One Investment Advisors must
determine that it is of comparable quality to a rated security. Banc One
Investment Advisors will look at a security's rating at the time of investment.
For more information about ratings, please see "Description of Ratings" in the
Appendix.
ILLIQUID INVESTMENTS
Each Fund may invest up to 10% of its net assets in illiquid investments. A
security is illiquid if it cannot be sold at approximately the value assessed by
the Fund within seven (7) days. Banc One Investment Advisors will follow
guidelines adopted by The One Group Board of Trustees in determining whether an
investment is illiquid.
SPECIAL RISK CONSIDERATIONS
NET ASSET VALUE: There is no assurance that the Funds will meet their investment
objectives or be able to maintain a net asset value of $1.00 per share on a
continuous basis.
PORTFOLIO TURNOVER: The Treasury Money Market Fund attempts to increase yield by
taking advantage of short-term market variations. This policy is expected to
result in high portfolio turnover. However, this should not adversely affect the
Fund because it usually does not pay brokerage commissions when purchasing U.S.
government securities. Higher portfolio turnover rates may result in additional
tax consequences to you.
FIXED INCOME SECURITIES: The value of the securities held by the Funds will
increase or decrease based on changes in interest rates. If rates increase, the
value of the Funds' investments generally decline. On the other hand, if rates
fall, the value of the investments generally increases. The value of your
investment in the Funds will increase or decrease as the value of a Fund's
investments increase and decrease. While securities with longer duration and
maturities tend to produce higher yields, they also are subject to greater
fluctuations in value when interest rates change. Usually changes in the value
of fixed income securities will not affect cash income generated, but may affect
the value of your investment.
HOW TO DO BUSINESS WITH THE ONE GROUP
PURCHASING FUND SHARES
WHERE CAN I BUY SHARES? You may purchase Fund shares from the following
sources:
- - The One Group Services Company, and
- - Shareholder Servicing Agents. These include investment advisors, brokers,
financial planners, banks, insurance companies, retirement or 401(k) plan
sponsors, or other intermediaries. Shares purchased this way will be held
for you by the Shareholder Servicing Agent.
WHO MAY PURCHASE FUND SHARES? Fund shares may be purchased by:
- - Commercial and retail institutional investors, including affiliates of BANC
ONE CORPORATION, that have opened accounts with the Fund's transfer agent,
State Street Bank and Trust Company, either directly or through a
Shareholder Servicing Agent.
- - Individuals with a net worth, or joint net worth with their spouse, at the
time of purchase in excess of $1 million. If you have questions about
eligibility, please call The One Group Services Company at 1-800-480-4111.
WHEN CAN I BUY SHARES?
- - Purchases may be made on any business day. This includes any day that the
Funds are open for business, other than weekends, days on which the New
York Stock Exchange ("NYSE") is closed, and the following holidays: New
6
<PAGE> 568
Years Day, Martin Luther King, Jr. Day, Presidents' Day, Good Friday,
Memorial Day, Independence Day, Labor Day, Columbus Day, Veterans Day,
Thanksgiving, and Christmas.
- - Purchase requests will be effective on the day received by The One Group
Services Company and you will be eligible to receive dividends declared the
same day, if (i) such purchase orders are received by The One Group
Services Company before 4:00 p.m., Eastern Time ("ET") for the Treasury
Money Market Fund and 11:00 a.m. EST for the Tax-Exempt Money Market Fund,
and (ii) the Fund's custodian, State Street Bank and Trust Company,
receives "federal funds" before 4:00 p.m., ET. If State Street Bank and
Trust Company does not receive federal funds by the cut-off time, the
purchase order will not be effective until the next Business Day on which
federal funds are timely received by State Street Bank and Trust Company.
On occasion, the NYSE will close before 4:00 p.m. ET. When that happens,
purchase requests received after the NYSE closes will be effective the
following business day.
- - If your shares are held by a Shareholder Servicing Agent, it is the
responsibility of the Shareholder Servicing Agent to send your purchase or
redemption order to the Fund. Your Shareholder Servicing Agent may have an
earlier cut-off time for purchase and redemption requests.
- - The One Group Services Company can reject a purchase order if it does not
think that it is in the best interests of a Fund and/or shareholders to
accept the order.
- - Shares are electronically recorded. Therefore, certificates will not be
issued.
HOW MUCH DO SHARES COST?
- - Shares are sold at net asset value ("NAV").
- - NAV per share is calculated by dividing the total market value of a Fund's
investments and other assets (minus expenses) by the number of outstanding
shares. The Funds use their best efforts to maintain their NAV at $1.00,
although there is no guarantee that they will be able to do so.
- - NAV is calculated each business day as of 11:00 p.m. and following the
close of the NYSE at 4:00 p.m. ET. On occasion, the NYSE will close before
4:00 p.m. ET. When that happens, NAV will be calculated as of the time the
NYSE closes.
HOW DO I OPEN AN ACCOUNT?
1. Read the prospectus carefully, and select the Fund or Funds most appropriate
for you.
2. Decide how much you want to invest. The minimum initial investment is
$1,000,000. Subsequent investments must also be at least $1,000,000.
The One Group Services Company may waive these minimums.
3. Complete the Account Application Form. Be sure to sign up for all of the
Account privileges that you plan to take advantage of. Doing so now means
that you will not have to complete additional paperwork later.
4. Send the completed application and a personal check (unless you choose to
pay by wire or bank transfer) payable to "The One Group" to:
State Street Bank and Trust Company
c/o The One Group
P.O. Box 8528
Boston, MA 02266-8528
5. All checks should be in U.S. dollars. Third party checks will not be
accepted. Redemptions from a Fund will not be permitted for ten (10)
calendar days if purchases are made by check.
6. If you purchase shares through a Shareholder Servicing Agent, you may be
required to complete additional forms or follow additional procedures. You
should contact your Shareholder Servicing Agent regarding purchases,
exchanges and redemptions.
7. If you have any questions, contact your Shareholder Servicing Agent or call
The One Group Services Company at 1-800-480-4111.
7
<PAGE> 569
CAN I PURCHASE SHARES OVER THE TELEPHONE? Yes. Simply select this option on your
Account Application Form and then:
- - Contact your Shareholder Servicing Agent or The One Group Services Company
at 1-800-480-4111 to relay your purchase instructions.
- - Authorized bank transfer or initiate a wire transfer payable to "The One
Group" to State Street Bank and Trust Company to the following wire
address:
State Street Bank & Trust Company
Attn: Custody & Shareholder Services
ABA 011 000 028
DDA 99034167
FBO The One Group Fund (ex: The One Group Prime Money Market Fund - A)
Your Account Number (ex: 123456789)
Your Account Registration (ex: John Smith & Mary Smith, JTWROS)
- - The One Group uses reasonable procedures to confirm that instructions given
by telephone are genuine. These procedures include recording telephone
instructions and asking for personal identification. If these procedures
are followed, The One Group will not be responsible for any loss,
liability, cost or expense of acting upon unauthorized or fraudulent
instructions; you bear the risk of loss.
- - You may revoke your right to make purchases over the telephone or by
sending a letter to:
State Street Bank and Trust Company
c/o The One Group
P.O. Box 8528
Boston, MA 02266-8528
EXCHANGING FUND SHARES
WHAT ARE MY EXCHANGE PRIVILEGES?
- - You may exchange your shares for shares of the other Fund described in this
prospectus. You may also exchange your shares for shares of any
institutional money market fund that The One Group may offer.
- - The One Group may change the terms and conditions of your exchange
privileges upon 60 days written notice.
- - The One Group does not charge a fee for this privilege.
- - The One Group Funds offer a Systematic Exchange Privilege which allows you
to automatically exchange shares of one fund to another on a monthly or
quarterly basis. This privilege is useful in Dollar Cost Averaging. To
participate in this privilege, please select it on your account
application. To learn more about it, please call The One Group Services
Company at 1-800-480-4111.
WHEN ARE EXCHANGES PROCESSED? Exchanges are usually processed the same business
day they are received, provided:
- - State Street Bank and Trust Company receives the request by 12:30 p.m. ET:
- - You have provided The One Group with all of the information necessary to
process the exchange.
- - You have received a current prospectus of the Fund or Funds into which you
wish to invest.
- - You have contacted your Shareholder Servicing Agent, if necessary.
ARE EXCHANGES TAXABLE? Generally:
- - An exchange between Funds is considered a sale and may result in a capital
gain or loss for Federal income tax purposes.
- - You should talk to your tax advisor before making an exchange.
ARE THERE LIMITS ON EXCHANGES? Yes. The exchange privilege is not intended as a
way for you to speculate on short term movements in the market. Therefore:
- - To prevent disruptions in the management of the Funds, The One Group limits
excessive exchange activity.
- - Exchange activity is excessive if it EXCEEDS TWO SUBSTANTIVE EXCHANGE
REDEMPTIONS (WITHIN 30 DAYS OF EACH OTHER) WITHIN A TWELVE MONTH PERIOD.
- - In addition, The One Group reserves the right to reject any exchange
request (even those that are not excessive) if the Fund reasonably believes
that the exchange will be disruptive to efficient portfolio management.
8
<PAGE> 570
REDEEMING FUND SHARES
WHEN CAN I REDEEM SHARES?
- - You may redeem all or some of your shares on any day that the Funds are
open for business.
- - Redemption requests received by The One Group Services Company before 4:00
p.m., ET (or when the NYSE closes), will be effective that day.
HOW DO I REDEEM SHARES?
- - Unless you have selected the telephone option on your Account Application
Form, you must send a written redemption request to your Shareholder
Servicing Agent, if applicable, or to State Street Bank and Trust Company
at the following address:
State Street Bank and Trust Company
c/o The One Group
P.O. Box 8528
Boston, MA 02266-8528
- - You may request redemption forms by calling The One Group Services Company
at 1-800-480-4111.
- - State Street Bank and Trust Company may require that the signature on your
redemption request be guaranteed by a commercial bank, a member of a
domestic stock exchange, or a member of the Securities Transfer Association
Medallion Program or the Stock Exchange Medallion Program, unless:
1. the redemption is for $50,000 worth of shares or less;
2. the redemption is payable to the shareholder of record;
3. the redemption check is mailed to the shareholder at the record
address; or
4. the redemption is payable by wire or bank transfer (ACH) to a
pre-existing bank account.
- - On the Account Application Form you may elect to have the redemption
proceeds mailed or wired to:
1. a designated commercial bank (there is no charge for this service);
or
2. State Street Bank and Trust Company or your Shareholder Servicing
Agent.
- - Your redemption proceeds will ordinarily be paid within seven days after
receipt of the redemption request. However, the Funds will attempt to honor
requests for next day payment on redemptions, if the request is received
before 2:00 p.m., ET.
- - The Funds will attempt to honor requests for payments in two Business Days,
if the redemption request is received after the time listed above.
WHAT WILL MY SHARES BE WORTH?
- - The NAV 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.
- - You will receive the NAV calculated after your redemption request is
received. Please read "How Much Do Shares Cost?"
CAN I REDEEM BY TELEPHONE? Yes, if you selected this option on your Account
Application Form. o Call your Shareholder Servicing Agent or State Street Bank
and Trust Company at 1-800-480-4111 to relay your redemption request.
- - Your redemption proceeds will be mailed or wired to the commercial bank
account you designated on your Account Application Form.
- - The One Group uses reasonable procedures to confirm that instructions given
by telephone are genuine. These procedures include recording telephone
instructions and asking for personal identification. If these procedures
are followed, The One Group will not be responsible for any loss,
liability, cost or expense of acting upon unauthorized or fraudulent
instructions; you bear the risk of loss.
ADDITIONAL INFORMATION REGARDING REDEMPTIONS
- - All redemptions will be for cash. The redemption price of shares is
expected to remain constant at $1.00 per share, although there is no
assurance that this will always be the case.
9
<PAGE> 571
- - If you redeem shares for which you paid by check, and The One Group has not
yet received payment on the check, The One Group will delay forwarding your
redemption proceeds for 10 or more days until payment has been collected
from your bank.
- - The One Group may suspend your ability to redeem when:
1. Trading on the NYSE is restricted.
2. The NYSE is closed (other than weekend and holiday closings).
3. The SEC has permitted a suspension.
4. An emergency exists.
- - You generally will recognize a gain or loss on a redemption for Federal
income tax purposes. You should talk to your tax advisor before making a
redemption.
- - The One Group may suspend your ability to redeem, or will redeem your
shares involuntarily, when it seems appropriate to do so in light of its
responsibilities under the Federal securities laws. The Statement of
Additional Information offers more details about this process.
SHAREHOLDER INFORMATION
VOTING RIGHTS
The Funds do not hold annual shareholder meetings, but may hold special
meetings. The special meetings are held, for example, to elect or remove
Trustees, change a Fund's fundamental investment objective, or approve an
investment advisory contract.
As a Fund shareholder, you have one vote for each share that you own. Each Fund,
votes separately on matters relating solely to that Fund, or which affect that
Fund differently. However, all shareholders will have equal voting rights on
matters that affect all shareholders equally.
DIVIDEND POLICIES
DIVIDENDS: The Funds generally declare dividends on each Business Day. Dividends
are distributed on the first business day of each month. Capital gains, if any,
for all Funds are distributed at least annually.
DIVIDEND REINVESTMENT: You automatically will receive all income dividends and
capital gain distributions in additional shares of the same Fund, unless you
have elected to take such payment in cash. The price of the shares is the NAV
determined immediately following the dividend record date. Reinvested dividends
and distributions receive the same tax treatment as dividends and distributions
paid in cash.
If you want to change the way in which you receive dividends and distributions,
you must write to State Street Bank & Trust Company at P.O. Box 8528, Boston, MA
02266-8528, at least 15 days prior to the distribution. The change is effective
upon receipt by State Street.
TAX TREATMENT OF THE FUNDS
TAX STATUS OF THE FUND: Each Fund intends to qualify as a "regulated investment
company" for Federal income tax purposes. If the Funds qualify, as they have in
the past, they will pay no federal income tax on the earnings they distribute to
shareholders.
TAX TREATMENT OF SHAREHOLDERS
TAXATION OF SHAREHOLDER TRANSACTIONS: A sale, exchange, or redemption of Fund
shares will generally produce either a taxable gain or a loss. You are
responsible for any tax liabilities generated by your transactions.
TAXATION OF DISTRIBUTIONS: Each Fund will distribute substantially all of its
net investment income (including, for this purpose, net short-term capital gain)
to investors on at least an annual basis. Dividends you receive from a Fund,
whether reinvested or received in cash, will be taxable to you. Dividends from a
Fund's net investment income will be taxable as ordinary income and dividends
from a Fund's long-term capital gains will be taxable to you as such, regardless
of how long you have held the shares.
10
<PAGE> 572
Dividends paid in January, but declared in October, November or December of the
previous year, will be considered to have been paid the previous December.
DISTRIBUTIONS FROM THE TREASURY MONEY MARKET FUND
You will be advised at least annually as to the amount and Federal income tax
character of distributions made to you during the year. Since all of the Fund's
net investment income is expected to be derived from earned interest, it is
anticipated that no part of any distribution will be eligible for the corporate
dividends received deduction. Shareholders not subject to tax on their income
generally will not be required to pay Federal income tax on amounts distributed
to therm.
Distributions from the Treasury Money Market Fund, to the extent they consist of
interest from securities of the U.S. government and certain of its agencies and
instrumentalities ("U.S. government interest"), may be recognized by state and
local tax authorities as exempt from state and local income taxes. However,
distributions of income other than U.S. government interest (including, but not
limited to, net gains, and income from repurchase transactions and securities
lending) generally will not qualify for exemption from state and local income
taxes. Although there is no assurance that any such state and local tax
exemption for U.S. government interest will be available, each Fund will advise
you annually regarding the portion of its distributions that consist of U.S.
government interest.
DISTRIBUTIONS FROM THE TAX-EXEMPT MONEY MARKET FUND
Exempt-interest dividends are attributable to the Tax-Exempt Money Market Fund's
net exempt-interest income and designated by the Fund as exempt-interest
dividends. Exempt-interest dividends are treated by the Fund's Shareholders as
items of interest excludable from gross income for Federal income tax purposes.
However, such dividends may be taxable to you under state or local laws as
ordinary income, even though all or a portion of the amounts may be derived from
interest which would be exempt from such taxes you had purchased from the
underlying obligations directly. In addition, the receipt of exempt-interest
dividends may cause persons receiving Social Security or Railroad Retirement
benefits to be taxable on a portion of such benefits. Part or all of the
interest on indebtedness incurred by you to purchase or carry Fund shares is not
deductible for Federal income tax purposes. If, at the close of each quarter of
the Tax-Exempt Money Market Fund's taxable year, at least 50% of the value of
its assets consists of obligations the interest on which is excludable from
gross income, the Fund will distribute exempt-interest dividends.
Exempt-interest dividends that are attributable to interest earned on certain
private activity bonds ("industrial development bonds" under prior law) will be
taxable to you if you are a "substantial user" of a facility being financed by
such bonds or a "related person" of such substantial user. If you may be a
substantial user or a related person, you should consult your tax advisers with
respect to the Federal income taxation of exempt-interest dividends.
An investment in the Tax-Exempt Money Market Fund may cause both individual and
corporate Shareholders to be subject to (or result in an increased liability
under) the Federal alternative minimum tax. Interest income from certain private
activity bonds in which the Fund may invest may be treated as an "item of tax
preference" for purposes of calculating alternative minimum taxable income and
accordingly, may subject investors to liability under the Federal alternative
minimum tax with respect to the portion of the Fund's distributions derived from
those securities. As a matter of fundamental policy, under normal market
conditions, not more than 20% of the Tax-Exempt Money Market Fund's total assets
will be invested in private activity bonds the interest on which is treated as a
preference item for purposes of the Federal alternative minimum tax for
individuals. In addition, for most corporate Shareholders of the Tax-Exempt
Money Market Fund, exempt-interest dividends will be included in "adjusted
current earnings" for purposes of computing the alternative minimum tax.
The Federal tax-exempt portion of dividends paid each year will be designated
within 60 days after the end of that year and will be based upon the ratio of
net tax-exempt income to total net income earned during any portion of the year.
Thus, a Shareholder who holds Shares for only a part of the year may be
allocated more or less tax-exempt dividends than would be the case if the
allocation were based on the ratio of net tax-exempt income to total net income
actually earned by the Fund while he or she was a Shareholder. Shareholders of
the Tax-Exempt Money Market Fund will be advised at least annually as to the
amount and Federal income tax character of distributions made to them during the
year.
11
<PAGE> 573
To the extent, if any, that dividends paid to you are derived from taxable
income, such dividends will be subject to Federal income tax. Since any taxable
net investment income of the Tax-Exempt Money Market Fund is expected to be
derived from earned interest, it is anticipated that no part of any distribution
will be eligible for the corporate dividends received deduction. If you are not
subject to tax on income generally, you will not be required to pay tax on
amounts distributed to you.
TAX INFORMATION: The Form 1099 that is mailed to you every January details your
dividends and their federal tax category. Even though the Funds provide you with
this information, you are responsible for verifying your tax liability with your
tax professional. For additional tax information see the Statement of Additional
Information. Please note that this tax discussion is general in nature; no
attempt has been made to present a complete explanation of the Federal, state,
local or foreign tax treatment of the Funds or their shareholders.
SHAREHOLDER INQUIRIES
If you have any questions or need additional information, please write The One
Group Services Company at 3435 Stelzer Road, Columbus, OH 43219 or call
1-800-480-4111.
BOX: REPORTING: In March and September you will receive a financial report from
The One Group. In addition, The One Group will periodically send you proxy
statements and other reports.
ORGANIZATION & MANAGEMENT OF THE FUNDS
THE FUNDS: Each Fund is a series of The One Group, an open-end management
investment company. The One Group currently consists of 40 separate Funds. Each
Fund described in this prospectus is diversified. Two of the Funds are described
in this prospectus; the other Funds are described in separate prospectuses. Each
Fund is supervised by the Board of Trustees.
THE BOARD OF TRUSTEES: The Trustees oversee the management and administration of
the Funds. The Trustees are responsible for making major decisions about each
Fund's investment objectives and policies, but delegate the day-to-day
administration of the Funds to the officers of The One Group.
THE ADVISOR: Banc One Investment Advisors makes the day-to-day investment
decisions for the Funds and continuously reviews, supervises and administers the
Funds' investment programs. Banc One Investment Advisors has served as
investment advisor to The One Group since 1993. Prior to that time, The One
Group was advised by affiliates of Banc One Investment Advisors. In addition to
The One Group, Banc One Investment Advisors serves as investment advisor to
other mutual funds and individual, corporate, charitable and retirement
accounts. As of June 30, 1998, Banc One Investment Advisors, an indirect,
wholly-owned subsidiary of BANC ONE CORPORATION, managed over $59 billion in
assets.
THE DISTRIBUTOR: The One Group Services Company, 3435 Stelzer Road, Columbus,
Ohio 43219, a wholly-owned subsidiary of The BISYS Group, Inc., markets the
Funds and distributes shares through selling brokers, financial institutions,
investment advisors, and other financial representatives.
THE ADMINISTRATOR AND SUB-ADMINISTRATOR: The One Group Services Company also
serves as the Funds' administrator. The One Group Services Company is
responsible for responding to shareholder inquiries and requests for
information, as well as providing regulatory compliance and reporting. For these
services, The One Group Services Company receives an annual fee of .05% of each
Fund's average daily net assets. The fee is calculated daily and paid monthly.
Banc One Investment Advisors, the Sub-Administrator, provides office space,
equipment, and facilities, as well as legal and regulatory support.
THE TRANSFER AGENT, CUSTODIAN, AND SUB-CUSTODIAN: State Street Bank and Trust
Company, P.O. Box 8528, Boston, MA 02266-8528, or your Shareholder Servicing
Agent, if appropriate, handles shareholder recordkeeping and statements,
distributes dividends, and processes buy and sell requests. As the Funds'
custodian, State Street holds the Funds' assets, settles all portfolio trades
and assists in calculating the Funds' net asset values. Bank One Trust Company,
N.A. serves sub-custodian in connection with the Funds' securities lending
activities under an agreement with State Street Bank and Trust Company. Bank One
Trust Company, N.A. is paid a fee for this service.
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<PAGE> 574
YEAR 2000
Preparing for the Year 2000 is a high priority for The One Group Family of
Mutual Funds. Both The One Group Services Company and Banc One Investment
Advisors have formed dedicated teams to help them successfully achieve Year 2000
compliance. In addition, these teams are responsible for assessing the readiness
of all other service providers to The One Group. Year 2000 remediation efforts
are directed toward both information technology and non-information technology
systems. Non-information technology systems include elevators, photocopy
machines, and facsimile machines, and should have no significant impact on the
delivery of services to The One Group.
Banc One Investment Advisors has identified 49 information technology systems
and interfaces that provide service and support to The One Group. Each system is
assigned a priority rating: high, medium or low. Systems rated "high" are those
which are essential to the operation of The One Group. Each system rated "high"
is scheduled to be Year 2000 compliant by December 31, 1998. All systems will be
tested for compliance throughout 1999.
Many, if not all, of the systems are owned or operated by third party servicers
(for example, The One Group's Custodian). Consequently, remediation efforts must
be made by those servicers. Banc One Investment Advisors and The One Group
Services Company have, and will continue to, monitor the remediation progress of
the service providers. This process involves documentation, on-site visits, and
review of remediation plans and test results. Both Banc One Investment Advisors
and The One Group Services Company have budgeted in excess of $700,000 in fiscal
year 1998 and over $1 million in fiscal year 1998 toward the remediation effort
for all systems and interfaces. Neither The One Group nor its shareholders will
bear any of the direct remediation expenses.
Neither The One Group Services Company nor Banc One Investment Advisors
currently anticipate that the move to Year 2000 will have a material impact on
their ability to continue to provide the Funds with service at current levels.
Likewise, The One Group currently anticipates that the more to Year 2000 will
not have a material impact on its operations.
13
<PAGE> 575
DETAILS ABOUT THE FUNDS' INVESTMENT PRACTICES AND POLICIES
INVESTMENT PRACTICES
The Funds invest in a variety of securities and employ a number of investment
techniques. Each security and technique involves certain risks. What follows is
a list of the securities and techniques utilized by the Funds, as well as the
risks inherent in their use. Fixed income securities are primarily influenced by
market, credit and prepayment risks, although certain securities may be subject
to additional risks. For a more complete discussion, please see the Statement of
Additional Information. Following the table is a more complete discussion of
risk.
Fund Name Fund Code
- --------- ---------
The One Group(R) Tax-Exempt Money Market Fund 1
The One Group(R) Treasury Money Market Fund 2
<TABLE>
<CAPTION>
Instrument Fund Code Risk Type
- -----------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
U.S. TREASURY OBLIGATIONS: Bills, notes, bonds, STRIPS, and CUBES. 1,2 Market
TREASURY RECEIPTS: TRS, TIGRs, and CATS. 1,2
Market
U.S. GOVERNMENT AGENCY SECURITIES: Securities issued by agencies and instrumentalities of the 1 Market
U.S. Government. These include Ginnie Mae, Fannie Mae, and Freddie Mac.
CERTIFICATES OF DEPOSIT: Negotiable instruments with a stated maturity, including deposits 1 Market
issued by foreign banks, Eurodollar Certificates of Deposit and Yankee Certificates of Deposit. Credit
Liquidity
Foreign
Investment
Political
TIME DEPOSITS: Non-negotiable receipts issued by a bank (including foreign banks) in exchange for the 1 Liquidity
deposit of funds. Credit
Market
Foreign
Investment
Political
REPURCHASE AGREEMENTS: The purchase of a security and the simultaneous commitment to return 1,2 Credit
the security to the seller at an agreed upon price on an agreed upon date. This is treated as a loan. Market
Liquidity
REVERSE REPURCHASE AGREEMENT: The sale of a security and the simultaneous commitment to 1,2 Market
buy the security back at an agreed upon price on an agreed upon date. This is treated as a Leverage
borrowing by a Fund.
SECURITIES LENDING: The lending of up to 33 1/3% of the Fund's total assets. In return, 1,2 Credit
the Fund will receive cash, other securities and/or letters of credit. Market
Leverage
ZERO-COUPON DEBT SECURITIES: Bonds and other debt that pay no interest, but are issued at 1,2 Credit
a discount from their value at maturity. When held to maturity, their entire return equals the Market
differences between their issue price and their maturity value. Liquidity
WHEN-ISSUED SECURITIES: Purchase or contract to purchase municipal securities 1 Market
at a fixed price for delivery at a future date. Leverage
Liquidity
INVESTMENT COMPANY SECURITIES: Shares of other mutual funds, including money 1,2 Market
market funds of The One Group and shares of other investment companies for
which Banc One Investment Advisors serves as investment advisor or administrator.
Banc One Investment Advisors will waive certain fees when investing in funds for
which it serves as investment advisor.
PUT OPTIONS: A put option gives the buyer the right to sell, and obligates the seller of the 1 Liquidity
option to buy, a municipal security at a specified price. Credit
</TABLE>
14
<PAGE> 576
<TABLE>
<S> <C> <C>
Management
Market
Leverage
BANKERS' ACCEPTANCES: Bills of exchange or time drafts drawn on and accepted by a 1 Credit
commercial bank. Maturities are generally six months or less. Liquidity
Market
COMMERCIAL PAPER: Secured and unsecured short-term promissory notes (including variable 1 Credit
amount master demand notes) that qualify as a municipal security. Liquidity
Market
FOREIGN SECURITIES: Obligations of foreign banks, overseas branches of U.S. banks and supranational 1 Political
entities. Foreign
Investment
Market
Liquidity
VARIABLE AND FLOATING RATE NOTES: Obligations with interest rates which are reset daily, weekly, 1 Market
quarterly or some other period and which may be payable to the Fund on demand. Credit
Liquidity
MUNICIPAL SECURITIES: Securities issued by a state or political subdivision to obtain funds for 1 Market
various public purposes. Municipal securities include private activity bonds and industrial Credit
development bonds, as well as General Obligation Notes, Tax Anticipation Notes, Bond Political
Anticipation Notes, Revenue Anticipation Notes, Project Notes, other short-term tax-exempt Tax
obligations, municipal leases, and obligations of municipal housing authorities and single
family revenue bonds.
</TABLE>
INVESTMENT RISKS
Below is a more complete discussion of the types of risks inherent in the
securities and investment techniques listed above. Because of these risks, the
value of the securities held by the Funds may fluctuate, as will the value of
your investment in the Funds. Certain investments are more susceptible to these
risk than others.
- - CREDIT RISK. The risk that the issuer of a security, or the counterparty to
a contract, will default or otherwise become unable to honor a financial
obligation. Credit risk is generally higher for non-investment grade
securities. The price of a security can be adversely affected prior to
actual default as its credit status deteriorates and the probability of
default rises.
- - LEVERAGE RISK. Associated with securities or practices that multiply small
index or market movements into large changes in value. Leverage is often
associated with investments in derivatives, but also may be embedded
directly in the characteristics of other securities.
- - Hedged. When a derivative (a security whose value is based on another
security or index) is used as a hedge against an opposite position that
the fund also holds, any loss generated by the derivative should be
substantially offset by gains on the hedged investment, and vice versa.
While hedging can reduce or eliminate losses, it can also reduce or
eliminate gains. Hedges are sometimes subject to imperfect matching
between the derivative and underlying security, and there can be no
assurance that a Fund's hedging transactions will be effective.
- - Speculative. To the extent that a derivative is not used as a hedge,
the fund is directly exposed to the risks of that derivative. Gains or
losses from speculative positions in a derivative may be substantially
greater than the derivative's original cost.
- - LIQUIDITY RISK. The risk that certain securities may be difficult or
impossible to sell at the time and the price that would normally prevail in
the market. The seller may have to lower the price, sell other securities
instead or forego an investment opportunity, any of which could have a
negative effect on fund management or performance. This includes the risk
of missing out on an investment opportunity because the assets necessary to
take advantage of it are tied up in less advantageous investments.
- - MARKET RISK. The risk that the market value of a security may move up and
down, sometimes rapidly and unpredictably. These fluctuations may cause a
security to be worth less than the price originally paid for it, or less
15
<PAGE> 577
than it was worth at an earlier time. Market risk may affect a single
issuer, industry, sector of the economy or the market as a whole. There is
also the risk that the current interest rate may not accurately reflect
existing market rates. For fixed income securities, market risk is largely,
but not exclusively, influenced by changes in interest rates. A rise in
interest rates typically causes a fall in values, while a fall in rates
typically causes a rise in values. Finally, key information about a
security or market may be inaccurate or unavailable. This is particularly
relevant to investments in foreign securities.
- - POLITICAL RISK. The risk of losses attributable to unfavorable governmental
or political actions, seizure of foreign deposits, changes in tax or trade
statutes, and governmental collapse and war.
- - FOREIGN INVESTMENT RISK. The risk associated with higher transaction costs,
delayed settlements, currency controls and adverse economic developments.
This also includes the risk that fluctuations in the exchange rates between
the U.S. dollar and foreign currencies may negatively affect an investment.
Adverse changes in exchange rates may erode or reverse any gains produced
by foreign currency denominated investments and may widen any losses.
Exchange rate volatility also my affect the ability of an issuer to repay
U.S. dollar denominated debt, thereby increasing credit risk.
- - TAX RISK. The risk that the issuer of the securities will fail to comply
with certain requirements of the Internal Revenue Code, which would cause
interest income to be retroactively included in gross income.
INVESTMENT POLICIES
Each Fund's investment objective and the following investment policies
summarized below are fundamental. This means that they cannot be changed without
the consent of a majority of the outstanding shares of the Funds. The full text
of the fundamental policies can be found in the Statement of Additional
Information.
Fundamental Policies of Each Fund
Each Fund:
1. Will use its best efforts to maintain a constant net asset value of $1.00 per
share, although there is no guarantee that the Funds will be able to do so.
2. Will not purchase the securities of an issuer if as a result more than 5% of
its total assets would be invested in the securities of that issuer or the Fund
would own more than 10% of the outstanding voting securities of that issuer.
This does not include securities issued or guaranteed by the United States, its
agencies or instrumentalities, and, if consistent with such Fund's investment
policies, repurchase agreements involving these securities. This restriction
applies with respect to 75% of a Fund's total assets. The Funds may invest the
remaining 25% of their total assets without restriction.
3. Will not purchase securities while borrowings (including reverse repurchase
agreements) exceed 5% of the respective Fund's assets.
4. Will not borrow money or issue senior securities, except that the Funds may
borrow from banks for temporary purposes in amounts not exceeding 10% of their
total assets at the time of the borrowing.
5. Will not mortgage, pledge or hypothecate any assets, except in connection
with borrowing specified in 4 above and in amounts not in excess of the lesser
of the dollar amount borrowed or 10% of the value of the respective Fund's total
assets at the time of its borrowing.
Fundamental Policies of Specific Funds
The Treasury Money Market Fund:
1. Will not purchase securities other than U.S. Treasury bills, notes and other
U.S. obligations issued or guaranteed by the U.S. government, some of which may
be subject to repurchase agreements.
The Tax-Exempt Money Market Fund:
16
<PAGE> 578
1. Will not concentrate in a particular industry. This does not include
Municipal Securities or governmental guarantees of Municipal Securities. Private
activity bonds that are backed only by the assets and revenues of a
nongovernmental issuer are not Municipal Securities for purposes of this
restriction. Additional investment policies can be found in the Statement of
Additional Information.
17
<PAGE> 579
APPENDIX
DESCRIPTION OF RATINGS
The following is a summary of published ratings by major credit rating agencies.
Credit ratings evaluate only the safety of principal and interest payments, not
the market value risk of lower quality securities. Credit rating agencies may
fail to change credit ratings to reflect subsequent events on a timely basis.
Although Banc One Investment Advisors considers security ratings when making
investment decisions, it also performs its own investment analysis and does not
rely solely on the ratings assigned by credit agencies.
Unrated securities will be treated as non-investment grade securities unless
Banc One Investment Advisors determines that such securities are the equivalent
of investment grade securities. Securities that have received different ratings
from more than one agency are considered investment grade if at least one agency
has rated the security investment grade.
DESCRIPTION OF COMMERCIAL PAPER RATINGS
Duff & Phelps Credit Rating Co. ("Duff")
- -----------------------------------------
D-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
obligations.
D-1 Very high certainty of timely payment. Liquidity factors are excellent
and supported by good fundamental protection factors. Risk factors are
minor.
D-1- High certainty of timely payment. Liquidity factors are strong and
supported by good fundamental protection factors. Risk factors are
very small.
Standard & Poor's Corporation ("S&P")
- -------------------------------------
A-1 Highest category of commercial paper. Capacity to meet financial
commitment is strong. Obligations designated with a plus sign (+)
indicate that capacity to meet financial commitment is extremely
strong.
A-2 Issues somewhat more susceptible to adverse effects of changes in
circumstances and economic conditions than obligations in higher
rating categories. However, the capacity to meet financial commitments
is satisfactory.
Fitch's IBCA Limited ("Fitch")
- ------------------------------
A1 Highest capacity for timely repayment. Those issues rated A1+
possess a particularly strong credit feature.
A2 Satisfactory capacity for timely repayment although such capacity may
be susceptible to adverse changes in business, economic or financial
conditions.
Moody's Investors Service ("Moody's")
- ---------------------------------------
Prime-1 Superior ability for repayment.
Prime-2 Strong ability for repayment.
DESCRIPTION OF BANK RATINGS
Moody's
- ------
These ratings represent Moody's opinion of a bank's intrinsic safety and
soundness.
18
<PAGE> 580
A These banks possess exceptional intrinsic financial strength.
Typically they will be major financial institutions with highly
valuable and defensible business franchises, strong financial
fundamentals, and a very attractive and stable operating environment.
B These banks possess strong intrinsic financial strength. Typically,
they will be important institutions with valuable and defensible
business franchises, good financial fundamentals, and an attractive
and stable operating environment.
C These banks possess good intrinsic financial strength. Typically, they
will be institutions with valuable and defensible business franchises.
These banks will demonstrate either acceptable financial fundamentals
within a stable operating environment, or better than average
financial fundamentals within an unstable operating environment.
S&P
- ---
S&P's credit rating is a current opinion of an obligor's overall financial
capacity (its creditworthiness) to pay its financial obligation.
AAA The highest rating assigned by S&P. The obligor's capacity to meet its
financial commitment on the obligation is extremely strong.
AA The obligor's capacity to meet its financial commitments on the
obligation is very strong.
A The obligation is somewhat more susceptible to the adverse effects of
changes in circumstances and economic conditions than obligations in
higher rated categories. However, the obligor's capacity to meet its
financial commitment on the obligation is still strong.
DESCRIPTION OF INSURANCE RATINGS
Moody's
- -------
These ratings represent Moody's opinions of the ability of insurance companies
to pay punctually senior policyholder claims and obligations.
Aaa Insurance companies rated in this category offer exceptional financial
security. While the financial strength of these companies is likely to
change, such changes as can be visualized are most unlikely to impair
their fundamentally strong position.
Aa These insurance companies offer excellent financial security. Together
with the Aaa group, they constitute what are generally known as high
grade companies. They are rated lower than Aaa companies because
long-term risks appear somewhat larger.
A Insurance companies rated in this category offer good financial
security. However, elements may be present which suggest a
susceptibility to impairment sometime in the future.
S&P
- ---
S&P's credit rating is a current opinion of the creditworthiness of an obligor
with respect to a specific financial obligation, a specific class of financial
obligations, or a specific financial program.
AAA This is the highest rating assigned by S&P. The obligor's capacity to
meet its financial commitment on the obligation is extremely strong.
AA The obligor's capacity to meet its financial commitments on the
obligation is very strong.
19
<PAGE> 581
A An obligation rated A is somewhat more susceptible to the adverse
effects of changes in circumstances and economic conditions than
obligations in higher rated categories. However, the obligor's
capacity to meet its financial commitment on the obligation is still
strong.
DESCRIPTION OF CORPORATE/MUNICIPAL BOND RATINGS
S&P
- ---
Investment Grade
AAA The highest rating. The rating indicates an extremely strong capacity to
meet its financial commitment.
AA Differs from AAA issues only in a small degree. The obligor's capacity
to meet its financial commitment is very strong.
A These bonds are somewhat more susceptible to the adverse effects of
changes in circumstances and economic conditions than debt in higher
rated categories. However, capacity to meet its financial commitment
on the obligation is still strong.
BBB Exhibits adequate protection parameters. However, adverse economic
conditions or changing circumstances are more likely to lead to a
weakened capacity to meet its financial commitment on the obligation.
Speculative Grade
BB Less vulnerable to non-payment than other speculative issues. However,
these bonds face major ongoing uncertainties or exposure to adverse
business, financial or economic conditions which could lead to
inadequate capacity to meet financial commitment on the obligation.
B More vulnerable to non-payment than obligations rated BB, but
currently has the capacity to meet its financial commitment on the
obligation. Adverse business, financial or economic conditions will
likely impair capacity or willingness to meet its financial commitment
on the obligation.
CCC Currently vulnerable to non-payment, and is dependent upon favorable
business, financial, and economic conditions to meet its financial
commitment on the obligation. In the event of adverse business,
financial, or economic conditions, they are not likely to have the
capacity to meet its financial commitment on the obligation.
CC Currently highly vulnerable to non-payment.
C This rating may be used to cover a situation where a bankruptcy
petition has been filed, or similar action has been taken, but
payments on this obligation are being continued.
D Bonds in payment default.
Ratings from AA to CCC may be modified by a plus (+) or minus (-) to show
relative standing within the major rating categories.
Moody's
- ------
Investment Grade
Aaa 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 an exceptionally stable, margin and principal
is secure.
20
<PAGE> 582
Aa High quality by all standards. Margins of protection may not be as
large as in Aaa securities, fluctuation of protective elements may be
greater, or there may be other elements present that make the
long-term risks appear somewhat larger than in Aaa securities.
A These bonds possess many favorable investment attributes and are to be
considered as upper-medium grade obligations. Factors giving security
to principal and interest are considered adequate, but elements may be
present which suggest a susceptibility to impairment sometime in the
future.
Baa These bonds are considered 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.
Non-Investment Grade
Ba These bonds have speculative elements; their future cannot be
considered as well assured. The protection of interest and principal
payments may be very moderate and thereby not well safeguarded during
good and bad times over the future.
B These bonds lack the characteristics of a desirable investment (i.e.,
potentially low assurance of timely interest and principal payments or
maintenance of other contract terms over any long period of time may
be small).
Caa Bonds in this category have poor standing and may be in default. These
bonds carry an element of danger with respect to principal and
interest payments.
Ca Speculative to a high degree and could be in default or have other
marked shortcomings. C is the lowest rating.
DESCRIPTION OF MUNICIPAL NOTE RATINGS
Moody's
- -------
MIG1 & VMIG1 Short-term municipal securities rated MIG1 or VMIG1
are of the best quality. They have strong protection from
established cash flows, superior liquidity support or
demonstrated broad-based access to the market for
refinancing.
MIG2 & VMIG2 These Short-term municipal securities rated are of
high quality. Margins of protection are ample although not
so large as in the preceding group.
MIG3 & VMIG3 Favorable quality. All security elements are
accounted for, but the undeniable strength of the preceding
grades is lacking. Liquidity and cash flow protection may be
narrow and marketing access for refinancing is likely to be
less well established.
S&P
- ---
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.
SP-1 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.
SP-3 Speculative capacity to pay principal and interest.
21
<PAGE> 583
DESCRIPTION OF PREFERRED STOCK RATINGS
Moody's
- -------
aaa Top-quality preferred stock. This rating indicates good asset protection
and the least risk of dividend impairment within the universe of
preferred stocks.
aa High-grade preferred stock. This rating indicates that there is a
reasonable assurance the earnings and asset protection will remain
relatively well maintained in the foreseeable future.
a Upper-medium grade preferred stock. While risks are judged to be
somewhat greater than in the "aaa" and "aa" classification, earnings and
asset protection are, nevertheless, expected to be maintained at
adequate levels.
baa Medium-grade preferred stock, neither highly protected nor poorly
secured. Earnings and asset protection appear adequate at present but
may be questionable over any great length of time.
S&P
- ---
S&P's preferred stock rating is an assessment of the capacity and willingness of
an issuer to pay preferred stock dividends and any applicable sinking fund
obligations.
AAA Highest rating. This rating indicates an extremely strong capacity to pay
the preferred stock obligations.
AA High-quality, fixed-income security. The capacity to pay preferred stock
obligations is very strong, although not as overwhelming as for issues
rated "AAA."
A Backed by a sound capacity to pay the preferred stock obligations,
although it is somewhat more susceptible to the adverse effects of
changes in circumstances and economic conditions.
BBB Backed by an adequate capacity to pay the preferred stock obligations.
Whereas the issuer normally exhibits adequate protection parameters,
adverse economic conditions or changing circumstances are more likely to
lead to a weakened capacity to make payments for a preferred stock in
this category than for issues in the "A" category.
SHORT-TERM DEBT RATINGS
Thompson Bank Watch, Inc. ("TBW") assigns ratings to specific debt instruments
with original maturities of one year or less. The TBW Short-Term ratings
specifically assess the likelihood of an untimely payment of principal and
interest.
TBW-1 Very high degree of likelihood that principal and interest will be
paid on a timely basis.
TBW-2 While degree of safety regarding timely repayment of principal and
interest is strong, the relative degree is not as high as for issues
rated TBW-1.
TBW-3 Lowest investment grade category. While more susceptible to adverse
developments than obligations with higher ratings, capacity to
service principal and interest in a timely fashion is considered
adequate.
TBW-4 Non-investment grade and, therefore, speculative.
22
<PAGE> 584
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23
<PAGE> 585
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24
<PAGE> 586
Investment Adviser and Sub-Administrator
Banc One Investment Advisors Corporation
1111 Polaris Parkway
P.O. Box 710211
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 8528
Boston, MA 02266-8528
Legal Counsel
Ropes & Gray
One Franklin Square
1301 K Street, N.W.
Suite 800 East
Washington, D.C. 20005
Independent Accountants
PricewaterhouseCoopers, LLP
100 East Broad Street
Columbus, OH 43215
The Statement of Additional Information contains more detailed information about
the Funds. The current Statement of Additional Information has been filed with
the Securities and Exchange Commission and is available without charge by
calling 1-800-480-4111 or by writing to The One Group Services Company at 3435
Stelzer Road, Columbus, Ohio 43219. The Statement of Additional Information is
incorporated into this prospectus by reference. The SEC maintains a Web site
(www.sec.gov) that contains the Statement of Additional Information, materials
incorporated by reference and other information regarding The One Group(R).
TOG-F-107
91984.01
25
<PAGE> 587
THE ONE GROUP(R)
FAMILY OF MUTUAL FUNDS
3435 Stelzer Road
Columbus, Ohio 43219-3035
(800) 480-4111
October __, 1998
THE ONE GROUP(R) TEXAS TAX-FREE BOND FUND
This Prospectus describes The One Group Texas Tax-Free Bond Fund which attempts
to produce current income that is exempt from Federal income tax. The
information in this prospectus is important. Please read it carefully before you
invest, and save it for future reference.
PLEASE REMEMBER THAT SHARES OF THE FUNDS: O ARE NOT DEPOSITS OR
OBLIGATIONS OF, OR GUARANTEED BY BANC ONE CORPORATION OR ITS AFFILIATES; O ARE
NOT INSURED OR GUARANTEED BY THE FEDERAL DEPOSIT INSURANCE CORPORATION OR BY ANY
FEDERAL OR STATE GOVERNMENTAL AGENCY; O INVOLVE INVESTMENT RISK, INCLUDING THE
POSSIBLE LOSS OF THE PRINCIPAL AMOUNT INVESTED.
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES
AND EXCHANGE COMMISSION NOR HAS THE COMMISSION PASSED UPON THE ACCURACY OR
ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY
IS A CRIMINAL OFFENSE.
<PAGE> 588
TABLE OF CONTENTS
A BRIEF PREVIEW OF THE FUND 3
ABOUT THE FUND 4
The One Group(R) Texas Tax-Free Bond Fund 4
MORE ABOUT THE FUND 6
HOW TO DO BUSINESS WITH THE ONE GROUP 7
Purchasing Fund Shares 7
Sales Charges 10
Sales Charge Reductions and Waivers 12
Exchanging Fund Shares 14
Redeeming Fund Shares 16
SHAREHOLDER INFORMATION 18
Voting Rights 18
Dividend Policies 18
Tax Treatment of the Fund 19
Tax Treatment of Shareholders 19
Shareholder Inquiries 20
ORGANIZATION & MANAGEMENT OF THE FUND 20
The Fund 20
The Board of Trustees 20
The Advisor 20
The Distributor 20
The Administrator and Sub-Administrator 20
The Transfer Agent, Custodian and Sub-Custodian 20
DETAILS ABOUT THE FUND'S INVESTMENT PRACTICES AND POLICIES 21
Investment Practices 21
Investment Risks 23
Investment Policies 24
APPENDIX: DESCRIPTION OF RATINGS 26
2
<PAGE> 589
[LOGO-(CLOCK)] A BRIEF PREVIEW OF THE FUND
WHAT IS THE GOAL OF THE TEXAS TAX-FREE BOND FUND? The Fund is designed to
produce current income consistent with both the preservation of principal and
exempt from Federal income tax. This Fund may not be appropriate for Individual
Retirement Accounts, Qualified Plans, and other Retirement Plans that receive
favorable tax treatment. Please read about the Fund before investing.
WHAT IS THE FUND'S INVESTMENT STRATEGY? The Fund invests in debt securities that
are issued by or on behalf of Texas or its respective authorities, agencies,
instrumentalities and political subdivisions that produce income that is exempt
from Federal income tax.
WHAT ARE THE MAIN RISKS OF INVESTING IN THE FUND? The Fund invests in
fixed-income investments that are subject to market fluctuations as a result of
changes in interest rates. As a result, the value of investments in the Fund may
decrease during periods of rising interest rates and increase during periods of
declining interest rates. In addition, some of the Fund invest in
mortgage-related securities which may have greater price and yield volatility
than traditional fixed-income securities. The Fund is a non-diversified fund
which exposes investors to special risks, including risks associated with Texas
specific investments. An investment in the Funds is not a deposit of BANC ONE
CORPORATION or its affiliates and is not insured or guaranteed by the Federal
Deposit Insurance Corporation or any other government agency. For more
information about risks, please read "More About the Fund" and "Investment
Risks."
WHAT CLASSES OF SHARES ARE AVAILABLE? The Fund currently offers four classes of
Shares: Class A, Class B, Class C and Class I. Class A, Class B and Class C
shares are offered to the general public. Class I 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. The section called "How To Do Business With The One Group"
will provide more information.
HOW DO I PURCHASE AND REDEEM SHARES? You may buy and redeem shares of the Fund
on any day that the Fund is open for business. Purchase and redemption
procedures are explained in greater detail in "How To Do Business With The One
Group." For additional information, call The One Group Services Company at
1-800-480-4111.
HOW ARE DIVIDENDS PAID? Generally, dividends are declared on each business day
and are distributed periodically 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 you elect to take the payment in
cash. For a more detailed discussion of dividends, see "Dividend Policies."
WHO MANAGES THE FUND? Banc One Investment Advisors Corporation ("Banc One
Investment Advisors"), an indirect subsidiary of BANC ONE CORPORATION, serves as
the advisor of the Fund. Banc One Investment Advisors is paid a fee for its
services. A more detailed discussion regarding Banc One Investment Advisors, its
services and compensation can be found in the Prospectus under the headings "The
Advisor" and "Expense Summary."
3
<PAGE> 590
THE ONE GROUP TEXAS TAX-FREE BOND FUND
INVESTMENT OBJECTIVE: The Fund is a non-diversified fund that seeks current
income both consistent with the preservation of principal and exempt from
Federal income tax.
INVESTMENT STRATEGY: The Fund invests in investment grade debt securities issued
by or on behalf of Texas and its authorities, political subdivisions, agencies
and instrumentalities, the interest on which, in the opinion of issuer's
counsel, is exempt from Federal income tax ("Texas Municipal Securities"). The
Fund's average weighted maturity normally will be between five and twenty years.
PORTFOLIO SECURITIES: The Fund invests at least 80% of its total assets in Texas
Municipal Securities. This is a fundamental policy. The Fund also may hold up to
20% of its total assets in cash or invest in municipal securities of states
(other than Texas), territories and possessions of the United States, and their
respective authorities, agencies, instrumentalities, and political subdivisions,
the interest on which is exempt from Federal income tax ("Municipal
Securities"). At least 65% of the total assets of the Fund will consist of
Municipal Securities that are bonds with remaining maturities of 7 to 30 years.
For a list of all securities in which the Fund may invest, please read
"Investment Practices."
RISK CONSIDERATIONS: The Fund invests in Texas Municipal Securities, which may
be impacted by economic and political developments in Texas. The Texas Municipal
Securities also include fixed-income investments. The value of these securities
will change in response to interest rate changes and other factors. Before you
invest, please read "More About the Fund" and "Investment Risks."
TAX CONSIDERATIONS: Up to 100% of the Fund's assets may be invested in Texas
Municipal Securities and Municipal Securities the interest on which is subject
to Federal alternative minimum tax. Shareholders who are subject to the Federal
alternative minimum tax may have all or a portion of their income from the Fund
subject to Federal income tax. In addition, corporate shareholders will be
required to take the interest on Municipal Securities and Texas Municipal
Securities into account in determining their alternative minimum taxable income.
FUND MANAGERS: Gary J. Madich, CFA, is Senior Managing Director of Fixed Income
Securities and has managed the Fund since the Fund's inception. Mr. Madich
joined Banc One Investment Advisors in 1995. Prior to joining Banc One
Investment Advisors, Mr. Madich was a Senior Vice President and Portfolio
Manager with Federated Investors. Mr. Madich has nineteen years of investment
management experience.
- -----------------------------------------------------------------------------
<TABLE>
<CAPTION>
SHAREHOLDER EXPENSES
<S> <C> <C> <C> <C>
Class A Class B Class C Class I
SHAREHOLDER TRANSACTION EXPENSES(1) ------- ------- ------- ---------
Maximum Sales Charge Imposed on Purchases 4.50% none none none
(as a percentage of offering price)
Maximum Contingent Deferred Sales Charge none(2) 5.00% 1.00% none
(as a percentage of original purchase price
or redemption proceeds, as applicable)
Redemption Fees none none none none
Exchange Fees none none none none
ANNUAL OPERATING EXPENSE
(as a percentage of average daily net assets)
Investment Advisory Fees (after fee waiver)(3)
12b-1 Fees (after fee waiver)(4)
Other Expenses (5)
Total Fund Operating Expenses (after fee
waivers)(6)
</TABLE>
(1) If you buy or sell shares through a Shareholder Servicing Agent, you
may be charged separate transaction fees by the Shareholder Servicing
Agent. In addition, a $10.00 sub-minimum account fee may be applicable
and a $7.00 charge will be deducted from redemption amounts paid by
wire.
(2) Except for purchases of $1 million or more. Please see "Sales
Charges."
(3) Without the fee waiver, Investment Advisory Fees would be ____% for
all classes of shares.
4
<PAGE> 591
(4) Due to 12b-1 fees, long-term Class A, Class B and Class C
shareholders may pay more than the equivalent of the maximum
front-end sales charges permitted by the rules of the National
Association of Securities Dealers. Without the voluntary waiver of
fees, 12b-1 fees would be ___% for Class A shares, ___% for Class B
shares and Class C shares.
(5) Other Expenses are based on estimated amounts for the current fiscal
year.
(6) Without the voluntary reduction of Investment Advisory and 12b-1
fees, Total Operating Expenses would be ___% for Class A shares,
____% for Class B shares, ____% for Class C shares and .__% for
Class I shares.
EXAMPLE: An investor would pay the following expenses on a $1,000 investment in
the Fund, assuming: (1) payment of the maximum sales charge; (2) 5% annual
return; and (3) redemption at the end of each time period.
1 YEAR 3 YEARS
------ -------
Class A
Class A (without fee waiver)
Class B
Class B (without fee waiver)
Class C
Class C (without fee waiver)
Class I
Class I (without fee waiver)
Assuming no redemption at the end of each time period, the dollar amounts in the
above example would be as follows:
1 YEAR 3 YEARS
------ -------
Class A
Class A (without fee waiver)
Class B
Class B (without fee waiver)
Class C
Class C (without fee waiver)
Class I
Class I (without fee waiver)
Class B shares automatically convert to Class A shares after eight (8) years.
Therefore, the "10 years" examples above reflect this conversion.
These examples are designed to assist you in understanding the various costs and
expenses that may be directly or indirectly paid by investors in the Fund. THESE
EXAMPLES SHOULD NOT BE CONSIDERED A REPRESENTATION OF PAST OR FUTURE EXPENSES
AND ACTUAL EXPENSES MAY BE GREATER OR LESS THAN THOSE SHOWN.
5
<PAGE> 592
MORE ABOUT THE FUND
WHEN THE PROSPECTUS REFERS TO "BONDS," WHAT TYPES OF INVESTMENTS ARE INCLUDED?
"Bonds" include debt instruments issued by the U.S. Treasury, U.S. government
agencies, municipalities and zero coupon obligations as well as debt instruments
issued by Texas and their respective authorities, political subdivisions,
agencies and instrumentalities.
PORTFOLIO QUALITY
The Fund only purchase securities that meet certain rating criteria:
- - Texas Municipal Securities that are bonds must be rated as investment
grade.
- - Other securities such as tax-exempt commercial paper, notes, and variable
demand obligations must be rated in one of the two highest investment grade
categories.
If the securities are unrated, Banc One Investment Advisors must determine that
they are of comparable quality to rated securities. Banc One Investment Advisors
will look at a security's rating at the time of investment. For more information
about ratings, please see "Description of Ratings" in the Appendix.
ILLIQUID INVESTMENTS
The Fund may invest up to 15% of its net assets in illiquid investments. A
security is illiquid if it cannot be sold at approximately the value assessed by
the Fund within seven (7) days. Banc One Investment Advisors will follow
guidelines adopted by The One Group Board of Trustees in determining whether an
investment is illiquid.
SPECIAL RISK CONSIDERATIONS
FIXED INCOME SECURITIES: Investments in fixed income securities (for example,
bonds) will increase or decrease based on changes in interest rates. If rates
increase, the value of the Fund's investments generally declines. On the other
hand, if rates fall, the value of the investments generally increases. The value
of your investment in the Fund will increase and decrease as the value of the
Fund's investments increase and decrease. While securities with longer duration
and maturities tend to produce higher yields, they are also subject to greater
fluctuations in value when interest rates change. Usually, changes in the value
of fixed income securities will not affect cash income generated, but may affect
the value of your investment.
DERIVATIVES: The Fund invests in securities that are considered to be
derivatives. "Derivatives" are securities that derive their value from the
performance of underlying assets or securities These include:
options
futures contracts
options on futures contracts
mortgage-backed securities, including collateralized mortgage obligations
and Real Estate Mortgage Investment Conduits (CMOs and REMICs)
structured instruments
swaps, caps and floors
new financial products
inverse floating rate instruments
asset-backed securities
These securities may be more volatile than other investments. Derivatives
present, to varying degrees, market, credit, leverage, liquidity, and management
risks. The Fund's use of derivatives may cause the Fund to recognize higher
amounts of short-term capital gains (generally taxed at ordinary income tax
rates) than it would if the Fund did not use such instruments. For a more
detailed discussion of these risks, please read "Investment Risks."
6
<PAGE> 593
NON-DIVERSIFIED FUND: The Fund is a "non-diversified" fund. This means that the
Fund may invest a more significant portion of its assets in the securities of a
single issuer than can a "diversified" fund. In addition, the Fund's investments
are concentrated geographically. These concentrations increase the risk of loss
to the Fund if an issuer fails to make interest or principal payments or if the
market value of a security declines.
TEXAS MUNICIPAL SECURITIES: Because the Fund is not diversified and because it
concentrates in securities of Texas issuers, certain factors may have a
disproportionate negative effect on the Fund's investments. These factors may
include certain economic conditions, constitutional amendments, legislative
measures, executive orders, administrative regulations and vote initiatives. For
a more complete description of the risks of investing in Texas Municipal
Securities, please see the Statement of Additional Information.
HOW TO DO BUSINESS WITH THE ONE GROUP
PURCHASING FUND SHARES
You may purchase Fund shares from the following sources:
- - The One Group Services Company, and
- - Shareholder Servicing Agents. These include investment advisors, brokers,
financial planners, banks, insurance companies, retirement or 401(k) plan
sponsors, or other intermediaries. Shares purchased this way will be held
for you by the Shareholder Servicing Agent.
WHEN CAN I BUY SHARES?
- - Purchases may be made on any business day. This includes any day that the
Funds are open for business, other than weekends, days on which the New
York Stock Exchange ("NYSE") is closed, and the following holidays: New
Years Day, Martin Luther King, Jr. Day, Presidents' Day, Good Friday,
Memorial Day, Independence Day, Labor Day, Thanksgiving, and Christmas.
- - Purchase requests received by The One Group Services Company before 4:00
p.m. Eastern time ("ET"), will be effective that day. One occasion, the
NYSE will close before 4:00 p.m. When that happens, purchases received
after the NYSE closes will be effective the following business day.
- - Purchase orders may be cancelled by the Fund's Custodian, State Street Bank
and Trust Company, if it does not receive "federal funds" by 4:00 p.m. ET
(i) on the business day after the order is placed if you are buying Class I
shares, and (ii) on the third business day if you are purchasing Class A,
Class B or Class C shares.
- - If your shares are held by a Shareholder Servicing Agent, it is the
responsibility of the Shareholder Servicing Agent to send your purchase or
redemption order to the Fund. Your Shareholder Servicing Agent may have an
earlier cut-off time for purchase and redemption requests.
- - The One Group Services Company can reject a purchase order if it does not
think that it is in the best interests of a Fund and/or its shareholders to
accept the order.
- - Shares are electronically recorded. Therefore, certificates will not be
issued.
WHAT KIND OF SHARES CAN I BUY?
The One Group offers the following classes of shares:
- - Class A, Class B and Class C shares are available to the general public.
- - Class I shares are available to institutional investors and any
organization authorized to act in a fiduciary, advisory, custodial or
agency capacity. We will refer to these entities as "Intermediaries."
7
<PAGE> 594
- - If you intend to hold your shares six or more years, Class B shares may be
appropriate for you. If you intend to hold your shares for less than six
years, you may want to consider Class A or Class C shares.
HOW MUCH DO SHARES COST?
- - Shares are sold at net asset value ("NAV") plus a sales charge, if any.
- - Each class of shares in each Fund has a different NAV. This is primarily
because each class has different distribution expenses.
- - NAV per share is calculated by dividing the total market value of a Fund's
investments and other assets allocable to a class (minus class expenses) by
the number of outstanding shares in that class.
- - A Fund's NAV changes every day. NAV is calculated each business day
following the close of the NYSE at 4:00 p.m. ET. On occasion, the NYSE will
close before 4:00 p.m. When that happens, NAV will be calculated as of the
time the NYSE closes.
HOW DO I OPEN AN ACCOUNT?
1. Read the prospectus carefully, and select the Fund or Funds most
appropriate for you.
2. Decide how much you want to invest.
- The minimum initial investment is $1,000 ($100 for employees of BANC
ONE CORPORATION and its affiliates).
- Subsequent investments must be at least $100 ($25 for employees of
BANC ONE CORPORATION and its affiliates).
- You may purchase no more than $250,000 of Class B shares at one time.
- The One Group Services Company may waive these minimums.
3. Complete the Account Application Form. Be sure to sign up for all of the
Account privileges that you plan to take advantage of. Doing so now means
that you will not have to complete additional paperwork later.
4. Send the completed application and a personal check (unless you choose to
pay by wire or bank transfer) payable to "The One Group" to:
State Street Bank and Trust Company
c/o The One Group
P.O. Box 8528
Boston, MA 02266-8528
5. All checks should be in U.S. dollars. Third party checks will not be
accepted. Redemptions from a Fund will not be permitted for ten (10)
calendar days if purchases are made by check or under the Systematic
Investment Plan (see below).
6. If you purchase shares through a Shareholder Servicing Agent, you may be
required to complete additional forms or follow additional procedures. You
should contact your Shareholder Servicing Agent regarding purchases,
exchanges and redemptions.
7. If you have any questions, contact your Shareholder Servicing Agent or call
The One Group Services Company at 1-800-480-4111.
8
<PAGE> 595
CAN I PURCHASE SHARES OVER THE TELEPHONE?
Yes. Simply select this option on your Account Application Form and then:
- - Contact your Shareholder Servicing Agent or The One Group Services Company
at 1-800-480-4111 to relay your purchase instructions.
- - Send a personal check made payable to "The One Group" to State Street Bank
and Trust Company (see address above), authorize a bank transfer or
initiate a wire transfer to the following wire address:
State Street Bank & Trust Company
Attn: Custody & Shareholder Services
ABA 011 000 028
DDA 99034167
FBO The One Group Fund (ex: The One Group Prime Money Market Fund - A)
Your Account Number (ex: 123456789)
Your Account Registration (ex: John Smith & Mary Smith, JTWROS)
- - The One Group uses reasonable procedures to confirm that instructions given
by telephone are genuine. These procedures include recording telephone
instructions and asking for personal identification. If these procedures
are followed, The One Group will not be responsible for any loss,
liability, cost or expense of acting upon unauthorized or fraudulent
instructions; you bear the risk of loss.
- - You may revoke your right to make purchases over the telephone by sending a
letter to:
State Street Bank and Trust Company
c/o The One Group
P.O. Box 8528
Boston, MA 02266-8528
CAN I AUTOMATICALLY INVEST ON A SYSTEMATIC BASIS?
Yes. After your Account is established, you may purchase additional Class A,
Class B and Class C shares by making automatic monthly investments from your
bank account. The minimum initial investment is still $1,000, but minimum
automatic additions are only $25. The One Group Services Company may waive these
minimums. To establish a Systematic Investment Plan:
- - Select the "Systematic Investment Plan" option on the Account Application
Form.
- - Provide the necessary information about the bank account from which your
investments will be made.
- - Shares purchased under a Systematic Investment Plan may not be redeemed for
ten (10) calendar days.
- - The One Group currently does not charge for this service, but may impose a
charge in the future. However, your bank may impose a charge for debiting
your bank account.
- - You may revoke your right to make systematic investments by calling The One
Group Services Company at 1-800- 480-4111 or by sending a letter to:
State Street Bank and Trust Company
c/o The One Group
P.O. Box 8528
Boston, MA 02266-8528
9
<PAGE> 596
CONVERSION FEATURE
Your Class B shares automatically convert to Class A shares after eight years
(measured from the end of the month in which they were purchased).
- - After conversion, your shares will be subject to the lower distribution and
shareholder servicing fees charged on Class A shares.
- - You will not be assessed any sales charges or fees for conversion of
shares, nor will you be subject to any Federal income tax.
- - Because the share price of the Class A shares may be higher than that of
the Class B shares at the time of conversion, you may receive fewer Class A
shares; however, the dollar value will be the same.
- - If you have exchanged Class B shares of one Fund for Class B shares of
another, the time you held the shares in each Fund will be added together.
SALES CHARGES
The One Group Services Company compensates Shareholder Servicing Agents who sell
shares of The One Group. Compensation comes from: sales charges, 12b-1 fees and
payments by The One Group Services Company from its own resources. The One Group
Services Company, at its own expense, also will provide promotional incentives
in the form of travel expenses, lodging and bonuses to licensed individuals who
sell shares of the Funds, as well as vacation trips (including lodging at luxury
resorts), tickets to entertainment events, and merchandise. Occasionally, cash
incentives will be paid to select Shareholder Servicing Agents. Those
Shareholder Servicing Agents who may receive special incentives include Banc One
Securities Corporation, The Advisors Group, United Planners Financial Services
of America, Inc., The Legend Group, and Rosewood Retirement Advisory Services,
LLC.
CLASS A SHARES
This table shows the amount of sales charge you pay and the commissions paid to
SHAREHOLDER SERVICING AGENTS.
<TABLE>
<CAPTION>
SALES CHARGE COMMISSION
SALES CHARGE AS A % AS A % AS A %
OF THE OFFERING OF YOUR OF OFFERING
AMOUNT OF PURCHASE PRICE INVESTMENT PRICE
- ------------------ ------------------ ---------- -----------
<S> <C> <C> <C> <C>
Less than $100,000 4.50% 4.71% 4.05%
$100,000-$249,999 3.50% 3.63% 3.05%
$250,000-$499,999 2.50% 2.56% 2.05%
$500,000-$999,999 2.00% 2.04% 1.60%
$1,000,000* 0.00% 0.00% 0.00%
</TABLE>
* If you purchase $1 million or more of Class A shares and are not assessed a
sales charge at the time of purchase, you will be charged the equivalent of
1% of the purchase price if you redeem any or all of the Class A shares
within one year of purchase.
CLASS B SHARES
Class B shares are offered at NAV, without any up-front sales charges. However,
if you redeem these shares within six years of the purchase date, you will be
assessed a Contingent Deferred Sales Charge ("CDSC") according to the following:
10
<PAGE> 597
<TABLE>
<CAPTION>
CDSC AS A % OF DOLLAR
YEAR SINCE PURCHASE AMOUNT SUBJECT TO CHARGE
------------------- ------------------------
<S> <C> <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%
more than 6 0.00%
</TABLE>
The One Group Services Company pays a commission of 4.00% of the original
purchase price to Shareholder Servicing Agents who sell Class B shares.
CLASS C SHARES
Class C shares are offered at NAV, without any up-front sales charge. However,
if you redeem your shares within one year of the purchase date, you will be
assessed as follows:
<TABLE>
<CAPTION>
CDSC AS A % OF DOLLAR
YEAR SINCE PURCHASE AMOUNT SUBJECT TO CHARGE
------------------- ------------------------
<S> <C> <C>
0-1 1.00%
After first year None
</TABLE>
Shareholder Servicing Agents selling Class C shares receive a commission of
1.00% of the original purchase price from The One Group Services Company.
HOW THE CDSC IS CALCULATED
- - The Fund assumes that all purchases made in a given month were made on the
first day of the month.
- - The CDSC is based on the current market value or the original cost of the
shares, whichever is less.
- - A sales charge is not imposed on increases in NAV above the initial
purchase price, nor is a sales charge assessed on shares acquired through
reinvestment of dividends or capital gains distributions.
- - To keep your CDSC as low as possible, the Fund first will redeem any shares
in your account that carry no CDSC, starting with Class A shares. After
that, the Fund will redeem the shares you have held for the longest time
and thus have the lowest CDSC.
- - If you exchange Class B or Class C shares of an unrelated mutual fund for
Class B or Class C shares of The Group in connection with a fund
reorganization, the CDSC applicable to your original shares (including the
period of time you have held those shares) will be applied to The One Group
shares you receive in the reorganization.
12B-1 FEES
12b-1 fees are paid by The One Group to The One Group Services Company as
compensation for its services and expenses. The One Group Services Company in
turn pays all or part of the 12b-1 fee to Shareholder Servicing Agents that sell
shares of The One Group.
- - The 12b-1 fees vary by share class as follows:
1. Class A shares pay a 12b-1 fee of .35% of the average daily net assets
of the Fund, which is currently being waived to .25%.
11
<PAGE> 598
2. Class B and Class C shares pay a 12b-1 fee of 1.00% of the
average daily net assets of the Fund, which is currently
being waived to .90%. This will cause expenses for Class B
and Class C shares to be higher and dividends to be lower
than for Class A shares.
3. There are no 12b-1 fees for Class I shares.
- - 12b-1 fees, together with the CDSC, help The One Group Services
Company sell Class B and Class C shares without an "up-front" sales
charge by defraying the costs of advancing brokerage commissions and
other expenses paid to Shareholder Servicing Agents.
- - The One Group Services Company may use up to .25% of the fees for
shareholder servicing and up to .75% for distribution.
- - The One Group Services Company may pay 12b-1 fees to its affiliates
and to Banc One Investment Advisors and its affiliates (or any
sub-advisor) for brokerage and other agency transactions.
SALES CHARGE REDUCTIONS AND WAIVERS
REDUCING YOUR CLASS A SALES CHARGES
There are several ways you can reduce the sales charges you pay on Class A
shares:
1. Right of Accumulation: You may add the market value of any Class A,
Class B or Class C shares of a Fund (except a money market fund) that
you (and your spouse and minor children) already own of any One Group
Fund (except a money market fund) to the amount of your next Class A
purchase for purposes of calculating the sales charge. An Intermediary
also may take advantage of this option.
2. Letter of Intent: With an initial investment of $2,000, you may
purchase Class A shares of one or more Funds over the next 13 months
and pay the same sales charge that you would have paid if all shares
were purchased at once. A percentage of your investment will be held
in escrow until the full amount covered by the Letter of Intent has
been invested.
To take advantage of the accumulation privilege or letter of intent, complete
the appropriate section of your fund application, or contact your Shareholder
Servicing Agent. To determine if you are eligible for the accumulation
privilege, contact The One Group Services Company at 1-800-480-4111. These
programs may be terminated or amended at any time.
WAIVER OF THE CLASS A SALES CHARGE
No sales charge is imposed on Class A shares of the Funds if the shares were:
1. Bought with the reinvestment of dividends and capital gains
distributions.
2. Acquired in exchange for other Fund shares if a comparable sales
charge has been paid for the exchanged shares.
3. Bought by officers, directors or trustees, retirees and employees (and
their spouses and immediate family members) of:
- The One Group.
- BANC ONE CORPORATION and its subsidiaries and affiliates.
- The One Group Services Company and its subsidiaries and
affiliates.
12
<PAGE> 599
- State Street Bank and Trust Company and its subsidiaries and
affiliates.
- Broker/dealers who have entered into dealer agreements with
The One Group and their subsidiaries and affiliates.
- An investment sub-advisor of a fund of The One Group and
such sub-advisor's subsidiaries and affiliates.
4. Bought by:
- Affiliates of BANC ONE CORPORATION and certain accounts
(other than IRA Accounts) for which an Intermediary acts in a
fiduciary, advisory, agency, custodial or similar capacity.
- 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 One Group Services Company.
- Retirement and deferred compensation plans and trusts used to
fund those plans, including, but not limited to, those
defined in Sections 401(a), 403(b) or 457 of the Internal
Revenue Code and "rabbi trusts."
- Shareholder Servicing Agents who have a dealer arrangement
with The One Group Services Company, 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 Shareholder Servicing
Agents who place trades their own accounts if the accounts
are linked to the master account of such Shareholder
Servicing Agent.
5. Bought with proceeds from the sale of Class I shares of a Fund of The
One Group or acquired in an exchange of Class I shares of a Fund for
Class A shares of the same Fund, but only if the purchase is made
within 60 days of the sale or distribution.
6. Bought with proceeds from the sale of shares of a mutual fund,
including a Fund of The One Group, for which a sales charge was paid,
but only if the purchase is made within 60 days of the sale or
distribution.
7. Bought in an IRA with the proceeds of a distribution from an employee
benefit plan, but only if the purchase is made within 60 days of the
sale or distribution and, at the time of the distribution, the
employee benefit plan had plan assets invested in a Fund of The One
Group.
8. Bought with assets of The One Group.
9. Bought in connection with plans of reorganizations of a Fund, such as
mergers, asset acquisitions and exchange offers to which a Fund is a
party.
The waivers described in (5), (6) and (7) above will not continue indefinitely
and may be discontinued at any time without notice.
WAIVER OF THE CLASS B SALES CHARGE
No sales charge is imposed on redemptions of Class B shares of the Funds:
1. Provided that you withdraw no more than 10% of the account value
annually. You do not have to participate in the Systematic Withdrawal
Plan to take advantage of this waiver.
2. If you buy the shares in connection with certain retirement plans,
such as 401(k) and similar qualified plans.
13
<PAGE> 600
3. If you are the shareholder (or a joint shareholder), or a participant
or beneficiary of certain retirement plans and you die or become
disabled (as defined by the Tax Code), but only if the redemption is
made within one year of such death or disability.
4. That represent a minimum required distribution from an IRA Account or
other qualifying retirement plan, but only if you are at least age 70
1/2.
5. Exchanged in connection with plans of reorganizations of a Fund, such
as mergers, asset acquisitions and exchange offers to which a Fund is
a party.
6. Acquired in exchange for Class B shares of other Funds of The One
Group.
WAIVER OF THE CLASS C SALES CHARGE
No sales charge is imposed on redemptions of Class C shares of the Funds:
1. Provided that you withdraw no more than 10% of the account value
annually. You do not have to participate in the Systematic Withdrawal
Plan to take advantage of this waiver.
2. If you buy the shares in connection with certain retirement plans,
such as 401(k) and similar qualified plans.
3. If you are the shareholder (or a joint shareholder), or a participant
or beneficiary of certain retirement plans and you die or become
disabled (as defined by the Tax Code), but only if the redemption is
made within one year of such death or disability.
4. That represent a minimum required distribution from an IRA Account or
other qualifying retirement plan, but only if you are at least age 70
1/2.
5. Exchanged in connection with plans of reorganizations of a Fund, such
as mergers, asset acquisitions and exchange offers to which a Fund is
a party.
6. Acquired in exchange for Class C shares of other Funds of The One
Group.
7. If The One Group Services Company receives notice before you invest
indicating that your Shareholder Servicing Agent, due to the type of
account that you have, is waiving its commission.
To take advantage of any of these sales charge waivers, you must qualify for
such waiver in advance. To see if you qualify, contact The One Group Services
Company at 1-800-480-4111 or your Shareholder Servicing Agent.
EXCHANGING FUND SHARES
WHAT ARE MY EXCHANGE PRIVILEGES?
You may make the following exchanges:
- - Class I shares of a Fund may be exchanged for Class A shares of that
Fund or for Class A or Class I shares of another Fund of The One
Group.
- - Class A shares of a Fund may be exchanged for Class I shares of that
Fund or for Class A or Class I shares of another Fund of The One
Group, but only if you are eligible to purchase those shares.
- - Class B shares of a Fund may be exchanged for Class B shares of
another Fund of The One Group.
- - Class C shares of a Fund may be exchanged for Class C shares of
another Fund of The One Group.
14
<PAGE> 601
The One Group Funds offer a Systematic Exchange Privilege which allows you to
automatically exchange shares of one fund to another on a monthly or quarterly
basis. This privilege is useful in Dollar Cost Averaging. To participate in this
privilege, please select it on your account application. To learn more about it,
please call The One Group Services Company at 1-800-480-4111.
The One Group does not charge a fee for this privilege. In addition, The One
Group may change the terms and conditions of your exchange privileges upon 60
days written notice.
WHEN ARE EXCHANGES PROCESSED?
Exchanges are processed the same business day they are received, provided:
- - State Street Bank and Trust Company receives the request by 4:00 p.m.
ET.
- - You have provided The One Group with all of the information necessary
to process the exchange.
- - You have received a current prospectus of the Fund or Funds in which
you wish to invest.
- - You have contacted your Shareholder Servicing Agent, if necessary.
DO I PAY A SALES CHARGE ON AN EXCHANGE?
Generally, you will not pay a sales charge on an exchange. However:
- - You will pay a sales charge if you own Class I shares of a
Fund and you want to exchange those shares for Class A shares, unless
you qualify for a sales charge waiver (see above).
- - You will pay a sales charge if you bought Class A shares of a Fund:
1. That does not charge a sales charge and you want to exchange
them for shares of a Fund that does, in which case you would
pay the sales charge applicable to the Fund into which you
are exchanging.
2. That charged a lower sales charge than the Fund into which
you are exchanging, in which case you would pay the
difference between that Fund's sales charge and all other
sales charges you have already paid.
- - If you exchange Class B or Class C shares of a Fund, you will not pay
a sales charge at the time of the exchange, however:
1. Your new Class B or Class C shares will be subject to the
higher CDSC of either the Fund from which you exchanged, the
Fund into which you exchanged, or any Fund from which you
previously exchanged.
2. The current holding period for your exchanged Class B or
Class C shares is carried over to your new shares.
ARE EXCHANGES TAXABLE?
Generally:
- - An exchange between classes of shares of the same Fund is not taxable
for Federal income tax purposes.
- - An exchange between Funds is considered a sale and generally results
in a capital gain or loss for Federal income tax purposes.
15
<PAGE> 602
- - You should talk to your tax advisor before making an exchange.
ARE THERE LIMITS ON EXCHANGES?
Yes. The exchange privilege is not intended as a way for you to speculate on
short-term movements in the market. Therefore:
- - To prevent disruptions in the management of the Funds, The One Group
limits excessive exchange activity.
- - Exchange activity is excessive if it EXCEEDS TWO SUBSTANTIVE EXCHANGE
REDEMPTIONS (WITHIN 30 DAYS OF EACH OTHER) WITHIN A TWELVE MONTH
PERIOD.
- - In addition, The One Group reserves the right to reject any exchange
request (even those that are not excessive) if the Fund reasonably
believes that the exchange will result in excessive transaction costs
or otherwise adversely affect other shareholders.
REDEEMING FUND SHARES
WHEN CAN I REDEEM SHARES?
- - You may redeem all or some of your shares on any day that the Funds
are open for business.
- - Redemption requests received by The One Group Services Company before
4:00 p.m. ET (or when the NYSE closes) will be effective that day.
HOW DO I REDEEM SHARES?
- - Unless you have selected the telephone option on your Account
Application Form, you must send a written redemption request to your
Shareholder Servicing Agent, if applicable, or State Street Bank and
Trust Company at the following address:
The One Group
c/o State Street Bank and Trust Company
P.O. Box 8528
Boston, MA 02266-8528
- - All requests for redemptions from IRA accounts must be in writing.
- - You may request redemption forms by calling The One Group Services
Company at 1-800-480-4111.
- - State Street Bank and Trust Company may require that the signature on
your redemption request be guaranteed by a commercial bank, a member
of a domestic stock exchange, or a member of the Securities Transfer
Association Medallion Program or the Stock Exchange Medallion Program,
unless:
1. the redemption is for $50,000 worth of shares or less;
2. the redemption is payable to the shareholder of record;
3. the redemption check is mailed to the shareholder at the
record address; or
4. the redemption is payable by wire or bank transfer (ACH) to
a pre-existing bank account.
- - On the Account Application Form you may elect to have the redemption
proceeds mailed or wired to:
1. a designated commercial bank; or
16
<PAGE> 603
2. State Street Bank and Trust Company or your Shareholder
Servicing Agent.
- - State Street Bank and Trust Company may charge you a wire redemption
fee. The current charge is $7.00.
- - Your redemption proceeds will be paid within seven days after receipt
of the redemption request.
WHAT WILL MY SHARES BE WORTH?
- - If you own Class A and Class I shares and the Fund receives your
redemption request by 4:00 p.m. ET (or when the NYSE closes), you will
receive that day's NAV.
- - If you own Class B or Class C shares and the Fund receives your
redemption request by 4:00 p.m. ET (or when the NYSE closes), you will
receive that day's NAV, minus the amount of any applicable CDSC.
CAN I REDEEM BY TELEPHONE?
Yes, if you selected this option on your Account Application Form.
- - Call your Shareholder Servicing Agent or State Street Bank and Trust
Company at 1-800-480-4111 to relay your redemption request.
- - Your redemption proceeds will be mailed or wired to the commercial
bank account you designated on your Account Application Form.
- - State Street Bank and Trust Company may charge you a wire redemption
fee. The current charge is $7.00.
- - The One Group uses reasonable procedures to confirm that instructions
given by telephone are genuine. These procedures include recording
telephone instructions and asking for personal identification. If
these procedures are followed, The One Group will not be responsible
for any loss, liability, cost or expense of acting upon unauthorized
or fraudulent instructions; you bear the risk of loss.
CAN I REDEEM ON A SYSTEMATIC BASIS?
If you have an account value of at least $10,000 you may elect to receive
monthly, quarterly or annual payments of not less than $100 each.
- - Select the "Systematic Withdrawal Plan" option on the Account
Application Form.
- - Specify the amount you wish to receive and the frequency of the
payments.
- - You may designate a person other than yourself as the payee.
- - There is no charge for this service.
- - If you select this option, please keep in mind that:
1. It may not be in your best interest to buy additional Class A
shares while participating in a Systematic Withdrawal Plan.
This is because Class A shares have an up-front sales charge.
2. If you own Class B or Class C shares, you or your designated
payee may receive systematic payments provided the payments
are limited to no more than 10% of your account value
annually, measured from the date the redemption request is
received.
17
<PAGE> 604
3. If the amount of the systematic payment exceeds the income
earned by your account since the previous payment under the
Systematic Withdrawal Plan, payments will be made by
redeeming some of your shares. This will reduce the amount of
your investment.
ADDITIONAL INFORMATION REGARDING REDEMPTIONS
- - All redemptions will be for cash.
- - If you redeem shares for which you paid by check, and The One Group
has not yet received payment on the check, The One Group will delay
forwarding your redemption proceeds for 10 or more days until payment
has been collected from your bank.
- - Because of the high cost of handling small investments, The One Group
charges a sub-minimum fee. Accounts under $1,000 that are not
participating in a Systematic Investment Plan will be assessed an
annual fee of $10.00. The sub-minimum account fee will not apply to
IRA accounts and the accounts of employees of BANC ONE CORPORATION and
its affiliates.
- - The One Group may suspend your ability to redeem when:
1. Trading on the NYSE is restricted.
2. The NYSE is closed (other than weekend and holiday closings).
3. The SEC has permitted a suspension.
4. An emergency exists.
The Statement of Additional Information offers more details about this
process.
- - You generally will recognize a gain or loss on a redemption for
Federal income tax purposes. You should talk to your tax advisor
before making a redemption.
SHAREHOLDER INFORMATION
VOTING RIGHTS
The Fund do not hold annual shareholder meetings, but may hold special meetings.
The special meetings are held, for example, to elect or remove Trustees, change
a Fund's fundamental investment objective, or approve an investment advisory
contract.
As a Fund shareholder, you have one vote for each share that you own. Each Fund,
and each class of shares within each Fund, vote separately on matters relating
solely to that Fund or class, or which affect that Fund or class differently.
However, all shareholders will have equal voting rights on matters that affect
all shareholders equally.
DIVIDEND POLICIES
DIVIDENDS: The Fund generally declares dividends daily. Dividends are
distributed on the first business day of each month. Capital gains, if any, for
the Fund are distributed at least annually. To maintain a relatively even rate
of distribution from the Fund, the monthly distributions for the Fund may be
fixed from time to time at rates consistent with Banc One Advisor's long-term
earnings expectations.
The Fund pays dividends and distributions on a per-share basis. This means that
the value of your shares will be reduced by the amount of the payment. If you
purchase shares shortly before the record date for a dividend or the
distribution of capital gains, you will pay the full price for the shares and
receive some portion of the price back as a taxable dividend or distribution.
Dividends payable on Class I shares will be more than those payable on other
classes of shares. This is because Class A, Class B and Class C shares have
higher distribution expenses.
18
<PAGE> 605
DIVIDEND REINVESTMENT: You automatically will receive all income dividends and
capital gain distributions in additional shares of the same Fund and class,
unless you have elected to take such payment in cash. The price of the shares is
the NAV determined immediately following the dividend record date. Reinvested
dividends and distributions receive the same tax treatment as dividends and
distributions paid in cash.
If you want to change the way in which you receive dividends and distributions,
you must write to State Street Bank & Trust Company at P.O. Box 8528, Boston, MA
02266-8528, at least 15 days prior to the distribution. The change is effective
upon receipt by State Street.
SPECIAL DIVIDEND RULES FOR CLASS B SHARES: Class B shares received as dividends
and capital gains distributions will be accounted for separately. Each time any
Class B shares (other than those in the sub-account) convert to Class A shares,
a percentage of the Class B shares in the sub-account will also convert to Class
A shares. (See "Conversion Feature.")
TAX TREATMENT OF THE FUND
TAX STATUS OF THE FUND: The Fund intends to qualify as a "regulated investment
company" for Federal income tax purposes. If the Fund qualifies, as it has in
the past, it will pay no federal income tax on the earnings it distributes to
shareholders.
TAX TREATMENT OF SHAREHOLDERS
TAXATION OF SHAREHOLDER TRANSACTIONS: A sale, exchange, or redemption of Fund
shares generally will produce either a taxable gain or a loss. You are
responsible for any tax liabilities generated by your transactions.
FEDERAL TAXATION OF DISTRIBUTIONS:
EXEMPT-INTEREST DIVIDENDS. If, at the close of each quarter of its taxable
year, at least 50% of the value of a Fund's assets consists of obligations
the interest on which is excludable from gross income, the Fund may pay
"exempt-interest dividends" to you. Generally, exempt-interest dividends
are excludable from gross income.
However:
1. If you receive Social Security or Railroad Retirement
benefits, you may be taxed on a portion of such benefits if
you receive exempt-interest dividends from the Funds.
2. 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.
INTEREST ON PRIVATE ACTIVITY BONDS: The Fund may invest as much as 100% of
its assets in municipal securities issued to finance private activities the
interest on which is a tax preference item for purposes of the Federal
alternative minimum tax ("Private Activity Bonds"). As a result, Fund
shareholders who are subject to the Federal alternative minimum tax may
have all or a portion of their income from the Fund subject to Federal
income tax. Additionally, corporate shareholders will be required to take
the interest on municipal securities (including state municipal securities)
into account in determining their alternative minimum taxable income.
Persons who are substantial users of facilities financed by private
activity bonds or who are "related persons" of such substantial users
should consult their tax advisors before investing in the Fund.
INVESTMENT INCOME AND CAPITAL GAINS DIVIDENDS. The Fund will distribute
substantially all of its net investment income (including, for this
purpose, net short-term capital gains) on at least an annual basis.
Dividends you receive from the Fund, other than "exempt-interest
dividends," will be taxable to you, whether reinvested or received in cash.
Dividends from the Fund's net investment income, if any, will be taxable as
ordinary income and capital gains dividends from the Fund's long-term
capital gains will be taxable to you as such, regardless of how long you
have held the shares.
Dividends paid in January, but declared in October, November or December of the
previous year, will be considered to have been paid the previous December.
19
<PAGE> 606
STATE AND LOCAL TAXATION OF DISTRIBUTIONS: Dividends that are derived from the
Fund's investments in U.S. government obligations may not be entitled to the
exemptions from state and local taxes that would be available if you purchased
U.S. government obligations directly. The Fund will notify you annually of the
percentage of income and distributions derived from U.S. government obligations.
TAX INFORMATION: The Form 1099 that is mailed to you every January details your
dividends and their federal tax category. Even though the Funds provide you with
this information, you are responsible for verifying your tax liability with your
tax professional. For additional tax information see the Statement of Additional
Information. Please note that this tax discussion is general in nature; 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.
SHAREHOLDER INQUIRIES
If you have any questions or need additional information, please write The One
Group Services Company at 3435 Stelzer Road, Columbus, OH 43219 or call
1-800-480-4111.
BOX: REPORTING: In March and September you will receive a financial report from
The One Group. In addition, The One Group will periodically send you proxy
statements and other reports.
ORGANIZATION & MANAGEMENT OF THE FUND
THE FUNDS: Each Fund is a series of The One Group, an open-end management
investment company. The One Group currently consists of 40 separate Funds. One
of the Funds is described in this prospectus; the other Funds are described in
separate prospectuses. Each Fund is supervised by the Board of Trustees.
THE BOARD OF TRUSTEES: The Trustees oversee the management and administration of
the Fund. The Trustees are responsible for making major decisions about the
Fund's investment objectives and policies, but delegate the day-to-day
administration of the Fund to the officers of The One Group.
THE ADVISOR: Banc One Investment Advisors makes the day-to-day investment
decisions for the Fund and continuously reviews, supervises and administers the
Fund's investment programs. Banc One Investment Advisors has served as
investment advisor to The One Group since 1993. Prior to that time, The One
Group was advised by affiliates of Banc One Investment Advisors. In addition to
The One Group, Banc One Investment Advisors serves as investment advisor to
other mutual funds and individual, corporate, charitable and retirement
accounts. As of June 30, 1998, Banc One Investment Advisors, an indirect,
wholly-owned subsidiary of BANC ONE CORPORATION, managed over $59 billion in
assets.
THE DISTRIBUTOR: The One Group Services Company, 3435 Stelzer Road, Columbus,
Ohio 43219, a wholly-owned subsidiary of The BISYS Group, Inc., markets the Fund
and distributes shares through selling brokers, financial institutions,
investment advisors, and other financial representatives.
THE ADMINISTRATOR AND SUB-ADMINISTRATOR: The One Group Services Company also
serves as the Fund's administrator. The One Group Services Company is
responsible for responding to shareholder inquiries and requests for
information, as well as providing regulatory reporting and compliance. For these
services, The One Group Services Company receives a fee based on the total
assets of The One Group. For the first $1.5 billion in One Group assets, The One
Group Services Company receives an annual fee of .20% of each Fund's average
daily net assets. The annual rate declines to .18% on assets up to $2 billion,
and to .16% when assets exceed $2 billion. The fee is calculated daily and paid
monthly. Some Funds are not included in the calculations. Banc One Investment
Advisors, the Sub-Administrator, provides office space, equipment, and
facilities, as well as legal and regulatory support.
THE TRANSFER AGENT, CUSTODIAN AND SUB-CUSTODIAN: State Street Bank and Trust
Company, P.O. Box 8528, Boston, MA 02266-8528 or your Shareholder Servicing
Agent, if appropriate, handles shareholder recordkeeping and statements,
distributes dividends, and processes buy and sell requests. As the Fund's
custodian, State Street holds the Fund's assets, settles all portfolio trades
and assists in calculating the Fund's net asset values. Bank One Trust Company,
N.A. serves as sub-custodian in connection with the Fund's securities lending
activities under an agreement with State Street Bank
20
<PAGE> 607
and Trust company and Bank One Trust Company, N.A. Bank One Trust Company, N.A.
is paid a fee by the Fund for this service.
YEAR 2000
Preparing for the Year 2000 is a high priority for The One Group Family of
Mutual Funds. Both The One Group Services Company and Banc One Investment
Advisors have formed dedicated teams to help them successfully achieve Year 2000
compliance. In addition, these teams are responsible for assessing the readiness
of all other service providers to The One Group. Year 2000 remediation efforts
are directed toward both information technology and non-information technology
systems. Non-information technology systems include elevators, photocopy
machines, and facsimile machines, and should have no significant impact on the
delivery of services to The One Group.
Banc One Investment Advisors has identified 49 information technology systems
and interfaces that provide service and support to The One Group. Each system is
assigned a priority rating: high, medium or low. Systems rated "high" are those
which are essential to the operation of The One Group. Each system rated "high"
is scheduled to be Year 2000 compliant by December 31, 1998. All systems will be
tested for compliance throughout 1999.
Many, if not all, of the systems are owned or operated by third party servicers
(for example, The One Group's Custodian). Consequently, remediation efforts must
be made by those servicers. Banc One Investment Advisors and The One Group
Services Company have, and will continue to, monitor the remediation progress of
the service providers. This process involves documentation, on-site visits, and
review of remediation plans and test results. Both Banc One Investment Advisors
and The One Group Services Company have budgeted in excess of $700,000 in fiscal
year 1998 and over $1 million in fiscal year 1998 toward the remediation effort
for all systems and interfaces. Neither The One Group nor its shareholders will
bear any of the direct remediation expenses.
Neither The One Group Services Company nor Banc One Investment Advisors
currently anticipate that the move to Year 2000 will have a material impact on
their ability to continue to provide the Funds with service at current levels.
Likewise, The One Group currently anticipates that the more to Year 2000 will
not have a material impact on its operations.
DETAILS ABOUT THE FUND'S INVESTMENT PRACTICES AND POLICIES
INVESTMENT PRACTICES
The Fund invests in a variety of securities and employ a number of investment
techniques. Each security and technique involves certain risks. What follows is
a list of the securities and techniques utilized by the Fund, as well as the
risks inherent in their use. Fixed income securities are primarily influenced by
market, credit and prepayment risks, although certain securities may be subject
to additional risks. For a more complete discussion, see the Statement of
Additional Information. Following the table is a more complete discussion of
risk.
<TABLE>
<CAPTION>
Instrument Fund Code Risk Type
- -----------------------------------------------------------------------------------------------------------------------
U.S. TREASURY OBLIGATIONS: Bills, notes, bonds, STRIPS, and CUBES. Market
<S> <C> <C>
TREASURY RECEIPTS: TRS, TIGRs, and CATS. Market
U.S. GOVERNMENT AGENCY SECURITIES: Securities issued by agencies and instrumentalities of the Market
U.S. Government. These include Ginnie Mae, Fannie Mae and Freddie Mac. Credit
CERTIFICATES OF DEPOSIT: Negotiable instruments with a stated maturity. Market
Credit
Liquidity
TIME DEPOSITS: Non-negotiable receipts issued by a bank in exchange for the deposit of funds. Market
Liquidity
Credit
REPURCHASE AGREEMENTS: The purchase of a security and the simultaneous commitment to return Credit
the security to the seller at an agreed upon price on an agreed upon date. This is treated as a loan. Market
Liquidity
REVERSE REPURCHASE AGREEMENT: The sale of a security and the simultaneous commitment to Market
buy the security back at an agreed upon price on an agreed upon date. This is treated as a Leverage
borrowing by a Fund.
SECURITIES LENDING: The lending of up to 1/3 of the Fund's total assets. Credit
In return the Fund will receive cash, other securities, and/or letters of credit as collateral. Market
Leverage
WHEN-ISSUED SECURITIES AND FORWARD COMMITMENTS: Purchase or contract to purchase securities Market
at a fixed price for delivery at a future date. Leverage
Liquidity
INVESTMENT COMPANY SECURITIES: Shares of other mutual funds, including money market funds Market
of The One Group and shares of other investment companies for which Banc One Investment
Advisors serves as investment advisor or administrator. Banc One Investment Advisors will
waive certain fees when investing in funds for which it serves as investment advisor.
CALL AND PUT OPTIONS: A call option gives the buyer the right to buy, and obligates the seller of Management
the option to sell, a security at a specified price. A put option gives the buyer the right to sell, and Liquidity
obligates the seller of the option to buy, a security at a specified price. The Funds will sell only Credit
covered call and secured put options. Market
</TABLE>
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<PAGE> 608
<TABLE>
<S> <C> <C>
Leverage
FUTURES AND RELATED OPTIONS: A contract providing for the future sale and purchase of a specified Management
amount of a specified security, class of securities, or an index at a specified time in the future and Market
at a specified price. Credit
Liquidity
Leverage
BANKERS' ACCEPTANCES: Bills of exchange or time drafts drawn on and accepted by a Credit
commercial bank. Maturities are generally six months or less. Liquidity
Market
COMMERCIAL PAPER: Secured and unsecured short-term promissory notes issued by corporations Credit
and other entities. Maturities generally vary from a few days to nine months. Liquidity
Market
RESTRICTED SECURITIES: Securities not registered under the Securities Act of 1933, such as Liquidity
privately placed commercial paper and Rule 144A securities. Market
VARIABLE AND FLOATING RATE NOTES: Obligations with interest rates which are reset Market
daily, weekly, quarterly or some other period and which may be payable to the Fund on demand. Credit
Liquidity
MORTGAGE-BACKED SECURITIES: Debt obligations secured by real estate loans and pools of loans. Pre-payment
These include collateralized mortgage obligations ("CMOs"), and Real Estate Mortgage Market
Investment Conduits ("REMICs"). Credit
Regulatory
DEMAND FEATURES: Securities that are subject to puts and standby commitments to purchase Market
the securities at a fixed price (usually with accrued interest) within a fixed period of time following Liquidity
demand by a Fund. Management
MORTGAGE DOLLAR ROLLS: A transaction in which a Fund sells securities for delivery in a current Pre-payment
month and simultaneously contracts with the same party to repurchase similar but not identical Market
securities on a specified future date. Regulatory
SWAPS, CAPS AND FLOORS: A Fund may enter into these transactions to manage its exposure Management
to changing interest rates and other factors. Swaps involve an exchange of obligations by two Credit
parties. Caps and floors entitle a purchaser to a principal amount from the seller of the cap Liquidity
or floor to the extent that a specified index exceeds or falls below a predetermined interest Market
NEW FINANCIAL PRODUCTS: New options and futures contracts and other financial products Management
continue to be developed and the Fund may invest in such options, contracts and products. Credit
Market
Liquidity
STRUCTURED INSTRUMENTS: Debt securities issued by agencies and instrumentalities of the Market
U.S. government, banks, municipalities, corporations and other businesses whose interest Liquidity
and/or principal payments are indexed to foreign currency exchange rates, interest rates, Management
or one or more other references indices. Credit
Foreign Investment
MUNICIPAL SECURITIES: Securities issued by a state or political subdivision to obtain funds for Credit
various public purposes. Municipal securities include private activity bonds and industrial Political
development bonds, as well as General Obligation Notes, Tax Anticipation Notes, Bond Tax
Anticipation Notes, Revenue Anticipation Notes, Project Notes, other short-term tax-exempt Market
obligations, municipal leases, and obligations of municipal housing authorities
and single family revenue bonds.
ASSET-BACKED SECURITIES: Securities secured by company receivables, home equity loans, truck Pre-payment
and auto loans, leases, credit card receivables and other securities backed by other types of Market
receivables or other assets. Credit
ZERO-COUPON DEBT SECURITIES: Bonds and other debt that pay no interest, but are issued at Credit
a discount from their value at maturity. When held to maturity, their entire return equals the Market
differences between their issue price and their maturity value.
INVERSE FLOATING RATE INSTRUMENTS: Leveraged floating rate debt instruments with interest Credit
rates that reset in the opposite direction from the market rate of interest to which the inverse floater Market
is indexed. Leverage
</TABLE>
22
<PAGE> 609
<TABLE>
<S> <C> <C>
LOAN PARTICIPATIONS AND ASSIGNMENTS: Participations in, or assignments of municipal securities, Market
including municipal leases. Credit
Political
Liquidity
Tax
</TABLE>
INVESTMENT RISKS
Below is a more complete discussion of the types of risks inherent in the
securities and investment techniques listed above. Because of these risks, the
value of the securities held by the Fund may fluctuate, as will the value of
your investment in the Fund. Certain investments are more susceptible to these
risks than others.
- - CREDIT RISK. The risk that the issuer of a security, or the counterparty to
a contract, will default or otherwise be unable to honor a financial
obligation. Credit risk is generally higher for non-investment grade
securities. The price of a security can be adversely affected prior to
actual default as its credit status deteriorates and the probability of
default rises.
- - LEVERAGE RISK. Associated with securities or practices that multiply small
index or market movements into large changes in value. Leverage is often
associated with investments in derivatives, but also may be embedded
directly in the characteristics of other securities.
- Hedged. When a derivative (a security whose value is based on another
security or index) is used as a hedge against an opposite position that the
fund also holds, any loss generated by the derivative should be
substantially offset by gains on the hedged investment, and vice versa.
While hedging can reduce or eliminate losses, it can also reduce or
eliminate gains. Hedges are sometimes subject to imperfect matching between
the derivative and underlying security, and there can be no assurance that
a Fund's hedging transactions will be effective.
- Speculative. To the extent that a derivative is not used as a hedge, the
Fund is directly exposed to the risks of that derivative. Gains or losses
from speculative positions in a derivative may be substantially greater
than the derivative's original cost.
- - LIQUIDITY RISK. The risk that certain securities may be difficult or
impossible to sell at the time and the price that normally prevails in the
market. The seller may have to lower the price, sell other securities
instead or forego an investment opportunity, any of which could have a
negative effect on fund management or performance. This includes the risk
of missing out on an investment opportunity because the assets necessary to
take advantage of it are tied up in less advantageous investments.
- - MANAGEMENT RISK. The risk that a strategy used by a fund's management may
fail to produce the intended result. This includes the risk that changes in
the value of a hedging instrument will not match those of the asset being
hedged. Incomplete matching can result in unanticipated risks.
- - MARKET RISK. The risk that the market value of a security may move up and
down, sometimes rapidly and unpredictably. These fluctuations may cause a
security to be worth less than the price originally paid for it, or less
than it was worth at an earlier time. Market risk may affect a single
issuer, industry, sector of the economy or the market as a whole. There is
also the risk that the current interest rate may not accurately reflect
existing market rates. For fixed income securities, market risk is largely,
but not exclusively, influenced by changes in interest rates. A rise in
interest rates typically causes a fall in values, while a fall in rates
typically causes a rise in values. Finally, key information about a
security or market may be inaccurate or unavailable. This is particularly
relevant to investments in foreign securities.
- - POLITICAL RISK. The risk of losses attributable to unfavorable governmental
or political actions, seizure of foreign deposits, changes in tax or trade
statutes, and governmental collapse and war.
- - FOREIGN INVESTMENT RISK. Risk associated with higher transaction costs,
delayed settlements, currency controls and adverse economic developments.
This also includes the risk that fluctuations in the exchange rates between
the U.S. dollar and foreign currencies may negatively affect an investment.
Adverse changes in exchange rates may erode or reverse any gains produced
by foreign currency denominated investments and may widen any losses.
Exchange
23
<PAGE> 610
rate volatility also may affect the ability of an issuer to repay U.S.
dollar denominated debt, thereby increasing credit risk.
- - PRE-PAYMENT RISK. The risk that the principal repayment of a security will
occur at an unexpected time, especially that the repayment of a mortgage or
asset-backed security occurs either significantly sooner or later than
expected. Changes in pre-payment rates can result in greater price and
yield volatility. Pre-payments generally accelerate when interest rates
decline. When mortgage and other obligations are pre-paid, a Fund may have
to reinvest in securities with a lower yield. Further, with early
prepayment, a Fund may fail to recover any premium paid, resulting in an
unexpected capital loss.
- - TAX RISK. The risk that the issuer of the securities will fail to comply
with certain requirements of the Internal Revenue Code, which would cause
adverse tax consequences.
- - REGULATORY RISK. The risk associated with Federal and state laws which may
restrict the remedies that a mortgage lender has when a borrower defaults
on mortgage loans. These laws include restrictions on foreclosures,
redemption rights after foreclosure, Federal and state bankruptcy and
debtor relief laws, restrictions on "due on sale" clauses, and state usury
laws.
INVESTMENT POLICIES
The Fund's investment objective and the following investment policies summarized
below are fundamental. This means that they cannot be changed without the
consent of a majority of the outstanding shares of the Fund. In addition to the
fundamental policies mentioned earlier, the following fundamental policies apply
to the Fund as specified. The full text of the fundamental policies can be found
in the Statement of Additional Information.
The Texas Tax-Free Bond Fund may not:
1. Purchase the securities of an issuer if as a result more than 25% of its
total assets would be invested in the securities of that issuer or the Fund
would own more than 10% of the outstanding voting securities of that issuer.
This does not include securities issued or guaranteed by the United States, its
agencies or instrumentalities, and repurchase agreements involving these
securities. This restriction applies to 50% of a Fund's total assets.
2. Concentrate in a particular industry or group of industries. This does not
include securities issued or guaranteed by the United States, its agencies or
instrumentalities, and repurchase agreements involving these securities and
Texas Municipal Securities or Municipal securities or governmental guarantees of
Texas Municipal Securities or Municipal Securities. Private activity bonds that
are backed only by the assets and revenues of a non-governmental issuer are not
Texas Municipal Securities or Municipal Securities for purposes of this
restriction.
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.
Additional investment policies are set forth in the Statement of Additional
Information.
TEMPORARY DEFENSIVE POSITION
For temporary defensive purposes, 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 also may invest up to 20% of its total assets in securities other than
Texas Municipal Securities.
While the Fund is engaged in a temporary defensive position, it will not be
pursuing its investment objectives. Therefore, the Fund will pursue a temporary
defensive position only when market conditions warrant.
PORTFOLIO TURNOVER
Portfolio turnover may vary greatly from year to year, as well as within a
particular year.
24
<PAGE> 611
Higher portfolio turnover rates will likely result in higher transaction costs
to the Fund and may result in additional tax consequences to you. To the extent
portfolio turnover results in short-term capital gains, such gains will
generally be taxed at ordinary income tax rates.
25
<PAGE> 612
APPENDIX A
DESCRIPTION OF RATINGS
The following is a summary of published ratings by major credit rating agencies.
Credit ratings evaluate only the safety of principal and interest payments, not
the market value risk of lower quality securities. Credit rating agencies may
fail to change credit ratings to reflect subsequent events on a timely basis.
Although Banc One Investment Advisors considers security ratings when making
investment decisions, it also performs its own investment analysis and does not
rely solely on the ratings assigned by credit agencies.
Unrated securities will be treated as non-investment grade securities unless
Banc One Investment Advisors determines that such securities are the equivalent
of investment grade securities. Securities that have received different ratings
from more than one agency are considered investment grade if at least one agency
has rated the security investment grade.
DESCRIPTION OF COMMERCIAL PAPER RATINGS
Duff & Phelps Credit Rating Co. ("Duff")
- ----------------------------------------
D-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 obligations.
D-1 Very high certainty of timely payment. Liquidity factors are
excellent and supported by good fundamental protection factors.
Risk factors are minor.
D-1- High certainty of timely payment. Liquidity factors are strong and
supported by good fundamental protection factors. Risk factors are
very small.
Standard & Poor's Corporation ("S&P")
- --------------------------------------
A-1 Highest category of commercial paper. Capacity to meet financial
commitment is strong. Obligations designated with a plus sign (+)
indicate that capacity to meet financial commitment is extremely
strong.
A-2 Issues somewhat more susceptible to adverse effects of changes in
circumstances and economic conditions than obligations in higher
rating categories. However, the capacity to meet financial
commitments is satisfactory.
Fitch's Investors Service, L.P. ("Fitch")
- -----------------------------------------
F-1+ Exceptionally strong credit quality. Strongest degree of assurance
for timely payment.
F-1 Very strong credit quality. Assurance of timely payment is only
slightly less in degree than issues rated F-1+.
F-2 Good credit quality. Satisfactory degree of assurance for timely
payment, but the margin of safety is not as good as for issues
assigned F-1+ and F-1 ratings.
IBCA Limited ("IBCA")
- ---------------------
A1 Highest capacity for timely repayment. Those issues rated A1+
possess a particularly strong credit feature.
A2 Satisfactory capacity for timely repayment although such capacity
may be susceptible to adverse changes in business, economic or
financial conditions.
26
<PAGE> 613
Moody's Investors Service ("Moody's")
- --------------------------------------
Prime-1 Superior ability for repayment.
Prime-2 Strong ability for repayment.
DESCRIPTION OF BANK RATINGS
Moody's
- -------
These ratings represent Moody's opinion of a bank's intrinsic safety and
soundness.
A These banks possess exceptional intrinsic financial strength.
Typically they will be major financial institutions with highly
valuable and defensible business franchises, strong financial
fundamentals, and a very attractive and stable operating
environment.
B These banks possess strong intrinsic financial strength.
Typically, they will be important institutions with valuable and
defensible business franchises, good financial fundamentals, and
an attractive and stable operating environment.
C These banks possess good intrinsic financial strength. Typically,
they will be institutions with valuable and defensible business
franchises. These banks will demonstrate either acceptable
financial fundamentals within a stable operating environment, or
better than average financial fundamentals within an unstable
operating environment.
S&P
- ---
S&P's credit rating is a current opinion of an obligor's overall financial
capacity (its creditworthiness) to pay its financial obligation.
AAA The highest rating assigned by S&P. The obligor's capacity to meet
its financial commitment on the obligation is extremely strong.
AA The obligor's capacity to meet its financial commitments on the
obligation is very strong.
A The obligation is somewhat more susceptible to the adverse effects
of changes in circumstances and economic conditions than
obligations in higher rated categories. However, the obligor's
capacity to meet its financial commitment on the obligation is
still strong.
DESCRIPTION OF INSURANCE RATINGS
Moody's
- --------
These ratings represent Moody's opinions of the ability of insurance companies
to pay punctually senior policyholder claims and obligations.
Aaa Insurance companies rated in this category offer exceptional
financial security. While the financial strength of these
companies is likely to change, such changes as can be visualized
are most unlikely to impair their fundamentally strong position.
Aa These insurance companies offer excellent financial security.
Together with the Aaa group, they constitute what are generally
known as high grade companies. They are rated lower than Aaa
companies because long-term risks appear somewhat larger.
27
<PAGE> 614
A Insurance companies rated in this category offer good financial
security. However, elements may be present which suggest a
susceptibility to impairment sometime in the future.
S&P
- ---
S&P's credit rating is a current opinion of the creditworthiness of an obligor
with respect to a specific financial obligation, a specific class of financial
obligations, or a specific financial program.
AAA This is the highest rating assigned by S&P. The obligor's capacity
to meet its financial commitment on the obligation is extremely
strong.
AA The obligor's capacity to meet its financial commitments on the
obligation is very strong.
A An obligation rated A is somewhat more susceptible to the adverse
effects of changes in circumstances and economic conditions than
obligations in higher rated categories. However, the obligor's
capacity to meet its financial commitment on the obligation is
still strong.
DESCRIPTION OF MUNICIPAL BOND RATINGS (including mortgage and asset-backed
securities)
S&P
- ---
Investment Grade
AAA The highest rating. The rating indicates an extremely strong
capacity to meet its financial commitment.
AA Differs from AAA issues only in a small degree. The obligor's
capacity to meet its financial commitment is very strong.
A These bonds are somewhat more susceptible to the adverse effects
of changes in circumstances and economic conditions than debt in
higher rated categories. However, capacity to meet its financial
commitment on the obligations is still strong.
BBB Exhibits adequate protection parameters. However, adverse economic
conditions or changing circumstances are more likely to lead to a
weakened capacity to meet its financial commitment on the
obligations.
Speculative Grade
BB Less vulnerable to non-payment than other speculative issues.
However, these bonds face major ongoing uncertainties or exposure
to adverse business, financial or economic conditions which could
lead to inadequate capacity to meet financial commitment on the
obligation.
B More vulnerable to non-payment than obligations rated BB, but
currently has the capacity to meet its financial commitment on the
obligation. Adverse business, financial or economic conditions
will likely impair capacity or willingness to meet its financial
commitment on the obligation.
CCC Currently vulnerable to non-payment, and is dependent upon
favorable business, financial, and economic conditions to meet its
financial commitment on the obligation. In the event of adverse
business, financial, or economic conditions, they are not likely
to have the capacity to meet its financial commitment on the
obligation.
CC Currently highly vulnerable to non-payment.
C This rating may be used to cover a situation where a bankruptcy
petition has been filed, or similar action has been taken, but
payments on this obligation are being continued.
28
<PAGE> 615
D Bonds in payment default.
Ratings from AA to CCC may be modified by a plus (+) or minus (-) to show
relative standing within the major rating categories.
Moody's
- -------
Investment Grade
Aaa 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 an exceptionally stable, margin and
principal is secure.
Aa High quality by all standards. Margins of protection may not be as
large as in Aaa securities, fluctuation of protective elements may
be greater, or there may be other elements present that make the
long-term risks appear somewhat larger than in Aaa securities.
A These bonds possess many favorable investment attributes and are
to be considered as upper-medium grade obligations. Factors giving
security to principal and interest are considered adequate, but
elements may be present which suggest a susceptibility to
impairment sometime in the future.
Baa These bonds are considered 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.
Non-Investment Grade
Ba These bonds have speculative elements; their future cannot be
considered as well assured. The protection of interest and
principal payments may be very moderate and thereby not well
safeguarded during good and bad times over the future.
B These bonds lack the characteristics of a desirable investment
(i.e., potentially low assurance of timely interest and principal
payments or maintenance of other contract terms over any long
period of time may be small).
Caa Bonds in this category have poor standing and may be in default.
These bonds carry an element of danger with respect to principal
and interest payments.
Ca Speculative to a high degree and could be in default or have other
marked shortcomings. C is the lowest rating.
DESCRIPTION OF MUNICIPAL NOTE RATINGS
Moody's
- -------
MIG1 & VMIG1 Short-term municipal securities rated MIG1 or VMIG1
are of the best quality. They have strong protection
from established cash flows, superior liquidity
support or demonstrated broad-based access to the
market for refinancing.
MIG2 & VMIG2 These Short-term municipal securities rated are of
high quality. Margins of protection are ample
although not so large as in the preceding group.
MIG3 & VMIG3 Favorable quality. All security elements are
accounted for, but the undeniable strength of the
preceding grades is lacking. Liquidity and cash flow
protection may be narrow and marketing access for
refinancing is likely to be less well established.
29
<PAGE> 616
S&P
- ---
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.
SP-1 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.
SP-3 Speculative capacity to pay principal and interest.
DESCRIPTION OF PREFERRED STOCK RATINGS
Moody's
- -------
aaa Top-quality preferred stock. This rating indicates good asset
protection and the least risk of dividend impairment within the
universe of preferred stocks.
aa High-grade preferred stock. This rating indicates that there is a
reasonable assurance the earnings and asset protection will remain
relatively well maintained in the foreseeable future.
a Upper-medium grade preferred stock. While risks are judged to be
somewhat greater than in the "aaa" and "aa" classification,
earnings and asset protection are, nevertheless, expected to be
maintained at adequate levels.
baa Medium-grade preferred stock, neither highly protected nor poorly
secured. Earnings and asset protection appear adequate at present
but may be questionable over any great length of time.
S&P
- ---
S&P's preferred stock rating is an assessment of the capacity and willingness of
an issuer to pay preferred stock dividends and any applicable sinking fund
obligations.
AAA Highest rating. This rating indicates an extremely strong capacity
to pay the preferred stock obligations.
AA High-quality, fixed-income security. The capacity to pay preferred
stock obligations is very strong, although not as overwhelming as
for issues rated "AAA."
A Backed by a sound capacity to pay the preferred stock obligations,
although it is somewhat more susceptible to the adverse effects of
changes in circumstances and economic conditions.
BBB Backed by an adequate capacity to pay the preferred stock
obligations. Whereas the issuer normally exhibits adequate
protection parameters, adverse economic conditions or changing
circumstances are more likely to lead to a weakened capacity to
make payments for a preferred stock in this category than for
issues in the "A" category.
SHORT-TERM DEBT RATINGS
Thompson Bank Watch, Inc. ("TBW") assigns ratings to specific debt instruments
with original maturities of one year or less. The TBW Short-Term ratings
specifically assess the likelihood of an untimely payment of principal and
interest.
TBW-1 Very high degree of likelihood that principal and interest will
be paid on a timely basis.
TBW-2 While degree of safety regarding timely repayment of principal and
interest is strong, the relative degree is not as high as for
issues rated TBW-1.
30
<PAGE> 617
TBW-3 Lowest investment grade category. While more susceptible to
adverse developments than obligations with higher ratings,
capacity to service principal and interest in a timely fashion is
considered adequate.
TBW-4 Non-investment grade and, therefore, speculative.
31
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32
<PAGE> 619
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33
<PAGE> 620
Investment Adviser and Sub-Administrator
Banc One Investment Advisors Corporation
1111 Polaris Parkway
P.O. Box 710211
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 8528
Boston, MA 02266-8528
Legal Counsel
Ropes & Gray
One Franklin Square
1301 K Street, N.W.
Suite 800 East
Washington, D.C. 20005
Independent Accountants
PricewaterhouseCoopers, LLP
100 East Broad Street
Columbus, OH 43215
The Statement of Additional Information contains more detailed information about
the Funds. The current Statement of Additional Information has been filed with
the Securities and Exchange Commission and is available without charge by
calling 1-800-480-4111 or by writing to The One Group Services Company at 3435
Stelzer Road, Columbus, Ohio 43219. The Statement of Additional Information is
incorporated into this prospectus by reference. The SEC maintains a Web site
(www.sec.gov) that contains the Statement of Additional Information, materials
incorporated by reference and other information regarding The One Group(R).
TOG-F-107
0091975
34
<PAGE> 621
STATEMENT OF ADDITIONAL INFORMATION
THE ONE GROUP(R)
THE ONE GROUP U.S. TREASURY SECURITIES MONEY MARKET FUND
(THE "U.S. TREASURY SECURITIES MONEY MARKET FUND")
THE ONE GROUP PRIME MONEY MARKET FUND (THE "PRIME MONEY MARKET FUND")
THE ONE GROUP MUNICIPAL MONEY MARKET FUND (THE "MUNICIPAL MONEY MARKET FUND")
THE ONE GROUP OHIO MUNICIPAL MONEY MARKET FUND (THE "OHIO MUNICIPAL MONEY MARKET
FUND")
THE ONE GROUP ASSET ALLOCATION FUND (THE "ASSET ALLOCATION FUND")
THE ONE GROUP LARGE COMPANY GROWTH FUND (THE "LARGE COMPANY GROWTH FUND")
THE ONE GROUP LARGE COMPANY VALUE FUND (THE "LARGE COMPANY VALUE FUND")
THE ONE GROUP GROWTH OPPORTUNITIES FUND (THE "GROWTH OPPORTUNITIES FUND")
THE ONE GROUP INTERNATIONAL EQUITY INDEX FUND (THE "INTERNATIONAL EQUITY INDEX
FUND")
THE ONE GROUP DISCIPLINED VALUE FUND (THE "DISCIPLINED VALUE FUND")
THE ONE GROUP EQUITY INDEX FUND (THE "EQUITY INDEX FUND")
THE ONE GROUP INCOME EQUITY FUND (THE "INCOME EQUITY FUND")
THE ONE GROUP VALUE GROWTH FUND (THE "VALUE GROWTH FUND")
THE ONE GROUP SMALL CAPITALIZATION FUND (THE "SMALL CAPITALIZATION FUND")
THE ONE GROUP INTERMEDIATE BOND FUND (THE "INTERMEDIATE BOND FUND")
THE ONE GROUP INCOME BOND FUND (THE "INCOME BOND FUND")
THE ONE GROUP GOVERNMENT BOND FUND (THE "GOVERNMENT BOND FUND")
THE ONE GROUP ULTRA SHORT-TERM INCOME FUND (THE "ULTRA SHORT-TERM
INCOME FUND")
THE ONE GROUP LIMITED VOLATILITY BOND FUND (THE "LIMITED VOLATILITY BOND FUND")
THE ONE GROUP TREASURY & AGENCY FUND (THE "TREASURY & AGENCY FUND")
THE ONE GROUP HIGH YIELD BOND FUND (THE "HIGH YIELD BOND FUND")
THE ONE GROUP INTERMEDIATE TAX-FREE BOND FUND (THE "INTERMEDIATE TAX-FREE BOND
FUND")
THE ONE GROUP MUNICIPAL INCOME FUND (THE "MUNICIPAL INCOME FUND")
THE ONE GROUP ARIZONA MUNICIPAL BOND FUND
(THE "ARIZONA MUNICIPAL BOND FUND") THE ONE GROUP WEST
VIRGINIA MUNICIPAL BOND FUND (THE "WEST VIRGINIA MUNICIPAL BOND FUND")
THE ONE GROUP LOUISIANA MUNICIPAL BOND FUND (THE "LOUISIANA MUNICIPAL
BOND FUND")
THE ONE GROUP OHIO MUNICIPAL BOND FUND (THE "OHIO MUNICIPAL BOND FUND")
THE ONE GROUP KENTUCKY MUNICIPAL BOND FUND (THE "KENTUCKY MUNICIPAL BOND FUND")
THE ONE GROUP TEXAS TAX-FREE BOND FUND (THE "TEXAS TAX-FREE BOND FUND")
THE ONE GROUP TREASURY MONEY MARKET FUND (THE "TREASURY MONEY MARKET FUND")
THE ONE GROUP TREASURY ONLY MONEY MARKET FUND (THE "TREASURY ONLY MONEY MARKET
FUND")
THE ONE GROUP GOVERNMENT MONEY MARKET FUND (THE "GOVERNMENT MONEY MARKET FUND")
THE ONE GROUP TAX-EXEMPT MONEY MARKET FUND (THE "TAX-EXEMPT MONEY MARKET FUND")
THE ONE GROUP INSTITUTIONAL PRIME MONEY MARKET FUND (THE "INSTITUTIONAL PRIME
MONEY MARKET FUND")
THE ONE GROUP INVESTOR GROWTH FUND (THE "INVESTOR GROWTH FUND")
THE ONE GROUP INVESTOR GROWTH & INCOME FUND (THE "INVESTOR GROWTH &
INCOME FUND")
THE ONE GROUP INVESTOR BALANCED FUND (THE "INVESTOR BALANCED FUND")
THE ONE GROUP INVESTOR CONSERVATIVE GROWTH FUND (THE "INVESTOR CONSERVATIVE
GROWTH FUND")
THE ONE GROUP INVESTOR AGGRESSIVE GROWTH FUND (THE "INVESTOR
AGGRESSIVE GROWTH")
THE ONE GROUP INVESTOR FIXED INCOME FUND (THE "INVESTOR FIXED INCOME FUND")
(EACH A "FUND," AND COLLECTIVELY THE "FUNDS")
OCTOBER __, 1998
This Statement of Additional Information is not a Prospectus, but supplements
and should be read in conjunction with the Prospectuses dated November 1, 1998.
This Statement of Additional Information is incorporated in its entirety into
each Fund's Prospectus. A copy of each Prospectus is available without charge by
writing to The One Group Services Company, 3435 Stelzer Road, Columbus, Ohio
43219, or by telephoning toll free (800)-480-4111.
<PAGE> 622
TABLE OF CONTENTS
PAGE
THE TRUST 1
INVESTMENT OBJECTIVES AND POLICIES 2
Additional Information on Fund Instruments 2
Asset-Backed Securities 2
Bank Obligations 2
Commercial Paper 2
Common Stock 3
Convertible Securities 3
Demand Features 3
Foreign Investments 4
Limitations on the Use of Foreign Investments 4
Foreign Currency Transactions 4
Forward Foreign Currency Exchange Contracts 6
Foreign Currency Futures Contracts 6
Foreign Currency Options 7
Foreign Currency Conversion 8
Other Foreign Currency Hedging Strategies 8
Risk Factors in Hedging Transactions 9
Futures and Options Trading 9
Futures Contracts 9
Limitations on the Use of Futures Contracts 10
Risk Factors in Futures Transactions 11
Options Contracts 12
Writing (Selling) Covered Calls 13
Purchasing Call Options 14
Purchasing Put Options 14
Secured Puts 14
Straddles and Spreads 14
Risk Factors in Options Transactions 15
Limitations on the Use of Options 15
Government Securities 15
High Quality Investments With Regard to the Money Market and
Institutional Money Market Funds 16
High Yield/High Risk Securities/Junk Bonds 17
Index Investing by the Equity Index and International
Equity Index Funds 18
Investment Company Securities 19
Loan Participations and Assignments 20
Mortgage-Related Securities 20
Mortgage-Backed Securities (CMOs and REMICs) 20
Limitations on the Use of Mortgage Backed Securities 22
Mortgage Dollar Rolls 22
Stripped Mortgage Backed Securities 23
Adjustable Rate Mortgage Loans 23
Risk Factors of Mortgage-Related Securities 24
Municipal Securities 25
Risk Factors in Municipal Securities 27
Limitations on the Use of Municipal Securities 27
Arizona Municipal Securities 28
Kentucky Municipal Securities 29
Louisiana Municipal Securities 29
Ohio Municipal Securities 30
Texas Municipal Securities 30
West Virginia Municipal Securities 31
New Financial Products 31
PERCs 31
Preferred Stock 31
ii
<PAGE> 623
Real Estate Investment Trusts ("REITs") 32
Repurchase Agreements 32
Reverse Repurchase Agreements 33
Restricted Securities 33
Securities Lending 34
Short-term Funding Agreements 34
SPDRs 35
Structured Instruments 35
Swaps, Caps and Floors 36
Treasury Receipts 37
U.S. Treasury Obligations 37
Variable and Floating Rate Instruments 37
Warrants 39
When-Issued Securities and Forward Commitments 39
Investment Restrictions 40
Portfolio Turnover 45
Additional Tax Information Concerning All Funds 46
Additional Tax Information Concerning the Tax-Advantaged Funds 48
Additional Tax Information Concerning the International
Equity Index Fund 50
Foreign Tax Credit 50
VALUATION 50
Valuation of the Money Market and Institutional Money
Market Funds 50
Valuation of the Equity Funds, the Bond Funds and the
Municipal Bond Funds 51
ADDITIONAL INFORMATION REGARDING THE
CALCULATION OF PER SHARE NET ASSET VALUE 51
ADDITIONAL PURCHASE AND REDEMPTION INFORMATION 52
MANAGEMENT OF THE TRUST 55
Trustees & Officers 55
Investment Advisor and Sub-Advisors 58
Glass-Steagall Act 60
Portfolio Transactions 61
Administrator 63
Distributor 67
Distribution Plan 67
Custodian and Transfer Agent 69
Experts 70
ADDITIONAL INFORMATION 71
Description of Shares 71
Shareholder and Trustee Liability 72
Performance 72
Calculation of Performance Data 73
Miscellaneous 83
iii
<PAGE> 624
THE TRUST
The One Group (the "Trust") is an open-end management investment company.
The Trust consists of forty series of units of beneficial interest ("Shares")
each representing interests in one of the following forty separate investment
portfolios ("Funds"):
Money Market Funds. 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"),
Equity 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,
the Small Capitalization Fund (formerly the Gulf South Growth
Fund),(these ten Funds being collectively referred to as the "EQUITY
FUNDS"),
Bond Funds. The Intermediate Bond Fund, the Income Bond Fund (formerly
the Income Portfolio), the Government Bond Fund, the Ultra Short-Term
Income Fund (formerly the Government ARM Fund), the Limited Volatility
Bond Fund, the Treasury & Agency Fund, and the High Yield Bond Fund
(formerly the Income Fund)(these seven Funds being collectively referred
to as the "BOND FUNDS"),
Municipal 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 Municipal Bond
Fund, the Kentucky Municipal Bond Fund, the Arizona Municipal Bond Fund,
and the Louisiana Municipal Bond Fund (these eight Funds being
collectively referred to as the "MUNICIPAL BOND FUNDS"),
Institutional Money Market 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"),
Funds of Funds. The Investor Growth Fund, the Investor Growth & Income
Fund, the Investor Aggressive Growth Fund, the Investor Fixed Income
Fund, the Investor Conservative Growth Fund, and the Investor Balanced
Fund (these six Funds being collectively referred to as the "FUNDS OF
FUNDS").
Tax-Advantaged Funds. The Municipal Money Market Fund, the Ohio Municipal Money
Market Fund, the Municipal Bond Funds, and the Tax-Exempt Money Market Fund are
also referred to as the "TAX-ADVANTAGED FUNDS."
Diversification. All of the Trust's Funds are diversified, as defined under the
Investment Company Act of 1940, as amended (the "1940 Act"), except the Ohio
Municipal Bond Fund, the Kentucky Municipal Bond Fund, the West Virginia
Municipal Bond Fund, the Texas Tax-Free Bond Fund, the Arizona Municipal Bond
Fund, the Ohio Municipal Money Market Fund, and the Louisiana Municipal Bond
Fund, which are non-diversified.
Share Classes. Shares in the Funds of the Trust (other than the Institutional
Money Market Funds, and the Money Market Funds) are offered in four separate
classes: Class I Shares, Class A Shares, Class B Shares and Class C Shares. The
U.S. Treasury Securities Money Market Fund and the Prime Money Market Fund offer
Class A Shares, Class B Shares, Class C Shares, Class I Shares and
Service Class Shares. The Institutional Money Market Funds offer only a single
class of shares. The Ohio Municipal Money Market Fund and the Municipal Money
Market Fund offer Class A, Class C and Class I 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.
1
<PAGE> 625
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
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. These securities are generally pass-through securities, which means that
principal and interest payments on the underlying securities (less servicing
fees) are passed through to shareholders on a pro rata basis. These securities
involve prepayment risk, which is the risk that the underlying debt may be
refinanced or paid off prior to their maturities during periods of declining
interest rates. In that case, a Fund manager may have to reinvest the proceeds
from the securities at a lower rate. Potential market gains on a security
subject to prepayment risk may be more limited than potential market gains on a
comparable security that is not subject to prepayment risk. Under certain
prepayment rate scenarios, a Fund may fail to recoup any premium paid on
asset-backed securities.
BANK OBLIGATIONS
Bank obligations consist of bankers' acceptances, 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
and savings and loan associations 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 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. Certain Funds
may also invest in obligations (including banker's acceptances and certificates
of deposit) denominated in foreign currencies (see "Foreign Investments"
herein).
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. TIME DEPOSITS are interest-bearing non-negotiable
deposits at a bank or a savings and loan association that have a specific
maturity date. A time deposit earns a specific rate of interest over a definite
period of time. Time deposits cannot be traded on the secondary market and those
exceeding seven days and with a withdrawal penalty are considered to be
illiquid.
COMMERCIAL PAPER
Commercial paper consists of promissory notes issued by corporations.
Although such notes are generally unsecured, the Funds may also purchase secured
commercial paper. 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 Funds only purchase commercial paper
that meets the following criteria.
2
<PAGE> 626
Bond Funds. The Limited Volatility Bond Fund, the Intermediate Bond Fund
and the Ultra Short-Term Income 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 Nationally Recognized
Statistical Rating Organization ("NRSRO") (such as A-2 or better by
Standard & Poor's Corporation ("S&P"), Aa or better by Moody's Investors
Service, Inc. ("MOODY'S") or A2 or better by Fitch IBCA ("FITCH")) or if
unrated, determined by Banc One Investment Advisors Corporation ("Banc
One Investment Advisors") to be of comparable quality. The High Yield
Bond Fund and the Income Bond Fund may purchase commercial paper in any
rating category by at least one NRSRO, or, if unrated, determined by Banc
One Investment Advisors or with respect to the High Yield Bond Fund, Banc
One High Yield Partners, LLC (the "HIGH YIELD SUB-ADVISOR" or a
"SUB-ADVISOR") to be of comparable quality.
Municipal Bond Funds. The Municipal Bond Funds 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 Banc One Investment Advisors to be of comparable
quality
Money Market Funds. The Money Market Funds (other than the U.S. Treasury
Securities Money Market 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 Banc One Investment Advisors to be of comparable quality.
Equity Funds. The Equity Funds 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 Banc One Investment Advisors to be of comparable quality.
COMMON STOCK
Common stock represents a share of ownership in a company and usually
carries voting rights and earns dividends. Unlike preferred stock, dividends on
common stock are not fixed but are declared at the discretion of the issuer's
board of directors.
CONVERTIBLE SECURITIES
Convertible securities have characteristics similar to both fixed income
and equity securities. Convertible securities may be issued as bonds or
preferred stock. 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 Funds' 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.
DEMAND FEATURES
Some of 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 securities or by
another third party, and may not be transferred separately from the underlying
security. The underlying securities subject to a put may be sold at any time at
market rates. The Funds expect that they will acquire puts only where the puts
are available without the payment of any direct or indirect consideration.
However, if advisable or necessary, 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.
Under a "STAND-BY COMMITMENT," a dealer would agree to purchase, at a
Fund's option, specified municipal securities at a specified price. A 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
3
<PAGE> 627
may also be referred to as put options. A Fund will generally limit its
investments in stand-by commitments to 25% of its total assets.
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.
FOREIGN INVESTMENTS
Some of the Funds may 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, Eurodollar Certificates of Deposit, Eurodollar
Time Deposits, Eurodollar 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.
Foreign investments 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 are not regulated by U.S. banking authorities and may be subject
to less stringent reserve requirements than those applicable to domestic
branches of U.S. banks. In addition, foreign banks generally are not bound by
the accounting, auditing, and financial reporting standards comparable to those
applicable to U.S. banks.
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 equity and
debt securities, will provide a source of increased diversification. The
International Equity Index Fund 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 the 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.
LIMITATIONS ON THE USE OF FOREIGN INVESTMENTS. Investments in all types
of foreign obligations or securities will not exceed 25% of the net assets of
the Equity Funds (with the exception of the International Equity Index Fund) and
the Income Bond and Limited Volatility Bond Funds.
FOREIGN CURRENCY TRANSACTIONS
The International Equity Index Fund may engage in various strategies to
hedge against interest rate and currency risks. These strategies may consist of
use of any of the following, some of which also have been described above:
options on Fund positions or currencies, financial and currency futures, options
on such futures, forward foreign currency transactions, forward rate agreements
and interest rate and currency swaps, caps and floors. The International Equity
Index Fund may engage in such transactions in both U.S. and non-U.S. markets. To
the extent the Fund enters into such transactions in markets other than in the
United States, the Fund may be subject to certain currency, settlement,
liquidity, trading and other risks similar to those described above with respect
to the Fund's investments in foreign securities. The International Equity Index
Fund may enter into such transactions only in connection with hedging
strategies.
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<PAGE> 628
While the Fund's use of hedging strategies is intended to reduce the volatility
of the net asset value of Fund shares, the net asset value of the Fund will
fluctuate. There can be no assurance that the Fund's hedging transactions will
be effective. Furthermore, the Fund may only engage in hedging activities from
time to time and may not necessarily be engaging in hedging activities when
movements in interest rates or currency exchange rates occur. Tax requirements
may limit the Fund's ability to engage in the hedging transactions and
strategies described below.
A substantial portion of the securities of the International Equity Index
Fund will be denominated in foreign currencies. In addition, the International
Equity Index Fund may hold funds in foreign currencies. Thus, the value of the
International Equity Index Fund's shares will be affected by changes in currency
exchange rates. The value of the Fund's investments denominated in foreign
currencies and any funds held in foreign currencies will depend on the relative
strength of those currencies and the U.S. dollar, and the Fund's may be affected
favorably or unfavorably by exchange control regulations or changes in exchange
rates between foreign currencies and the U.S. dollar. Changes in the foreign
currency exchange rates also may affect the value of dividends and interest
earned, gains and losses realized on the sale of securities and net investment
income and gains, if any, to be distributed to Shareholders by a Fund. The
exchange rates between the U.S. dollar and other currencies are determined by
the forces of supply and demand in foreign exchange markets. Accordingly, the
ability of the Fund to achieve its investment objective may depend, to a certain
extent, on exchange rate movements.
The International Equity Index Fund is authorized to deal in forward
foreign exchange between currencies of the different countries in which the Fund
will invest and multi-national currency units as a hedge against possible
variations in the foreign exchange rate between these currencies. This is
accomplished through contractual agreements entered into in the interbank market
to purchase or sell one specified currency for another currency at a specified
future date (up to one year) and price at the time of the contract. The
International Equity Index Fund's dealings in forward foreign exchange will be
limited to hedging involving either specific transactions or portfolio
positions.
Transaction Hedging. When the 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 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 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 International Equity Index 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 engaging in position hedging, the International
Equity Index Fund will enter into foreign currency exchange transactions to
protect against a decline in the values of the foreign currencies in which its
portfolio securities are denominated (or an increase in the value of currency
for securities which Banc One Investment Advisors or Independence International
Associates, Inc. (the "INTERNATIONAL SUB-ADVISOR" or a "SUB-ADVISOR") 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
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<PAGE> 629
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, the International Equity Index Fund may have 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 seek to maintain an investment
portfolio that is relatively neutral to fluctuations in the value of the U.S.
dollar relative to major foreign currencies and 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. Moreover, it may not be
possible for the Fund to hedge against a devaluation that is so generally
anticipated that the Fund is not able to contract to sell the currency at a
price above the anticipated devaluation level.
FORWARD FOREIGN CURRENCY EXCHANGE CONTRACTS. The International Equity
Index Fund, for hedging purposes only, may purchase forward foreign currency
exchange contracts, which involve 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.
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.
At the maturity of a forward 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.
FOREIGN CURRENCY FUTURES CONTRACTS. The International Equity Index Fund
may purchase foreign currency futures contracts. 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 Fund will
enter into foreign currency futures contracts solely for bona fide hedging or
other appropriate risk management purposes as defined in CFTC regulations.
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.
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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.
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 (the "SEC").
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.
At the maturity of a 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.
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.
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<PAGE> 631
The Fund is authorized to purchase or sell listed foreign currency
options, and currency swap contracts as a short or long hedge against possible
variations in foreign exchange rates. Such transactions may be effected with
respect to hedges on non-U.S. dollar denominated securities (including
securities denominated in the ECU) owned by the Fund, sold by the Fund but not
yet delivered, committed or anticipated to be purchased by the Fund, or in
transaction or cross-hedging strategies. As an illustration, a Fund may use such
techniques to hedge the stated value in U.S. dollars of an investment in a
Japanese yen-dominated security. In such circumstances, for example, the Fund
may purchase a foreign currency put option enabling it to sell a specified
amount of yen for dollars at a specified price by a future date. To the extent
the hedge is successful, a loss in the value of the dollar relative to the yen
will tend to be offset by an increase in the value of the put option. To offset,
in whole or in part, the cost of acquiring such a put option, the Fund also may
sell a call option which, if exercised, requires it to sell a specified amount
of yen for dollars at a specified price by a future date (a technique called a
"straddle"). By selling such call option in this illustration, the Fund gives up
on the opportunity to profit without limit from increases in the relative value
of the yen to the dollar.
Certain differences exist between these foreign currency hedging
instruments. Foreign currency options provide the holder thereof the right to
buy or to sell a currency at a fixed price on a future date. Listed options are
third-party contracts (i.e., performance of the parties' obligations is
guaranteed by an exchange or clearing corporation) which are issued by a
clearing corporation, traded on an exchange and have standardized strike prices
and expiration dates. OTC options are two-party contracts and have negotiated
strike prices and expiration dates. Options on futures contracts are traded on
boards of trade or futures exchanges. Currency swap contacts are negotiated two
party agreements entered into in the interbank market whereby the parties
exchange two foreign currencies at the inception of the contract and agree to
reverse the exchange at a specified future time and at a specified exchange
rate. The International Equity Index Fund will not speculate in foreign currency
options, futures or related options or currency swap contracts. Accordingly, the
International Equity Index Fund will not hedge a currency substantially in
excess (as determined by Banc One Investment Advisors or the International
Sub-Advisor) of the market value of the securities denominated in such currency
which it owns, the expected acquisition price of securities which it has
committed or anticipates to purchase which are denominated in such currency,
and, in the cases of securities which have been sold by the Fund but not yet
delivered, the proceeds thereof in its denominated currency. Further, the
International Equity Index Fund will segregate, at its Custodians, U.S.
government or other high quality securities having a market value representing
any subsequent net decrease in the market value of such hedged positions
including net positions with respect to cross-currency hedges. The International
Equity Index Fund may not incur potential net liabilities with respect to
currency and securities positions, including net liabilities with respect to
cross-currency hedges, of more than 33 1/3% of its total assets from foreign
currency options, futures, related options and forward currency transactions.
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 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.
OTHER FOREIGN CURRENCY HEDGING STRATEGIES. New options and futures
contracts and other financial products, and various combinations thereof,
continue to be developed, and the International Equity Index Fund may invest in
any such options, contracts and products as may be developed to the extent
consistent
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<PAGE> 632
with the Fund's investment objective and the regulatory requirements applicable
to investment companies, and subject to the supervision of the Trust's Board of
Trustees.
RISK FACTORS IN HEDGING TRANSACTIONS
Imperfect Correlation. Foreign currency hedging transactions present
certain risks. In particular, the variable degree of correlation between
price movements of the instruments used in hedging strategies and price
movements in the security being hedged creates the possibility that
losses on the hedge may be greater than gains in the value of the Fund's
securities.
Liquidity. In addition, these instruments may not be liquid in all
circumstances. As a result, in volatile markets, the Fund may not be able
to dispose of or offset a transaction without incurring losses. Although
the contemplated use of hedging instruments should tend to reduce the
risk of loss due to a decline in the value of the hedged security, at the
same time the use of these instruments could tend to limit any potential
gain which might result from an increase in the value of such security.
Judgement of the Advisor and the International Sub-Advisor. Successful
use of hedging instruments by the International Equity Index Fund is
subject to the ability of the Banc One Investment Advisors and/or the
International Sub-Adviser to predict correctly movements in the direction
of interest and currency rates and other factors affecting markets for
securities. If the expectations of Banc One Investment Advisors or the
International Sub-Advisor are not met, the Fund would be in a worse
position than if a hedging strategy had not been pursued. For example, if
the Fund has hedged against the possibility of an increase in interest
rates which would adversely affect the price of securities in its
portfolio and the price of such securities increases instead, the Fund
will lose part or all of the benefit of the increased value of its
securities because it will have offsetting losses in its hedging
positions. In addition, when hedging with instruments that require
variation margin payments, if the Fund has insufficient cash to meet
daily variation margin requirements, it may have to sell securities to
meet such requirements. Such sales of securities may, but will not
necessarily, be at increased prices which reflect the rising market.
Thus, the Fund may have to sell securities at a time when it is
disadvantageous to do so.
FUTURES AND OPTIONS TRADING
Some of the Funds may enter into futures contracts, options, options on
futures contracts and stock index futures contracts and options thereon for the
purposes of remaining fully invested, reducing transaction costs, or managing
interest rate risk.
FUTURES CONTRACTS
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 most 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. 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 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.
When making futures trades, the Funds 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
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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. A 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 CFTC without rendering the fund a commodity
pool operator or adversely affecting its status as an investment company for
federal securities laws or income tax purposes.
A Fund may buy and sell futures contracts and related options to manage
its exposure to changing interest rates and security prices. 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.
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 managing this exposure. While
the Funds will incur commission expenses in both opening and closing out futures
positions, these costs may be 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 reference
security or 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.
LIMITATIONS 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.
The Funds of Funds will not enter into futures contract transactions, however,
the One Group mutual funds in which they invest may do so as described herein.
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.
The Funds have undertaken to restrict their futures contract trading as
follows: first, the Funds will not engage in transactions in futures contracts
for speculative purposes; 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
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<PAGE> 634
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 SEC. 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 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 of 1986 (the "CODE")
requirements for qualification as a registered investment company and the
Trust's intention to qualify as such. In certain circumstances, entry into a
futures contract that substantially eliminates risk of loss and the opportunity
for gain in an "appreciated financial position" will also accelerate gain to the
Funds.
RISK FACTORS IN FUTURES TRANSACTIONS
LIQUIDITY. 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 such positions. 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.
RISK OF LOSS. 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 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 only for risk
management purposes, Banc One Investment Advisors and, with respect to the
International Equity Index Fund, the International Sub-Advisor, and, with
respect to the High Yield Bond, the High Yield Sub-Advisor 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.
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CORRELATION RISK. Utilization of futures transactions by a Fund involves
the risk of imperfect or no correlation where the securities underlying futures
contracts have different maturities than the portfolio securities being hedged.
It is also possible that a Fund could 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.
PRICE FLUCTUATIONS. 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 futures positions
and subjecting some futures traders to substantial losses.
Some futures strategies, including selling futures, buying puts and
writing covered calls, may reduce a Fund's exposure to price fluctuations. Other
strategies, including buying futures, 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. A Fund expects to
enter into these transactions to manage a return or spread on a particular
investment or portion of its assets, to protect against any increase in the
price of securities a Fund anticipates purchasing at a later date, or for other
risk management strategies.
OPTIONS CONTRACTS
Some of the Funds may use options on securities or futures contracts as a
hedging device. An option gives the buyer of the option the right (but not the
obligation) to purchase a futures contract or security at a specified price
(also called the STRIKE price). A CALL OPTION gives the 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.
A PUT OPTION gives the buyer the right to sell the underlying futures
contract or security. The purchase price of an option is referred to as its
"premium." The seller (or "writer") of a put option must purchase futures
contracts or securities at a strike price if the option is exercised. In the
case of a call option, the seller must sell the futures contract or security in
the underlying futures contract or security at the strike price if the option is
exercised.
A NAKED OPTION is an option written by a party who does not own the
underlying futures contract or security. A COVERED OPTION is an option written
by a party who does own the underlying position. The initial purchase (sale) of
an option is an "opening transaction." In order to close out an option position,
the Fund may enter into a "closing transaction". This involves 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.
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 and
"out-of-the-money" if the strike price is above current market levels. A put
option is "in-the-money" if the strike price is above current market levels, and
"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
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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.
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.
WRITING (SELLING) COVERED CALLS
Some of the Funds may write (sell) covered call options and purchase
options to close out options previously written by the Fund. 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. Generally,
the Funds will write covered call options on securities which, in the opinion of
Banc One Investment Advisors or the applicable Sub-Advisor, 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. 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.
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 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. Thus, the security could be "called away" at a price substantially below
the fair market value of the security. 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 Advisor or Sub-Advisor, in
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 Fund'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.
Generally, a Fund, in order to avoid the exercise of an option sold by
it, will be able 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 a Fund's best interest. A closing purchase
transaction consists of a Fund purchasing an option having the same terms as the
option sold by a Fund, and has the effect of cancelling a 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 a Fund delivers securities to the holder of a call option, a
Fund's turnover rate will increase, which would cause a Fund to incur additional
brokerage expenses.
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.
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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 options 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.
PURCHASING CALL OPTIONS
Certain Funds 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. In the event that paying a premium for a call option, together with
a price movement in the underlying security, is such that exercise of the option
would not be profitable to the Fund, loss of the premium may be offset by a
decrease in the acquisition cost of securities by the Fund.
PURCHASING PUT OPTIONS
Certain Funds may also purchase put options to protect their portfolio
holdings in an underlying security against a decline in market value. Such hedge
protection is provided 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.
However, any loss of premium may be offset by an increase in the value of the
Fund's securities.
SECURED PUTS
Certain Funds may write secured puts. For the secured 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 the security. If a
secured put option expires unexercised, the writer realizes a gain in the amount
of the premium.
STRADDLES AND SPREADS
Certain Funds also may engage in straddles and spreads. In a straddle
transaction, a 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 Banc One Investment Advisors or the
applicable Sub-Advisor 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
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RISK FACTORS IN OPTIONS TRANSACTIONS
Risk of Loss. 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. In addition, there may be
imperfect or no correlation between the changes in market value of the
securities held by the Funds and the prices of the options.
Judgement of Advisor and Sub-Advisors. The successful use of the options
strategies depends on the ability of Banc One Investment Advisors or the
applicable Sub-Advisor to assess interest rate and market movements correctly
and to accurately calculate the fair price of the option. The effective use of
options also depends on a Fund's ability to terminate option positions at times
when Banc One Investment Advisors or the applicable Sub-Advisor, deems it
desirable to do so. A Fund will take an option position only if Banc One
Investment Advisors or the applicable Sub-Advisor believes there is a liquid
secondary market for the option, however, there is no assurance that a Fund will
be able to effect closing transactions at any particular time or at an
acceptable price.
Liquidity. 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.
Market Restrictions. 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.
Foreign Investment Risks. 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.
LIMITATIONS ON THE USE OF OPTIONS.
Each Fund will limit the writing of put and call options to 25% of its
net assets. Some Funds may enter into over-the-counter option transactions.
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.
GOVERNMENT SECURITIES
Obligations of certain agencies and instrumentalities of the U.S.
government, 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 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, such as the
Federal Farm Credit Banks and the Federal Home Loan Mortgage Corporation
("FREDDIE MAC") are
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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 Banc One Advisors or the applicable Sub-Advisor
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.
HIGH QUALITY INVESTMENTS WITH REGARD TO THE MONEY MARKET AND INSTITUTIONAL MONEY
MARKET FUNDS
The Money Market and Institutional Money Market Funds, may invest only in
obligations determined by the Fund's investment Advisor, Banc One Investment
Advisors 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 NRSRO 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 Banc One Investment Advisors 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-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 Banc One Investment Advisors 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 Banc One Investment Advisors 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 Banc One Investment Advisors 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 Banc One Investment Advisors. 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 Banc One Investment Advisors pursuant to the guidelines
adopted by the Board of Trustees. Second-Tier Securities are all other Eligible
Securities.
Each Money Market Fund (other than the Ohio Municipal Money Market Fund
and the Municipal Money Market Fund) and Institutional Money Market Fund (other
than the Tax-Exempt Money Market Fund) 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
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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 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.
Under the guidelines adopted by the Trust's Board of Trustees and in
accordance with Rule 2a-7 under the 1940 Act, Banc One Investment Advisors 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.
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.
HIGH YIELD/HIGH RISK SECURITIES/JUNK BONDS
The High Yield Bond Fund and the Income Bond Fund may invest in high
yield securities. High yield, high risk bonds are securities that are generally
rated below investment grade by the primary rating agencies (BB or lower by S&P
and BA or lower by Moody's). Other terms used to describe such securities
include "lower rated bonds", "non-investment grade bonds," "below investment
grade bonds," and "junk bonds". Generally, lower rated debt securities provide a
higher yield than higher rated debt securities of similar maturity, but are
subject to a greater degree of risk with respect to the ability of the issuer to
meet its principal and interest obligations. Issuers of high yield securities
may not be as strong financially as those issuing higher rated securities. These
securities are regarded as predominately speculative. The market value of high
yield securities may fluctuate more than the market value of higher rated
securities, since high yield securities tend to reflect short-term corporate and
market developments to a greater extent than higher rated securities, which
fluctuate primarily in response to the general level of interest rates, assuming
that there has been no change in the fundamental quality of such securities. The
market prices of fixed income securities generally fall when interest rates
rise. Conversely, the market prices of fixed-income securities generally rise
when interest rates fall.
Additional risks of high yield securities include limited liquidity and
secondary market support. As a result, the prices of high yield securities may
decline rapidly in the event that a significant number of holders decide to
sell. Changes in expectations regarding an individual issuer, an industry or
high yield securities generally could reduce market liquidity for such
securities and make their sale by the Funds more difficult, at least in the
absence of price concessions. Reduced liquidity also could adversely affect the
Funds' ability to accurately value high yield securities. Issuers of high yield
securities also are more vulnerable to real or perceived economic changes (for
instance, an economic downturn or prolonged period of rising interest rates),
political changes or adverse developments specific to the issuer. Adverse
economic, political or other developments may impair the issuer's ability to
service principal and interest obligations, to meet projected business goals and
to obtain additional financing, particularly if the issuer is highly leveraged.
In the event of a default, the Funds would experience a reduction of their
income and could expect a decline in the market value of the defaulted
securities.
Further, proposed or yet to be proposed new laws may have a possible
negative impact on the market for high yield, high risk bonds. As an example, in
the late 1980's, legislation required federally-insured savings and loan
associations to divest their investments in high yield, high risk bonds. New
legislation, if enacted, could have a material negative effect on a Fund's net
asset value and investment practices.
Finally, the market prices of high-yield, high risk securities structured
as zero coupon or pay-in-kind securities (as defined below) are generally
affected to a greater extent by interest rate changes and tend to be more
volatile than securities which pay interest periodically. In addition, zero
coupon, pay-in-kind and delayed interest bonds often do not pay interest until
maturity. Accordingly, such bonds may involve greater credit risks than bonds
paying interest currently. However, the Fund must recognize a computed amount of
interest income and pay dividends to shareholders even though it has received no
cash. In some instances, the Funds may have to sell securities to have
sufficient cash to pay the dividends.
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The high yield, high risk investments include the following:
-- Straight fixed-income debt securities. These include bonds and other
debt obligations which bear a fixed or variable rate of interest payable
at regular intervals and have a fixed or resettable maturity date. The
particular terms of such securities vary and may include features such as
call provisions and sinking funds.
-- Zero-coupon debt securities. These bear no interest obligation but are
issued at a discount from their value at maturity. When held to maturity,
their entire return equals the difference between their issue price and
their maturity value.
-- Zero-fixed-coupon debt securities. These are zero-coupon debt
securities which convert on a specified date to interest-bearing debt
securities.
-- Pay-in-kind bonds. These are bonds which allow the issuer, at its
option, to make current interest payments on the bonds either in cash or
in additional bonds.
-- Private Placements. These are bonds sold directly to a small number of
investors, usually institutional, without registration under the
Securities Act of 1933
-- Convertible Securities. These are bonds or preferred stock that
convert to common stock.
-- Preferred Stock. These are stocks that generally pay a dividend at a
specified rate and which have preference over common stock in the payment
of dividends and in liquidation.
-- Loan Participations and Assignments. These are participations in, or
assignments of all or a portion of loans to corporations or to
governments, including governments of the less developed countries
("LDC'S").
This foregoing list is not definitive. The prospectus and this Statement of
Additional Information list additional types of permissible investments. Such
investments may be purchased by some of the Funds even if they are classified as
non-investment grade securities.
INDEX INVESTING BY THE EQUITY INDEX AND INTERNATIONAL EQUITY INDEX FUNDS
Equity Index Fund. It is anticipated that the indexing approach that will
be employed by the Equity Index Fund will be an effective method of
substantially tracking 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, 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 weights 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
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<PAGE> 642
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.
Banc One Investment Advisors generally selects stocks for the Equity
Index Fund in the order of their weights 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.
International Equity Index Fund. It is anticipated that the indexing
approach that will be employed by the International Equity Index Fund will be an
effective method of substantially tracking 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 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.
INVESTMENT COMPANY SECURITIES
Some of the Funds may invest up to 5% of their total assets in the
securities of any one investment company (another mutual fund), but may not own
more than 3% of the outstanding securities of any one investment company or
invest more than 10% of their total assets in the securities of other investment
companies. These limits do not apply to the Funds of Funds. Other investment
company securities may include securities of a money market fund of the Trust,
and securities of other investment companies for which Banc One Investment
Advisors serves as investment advisor or administrator. Because other investment
companies employ an investment advisor, such investments by the Funds may cause
Shareholders to bear duplicate fees. Banc One Investment Advisors will waive its
fee attributable to the assets of the investing fund invested in a money market
fund of the Trust and in other funds advised by Banc One Investment Advisors;
and, to the extent required by the laws of any state in which shares of the
Trust are sold, Banc One Investment Advisors will waive its fees attributable to
the assets of any Fund invested in any investment company.
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<PAGE> 643
LOAN PARTICIPATIONS AND ASSIGNMENTS
Some of the Funds may invest in fixed and floating rate loans ("LOANS")
arranged through private negotiations between issuers (which may be corporate
issuers or issuers of Sovereign Debt Obligations) and one or more financial
institutions ("LENDERS"). Investments in loans are expected in most instances to
be in the form of participations in Loans ("PARTICIPATIONS") and assignments of
all or a portion of Loans ("Assignments") from third parties. Because loan
participants and assignments may be illiquid, a Fund will invest no more than
15% (10% for the Money Market Funds) of its net assets in loan participations
and other illiquid assets. The government that is the borrower on the Loan will
be considered by the Fund to be the issuer of a Participations or Assignment for
purposes of the fund's fundamental investment policy that it will not invest 25%
or more of its total assets in securities of issuers conducting their principal
business activities in the same industry (i.e., foreign government). The Funds
investment in Participations typically will result in the Fund having a
contractual relationship only with the Lender and not with the borrower.
When a Fund purchases Assignments from Lenders it will acquire direct
rights against the borrower on the Loan. Because Assignments are arranged
through private negotiations between potential assignees and potential
assignors, however, the rights and obligations acquired by a Fund as the
purchaser of an Assignment may differ from, and be more limited than, those held
by the assigning Lender. The assignability of certain Sovereign Debt Obligations
is restricted by the governing documentation as to the nature of the assignee
such that the only way in which a Fund may acquire an interest in a Loan is
through a Participations and not an Assignment. A Fund may have difficulty
disposing of Assignments and Participations because to do so it will have to
assign such securities to a third party. Because there is no liquid market for
such securities, the Funds anticipate that such securities could be sold only to
a limited number of institutional investors. The lack of a liquid secondary
market may have an adverse impact on the value of such securities and a Fund's
ability to dispose of particular Assignments or Participations when necessary to
meet a Fund's liquidity needs in response to a specific economic event such as a
deterioration in the creditworthiness of the borrower. The lack of a liquid
secondary market for Assignments and Participations also may make it more
difficult for a Fund to assign a value to those securities for purposes of
valuing a Fund's portfolio and calculating its net asset value.
MORTGAGE-RELATED SECURITIES
MORTGAGE-BACKED SECURITIES (CMOS AND REMICS). Certain of the Funds may
invest in mortgage-backed securities including collateralized mortgage
obligations ("CMOS") and Real Estate Mortgage Investment Conduits ("REMICS").
Mortgage-backed securities represent pools of mortgage loans assembled for sale
to investors by various governmental agencies such as Ginnie Mae and
government-related organizations such as Fannie Mae and Freddie Mac, as well as
by nongovernmental issuers such as commercial banks, savings and loan
institutions, mortgage bankers, and private mortgage insurance companies. Such
non-governmental mortgage securities cannot be treated as U.S. government
securities for purposes of investment policies. 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.
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.
Ginnie Mae Securities. Mortgage-related securities issued by 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.
Fannie Mae Securities. Mortgage-related securities issued by 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.
Freddie Mac Securities. Mortgage-related securities issued by 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.
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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 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.
CMOs and guaranteed REMIC pass-through certificates ("REMIC
CERTIFICATES") issued by Fannie Mae, Freddie Mac, Ginnie Mae and private issuers
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 Funds do 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). 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 provide for the redistribution of cash flow to 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. This reallocation of
interest and principal results in the redistribution of prepayment risk across
to different classes. This allows for the creation of bonds with more or less
risk than the underlying collateral exhibits. 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
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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 Z-Bonds in which the Funds 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.
LIMITATIONS ON THE USE OF MORTGAGE-BACKED SECURITIES
Equity Funds. The Asset Allocation Fund may invest in mortgage-backed
securities issued by private issuers including Guaranteed CMOs and REMIC
pass through Securities that are rated in one of the four highest rating
categories by at least one NRSRO at the time of investment or, if
unrated, determined by Banc One Investment Advisors to be of comparable
quality.
Bond Funds. The Government Bond Fund and the Treasury & Agency Fund may
only invest in mortgage-backed securities issued or guaranteed by the
U.S. government, or its agencies or instrumentalities. The other Bond
Funds that invest in mortgage-backed securities may invest in
mortgage-backed securities issued by private issuers including Guaranteed
CMOs and REMIC pass-through securities. The Government Bond Fund and the
Treasury & Agency Fund may invest in mortgage-backed securities that are
rated in one of the three highest rating categories by at least one NRSRO
at the time of investment or, if unrated, determined by Banc One
Investment Advisors to be of comparable quality. The Limited Volatility
Bond Fund, the Ultra Short-Term Income Fund and the Intermediate Bond
Fund may invest in mortgage-backed securities that are rated in one of
the four highest rating categories by at least one NRSRO at the time of
investment or, if unrated, determined by Banc One Investment Advisor to
be of comparable quality. The Income Bond Fund and the High Yield Bond
Fund can invest in mortgage-backed securities in ANY rating category.
Money Market Funds. The Government Money Market Fund may only invest in
mortgage-backed securities issued or guaranteed by the U.S. government,
or its agencies or instrumentalities. The other Money Market Funds that
invest in mortgage-backed securities may invest in mortgage-backed
securities issued by private issuers including Guaranteed CMOs and REMIC
pass-through securities. The Prime Money Market Fund, the Municipal Money
Market Fund, and the Ohio Municipal Money Market Fund may invest in
mortgage-backed securities that are rated in one of the two highest
rating categories by at least one NRSRO at the time of investment or, if
unrated, determined by Banc One Investment Advisors to be of comparable
quality.
MORTGAGE DOLLAR ROLLS. Some of the Funds may enter into Mortgage Dollar
Rolls in which the Funds sell securities for delivery in the current month and
simultaneously contract with the same counterparty to repurchase similar (same
type, coupon and maturity) but not identical securities on a specified future
date. When a Fund enters into mortgage dollar rolls, the Fund will hold and
maintain a segregated account until the settlement date, cash or liquid, high
grade debt securities in an amount equal to the forward purchase price. The
Funds 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 Funds compared with what such
performance would have been without the use of mortgage dollar rolls. The
benefits derived from the use of mortgage dollar rolls may depend upon Banc One
Investment Advisors' ability to predict correctly mortgage prepayments and
interest rates. There is no assurance that mortgage dollar rolls can be
successfully employed. The Funds currently intend to enter into mortgage dollar
rolls that are accounted for as a financing transaction. For purposes of
diversification and investment limitations, mortgage dollar rolls are considered
to be mortgage-backed securities.
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STRIPPED MORTGAGE BACKED SECURITIES. Stripped Mortgage Backed Securities
("SMBS") are derivative multi-class mortgage securities. 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 principal ("POS").
Mortgage IOs receive monthly interest payments based upon a notional amount that
declines over time as a result of the normal monthly amortization and
unscheduled prepayments of principal on the associated mortgage POs.
In addition to the risks applicable to Mortgage-Related Securities in
general, SMBS 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. Changes in prepayment rates can cause the return on
investment in IOs to be highly volatile, and under extremely high prepayment
conditions IOs can incur significant losses. POs are bought at a discount to the
ultimate principal repayment value. The rate of return on a PO will vary with
prepayments, rising as prepayment increase and falling as prepayments decrease.
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 any premium paid will not be fully recouped.
Banc One Investment Advisors will seek to manage these risks (and potential
benefits) by investing in a variety of such securities and by using certain
analytical and hedging.
The Bond Funds (other than the Limited Volatility Bond Fund and the
Treasury & Agency Fund), and the Asset Allocation Fund may invest in SMBS to
enhance revenues or hedge against interest rate risk. The Funds may only invest
in SMBS issued or guaranteed by the U.S. government, its agencies or
instrumentalities. Although the market for SMBS is increasingly liquid, certain
SMBS may not be readily marketable and will be considered illiquid for purposes
of the Funds' limitations on investments in illiquid securities.
ADJUSTABLE RATE MORTGAGE LOANS. The Bond Funds and the Asset Allocation
Fund, may invest in adjustable rate mortgage loans ("ARMS"). The Treasury &
Agency Fund may buy only government 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 payment protect borrowers from unlimited interest rate and
payment increases.
Certain adjustable rate mortgage loans may provide for periodic
adjustments of scheduled payments in order to amortize fully the mortgage loan
by its stated maturity. Other adjustable rate mortgage loans may
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permit their stated maturity to be extended or shortened in accordance with the
portion of each payment that is applied to interest as affected by the periodic
interest rate adjustments.
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.
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 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 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.
RISKS FACTORS OF MORTGAGE-RELATED SECURITIES.
Guarantor Risk. There can be no assurance that the U.S. government would
provide financial support to Fannie Mae, Freddie Mac or Ginnie Mae if necessary
in the future. 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.
Interest Rate Sensitivity. If a Fund 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 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 receive when these amounts are reinvested.
Market Value. The market value of the Fund's adjustable rate
Mortgage-Backed Securities may be adversely affected if interest rates increase
faster than the rates of interest payable on such securities or by the
adjustable rate mortgage loans underlying such securities. Furthermore,
adjustable rate Mortgage-Backed Securities or the mortgage loans underlying such
securities may contain provisions limiting the amount by which rates may be
adjusted upward and downward and may limit the amount by which monthly payments
may be increased or decreased to accommodate upward and downward adjustments in
interest rates.
Prepayments. Although having less risk of decline during periods of
rising interest rates, adjustable rate Mortgage-Backed Securities have less
potential for capital appreciation than fixed rate Mortgage-Backed Securities
because their coupon rates will decline in response to market interest rate
declines. The market value of fixed rate Mortgage-Backed Securities may be
adversely affected as a result of increases in interest rates and, because of
the risk of unscheduled principal prepayments, may benefit less
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<PAGE> 648
than other fixed rate securities of similar maturity from declining interest
rates. Finally, to the extent Mortgage-Backed Securities are purchased at a
premium, mortgage foreclosures and unscheduled principal prepayments may result
in some loss of the Fund's principal investment to the extent of the premium
paid. On the other hand, if such securities are purchased at a discount, both a
scheduled payment of principal and an unscheduled prepayment of principal will
increase current and total returns and will accelerate the recognition of
income.
Yield Characteristics. 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 Funds invest 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.
MUNICIPAL SECURITIES
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.
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-Advantaged Funds (other than the Municipal Money Market Fund) 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.
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 (other than 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-Advantaged Funds
(other than the Ohio Municipal Money Market Fund, the Ohio Municipal Bond
Fund and Municipal Money Market Fund).
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 payment of principal and
interest on private activity bonds generally is dependent solely on the
ability of the facility users to meet its financial obligations and the
pledge, if any, of real and personal property as security for said
payment.
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<PAGE> 649
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 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 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).
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. Banc One Investment Advisors or the applicable Sub-Advisor
will consider such an event in determining whether the Fund should continue to
hold the obligations.
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
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lease, an installment purchase contract, a conditional sales contract, or a
participation interest in any of the above. 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
canceled.
RISK FACTORS IN MUNICIPAL SECURITIES
Tax Risk. 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.
Housing Authority Tax Risk. 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 will be consistently met, there is no
assurance that the 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 and possibly requiring a Fund to sell the
bonds at the reduced value. 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
Information Risk. 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.
State and Federal Laws. 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.
Litigation and Current Developments. 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.
New Legislation. 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. The 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.
LIMITATIONS ON THE USE OF MUNICIPAL SECURITIES.
As a matter of fundamental policy, under normal market conditions, at
least 80% of the total assets (net assets in the case of the Louisiana Municipal
Bond Fund) 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,
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<PAGE> 651
the Louisiana Municipal Bond Fund, the West Virginia Municipal Bond Fund, the
Arizona Municipal Bond Fund, and the Tax- Exempt Money Market Fund will be
invested in Municipal Securities. Other Funds may also invest in Municipal
Securities if Banc One Investment Advisors or the applicable Sub-Advisor
determines that such Municipal Securities offer attractive yields. 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.
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. Each Fund will
limit its investment in municipal leases to no more than 5% of its total assets.
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 both federal income tax
and Arizona personal income tax .
Risk Factors Regarding Investments in Arizona Municipal Securities. Over
the past several decades, Arizona's economy has grown faster than most other
regions of the country. Arizona's population experienced an increase of 2.9% in
1996 and a substantially similar percentage increase in 1997. Arizona's
employment rate increased 6.7% in 1994, 6.1% in 1995, 5.6% in 1996 and 4.4% in
1997. For 1997, Arizona ranked second in the country for job growth, and the
Phoenix-Mesa metropolitan area ranked first among all United States metropolitan
areas for job growth. Recent lay offs by Motorola and Intel, two large Phoenix
area employers, may lead to more modest job growth in 1998. The 1996
unemployment rate was 5.5%, and the 1997 unemployment rate was 4.7%.
Arizona's per capita personal income has generally varied between 5% and
15% below the national average due to such factors as the chronic poverty on the
state's Indian reservations, the states relatively high number of retirees and
children, and the state's below-average wage scale. However, Arizona's aggregate
personal income grew nearly 5.3% during 1996 to approximately $84.5 billion and
is estimated to have reached $100.8 billion in 1997.
Despite an increase in population, employment and aggregate personal
income, retail sales growth rates have declined over the last few years. The
growth rate was 12.0% in 1994, 8.8% in 1995, 5.9% in 1996 and an estimated 5.1%
in 1997.
After experiencing several years of budget shortfalls requiring mid-year
adjustments, the State of Arizona has had significant budget surpluses each year
since 1993, including a $593.3 million surplus for the fiscal year ended June
30, 1997. An amendment to the Arizona Constitution requiring a 2/3 majority vote
in both houses of the Legislature to enact any tax or fee increase limits
Arizona's ability to raise additional revenue when needed, but Arizona has
placed some of its surplus revenues in a rainy-day fund to address this risk.
The State of Arizona, as such, has no general obligation debt. The
Arizona Department of Transportation, the Arizona Board of Regents, the Arizona
Power Authority and the Water Infrastructure Authority of Arizona have each
issued revenue bonds. The State of Arizona has financed certain capital
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improvements and equipment through certificates of participation, which
represent undivided interests in lease payments to be made by the state that are
subject to annual appropriations by the Arizona legislature.
The Arizona Constitution limits the amount of debt that can be issued by
the state's counties, cities, towns, school districts and other municipal
corporations in the form of indebtedness payable from property taxes or other
general fund sources. In general, those political subdivisions may not become
indebted in an amount exceeding six percent of the value of the taxable property
in the political subdivision without the approval of a majority of the qualified
electors voting at an election. No county or school district may become indebted
in an amount exceeding 15% (30% for unified school districts) of the value of
taxable property, even with voter approval. Incorporated cities or towns with
voter approval may become indebted in an amount up to 20% of the value of
taxable property, for purposes of supplying water, light, sewers, open space
preserves, parks, playgrounds and recreational facilities. These constitutional
debt limits generally do not apply to revenue bonds payable from a special fund
revenue source.
In July 1994, the Arizona Supreme Court ruled that Arizona's system for
financing public education created substantial disparities in facilities among
school districts and violated the provisions of the Arizona Constitution which
require the Legislature to establish and maintain "a general and uniform public
school system." After several attempts, each of which were held unconstitutional
by the Arizona Supreme Court, the Legislature enacted legislation in July 1998,
which establishes a centralized state school capital finance system and, among
other things, limits the ability of school districts to issue bonds. There are
currently no challenges pending with respect to the legislation.
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 both federal income tax
and Kentucky personal income tax.
Risk Factors Regarding Investments in Kentucky Municipal Securities. As
of June 30, 1998, Kentucky had an unemployment rate of 4.5%, slightly less than
the 4.7% national average. For calendar year 1997, Kentucky's per capita income
ranked 41st in the nation and was 81% of the national average. The most current
audited financial statements for Kentucky indicate a surplus of funds in the
General Fund of $538,075,000 as of June 30, 1997, which was $411,185,000 above
the budgeted balance.
Unlike the municipal securities of most states, nearly all Kentucky
Municipal Securities are not general obligations of the issuer; rather, payment
depends on revenues generated by the property financed by the securities.
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 both federal income tax
and Louisiana personal income tax.
Risk Factors Regarding Investments in Louisiana Municipal Securities. The
State of Louisiana continues to consolidate its economic and financial gains
after a period of difficulty. In the mid-1980's, abrupt declines in the price of
oil disrupted both the economy and financial operations of the State. Recent
years have generally produced operating surpluses and major financial issues,
such as Medicaid and risk management, have been addressed. Also, debt has been
reduced to a moderate level, at $574 per capita and 2.9% of personal income.
Louisiana's economy is resource based, led by oil and gas, but
agribusiness and tourism are also significant components. Growth in the service
employment sector is providing more diversity, but the State is still very
dependent on oil and gas for direct or indirect employment and income. The price
of oil is estimated at $17 per barrel in 1998 and $17.50 in 1999.
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<PAGE> 653
Personal income gains were in excess of the national rates in 1990 -
1994, both in total and on a per capita basis, but the gains were lower in 1995
and 1996. Louisiana's per capita personal income is currently equal to 81% of
the national average, but this is still well below the 90% figure recorded in
1981 when the oil and gas industry was extremely active. The State projects
employment to increase 4.8% in 1998 and 4.5% in 1999.
OHIO MUNICIPAL SECURITIES
As used in the Prospectuses and this Statement of Additional Information,
the term "Ohio Municipal Securities" refers to debt securities which are issued
by or on behalf of Ohio or its respective authorities, agencies,
instrumentalities and political subdivisions which produce interest which, in
the opinion of counsel for the issuer are 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 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 obligors
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 which 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 Ohio Municipal 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.
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.
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
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strengthened, with employment growth occurring in most sectors. In addition,
Texas' major financial institutions have been recapitalized and bank failures
have generally ceased.
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 authorities, agencies,
instrumentalities and political subdivisions and which produce interest which,
in the opinion of counsel for the issuer, is exempt from both federal income tax
and is generally exempt from West Virginia income tax.
Risk Factors Regarding Investments in West Virginia Municipal Securities.
Being invested primarily in West Virginia securities, the West Virginia
Municipal Bond Fund is subject to the risks of West Virginia's economy and of
the financial condition of its state and local governments and their agencies.
West Virginia's economy is relatively stable. While coal mining,
chemicals and manufacturing make up an important part of that economy, state and
local governments have made and continue to make concentrated efforts to
encourage diversification of the state's economy with some success. However,
unemployment for the State continues to exceed the national average.
The financial resources for state and local governments in recent years
have been adequate. But, with little or no population growth, an aging
population, unemployment remaining above the national average, continuing
decline in school enrollment, the government and school boards continue to
struggle to produce sufficient revenues to fund operations to support public
education.
NEW FINANCIAL PRODUCTS
New options and futures contracts and other financial products, and
various combinations thereof, continue to be developed and certain of the Funds
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.
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.
*PERCS is a registered trademark of Morgan Stanley, which does not
sponsor and is in no way affiliated with The One Group.
PREFERRED STOCK
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Preferred stock is a class of stock that generally pays dividends at a
specified rate and has preference over common stock in the payment of dividends
and liquidation. Preferred stock generally does not carry voting rights. As with
all equity securities, the price of preferred stock fluctuates based on changes
in a company's financial condition and on overall market and economic
conditions.
REAL ESTATE INVESTMENT TRUSTS ("REITS")
Certain of the Funds may invest in equity interests or debt obligations
issued by REITs. REITs are pooled investment vehicles which invest primarily in
income producing real estate or real estate related loans or interest. REITs are
generally classified as equity REITs, mortgage REITs or a combination of equity
and mortgage REITs. Equity REITs invest the majority of their assets directly in
real property and derive income primarily from the collection of rents. Equity
REITs can also realize capital gains by selling property that has appreciated in
value. Mortgage REITs invest the majority of their assets in real estate
mortgages and derive income from the collection of interest payments. Similar to
investment companies, REITs are not taxed on income distributed to shareholders
provided they comply with several requirements of the Code. A Fund will
indirectly bear its proportionate share of expenses incurred by REITs in which a
Fund invests in addition to the expenses incurred directly by a Fund.
Investing in REITs involves certain unique risks in addition to those
risks associated with investing in the real estate industry in general. Equity
REITs may be affected by changes in the value of the underlying property owned
by the REITs, while mortgage REITs may be affected by the quality of any credit
extended. REITs are dependent upon management skills, are not diversified, are
subject to heavy cash flow dependency, default by borrowers and
self-liquidation. REITs are also subject to the possibilities of failing to
qualify for tax free pass-through of income under the Code and failing to
maintain their exemption from registration under the Act.
REITs (especially mortgage REITs) are also subject to interest rate
risks. When interest rates decline, the value of a REIT's investment in fixed
rate obligations can be expected to rise. Conversely, when interest rates rise,
the value of a REIT's investment in fixed rate obligations can be expected to
decline. In contrast, as interest rates on adjustable rate mortgage loans are
reset periodically, yields on a REIT's investment in such loans will gradually
align themselves to fluctuate less dramatically in response to interest rate
fluctuations than would investments in fixed rate obligations.
Investment in REITs involves risks similar to those associated with
investing in small capitalization companies. REITs may have limited financial
resources, may trade less frequently and in a limited volume and may be subject
to more abrupt or erratic price movements than larger company securities.
Historically, small capitalization stocks, such as REITs, have been more
volatile in price than the larger capitalization stocks included in the S&P
Index of 500 Common Stocks.
REPURCHASE AGREEMENTS
Under the terms of a repurchase agreement, a Fund would acquire
securities from a seller, 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 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. Repurchase
agreements are considered by the SEC to be loans by a Fund under the 1940 Act.
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Repurchase Agreement Counterparties. For Funds other than the
International Equity Index Fund, repurchase counterparties include
Federal Reserve member banks with assets in excess of $1 billion and
registered broker dealers which Banc One Investment Advisors or, in the
case of the High Yield Bond Fund, High Yield Sub-Advisor deems
creditworthy under guidelines approved by the Board of Trustees. In the
case of the International Equity Index Fund, repurchase counterparties
include banks or foreign banks with total assets in excess of $1 billion
or broker-dealers which may or may not be registered, which the
International Sub-Advisor, deems creditworthy under guidelines approved
by the Board of Trustees.
REVERSE REPURCHASE AGREEMENTS
Funds may borrow money for temporary purposes by entering into reverse
repurchase agreements. 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 cash or liquid 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 SEC to be
borrowings by a Fund under the 1940 Act.
RESTRICTED SECURITIES
Some of the Funds may invest in commercial paper issued in reliance on
the exemption from registration afforded by Section 4(2) of the Securities Act
of 1933 and other restricted securities. 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
liquidity established by the Trustees are quite liquid. The Funds intend,
therefore, to treat restricted securities that meet the liquidity criteria
established by the Board of Trustees, including Section 4(2) commercial paper
and Rule 144A Securities, as determined by Banc One Investment Advisors, as
liquid and not subject to the investment limitation applicable to illiquid
securities.
The ability of the Trustees to determine the liquidity of certain
restricted securities is permitted under a SEC Staff position set forth in the
adopting release for Rule 144A under the Securities Act of 1933 ("RULE 144A").
Rule 144A is a nonexclusive safe-harbor for certain secondary market
transactions involving securities subject to restrictions on resale under
federal securities laws. Rule 144A provides an exemption from registration for
resales of otherwise restricted securities to qualified institutional buyers.
Rule 144A was expected to further enhance the liquidity of the secondary market
for securities eligible for resale. 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 Banc One Investment Advisors 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.
Certain Section 4(2) commercial paper programs cannot rely on Rule 144A
because, among other things, they were established before the adoption of the
rule. However, the Trustees may determine for
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purposes of the Trust's liquidity requirements that an issue of 4(2) commercial
paper is liquid if the following conditions, which are set forth in a 1994 SEC
no-action letter, are met:
- The 4(2) paper must not be traded flat or in default as to principal or
interest;
- The 4(2) paper must be rated in one of the two highest rating
categories by a least two NRSROS, or if only one NRSRO rates the security, by
that NRSRO, or if unrated, is determined by Banc One Investment Advisors or the
applicable Sub-Advisor to be of equivalent quality; and
- Banc One Investment Advisors or the applicable Sub-Advisor must
consider the trading market for the specific security, taking into account all
relevant factors, including but not limited, to whether the paper is the subject
of a commercial paper program that is administered by an issuing and paying
agent bank and for which there exists a dealer willing to make a market in that
paper, or is administered by a direct issuer pursuant to a direct placement
program; and
- Banc One Investment Advisors or the applicable Sub-Advisor shall
monitor the liquidity of the 4(2) commercial paper purchased and shall report to
the Board of Trustees promptly if any such securities are no longer determined
to be liquid if such determination causes a Fund to hold more than 15% (10% for
Money Market Funds) of its net assets in illiquid securities in order for the
Board of Trustees to consider what action, if any, should be taken on behalf of
The One Group, unless Banc One Investment Advisors or the applicable Sub-Advisor
is able to dispose of illiquid assets in an orderly manner in an amount that
reduces the Fund's holdings of illiquid assets to less than 15% (10% for Money
Market Funds) of its net assets; and
- Banc One Investment Advisors or the applicable Sub-Advisor shall report
to the Board of Trustees on the appropriateness of the purchase and retention of
liquid restricted securities under these Guidelines no less frequently that
quarterly.
SECURITIES LENDING
In order to generate additional income, each of the Funds, except the
Funds of Funds, may lend up to 33 1/3% of the securities in which they are
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, letters of credit or any combination of cash,
such securities, shares, or letters of credit as collateral equal at all times
to at least 100% of the market value plus accrued interest on the securities
lent. The Funds 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
commercial paper, repurchase agreements, variable and floating rate instruments,
restricted securities, asset-backed securities, and the other types of
investments permitted by the applicable Fund's prospectus. 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 Banc One Investment Advisors to be of good standing under guidelines
established by the Trust's Board of Trustees and when, in the judgment of Banc
One Investment Advisors, the consideration which can be earned currently from
such securities loans justifies the attendant risk. Loans are subject to
termination by the Funds or the borrower at any time, and are therefore, not
considered to be illiquid investments.
SHORT-TERM FUNDING AGREEMENTS
Some Funds may, in order to enhance yield, make limited investments in
short-term funding agreements issued by banks and highly rated U.S. insurance
companies. Short-term funding agreements issued by insurance companies are
sometimes referred to as Guaranteed Investment Contracts ("GICS"), while those
issued by banks are referred to as Bank Investment Contracts ("BICS"). Pursuant
to such agreements, the Funds make cash contributions to a deposit account at a
bank or insurance company. The bank or insurance company then credits to the
Funds on a monthly basis guaranteed interest at either a fixed, variable or
floating rate. These contracts are general obligations of the issuing bank or
insurance company (although they may be the obligations of an insurance company
separate account) and are paid from the general assets of the issuing entity.
The Funds will purchase short-term funding agreements only from banks and
insurance companies which, at the time of purchase, are rated in one of the
three highest rating categories and have assets of $1
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billion or more. Generally, there is no active secondary market in short-term
funding agreements. Therefore, short-term funding agreements may be considered
by the Funds to be illiquid investments. To the extent that a short-term funding
agreement is determined to be illiquid, such agreements will be acquired by the
Funds only if, at the time of purchase, no more than 15% of the Fund's net
assets (10% of the Money Market Fund's net assets) will be invested in
short-term funding agreements and other illiquid securities.
SPDRS
Certain Funds may invest in Standard & Poor's Depository Receipts
("SPDRS"). SPDRs are interests in unit investment trusts. Such investment trusts
invest in a securities portfolio that includes substantially all of the common
stocks (in substantially the same weights) as the common stocks included in a
particular Standard Poor's Index such as the S&P 500. SPDRs are traded on the
American Stock Exchange, but may not be redeemed. The results of SPDRs will not
match the performance of the designated S&P Index due to reductions in the
SPDRs' performance attributable to transaction and other expenses, including
fees paid by the SPDR to service providers. SPDRs distribute dividends on a
quarterly basis.
SPDRs are not actively managed. Rather, a SPDR's objective is to track
the performance of a specified index. Therefore, securities may be purchased,
retained and sold by SPDRs at times when an actively managed trust would not do
so. As a result, you can expect greater risk of loss (and a correspondingly
greater prospect of gain) from changes in the value of securities that are
heavily weighted in the index than would be the case if SPDR was not fully
invested in such securities. Because of this, a SPDRs price can be volatile, a
Fund may sustain sudden, and sometimes substantial, fluctuations in the value of
its investment in SPDRs.
A Fund will limit its investments in SPDRs to 5% of the Fund's total
assets and 3% of the outstanding voting securities of the SPDRs issuer.
Moreover, a Fund's investments in SPDRs will not exceed 10% of the Fund's total
assets, when aggregated with all other investments in investment companies.
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 indices. 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. Structured
instruments are commonly considered to be derivatives.
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 Banc One Investment Advisors or
the applicable Sub-Advisor, principal and/or interest payments on the structured
instrument may be substantially less than expected. 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."
The Funds will invest only in structured securities that are consistent
with each Fund's investment objective, policies and restrictions and Banc One
Investment Advisors' or the applicable Sub-Advisor'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.
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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.
SWAPS, CAPS AND FLOORS
Certain of the Funds 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 "Risk Factors in Futures Contracts."
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 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. In addition, the Fund may incur a market
value adjustment on securities held upon the early termination of the swap. 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
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the Fund is able to negotiate such an offsetting swap contract, however, the
Fund could be subject to continued adverse developments, even after Banc One
Investment Advisors or the applicable Sub-Advisor has determined that it would
be prudent to close out or offset the first swap contract.
The Funds (other than the High Yield Bond 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 one of the top two rating categories by at least one NRSRO,
or if unrated, determined by Banc One Investment Advisors 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 Banc One Investment Advisors or the applicable Sub-Advisor 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. In addition,
in certain circumstances entry into a swap contract that substantially
eliminates risk of loss and the opportunity for gain in an "appreciated
financial position" will accelerate gain to the Funds.
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 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 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 Banc One Investment
Advisors 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. Each of the Bond Funds generally will limit their investments in
swaps, caps and floors to 25% of its total assets.
TREASURY RECEIPTS
Certain of the Funds 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. Receipts include
Treasury Receipts ("TRS"), Treasury Investment Growth Receipts ("TIGRS"), and
Certificates of Accrual on Treasury Securities ("CATS").
U.S. TREASURY OBLIGATIONS
The Funds 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"). The Funds may also invest in
Inflation Indexed Treasury Obligations.
VARIABLE AND FLOATING RATE INSTRUMENTS
Certain obligations purchased by some of the Funds may carry variable or
floating rates of interest, may involve a conditional or unconditional demand
feature and may include variable amount master demand notes.
VARIABLE AMOUNT MASTER DEMAND NOTES are 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
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principal and accrued interest. While the notes are not typically rated by
credit rating agencies, issuers of variable amount master demand notes (which
are normally manufacturing, retail, financial, brokerage, investment banking and
other business concerns) must satisfy the same criteria as set forth above for
commercial paper. Banc One Advisers or the Sub-Advisor 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.
Some of the Funds subject to their investment objective policies and
restrictions, may acquire VARIABLE AND FLOATING RATE INSTRUMENTS. A variable
rate instrument 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 instrument
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 instrument
are frequently not rated by credit rating agencies; however, unrated variable
and floating rate instruments purchased by a Fund will be determined by Banc One
Investment Advisors or the applicable Sub-Advisor 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, Banc One Investment Advisors or the
applicable Sub-Advisor will consider the earning power, cash flow and other
liquidity ratios of the issuers of such instruments (such issuers include
financial, merchandising, bank holding and other companies) and will
continuously monitor their financial condition. There may be no active secondary
market with respect to a particular variable or floating rate instrument
purchased by a Fund. The absence of such an active secondary market, could make
it difficult for the Fund to dispose of the variable or floating rate instrument
involved in the event the issuer of the instrument 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 instruments may be secured by
bank letters of credit or other assets. A Fund will purchase a variable or
floating rate instrument to facilitate portfolio liquidity or to permit
investment of the Fund's assets at a favorable rate of return.
With respect to the Money Market Funds and the Institutional Money
Market Funds, variable or floating rate instruments 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) Adjustable Rate Government Securities. A Government Security which
is a Variable Rate Security where the variable rate of interest is readjusted no
less frequently than every 762 days shall be deemed to have a maturity equal to
the period remaining until the next readjustment of the interest rate. A
Government Security which is a Floating Rate Security shall be deemed to have a
remaining maturity of one day.
(2) Short-Term Variable Rate Securities. A Variable Rate Security, the
principal amount of which, in accordance with the terms of the security, must
unconditionally be paid in 397 calendar days or less shall be deemed to have
maturity equal to the earlier 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.
(3) Long-Term Variable Rate Securities. A Variable Rate Security, the
principal amount of which is scheduled to be paid in more than 397 days, that is
subject to a Demand Feature shall be deemed 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) Short-Term Floating Rate Securities. A Floating Rate Security, the
principal amount of which, in accordance with the terms of the security, must
unconditionally be paid in 397 calendar days or less shall be deemed to have a
maturity of one day.
(5) Long-Term Floating Rate Securities. A Floating Rate Security, the
principal amount of which is scheduled to be paid in more than 397 days, that is
subject to a demand feature, shall be deemed to have a maturity equal to the
period remaining until the principal amount can be recovered through demand.
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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 397
calendar days and upon no more than 30 days notice.
LIMITATIONS ON THE USE OF VARIABLE AND FLOATING RATE NOTES. Variable
and floating rate instruments 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 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, which can purchase such
notes) of the Fund's net assets only if such instruments 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. There is no limit on the extent to which a
Fund may purchase demand instruments that are not illiquid. If not rated, such
instruments must be found by Banc One Investment Advisors or the Sub-Advisor,
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.
WARRANTS
Warrants are securities, typically issued with preferred stock or
bonds, that give the holder the right to buy a proportionate amount of common
stock at a specified price, usually at a price that is higher than the market
price at the time of issuance of the warrant. The right may last for a period of
years or indefinitely.
WHEN-ISSUED SECURITIES AND FORWARD COMMITMENTS
Some Funds may purchase securities on a "when-issued" and forward
commitment 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. The Funds may purchase securities on a
when-issued basis when deemed by Banc One Investment Advisors or the applicable
Sub-Advisor 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. The Funds generally will
not pay for such securities or earn interest on them until received. Although
the purchase of securities on a when-issued basis is not considered to be
leveraging, it has the effect of leveraging. When Banc One Investment Advisors
or the applicable Sub- Advisor purchases a when-issued security, the Custodian
will set aside cash or liquid securities to satisfy the 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. The Fund's net assets may
fluctuate to a greater degree when it sets aside portfolio securities to cover
such purchase commitments than when it sets aside cash. In addition, 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.
In a forward commitment transaction, the Funds contract to purchase
securities for a fixed price at a future date beyond customary settlement time.
The Funds are 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 Funds may enter into offsetting contracts for the forward sale of other
securities that they own. 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.
Limitations on the Use of When Issued Securities and Forward
Commitments. No Fund intends to purchase "when-issued" securities for
speculative purposes but only for the purpose of acquiring portfolio securities.
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 Banc One Investment Advisors and the Sub-Advisor to manage the Fund
might, as described in the Prospectuses, be affected in the event
39
<PAGE> 663
its commitments to purchase when-issued securities ever exceeded 40% of the
value of its assets. Commitments to purchase when-issued securities will not,
under normal market conditions, exceed 25% of a Fund's total assets, and a
commitment will not exceed 90 days. A Fund may dispose of a when-issued security
or forward commitment prior to settlement if Banc One Investment Advisors or the
applicable Sub- Advisor deems it appropriate to do so.
INVESTMENT RESTRICTIONS
The following investment restrictions are FUNDAMENTAL and 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.
Each of the Equity 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 a Fund's investment objective and policies, repurchase
agreements involving such securities) if as a result more than 5% of the total
assets of a Fund would be invested in the securities of such issuer or a Fund
would own more than 10% of the outstanding voting securities of such issuer.
This restriction applies to 75% of a Fund's assets. With respect to The One
Group Equity Index Fund, no more than 10% of the Fund's assets may be invested
in securities issued or guaranteed by the United States, its agencies or
instrumentalities. 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 a Fund to be invested in the securities of one or more issuers
conducting their principal business activities in the same industry, provided
that this information 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 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 the Prospectus and in this Statement of Additional Information.
Each of the Bond 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 a Fund's investment objective and policies, repurchase
agreements involving such securities) if as a result more than 5% of the total
assets of a Fund would be invested in the securities of such issuer or a Fund
would own more than 10% of the outstanding voting securities of such issuer.
This restriction applies to 75% of a 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 a 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.
40
<PAGE> 664
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 the Prospectus and in this Statement of Additional Information.
Each of the Fund of Funds may not:
1. Purchase securities of any issuer (except securities issued or
guaranteed by the United States, its agencies or instrumentalities, securities
of regulated investment companies, and, if consistent with a Fund's investment
objective and policies, repurchase agreements involving such securities) if as a
result more than 5% of the total assets of a Fund would be invested in the
securities of such issuer or a Fund would own more than 10% of the outstanding
voting securities of such issuer. This restriction applies to 75% of a 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 a Fund to be invested in the securities of one or more issuers
conducting their principal business activities in the same industry, except for
investments in funds of the One Group, 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
services. 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 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 the Prospectus and in this Statement of Additional Information.
Each of the Money Market 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 the Fund's investment objective and policies, repurchase
agreements involving such securities) if as a result more than 5% of the total
assets of a Fund would be invested in the securities of such issuer or a 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 and also provided that
with respect to the Ohio Municipal Money Market Fund, as to 50% of such Fund's
assets, the Fund may invest up to 25% of its assets in the securities of a
single issuer. With respect to remaining 50% of its total assets, the Ohio
Municipal Money Market Fund may not purchase the securities of any issuer if as
a result more than 5% of the total assets of the Fund would be invested in the
securities of such issuer. 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
nongovernmental user, such user would be considered the issuer.
2. Purchase any securities that would cause more than 25% of the total
assets of a 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) that this limitation does not apply
to investments in the obligations issued or guaranteed by the U.S. government or
its agencies and instrumentalities, domestic bank certificates of deposit or
bankers' acceptance 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 and the Ohio Municipal Money Market Fund, the Municipal Money Market Fund,
this limitation shall not apply to Municipal Securities or governmental
guarantees of Municipal Securities; and further provided, that for the purposes
of this limitation only, private activity bonds that are backed only by the
assets and revenues of a non-governmental user shall not be deemed to be Ohio
Municipal Securities for purposes of the Ohio Municipal Money Market Fund nor
Municipal Securities for purposes of the Prime Money Market Fund and the
Municipal Money Market Fund.
41
<PAGE> 665
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 the Prospectus and in this Statement of Additional Information.
With respect to the Institutional Money Market Funds:
The Treasury Only Money Market Fund may not:
1. Purchase securities other than U.S. Treasury bills, notes and other
U.S. obligations issued or guaranteed by the U.S. Treasury.
2. Invest in any securities subject to repurchase agreements.
The Government Money Market Fund may not:
1. Purchase securities other than those issued or guaranteed by the
U.S. government or its agencies or instrumentalities, some of which may be
subject to repurchase agreements.
Each of the Institutional Money Market Funds may not:
1. Borrow money or issue senior securities, except that each Fund may
borrow from banks for temporary purposes in amounts up to 10% of the value of
the Fund's 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 respective Fund's total assets at the time of its borrowing.
2. Purchase securities while borrowings (including reverse repurchase
agreements) exceed 5% of the respective Fund's net assets.
3. 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.
With respect to the Municipal Bond Funds:
The Intermediate Tax-Free Bond Fund and the Municipal Income 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 a Fund's investment objective and policies, repurchase
agreements involving such securities) if as a result more than 5% of the total
assets of a Fund would be invested in the securities of such issuer or a Fund
would own more than 10% of the outstanding voting securities of such issuer.
This restriction applies to 75% of a 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 a 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 Municipal Securities or governmental
guarantees of Municipal Securities, and with respect to the Municipal Income
Fund, housing authority obligations. 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.
42
<PAGE> 666
The Arizona Municipal Bond Fund, the West Virginia Municipal Bond, the
Louisiana Municipal Bond Fund, The Ohio Municipal Bond Fund, and the Kentucky
Municipal Bond 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 a Fund's investment objective and policies, repurchase
agreements involving such securities) if as a result more than 25% of the total
assets of a Fund would be invested in the securities of such issuer. This
restriction applies to 50% of a Fund's assets. With respect to the remaining 50%
of its total assets, a Fund may not purchase the securities of any issuer if as
a result more than 5% of the total assets of the Fund would be invested in the
securities of such Issuer. 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 (i) that would cause more than 25% of the
total assets of a 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; and (ii) this limitation does
not apply to Municipal Securities or Ohio Municipal Securities, Kentucky
Municipal Securities, Arizona Municipal Securities, West Virginia Municipal
Securities, and Louisiana 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. In addition, with respect to the
Arizona Municipal Bond Fund and the West Virginia Municipal Bond Fund, for
purposes of this limitation only, private activity bonds that are backed only by
the assets and revenues of a non-governmental issued shall not be deemed to be
Municipal Securities or Arizona Municipal Securities (for the Arizona Municipal
Bond Fund) or West Virginia Securities (for the West Virginia Municipal Bond
Fund).
None of the Municipal Bond Funds may:
1. 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.
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 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 Fund may purchase
or sell financial futures contracts and (except for the Treasury & Agency Fund)
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 contracts, 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. Except for the Treasury & Agency Fund, 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 Fund 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 rules, regulations and applicable exemptive relief
thereunder.
43
<PAGE> 667
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.
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 Fund, the Prime
Money Market Fund and the Government Money Market Fund 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. 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.)
2. Acquire the securities of registered open-end investment companies
or registered unit investment trusts in reliance on Section 12(d)(1)(F) or
12(d)(1)(G) of the 1940 Act, other than the Investor Growth Fund, the Investor
Growth & Income Fund, the Investor Conservative Growth Fund, the Investor
Balanced Fund, the Investor Aggressive Growth Fund, and the Investor Fixed
Income Fund.
The foregoing percentages apply at the time of purchase of a security.
Banc One Investment Advisors or the applicable Sub-Advisor shall report to the
Board of Trustees promptly if any of a Fund's investments are no longer
determined to be liquid or if the market value of Fund assets has changed if
such determination or change causes a Fund to hold more than 15% (10% in the
case of a Fund that is a Money Market Fund) of its net assets in illiquid
securities in order for the Board of Trustees to consider what action, if any,
should be taken on behalf of the Trust, unless Banc One Investment Advisors or
the applicable Sub- Advisor is able to dispose of illiquid assets in an orderly
manner in an amount that reduces the Fund's holdings of illiquid assets to less
than 15% (or 10% in the case of a Fund that is a Money Market Fund) of its net
assets.
Additionally, although not a matter controlled by their fundamental
investment restrictions, so long as their shares are registered under the
securities laws of the State of Texas, the Prime Money Market Fund and the Ohio
Municipal Money Market Fund will: (i) limit their investments in other
investment companies to no more than 10% of each Funds total asset; (ii) invest
only in other investment companies with substantially similar investment
objectives; and (iii) invest only in other investment companies with charges and
fees substantially similar to those set forth in paragraph (3) and (4) of
Section 123.3 of the Texas State Statute, not to exceed .25% in 12b-1 and no
other commission or other remuneration is paid or given directly or indirectly
for soliciting any security holder in Texas.
In addition, the Intermediate Tax-Free Bond Fund will not invest more
than 25% of its assets in municipal securities that are related in such a way
that a political, economic or business development affecting one security will
also affect other municipal securities.
44
<PAGE> 668
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 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, 1998 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, 1998 and 1997 were as follows:
<TABLE>
<CAPTION>
THE ONE GROUP PORTFOLIO TURNOVER
FISCAL YEAR ENDED
JUNE 30,
--------
FUND 1998 1997
- ------------------------------------------------------------------------------------------------------------------
<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 14.68% 28.18%
Disciplined Value 106.41% 92.66%
Growth Opportunities 158.43% 301.35%
Equity Index 4.32% 5.81%
Large Company Value 47.35% 77.05%
Asset Allocation 46.04% 80.96%
International Equity Index 9.90% 9.61%
Large Company Growth 117.34% 57.17%
Income Bond 30.83% 55.18%
Limited Volatility Bond 56.99% 66.61%
Intermediate Tax-Free Bond 109.03% 86.89%
Municipal Income 69.76% 62.83%
Ohio Municipal Bond 10.49% 7.45%
Government Bond 91.49% 60.53%
Ultra Short-Term Income 41.15% 70.36%
Intermediate Bond 60.08% 55.91%
Treasury Only Money Market 0%** 0%**
Government Money Market 0%** 0%**
Kentucky Municipal Bond NA* 13.30%
Institutional Prime Money Market NA* NA+
Treasury Money Market NA* NA+
Tax-Exempt Money Market NA* NA+
Arizona Municipal Bond 20.89% 5.66%***
Texas Tax-Free Bond NA* NA+
W. Virginia Municipal Bond 16.69% 6.21%***
Louisiana Municipal Bond 12.03% 17.39%
Value Growth 62.37% 113.17%
Small Capitalization 83.77% 92.01%
Investor Growth 4.05% 18.49%++
Investor Growth & Income 11.38% 18.07%++
Investor Aggressive Growth NA* NA+
Investor Conservative Growth 3.22% 28.46%++
Investor Balanced 9.71% 12.20%++
Investor Fixed Income NA* NA+
High Yield Bond NA* NA+
Treasury & Agency 41.60% 54.44%***
<FN>
* As of June 30, 1998, the Fund had not commenced operations.
</TABLE>
45
<PAGE> 669
** Turnover rate is not applicable to money market funds.
*** Portfolio turnover rate for the period January 20, 1997 through June
30, 1997.
+ As of June 30, 1997, the Fund had not commenced operations.
++ Portfolio turnover rate for the period December 10, 1996 through June
30, 1997.
Some of the Funds listed above had portfolio turnover rates in excess
of 100%. This means that these Funds sold and replaced over 100% of their
investments. The high portfolio turnover rates for the fiscal year ended June
30, 1997 and June 30, 1998 for these Funds resulted from various factors,
including some or all of the following: investment strategies, unusually high
market volatility and significant growth of the Funds. Higher portfolio turnover
rates will likely result in higher transaction costs to the Funds and may result
in additional tax consequences to Shareholders. To the extent portfolio turnover
results in short-term capital gains, such gains will generally be taxed at
ordinary income tax rates. 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. Portfolio turnover will not be a
limiting factor in making portfolio decisions.
ADDITIONAL TAX INFORMATION CONCERNING ALL FUNDS
Each Fund is treated as a separate entity for federal income tax
purposes and is not combined with The One Group's other funds. 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 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 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, and (2)
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, 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 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 U.S. 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 limit the range of the Fund's investments. If a Fund 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.
46
<PAGE> 670
Shareholders of the Funds will generally be subject to 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 (generally taxed at a 20% tax rate for
non-corporate shareholders) regardless of how long the Shareholder has held its
shares. Some 1998 distributions of gains realized in 1997 may be subject to tax
at a 28% tax rate. 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 (generally taxed at a 20% tax rate for non-corporate
shareholders), 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-interest dividends received on such shares. Dividends and distributions
on a Fund's shares are generally subject to federal income tax as described
herein to the extent they do not exceed the Fund's realized income and gains,
even though such dividends and distributions may economically represent a return
of a particular shareholder's investment. Such distributions are likely to occur
in respect of shares purchased at a time when the Fund's net asset value
reflects gains that are either unrealized, or realized but not distributed.
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, swaps, short sales, foreign currencies, and foreign
securities will be subject to special tax rules (including mark-to-market,
constructive sale, straddle, wash sale and short sale 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 long-term
capital gains into short-term capital gains, 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 and cause differences between a Fund's book income
and taxable income. 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 "Details About the Funds' Investment Practices
and Policies" in the Funds' Prospectuses, are sold at original issue discount
and thus do not make periodic cash interest payments. Similarly, zero-coupon
bonds do not make periodic 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 Banc One Investment Advisors would not otherwise 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.
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<PAGE> 671
The Internal Revenue Service recently revised its regulations affecting
the application to foreign investors of the back-up withholding and withholding
tax rules described above. The new regulations will generally be effective for
payments made after December 31, 1999 (although transition rules will apply). In
some circumstances, the new rules will increase the certification and filing
requirements imposed on foreign investors in order to qualify for exemption from
the 31% back-up withholding tax and for reduced withholding tax rates under
income tax treaties. Foreign investors in a Fund should consult their tax
advisors with respect to the potential application of these new regulations. 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-Advantaged 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 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 advisors 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-Advantaged Funds and the International Funds 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-ADVANTAGED 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 total 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-Advantaged 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-Advantaged 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-Advantaged Fund during
such year, regardless of the period for which the Shares were held.
Exempt-interest dividends may generally be treated by a Tax-Advantaged
Fund's Shareholders as items of interest excludable from their gross income
under Section 103(a) of the Code. However, each Shareholder of a Tax-Free Fund
is advised to consult his or her tax advisor with respect to whether such
Shareholder may be treated as a "SUBSTANTIAL USER" or a "RELATED PERSON" to such
user under Section 147(a) of the Code 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.
Dividends attributable to interest on certain private activity bonds
issued after August 7, 1986 must be taken into account in determining
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).
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 Funds to purchase sufficient amounts of tax exempt securities to
satisfy the Code's requirements for the payment of "exempt-interest" dividends.
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<PAGE> 672
Each Tax-Advantaged 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-Advantaged Fund may acquire rights regarding specified
portfolio securities under puts. See "Futures and Options Trading." 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-Advantaged 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.
Following is a brief discussion of treatment of exempt-interest
dividends by certain states.
Arizona Taxes. Shareholders of the Arizona Municipal Bond Fund will not
be subject to Arizona income tax on exempt-interest dividends received from the
Fund to the extent that such dividends are attributable to interest on
tax-exempt obligations of the state of Arizona and its political subdivisions
("Local Obligations"). Interest from Local Obligations however, may be
includable in Federal gross income.
Kentucky Taxes. Fund shares are currently exempt from the Kentucky tax
on intangible property. The Kentucky Supreme Court recently held that corporate
shares are not subject to the Kentucky intangible property tax because of an
exemption for shares of certain corporations with in-state activities which the
Court held to violate the Commerce Clause of the U.S. Constitution. The Kentucky
Revenue Cabinet has announced that, in light of the ruling, it will not, as a
matter of policy, require that the Kentucky intangible property tax be paid on
any portion of the value of shares of any mutual fund. Previously the Cabinet
had required owners of shares of mutual funds to pay tax on the portion of their
share value representing underlying fund assets not exempt from the tax. The
Cabinet could change this policy in the future. The Kentucky General Assembly
could re-enact the intangible tax on corporate shares and other similar
securities without the exemption found objectionable by the Court. There is no
assurance that the Fund shares will remain free from the Kentucky intangible
property tax.
West Virginia Taxes. Shareholders may reduce their West Virginia
adjusted gross income ("AGI") for that portion of the interest or dividends they
receive which represents interest or dividends of the Fund on obligations or
securities of any authority, commission or instrumentality of West Virginia that
is exempt from the West Virginia personal income tax by Federal or West Virginia
law. Shareholders may also reduce their West Virginia AGI for that portion of
interest or dividends received from the Fund derived from obligations of the
United States and from obligations or securities of some authorities,
commissions or instrumentalities of the United States.
However, shareholders cannot reduce their West Virginia AGI for any
portion of interest or dividends received from the Fund derived from income on
obligations of any state, or political subdivision thereof, other than West
Virginia, regardless of any Federal law exemption, such as that accorded
"exempt-interest dividends;" and they must increase their West Virginia AGI by
the amount of such interest or dividend income. Also, a shareholder must
increase his West Virginia AGI by interest on indebtedness incurred (directly or
indirectly) to purchase or hold shares of the Fund to the extent such interest
was deductible in determining Federal AGI. The sale, exchange, or redemption of
Fund shares is subject to the West Virginia income tax to the extent the gain or
loss therefrom affects the determination of the shareholder's Federal AGI.
The foregoing is only a summary of some of the important tax
considerations generally affecting purchasers of Shares of a Tax-Advantaged
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 state
income tax treatment of each Tax-Advantaged 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-Advantaged Fund are urged
to consult their tax advisors with specific reference to their own tax
situation, including the potential application of state, local and foreign
taxes.
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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.
Gains from foreign currencies (including foreign currency options,
foreign currency futures and foreign currency forward contracts) will (under
regulations to be issued) constitute qualifying income for purposes of the 90%
test only to the extent that they are directly related to the trust's business
of investing in stock or securities.
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 Shareholders of the International Equity
Index Fund. 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 gains (and to a limited extent, losses) from 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 may 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. In
addition, no credit will be allowed for foreign taxes paid in respect of any
dividend on stock paid or accrued after September 4, 1997 unless the stock was
held (without protection from risk of loss) for at least 16 days during the
30-day period beginning 15 days before the ex-dividend date. For certain
preferred stock the holding period is 46 days during the 90-day period beginning
45 days before the ex-dividend date. This means that (i) Shareholders not
satisfying this holding period requirement may not claim foreign tax credits in
respect of their shares, and (ii) the Fund may not "flow through" tax credits to
Shareholders in respect of dividends on stock that the Fund has not held for the
requisite period. If the Fund makes this election with respect to foreign tax
credits it will notify Shareholders of their proportionate share of foreign
taxes paid, the portion of the distribution that represents foreign source
income, and any amount of such foreign taxes paid which are not creditable
because the Fund did not meet the holding period requirement. 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 up to 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 advisors.
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
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<PAGE> 674
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 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
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 and the High Yield Bond Fund are
determined by Banc One Investment Advisors or the applicable Sub-Advisor 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. Mutual fund investments of the Funds of Funds will
be valued at the most recently calculated net asset 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 Advisor 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 Class I, Class A,
Class B, Class C 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 Class I,
Class A, Class B, Class C and Service Class Shares is calculated
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<PAGE> 675
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 Class I, Class A, Class B, Class C
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, Class C and Service Class Shares.
ADDITIONAL PURCHASE AND REDEMPTION INFORMATION
All of the classes of Shares in each Fund (other than Service Class
shares in the U.S. Treasury Securities Money Market Fund and the Institutional
Prime Money Market 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.
Class I 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 I Shares are not available to
Individual Retirement Accounts.
Class A, Class B and Class C Shares may be purchased by any investor
that does not meet the purchase eligibility criteria, described above, with
respect to Class I Shares. In addition to purchasing Class A, Class B and Class
C Shares directly from the Distributor, an investor may purchase Class A, Class
B and Class C 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).
WAIVER OF CLASS A SALES CHARGE. As described in each Prospectus for
each of the Equity and Bond Funds and the Funds of 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:
(1) Bought with the reinvestment of dividends and capital gains
distributions;
(2) acquired through the exercise of exchange privileges where a
comparable sales charge has been paid for exchanged Shares;
(3) 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, of State Street
Bank and Trust Company and its subsidiaries and affiliates, of
broker-dealers who have entered into a dealer agreement with the Trust
and their subsidiaries and affiliates, or of an investment sub-Advisor
of a Fund of the Trust and such sub-Advisor's subsidiaries and
affiliates;
(4) 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; 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; retirement and deferred compensation plans and trusts used
to fund these plans, including, but not limited to, those defined in
Sections 401(a), 403(b) or 457 of the Code and "rabbi trusts; or
purchased by investment Advisors, 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 Advisors, financial
planners or other intermediaries who place trades for their own
accounts if the
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<PAGE> 676
accounts are linked to the master account of such investment Advisor,
financial planner or other intermediary;
(5) purchased with proceeds from the redemption of Class I Shares of a
Fund of the Trust or acquired in an exchange of Class I Shares of a
Fund for Class A Shares of the same Fund, but only if the purchase is
made within 60 days of the sale or distribution:
(6) purchased with proceeds from the redemption of Shares of a mutual
fund, including a Fund of the Trust, for which a sales charge was paid
but only if the purchase is made within 60 days of the sale or
distribution;
(7) purchased in an Individual Retirement Account with the proceeds of
a distribution from an employee benefit plan, but only if the purchase
is made within 60 days of the sale or distribution and at the time of
distribution, the employee benefit plan had plan assets invested in a
Fund of the Trust;
(8) purchased with Trust assets;
(9) bought in connection with plans of reorganization of a Fund, such
as mergers, asset acquisitions and exchange offers to which a Fund is a
party.
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 (5), (6), and (7)
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 (5), (6), and (7) 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 (5), (6), and (7).
Exchanges.
The exchange privileges described herein 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.
Class I. Class I Shareholders of a Fund may exchange their Shares for
Class A Shares of the same Fund or for Class A Shares or Class I Shares of
another Fund of the Trust. Class A Shareholders may exchange their Shares for
Class I Shares of a Fund or for Class I or Class A Shares of another Fund or the
Trust, if the Shareholder is eligible to purchase such Shares. If a Class A
Shareholder of the High Yield Bond Fund exchanges his or her Shares within one
year of receipt of the Shares, the Shareholder will be assessed a 2% redemption
fee.
Class A 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 Class I Shares for Class A Shares also will require payment of the
sales charge unless the sales charge is waived, as provided above. If a
Shareholder (no longer eligible to purchase Class I Shares) purchases Class A
Shares of a Fund, the Shareholder will be subject to Distribution and
Shareholder Services Plan Fees.
Class B Shares. 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
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<PAGE> 677
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.
Class C Shares. Class C Shareholders may not exchange their Class C
Shares for shares of any other class nor may shares of any other class be
exchanged for Class C Shares.
Service Class Shares. 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.
Institutional Money Market Funds. 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.
Redemptions
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 SEC has by order permitted such suspension, or
(d) an emergency exists as determined by the SEC.
54
<PAGE> 678
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 six Trustees, all of whom, except John F. Finn, 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, their ages, and principal
occupations during the past five years are set forth below.
<TABLE>
<CAPTION>
POSITION(S) HELD PRINCIPAL OCCUPATION
NAME AND ADDRESS AGE WITH THE TRUST DURING PAST 5 YEARS
- ----------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Peter C. Marshall 56 Trustee From November, 1993 to present,
DCI Marketing, Inc. President, DCI Marketing, Inc.;
2727 W. Good Hope Road from August, 1992 to November, 1993, Vice
Milwaukee, WI 53209 President-Finance and Treasurer,
DCI Marketing, Inc.
Charles I. Post 70 Trustee From July, 1986 to present, has
7615 4th Avenue West been self-employed as a consultant.
Bradenton, FL 34209
John S. Randall 85 Trustee Since 1972, has been self-employed
1840 North Prospect Ave. as a management consultant.
Apt. 419
Milwaukee, WI 53202
Frederick W. Ruebeck 58 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
Robert A. Oden, Jr. 51 Trustee From 1995 to present, President
Office of the President Kenyon College; from 1989 to
Ransom Hall 1995, Headmaster, The Hotchkiss
Kenyon College School.
Gambier, OH 43022
John F. Finn 51 Trustee Since 1975, President of Garner, Inc.,
President (Wholesale Distributor to the outdoor
Garner, Inc. power equipment industry)
1150 Chesepeake Avenue
Columbus, Ohio 43212
</TABLE>
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 for the Trust's fiscal year ended June 30, 1998.
55
<PAGE> 679
<TABLE>
<CAPTION>
COMPENSATION TABLE(1)
PENSION OR
RETIREMENT
BENEFITS ESTIMATED TOTAL
AGGREGATE ACCRUED ANNUAL COMPENSATION
COMPENSATION AS PART BENEFITS FROM
NAME OF FROM THE OF FUND UPON THE FUND
PERSON, POSITION TRUST EXPENSES(2) RETIREMENT COMPLEX(3)
- ----------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Peter C. Marshall, $11,750 N/A N/A $14,750
Chairman
Charles I. Post, $11,250 N/A N/A $14,250
Trustee
John S. Randall, $11,250 N/A N/A $14,250
Trustee
Frederick W. Ruebeck, $11,250 N/A N/A $14,250
Trustee
Robert A. Oden, Jr. $11,250 N/A N/A $14,250
Trustee
John F. Finn $ 0 N/A N/A $ 0
Trustee
<FN>
1 Figures are for the Trust's fiscal year ended June 30, 1998.
2 The Trustees may defer all or a part of its compensation payable by the
Trust pursuant to the Deferred Compensation Plan for Trustees of The
One Group (the "PLAN"). Under the Plan, the Trustees may specify one or
more fiduciary class shares of one or more Funds of the Trust that will
be used to measure the performance of a Trustee's deferred compensation
account. A Trustee's deferred compensation account will be paid at such
times as elected by the Trustee subject to certain mandatory payment
provisions in the Plan (e.g., death of a Trustee.)
3 "Fund Complex" comprises the 33 operational funds of The One Group as
well as the 5 funds of The One Group(R) Investment Trust at June 30,
1998.
</TABLE>
56
<PAGE> 680
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.
<TABLE>
<CAPTION>
POSITION(S) HELD PRINCIPAL OCCUPATION
NAME AND ADDRESS WITH THE TRUST DURING PAST 5 YEARS
- ---------------------------------------------------------------------------------------------------
<S> <C> <C>
Mark S. Redman President and From November, 1997 to present,
The One Group Services Assistant Secretary President, The One Group Services
Company Company; From June, 1995 to
3435 Stelzer Road November, 1997, Officer, The One
Columbus, Ohio 43219 Group Services Company; From
February, 1989 to present, employee
of BISYS Fund Services, Inc. (FKA
Winsbury Company)
William J. Tomko Treasurer From April, 1997 to present, Chief
BISYS Fund Services, Inc. Operating Officer, BISYS Fund
3435 Stelzer Road Services, Inc.; From April, 1987, to
Columbus, Ohio 432191997, April, 1997, employee, BISYS Fund
. Services, Inc.
Charles L. Booth Secretary From February, 1998, to present,
BISYS Fund Services, Inc. Chief Compliance Officer and
3435 Stelzer Road Vice President Fund Administration,
BISYS Fund Services, Inc.; From April,
1988, to February, 1998, employee, BISYS
Fund Services, Inc.
Alaina J. Metz Assistant Secretary From June 1995 to present,
BISYS Fund Services, Inc. Chief Administrator,
3435 Stelzer Road Administration and Regulatory
Columbus, Ohio 43219 Services, BISYS Fund Services,
Inc.; from May 1989 to June 1995,
Supervisor, Mutual Fund Legal Department,
Alliance Capital Management.
</TABLE>
57
<PAGE> 681
INVESTMENT ADVISOR AND SUB-ADVISORS
Banc One Investment Advisors Corporation
Investment advisory services to each of the Trust's Funds are provided
by Banc One Investment Advisors. Banc One Investment Advisors makes the
investment decisions for the assets of the Funds (except for the International
Equity Index Fund and the High Yield Bond Fund which are sub-advised by Sub-
Advisors). In addition, Banc One Investment Advisors continuously reviews,
supervises and administers the Funds' 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 Banc One Investment
Advisors and are not insured by the FDIC or issued or guaranteed by the U.S.
government or any of its agencies.
Banc One Investment Advisors 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, Louisiana, 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
$59 billion as of June 30, 1998.
Banc One Investment Advisors 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 (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. Prior to January 2, 1996,
investment advisory services were provided to the predecessor Funds of the
Louisiana Municipal Bond Fund, the Value Growth Fund, and the Small
Capitalization Fund (formerly the Gulf South Growth Fund), formerly Paragon
Louisiana Tax-Free Fund, Paragon Value Growth Fund and Paragon Gulf South Growth
Fund, respectively, by Premier Investment Advisors, LLP.
During the fiscal years ended June 30, 1998, 1997, and 1996, the Funds
of the Trust paid the following investment advisory fees to Banc One Investment
Advisors (except as noted above) and Banc One Investment Advisors voluntarily
waived investment advisory fees as follows:
58
<PAGE> 682
THE ONE GROUP ADVISORY--NET
<TABLE>
<CAPTION>
FISCAL YEAR ENDED JUNE 30,
1998 1997 1996
- -------------------------------------------------------------------------------------------------------------
FUND NET WAIVED NET WAIVED NET WAIVED
- ----------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
U.S. Treasury Securities
Money Market $9,337,795 $2,237,340 $5,992,323 $2,742,727 $3,335,123 $2,120,534
Prime Money Market $9,806,764 $1,675,435 $7,824,731 $1,899,772 $5,939,373 $2,662,726
Municipal Money Market $1,491,141 $596,454 $1,241,937 $ 593,593 $1,111,463 $ 930,328
Ohio Municipal Money
Market $252,818 $60,211 $ 231,786 $ 36,034 $ 171,609 $ 114,565
Income Equity $6,571,128 -0- $4,104,562 $ 0 $1,809,128 $ 70,594
Disciplined Value $4,758,742 -0- $4,129,523 $ 0 $3,934,183 $ 61,237
Growth Opportunities $6,492,467 -0- $4,511,169 $ 0 $3,688,445 $ 54,262
Equity Index $992,672 $1,985,360 $ 547,238 $1,094,476 $ 238,008 $ 638,315
Large Company Value $5,638,325 -0- $4,726,413 $ 0 $3,763,553 $ 0
Asset Allocation $1,178,256 $191,626 $ 684,481 $ 142,861 $ 306,083 $ 92,023
International Equity Index $2,373,749 -0- $2,201,616 $ 837 $1,279,277 $ 91,958
Large Company Growth $12,023,999 -0- $7,948,260 $ 0 $5,235,736 $ 245,284
Income Bond $3,382,474 $1,691,244 $2,581,863 $1,290,933 $1,918,010 $1,135,461
Limited Volatility Bond $1,879,523 $1,700,459 $1,830,204 $1,830.204 $1,330,873 $1,450,516
Intermediate Tax-Free Bond $1,904,783 $1,025,646 $1,235,203 $ 776,825 $ 629,789 $ 769,809
Municipal Income $2,184,870 $624,243 $1,314,694 $ 387,974 $ 714,573 $ 387,167
Ohio Municipal Bond $544,952 $517,943 $ 389,001 $ 391,781 $ 257,158 $ 328,794
Government Bond $3,714,960 $80,216 $3,098,420 $ 194,800 $2,182,543 $ 70,159
Ultra Short-Term Income $424,770 $699,133 $ 117,314 $ 342,966 $ 29,293 $ 227,497
Intermediate Bond $2,224,150 $1,726,329 $1,273,126 $1,092,194 $ 612,348 $ 747,012
Treasury Only Money Market $518,513 -0- $ 385,087 $ 0 $ 287,729 $ 0
Government Money Market $1,735,256 -0- $ 848,690 $ 0 $ 612,362 $ 5,166
Kentucky Municipal Bond $469,392 $117,349 $ 270,459 $ 78,137 $ 108,684 $ 132,964
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 Municipal Bond $1,007,240 $154,639 $390,737+++ $126,415+++ NA* NA*
Texas Tax-Free Bond NA ## NA # NA # NA* NA*
W. Virginia Municipal
Bond $365,585 $103,485 $121,278+++ $66,525+++ NA* NA*
Louisiana Municipal Bond $572,161 $355,668 $ 683,535 $ 394,121$ 207,766++ $ 103,883++
Value Growth $4,485,408 -0- $2,309,475 $ 69,333$ 400,112++ $ 51,948++
Small Capitalization $902,099 -0- $ 699,896 $ 30,410$ 184,391++ $ 25,531++
High Yield Bond NA ## NA ## NA # NA # NA* NA*
Investor Growth $35,565 $21,362 $1,552 $6,244++++ NA* NA*
Investor Growth
& Income $49,435 $17,732 $ 2,046 $8,237++++ NA* NA*
Investor Aggressive Growth NA ## NA ## NA # NA # NA* NA*
Investor Conservative
Growth $4,622 $18,489 $ 683 $2,750++++ NA* NA*
Investor Balanced $53,241 $11,387 $ 3,107 $ 12,503++++ NA* NA*
Investor Fixed Income NA ## NA ## NA # NA # NA* NA*
Treasury & Agency Fund $232,442 $232,443 $ 99,224 $ 99,225+++ NA* NA*
<FN>
## As of June 30, 1998, the Fund had not commenced operations.
# As of June 30, 1997, the Fund had not commenced operations.
* As of June 30, 1996, the Fund had not commenced operations.
++ Fees for the period from December 31, 1995 to June 30, 1996.
+++ Fees for the period from January 20, 1997 to June 30, 1997.
++++ Fees for the period from December 10, 1996 to June 30, 1997.
</TABLE>
59
<PAGE> 683
All investment advisory services are provided to the Funds by Banc One
Investment Advisors pursuant to an investment advisory agreement dated January
11, 1993 (the "INVESTMENT ADVISORY AGREEMENT"). The Investment Advisory
Agreement (and the International Sub-Investment Advisory Agreement and the High
Yield 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
Agreement and International Sub-Advisory Agreements were renewed by the Trust's
Board of Trustees at their quarterly meeting on August 20, 1998. 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 Advisor or
Sub-Advisor 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 Advisor or Sub-Advisor 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 Banc One Investment Advisors or
Sub-Advisor 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-Advisor to
the Ultra Short-Term Income Fund, $26,251 in sub-advisory fees from Banc One
Advisors for the fiscal year ended June 30, 1996.
Independence International Associates, Inc.
Independence International Associates, Inc. ("Independence
International") serves as investment Sub-Advisor to the International Equity
Index Fund pursuant to an agreement (the "INTERNATIONAL SUB-INVESTMENT ADVISORY
AGREEMENT") with Banc One Investment Advisors dated January 11, 1993.
Independence International is a wholly-owned subsidiary of John Hancock Asset
Management, Inc. and an indirect, wholly-owned subsidiary of John Hancock Mutual
Life Insurance Company. Boston International Advisors, Inc., the predecessor of
Independence International, received $212,352 in sub-advisory fees from Banc One
Investment Advisors for the fiscal year ended June 30, 1996; $315,098 in
sub-advisory fees from Banc One Investment Advisors for the fiscal year ended
June 30, 1997; and $416,939 in sub-advisory fees from Banc One Investment
Advisors for the fiscal year ended June 30, 1998.
Banc One High Yield Partners, LLC
Banc One High Yield Partners, LLC serves as investment Sub-Advisor to
the High Yield Bond Fund pursuant to an agreement with Banc One Investment
Advisors (the "HIGH YIELD INVESTMENT ADVISORY AGREEMENT"). The Sub-Advisor was
formed in June, 1998 to provide investment advisory services related to high
yield, high risk assets to various clients, including the Fund. The Sub-Advisor
is controlled by Banc One Investment Advisors and Pacholder Associates, Inc., an
investment advisory firm which specializes in high yield, high risk, fixed
income securities. Neither Banc One Investment Advisors, Pacholder Associates,
Inc. or the Sub-Advisor have experience in managing an open-end investment
company investing primarily in high yield, high risk bonds. For its services,
the Sub-Advisor is entitled to a fee, which is calculated daily and paid monthly
by Banc One Investment Advisors, equal to .70% of the Fund's average daily net
assets. The Sub-Advisor has voluntarily agreed to waive all or part of its fees.
This fee waiver is voluntary and may be terminated at any time.
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
60
<PAGE> 684
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 Advisor, 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 Advisors 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 Advisors 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, Banc One
Investment Advisors 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 Banc One Investment Advisors from continuing to
perform such services for the Trust. Depending upon the nature of any changes in
the services which could be provided by Banc One Investment Advisors, the Board
of Trustees of the Trust would review the Trust's relationship with Banc One
Investment Advisors 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.
PORTFOLIO TRANSACTIONS
Pursuant to the Advisory and Sub-Advisory Agreements, Banc One
Investment Advisors and the applicable Sub-Advisor 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, the Funds of 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 generally include (but not in the case of
mutual fund shares purchased by the Funds of Funds) 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 Banc One Investment Advisors or the applicable Sub-Advisor generally seeks
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 Banc One Investment Advisors and the applicable
Sub-Advisor with respect to the Funds each serves based on their 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 Banc One Investment Advisors or the applicable
Sub-Advisor may receive orders for transactions by the Trust, even if such
dealers charge commissions in excess of the lowest rates available, provided
such commissions are reasonable in light of the value of brokerage and research
services received. Such research services may include, but are not be limited
to,
61
<PAGE> 685
analysis and reports concerning economic factors and trends, industries,
specific securities, and portfolio strategies. Information so received is in
addition to and not in lieu of services required to be performed by Banc One
Investment Advisors or the applicable Sub-Advisor and does not reduce the
advisory fees payable to Banc One Investment Advisors or the applicable
Sub-Advisor. Such information may be useful to Banc One Investment Advisors or
the applicable Sub-Advisor 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 Banc One Investment Advisors or the applicable
Sub-Advisor in carrying out their obligations to the Trust. In the last fiscal
year, Banc One Investment Advisors directed brokerage commissions to brokers who
provided research services to Banc One Investment Advisors. Total compensation
paid to such brokers amounted to $14,566,893.79.
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 Advisors 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, 1996, the Trust paid
brokerage commissions to Goldman for brokerage services provided as follows:
<TABLE>
<CAPTION>
FUND COMMISSIONS PAID
<S> <C>
Income Equity $ 5,750
Disciplined Value $ 1,810
Growth Opportunities $11,714
Equity Index $42,243
Large Company Value $10,650
Asset Allocation $ 9,602
Small Capitalization $ 2,265
Value Growth $ 1,647
</TABLE>
During the Trust's fiscal year ended June 30, 1996, the percentage of
the Trust's aggregate brokerage commissions paid to Goldman was 1.26% and the
percentage of the Trust's aggregate dollar amount of transactions involving the
payment of commissions effected through Goldman was 1.47%.
In the fiscal years ended June 30, 1998, 1997, and 1996, each of the
Funds of the Trust that paid brokerage commissions and the amounts paid for each
year were as follows:
THE ONE GROUP BROKERAGE COMMISSIONS
<TABLE>
<CAPTION>
FISCAL YEAR ENDED JUNE 30,
- --------------------------------------------------------------------------------
FUND 1998 1997 1996
- --------------------------------------------------------------------------------
<S> <C> <C> <C>
Income Equity $ 331,556 $ 395,450 $ 96,204
Disciplined Value $1,541,217 $1,570,859 $ 613,774
Growth Opportunities $2,455,346 $3,199,337 $2,798,442
Equity Index $ 72,702 $ 162,178 $ 56,155
Large Company Value $ 722,191 $1,378,450 $2,126,632
Asset Allocation $ 154,837 $ 194,187 $ 61,678
International Equity Index $ 514,660 $ 349,010 $ 176,140
Large Company Growth $2,935,851 $1,285,883 $ 596,397
Small Capitalization $ 180,460 $ 194,127 $ 43,039
Value Growth $ 763,394 $1,005,409 $ 224,373
</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 Banc One Investment Advisors or the applicable Sub-Advisor. 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 Banc One Investment
Advisors or the applicable
62
<PAGE> 686
Sub-Advisor 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, Banc One
Investment Advisors and the applicable Sub-Advisor 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, Banc One
Investment Advisors and the applicable Sub-Advisor will not inquire or take into
consideration whether an issuer of securities proposed for purchase or sale by
the Trust is a customer of Banc One Investment Advisors or the applicable
Sub-Advisor or their parents or subsidiaries or affiliates and, in dealing with
its commercial customers, Banc One Investment Advisors and the applicable
Sub-Advisor and their respective parent, subsidiaries, and affiliates will not
inquire or take into consideration whether securities of such customers are held
by the Trust.
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 SEC, 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.
Banc One Investment Advisors also serves as Sub-Administrator to each
Fund of the Trust, pursuant to an agreement between the Administrator and Banc
One Investment Advisors. Pursuant to this agreement, Banc One Investment
Advisors performs many of the Administrator's duties, for which Banc One
Investment Advisors receives a fee paid by the Administrator.
The Trust paid fees for administrative services to The One Group
Services Company as Administrator; and to 440 Financial Management, as previous
Administrator of the Trust, for the fiscal years ended June 30, 1998, 1997, and
1996 as follows:
THE ONE GROUP ADMINISTRATOR--NET
<TABLE>
<CAPTION>
THE ONE GROUP FISCAL YEAR ENDED JUNE 30, 1998
SERVICES COMPANY BANC ONE INVESTMENT ADVISORS**
FUND NET WAIVED NET WAIVED
- --------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
U.S. Treasury Securities Money Market $2,892,564 $ 563,420 $1,953,193 $ 0
Prime Money Market $2,909,462 $ 492,004 $1,964,556 $ 0
Municipal Money Market $ 537,827 $ 66,086 $ 363,608 $ 0
Ohio Municipal Money Market $ 57,990 $ 71,908 $ 39,212 $ 0
Income Equity $ 866,925 $ 0 $ 585,415 $ 0
Disciplined Value $ 627,733 $ 0 $ 424,072 $ 0
Growth Opportunities $ 856,657 $ 0 $ 578,193 $ 0
Equity Index $ 593,918 $ 631,314 $ 398,167 $ 0
Large Company Value $ 743,765 $ 0 $ 502,444 $ 0
Asset Allocation $ 93,135 $ 188,687 $ 62,825 $ 0
International Equity Index $ 495,338 $ 0 $ 334,504 $ 0
Large Company Growth $1,586,501 $ 0 $1,070,862 $ 0
Income Bond $ 825,562 $ 0 $ 557,511 $ 0
Limited Volatility Bond $ 582,384 $ 0 $ 393,556 $ 0
Intermediate Tax-Free Bond $ 476,747 $ 0 $ 322,115 $ 0
</TABLE>
63
<PAGE> 687
<TABLE>
<S> <C> <C> <C> <C>
Municipal Income $ 609,675 $ 0 $ 411,186 $ 0
Ohio Municipal Bond $ 172,939 $ 0 $ 116,807 $ 0
Government Bond $ 628,220 $ 326,624 $ 424,114 $ 0
Ultra Short-Term Income $ 0 $ 334,196 $ 0 $ 0
Intermediate Bond $ 642,930 $ 0 $ 433,882 $ 0
Treasury Only Money Market $ 0 $ 0 $ 321,862 $ 0
Government Money Market $ 0 $ 0 $1,084,467 $ 0
Institutional Prime Money Market NA* NA* NA* NA*
Treasury Money Market NA* NA* NA* NA*
Tax-Exempt Money Market NA* NA* NA* NA*
Arizona Municipal Bond $ 235,850 $ 27,440 $ 159,048 $ 0
Kentucky Municipal Bond $ 127,280 $ 0 $ 85,987 $ 0
Texas Tax-Free Bond NA* NA* NA* NA*
W. Virginia Municipal Bond $ 87,100 $ 24,557 $ 159,048 $ 0
Louisiana Municipal Bond $ 150,915 $ 0 $ 102,041 $ 0
Value Growth $ 591,870 $ 0 $ 399,405 $ 0
Small Capitalization $ 96,910 $ 37,328 $ 65,129 $ 0
High Yield Bond NA* NA* NA* NA*
Investor Growth $ 0 $ 113,852 $ 0 $ 0
Investor Growth & Income $ 0 $ 134,333 $ 0 $ 0
Investor Aggressive Growth NA* NA* NA* NA*
Investor Conservative Growth $ 0 $ 46,223 $ 0 $ 0
Investor Balanced $ 0 $ 129,257 $ 0 $ 0
Investor Fixed Income NA* NA* NA* NA*
Treasury & Agency $ 41,644 $ 120,468 $ 27,972 $ 0
</TABLE>
* As of June 30, 1998, the Fund had not commenced operations.
** These fees were paid by The One Group Services Company to Banc One Investment
Advisors pursuant to the Sub-Administration Agreement.
THE ONE GROUP ADMINISTRATOR--NET
<TABLE>
<CAPTION>
FISCAL YEAR ENDED JUNE 30, 1997
THE ONE GROUP BANC ONE INVESTMENT ADVISORS**
SERVICES -------------------------------
FUND COMPANY NET WAIVED NET WAIVED
- -------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
U.S. Treasury Securities $4,041,160 $ 52,457 $ $ 0
Money Market
Prime Money Market $4,325,620 $268,513 $1,666,976 $ 0
Municipal Money Market $ 821,921 $ 45,236 $ 314,733 $ 0
Ohio Municipal Money Market $ 168,236 $ 79,377 $ 107,188 $ 0
Income Equity $ 916,621 $ 0 $ 332,802 $ 0
Disciplined Value $ 922,753 $ 0 $ 334,826 $ 0
Growth Opportunities $1,007,999 $ 0 $ 365,770 $ 0
Equity Index $ 329,854 $574,004 $ 328,342 $ 0
Large Company Value $1,056,104 $ 0 $ 383,222 $ 0
Asset Allocation $ 94,269 $116,194 $ 76,370 $ 0
International Equity Index $ 662,008 $ 0 $ 240,084 $ 0
Large Company Growth $1,775,503 $ 0 $ 644,453 $ 0
Income Bond $1,067,153 $ 0 $ 387,285 $ 0
Limited Volatility Bond $1,008,923 $ 0 $ 366,010 $ 0
Intermediate Tax-Free Bond $ 554,163 $ 0 $ 201,205 $ 0
Municipal Income $ 609,095 $ 16,541 $ 227,031 $ 0
Ohio Municipal Bond $ 213,314 $ 1,857 $ 78,076 $ 0
Government Bond $ 990,039 $220,036 $ 439,098 $ 0
Ultra Short-Term Income $ 60,695 $ 95,720 $ 50,007 $ 0
Intermediate Bond $ 651,480 $ 0 $ 236,534 $ 0
Treasury Only Money Market $ 240,680 $ 0 $ 240,061 $ 0
</TABLE>
64
<PAGE> 688
<TABLE>
<S> <C> <C> <C> <C>
Government Money Market $ 530,431 $ 0 $ 530,415 $ 0
Institutional Prime NA* NA* NA* NA*
Money Market
Treasury Money Market NA* NA* NA* NA*
Tax-Exempt Money Market NA* NA* NA* NA*
Arizona Municipal Bond $ 140,206 $ 49,819 $ 69,221 $ 0
Kentucky Municipal Bond $ 127,957 $ 0 $ 46,478 $ 0
Texas Tax-Free Bond NA* NA* NA* NA*
W. Virginia Municipal Bond $ 58,427 $ 10,580 $ 25,040 $ 0
Louisiana Municipal Bond $ 297,050 $ 0 $ 107,762 $ 0
Value Growth $ 531,250 $ 0 $ 192,876 $ 0
Small Capitalization $ 92,752 $ 70,432 $ 59,214 $ 0
High Yield Bond NA* NA* NA* NA*
Investor Growth $ 15,583 $ 0 $ 0 $ 0
Investor Growth & Income $ 0 $ 20,566 $ 0 $ 0
Investor Aggressive Growth NA* NA* NA* NA*
Investor Conservative Growth $ 0 $ 6,866 $ 0 $ 0
Investor Balanced $ 0 $ 31,220 $ 0 $ 0
Investor Fixed Income NA* NA* NA* NA*
Treasury & Agency $ 13,891 $ 68,143 $ 29,765 $ 0
</TABLE>
* As of June 30, 1997, the Fund had not commenced operations.
** These fees were paid by The One Group Services Company to Banc One
Investment Advisors pursuant to the Sub-Administration Agreement.
65
<PAGE> 689
THE ONE GROUP ADMINISTRATOR--NET
<TABLE>
<CAPTION>
FISCAL YEAR ENDED JUNE 30, 1996
THE ONE GROUP BANC ONE INVESTMENT ADVISORS**
SERVICES --------------------------------- 440***
FUND COMPANY NET WAIVED NET WAIVED NET WAIVED
- ------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
U.S. Treasury Securities
Money Market $1,675,933 $ 23,824 $ 928,127 $ 0 $ 881,386 $ 19,060
Prime Money Market $2,490,499 $ 0 $1,463,271 $ 0 $1,611,838 $ 0
Municipal Money Market $ 504,611 $ 58,625 $ 340,160 $ 0 $ 328,817 $ 82,052
Ohio Municipal Money Market $ 9,933 $ 87,195 $ 53,819 $ 0 $ 22,276 $ 39,800
Income Equity $ 286,663 $ 0 $ 151,456 $ 0 $ 136,804 $ 0
Disciplined Value $ 543,544 $ 0 $ 321,420 $ 0 $ 357,658 $ 0
Growth Opportunities $ 511,634 $ 0 $ 301,050 $ 0 $ 332,353 $ 0
Equity Index $ 219,301 $ 96,276 $ 165,797 $ 0 $ 52,623 $ 119,116
Large Company Value $ 532,314 $ 0 $ 300,440 $ 0 $ 283,851 $ 32,509
Asset Allocation $ 19,184 $ 48,482 $ 33,779 $ 0 $ 22,718 $ 11,794
International Equity Index $ 307,633 $ 0 $ 171,529 $ 0 $ 172,763 $ 0
Large Company Growth $ 778,543 $ 0 $ 441,303 $ 0 $ 457,430 $ 0
Income Bond $ 505,703 $ 0 $ 302,920 $ 0 $ 343,646 $ 186
Limited Volatility Bond $ 471,594 $ 0 $ 275,961 $ 0 $ 301,887 $ 0
Intermediate Tax-Free Bond $ 222,203 $ 0 $ 138,734 $ 0 $ 167,244 $ 0
Municipal Income $ 210,905 $ 43,781 $ 142,512 $ 0 $ 110,442 $ 43,233
Ohio Municipal Bond $ 81,876 $ 15,630 $ 57,825 $ 0 $ 55,179 $ 11,740
Government Bond $ 544,937 $ 6,947 $ 297,480 $ 0 $ 270,620 $ 12,171
Ultra Short-Term Income $ 0 $ 50,706 $ 28,274 $ 0$35,162
Intermediate Bond $ 229,988 $ 0 $ 134,912 $ 0 $ 148,161 $ 0
Treasury Only Money Market $ 113,945 $ 0 $ 179,830 $ 0 $ 65,888 $ 0
Government Money Market $ 232,688 $ 0 $ 385,955 $ 0 $ 153,141 $ 131
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 Municipal Bond NA* NA* NA* NA* NA* NA*
Kentucky Municipal Bond $ 38,104 $ 1,196 $ 23,883 $ 0 $ 26,310 $ 2,256
Texas Tax-Free Bond NA* NA* NA* NA* NA* NA*
W. Virginia Municipal Bond NA* NA* NA* NA* NA* NA*
Louisiana Municipal Bond $ 86,078 $ 0 $ 31,165+ $ 0 $ 0 $ 0
Value Growth $ 101,245 $ 0 $ 36,656+ $ 0 $ 0 $ 0
Small Capitalization $ 47,011 $ 0 $ 17,021+ $ 0 $ 0 $ 0
High Yield Bond NA* NA* NA* NA* NA* NA*
Investor Growth NA* NA* NA* NA* NA* NA*
Investor Growth & Income NA* NA* NA* NA* NA* NA*
Investor Aggressive Growth NA* NA* NA* NA* NA* NA*
Investor Conservative Growth NA* NA* NA* NA* NA* NA*
Investor Balanced NA* NA* NA* NA* NA* NA*
Investor Fixed Income NA* NA* NA* NA* NA* NA*
Treasury & Agency NA* NA* NA* NA* NA* NA*
</TABLE>
* As of June 30, 1996, the Fund had not commenced operations.
** These were fees paid by The One Group Services Company to Banc One
Investment Advisors pursuant to the Sub-Administration Agreement for
the period from December 1, 1995 through June 30, 1996, and by 440 for
the period June 30, 1995 to December 1, 1995.
*** These were fees paid from July 1, 1995 through early November 30, 1995.
+ These fees were paid from March 26, 1996 through June 30, 1996.
66
<PAGE> 690
Unless sooner terminated, the Administration Agreement between the
Trust and The One Group Services Company will continue in effect through
November 30, 1998. 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.
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 Distributor beginning November 1, 1995.
Unless otherwise terminated, the Distribution Agreement will continue in effect
until October 31, 1998 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,
Class C 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, Class C 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 five 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. The Distribution
Plan was further amended on February 29, 1996, to eliminate certain "defensive"
provisions of the Distribution Plan. A Distribution and Shareholder Services
Plan (the "CDSC PLAN") for Class B and Class C Shares was initially approved on
August 12, 1993 by the Independent Trustees. The CDSC Distribution Plan was
re-executed on December 13, 1995 and amended on February 20, 1997. 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, 1998, the distribution fees paid
by the Class A, Class B, Class C and Service Class Shares (formerly Retirement
Class Shares) of the Trust to The One Group Services Company were as follows:
67
<PAGE> 691
THE ONE GROUP DISTRIBUTION FEES PAID FOR THE FISCAL YEAR ENDED JUNE 30, 1998
<TABLE>
<CAPTION>
SERVICE
FUND DISTRIBUTOR CLASS A CLASS B CLASS C CLASS
- -------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
U.S. Treasury Securities
Money Market One Group Ser. $ 1,865,911 $ 1,370 $ 4 -
Prime Money Market One Group Ser. $ 1,334,085 $ 9,530 - -
Municipal Money Market One Group Ser. $ 243,989 - - -
Ohio Municipal Money Market One Group Ser. $ 91,966 - - -
Income Equity One Group Ser. $ 247,834 $ 1,218,721 $ 3,516 -
Disciplined Value One Group Ser. $ 71,119 $ 708,719 - -
Growth Opportunities One Group Ser. $ 168,985 $ 638,750 $ 1,384 -
Equity Index One Group Ser. $ 389,725 $ 2,521,768 $ 5,666 -
Large Company Value One Group Ser. $ 41,564 $ 131,570 - -
Asset Allocation One Group Ser. $ 100,049 $ 738,989 - -
International Equity Index One Group Ser. $ 41,768 $ 113,966 $ 154 -
Large Company Growth One Group Ser. $ 395,550 $17,362,771 $ 1,498 -
Income Bond One Group Ser. $ 36,635 $ 123,951 - -
Limited Volatility Bond One Group Ser. $ 44,939 $ 36,337 - -
Intermediate Tax-Free Bond One Group Ser. $ 27,396 $ 40,944 - -
Municipal Income One Group Ser. $ 243,989 - $ 6,903 -
Ohio Municipal Bond One Group Ser. $ 41,056 $ 170,689 - -
Government Bond One Group Ser. $ 82,779 $ 136,972 - -
Ultra Short-Term Income One Group Ser. $ 91,457 $ 25,723 $ 2,254 -
Intermediate Bond One Group Ser. $ 79,016 $ 131,932 - -
Treasury Only Money Market One Group Ser. - - - -
Government Money Market One Group Ser. - - - -
Institutional Prime Money Market* One Group Ser. - - - -
Kentucky Municipal Bond One Group Ser. $ 15,661 $ 32,901 - -
Treasury Money Market* One Group Ser.
Tax-Exempt Money Market* One Group Ser.
Arizona Municipal Bond One Group Ser. $ 3,070 $ 364 - -
Texas Tax-Free Bond* One Group Ser.
W. Virginia Municipal Bond One Group Ser. $ 3,233 $ 13,282 - -
Louisiana Municipal Bond One Group Ser. $ 121,555 $ 38,855 - -
Value Growth One Group Ser. $ 154,965 $ 160,647 $ 1,566 -
Small Capitalization One Group Ser. $ 48,572 $ 55,214 $ 191 -
High Yield Bond* One Group Ser.
Investor Growth One Group Ser. $ 56,780 $ 326,605 $40,419 -
Investor Growth & Income One Group Ser. $ 45,993 $ 391,056 $24,289 -
Investor Aggressive Growth* One Group Ser.
Investor Conservative Growth One Group Ser. $ 12,778 $ 162,370 $19,234 -
Investor Balanced One Group Ser. $ 32,762 $ 296,604 $26,669 -
Investor Fixed Income* One Group Ser.
Treasury & Agency One Group Ser. $ 26,930 $ 29,440 - -
</TABLE>
*These Funds had not commenced operations as of June 30, 1998.
68
<PAGE> 692
In accordance with Rule 12b-1 under the 1940 Act, the Distribution Plan
and CDSC Plan may be terminated with respect to the Class A Shares, Class B
Shares, Class C 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, Class C Shares or Service Class
Shares, respectively, of that Fund. The Distribution Plan and CDSC 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, Class C Shares or Service Class Shares of a Fund
requires the approval of that Fund's Class A, Class B, Class C 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 agreements between the
Trust, 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 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 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.
69
<PAGE> 693
EXPERTS
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, were audited by the predecessor
auditors for such Funds.
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, were audited by the
predecessor auditors for such Funds.
The financial statements for the predecessor funds of the Louisiana
Municipal Bond Fund, the Value Growth Fund, and the Gulf South Growth Fund, the
Paragon Louisiana Tax-Free Fund, the Paragon Value Growth Fund and the Paragon
Gulf South Growth Fund, for the fiscal year ended November 30, 1995, were
audited by the predecessor auditor of such Funds.
The law firm of Ropes & Gray, One Franklin Square, 1301 K Street, N.W.,
Suite 800 East, Washington, D.C. 20005 is counsel to the Trust. From time to
time, Ropes & Gray have rendered legal services to BANC ONE CORPORATION and its
subsidiary banks.
70
<PAGE> 694
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 40 series of Shares,
which represent interests in the following:
1. The Prime Money Market Fund;
2. The U.S. Treasury Securities Money Market Fund;
3. The Municipal Money Market Fund;
4. The Ohio Municipal Money Market Fund;
5. The Income Equity Fund;
6. The Disciplined Value Fund;
7. The Growth Opportunities Fund;
8. The Value Growth Fund;
9. The Small Capitalization Fund;
10. The Large Company Value Fund;
11. The Large Company Growth Fund;
12. The International Equity Index Fund;
13. The Equity Index Fund;
14. The Asset Allocation Fund;
15. The Income Bond Fund;
16. The Limited Volatility Bond Fund;
17. The Intermediate Bond Fund;
18. The Government Bond Fund;
19. The Ultra Short-Term Income Fund;
20. The High Yield Bond Fund;
21. The Investor Growth Fund;
22. The Investor Growth & Income Fund;
23. The Investor Aggressive Growth Fund;
24. The Investor Fixed Income Fund;
25. The Investor Conservative Growth Fund;
26. The Investor Balanced Fund;
27. The Municipal Income Fund;
28. The Intermediate Tax-Free Bond Fund;
29. The Ohio Municipal Bond Fund;
30. The Texas Tax-Free Bond Fund;
31. The West Virginia Municipal Bond Fund;
32. The Kentucky Municipal Bond Fund;
33. The Louisiana Municipal Bond Fund;
34. The Arizona Municipal Bond Fund;
35. The Treasury Money Market Fund;
36. The Treasury Only Money Market Fund;
37. The Government Money Market Fund;
38. The Tax-Exempt Money Market Fund;
39. The Institutional Prime Money Market Fund; and
40. The Treasury & Agency Fund
The Funds of the Trust (other than the Institutional Money Market Funds, and the
Money Market Funds offer shares in four separate classes: Class I Shares, Class
A Shares, Class B and Class C Shares. The U.S. Treasury Securities Money Market
Fund and the Prime Money Market Fund offer Class I Shares, Class A Shares, Class
B Shares, Class C Shares, Class I Shares and Service Class Shares. The
Institutional Money Market Funds
71
<PAGE> 695
offer only a single class of shares. The Municipal Money Market Fund and the
Ohio Municipal Money Market Fund offer Class I, Class A and Class C 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.
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, Class C 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.
PERFORMANCE
From time to time, the Funds 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 a 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 a 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 a Fund. This figure
is then "annualized" (multiplied by 365 days and divided by the applicable
number of days in the period).
72
<PAGE> 696
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.
Further information about the performance of each class of the Funds is
contained in the Trust's Annual Report to Shareholders for The One Group, which
may be obtained without charge by calling 1-800-480-4111.
CALCULATION OF PERFORMANCE DATA
The yield for each Money Market Funds, and the Institutional Money
Market Funds 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 Fund because those Funds had not commenced operations as of June
30, 1998.
MONEY MARKET FUNDS
<TABLE>
<CAPTION>
CLASS I SHARES INCEPTION 7-DAY YIELD
DATE 6/30/98
- ------------------------------------------------------------------------------
<S> <C> <C>
U.S. Treasury Securities 09/09/85 5.12%
Prime 08/01/85 5.22%
Municipal 06/04/87 3.15%
Ohio Municipal(1) 06/09/93 3.21%
CLASS A SHARES INCEPTION 7-DAY YIELD
DATE 6/30/98
- ------------------------------------------------------------------------------
U.S. Treasury Securities 02/18/92 4.87%
Prime 02/18/92 4.97%
Municipal 02/18/92 2.90%
Ohio Municipal(1) 01/26/93 2.96%
INSTITUTIONAL SHARES INCEPTION 7-DAY YIELD
DATE 6/30/98
- ------------------------------------------------------------------------------
Treasury Only Money 04/16/93
Market 5.04%
Government Money Market 06/14/93 5.56%
CLASS B SHARES INCEPTION 7-DAY YIELD
DATE 6/30/98
- ------------------------------------------------------------------------------
U.S. Treasury Securities 11/01/96 4.12%
Prime 11/01/96 4.22%
</TABLE>
(1) A portion of the income may be subject to alternative minimum tax.
73
<PAGE> 697
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 Funds contained in the following
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, 1997. 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.
TAX-EQUIVALENT YIELD
<TABLE>
<CAPTION>
CLASS I 7 DAY
YIELD 28% TAX 39.6% TAX
- ------------------------------------------------------------------------------
<S> <C> <C> <C>
Municipal Money Market 3.15% 4.38% 5.22%
Ohio Municipal
Money Market 3.21% 4.46% 5.31%
CLASS A SHARES 7 DAY
YIELD 28% TAX 39.6% TAX
- ------------------------------------------------------------------------------
Municipal Money Market 2.49% 4.03% 4.80%
Ohio Municipal
Money Market 2.96% 4.11% 4.90%
</TABLE>
The performance of the funds may be compared in publications to the
performance of various indices and investments (such as other mutual funds) for
which reliable performance data is available, as well as averages, performance
rankings or other information prepared by recognized mutual fund statistical
services, as set forth below.
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, the
Funds of 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[(cd +1)6-1]
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 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 Texas Tax-Free Bond Fund.
74
<PAGE> 698
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.
75
<PAGE> 699
CLASS I SHARES
FIXED INCOME FUNDS
<TABLE>
<CAPTION>
AVERAGE ANNUAL TOTAL RETURN AS OF 6/30/98
- -------------------------------------------------------------
30-DAY
INCEPTION LIFE OF SEC
DATE 1 YEAR 3 YEAR 5 YEAR 10 YEAR FUND YIELD
- -----------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
Income Bond(2) 07/02/87 7.97% 6.89% 5.85% 7.63% 7.30% 6.13%
Limited Volatility Bond 09/04/90 7.03% 6.16% 5.41% - 7.03% 5.75%
Intermediate Tax-Free(2) 09/04/90 7.74% 6.96% 5.46% - 6.95% 4.13%
Ohio Municipal Bond(2) 07/02/91 7.13% 6.68% 5.20% - 6.84% 4.19%
Municipal Income(2) 02/09/93 8.09% 7.03% 5.76% - 5.92% 4.76%
Government Bond 02/08/93 10.81% 7.54% 6.27% - 6.48% 5.88%
Ultra Short-Term Income 02/02/93 6.00% 6.25% 5.20% - 5.18% 5.85%
Intermediate Bond 02/28/92 8.71% 7.10% 6.08% - 6.96% 5.90%
Kentucky Municipal Bond(2) 03/12/93 7.11% 6.73% 5.40% - 5.52% 3.91%
Louisiana Municipal Bond(2) 12/29/89 6.62% 6.27% 5.26% - 6.81% 3.90%
West Virginia Municipal
Bond(1),(2) 01/21/97 7.36% 6.43% 5.62% 6.69% 7.39% 4.13%
Arizona Municipal
Bond(2) 01/21/97 6.58% 5.95% 5.28% 7.01% 7.34% 3.82%
Treasury & Agency(1) 01/21/97 7.91% 6.28% 6.30% 7.42% 7.39% 5.37%
</TABLE>
EQUITY FUNDS
<TABLE>
<CAPTION>
AVERAGE ANNUAL TOTAL RETURN AS OF 6/30/98
- -------------------------------------------------------------
30-DAY
INCEPTION LIFE OF SEC
DATE 1 YEAR 3 YEAR 5 YEAR 10 YEAR FUND YIELD
- -----------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
Disciplined Value 03/02/89 28.27% 22.92% 17.52% - 14.11% 0.77%
Income Equity 07/02/87 23.18% 26.16% 20.21% 16.23% 13.99% 1.27%
Equity Index 07/02/91 29.73% 29.79% 22.58% - 19.64% 1.17%
Large Company Value 03/01/91 21.46% 20.28% 16.88% - 14.68% 1.08%
Growth Opportunities 03/02/89 32.26% 28.33% 19.63% - 17.91% -0.38%
International Equity
Index(3) 10/28/92 9.54% 11.78% 10.93% - 12.84% NA
Asset Allocation 04/05/93 22.12% 18.97% 14.11% - 13.71% 2.70%
Large Company Growth 02/28/92 35.75% 28.48% 22.79% - 19.88% 0.09%
Small Capitalization 07/01/91 23.58% 19.36% 14.55% - 17.10% 0.10%
Value Growth 12/29/89 32.26% 28.33% 17.63% - 17.91% 0.48%
THE ONE GROUP INVESTOR FUNDS
Investor Conservative
Growth 12/10/96 12.73% - - - 12.15% NA
Investor Balanced 12/10/96 17.02% - - - 16.60% NA
Investor Growth & Income 12/10/96 20.34% - - - 20.40% NA
Investor Growth 12/10/96 23.81% - - - 24.49% NA
</TABLE>
76
<PAGE> 700
CLASS A SHARES
FIXED INCOME FUNDS
<TABLE>
<CAPTION>
AVERAGE ANNUAL TOTAL RETURN AS OF 6/30/98
- -------------------------------------------------------------
30-DAY
INCEPTION LIFE OF SEC
DATE 1 YEAR 3 YEAR 5 YEAR 10 YEAR FUND YIELD
- -----------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Income Bond(2) 02/18/92 7.82% 6.63% 5.60% - 6.64% 5.88%
With Sales Charge 3.00% 5.00% 4.63% - 5.87%
Limited Volatility Bond 02/18/92 6.32% 5.88% 5.13% - 5.86% 5.49%
With Sales Charge 3.16% 4.80% 4.49% - 5.35%
Intermediate Tax-Free(2) 02/18/92 7.50% 6.71% 5.22% - 6.08% 3.73%
With Sales Charge 2.70% 5.09% 4.26% - 5.32%
Ohio Municipal Bond(2) 02/18/93 6.87% 6.42% 4.97% - 6.30% 3.94%
With Sales Charge 2.10% 4.80% 4.01% - 5.53%
Municipal Income(2) 02/23/93 7.84% 6.80% 5.57% - 5.67% 4.51%
With Sales Charge 2.94% 5.17% 4.59% - 4.77%
Government Bond 03/05/93 10.54% 7.28% 5.98% - 5.95% 5.88%
With Sales Charge 5.53% 5.65% 5.01% - 5.03%
Ultra Short-Term Income 03/10/93 5.75% 6.05% 4.98% - 4.97% 5.56%
With Sales Charge 2.52% 5.00% 4.34% - 4.37%
Intermediate Bond 11/30/94 8.47% 6.87% - - 8.66% 5.65%
With Sales Charge 3.58% 5.25% - - 7.26%
Kentucky Municipal Bond(2) 01/20/95 6.86% 6.34% 5.17% - 5.30% 3.49%
With Sales Charge 2.06% 4.72% 4.20% - 4.39%
Louisiana Municipal Bond(2) 12/29/89 6.74% 6.07% 5.14% - 6.74% 3.65%
With Sales Charge 6.17% 4.47% 4.18% - 6.17%
West Virginia
Municipal Bond(1,2) 01/21/97 6.98% 6.27% 5.42% 6.45% 7.15% 3.88%
With Sales Charge 2.16% 4.66% 4.45% 5.96% 6.82%
Arizona Municipal
Bond(1,2) 01/21/97 6.30% 5.23% 4.72% 6.60% 6.99% 3.41%
With Sales Charge 1.52% 3.61% 3.76% 6.10% 6.73%
Treasury & Agency(1) 01/21/97 8.13% 6.23% 6.16% 7.21% 7.18% 4.96%
With Sales Charge 4.87% 5.15% 5.53% 6.89% 6.86%
</TABLE>
EQUITY FUNDS
<TABLE>
<CAPTION>
AVERAGE ANNUAL TOTAL RETURN AS OF 6/30/98
- -------------------------------------------------------------
30-DAY
INCEPTION LIFE OF SEC
DATE 1 YEAR 3 YEAR 5 YEAR 10 YEAR FUND YIELD
- -----------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
Disciplined Value 02/18/92 27.90% 22.58% 17.27% - 15.79% .53%
With Sales Charge 22.13% 20.72% 16.19% - 14.96%
Income Equity 02/18/92 22.91% 25.82% 19.89% - 17.43% .99%
With Sales Charge 17.39% 23.91% 18.79% - 16.59%
Equity Index 02/18/92 29.33% 29.42% 22.29% - 19.44% .93%
With Sales Charge 23.49% 27.45% 21.17% - 18.58%
Large Company Value 02/18/92 21.14% 20.00% 16.66% - 14.00% .82%
With Sales Charge 15.69% 18.16% 15.59% - 13.17%
Growth Opportunities 02/18/92 30.95% 25.88% 18.85% - 15.87% -0.62%
With Sales Charge 25.07% 23.95% 17.76% - 15.03%
International Equity
Index(3) 04/23/93 9.34% 11.60% 10.70% - 10.21% NA
With Sales Charge 4.40% 9.89% 9.68% - 9.23%
Asset Allocation 04/02/93 21.71% 18.64% 13.82% - 13.40% 2.47%
With Sales Charge 16.25% 16.82% 12.78% - 12.41%
Large Company Growth 01/01/94 35.43% 28.01% - - 23.70% -0.14%
</TABLE>
77
<PAGE> 701
<TABLE>
<S> <C> <C> <C> <C> <C> <C> <C>
With Sales Charge 29.33% 26.07% - - 22.39%
Small Capitalization 07/01/91 23.28% 19.14% 14.42% - 17.01% -0.14%
With Sales Charge 17.69% 17.32% 13.37% - 16.25%
Value Growth 12/29/89 31.69% 28.05% 19.48% - 17.82% 0.24%
With Sales Charge 26.04% 26.11% 18.38% - 17.19%
</TABLE>
THE ONE GROUP INVESTOR FUNDS
<TABLE>
<CAPTION>
AVERAGE ANNUAL TOTAL RETURN AS OF 6/30/98
- -------------------------------------------------------------
30-DAY
INCEPTION LIFE OF SEC
DATE 1 YEAR 3 YEAR 5 YEAR 10 YEAR FUND YIELD
- -----------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
Investor Conservative
Growth 12/10/96 12.38% - - - 11.56% NA
With Sales Charge 7.29% - - - 8.31% NA
Investor Balanced 12/10/96 16.62% - - - 16.29% NA
With Sales Charge 11.39% - - - 12.90% NA
Investor Growth & Income 12/10/96 20.18% - - - 20.73% NA
With Sales Charge 14.76% - - - 17.21% NA
Investor Growth 12/10/96 23.44% - - - 23.78% NA
With Sales Charge 17.87% - - - 20.17% NA
</TABLE>
CLASS B SHARES
FIXED INCOME FUNDS
<TABLE>
<CAPTION>
AVERAGE ANNUAL TOTAL RETURN AS OF 6/30/98
- -------------------------------------------------------------
30-DAY
INCEPTION LIFE OF SEC
DATE 1 YEAR 3 YEAR 5 YEAR 10 YEAR FUND YIELD
- -----------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
Income Bond(2) 01/14/94 7.13% 5.96% - - 5.07% 5.22%
With Sales Charge 3.13% 5.07% - - 4.70%
Limited Volatility Bond 01/14/94 5.98% 5.33% - - 4.75% 4.99%
With Sales Charge 2.98% 5.03% - - 4.75%
Intermediate Tax-Free(2) 01/14/94 6.81% 6.03% - - 4.28% 3.25%
With Sales Charge 2.81% 5.13% - - 3.89%
Ohio Municipal Bond(2) 01/14/94 6.20% 6.23% - - 4.05% 3.29%
With Sales Charge 2.20% 4.81% - - 3.66%
Municipal Income(2) 01/14/94 7.04% 6.08% - - 4.85% 3.86%
With Sales Charge 3.04% 5.18% - - 4.47%
Government Bond 01/14/94 9.86% 6.61% - - 5.70% 4.98%
With Sales Charge 5.86% 5.72% - - 5.33%
Ultra Short-Term Income 01/14/94 5.32% 5.39% - - 4.66% 5.09%
With Sales Charge 2.32% 5.09% - - 4.66%
Intermediate Bond 11/30/94 7.13% 5.96% - - 5.07% 5.00%
With Sales Charge 3.13% 5.07% - - 4.70%
Kentucky Municipal Bond(2) 03/16/95 6.20% 5.72% - - 6.04% 3.01%
With Sales Charge 2.20% 4.82% - - 5.23%
Louisiana Municipal Bond(2) 09/16/94 5.69% 5.39% - - 5.57% 3.00%
With Sales Charge 1.69% 4.48% - - 4.88%
West Virginia Municipal
Bond(1,2) 01/21/97 6.57% 5.63% 4.76% 5.79 6.47 3.23
With Sales Charge 2.57% 4.73% 4.59% 5.79 6.47
Arizona Municipal Bond(1,2) 01/21/97 2.65% 3.47% 3.41% 5.59 6.13 2.93
With Sales Charge -1.35% 2.53% 3.23% 5.59 6.13
Treasury & Agency(1) 01/21/97 7.33% 5.60% 5.59% 6.66 6.63 4.62
With Sales Charge 4.33% 5.30% 5.59% 6.66 6.63
</TABLE>
78
<PAGE> 702
EQUITY FUNDS
<TABLE>
<CAPTION>
AVERAGE ANNUAL TOTAL RETURN AS OF 6/30/98
- -------------------------------------------------------------
30-DAY
INCEPTION LIFE OF SEC
DATE 1 YEAR 3 YEAR 5 YEAR 10 YEAR FUND YIELD
- -----------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
Disciplined Value 01/14/94 26.97% 21.67% - - 16.38% -0.20%
With Sales Charge 22.97% 20.99% - - 16.12%
Income Equity 01/14/94 21.97% 24.92% - - 20.06% .30%
With Sales Charge 17.97% 24.28% - - 19.82%
Equity Index 01/14/94 22.74% 30.68% - - 22.74% .21%
With Sales Charge 22.51% 29.53% - - 22.51%
Large Company Value 01/14/94 20.18% 19.19% - - 16.80% .10%
With Sales Charge 16.18% 18.48% - - 16.54%
Growth Opportunities 01/14/94 29.79% 24.25% - - 18.09% -1.33%
With Sales Charge 25.79% 27.05% - - 17.84%
International Equity
Index(3) 01/14/94 8.48% 10.59% - - 8.53% NA
With Sales Charge 4.48% 9.76% - - 8.19%
Asset Allocation 01/14/94 20.95% 17.84% - - 13.63% 1.73%
With Sales Charge 16.95% 17.12% - - 13.34%
Large Company Growth 01/14/94 34.39% 27.25% - - 22.49% -0.85%
With Sales Charge 30.39% 26.63% - - 22.26%
Small Capitalization 09/09/94 22.24% 18.23% - - 15.88% -0.87%
With Sales Charge 18.24% 17.51% - - 15.35%
Value Growth 12/29/89 30.89% 27.05% - - 23.28% -0.48%
With Sales Charge 26.89% 26.43% - - 22.84%
</TABLE>
THE ONE GROUP INVESTOR FUNDS
<TABLE>
<CAPTION>
AVERAGE ANNUAL TOTAL RETURN AS OF 6/30/98
- -------------------------------------------------------------
30-DAY
INCEPTION LIFE OF SEC
DATE 1 YEAR 3 YEAR 5 YEAR 10 YEAR FUND YIELD
- -----------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
Investor Conservative Growth 11.53% 10.90%
With Sales Charge 12/10/96 7.53% NA NA NA 8.46% NA
Investor Balanced 15.85% 15.67%
With Sales Charge 12/10/96 11.85% NA NA NA 13.28%
Investor Growth & Income 19.13% 19.72%
With Sales Charge 12/10/96 15.13% NA NA NA 17.38%
Investor Growth 12/10/96 22.52% NA NA NA 23.91%
With Sales Charge 18.52% 21.61%
</TABLE>
CLASS C SHARES
FIXED INCOME FUNDS
<TABLE>
<CAPTION>
AVERAGE ANNUAL TOTAL RETURN AS OF 6/30/98
- -------------------------------------------------------------
30-DAY
INCEPTION LIFE OF SEC
DATE 1 YEAR 3 YEAR 5 YEAR 10 YEAR FUND YIELD
- -----------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
Municipal Income(2)) 11/04/97 - - - - 8.28% 3.86%
With Sales Charge 7.28%
Intermediate Bond 11/04/97 - - - - 8.20% 5.01%
With Sales Charge 7.20%
</TABLE>
79
<PAGE> 703
EQUITY FUNDS
<TABLE>
<CAPTION>
AVERAGE ANNUAL TOTAL RETURN AS OF 6/30/98
- -------------------------------------------------------------
30-DAY
INCEPTION LIFE OF SEC
DATE 1 YEAR 3 YEAR 5 YEAR 10 YEAR FUND YIELD
- -----------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
Income Equity 11/04/97 - - - - 16.57% 0.31%
With Sales Charge 15.57%
Equity Index 11/04/97 - - - - 21.07% 0.20%
With Sales Charge 20.07%
Growth Opportunities 11/04/97 - - - - 14.27% -1.31%
With Sales Charge 13.27%
International Equity
Index(3) 11/04/07 - - - - 16.34% NA
With Sales Charge 15.34%
Large Company Growth 11/04/97 - - - - 27.63% -0.85%
With Sales Charge 26.63%
Small Capitalization 11/04/97 - - - - 3.08% -0.87%
With Sales Charge 2.16%
Value Growth 11/04/97 - - - - 20.87% -0.54%
With Sales Charge 19.87%
</TABLE>
80
<PAGE> 704
THE ONE GROUP INVESTOR FUNDS
<TABLE>
<CAPTION>
AVERAGE ANNUAL TOTAL RETURN AS OF 6/30/98
- -------------------------------------------------------------
30-DAY
INCEPTION LIFE OF SEC
DATE 1 YEAR 3 YEAR 5 YEAR 10 YEAR FUND YIELD
- -----------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
Investor Conservative Growth 07/01/97 NA NA NA NA 11.48 NA
With Sales Charge 10.48
Investor Balanced 07/01/97 NA NA NA NA 15.66 NA
With Sales Charge 14.66
Investor Growth & Income 07/01/97 NA NA NA NA 19.08 NA
With Sales Charge 18.08
Investor Growth 07/01/97 NA NA NA NA 22.42 NA
With Sales Charge 21.42
</TABLE>
(1) The quoted performance of these funds ("Mutual Funds") advised by Banc
One Investment Advisors Corporation includes performance of certain
collective trust fund ("Commingled") accounts for periods dating back
to 12/31/83 for the West Virginia Municipal Bond Fund, 11/30/79 the
Arizona Municipal Bond Fund and 4/30/88 for the Treasury & Agency Fund.
Prior to the Mutual Funds commencement of for operations on 1/21/97,
the Commingled accounts were adjusted to reflect the expenses
associated with the Mutual Funds. The Commingled accounts were not
registered with the Securities and Exchange Commission and, therefore,
were not subject to the investment restrictions imposed by law on
registered mutual funds. If the Commingled accounts had been
registered, the Commingled accounts' performance may have been
adversely affected.
(2) A portion of the income may be subject to the federal alternative
minimum tax.
(3) Foreign investing involves a greater degree of risk and volatility.
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:
distribution yield = a/(b) x 365
-----------
c
In the formula, "a" represents dividends distributed by a particular
class during that period; "b" represents month end offer price or net asset
value 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.
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 Class I 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, 1998 (calculated as described
above) is as follows:
The above quoted performance for the Arizona Municipal Bond Fund, the
West Virginia Municipal Bond Fund, and the Treasury & Agency Fund, respectively,
includes the performance for the Arizona Municipal Bond Investment Fund, the
West Virginia Municipal Bond Investment Fund and the Treasury Only Government
Based Investment Trust, common trust funds managed by Banc One Advisors
(collectively the "CIFs"). The quoted performance of these Funds include
performance of the corresponding CIFs for periods dating back to December 31,
1983 for the West Virginia Municipal Bond Fund, November 30, 1979 for the
Arizona Municipal Bond Fund and April 30, 1988 for the Treasury & Agency Fund.
Because the management of the Funds is substantially the same as the CIFs, the
quoted performance of the Funds will include the performance of the CIFs for the
periods prior to January 20, 1997, the effectiveness of the Trust's registration
statement as it relates to the Funds. The quoted performance will be adjusted to
reflect the deduction of estimated current fees of the Funds on a class by class
basis absent any waivers. The CIFs were not registered under the Investment
Company Act of 1940, as amended (the "1940 ACT"), and therefore were not subject
to certain investment restrictions, limitations, and diversification
81
<PAGE> 705
requirements that are imposed by the 1940 Act and the Code. If the CIFs had been
so registered, their performance might have been adversely affected.
In addition, the performance of each class of a 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, the performance of
each class of a Fund may be compared to other funds or to relevant indices that
may calculate total return without reflecting sales charges; in which case, a
Fund may advertise its total return in the same manner. If reflected, sales
charges would reduce these total return calculations.
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, Solomon 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.
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 AND THE FUNDS OF 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, the Municipal Bond Funds and the
Funds of 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, THE FUNDS OF 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.
82
<PAGE> 706
The Bond Funds, the Funds of 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.
The Bond Funds, the Funds of 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."
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.
83
<PAGE> 707
As of July 30, 1998, 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 Class I Shares of the Trust, and possessed voting or investment
power as follows:
<TABLE>
<CAPTION>
PERCENT OF
BENEFICIAL
FUND OWNERSHIP
<S> <C>
Large Company Growth Fund 89.34%
Disciplined Value Fund 85.05%
Growth Opportunities Fund 82.72%
Income Bond Fund 87.82%
Intermediate Tax-Free Bond Fund 97.89%
Prime Money Market Fund 49.80%
U.S. Treasury Securities Money Market Fund 18.95%
Municipal Money Market Fund 77.03%
Income Equity Fund 90.92%
Equity Index Fund 81.48%
Large Company Value Fund 88.05%
Ohio Municipal Bond Fund 93.05%
Limited Volatility Bond Fund 89.09%
International Equity Index Fund 88.00%
Asset Allocation Fund 75.60%
Ohio Municipal Money Market Fund 62.73%
Municipal Income 97.25%
Kentucky Municipal Bond Fund 93.13%
Government Bond Fund 87.38%
Ultra Short-Term Income Fund 77.69%
Louisiana Municipal Bond Fund 95.68%
Value Growth Fund 82.83%
Small Capitalization Fund 81.99%
Intermediate Bond Fund 89.78%
Arizona Municipal Bond Fund 94.72%
West Virginia Municipal Bond Fund 98.29%
Investor Growth Fund 65.79%
Investor Growth & Income Fund 76.04%
Investor Balanced Fund 85.31%
Investor Conservative Growth Fund 77.33%
Treasury Only Money Market Fund 18.42%
Government Money Market Fund 10.64%
Treasury & Agency Fund 99.17%
</TABLE>
As a result, Banc One Corporation may be deemed to be a "controlling
person" of Class I Shares of each of the aforementioned Funds other than
the Treasury Only Money Market Fund and the U.S. Treasury Securities Money
Market Fund, under the Investment Company Act of 1940.
In addition, as of July 30, 1998, 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:
84
<PAGE> 708
25% SHAREHOLDERS
<TABLE>
<CAPTION>
NAME AND PERCENTAGE OF TYPE OF
ADDRESS FUND/CLASS OWNERSHIP OWNERSHIP
- --------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Northern Trust Bank of AZ Ttee Arizona Municipal 33.72% Record
For Thomas A Brand & Rev Trust Bond Fund
PO Box 92956 Class A
Chicago, IL 60675-2956
Carolyn S Ward Arizona Municipal 25.81% Beneficial
James D Ward JT TEN Bond Fund
825 W Annadale Class B
Tucson, AZ 85737-6923
Strafe & Co Arizona Municipal 100.00% Record
Attn Mutual Funds 0393 Bond Fund
100 E Broad Street Class I
Columbus, OH 43215-3607
Dean Witter For The Benefit Of Large Company 30.88% Record
Selma J Berry & Growth Fund
Colin G Berry JTTEN Class C
Church St Station B PO Box 250
New York, NY 10008-0250
Strafe & Co Large Company 90.89% Record
Attn Mutual Funds 0393 Growth Fund
100 E Broad Street Class I
Columbus, OH 43215-3607
Strafe & Co Disciplined Value 86.48% Record
Attn Mutual Funds 0393 Fund
100 E Broad Street Class I
Columbus, OH 43215-3607
Banc One Securities Corp FBO Growth 78.53% Record
The One Investment Solution Opportunities Fund
733 Greencrest Dr Class C
Westerville, OH 43081-4903
Strafe & Co Cash Div Cash Growth 84.32% Record
C/O Bank One Trust Co Opportunities Fund
Attn Mutual Fund 0393 Class I
100 E Broad Street
Columbus, OH 43215
Strafe & Co Income Bond Fund 88.91% Record
C/O Bank One Trust Co Class I
Attn Mutual Funds
100 E Broad St
Columbus, OH 43215-3607
</TABLE>
85
<PAGE> 709
<TABLE>
<S> <C> <C> <C>
Strafe & Co Intermediate Tax- 99.52% Record
Attn Mutual Funds Free Fund
100 E Broad St
Columbus, OH 43215-3607 Class I
Dean Witter FBO Prime Money Market Fund 55.38% Record
Banc One Securities Class A
PO Box 250
Church Street Station
New York, NY 10013-0250
BISYS Fund Services Inc Prime Money Market Fund 34.99% Record
Fbo Bank One Corporate Sweep Class A
Attn Mike Bryan
3435 Stelzer Road Suite 1000
Columbus OH 43219-6004
Strafe & Co Prime Money Market Fund 90.15% Record
Bank One Trust Co., NA Class I
Department 0393 S.T.I.F.
Columbus OH 43271-0001
BISYS Fund Services Inc US Treasury Securities 38.66% Record
Fbo Bank One Corporate Sweep Money Market Fund
Attn Mike Bryan Class A
3435 Stelzer Road Suite 1000
Columbus OH 43219-6004
Dean Witter FBO US Treasury Securities 29.27% Record
Banc One Securities Money Market Fund
PO Box 250 Class A
Church Street Station
New York NY 10013-0250
BISYS Fund Services Inc US Treasury Securities 26.40% Record
Fbo Bank One Texas Sweep Money Market Fund
Attn Mike Bryan Class A
3435 Stelzer Road Suite 1000
Columbus OH 43219-6004
The One Group Services Company US Treasury Securities 86.96% Beneficial
C/O Fund Administration Money Market Fund
3435 Stelzer Road Class C
Columbus OH 43219-6004
Strafe & Co (N) US Treasury Securities 80.94% Record
Bank One Ohio Trust Co., NA Money Market Fund
Department 0393 S.T.I.F. Class I
Columbus OH 43271-0001
Dean Witter FBO Municipal Money Market 58.27% Record
Banc One Securities Fund
</TABLE>
86
<PAGE> 710
<TABLE>
<S> <C> <C> <C>
PO Box 250 Class A
Church Street Station
New York NY 10013-0250
BISYS Fund Services Inc Municipal Money Market 38.79% Record
FBO Bank One Corporate Sweep Fund
Attn Mike Bryan Class A
3435 Stelzer Road Suite 1000
Columbus OH 43219-6004
Strafe & Co (D) Municipal Money Market 96.77% Record
Bank One Ohio Trust Co., NA Fund
Department 0393 S.T.I.F. Class I
Columbus OH 43271-0001
Dean Witter For The Benefit Of Income Equity Fund 71.70% Record
McKee Char TR/Lynn A Hammond & Class C
Clare W White Co-TTEES
Church St Station B PO Box 250
New York NY 10013-0250
Strafe & Co Income Equity Fund 92.64% Record
Attn Mutual Funds 0393 Class I
100 E Broad Street
Columbus OH 43215-3607
Banc One Securities Corp Fbo Equity Index Fund 32.30% Beneficial
The One Investment Solution Class A
733 Greencrest Dr
Westerville OH 43081-4903
Banc One Securities Corp Fbo Equity Index Fund 62.48% Beneficial
The One Investment Solution Class C
733 Greencrest Dr
Westerville OH 43081-4903
Strafe & Co. Equity Index Fund 88.78% Record
Attn Mutual Funds 0393 Class I
100 E Broad Street
Columbus OH 43215-3607
Banc One Sec Svgs Plan -Equity Fund Equity Index Fund 30.56% Beneficial
100 E Broad Street Class I
Columbus, OH 43215-3607
Strafe & Co. Large Company Value Fund 89.11% Record
Attn Mutual Funds 0393 Class I
100 E Broad Street
Columbus OH 43215-3607
Strafe & Co. Ohio Municipal Bond Fund 98.98% Record
Attn Mutual Funds 0393
100 E Broad Street
</TABLE>
87
<PAGE> 711
<TABLE>
<S> <C> <C> <C>
Columbus OH 43215-3607 Class I
Banc One Securities Corp Fbo International Equity 49.22% Beneficial
The One Investment Solution Index Fund
733 Greencrest Dr Class C
Westerville OH 43081-4903
Dean Witter For The Benefit Of International Equity 26.58% Record
Robert M Lynch & Index Fund
PO Box 250 Church Street Station Class C
New York, NY 1008-0250
Strafe & Co International Equity 87.62% Record
Attn Mutual Funds 0393 Index Fund
100 E Broad Street Class I
Columbus OH 43215-3607
Strafe & Co Louisiana Municipal Bond 98.38% Record
Attn Mutual Funds 0393 Fund
100 E Broad Street Class I
Columbus OH 43215-3607
Banc One Securities Corp Fbo Value Growth Fund 66.95% Beneficial
The One Investment Solution Class C
733 Greencrest Dr
Westerville OH 43081-4903
Strafe & Co. Value Growth Fund 83.80% Record
Attn: Mutual Funds 0393 Class I
100 E. Broad Street
Columbus, OH 43215-3607
Strafe & Co. Small Company Growth Fund 77.52% Record
Attn: Mutual Funds 0393 Class I
100 E. Broad Street
Columbus, OH 43215-3607
Strafe & Co. Asset Allocation Fund 79.54% Record
Attn: Mutual Funds 0393 Class I
100 E. Broad Street
Columbus, OH 43215-3607
Dean Witter FBO Ohio Municipal Money 99.10% Record
Banc One Securities Market Fund
PO Box 250 Class A
Church Street Station
New York NY 10013-0250
Strafe & Co Ohio Municipal Money 97.33% Record
C/O Bank One Trust Co Market Fund
Attn Mutual Funds Class I
100 E Broad Street
Columbus OH 43215-3607
</TABLE>
88
<PAGE> 712
<TABLE>
<S> <C> <C> <C>
Banc One Securities Corp FBO Municipal Income Fund 44.14% Beneficial
The One Investment Solution Class A
733 Greencrest Dr
Westerville OH 43081-4903
Banc One Securities Corp FBO Municipal Income Fund 39.48% Beneficial
The One Investment Solution Class C
733 Greencrest Dr
Westerville OH 43081-4903
Dean Witter For The Benefit Of Municipal Income Fund 25.64% Record
Gale R Hershberger & Class C
Linda L Hershberger JTTEN
Church St Station B PO Box 250
New York, NY 10013-0250
Strafe & Co Municipal Income Fund 99.15% Record
Attn Mutual Funds Class I
100 E Broad Street
Columbus OH 43215-3607
Dean Witter For The Benefit Of West Virginia Municipal 26.33% Record
Stephen A Lewis Bond Fund Class A
3720 Noyles Avenue
5 World Trade Center 6th Floor
New York NY 10048-0205
Strafe & Co West Virginia Municipal 98.52% Record
Attn Mutual Funds 0393 Bond Fund Class I
100 E Broad Street
Columbus OH 43215-3607
Strafe & Co Government Bond Fund 88.55% Record
Attn Mutual Funds 0393 Class I
100 E Broad Street
Columbus OH 43215-3607
Strafe & Co. Ultra Short Term Income 89.12% Record
Attn: Mutual Funds 0393 Fund
100 E. Broad Street Class I
Columbus, OH 43215-3607
Banc One Securities Corp FBO Intermediate Bond Fund 55.94% Beneficial
The One Investment Solution Class A
733 Greencrest Dr
Westerville OH 43081-4903
Banc One Securities Corp FBO Intermediate Bond Fund 53.34% Beneficial
The One Investment Solution Class C
733 Greencrest Dr
Westerville OH 43081-4903
</TABLE>
89
<PAGE> 713
<TABLE>
<S> <C> <C> <C>
Strafe & Co
Attn Mutual Funds 0393 Intermediate Bond Fund 91.33% Record
100 E Broad Street Class I
Columbus OH 43215-3607
Strafe & Co. Investor Growth Fund 69.73% Record
C/O Bank One Trust Co Class I
Attn Mutual Funds
100 E Broad Street
Columbus OH 43215-3607
Strafe & Co Investor Growth & Income 81.94% Record
C/O Bank One Trust Co Fund
Attn Mutual Funds Class I
100 E Broad Street
Columbus OH 43215-3607
Strafe & Co Investor Balanced Fund 88.52% Record
C/O Bank One Trust Co Class I
Attn Mutual Funds
100 E Broad Street
Columbus OH 43215-3607
Strafe & Co Investor Conservative 85.27% Record
C/O Bank One Trust Co Growth Fund
Attn Mutual Funds Class I
100 E Broad Street
Columbus OH 43215-3607
Strafe & Co. Treasury & Agency Fund 99.87% Record
Attn: Mutual Funds 0393 Class I
100 E. Broad Street
Columbus, OH 43215-3607
Strafe & Co. Treasury Only Money 66.86% Record
C/O Bank One Trust Co Market Fund
Attn: Mutual Funds
100 E. Broad Street
Columbus, OH 43215-3607
Strafe & Co. US Government Money 82.20% Record
C/O Bank One Trust Co Market Fund
Attn: Mutual Funds
100 E. Broad Street
Columbus, OH 43215-3607
</TABLE>
90
<PAGE> 714
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.
5% SHAREHOLDERS
<TABLE>
<CAPTION>
NAME AND PERCENTAGE OF TYPE OF
ADDRESS FUND/CLASS OWNERSHIP OWNERSHIP
- ---------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
For Thomas A Brand & Rev Trust Arizona Municipal Bond Fund 33.72% Record
PO Box 92956 Class A
Chicago, IL 60675-2956
American Express Trust Company Arizona Municipal Bond Fund 15.73% Record
Trustee of the Danielle D'Ottavio Class A
IRR Trust U/A/D 4-24-91
PO Box 534 N10/789
Minneapolis, MN 55440-0534
Dean Witter for the Benefit of Arizona Municipal Bond Fund 14.52% Record
Elizabeth Ryan Miller Class A
4140 N 49th Way
Church St Station - P.O. Box 250
New York, NY 10013-0250
Gust Trust Under Agreement 1/17 Arizona Municipal Bond Fund 11.91% Record
Devens Gust & Mary Elizabeth Gust Class A
Co-Trustees KY 40207-2626
P.O. Box 25
Mule Creek, NM 88051-0025
Dean Witter For The Benefit Of Arizona Municipal Bond Fund 7.66% Record
William J Lofy Trust Class A
PO Box 250 Church Street Station
New York, NY 10008-0250
Carolyn S Ward Arizona Municipal Bond Fund 25.81% Beneficial
James D Ward JT TEN Class B
825 W Annadale
Tucson, AZ 85737-6923
Dean Witter For The Benefit Of Arizona Municipal Bond Fund 20.65% Record
Eugene B Debuck Class B
4550 North Flowing Wells #90
Church St Station - P.O. Box 250
New York, NY 10008-0250
</TABLE>
91
<PAGE> 715
<TABLE>
<S> <C> <C> <C>
Dean Witter For The Benefit Of Arizona Municipal Bond Fund 16.86% Record
Charles Stoddard & Class B
P.O. Box 250 -Church Street Station
New York, NY 10008-0250
Dean Witter For The Benefit Of Arizona Municipal Bond Fund 13.31% Record
Marshall L Silverstein Trust Class B
P.O. Box 250 Church Street Station
New York, NY 10008-0250
Scottsdale, AZ 85258-1618
Dean Witter For The Benefit Of Arizona Municipal Bond Fund 9.99% Record
Pete R Samorano & Class B
P.O. Box 250 Church Street Station
New York, NY 10008-0250
Strafe & Co Arizona Municipal Bond Fund 100.00% Record
Attn Mutual Funds 0393 Class I
100 E Broad Street
Columbus, OH 43215-3607
Dean Witter For The Benefit Of Large Company Growth Fund 30.88% Record
Selma J Berry & Class C
Colin G Berry JTTEN
Church St Station - PO Box 250
New York, NY 10008-0250
Dean Witter For The Benefit Of Large Company Growth Fund 9.77% Record
Linda Sue Trizila & Class C
P.O. Box 250 Church Street Station
New York, NY 10008-0250
Dean Witter Reynolds Cust For Large Company Growth Fund 7.75% Record
Cecil Jewell Class C
IRA Rollover Dated 10/15/97
Church St Station - P.O. Box 250
New York, NY 10013-0250
Dean Witter For The Benefit Of Large Company Growth Fund 5.78% Record
Rosa L Peattie Class C
374 Venus Drive
Church St Station - P.O. Box 250
New York, NY 10013-0250
Champion Windows MFG Co Inc Large Company Growth Fund 5.68% Beneficial
11750 Commons Dr Class C
Cincinnati, OH 45246-2550
Strafe & Co Large Company Growth Fund 90.89% Record
Attn Mutual Funds 0393 Class I
100 E Broad Street
Columbus, OH 43215-3607
Banc One Corporation Large Company Growth Fund 11.44% Beneficial
100 E Broad Street Class I
Columbus, OH 43215-3607
</TABLE>
92
<PAGE> 716
<TABLE>
<S> <C> <C> <C>
Banc One Sec Svgs Plan Large Company Growth Fund 10.39% Beneficial
100 E Broad Street Class I
Columbus, OH 43215-3607
Strafe & Co
Attn Mutual Funds 0393 Disciplined Value Fund 86.48% Record
100 E Broad Street Class I
Columbus, OH 43215-3607
Banc One Corporation
100 E Broad Street Disciplined Value Fund 15.09% Beneficial
Columbus, OH 43215-3607 Class I
The One Group Investor Growth Fund Disciplined Value Fund 5.32% Beneficial
The One Group Services Company Class I
3435 Stelzer Road
Columbus, OH 43219-6004
Banc One Securities Corp FBO
The One Investment Solution Growth Opportunities Fund 14.81% Record
733 Greencrest Dr Class A
Westerville, OH 43081-4903
Northern Trust Company TTEE Growth Opportunities Fund 8.09% Record
Ohio Masanic Home Benevolent Endowment Class A
PO Box 92956
Chicago, IL 60675-2956
Invesco Trust Co TTEE Growth Opportunities Fund 6.00% Record
T D Williamson, Inc Thrift Plan Class A
PO Box 77405
Atlanta, GA 30357-1405
Banc One Securities Corp FBO Growth Opportunities Fund 78.53% Record
The One Investment Solution Class C
733 Greencrest Dr
Westerville, OH 43081-4903
Strafe & Co Cash Div Cash Growth Opportunities Fund 84.32% Record
C/O Bank One Trust Co Class I
Attn Mutual Fund 0393
100 E Broad Street
Columbus, OH 43215
Banc One Corporation Growth Opportunities Fund 10.18% Beneficial
100 E Broad Street Class I
Columbus, OH 43215-3607
Dean Witter For The Benefit Of Income Bond Fund 10.21% Record
Alpert Corp Money Purchase Plan Class A
Steven Kurtz TTEE
5 World Trade Center 6th Floor
New York, NY 10048-0205
</TABLE>
93
<PAGE> 717
<TABLE>
<S> <C> <C> <C>
Gila River Health Care Corporation Income Bond Fund 6.05% Beneficial
Attn Finance Class A
PO Box 38
Sacaton AZ 85247-0038
Strafe & Co Income Bond Fund 88.91% Record
C/O Bank One Trust Co Class I
Attn Mutual Funds
100 E Broad St
Columbus, OH 43215-3607
Dean Witter For the Benefit of Intermediate Tax-Free Fund 10.96% Record
Estate of Emma Lou Lancaster Class A
PO Box 250 Church Street Station
New York, NY 10008-0250
Dean Witter for the Benefit of Intermediate Tax-Free Fund 6.89% Record
Jerome Kearns & Class A
PO Box 250 Church Street Station
New York, NY 10008-0250
J Noland Singletary Intermediate Tax-Free Fund 6.40% Beneficial
7350 Bocage Blvd Class A
Baton Rouge LA 70809-1138
Norwest Bank Co NA TTEE Intermediate Tax-Free Fund 5.31% Record
FBO Eliot S Wolff Class A
1740 Broadway MS #8751
Denver CO 80274-0002
Strafe & Co Intermediate Tax-Free Fund 99.52% Record
Attn Mutual Funds Class I
100 E Broad St
Columbus, OH 43215-3607
Dean Witter FBO Prime Money Market Fund 55.38% Record
Banc One Securities Class A
PO Box 250
Church Street Station
New York, NY 10013-0250
BISYS Fund Services Inc Prime Money Market Fund 34.99% Record
Fbo Bank One Corporate Sweep Class A
Attn Mike Bryan
3435 Stelzer Road Suite 1000
Columbus OH 43219-6004
Strafe & Co Prime Money Market Fund 90.15% Record
Bank One Trust Co., NA Class I
Department 0393 S.T.I.F.
Columbus OH 43271-0001
Bank One Trust Company NA Prime Money Market Fund 8.49% Record
Omnibus-Corporate Cash Sweep AC Class I
Attn Cash Management DB3
235 W Schrock Rd
Westerville OH 43081-2874
</TABLE>
94
<PAGE> 718
<TABLE>
<S> <C> <C> <C>
BISYS Fund Services Inc US Treasury Securities 38.66% Record
Fbo Bank One Corporate Sweep Money Market Fund
Attn Mike Bryan Class A
3435 Stelzer Road Suite 1000
Columbus OH 43219-6004
</TABLE>
95
<PAGE> 719
<TABLE>
<S> <C> <C> <C>
Dean Witter FBO US Treasury Securities 29.27% Record
Banc One Securities Money Market Fund
PO Box 250 Class A
Church Street Station
New York NY 10013-0250
BISYS Fund Services Inc US Treasury Securities 26.40% Record
Fbo Bank One Texas Sweep Money Market Fund
Attn Mike Bryan Class A
3435 Stelzer Road Suite 1000
Columbus OH 43219-6004
State Street Bank & Trust Co US Treasury Securities 20.19% Record
Cust For the IRA of Money Market Fund
Edward Hillman III Class B
121 S Walnut St
Troy OH 45373-3530
State Street Bank & Trust Co US Treasury Securities 15.55% Record
Cust For the IRA of Money Market Fund
Roland J Bourgeois Class B
692C W Wickenburg Way
Wickenburg AZ 85390-2268
State Street Bank & Trust Co US Treasury Securities 11.02% Record
Cust For the IRA of Money Market Fund
John N Crew Class B
4313 Edmondson Ave
Dallas TX 75205-2601
Dean Witter For The Benefit Of US Treasury Securities 7.54% Record
Yo Suzuki Money Market Fund
2031 Grandview Ave Apt B Class B
Boulder CO 80302-6552
State Street Bank & Trust Co US Treasury Securities 6.85% Record
Cust For the IRA of Money Market Fund
Charles E Faris Class B
110 Flint Dr
Chillicothe OH 45601-7600
State Street Bank & Trust Co US Treasury Securities 6.50% Record
Cust For the IRA of Money Market Fund
Joe D Bolding Class B
803 Holly Cir
Allen TX 75002-5216
Jeffery J Hutchinson US Treasury Securities 5.72% Beneficial
489 Highway 665 Money Market Fund
Montegut LA 70377-2207 Class B
State Street Bank & Tr US Treasury Securities 5.71% Record
SEP IRA Jeffrey S Lux Money Market Fund
2220 Justice St Class B
Monroe LA 71201-3620
</TABLE>
96
<PAGE> 720
<TABLE>
<S> <C> <C> <C>
State Street Bank & Trust Co US Treasury Securities 5.64% Record
Cust For the IRA Rollover of Money Market Fund
Pamela A Bell Class B
1692 Leighton Dr
Reynoldsburg OH 43068-8111
</TABLE>
97
<PAGE> 721
<TABLE>
<S> <C> <C> <C>
The One Group Services Company US Treasury Securities 86.96% Beneficial
C/O Fund Administration Money Market Fund
3435 Stelzer Road Class C
Columbus OH 43219-6004
Strafe & Co (N) US Treasury Securities 80.94% Record
Bank One Ohio Trust Co., NA Money Market Fund
Department 0393 S.T.I.F. Class I
Columbus OH 43271-0001
Bank one Trust Company NA US Treasury Securities 17.95% Record
Omnibus-Corporate Cash Sweep AC Money Market Fund
Attn: Cash Management DB3 Class I
235 W Schrock Rd
Westerville OH 43081-2874
Dean Witter FBO Municipal Money Market Fund 58.27% Record
Banc One Securities Class A
PO Box 250
Church Street Station
New York NY 10013-0250
BISYS Fund Services Inc Municipal Money Market Fund 38.79% Record
FBO Bank One Corporate Sweep Class A
Attn Mike Bryan
3435 Stelzer Road Suite 1000
Columbus OH 43219-6004
Strafe & Co (D) Municipal Money Market Fund 96.77% Record
Bank One Ohio Trust Co., NA Class I
Department 0393 S.T.I.F.
Columbus OH 43271-0001
DC Livestock Co Ltd Part Yea Municipal Money Market Fund 7.66% Beneficial
100 E Broad Street Class I
Columbus, OH 43215-3607
Dean Witter For The Benefit Of Income Equity Fund 71.70% Record
McKee Char TR/Lynn A Hammond & Class C
Clare W White Co-TTEES
Church St Station - PO Box 250
New York NY 10013-0250
UMB Bank Cust Fbo Income Equity Fund 7.16% Record
Bruce W Young IRA Class C
718 Sycamore Ave SPC 200
Vista CA 92083-7952
Strafe & Co Income Equity Fund 92.64% Record
Attn Mutual Funds 0393 Class I
100 E Broad Street
Columbus OH 43215-3607
</TABLE>
98
<PAGE> 722
<TABLE>
<S> <C> <C> <C>
Banc One Securities Corp Fbo Equity Index Fund 32.30% Beneficial
The One Investment Solution Class A
733 Greencrest Dr
Westerville OH 43081-4903
Banc One Securities Corp Fbo Equity Index Fund 62.48% Beneficial
The One Investment Solution Class C
733 Greencrest Dr
Westerville OH 43081-4903
Strafe & Co. Equity Index Fund 88.78% Record
Attn Mutual Funds 0393 Class I
100 E Broad Street
Columbus OH 43215-3607
Banc One Sec Svgs Plan -Equity Fund Equity Index Fund 30.56% Beneficial
100 E Broad Street Class I
Columbus, OH 43215-3607
Indpls Power & Light Co - Equity Fund Equity Index Fund 6.27% Beneficial
100 E Broad Street Class I
Columbus, OH 43215-3607
Strafe & Co. Large Company Value Fund 89.11% Record
Attn Mutual Funds 0393 Class I
100 E Broad Street
Columbus OH 43215-3607
Banc One Corporation Large Company Value Fund 23.71% Beneficial
100 E Broad Street Class I
Columbus, OH 43215-3607
Dean Witter For The Benefit Of Ohio Municipal Bond Fund 7.10% Record
Vivian R Sauls Class A
519 Chapel Rd
Church St Station - PO Box 250
New York NY 10013-0250
Strafe & Co. Ohio Municipal Bond Fund 98.98% Record
Attn Mutual Funds 0393 Class I
100 E Broad Street
Columbus OH 43215-3607
NES Group Inc Corp Investmt Act Ohio Municipal Bond Fund 7.21% Beneficial
100 E Broad Street Class I
Columbus, OH 43215-3607
Northern Trust Company TTEE International Equity Index 21.00% Record
Ohio Masanic Home Benevolent Fund
Endowment Class A
P.O. Box 92956
Chicago, IL 60675-2956
Firstar Trust Co TTEE International Equity Index 18.15% Record
FBO Milwaukee Foundation - Equit Fund
P.O. Box 1787 Class A
Milwaukee WI 53201-1787
</TABLE>
99
<PAGE> 723
<TABLE>
<S> <C> <C> <C>
Banc One Securities Corp Fbo International Equity Index 49.22% Beneficial
The One Investment Solution Fund
733 Greencrest Dr Class C
Westerville OH 43081-4903
Dean Witter For The Benefit Of International Equity Index 26.58% Record
Robert M Lynch & Fund
PO Box 250 Church Street Station Class C
New York, NY 1008-0250
Dean Witter For The Benefit Of International Equity Index 10.02% Record
John S Wagner & Fund
PO Box 250 Church Street Station Class C
New York, NY 1008-0250
UMB Bank Cust FBO International Equity Index 5.46% Record
Darlene Y Young IRA Fund
718 Sycamore Ave SPC 200 Class C
Vista CA 92083-7952
Strafe & Co International Equity Index 87.62% Record
Attn Mutual Funds 0393 Fund
100 E Broad Street Class I
Columbus OH 43215-3607
Banc One Corporation International Equity Index 14.62% Beneficial
100 E Broad Street Fund
Columbus, OH 43215-3607 Class I
Wallace & Co Limited Volatility Bond Fund 7.08% Record
PO Box 21119 Class A
Shreveport LA 71152-0001
Strafe & Co Louisiana Municipal Bond 98.38% Record
Attn Mutual Funds 0393 Fund
100 E Broad Street Class I
Columbus OH 43215-3607
Banc One Securities Corp Fbo Value Growth Fund 18.36% Beneficial
The One Investment Solution Class A
733 Greencrest Dr
Westerville OH 43081-4903
Banc One Securities Corp Fbo Value Growth Fund 66.95% Beneficial
The One Investment Solution Class C
733 Greencrest Dr
Westerville OH 43081-4903
Dean Witter For The Benefit Of Value Growth Fund 7.14% Record
Martin Homes Inc Profit Sharing Class C
PO Box 250 Church Street Station
New York, NY 10008-0250
Dean Witter For The Benefit Of Value Growth Fund 5.13% Record
John S Wagner & Class C
PO Box 250 Church Street Station
New York, NY 10008-0250
</TABLE>
100
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<TABLE>
<S> <C> <C> <C>
Strafe & Co. Value Growth Fund 83.80% Record
Attn: Mutual Funds 0393 Class I
100 E. Broad Street
Columbus, OH 43215-3607
Dean Witter For The Benefit Of Small Capitalization Fund 16.06% Record
Robert Kennedy and Class C
Annemarie Kennedy Reisinger JTT
Church St Station - PO Box 250
New York, NY 10013-0250
State Street Bank & Trust Co Small Capitalization Fund 13.66% Record
Cust for the IRA Rollover of Class C
Donald E Hammond
1000 Fairway Blvd
Columbus OH 43213-2521
State Street Bank & Trust Co Small Capitalization Fund 12.26% Record
Cust for the IRA of Class C
Linda L Cole
14 Penguin Ct
Woodlands TX 77380-1827
Dean Witter For The Benefit Of Small Capitalization Fund 8.08% Record
Wells Pickney & McHugh Class C
PO Box 250 Church Street Station
New York NY 10008-0250
Dean Witter For The Benefit Of Small Capitalization Fund 8.02% Record
Laurence R Simon Class C
IRA STD/Rollover DTD 06/10/97
Church St Station - PO Box 250
New York, NY 10013-0250
State Street Bank & Trust Co Small Capitalization Fund 6.00% Record
Cust for the IRA of Class C
Linda Stephens
9057 E State Rd 46
Bloomington IN 47401-9241
State Street Bank & Trust Co Small Capitalization Fund 5.94% Record
Cust for the IRA Rollover Of Class C
Kevin Blair
701 E Whipp Rd
Centerville OH 45459-2205
Strafe & Co. Small Company Growth Fund 77.52% Record
Attn: Mutual Funds 0393 Class I
100 E. Broad Street
Columbus, OH 43215-3607
The One Group Investor Growth Fund Small Company Growth Fund 7.87% Beneficial
The One Group Services Company Class I
3435 Stelzer Road
Columbus OH 43219-6004
</TABLE>
101
<PAGE> 725
<TABLE>
<S> <C> <C> <C>
Firstar Trust Company Small Company Growth Fund 5.97% Beneficial
FBO Milwaukee Foundation Class I
PO Box 1787
Milwaukee WI 53201-1787
Strafe & Co. Asset Allocation Fund 79.54% Record
Attn: Mutual Funds 0393 Class I
100 E. Broad Street
Columbus, OH 43215-3607
OFDA (MT 2) Asset Allocation Fund Asset Allocation Fund 8.22% Beneficial
100 E Broad Street Class I
Columbus, OH 43215-3607
Dean Witter FBO Ohio Municipal Money Market 99.10% Record
Banc One Securities Fund
PO Box 250 Class A
Church Street Station
New York NY 10013-0250
Strafe & Co Ohio Municipal Money Market 97.33% Record
C/O Bank One Trust Co Fund
Attn Mutual Funds Class I
100 E Broad Street
Columbus OH 43215-3607
Bell City HFD Cook '98 Project Fund Ohio Municipal Money Market 11.91% Beneficial
100 E Broad Street Fund
Columbus, OH 43215-3607 Class I
Torley John TR U/A 2/23/90 Ohio Municipal Money Market 9.17% Beneficial
100 E Broad Street Fund
Columbus, OH 43215-3607 Class I
Henny Penny Corp Money Mkt Acct Ohio Municipal Money Market 5.91% Beneficial
100 E Broad Street Fund
Columbus, OH 43215-3607 Class I
Wallick Construction Company Ohio Municipal Money Market 5.76% Beneficial
100 E Broad Street Fund
Columbus, OH 43215-3607 Class I
Banc One Securities Corp FBO Municipal Income Fund 44.14% Beneficial
The One Investment Solution Class A
733 Greencrest Dr
Westerville OH 43081-4903
Banc One Securities Corp FBO Municipal Income Fund 39.48% Beneficial
The One Investment Solution Class C
733 Greencrest Dr
Westerville OH 43081-4903
Dean Witter For The Benefit Of Municipal Income Fund 25.64% Record
Gale R Hershberger & Class C
Linda L Hershberger JTTEN
Church St Station - PO Box 250
New York, NY 10013-0250
</TABLE>
102
<PAGE> 726
<TABLE>
<S> <C> <C> <C>
Dean Witter For The Benefit Of Municipal Income Fund 5.76% Record
Roberta A Silberstein 1984 Class C
Irrevocable Support Trust
Church St Station - PO Box 250
New York, NY 10013-0250
Strafe & Co Municipal Income Fund 99.15% Record
Attn Mutual Funds Class I
100 E Broad Street
Columbus OH 43215-3607
Dean Witter For The Benefit Of Kentucky Municipal Bond Fund 12.36% Record
Gary Osswald Class A
PO Box 250 Church Street Station
New York, NY 10008-0250
Dean Witter For The Benefit Of Kentucky Municipal Bond Fund 6.69% Record
Karrick Scott Collins Trust Class A
Karrick Scott Collins TTEE
Church St Station - PO Box 250
New York, NY 10013-0250
Strafe & Co Kentucky Municipal Bond Fund 94.40% Record
Attn Mutal Funds 0393 Class I
100 E Broad Street
Columbus OH 43215-3607
Dean Witter For The Benefit Of West Virginia Municipal 26.33% Record
Stephen A Lewis Bond Fund Class A
3720 Noyles Avenue
5 World Trade Center 6th Floor
New York NY 10048-0205
Dean Witter For The Benefit Of West Virginia Municipal 19.59% Record
James F Duncan Bond Fund Class A
PO Box 250 Church Street Station
New York NY 10008-0250
Dean Witter For The Benefit Of West Virginia Municipal 12.68% Record
James Henry Dean & Bond Fund Class A
Anna K Dean JTTEN
Church St Station - PO Box 250
New York NY 10013-0250
Dean Witter For The Benefit Of West Virginia Municipal 12.36% Record
R Clark Morton Bond Fund Class A
129 Elm Street
Church St Station - PO Box 250
New York NY 10013-0250
Dean Witter For The Benefit Of West Virginia Municipal 10.78% Record
C Carl Tully Bond Fund Class A
4530 Spring Hill
5 World Trade Center 6th Floor
New York NY 10048-0205
</TABLE>
103
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<TABLE>
<S> <C> <C> <C>
Dean Witter For The Benefit Of West Virginia Municipal 6.43% Record
Ruth A Harper Bond Fund Class A
PO Box 196
5 World Trade Center 6th Floor
New York NY 10048-0205
Dean Witter For The Benefit Of West Virginia Municipal 5.73% Record
Thomas D Jarrett & Bond Fund Class A
PO Box 250 Church Street Station
New York NY 10008-0250
Dean Witter For The Benefit Of West Virginia Municipal 5.02% Record
Patricia H Morton Bond Fund Class A
129 Elm Street
Church St Station - PO Box 250
New York NY 10013-0250
Dean Witter For The Benefit Of West Virginia Municipal 17.52% Record
Katherine Poe Bond Fund Class B
606 River Lane
5 World Trade Center 6th Floor
New York NY 10048-0205
Dean Witter For The Benefit Of West Virginia Municipal 6.69% Record
Evelyn Fox Bond Fund Class B
PO Box 250 Church Street Station
New York NY 10008-0250
Dean Witter For The Benefit Of West Virginia Municipal 5.29% Record
Clara R Mahoney and Bond Fund Class B
PO Box 250 Church Street Station
New York NY 10008-0250
Strafe & Co West Virginia Municipal 98.52% Record
Attn Mutual Funds 0393 Bond Fund Class I
100 E Broad Street
Columbus OH 43215-3607
Strafe & Co Government Bond Fund 88.55% Record
Attn Mutual Funds 0393 Class I
100 E Broad Street
Columbus OH 43215-3607
Dean Witter For The Benefit Of Ultra Short Term Income Fund 19.13% Record
Samaritan Health Plan Class A
PO Box 250 Church Street Station
New York NY 10008-0250
Dean Witter For The Benefit Of Ultra Short Term Income Fund 14.74% Record
Bank One Collateral Acct Class A
FBO Thermex Energy Corporation
Church St Station - PO Box 250
New York NY 10013-0250
</TABLE>
104
<PAGE> 728
<TABLE>
<S> <C> <C> <C>
Dean Witter For The Benefit Of Ultra Short Term Income Fund 8.88% Record
Genesis Health Care System Class A
800 Forest Avenue
Church St Station - PO Box 250
New York NY 10013-0250
Investment Company Institute Ultra Short Term Income Fund 7.76% Record
1401 H St NW Class A
Washington DC 20005-2110
Gila River Health Care Corporation Ultra Short Term Income Fund 5.57% Record
Attn Finance Class A
PO Box 38
Sacaton AZ 85247-0038
Dean Witter For The Benefit Of Ultra Short Term Income Fund 9.35% Record
Jeanette P Reilly Revocable Trust Class B
PO Box 250 Church Street Station
New York NY 10008-0250
Dean Witter For The Benefit Of Ultra Short Term Income Fund 9.11% Record
Samuel D Goldberg Class B
PO Box 250 Church Street Station
New York NY 10008-0250
Strafe & Co. Ultra Short Term Income Fund 89.12% Record
Attn: Mutual Funds 0393 Class I
100 E. Broad Street
Columbus, OH 43215-3607
Banc One Securities Corp FBO Intermediate Bond Fund 55.94% Beneficial
The One Investment Solution Class A
733 Greencrest Dr
Westerville OH 43081-4903
Banc One Securities Corp FBO Intermediate Bond Fund 53.34% Beneficial
The One Investment Solution Class C
733 Greencrest Dr
Westerville OH 43081-4903
State Street Bank & Trust Co Intermediate Bond Fund 14.61% Record
Cust For the IRA Rollover Of Class C
George L Allison
768 E Indiana Ave
Spencer IN 47460-1538
Dean Witter For The Benefit Of Intermediate Bond Fund 9.51% Record
Anna Marie Berry Class C
1145 Linden Drive
Church St Station - PO Box 250
New York NY 10013-0250
Dean Witter For The Benefit Of Intermediate Bond Fund 7.48% Record
Sharon Kaye Miller Class C
PO Box 250 Church Street Station
New York NY 10008-0250
</TABLE>
105
<PAGE> 729
<TABLE>
<S> <C> <C> <C>
Strafe & Co Intermediate Bond Fund 91.33% Record
Attn Mutual Funds 0393 Class I
100 E Broad Street
Columbus OH 43215-3607
Bank One TTEE Investor Growth Fund 5.68% Record
Harrison Holding Corp 401K Class A
C/O Banc One Investment Mgmt
Retirement Services - Daily R K
190 Heatherdown Drive
Westerville OH 43081-2868
Strafe & Co. Investor Growth Fund 69.73% Record
C/O Bank One Trust Co Class I
Attn Mutual Funds
100 E Broad Street
Columbus OH 43215-3607
Banc One Sec Svgs Plan Investor Growth Fund 19.14% Beneficial
100 E Broad Street Class I
Columbus, OH 43215-3607
Bank One TTEE Investor Growth Fund 12.12% Record
Brillion Iron Works P/S Class I
C/O Banc One Investment Mgmt
Retirement Services - Daily R K
190 Heatherdown Drive
Westerville OH 43081-2868
Virginia R Corrin Investor Growth Fund 9.68% Beneficial
100 E Broad Street Class I
Columbus, OH 43215-3607
Dean Witter For The Benefit Of Investor Growth & Income 10.36% Record
St Mary's Educational Endowment Foundation Fund
Church St Station PO Box 250 Class C
New York NY 10013-0250
Dean Witter For The Benefit Of Investor Growth & Income 5.79% Record
Charles R Snyder TRSTEE Fund
PO Box 250 Church Street Station Class C
New York NY 10008-0250
Strafe & Co Investor Growth & Income 81.94% Record
C/O Bank One Trust Co Fund
Attn Mutual Funds Class I
100 E Broad Street
Columbus OH 43215-3607
Revco D.S., Inc. Serp - Trust A Investor Growth & Income 14.49% Beneficial
100 E Broad Street Fund
Columbus, OH 43215-3607 Class I
Banc One Sec Svgs Plan Investor Growth & Income 12.91% Beneficial
100 E Broad Street Fund
Columbus, OH 43215-3607 Class I
</TABLE>
106
<PAGE> 730
<TABLE>
<S> <C> <C> <C>
Bank One TTEE Investor Growth & Income 5.14% Record
Brillion Iron Works P/S Fund
C/O Banc One Investment Mgmt Class I
Retirement Services - Daily R K
190 Heatherdown Drive
Westerville OH 43081-2868
Dean Witter For The Benefit Of Investor Balanced Fund 6.23% Record
Rockford Police Relief Assoc Class A
420 West State St
Church St Station - PO Box 250
New York NY 10013-0250
Frontier Trust TTEE Investor Balanced Fund 5.18% Record
A/C Investment C/O Higginbotham Class A
Bartlers Co Of New Mexico
214 N Main Ave
Lovington NM 88260-4017
Dean Witter For The Benefit Of Investor Balanced Fund 8.29% Record
James B White & Class C
Norma J White JTTEN
Church St Station - PO Box 250
New York NY 10013-0250
Dean Witter For The Benefit Of Investor Balanced Fund 8.13% Record
Joseph A Hess Class C
IRA Standard Dated 11/18/97
Church St Station - PO Box 250
New York NY 10013-0250
State Street Bank & Trust Co Investor Balanced Fund 7.19% Record
Cust For The IRA Rollover Of Class C
George L Allison
768 E Indiana Ave
Spencer IN 47460-1538
Strafe & Co Investor Balanced Fund 88.52% Record
C/O Bank One Trust Co Class I
Attn Mutual Funds
100 E Broad Street
Columbus OH 43215-3607
Black Clawson Co Member Pension Plan Investor Balanced Fund 16.31% Beneficial
100 E Broad Street Class I
Columbus, OH 43215-3607
Centennial Liquor Retirement Plan Investor Balanced Fund 6.44% Beneficial
100 E Broad Street Class I
Columbus, OH 43215-3607
Kenosha Carpenters #161 Pens-Mgd Investor Balanced Fund 6.14% Beneficial
100 E Broad Street Class I
Columbus, OH 43215-3607
Affiliated MPP Investor Balanced Fund 5.31% Beneficial
100 E Broad Street Class I
Columbus, OH 43215-3607
</TABLE>
107
<PAGE> 731
<TABLE>
<S> <C> <C> <C>
Dean Witter For The Benefit Of
Paavo Ensio & Investor Conservative 15.52% Record
PO Box 250 Church Street Station Growth Fund
New York NY 10008-0250 Class A
Dean Witter Reynolds Cust For Investor Conservative 8.20% Record
Peter Layefsky Growth Fund
PO Box 250 Church Street Station Class C
New York NY 10008-0250
DWR Cust For Central Blueprint Co Investor Conservative 6.00% Record
FBO Plan Administrator Growth Fund
VIP Plus PFT Sharing DTD 09/26/97 Class C
Church Street Station - PO Box 250
New York NY 10013-0250
Strafe & Co Investor Conservative 85.27% Record
C/O Bank One Trust Co Growth Fund
Attn Mutual Funds Class I
100 E Broad Street
Columbus OH 43215-3607
Kenosha Carpenters #161 Pens-Mgd Investor Conservative 16.49% Beneficial
100 E Broad Street Growth Fund
Columbus, OH 43215-3607 Class I
Banc One Sec Svgs Plan Investor Conservative 15.20% Beneficial
100 E Broad Street Growth Fund
Columbus, OH 43215-3607 Class I
Shelly & Sands MPP Investor Conservative 5.43% Beneficial
100 E Broad Street Growth Fund
Columbus, OH 43215-3607 Class I
Dean Witter For The Benefit Of Treasury & Agency Fund 15.31% Record
Billy J Eisenhour Class A
PO Box 250 Church Street Station
New York NY 10008-0250
Dean Witter For The Benefit Of Treasury & Agency Fund 8.36% Record
Tonto Apache Tribe Class A
30 E Apache Reservation
Church St Station - PO Box 250
New York NY 10013-0250
Dean Witter For The Benefit Of Treasury & Agency Fund 7.66% Record
Maricopa County Municipal Class A
PO Box 250 Church Street Station
New York NY 10008-0250
Dean Witter For The Benefit Of Treasury & Agency Fund 6.38% Record
Lloyd D Eisenhour & Class A
PO Box 250 Church Street Station
New York NY 10008-0250
</TABLE>
108
<PAGE> 732
<TABLE>
<S> <C> <C> <C>
State Street Bank & Trust Co Treasury & Agency Fund 5.88% Record
Cust For The IRA Of Class B
Thomas W Moore
5901 Bay Club Dr
Arlington TX 76013-5213
State Street Bank & Trust Co Treasury & Agency Fund 5.07% Record
Cust For The IRA Of Class B
Betty Moore
5901 Bay Club Dr
Arlington TX 76013-5213
Strafe & Co. Treasury & Agency Fund 99.87% Record
Attn: Mutual Funds 0393 Class I
100 E. Broad Street
Columbus, OH 43215-3607
Strafe & Co. Treasury Only Money Market 66.86% Record
C/O Bank One Trust Co Fund
Attn: Mutual Funds
100 E. Broad Street
Columbus, OH 43215-3607
BISYS Fund Services Inc Treasury Only Money Market 14.47% Record
FBO Bank One Corporate Sweep Fund
Attn Mike Bryan
3435 Stelzer Road Suite 1000
Columbus OH 43219-6004
Enbecee Company Treasury Only Money Market 11.22% Beneficial
PO Box 61837 Fund
New Orleans LA 70161-1837
Strafe & Co. US Government Money Market 82.20% Record
C/O Bank One Trust Co Fund
Attn: Mutual Funds
100 E. Broad Street
Columbus, OH 43215-3607
BWC - John Hancock US Government Money Market 8.57% Beneficial
100 E Broad Street Fund
Columbus, OH 43215-3607
BWC - Miller Anderson US Government Money Market 8.53% Beneficial
100 E Broad Street Fund
Columbus, OH 43215-3607
Bank One Texas NA US Government Money Market 7.27% Beneficial
1717 Main St Fund
Dallas TX 75201-4605
BISYS Fund Services Inc US Government Money Market 6.25% Record
FBO Bank One Corporate Sweep Fund
Attn Mike Bryan
3435 Stelzer Road Suite 1000
Columbus OH 43219-6004
</TABLE>
109
<PAGE> 733
As a group, the Trustee and Officers of the Trust owned less than 1% of the
Shares of each class of the Trust.
110
<PAGE> 734
Registration Statement
of The One Group(R)
on Form N-1A
Item 24. Financial Statements and Exhibits
(a) Financial Statements:
-- Will be incorporated by reference pursuant to a
subsequent filing made pursuant to Rule 485(b)
(b) Exhibits:
(1) Amended and Restated Declaration of Trust as of February 11,
1993 is incorporated by reference to Exhibit (1) to
Post-Effective Amendment No. 39 (filed August 16, 1996) to
Registrant's Registration Statement on Form N-1A.
(2) Code of Regulations as amended and restated as of October 25,
1990 is incorporated by reference to Exhibit (2) to
Post-Effective Amendment No. 39 (filed August 16, 1996) to
Registrant's Registration Statement on Form N-1A.
(3) None.
(4) None.
(5)(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.
(5)(b) Amended and Restated Schedule A to the Investment Advisory
Agreement between Registrant and Banc One Investment Advisors
Corporation dated May 21, 1998 is incorporated by reference to
Exhibit (6)(b) to Registrant's Registration Statement on Form
N-14 (filed on May 29, 1998).
(5)(c) Sub-Investment Advisory Agreement dated October 1, 1996
between Banc One Investment Advisors Corporation and
Independence International Associates, Inc. is incorporated by
reference to Exhibit (5)(c) to Post-Effective Amendment No.
<PAGE> 735
42 (filed June 18, 1997) to the Registrant's Registration
Statement on Form N-1A.
(5)(d) Sub-Investment Advisory Agreement, dated as of August 20, 1998
between Banc One Investment Advisors Corporation and Banc One
High Yield Partners, LLC is filed herewith.
(6)(a) Re-executed Distribution Agreement dated December 13, 1995
between Registrant and The One Group Services Company is
incorporated by reference to Exhibit (7)(c) to Registrant's
Registration Statement on Form N-14 (filed January 19, 1996).
(6)(b) Revised Schedules A-D to the Distribution Agreement between
the Registrant and The One Group Services Company are
incorporated by reference to Exhibit (6)(b) to Post-Effective
Amendment No. 40 (filed August 29, 1996) to the Registrant's
Registration Statement on Form N-1A.
(6)(c) Revised Schedule E to the Distribution Agreement between the
Registrant and The One Group Services Company is incorporated
by reference to Exhibit (6)(d) to Post-Effective Amendment No.
43 (filed August 29, 1997) to Registrant's Registration
Statement on Form N-1A.
(6)(d) Dealer's Agreement for Registrant dated November 11, 1995
between The One Group Services Company and Banc One Securities
Corporation is incorporated by reference to Exhibit (7)(d) to
Registrant's Registration Statement on Form N-14 (filed
January 19, 1996).
(6)(e) Form of Shareholder Servicing Agreement between the Registrant
and Participating Service Organizations is incorporated by
reference to Exhibit (7)(f) to Registrant's Registration
Statement on Form N-14 (filed on May 29, 1998).
(6)(f) Agency Services and Delegation Agreement between INVESCO Trust
Company and Registrant dated January 1, 1998 is incorporated
by reference to Exhibit (10)(j) to Registrant's Registration
Statement on Form N-14 (filed on May 29, 1998).
(7) Deferred Compensation Plan for Trustees of The One Group is
filed herewith.
(8)(a) Custodian Contract dated as of July 29, 1988 between
Registrant and State Street Bank and Trust Company is filed
herewith.
(8)(b) Amendment to Custodian Contract between Registrant and State
Street Bank and Trust Company is filed herewith.
(8)(c) Sub-Custodian Agreement between State Street Bank and Trust
Company, Bank One Trust Company, N.A. and the Registrant is
incorporated by reference to
<PAGE> 736
Exhibit (8)(b) to Post-Effective Amendment No. 37 (filed June
13, 1996) to the Registrant's Registration Statement on Form
N-1A.
(8)(d) First Amendment to the Subcustodian Agreement dated as of
December, 1996 between State Street Bank and Trust Company,
Bank One Trust Company, N.A. and the Registrant is filed
herewith.
(8)(e) International Securities Lending Subcustodian and Services
Agreement, dated December 29, 1997 between State Street Bank
and Trust Company, Bank One Trust Company, N.A. and the
Registrant is incorporated by reference to Exhibit (8)(c) to
Post-Effective Amendment No. 44 (filed June 5, 1998) to the
Registrant's Registration Statement on Form N-1A.
(9)(a) Re-executed Management and Administration Agreement dated
November 20, 1997 is incorporated by reference to Exhibit
(13)(b) to Registrant's Registration Statement on Form N-14
(filed on May 29, 1998).
(9)(b) Revised Schedule A to the Management and Administration
Agreement between the Registrant and The One Group Services
Company is incorporated by reference to Exhibit (9)(b) to
Post-Effective Amendment No. 43 (filed August 29, 1997) to
Registrant's Registration Statement on Form N-1A
(9)(c) Transfer Agency and Service Agreement dated as of July 29,
1988 between the Registrant and State Street Bank and Trust
Company is filed herewith
(9)(d) Amendment to the Transfer Agency and Service Agreement dated
as of February 6, 1992 between the Registrant and State
Street Bank and Trust Company.
(9)(e) Fund Accounting Agreement dated December 1, 1995 between the
Registrant and The One Group Services Company is incorporated
by reference to Exhibit (13)(c) to Registrant's Registration
Statement on Form N-14 (filed January 19, 1996).
(9)(f) Revised Schedule A to the Fund Accounting Agreement between
the Registrant and The One Group Services Company is
incorporated by reference to Exhibit (9)(e) to Post-Effective
Amendment No. 40 (filed August 29, 1996) to the Registrant's
Registration Statement on Form N-1A.
(9)(g) Sub-Administration Agreement dated December 1, 1995 between
The One Group Services Company and Banc One Investment
Advisors Corporation is incorporated by reference to Exhibit
(13)(d) to the Registrant's Registration Statement on Form
N-14 (filed January 19, 1996).
(9)(h) Revised Schedule A to the Sub-Administration Agreement between
The One Group Services Company and Banc One Investment
Advisors is incorporated by reference to Exhibit (9)(g) to
Post-Effective Amendment No. 40 (filed August 29, 1996) to the
Registrant's Registration Statement on Form N-1A.
(9)(i) Agency Services and Delegation Agreement dated January 1, 1996
between the
<PAGE> 737
Registrant and BISYS Qualified Plan Services is incorporated
by reference to Exhibit (9)(g) to Post-Effective Amendment No.
37 (filed June 13, 1996) to the Registrant's Registration
Statement on Form N-1A.
(9)(j) Form of Agency Services and Delegation Agreement between the
Registrant and Bank One Trust Company, NA is incorporated by
reference to Exhibit (9)(i) to Post-Effective Amendment No. 43
(filed August 29, 1997) to Registrant's Registration
Statement on Form N-1A.
(9)(k) Form of Order Processing Agreement between the Registrant and
Bank One Trust Company, NA is incorporated by reference to
Exhibit (9)(j) to Post-Effective Amendment No. 43 (filed
August 29, 1997) to Registrant's Registration Statement on
Form N-1A.
(9)(l) Shareholder Servicing Agreement is incorporated by reference
to Exhibit 9(h) to Post-Effective Amendment No. 37 (filed June
13, 1996) to the Registrant's Registration Statement on Form
N-1A.
(9)(m) Services Agreement dated as of June 6, 1997 between the
Registrant and Charles Schwab & Company, is incorporated by
reference to Exhibit (9)(l) to Post-Effective Amendment No. 44
(filed June 5, 1998) to Registrant's Registration
Statement on Form N-1A.
(9)(n) Operating Agreement dated as of June 6, 1997 between the
Registrant and Charles Schwab & Company, is incorporated by
reference to Exhibit (9)(m) to Post-Effective Amendment No. 44
(filed June 5, 1998) to Registrant's Registration
Statement on Form N-1A.
(9)(o) Retirement Services Order Processing Agreement dated as of
June 6, 1997 between the Registrant and Charles Schwab &
Company, is incorporated by reference to Exhibit (9)(n) to
Post-Effective Amendment No. 44 (filed June 5, 1998) to
Registrant's Registration Statement on Form N-1A.
(9)(p) Securities Lending Agreement for Non-ERISA Accounts dated as
of August 1995 between the Registrant, Banc One Investment
Advisors Corporation, and Bank One Trust Company NA. is filed
herewith.
(9)(q) Amendment to Securities Lending Agreement for Non-ERISA
Accounts dated as of January 21, 1997 between the Registrant,
Banc One Investment Advisors Corporation, and Bank One Trust
Company, N.A. is filed herewith.
(9)(r) Second Amendment to the Securities Lending Agreement (Domestic
Securities), effective May 21, 1998, between the Registrant,
Banc One Investment Advisors Corporation, and Bank One Trust
Company, N.A. is filed herewith.
(9)(s) Securities Lending Agreement for Non-ERISA Accounts dated as
of January 8,
<PAGE> 738
1998 between the Registrant, Banc One Investment Advisors
Corporation, and Bank One Trust Company, N.A. is filed
herewith.
(9)(t) Amendment to the Securities Lending Agreement (Foreign
Securities) effective May 21, 1998 is filed herewith.
(10) Opinion and consent of counsel is filed herewith.
(11) Consent of Ropes & Gray is filed herewith.
(12) None
(13) Purchase Agreement dated July 18, 1985, between Registrant and
Physicians Insurance Company of Ohio is filed herewith.
(14) None
(15)(a) Re-Executed Distribution and Shareholder Services Plan - Class
A and Service Class shares dated November 1, 1995, as amended
August 20, 1997, between the Registrant and The One Group
Services Company is incorporated by reference to Exhibit
(15)(a) to Post-Effective Amendment No. 43 (filed August 29,
1997) to Registrant's Registration Statement on Form N-1A.
(15)(b) Distribution and Shareholder Services Plan - Class B and Class
C Shares dated January 1, 1994, as amended August 20, 1997,
between the Registrant and The One Group Services Company is
incorporated by reference to Exhibit (15)(b) to Post-Effective
Amendment No. 43 (filed August 29, 1997) to Registrant's
Registration Statement on Form N-1A.
(16) Schedules for Computation of Performance Calculations are
incorporated by reference to Exhibit (16) to Post-Effective
Amendment No. 43 (filed August 29, 1997) to the Registrant's
Registration Statement on Form N-1A.
(17) Will be filed pursuant to a subsequent filing made pursuant to
Rule 485(b)
(18)(a) Multiple Class Plan for the Registrant adopted by the Board of
Trustees on May 22, 1995, as amended May 21, 1998 is
incorporated by reference to Exhibit (10)(k) to Registrant's
Registration Statement on Form N-14 (filed on May 29, 1998).
Item 25. Persons Controlled by or under Common Control with Registrant
As of the effective date of this Registration Statement there are no persons
controlled or under common control with the Registrant.
<PAGE> 739
Item 26. Number of Holders of Securities
No longer required by new Form N-1A.
Item 27. Indemnification
Article IX, Section 9.2 of the Registrant's Declaration of
Trust, incorporated as Exhibit (1) hereto, provides for the
indemnification of Registrant's trustees and officers.
Indemnification of the Registrant's principal underwriter,
custodians, investment advisers, administrator, and transfer
agents is provided for in the Registrant's respective
Agreements with those service providers as filed or
incorporated by reference as Exhibits hereto. As of the
effective date of this Registration Statement, the Registrant
has obtained from a major insurance carrier a trustees and
officers' liability policy covering certain types of errors
and omissions. In no event will Registrant indemnify any of
its trustees, officers, employees, or agents against any
liability to which such person would otherwise be subject by
reason of his willful misfeasance, bad faith, or gross
negligence in the performance of his duties, or by reason of
his reckless disregard of the duties involved in the conduct
of his office or under his agreement with Registrant.
Registrant will comply with Rule 484 under the Securities Act
of 1933 and Release 11330 under the Investment Company Act of
1940 in connection with any indemnification.
Insofar as indemnification for liability arising under the
Securities Act of 1933 may be permitted to trustees, officers,
and controlling persons of Registrant pursuant to the
foregoing provisions, or otherwise, Registrant has been
advised that in the opinion of the Securities and Exchange
Commission such indemnification is against public policy as
expressed in the Act and is, therefore, unenforceable. In the
event that a claim for indemnification against such
liabilities (other than the payment by Registrant of expenses
incurred or paid by a trustee, officer or controlling person
of Registrant in the successful defense of any action, suit or
proceeding) is asserted by such trustee, officer, or
controlling person in connection with the securities being
registered, Registrant will, unless in the opinion of its
counsel the matter has been settled by controlling precedent,
submit to a court of appropriate jurisdiction the question of
whether such indemnification by it is against public policy as
expressed in the Act and will be governed by the final
adjudication of such issue.
Item 28. Business and Other Connections of Investment Advisers
Banc One Investment Advisors Corporation ("Banc One Investment
Advisors") performs investment advisory services for all of
the Funds of the Group. Independence International Associates,
Inc. performs investment sub-advisory services for the
International Equity Index Fund. Banc One High Yield Partners,
LLC provides investment advisory services for the High Yield
<PAGE> 740
Bond Fund.
Banc One Investment Advisors is an indirect wholly-owned
subsidiary of BANC ONE CORPORATION, a bank holding company
incorporated in the state of Ohio. BANC ONE CORPORATION now
operates affiliate banking organizations in Arizona, Colorado,
Illinois, Indiana, Kentucky, Louisiana, 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.
To the knowledge of Registrant, none of the directors or
officers of Banc One Investment Advisors, Independence
International Associates, Inc. or Banc One High Yield
Partners, LLC, except as set forth or incorporated herein, is
or has been, at any time during the past two calendar years,
engaged in any other business, profession, vocation or
employment of a substantial nature. Set forth below are the
names and principal businesses of the directors of Banc One
Investment Advisors who are engaged in any other business,
profession, vocation or employment of a substantial nature.
Banc One Investment Advisors
----------------------------
Position with
Banc One Investment Other Substantial Type of
Advisors Occupation Business
- ------------------- ----------------- --------
David J. Kundert, Chairman Chairman, Bank Investment
and CEO One Trust
Company, NA, 100
East Broad Street,
Columbus, Ohio
43215
<PAGE> 741
Frederick L. Cullen, Director Chairman/CEO Banking
Bank One, NA, 100
East Broad Street,
Columbus, Ohio
43215; Chairman
and Chief Operating
Officer, Banc One
Ohio Corporation,
100 East Broad Street,
Columbus, Ohio
43215
Garrett Jamison, Director President & Chief Banking
Executive Officer,
Bank One Trust
Company, NA, 100
East Broad Street,
Road, Columbus, Ohio
43215
Geoffrey von Kuhn, Director Vice Chairman, Banking
Banc One Capital
Corporation, 150
East Gay Street,
Columbus, Ohio
43215
<PAGE> 742
David R. Meuse, Director Chairman/CEO Investment
Banc One Capital
Holding Corporation,
150 East Gay Street,
Columbus, Ohio
43215
Michael J. McMennamin, Banking
Director Executive VP &
Chief Financial
Officer, BANC
ONE CORPORATION,
100 East Broad
Street, Columbus,
Ohio 43215
The principal business address of the principal executive officer and directors
of Banc One Advisors is 1111 Polaris Parkway, P.O. Box 710211, Columbus, Ohio
43271-0211.
Independence International Associates, Inc.
-------------------------------------------
Independence International Associates, Inc. ("IIA") is the
Sub-Investment Advisor to the International Equity Index Fund. IIA, a
corporation organized under the laws of Massachusetts, provides investment
advice to institutional and investment company clients. Information regarding
the firm's ownership and other business connections of the officers and
directors is listed on the Form ADV filed by IIA with the SEC pursuant to the
Investment Advisers Act of 1940 (SEC File No.801-28785), the text of which is
hereby incorporated by reference.
Banc One High Yield Partners, LLC
---------------------------------
Banc One High Yield Partners, LLC is the Sub-Investment Advisor to the
High Yield Bond Fund ("Banc One Partners"). Banc One Partners, a limited
liability company organized under the laws of Ohio, provides investment advice
to the High Yield Bond Fund. Set forth below are the names and principal
businesses of the managers and investment officers of Banc One Partners who are
engaged in any other business, profession, vocation or employment of a
substantial nature.
<PAGE> 743
Position with Other Substantial Type of
Banc One Partners Occupation Business
- ----------------- ----------------- --------
James P. Shanahan, Manager Pacholder Investment
Associates, Inc.,
Managing Director
& General Counsel,
8044 Montgomery
Road, Suite #382,
Cincinnati, Ohio
45236
William J. Morgan, Manager Pacholder Investment
Associates, Inc.,
President, 8044
Montgomery Road,
Suite #382,
Cincinnati, Ohio
45236
Mark A. Beeson, Manager Banc One Investment
Investment
Advisors, Senior
Managing Director,
1111 Polaris
Parkway, Columbus,
Ohio 43271
Gary Madich, Manager Banc One Investment
Investment
Advisors, Senior
Managing Director,
1111 Polaris
Parkway, Columbus,
Ohio 43271
<PAGE> 744
Ryan L. Langdon, Vice Pacholder Investment
President -- Senior Analyst Associates, Inc.,
Vice President, 8044
Montgomery Road,
Suite #382,
Cincinnati, Ohio
45236
Anthony L. Longi, Jr., Vice Pacholder Investment
President -- Portfolio Manager Associates, Inc.,
Executive Vice
President, 8044
Montgomery Road,
Suite #382,
Cincinnati, Ohio
45236
Item 29. Principal Underwriters
(a) The One Group Services Company acts as administrator and
distributor for each of the Fund's Portfolios.
(b) The directors and officers of The One Group Services Company
are set forth below. The business address of each director or
officer is 3435 Stelzer Road, Columbus, Ohio 43219.
Name Positions and Offices Positions and
- ---- with The One Group with Registrant
Services Company ---------------
----------------
Lynn J. Mangum Chairman and Chief None
Executive Officer
Robert J. McMullen Executive Vice President None
and Director
Dennis Sheehan Senior Vice President None
Kevin J. Dell Vice President/Secretary/ None
General Counsel
Michael D. Burns Vice President/Compliance None
Officer
Annamaria Porcaro Assistant Secretary None
Robert Tuch Assistant Secretary None
<PAGE> 745
Stephen G. Mintos Executive Vice President/ None
Chief Operating Officer
Charles L. Booth Senior Vice President Secretary
Dale Smith Vice President/ None
Chief Financial Officer
John Gilliam Vice President None
Mark S. Redman President President
Mark J. Ryberczyk Senior Vice President None
(c) Not applicable.
Item 30. Location of Accounts and Records
(1) Banc One Investment Advisors Corporation, 1111
Polaris Parkway, P.O. Box 710211, Columbus, Ohio
43271-0211 (records relating to its functions as
Investment Adviser and Sub-Administrator).
(2) Independence International Associates, Inc., 75 State
Street, Boston, MA 02109 (records relating to its
functions as Sub-Investment Adviser to the
International Equity Index Fund).
(3) Banc One High Yield Partners, LLC, 1111 Polaris
Parkway, P.O. Box 710211, Columbus, Ohio 43271-0211
and 8044 Montgomery Road, Suite #382, Cincinnati,
Ohio 45236 (records relating to its functions as
Sub-Investment Advisor to the High Yield Bond Fund).
(4) The One Group Services Company, 3435 Stelzer Road,
Columbus, OH 43219 (records relating to its functions
as Distributor for all funds).
(5) The One Group Services Company, 3435 Stelzer Road,
Columbus, OH 43219 (records relating to its functions
as Administrator for all funds).
(6) State Street Bank and Trust Company, 470 Atlantic
Avenue, Fifth Floor, Boston, MA 02205-9087 (records
relating to its functions as custodian and transfer
agent to all funds).
(7) Ropes & Gray, One Franklin Square, 1301 K Street,
N.W., Suite 800 East, Washington, D.C. 20005
(Declaration of Trust, Code of Regulations, and
Minute Books).
Item 31. Management Services
N/A
<PAGE> 746
Item 32. Undertakings
The Registrant undertakes to call a meeting of Shareholders,
at the request of at least 10% of the Registrant's outstanding
shares, for the purpose of voting upon the question of removal
of a trustee or trustees and to assist in communications with
other shareholders as required by Section 16(c) of the
Investment Company Act of 1940.
The Registrant undertakes to furnish to each person to whom a
prospectus for a particular fund is delivered a copy of the
Registrant's latest annual report to shareholders relating to
that fund upon request and without charge.
<PAGE> 747
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933 and the Investment
Company Act of 1940, the Registrant has duly caused this Post-Effective
Amendment No. 45 to the Registration Statement to be signed on its behalf by the
undersigned, thereto duly authorized, in the City of Washington, D.C. on the
26th of August, 1998
The One Group(R)
(Registrant)
By: /s/ MARK S. REDMAN
-----------------------
*Mark S. Redman
Pursuant to the requirements of the Securities Act of 1933, this Amendment to
the Registration Statement has been signed below by the following persons in the
capacities and on the date indicated.
Signature Title Date
- --------- ----- ----
/s/ MARK S. REDMAN President August 26, 1998
- -------------------------
* Mark S. Redman
/s/ WILLIAM J. TOMKO Treasurer August 26, 1998
- -------------------------
* William J. Tomko
/s/ PETER C. MARSHALL Trustee August 26, 1998
- -------------------------
*Peter C. Marshall
/s/ CHARLES I. POST Trustee August 26, 1998
- -------------------------
*Charles I. Post
/s/ JOHN S. RANDALL Trustee August 26, 1998
- -------------------------
*John S. Randall
/s/ FREDERICK W. RUEBECK Trustee August 26, 1998
- -------------------------
*Frederick W. Ruebeck
/s/ ROBERT A ODEN Trustee August 26, 1998
- -------------------------
*Robert A Oden
/s/ JOHN F. FINN Trustee August 26, 1998
- -------------------------
*John F. Finn
By: /s/ ALAN G. PRIEST
----------------------
Alan G. Priest
Attorney-in-Fact
<PAGE> 748
EXHIBIT INDEX
Exhibit No. Description
- ----------- -----------
(5)(d) Sub-Investment Advisory Agreement, dated as of August
20, 1998 between Banc One Investment Advisors
Corporation and Banc One High Yield Partners, LLC.
(7) Deferred Compensation Plan for Trustees of The One
Group.
(8)(a) Custodian Contract dated as of July 29, 1988 between
Registrant and State Street Bank and Trust Company.
(8)(b) Amendment to Custodian Contract between Registrant
and State Street Bank and Trust Company.
(8)(d) First Amendment to the Subcustodian Agreement dated
as of December, 1996 between State Street Bank and
Trust Company, Bank One Trust Company, N.A. and the
Registrant.
(9)(c) Transfer Agency and Service Agreement dated as of
July 29, 1988 between the Registrant and State Street
Bank and Trust Company.
(9)(d) Amendment to the Transfer Agency and Service
Agreement dated as of February 6, 1992 between the
Registrant and State Street Bank and Trust Company.
(9)(p) Securities Lending Agreement for Non-ERISA Accounts
dated as of August 1995, between the Registrant, Banc
One Investment Advisors Corporation and Bank One
Trust Company, N.A.
(9)(q) Amendment to Securities Lending Agreement for
Non-ERISA Accounts dated as of August 21, 1995
between the Registrant, Banc One Investment Advisors
Corporation and Bank One Trust Company, N.A.
(9)(r) Second Amendment to the Securities Lending Agreement
(Domestic Securities), effective May 21, 1998,
between the Registrant, Banc One Investment Advisors
Corporation, and Bank One Trust Company, N.A.
(9)(s) Securities Lending Agreement for Non-ERISA Accounts
dated as of January 8, 1998 between the Registrant,
Banc One Investment Advisors Corporation, and Bank
One Trust Company, N.A.
(9)(t) Amendment to the Securities Lending Agreement
(Foreign Securities) effective May 21, 1998 between
the Registrant, Banc One Investment Advisors
Corporation, and Bank One Trust Company, N.A.
(10) Opinion and consent of Counsel.
(11) Consent of Consent of Ropes & Gray.
(13) Purchase Agreement dated July 18, 1985 between
Registrant and Physicians Insurance Company of Ohio.
<PAGE> 1
EXHIBIT (5)(d)
SUB-INVESTMENT ADVISORY AGREEMENT, DATED AS OF AUGUST 20, 1998,
BETWEEN BANC ONE INVESTMENT
ADVISORS CORPORATION AND BANC ONE HIGH YIELD PARTNERS, LLC
<PAGE> 2
SUB-INVESTMENT ADVISORY AGREEMENT
AGREEMENT made as of August 20, 1998 by and between BANC ONE INVESTMENT
ADVISORS CORPORATION, an Ohio corporation with its principal office in Columbus,
Ohio (hereinafter called the "Investment Adviser") and BANC ONE HIGH YIELD
PARTNERS, LLC, an investment adviser with its principal office in Columbus, Ohio
(hereinafter called the "Sub-Adviser").
WHEREAS, the Investment Adviser serves as the Investment Adviser to The
One Group High Yield Fund (the "Fund") of The One Group (the "Trust"), a
Massachusetts business trust and an open-end diversified management investment
company registered under the Investment Company Act of 1940, as amended (the
"1940 Act");
WHEREAS, the Investment Adviser desires to retain the Sub-Adviser to
provide investment sub-advisory services to the Trust with regard to the Fund
and the Sub-Adviser is willing and believes it possesses legal authority to make
available such services;
NOW, THEREFORE, in consideration of the premises and mutual covenants
herein contained, the parties hereto agree as follows:
1. Retention. The Investment Adviser hereby retains the Sub-Adviser to
provide certain sub-investment advisory services herein set forth to it with
regard to the Fund for the period and on the terms set forth in this Agreement.
The Sub-Adviser accepts such retention and agrees to furnish the services herein
set forth for the compensation herein provided.
2. Delivery of Documents. The Investment Adviser has furnished the
Sub-Adviser with copies properly certified or authenticated of each of the
following documents:
(a) the Trust's Amended and Restated Declaration of Trust, as
filed with the Secretary of State of the Commonwealth of Massachusetts
on February 19, 1993, and all amendments thereto or restatements
thereof (such Declaration, as presently in effect and as it shall from
time to time be amended or restated, is herein called the "Declaration
of Trust");
(b) the Trust's Code of Regulations and amendments thereto;
(c) resolutions of the Trust's Board of Trustees authorizing the
appointment of the Sub-Adviser and approving this Agreement;
(d) the Trust's original Notification of Registration on Form
N-8A under the 1940 Act as filed with the Securities and Exchange
Commission on February 20, 1985 and all amendments thereto;
(e) the Trust's current Registration Statement on Form N-lA
under the Securities Act of 1933, as amended ("1933 Act"), and under
the 1940 Act as filed with the Securities and Exchange Commission and
all amendments thereto; and
<PAGE> 3
(f) the Trust's most recent prospectus and Statement of
Additional Information relating to the Fund (such prospectus and
Statement of Additional Information, as presently in effect, and all
amendments and supplements thereto are herein collectively called the
"Prospectus").
The Investment Adviser will promptly furnish the Sub-Adviser with
copies of all amendments of or supplements to the foregoing documents.
3. Management. Subject always to the instructions and supervision of
the Investment Adviser and the Trust's Board of Trustees, the Sub-Adviser will
provide a continuous investment program for the Fund, including investment
research and management with respect to all securities and investments and cash
equivalents in the Fund. The Sub-Adviser will determine from time to time what
securities and other investments will be purchased, retained or sold by the
Trust with respect to the Fund and will place all purchase and sale orders on
behalf of the Trust with respect to the Fund. The Sub-Adviser will provide the
services under this Agreement in accordance with the Fund's investment
objective, policies and restrictions as stated in the Prospectus and resolutions
of the Trust's Board of Trustees. The Sub-Adviser further agrees that it:
(a) will use the same skill and care in providing such services
as it uses in providing services to fiduciary accounts for which it has
investment responsibilities;
(b) will comply in all material respects with all applicable
Rules and Regulations of the Securities and Exchange Commission and in
addition will conduct its activities under this Agreement in accordance
with any applicable regulations pertaining to the investment advisory
activities of the Sub-Adviser;
(c) will not make loans to any person to purchase or carry units
of beneficial interest ("Shares") in the Fund or make loans to the
Trust;
(d) will place orders pursuant to its investment determinations
for the Fund either directly with the issuer or with any broker or
dealer. In placing orders with brokers and dealers, the Sub-Adviser
will attempt to obtain prompt execution of orders in an effective
manner at the most favorable price. Consistent with this obligation,
when the execution and price offered by two or more brokers or dealers
are comparable, the Sub-Adviser may, in its discretion, purchase and
sell portfolio securities to and from brokers and dealers who provide
the Sub-Adviser with research advice and other services. In no instance
will portfolio securities be purchased from or sold to The One Group
Services Company, the Investment Adviser, the Sub-Adviser or any
affiliated person of either the Trust, The One Group Services Company,
the Investment Adviser, or the Sub-Adviser, except to the extent
permitted by the 1940 Act;
(e) will treat confidentially and as proprietary information of
the Trust 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 in the 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. The foregoing shall not apply to any information
that is publicly available when provided or thereafter becomes publicly
available other than
<PAGE> 4
through a breach of this Agreement, or that is required or requested to
be disclosed by the Securities and Exchange Commission or any other
regulatory examiner of the Sub-Adviser, any auditor of the parties
hereto, by judicial or administrative process or otherwise by
applicable law or regulation. Nothing herein shall restrict the
Sub-Adviser's ability to publish information regarding the performance
of accounts under its management; and
(f) will maintain its policy and practice of conducting its
fiduciary functions independently. In making investment recommendations
for the Fund, the Sub-Adviser's personnel will not inquire or take into
consideration whether the issuers of securities proposed for purchase
or sale for the Fund's account are customers of the Investment Adviser,
the Sub-Adviser or the parents or subsidiaries or affiliates of the
Investment Adviser or Sub-Adviser. In dealing with such customers, the
Sub-Adviser and its parent, subsidiaries, and affiliates will not
inquire or take into consideration whether securities of those
customers are held by the Trust.
4. Services Not Exclusive. The investment advisory services furnished
by the Sub-Adviser hereunder are not to be deemed exclusive. Except to the
extent necessary to perform the Sub-Adviser's obligations under this Agreement,
nothing herein shall be deemed to limit or restrict the right of the
Sub-Adviser, or any subsidiary or affiliate of the Sub-Adviser, or any employee
of the Sub-Adviser, to engage in any other business, whether of a similar or
dissimilar nature, or to render services of any kind to any other person.
5. Books and Records. In compliance with the requirements of Rule 3la-3
under the 1940 Act, the Sub-Adviser 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.
The Sub-Adviser further agrees to preserve for the periods prescribed by Rule
3la-2 under the 1940 Act all records which it maintains for the Fund that are
required to be maintained by Rule 3la-1 under the 1940 Act.
6. Expenses. During the term of this Agreement, the Sub-Adviser will
pay all expenses incurred by it in connection with its activities under this
Agreement other than the cost of securities (including brokerage commissions, if
any) purchased for the Trust. The Trust and the Investment Adviser will be
responsible for all of their respective expenses and liabilities.
7. Compensation. For the services provided and the expenses assumed
pursuant to this Agreement, the Investment Adviser will pay the Sub-Adviser and
the Sub-Adviser will accept as full compensation therefor a fee computed daily
and paid monthly in arrears on the first business day of each month at an annual
rate of seventy one-hundredths of one percent (0.70%) of the Fund's average
daily net assets.
If the fee payable to the Sub-Adviser pursuant to this Section 7 begins
to accrue before the end of any month or if this Agreement terminates before the
end of any month, the fee for the period from such date to the end of such month
or from the beginning of such month to the date of termination, as the case may
be, shall be prorated according to the proportion which such period bears to the
full month in which such effectiveness or termination occurs. For purposes of
calculating fees, the value of the Trust's net assets shall be computed in the
manner specified in the Prospectus and the Trust's Declaration of Trust
<PAGE> 5
for the computation of the value of the Trust's net assets in connection with
the determination of the net asset value of the Trust's shares. Payment of said
compensation shall be the sole responsibility of the Investment Adviser and
shall in no way be an obligation of the Fund or of the Trust.
8. Limitation of Liability. The Sub-Adviser shall not be liable for any
error of judgment or mistake of law or fact or for any loss suffered by the
Trust or the Investment Adviser in connection with the performance of this
Agreement, 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 Sub-Adviser in the
performance of its duties or from reckless disregard by it of its obligations
and duties under this Agreement.
9. Duration and Termination. This Agreement will become effective as of
the date first written above, provided that it shall have been approved by vote
of a majority of the outstanding voting securities of the Fund, in accordance
with the requirements under the 1940 Act, and, unless sooner terminated as
provided herein, shall continue in effect until November 30, 1999.
Thereafter, if not terminated, this Agreement shall continue in effect
for successive periods of twelve months each ending on November 30 of each year,
provided such continuance is specifically approved at least annually (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 the Trust, the Sub-Adviser,
or the Investment Adviser, cast in person at a meeting called for the purpose of
voting on such approval, and (b) 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
the Fund. Notwithstanding the foregoing, this Agreement may be terminated at any
time on sixty days' written notice, without the payment of any penalty, by the
Trust (by vote of the Trust's Board of Trustees or by vote of a majority of the
outstanding voting securities of the Fund), by the Investment Adviser or by the
Sub-Adviser. This Agreement will immediately terminate in the event of its
assignment and upon termination of the Investment Advisory Agreement between the
Trust and the Investment Advisor. (As used in this Agreement, the terms
"majority of the outstanding voting securities," "interested persons" and
"assignment" shall have the same meaning of such terms in the 1940 Act.)
10. Amendment of this Agreement. No provision 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.
11. 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.
If any provision of this Agreement shall be held or made invalid by a
court decision, statute, rule or otherwise, the remainder of this Agreement
shall not be affected thereby.
This Agreement shall be binding upon and shall inure to the benefit of
the parties hereto and their respective successors and shall be governed by the
laws of the Commonwealth of Massachusetts.
<PAGE> 6
The names "The One Group" and "Trustees of The One Group" refer
respectively to the Trust created and the Trustees, as trustees but not
individually or personally, acting from time to time under an Amended and
Restated Declaration of Trust dated as of February 11, 1993 to which reference
is hereby made and a copy of which is on file at the office of the Secretary of
State 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 the Trust personally, but bind only the assets of the Trust,
and all persons dealing with any series of Shares of the Trust must look solely
to the assets of the Trust belonging to such series for the enforcement of any
claims against the Trust.
[THE REMAINDER OF THIS PAGE INTENTIONALLY LEFT BLANK.]
<PAGE> 7
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 above
written.
BANC ONE INVESTMENT ADVISORS CORPORATION
By: /s/ MARK A. BEESON
---------------------------------------
Title: Senior Managing Director
------------------------------------
BANC ONE HIGH YIELD PARTNERS, LLC
By: /s/ ANTHONY L. LONGI, JR.
---------------------------------------
Title: Vice President -- Portfolio Manager
------------------------------------
The One Group hereby acknowledges
and agrees to the provisions of
paragraph 3(e) of this Agreement.
THE ONE GROUP
By: /s/ MARK S. REDMAN
------------------------------
Title: President
---------------------------
<PAGE> 1
EXHIBIT (7)
DEFERRED COMPENSATION PLAN FOR TRUSTEES OF
THE ONE GROUP
<PAGE> 2
DEFERRED COMPENSATION PLAN FOR
TRUSTEES OF THE ONE GROUP
This Deferred Compensation Plan for Trustees ("Plan") is designed to
permit members of the Board of Trustees of The One Group (the "Trust") to elect
to defer the receipt of all or a portion of the compensation earned by them as
such trustees in lieu of receiving payment of such compensation currently, and
to give the Trustees a pecuniary interest in the investment performance of the
Trust.
1. Eligibility. Any member of the Board of Trustees (the "Board") of the Trust
(each a "Trustee") shall be Eligible to participate in the Plan, if he or she so
elects.
2. Amount of Deferral. A Trustee participating in the Plan (a "Participating
Trustee") may defer receipt of all or a specified portion of the compensation
(including fees for attending meetings) earned by such trustee for serving as a
member of the Board, or as a member of any committee of the Board of which such
trustee from time to time may be a member. Reimbursement of expenses associated
with attending meetings of the Board or committees of the Board may not be
deferred.
3. Deferred Compensation Account. A book entry deferred compensation account
(the "Account") shall be established in the name of each Participating Trustee.
Under the Plan, any compensation earned by a Participating Trustee will be
credited to his or her Account on the first business day after the date such
compensation otherwise would have been payable to such Participating Trustee.
4. Deferred Compensation Account Investment.
(a) Participating Trustees may specify Class i shares of one or more of
the funds of The One Group ("Eligible Funds") that will be used to measure the
investment performance of the Participating Trustee's Account. A Participating
Trustee may change his or her Eligible Fund selection no more frequently then
quarterly, to be effective on the first day of the following quarter.
(b) The value of the Account will equal the amount such Account would
have had if the amount credited to it had been invested and reinvested in shares
of the designated Eligible Funds. The initial value of the amount credited to
the Account will be effected at the Eligible Fund's current net asset value as
set forth in The One Group's Declaration of Trust and currently effective
Registration Statement The Account will be credited or charged with book
adjustments representing all interest, dividends and other earnings and all
gains and losses that would have been realized had the amounts credited to the
Account actually been invested in the Eligible Funds.
(i) In the event that an Eligible Fund combines, reclassifies
or substitutes other securities by merger, consolidation or otherwise
for its outstanding shares, the number of shares credited to the
Participating Trustee's Account shall be adjusted to preserve rights
substantially proportionate to the rights held immediately prior to
such event.
(ii) On each payable date of a dividend or capital gains
distribution declared by the Board, the Account will be credited with
amounts representing the number of full and fractional shares of the
Eligible Fund that the shares credited to the Account would have
purchased if reinvested at the net asset value on the record date
established by the Board with respect to such dividend and/or capital
<PAGE> 3
gains distribution.
(c) The Plan does not obligate the Trust to purchase, hold or dispose
of any investments, and if the Trust should choose to purchase investments,
including the shares of Eligible Funds, in order to match its obligations
exactly, all such investments will continue to be part of the general assets and
property of the Trust. If the Trust purchases shares of the Eligible Funds, the
shares will be held solely in the name of the Trust. The Trust will not purchase
shares of Eligible Funds if the purchase of such shares would result in a
violation of Section 12(d)(1) of the Investment Company Act of 1940. If the
Trust purchases shares of Eligible Funds, it will vote such shares in proportion
to the votes of all other shareholders of such Eligible Fund.
5. Manner of Electing Deferral.
(a) A Participating Trustee shall elect to participate in the Plan and
defer his or her compensation by completing, signing and filing with the Trust a
Notice of Election to Defer Compensation (the "Notice of Election"), a form of
which is attached to this Plan. The Notice of Election shall include:
(i) the amount of compensation to be deferred;
(ii) the name of the Eligible Fund or Funds against which
the performance of the Account is to be measured;
(iii) the manner of payment of such deferred compensation
(i.e., in a lump sum or the number of annual
installments);
(iv) the time or times of payment of such deferred
compensation; and
(v) any beneficiary designated pursuant to Section 8(c)
of the Plan.
(b) The Participating Trustee's deferred fees will be distributed
commencing on a date specified by the Participating Trustee on the Notice of
Election, which shall be no sooner than:
(i) the first business day of January of the year
following the year in which the Participating Trustee
ceases to be a trustee, and
(ii) a date one year after the deferral election.
Notwithstanding the foregoing, deferred compensation under the Plan shall be
distributed:
(i) in the event of the Participating Trustee's death, as
provided in Section 8(c) of this Plan, or
(ii) upon the occurrence of any of the following events:
1. the dissolution, liquidation , or winding up
of the Trust, whether voluntary or
involuntary;
2. the voluntary sale, conveyance or transfer
of all or substantially all of the
<PAGE> 4
Trust's assets (unless the obligations of
the Trust have been assumed by another
investment company);
3. the merger of the Trust into another
investment company or its consolidation with
one or more other investment companies
(unless the obligations of the Trust are
assumed by such surviving entity and the
surviving entity is another investment
company); or
4. the date on which an unforeseeable event
causing material financial hardship occurs
which is not within the Participating
Trustee's control, subject to approval by
the Plan's Administrator.
6. Effective Date of Deferral Elections.
(a) Any election by a trustee, or nominee for election as a trustee, to
defer compensation pursuant to the Plan shall be irrevocable from and after the
date on which such trustee's Notice of Election is filed with the Trust (except
as provided in Section 7(b) of the Plan), and shall be effective to defer such
person's compensation as a trustee as follows:
(i) as to any trustee in office on the effective date of
the Plan who files a Notice of Election no later than
60 days after such effective date, the Notice shall
be effective to defer any compensation which is
earned by such trustee after the date of the filing
of the Notice of Election;
(ii) as to any nominee for the office of trustee who has
not previously served as a trustee and who files a
Notice of Election prior to his election as a
trustee, such election to defer shall be effective to
defer any compensation which is earned by such
nominee after his election as a trustee; and
(iii) as to any other trustee, the election to defer shall
be effective to defer any compensation that is earned
from and after January 1 of the calendar year next
succeeding the year in which the Notice of Election
is filed.
(b) Any election to defer compensation made by a trustee shall continue
in effect until the Trust is notified in writing by such trustee prior to the
end of any calendar year that he or she wishes to terminate or modify such
election with respect to (and only with respect to) compensation earned after
the calendar year in which such amended Notice of Election is filed with the
Trust. Upon receipt by the Trust of such an amended Notice of Election, any
compensation earned by such trustee from and after January 1 of the calendar
year succeeding the day on which such notice was received shall be paid
currently and no longer deferred as provided in the Plan. However, any amounts
in such Participating Trustee's Account on such January 1 shall continue to be
payable in accordance with the Notice of Election (or Notices) pursuant to which
it was deferred.
(c) A Participating Trustee who has filed a Notice of Election to
terminate deferment of compensation may thereafter again file a Notice of
Election to participate pursuant to Section 6 hereof effective for the calendar
year subsequent to the calendar year in which he or she files the new Notice.
7. Payment of Deferred Compensation.
(a) No payment may be made from any Account except as provided in this
Section.
<PAGE> 5
(b) The aggregate value of a Participating Trustee's Account will be
paid in a lump sum or in installments, as specified in his or her Notice (or
Notices) of Election and at the time or times specified in the Notice (or
Notices) of Election. If installments are elected by a Participating Trustee,
the amount of the first payment shall be a fraction of the then value of such
Participating Trustee's Account, the numerator of which is one, and the
denominator of which is the total number of installments. The amount of each
subsequent payment shall be a fraction of the then value of such Participating
Trustee's Account remaining after the prior payment, the numerator of which is
one and the denominator of which is the total number of installments elected
minus the number of installments previously paid. If a lump sum is elected,
payment shall be made in the amount credited to the Participating Trustee's
Account.
(c) In the event of a Participating Trustee's death before he or she
has received payment of all amounts in such Participating Trustee's Account, the
value of such Account shall be paid in accordance with the provisions of the
Plan as soon as reasonably possible to the beneficiary designated in such
Participating Trustee's Notice of Election. If such beneficiary does not survive
the Participating Trustee or no beneficiary is designated, payment of all
amounts in the Account shall be made in a lump sum to such Participating
Trustee's estate. Any beneficiary so designated by a Participating Trustee may
be changed at any time by notice in writing from such trustee to the Trust.
Payment under this subsection shall equal the amount credited to the
Participating Trustee's Account at the time of his death.
(d) Upon the occurrence of an unforeseen event causing material
financial hardship, the administrator shall distribute to the Participating
Trustee, in a single lump sum, an amount equal to the lesser of amount requested
by the Participating Trustee and amount remaining in the Account.
8. Statement of Account. the Trust will furnish each Participating Trustee with
a quarterly statement setting forth the value of such Participating Trustee's
Account as of the end of each calendar quarter and all credits to and payments
from such Account during such quarter. Such statements will be furnished no
later than 60 days after the end of each calendar quarter.
9. Rights in Account. Credits to Accounts shall remain part of the general
assets of the Trust, shall at all times be the sole and absolute property of the
Trust and shall in no event be deemed to constitute a fund, trust or collateral
security for the payment of the deferred compensation to which trustees are
entitled from such Accounts. The right of any Participating Trustee or his
designated beneficiary or estate to receive future payment of deferred
compensation under the provisions of the Plan shall be an unsecured claim
against general assets of the Trust, if any, available at the time of payment.
10. Non-Assignability. No Participating Trustee, his or her designated
beneficiary or estate, nor any other person shall have the right to encumber,
pledge, sell, assign or transfer the right to receive payments under this Plan,
except by will or by the laws of descent and distribution. All such payments and
the right thereto are expressly declared to be non-assignable.
11. Administration. The Plan shall be administered by such officers of the Trust
as are appointed by the Chairman of the Board or, if no Chairman of the Board
has been appointed, by the President of the Trust. All Notices shall be filed
with the officers as appointed and such officers shall be responsible for
maintaining records of all Accounts and for furnishing the quarterly statements
of account provided for in Section 8 of the Plan. Such officers shall also have
the general authority to interpret, construe and implement provisions of the
Plan. Any determination by such officers shall be binding on the Participating
Trustee and shall be final and conclusive.
12. Amendment or Termination. The Plan may at any time be amended, modified or
terminated by the
<PAGE> 6
Board. However, no amendment, modification or termination shall adversely affect
any Participating Trustee's rights in respect of amounts theretofore credited to
his or her Account.
13. Effective Date. This Plan shall be effective as of __________________ and
any amendments hereto shall be effective on the date of adoption thereof by the
Board.
<PAGE> 7
Notice of Election to Defer Compensation
Under the
Deferred Compensation Plan
for the Trustees of
The One Group Investment Trust
----------------------------------------------
I hereby elect to defer compensation to which I may hereafter become
entitled, as follows (check one):
1. Effective Date:
______(a) Compensation earned after the date of this election
______(b) Compensation earned after_____________________.
[future date]
2. Amount Deferred:
______(a) All Compensation
______(b) $______per quarter
______(c) Other:____________________________________________
__________________________________________________.
3. Time of Payment:
______(a) The first business day of January of the year
following the year in which I cease to be a Trustee
______(b) The first business day of _____________
[specify]
_______________________________________.
[month(s) and year(s)]
4. Manner of Payments:
______(a) Entire amount in a lump sum
______(b) In ___________________ equal installments
<PAGE> 8
5. Period of Election:
Subject to my further election to change or terminate it, my
election shall continue:
______(a) Until I cease to be a Trustee
______(b) Until _____________________________.
[specify date or event]
6. Designation of Beneficiary:
I hereby designate _______________________________________ of
_________________________________* as my beneficiary to
receive payments in the event of my death before payments in
full hereunder have been made. In the event that the said
beneficiary predeceases me, I hereby designate
______________________________ of ___________________________*
as beneficiary instead.
7. Eligible Funds
I hereby elect that my Account under the Plan be considered to
be invested as follows (in multiples of [ %]):
________________________ Fund _______________%
________________________ Fund _______________%
________________________ Fund _______________%
________________________ Fund _______________%
* If more than one beneficiary is to be designated, add a page listing
the beneficiaries and specify the percentage of each payment to be
received by each beneficiary.
<PAGE> 9
8. Amendment or Termination:
I hereby (amend) (terminate) my written directions as
indicated in Notice of Election to Defer Compensation dated
_________________________, in accordance with Section 6(b) of
the Deferred Compensation Plan and in the following manner:
_____________________________________________________________
_____________________________________________________________
_____________________________
[Signature of Trustee]
Date:____________________
_________________________
0079593.01
<PAGE> 1
EXHIBIT (8)(a)
CUSTODIAN CONTRACT, DATED AS OF JULY 29, 1988 BETWEEN REGISTRANT AND
STATE STREET BANK AND TRUST COMPANY
<PAGE> 2
CUSTODIAN CONTRACT
between
The Helmsman Fund
and
STATE STREET BANK AND TRUST COMPANY
Revised
2/10/88
ASCGS 07/87
Standard Global Series Trust
<PAGE> 3
TABLE OF CONTENTS
Page
----
1. Employment of Custodian and Property to be Held by
It .............................................................1
2. Duties of the Custodian with Respect to Property of the
Fund Held by the Custodian in the United States........................3
2.1 Holding Securities...........................................3
2.2 Delivery of Securities.......................................3
2.3 Registration of Securities...................................8
2.4 Bank Accounts................................................9
2.5 Availability of Federal Funds...............................10
2.6 Collection of Income........................................10
2.7 Payment of Fund Monies......................................11
2.8 Liability for Payment in Advance of
Receipt of Securities Purchased.............................14
2.9 Appointment of Agents.......................................14
2.10 Deposit of Fund Assets in Securities System.................14
2.10A Fund Assets Held in the Custodian's Direct
Paper System................................................17
2.11 Segregated Account..........................................19
2.12 Ownership Certificates for Tax Purposes.....................21
2.13 Proxies.....................................................21
2.14 Communications Relating Portfolio Securities................21
3. Duties of the Custodian with Respect to Property of
the Fund Held Outside of the United States............................22
3.1 Appointment of Foreign Sub-Custodians.......................22
3.2 Assets to be Held...........................................23
3.3 Foreign Securities Depositories.............................23
3.4 Segregation of Securities...................................23
3.5 Agreements with Foreign Banking Institutions................24
3.6 Access of Independent Accountants of the Fund...............25
3.7 Reports by Custodian........................................25
3.8 Transactions in Foreign Custody Account.....................26
3.9 Liability of Foreign Sub-Custodians.........................27
3.10 Monitoring Responsibilities.................................28
3.11 Branches of U.S. Banks......................................28
4. Payments for Repurchases or Redemptions and Sales
of Shares of the Fund.................................................29
5. Proper Instructions...................................................30
6. Actions Permitted Without Express Authority...........................31
<PAGE> 4
7. Evidence of Authority.................................................31
8. Duties of Custodian With Respect to the Books of Account
and Calculation of Net Asset Value and Net
Income................................................................32
9. Records...............................................................33
10. Opinion of Fund's Independent Accountant..............................33
11. Reports to Fund by Independent Public Accountant......................34
12. Compensation of Custodian.............................................34
13. Responsibility of Custodian...........................................34
14. Effective Period, Termination and Amendment...........................37
15. Successor Custodian...................................................39
16. Interpretive and Additional Provisions................................40
17. Additional Funds......................................................40
18. Massachusetts Law to Apply............................................41
19. Prior Contracts.......................................................41
20. Names.................................................................42
<PAGE> 5
CUSTODIAN CONTRACT
This Contract between The Helmsman Fund, a business trust organized and
existing under the laws of Massachusetts, having its principal place of business
at 33 North Third Street, Columbus, Ohio 43215 hereinafter called the "Fund",
and State Street Bank and Trust Company, a Massachusetts trust company, having
its principal place of business at 225 Franklin Street, Boston, Massachusetts,
02110, hereinafter called the "Custodian",
WITNESSETH:
WHEREAS, the Fund is authorized to issue shares in separate series, with
each such series representing interests in a separate portfolio of securities
and other assets; and
WHEREAS, the Fund intends to initially offer shares in five series, the
Helmsman Prime Obligation Portfolio, Helmsman Government Portfolio, Helmsman
Income Portfolio, Helmsman Tax Free Obligations Portfolio, and Helmsman Value
Equity Portfolio (such series together with all other series subsequently
established by the Fund and made subject to this Contract in accordance with
paragraph 17, being herein referred to as the " Portfolio(s)");
NOW THEREFOR, in consideration of the mutual covenants and agreements
hereinafter contained, the parties hereto agree as follows:
1. Employment of Custodian and Property to be Held by It
The Fund hereby employs the Custodian as the custodian of the assets of
the Portfolios of the Fund, including securities which the Fund, on behalf of
the applicable Portfolio desires to be held in places within the United States
("domestic
-1-
<PAGE> 6
securities") and securities it desires to be held outside the United States
('foreign securities") pursuant to the provisions of the Fund's Declaration of
Trust. The Fund on behalf of the Portfolio(s) agrees to deliver to the Custodian
all securities and cash of the Portfolios, and all payments of income, payments
of principal or capital distributions received by it with respect to all
securities owned by the Portfolio(s) from time to time, and the cash
consideration received by it for such new or treasury shares of beneficial
interest of the Fund representing interests in the Portfolios, ("Shares") as may
be issued or sold from time to time. The Custodian shall not be responsible for
any property of a Portfolio held or received by the Portfolio and not delivered
to the Custodian.
Upon receipt of " Proper Instructions" (within the meaning of Article
5), the Custodian shall on behalf of the applicable Portfolio(s) from time to
time employ one or more sub-custodians located in the United States, but only in
accordance with an applicable vote by the Board of Trustees of the Fund, on
behalf of the applicable Portfolio(s), and provided that the Custodian shall
have no more or less responsibility or liability to the Fund on account of any
actions or omissions of any sub-custodian so employed than any such
sub-custodian has to the Custodian. The Custodian may employ as sub-custodians
for the Fund's foreign securities on behalf of the applicable Portfolio(s) the
foreign banking institutions and foreign securities depositories designated in
Schedule A hereto but only in accordance with the provisions of Article 3.
-2-
<PAGE> 7
2. Duties of the Custodian with Respect to Property of the Fund Held By
the Custodian in the United States
2.1 Holding Securities. The Custodian shall hold and physically segregate
for the account of the Fund all non-cash property, to be, held by it in
the United States, including all domestic securities owned by the Fund,
other than (a) securities which are maintained pursuant to Section 2.10
in a clearing agency registered with the Securities and Exchange
Commission under Section 17A of the Securities Exchange of 1934, which
acts as a securities depository, or in the book-entry system authorized
by the U.S. Department of the Treasury and certain federal agencies
(collectively referred to herein as "Securities System") in accordance
with applicable Federal Reserve Board and Securities and Exchange
Commission rules and regulations, if any, and (b) commercial paper of
an issuer for which State Street Bank and Trust Company acts as issuing
and paying agent ("Direct Paper") which is deposited and/or maintained
in the Direct Paper System of the Custodian pursuant to Section 2.10A.
2.2 Delivery of Securities. The Custodian shall release and deliver
domestic securities owned by a Portfolio held by the Custodian or in a
Securities System account of the system account ("Direct Paper System
Account") only upon receipt of Proper Instructions, which may be
continuing instructions when deemed appropriate by the parties, and
only in the following cases:
1) Upon sale of such securities for the account of the Portfolio
and receipt of payment therefor;
-3-
<PAGE> 8
2) Upon the receipt of payment in connection with any repurchase
agreement related to such securities entered into by the
Portfolio;
3) In the case of a sale effected through a Securities System, in
accordance with the provisions of Section 2.10 hereof;
4) To the depository agent in connection with tender or other
similar offers for securities of the Portfolio;
5) To the issuer thereof or its agent when such securities are
called, redeemed, retired or otherwise become payable;
provided that, in any such case, the cash or other
consideration is to be delivered to the Custodian;
6) To the issuer thereof, or its agent, for transfer into the
name of the Portfolio or into the name of any nominee or
nominees of the Custodian or into the name or nominee name of
any agent appointed pursuant to Section 2.9 or into the name
or nominee name of any sub-custodian appointed pursuant to
Article 1; or for exchange for a different number of bonds,
certificates or other evidence representing the same aggregate
face amount or number of units; provided that, in any such
case, the new securities are to be delivered to the Custodian;
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<PAGE> 9
7) Upon the sale of such securities for the account of the
Portfolio, to the broker or its clearing agent, against a
receipt, for examination in accordance with "street delivery"
custom; provided that in any such case, the Custodian shall
have no responsibility or liability for any loss arising from
the delivery of such securities prior to receiving payment for
such securities except as may arise from the Custodian's own
negligence or willful misconduct;
8) For exchange or conversion pursuant to any plan of merger,
consolidation, recapitalization, reorganization or
readjustment of the securities of the issuer of such
securities, or pursuant to provisions for conversion contained
in such securities, or pursuant to any deposit agreement;
provided that, in any such case, the new securities and cash,
if any, are to be delivered to the Custodian;
9) In the case of warrants, rights or similar securities, the
surrender thereof in the exercise of such warrants, rights or
similar securities or the surrender of interim receipts or
temporary securities for definitive securities; provided that,
in any such case, the new securities and
-5-
<PAGE> 10
cash, if any, are to be delivered to the Custodian;
10) For delivery in connection with any loans of securities made
by the Portfolio, but only against receipt of adequate
collateral as agreed upon from time to time by the Custodian
and the Fund on behalf of the Portfolio, which may be in the
form of cash or obligations issued by the United States
government, its agencies or instrumentalities, except that in
connection with any loans for which collateral is to be
credited to the Custodian's account in the book-entry system
authorized by the U.S. Department of the Treasury, the
Custodian will not be held liable or responsible for the
delivery of securities owned by the Portfolio prior to the
receipt of such collateral;
11) For delivery as security in connection with any borrowings by
the Fund on behalf of the Portfolio requiring a pledge of
assets by the Fund on behalf of the Portfolio, but only
against receipt of amounts borrowed;
12) For delivery in accordance with the provisions of any
agreement among the Fund on behalf of the Portfolio, the
Custodian and a broker-dealer registered under the Securities
Exchange Act of 1934 (the
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<PAGE> 11
"Exchange Act") and a member of the National Association of
Securities Dealers, Inc. ("NASD"), relating to compliance with
the rules of The Options Clearing Corporation and of any
registered national securities exchange, or of any similar
organization or organizations, regarding escrow or other
arrangements in connection with transactions by the Portfolio
of the Fund;
13) For delivery in accordance with the provisions of any
agreement among the Fund on behalf of the Portfolio, the
Custodian, and a Futures Commission Merchant registered under
the Commodity Exchange Act, relating to compliance with the
rules of the Commodity Futures Trading Commission and/or any
Contract Market, or any similar organization or organizations,
regarding account deposits in connection with transactions by
the Portfolio of the Fund;
14) Upon receipt of instructions from the transfer agent
("Transfer Agent') for the Fund, for delivery to such Transfer
Agent or to the holders of shares in connection with
distributions in kind, as may be described from time to time
in the currently effective prospectus and statement of
additional information of the
-7-
<PAGE> 12
Fund, related to the Portfolio (Prospectus"), in satisfaction
of requests by holders of Shares for repurchase or redemption;
and
15) For any other proper corporate purpose, but only upon receipt
of, in addition to Proper Instructions from the Fund on behalf
of the applicable Portfolio, a certified copy of a resolution
of the Board of Trustees or of the Executive Committee signed
by an officer of the Fund and certified by the Secretary or an
Assistant Secretary, specifying the securities of the
Portfolio to be delivered, setting forth the purpose for which
such delivery is to be made, declaring such purpose to be a
proper corporate purpose, and naming the person or persons to
whom delivery of such securities shall be made.
2.3 Registration of Securities. Domestic securities held by the Custodian
(other than bearer securities) shall be registered in the name of the
Portfolio or in the name of any nominee of the Fund on behalf of the
Portfolio or of any nominee of the Custodian which nominee shall be
assigned exclusively to the Portfolio, unless the Fund has authorized
in writing the appointment of a nominee to be used in common with other
registered investment companies having the same investment adviser as
the Portfolio, or in the name or nominee name of any agent
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<PAGE> 13
appointed pursuant to Section 2.9 or in the name or nominee name of any
sub-custodian appointed pursuant to Article 1. All securities accepted
by the Custodian on behalf of the Portfolio under the terms of this
Contract shall be in "street name' or other good delivery form.
2.4 Bank Accounts. The Custodian shall open and maintain a separate bank
account or accounts in the United States in the name of each Portfolio
of the Fund, subject only to draft or order by the Custodian acting
pursuant to the terms of this Contract, and shall hold in such account
or accounts, subject to the provisions hereof, all cash received by it
from or for the account of the Portfolio, other than cash maintained by
the Portfolio in a bank account established and used in accordance with
Rule 17f-3 under the Investment Company Act of 1940. Funds held by the
Custodian for a Portfolio may be deposited by it to its credit as
Custodian in the Banking Department of the Custodian or in such other
banks or trust companies as it may in its discretion deem necessary or
desirable; provided, however, that every such bank or trust company
shall be qualified to act as a custodian under the Investment Company
Act of 1940 and that each such bank or trust company and the funds to
be deposited with each such bank or trust
-9-
<PAGE> 14
company shall on behalf of each applicable Portfolio be approved by
vote of a majority of the Board of Trustees of the Fund. Such funds
shall be deposited by the Custodian in its capacity as Custodian and
shall be withdrawable by the Custodian only in that capacity.
2.5 Availability of Federal Funds. upon mutual agreement between the Fund
on behalf of each applicable Portfolio and the Custodian, the Custodian
shall, upon the receipt of Proper Instructions from the Fund on behalf
of a Portfolio, make federal funds available to such Portfolio, as of
specified times agreed upon from time to time by the Fund and the
Custodian in the amount of checks received in payment for Shares of
such Portfolio which are deposited into the Portfolio's account.
2.6 Collection of Income. The Custodian shall collect on a timely basis all
income and other payments with respect to United States registered
securities held hereunder to which each Portfolio shall be entitled
either by law or pursuant to custom in the securities business, and
shall collect on a timely basis all income and other payments with
respect to United States bearer securities if, on the date of payment
by the issuer, such securities are held by the Custodian or its agent
and shall credit such income, as collected, to such Portfolio's
custodian account. Without limiting the generality of the
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<PAGE> 15
foregoing, the Custodian shall detach and present for payment all
coupons and other income items requiring presentation as and when they
become due and shall collect interest when due on securities held
hereunder. Income due each Portfolio on securities loaned pursuant to
the provisions of Section 2.2 (10) shall be the responsibility of the
Fund. The Custodian will have no duty or responsibility in connection
therewith, other than to provide the Fund with such information or as
may be necessary to assist the Fund in arranging for the timely
delivery to the Custodian of the income to which the Portfolio is
properly entitled.
2.7 Payment of Fund Monies. Upon receipt of Proper Instructions from the
Fund on behalf of the applicable Portfolio, which may be continuing
instructions when deemed appropriate by the parties, the Custodian
shall pay out monies of a Portfolio in the following cases only;
1) Upon the purchase of domestic securities, options, futures
contracts or options on futures contracts for the account of
the Portfolio but only (a) against the delivery of such
securities, or evidence of title to such options, futures
contracts or options on futures contracts, to the Custodian
(or any bank, banking firm or trust company doing business in
the United States or abroad which
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<PAGE> 16
is qualified under the Investment Company Act of 1940, as
amended, to act as a custodian and has been designated by the
Custodian as its agent for this purpose) registered in the
name of the Portfolio or in the name of a nominee of the
Custodian referred to in Section 2.3 hereof or in proper form
for transfer; (b) in the case of a purchase effected through a
Securities System, in accordance with the conditions set forth
in Section 2.10 hereof or (c) in the case of a purchase
involving the Direct Paper System, in accordance with the
conditions set forth in Section 2.10A; or (d) in the case of
repurchase agreements entered into between the Fund on behalf
of the Portfolio and the Custodian, or another bank, or a
broker-dealer which is a member of NASD, (i) against delivery
of the securities either in certificate form or through an
entry crediting the Custodian's account at the Federal Reserve
Bank with such securities or (ii) against delivery of the
receipt evidencing purchase by the Portfolio of securities
owned by the Custodian along with written evidence of the
agreement by the Custodian to repurchase such securities from
the Portfolio;
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<PAGE> 17
2) In connection with conversion, exchange or surrender of
securities owned by the Portfolio as set forth in Section 2.2
hereof;
3) For the redemption or repurchase of Shares issued by the
Portfolio as set forth in Article 4, hereof;
4) For the payment of any expense or liability incurred by the
Portfolio, including but not limited to the following payments
for the account of the Portfolio: interest, taxes, management,
accounting, transfer agent and legal fees, and operating
expenses of the Fund whether or not such expenses are to be in
whole or part capitalized or treated as deferred expenses;
5) For the payment of any dividends on Shares of the Portfolio
declared pursuant to the governing documents of the Fund;
6) For payment of the amount of dividends received in respect to
securities sold short;
7) For any other proper purpose, but only upon receipt of, in
addition to Proper Instructions from the Fund on behalf of the
Portfolio, a certified copy of a resolution of the Board of
Trustees or of the Executive Committee of the Fund signed by
an officer of the Fund and certified by its Secretary or an
Assistant Secretary, specifying the amount of such
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<PAGE> 18
payment, setting forth the purpose for which such payment is
to be made, declaring such purpose to be a proper purpose, and
naming the person or persons to whom such payment is to be
made.
2.8 Liability for Payment in Advance of Receipt of Securities Purchased. In
any and every case where payment for purchase of domestic securities
for the account of a Portfolio is made by the Custodian in advance of
receipt of the securities purchased in the absence of specific written
instructions from the Fund on behalf of such Portfolio to so pay in
advance, the Custodian shall be absolutely liable to the Fund for such
securities to the same extent as if the securities had been received by
the Custodian.
2.9 Appointment of Agents. The Custodian may at any time or times in its
discretion appoint (and may at any time remove) any other bank or trust
company which is itself qualified under the Investment Company Act of
1940, as amended, to act as a custodian, as its agent to carry out such
of the provisions of this Article 2 as the Custodian may from time to
time direct; provided, however, that the appointment of any agent shall
not relieve the Custodian of its responsibilities or liabilities
hereunder.
2.10 Deposit of Fund Assets in Securities Systems. The Custodian may deposit
and/or maintain domestic
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<PAGE> 19
securities owned by a Portfolio in a Securities System subject to the
following provisions:
1) The Custodian may keep domestic securities of the Portfolio in
a Securities System provided that such securities are
represented in an account ("Account") of the Custodian of the
Securities System which shall not include any assets of the
Custodian other than assets held as a fiduciary, custodian or
otherwise for customers;
2) The records of the Custodian with respect to securities of the
Portfolio which are maintained in a Securities System shall
identify by book-entry those securities belonging to the
Portfolio;
3) The Custodian shall pay for securities purchased for the
account of the Portfolio upon (i) receipt of advice from the
Securities System that such securities have been transferred
to the Account, and (ii) the making of an entry on the records
of the Custodian to reflect such payment and transfer for the
account of the Portfolio. The Custodian shall transfer
securities sold for the account of the Portfolio upon (i)
receipt of advice from the Securities System that
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<PAGE> 20
payment for such securities has been transferred to the
Account, and (ii) the making of an entry on the records of the
Custodian to reflect such transfer and payment for the account
of the Portfolio. Copies of all advice from the Securities
System of transfers of securities for the account of the
Portfolio shall identify the Portfolio, be maintained for the
Portfolio by the Custodian and be provided to the Fund at its
request. Upon request, the Custodian shall furnish the Fund on
behalf of the Portfolio confirmation of each transfer to or
from the account of the Portfolio in the form of a written
advice or notice and shall furnish to the Fund on behalf of
the Portfolio copies of daily transactions in the Securities
System for the account of the Fund;
4) The Custodian shall provide the Fund for the Portfolio with
any report obtained by the Custodian on the Securities
System's accounting system, internal accounting control and
procedures for safeguarding securities deposited in the
Securities System;
5) The Custodian shall have received from the Fund on behalf of
the Portfolio the initial or annual certificate, as the case
may be, required by Article 14 hereof;
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<PAGE> 21
6) Anything to the contrary in this Contract notwithstanding, the
Custodian shall be liable to the Fund for the benefit of the
Portfolio for any loss or damage to the Portfolio resulting
from use of the Securities System by reason of any negligence,
misfeasance or misconduct of the Custodian or any of its
agents or of any of its or their employees or from failure of
the Custodian or any such agent to enforce effectively such
rights as it may have against the Securities System; at the
election of the Fund, the Fund shall be entitled to be
subrogated to the rights of the Custodian with respect to any
claim against the Securities System or any other person which
the Custodian may have as a consequence of any such loss or
damage if and to the extent that the Portfolio has not been
made whole for any such loss or damage.
2.10A Fund Assets Held in the Custodian's Direct Paper System The Custodian
may deposit and/or maintain securities owned by a Portfolio in the
Direct Paper System of the Custodian subject to the following
provisions:
1) No transaction relating to securities in the
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<PAGE> 22
Direct Paper System will be effected in the absence of Proper
Instructions from the Fund on behalf of the Portfolio;
2) The Custodian may keep securities of the Portfolio in the
Direct Paper System only if such securities are represented in
an account ("Account") of the Custodian in the Direct Paper
System which shall not include any assets of the Custodian
other than assets held as a fiduciary, custodian or otherwise
for customers;
3) The records of the Custodian with respect to securities of the
Portfolio which are maintained in the Direct Paper System
shall identify by book-entry those securities belonging to the
Portfolio;
4) The Custodian shall pay for securities purchased for the
account of the Portfolio upon the making of any entry on the
records of the Custodian to reflect such payment and transfer
of securities to the account of the Portfolio. The Custodian
shall transfer securities sold for the account of the
Portfolio upon the making of any entry on the records of the
Custodian to reflect such transfer and receipt of payment for
the account of the Portfolio;
5) The Custodian shall furnish the Fund on behalf of the
Portfolio confirmation of
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<PAGE> 23
each transfer to or from the account of the Portfolio, in the
form of a written advice or notice, of Direct Paper on the
next business day following such transfer and shall furnish to
the Fund on behalf of the Portfolio copies of daily
transaction sheets reflecting each day's transaction in the
Direct Paper System for the account of the Portfolio;
6) The Custodian shall have received the initial or annual
Certificate, as the case may be, required by section 14
hereof;
7) The Custodian shall provide the Fund with any report on its
system of internal accounting control as the Fund may
reasonably request from time to time.
2.11 Segregated Account. The Custodian shall upon receipt of Proper
Instructions from the Fund on behalf of each applicable Portfolio
establish and maintain a segregated account of or accounts for and on
behalf of each such Portfolio, into which account or accounts may be
transferred cash and/or securities, including securities maintained in
an account by the Custodian pursuant to Sections 2.10 or 2.10A hereof,
(i) in accordance with the provisions of any agreement among the Fund
on behalf of the Portfolio, the custodian and a broker-dealer
registered under the Exchange Act and a member of
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<PAGE> 24
the NASD )or any futures commission merchant registered under the
Commodity Exchange Act), relating to compliance with the rules of The
Options Clearing Corporation and of any registered national securities
exchange (or the commodity Futures Trading Commission or any registered
contract market), or of any similar organization or organizations,
regarding escrow or other arrangements in connection with transactions
by the Portfolio, (ii) for purposes of segregating cash or government
securities in connection with options purchased, sold or written by the
Portfolio or commodity futures contracts or options thereon purchased
or sold by the Portfolio, (iii) for the purposes of compliance by the
Portfolio with the procedures required by Investment Company Act
Release No. 10666, or any subsequent release or releases of the
Securities and Exchange Commission relating to the maintenance of
segregated accounts by registered investment companies and (iv) for
other proper corporate purposes, but only, in the case of clause (iv),
upon receipt of, in addition to Proper Instructions from the Fund on
behalf of the applicable Portfolio, a certified copy of a resolution of
the Board of Trustees or of the Executive Committee signed by an
officer of the Fund and certified by the Secretary or an Assistant
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<PAGE> 25
Secretary, setting forth the purpose or purposes of such segregated
account and declaring such purposes to be proper corporate purposes.
2.12 Ownership Certificates for Tax Purposes. The Custodian shall execute
ownership and other certificates and affidavits for all federal and
state tax purposes in connection with receipt of income or other
payments with respect to domestic securities of each Portfolio held by
it and in connection with transfers of such securities.
2.13 Proxies. The Custodian shall, with respect to the domestic securities
held hereunder, cause to be promptly executed by the registered holder
of such securities, if the securities are registered otherwise than in
the name of the Portfolio or a nominee of the Portfolio, all proxies,
without indication of the manner in which such proxies are to be voted,
and shall promptly deliver to the Portfolio such proxies, all proxy
soliciting materials and all notices relating to such securities.
2.14 Communications Relating to Fund Portfolio Securities,. The Custodian
shall transmit promptly to the Fund for each Portfolio all written
information (including, without limitation, pendency of calls and
maturities of domestic securities and expirations of rights in
connection therewith and notices of exercise of call and put options
written
-21-
<PAGE> 26
by the Fund on behalf of the Portfolio and the maturity of futures
contracts purchased or sold by the Portfolio) received by the Custodian
from issuers of the securities being held for the Portfolio. With
respect to tender or exchange offers, the Custodian shall transmit
promptly to the Portfolio all written information received by the
Custodian from issuers of the domestic securities whose tender or
exchange is sought and from the party (or his agents) making the tender
or exchange offer. If the Portfolio desires to take action with.
respect to any tender offer, exchange offer or any other similar
transactions, the Portfolio shall notify the Custodian at least three
business days prior to the date on which the Custodian is to take such
action.
3. Duties of the Custodian with Respect to Property of the Fund Held
Outside of the United States
3.1 Appointment of Foreign Sub-Custodians.
The Custodian is authorized and instructed to employ as
sub-custodians for the securities and other assets of the
Portfolios maintained outside of the United States the foreign
banking institutions and foreign securities depositories
designated on Schedule A hereto ("foreign sub-custodians").
Upon receipt of 'Proper Instructions", together with a
certified resolution of the Fund's Board of Trustees on behalf
of the applicable Portfolio(s), the Custodian and the Fund may
on behalf of the
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<PAGE> 27
applicable Portfolio(s) to amend Schedule A hereto from time
to time agree to designate additional foreign banking
institutions and foreign securities depositories to act as
sub-custodians. Upon receipt of Proper Instructions from the
Fund on behalf of the applicable Portfolio(s) the Custodian
shall cease the employment of any one or more of such
sub-custodians for maintaining custody of the applicable
Portfolio(s) assets.
3.2 Assets to be Held. The Custodian shall limit the securities
and other assets maintained in the custody of the foreign
sub-custodians to: (a) 'foreign securities", as defined in
paragraph (c)(1) of Rule 17f-5 under the Investment Company
Act of 1940, and (b) cash and cash equivalents in such amounts
as the Custodian or the Fund may determine to be reasonably
necessary to effect the foreign securities transactions of the
applicable Portfolios.
3.3 Foreign Securities Depositories. Except as may otherwise be
agreed upon in writing by the Custodian and the Fund on behalf
of the applicable Portfolio, assets of the applicable
Portfolios shall be maintained in foreign securities
depositories only through arrangements implemented by the
foreign banking institutions serving as sub-custodians
pursuant to the terms hereof.
3.4 Segregation of Securities. The Custodian shall identify on its
books as belonging to each applicable Portfolio of the Fund,
the foreign
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<PAGE> 28
securities of such Portfolios held by each foreign
sub-custodian. Each agreement pursuant to which the Custodian
employs a foreign banking institution shall require that such
institution establish custody account(s) for the Custodians on
behalf of the Fund for each applicable Portfolio of the Fund
and physically segregate in each such account securities and
other assets of the Portfolios, and, in the event that such
institution deposits the securities of one or more of the
Portfolios in a foreign securities depository, that it shall
identify on its books as belonging to the Custodian, as agent
for each applicable Portfolio, the securities so deposited
(all collectively referred to as the "Account").
3.5 Agreements with Foreign Banking Institutions. Each agreement
with a foreign banking institution shall be substantially in
the form set forth in Exhibit 1 hereto and shall provide that:
(a) the assets of each Portfolio will not be subject to any
right, charge, security interest, lien or claim of any kind in
favor of the foreign banking institution or its creditors,
except-c a claim of payment for their safe custody or
administration; (b) beneficial ownership for the assets of
each Portfolio will be freely transferable without the payment
of money or value other than for custody or administration;
(c) adequate records will be maintained identifying the
-24-
<PAGE> 29
assets as belonging to the Fund; (d) officers of or auditors
employed by, or other representatives of the Custodian,
including to the extent permitted under applicable law the
independent public accountants for the Fund, will be given
access to the books and records of the foreign banking
institution relating to its actions under its agreement with
the Custodian; and (e) assets of the Portfolios held by the
foreign sub-custodian will be subject only to the instructions
of the Custodian or its agents.
3.6 Access of Independent Accountants of the Fund. Upon request of
the Fund, the Custodian will use its best efforts to arrange
for the independent accountants of the Fund to be afforded
access to the books and records of any foreign banking
institution employed as a foreign sub-custodian insofar as
such books and records relate to the performance of such
foreign banking institution under its agreement with the
Custodian.
3.7 Reports by Custodian. The Custodian will supply to the Fund
from time to time, as mutually agreed upon, statements in
respect of the securities and other assets of the Portfolio(s)
held by foreign sub-custodians, including but not limited to
an identification of entities having possession of the
Portfolio(s) securities and other assets and advices or
notifications of any transfers of securities
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<PAGE> 30
or from each custodial account maintained by a foreign banking
institution for the Custodian on behalf of each applicable
Portfolio indicating, as to securities acquired for a
Portfolio, the identity of the entity having physical
possession of such securities.
3.8 Transactions in Foreign Custody Account. (a) Upon receipt of
Proper Instructions, which may be continuing instructions when
deemed appropriate by the parties, the Custodian shall on
behalf of each applicable Portfolio make or cause its foreign
sub-custodian to transfer, exchange or deliver foreign
securities owned by the Portfolio, but except to the extent
explicitly provided herein only in this Section 3.8, the cases
specified in Section 2.2.(b) Upon receipt of Proper
Instructions, which may be continuing instructions when deemed
appropriate by the parties, the Custodian shall on behalf of
each applicable Portfolio pay out or cause its foreign
sub-custodians to pay out monies of a Portfolio, but except to
the extent explicitly provided in this Section 3.8 only in any
of the cases specified in Section 2.7.(c) Notwithstanding any
provision of this Contract to the contrary, settlement and
payment for securities received for the account of each
applicable Portfolio and delivery of securities maintained for
the account of each applicable Portfolio may be effected in
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<PAGE> 31
accordance with the customary or established securities
trading or securities processing practices and procedures in
the jurisdiction or market in which the transaction occurs,
including, without limitation, delivering securities to the
purchaser thereof or to a dealer therefor (or an agent for
such purchaser or dealer) against a receipt with the exception
of receiving later payment for such securities from such
purchaser or dealer. (d) Securities maintained in the custody
of a foreign sub-custodian may be maintained in the name of
such entity's nominee to the same extent as set forth in
Section 2.3 of this Contract with respect to nominees of the
Custodian and the Fund agrees to hold any such nominee
harmless from any liability as a holder of record of such
securities.
3.9 Liability of Foreign Sub-Custodians. Each agreement pursuant
to which the Custodian employs a foreign banking institution
as a foreign sub-custodian shall require the institution to
exercise reasonable care in the performance of its duties and
to indemnify, and hold harmless, the Custodian and Fund from
and against any loss, damage, cost, expense, liability or
claim arising out of or in connection with the institution's
performance of such obligations. At the election of the Fund,
it shall be entitled to be subrogated to the rights of the
Custodian with respect to any claims against a foreign banking
-27-
<PAGE> 32
institution as a consequence of any such loss, damage, cost,
expense, liability or claim if and to the extent that the Fund
has not been made whole for any such loss, damage, cost,
expense, liability or claim.
3.10 Monitoring Responsibilities. The Custodian shall furnish
annually to the Fund, during the month of June, information
concerning the foreign sub-custodians employed by the
Custodian. Such information shall be similar in kind and scope
to that furnished to the Fund in connection with the initial
approval of this Contract. In addition, the Custodian will
promptly inform the Fund in the event that the Custodian
learns of a material adverse change in the financial condition
of a foreign sub- custodian or is notified by a foreign
banking institution employed as a foreign sub-custodian that
there appears to be a substantial likelihood that its
shareholders' equity will decline below $200 million (U.S.
dollars or the equivalent thereof) or that its shareholders'
equity has declined below $200 million (in each case computed
in accordance with generally accepted U.S. accounting
principles).
3.11 Branches of U.S. Banks. Except as otherwise set forth in this
Contract, the provisions hereof shall not apply where the
custody of the Fund assets maintained in a foreign branch of a
banking institution which is a "bank" as defined by Section
-28-
<PAGE> 33
2(a) (5) of the Investment Company Act of 1940 which meets the
qualification set forth in Section 26(a) (1) of said Act. The
appointment of any such branch as a sub-custodian shall be
governed by Article 1 of this Contract.
4. Payments for Sales or Repurchases or Redemptions of Shares of the Fund.
The Custodian shall receive from the distributor for the Shares or from the
Transfer Agent of the Fund and deposit into the account of the appropriate
Portfolio such payments as are received for Shares of that Portfolio issued or
sold from time to time by the Fund. The Custodian will provide timely
notification to the Fund on behalf of each such Portfolio and the Transfer Agent
of any receipt by it of payments for Shares of such Portfolio.
From such funds as may be available for the purpose but subject to the
limitations of the Declaration of Trust and any applicable votes of the Board of
Trustees of the Fund pursuant thereto, the Custodian shall, upon receipt of
instructions from the Transfer Agent, make funds available for payment to
holders of Shares who have delivered to the Transfer Agent a request for
redemption or repurchase of their Shares. In connection with the redemption or
repurchase of Shares of a Portfolio, the Custodian is authorized upon receipt of
instructions from the Transfer Agent to wire funds to or through a commercial
bank designated by the redeeming shareholders. In connection with the redemption
or repurchase of Shares
-29-
<PAGE> 34
of the Fund, the Custodian shall honor checks drawn on the Custodian by a holder
of Shares, which checks have been furnished by the Fund to the holder of Shares,
when presented to the Custodian in accordance with such procedures and controls
as are mutually agreed upon from time to time, between the Fund and the
Custodian.
5. Proper Instructions. Proper Instructions as used throughout this
Contract means a writing signed or initialed by one or more person or persons as
the Board of Trustees shall have from time to time authorized. Each such writing
shall set forth the specific transaction or type of transaction involved,
including a specific statement of the purpose for which such action is
requested. Oral instructions will be considered Proper Instructions if the
Custodian reasonably believes them to have been given by a person authorized to
give such instructions with respect to the transaction involved. The Fund shall
cause all oral instructions to be confirmed in writing. Upon receipt of a
certificate of the Secretary or an Assistant Secretary as to the authorization
by the Board of Trustees of the Fund accompanied by a detailed description of
procedures approved by the Board of Trustees, Proper Instructions may include
communications effected directly between electromechanical or electronic devices
provided that the Board of Trustees and the Custodian are satisfied that such
procedures afford adequate safeguards for the Portfolio's assets.
-30-
<PAGE> 35
6. Actions Permitted without Express Authority. The Custodian may in its
discretion, without express authority from the Fund on behalf of each applicable
Portfolio:
1) make payments to itself or others for minor expenses of handling
securities or other similar items relating to its duties under this Contract,
provided that all such payments shall be accounted for to the Fund on behalf of
the Portfolio;
2) surrender securities in temporary form for securities in definitive
form;
3) endorse for collection, in the name of the Portfolio, checks, drafts
and other negotiable instruments; and
4) in general, attend to all non-discretionary details in connection
with the sale, exchange, substitution, purchase, transfer and other dealings
with the securities and property of the Portfolio except as otherwise directed
by the Board of Trustees of the Fund.
7. Evidence of Authority. The Custodian shall be protected in acting upon
any instructions, notice, request, consent,. certificate or other instrument or
paper believed by it to be genuine and to have been properly executed by or on
behalf of the Fund. The Custodian may receive and accept a certified copy of a
vote of the Board of Trustees of the Fund as conclusive evidence (a) of the
authority of any person to act in accordance with such vote or (b) of any
-31-
<PAGE> 36
determination or of any action by the Board of Trustees pursuant to the
Declaration of Trust as described in such vote, and such vote may be considered
as in full force and effect until receipt by the Custodian of written notice to
the contrary.
8. Duties of Custodian with Respect to the Books of Accounts and
Calculation of Net Asset Value and Net Income.
The Custodian shall cooperate with and supply necessary information to
the entity or entities appointed by the Board of Trustees of the Fund to keep
the books of account of each Portfolio and/or compute the net asset value per
share of the outstanding shares of each Portfolio or, if directed in writing to
do so by the Fund on behalf of the Portfolio, shall itself keep such books of
account and/or compute such net asset value per share. If so directed, the
Custodian shall also calculate daily the net income of the Portfolio as
described in the Fund's currently effective prospectus related to such Portfolio
and shall advise the Fund and the Transfer Agent daily of the total amounts of
such net income and, if instructed in writing by an officer of the Fund to do
so, shall advise the Transfer Agent periodically of the division of such net
income among its various components. The calculations of the net asset value per
share and the daily income of each Portfolio shall be made at the time or times
described from time to time in the Fund's currently effective prospectus related
to such Portfolio.
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<PAGE> 37
9. Records
The Custodian shall with respect to each Portfolio create and maintain
all records relating to its activities and obligations under this Contract in
such manner as will meet the obligations of the Fund under the Investment
Company Act of 1940, with particular attention to Section 31 thereof and Rules
3la-1 and 3la-2 thereunder, applicable federal and state tax laws and any other
law or administrative rules or procedures which may be applicable to the Fund.
All such records shall be the property of the Fund and shall at all times during
the regular business hours of the Custodian be open for inspection by duly
authorized officers, employees or agents of the Fund and employees and agents of
the Securities and Exchange Commission. The Custodian shall, at the Fund's
request, supply the Fund with a tabulation of securities owned by each Portfolio
and held by the Custodian and shall, when requested to do so by the Fund and for
such compensation as shall be agreed upon between the Fund and the Custodian,
include certificate numbers in such tabulations.
10. Opinion of Fund's Independent Accountant
The Custodian shall take all reasonable actions, as the Fund on behalf
of each applicable Portfolio may from time to time request, to obtain from year
to year favorable opinions from the Fund's independent accountants with respect
to its activities hereunder in connection with the preparation of the Fund's
Form N-lA, and Form
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<PAGE> 38
N-SAR or other periodic reports to the Securities and Exchange Commission and
with respect to any other requirements of such Commission.
11. Reports to Fund by Independent Public Accountants
The Custodian shall provide the Fund, on behalf of each of the
Portfolios at such time as the Fund may reasonably require, with reports by
independent public accountants on the accounting system, internal accounting
control and procedures for safeguarding securities, futures contracts and
options on futures contracts, including securities deposited and/or maintained
in a Securities System and securities deposited and/or maintained in the Direct
Paper System, relating to the services provided by the Custodian under this
Contract; such reports, shall be of sufficient scope and in sufficient detail,
as may reasonably be required by the Fund to provide reasonable assurance that
any material inadequacies would be disclosed by such examination, and, if there
are no such inadequacies, the reports shall so state.
12. Compensation of Custodian
The Custodian shall be entitled to reasonable compensation for its
services and expenses as Custodian, as agreed upon from time to time between the
Fund on behalf of each applicable Portfolio and the Custodian.
13. Responsibility of Custodian
So long as and to the extent that it is in the exercise of reasonable
care, the Custodian shall not be
-34-
<PAGE> 39
responsible for the title, validity or genuiness of any property or evidence of
title thereto received by it or delivered by it pursuant to this Contract and
shall be held harmless in acting upon any notice, request, consent, certificate
or other instrument reasonably believed by it to be genuine and to be signed by
the proper party or parties. The Custodian shall be held to the exercise of
reasonable care in carrying out the provisions of this Contract, but shall be
kept indemnified by and shall be without liability to the Fund for any action
taken or omitted by it in good faith without negligence. It shall be entitled to
rely on and may act upon advice of counsel (who may be counsel for the Fund) on
all matters, and shall be without liability for any action reasonably taken or
omitted pursuant to such advice. Notwithstanding the foregoing, the
responsibility of the Custodian with respect to redemptions effected by check
shall be in accordance with a separate Agreement entered into between the
Custodian and the Fund.
The Custodian shall be liable for the acts or omissions of a foreign
banking institution appointed pursuant to the provisions of Article 3 to the
same extent as set forth in Article I hereof with respect to sub-custodians
located in the United States (except as specifically provided in Article 3.10)
and, regardless of whether assets are maintained in the custody of a foreign
banking institution, a foreign securities depository or a branch of a U.S. bank
as contemplated by paragraph 3.11
-35-
<PAGE> 40
hereof, the Custodian shall not be liable for any loss, damage, cost, expense,
liability or claim resulting from, or caused by, the direction of or
authorization by the Fund to maintain custody or any securities or cash of the
fund in a foreign country including, but not limited to, losses resulting from
nationalization, expropriation, currency restrictions, or acts of war or
terrorism.
If the Fund on behalf of a Portfolio requires the Custodian to take any
action with respect to securities, which action involves the payment of money or
which action may, in the opinion of the Custodian, result in the Custodian or
its nominee assigned to the Fund or the Portfolio being liable for the payment
of money or incurring liability of some other form, the Fund on behalf of the
Portfolio, as a prerequisite to requiring the Custodian to take such actions,
shall provide indemnity to the Custodian in an amount and form satisfactory to
it.
The Fund agrees to indemnify and hold harmless the Custodian and its
nominee from and against all taxes, charges, expenses, assessments, claims and
liabilities (including counsel fees) incurred or assessed against it or its
nominee in connection with the performance of this Contract, except such as may
arise from it or its nominee's own negligent action, negligent failure to act or
willful misconduct. The Custodian is authorized to charge any account of the
Fund for such items and its fees. To secure any such authorized charges and any
advances of cash or securities made by the Custodian to or
-36-
<PAGE> 41
for the benefit of the Fund for any purposes which results in the Fund incurring
an overdraft at the end of any business day or for extraordinary or emergency
purposes during any business day, the Fund hereby grants to the Custodian a
security interest in and pledges to the Custodian securities held for it by the
Custodian, in an amount not to exceed the lessor of the dollar amounts borrowed
or ten percent of the Fund's gross assets, the specific to be designated in
writing from time to time by the Fund or its investment adviser. Should the Fund
fail to repay promptly any advances of cash or securities, the Custodian shall
be entitled to use available cash and to dispose of pledged securities and
property as is necessary to repay any such advances.
14. Effective Period, Termination and Amendment
This Contract shall become effective as of its execution, shall
continue in full force and effect until terminated as hereinafter provided, may
be amended at any time by mutual agreement of the parties hereto and may be
terminated by either party by an instrument in writing delivered or mailed,
postage prepaid to the other party, such termination to take effect not sooner
than thirty (30) days after the date of such delivery or mailing; provided,
however that the Custodian shall not with respect to a Portfolio act under
Section 2.10 hereof in the absence of receipt of an initial certificate of the
Secretary or an Assistant Secretary that the Board of Trustees of the Fund has
approved the initial use of a
-37-
<PAGE> 42
particular Securities System by such Portfolio and the receipt of an annual
certificate of the Secretary or an Assistant Secretary that the board of
Trustees has reviewed the use such Portfolio of such Securities System, as
required in each case by Rule 17f-4 under the Investment Company Act of 1940, as
amended and that the Custodian shall not with respect to a Portfolio act under
Section 2.10A hereof in the absence of receipt of an initial certificate of the
Secretary or an Assistant Secretary that the Board of Trustees has approved the
initial use of the Direct Paper System by such Portfolio and the receipt of an
annual certificate of the Secretary or an assistant Secretary that the Board of
Trustees has reviewed the use by such Portfolio of the Direct Paper System;
provided further, however, that the Fund shall not amend or terminate this
Contract in contravention of any applicable federal or state regulations, or any
provision of the Declaration of Trust, and further provided, that the Fund on
behalf of one or more of the Portfolios may at any time by action of its Board
of Trustees, (i) substitute another bank or trust company for the Custodian by
giving notice as described above to the Custodian, or (ii) immediately terminate
this Contract in the event of the appointment of a conservator or receiver for
the Custodian by the Comptroller of the Currency or upon the happening of a like
event at the direction of an appropriate regulatory agency or court of competent
jurisdiction.
-38-
<PAGE> 43
Upon termination of the Contract, the Fund on behalf of each applicable
Portfolio shall pay to the Custodian such compensation as may be due as of the
date of such termination and shall likewise reimburse the Custodian for its
costs, expenses and disbursements.
15. Successor Custodian
If a successor custodian for the Fund, of one or more of the Portfolios
shall be appointed by the Board of Trustees of the Fund, the Custodian shall,
upon termination, deliver to such successor custodian at the office of the
Custodian, duly endorsed and in the form for transfer, all securities of each
applicable Portfolio then held by it hereunder and shall transfer to an account
of the successor custodian all of the securities of each such Portfolio held in
a Securities System.
If no such successor custodian shall be appointed, the Custodian shall,
in like manner, upon receipt of a certified copy of a vote of the Board of
Trustees of the Fund, deliver at the office of the Custodian and transfer such
securities, funds and other properties in accordance with such vote.
In the event that no written order designating a successor custodian or
certified copy of a vote of the Board of Trustees shall have been delivered to
the Custodian on or before the date when such termination shall become
effective, then the Custodian shall have the right to deliver to a bank or trust
company, which is a "bank" as defined in the Investment Company Act of 1940,
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<PAGE> 44
doing business in Boston, Massachusetts, of its own selection, having any
aggregate capital, surplus, and undivided profits, as shown by its last
published report, of not less than $25,000,000, all securities, funds and other
properties held by the Custodian on behalf of each applicable Portfolio and all
instruments held by the Custodian relative thereto and all other property held
by it under this Contract and to transfer to an account of such successor
custodian all the securities of each such Portfolio held in any Securities
System and the Direct Paper System. Thereafter, such bank or trust company shall
be the successor of the Custodian under this Contract.
In the event that securities, funds and other properties remain in the
possession of the Custodian after the date of termination hereof owing to
failure of the Fund to procure the certified copy of the vote referred to or of
the Board of Trustees to appoint a successor custodian, the Custodian shall be
entitled to fair compensation for its services during such period as the
Custodian retains possession of such securities, funds and other properties and
the provisions of this Contract relating to the duties and obligations of the
Custodian shall remain in full force and effect.
16. Interpretive and Additional Provisions
In connection with the operation of this Contract, the Custodian and
the Fund on behalf of each of the Portfolios, may from time to time agree on
such provisions interpretive of or in addition to the provisions of this
Contract as may in their joint opinion be consistent with
-40-
<PAGE> 45
the general tenor of this Contract. Any such interpretive or additional
provisions shall be in writing signed by both parties and shall be annexed
hereto, provided that no such interpretive or additional provisions shall
contravene any applicable federal or state regulations or any provision of the
Declaration of Trust of the Fund. No interpretive or additional provisions made
as provided in the preceding sentence shall be deemed to be an amendment of this
Contract.
17. Additional Funds
In the event that the Fund establishes one or more series of Shares in
addition to Helmsman Prime Obligation Portfolio, Helmsman Government Portfolio
Helmsman income Portfolio, Helmsman Tax Free Obligations Portfolio, and Helmsman
Value Equity Portfolio with respect to which it desires to have the Custodian
render services as custodian under the terms hereof, it shall so notify the
Custodian in writing, and if the Custodian agrees in writing to provide such
services, such series of Shares shall become a Portfolio hereunder.
18. Massachusetts Law to Apply
This Contract shall be construed and the provisions thereof interpreted
under and in accordance with laws of the Commonwealth of Massachusetts.
19. Prior Contracts
This Contract supersedes and terminates, as of the date hereof, all
prior contracts between the Fund on behalf of each of the Portfolios and the
Custodian relating to the custody of the Fund's assets.
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<PAGE> 46
20. Names. The names The Helmsman Fund and Trustees of The Helmsman Fund
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 which is hereby referred to and a copy of which is on
file at the office of the State Secretary of the Commonwealth of Massachusetts
and at the principal office of the Trust. The obligations of The Helmsman Fund
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 Trust Property, and all persons dealing
with any class of shares of the Trust must look solely to the Trust property
belonging to such class for the enforcement of any claims against the Trust.
-42-
<PAGE> 47
IN WITNESS WHEREOF, each of the parties has caused this instrument to be
executed in its name and behalf by its duly authorized representative and its
seal to be hereunder affixed as of the 29th day of July, 1981.
The Helmsman Fund
BY: /s/ MARK A. DILLON
-----------------------------------------------------------------------
ATTEST:
/s/ Rene S. Anderson
-----------------------------------------------------------------------
STATE STREET BANK AND TRUST COMPANY
BY: /s/
-----------------------------------------------------------------------
Vice President
ATTEST:
/s/
-----------------------------------------------------------------------
Assistant Secretary
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<PAGE> 48
Schedule A
The following foreign banking institutions and foreign securities
depositories have been approved by the Board of Trustees of The Helmsman Fund
for the use as sub-custodians for the Fund's securities and other assets:
(Insert banks and securities depositories)
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<PAGE> 49
EXHIBIT 1
SUB CUSTODIAN AGREEMENT
TO:
Gentlemen:
The undersigned ("State Street") hereby request that you (the "Bank")
establish a custody account and a cash account for each Fund identified in the
Schedule attached to this Agreement and each additional account which is
identified to this Agreement. Each such custody or cash account a applicable
will be referred to herein as the "Account" and will be subject to the following
terms and conditions:
1. The Bank shall hold as agent for State Street and shall
physically segregate in the Account such cash, bullion, coin,
stocks, shares, bonds, debentures, notes and other securities
and other property which is delivered to the Bank for that
State Street Account (the "Property").
2. a. Without the prior approval of State Street it will not
deposit securities in any securities depository or utilize
a clearing agency, incorporated or organized under the laws
of a country other than the United States, unless such
depository or clearing house operates the central system
for handling of securities or equivalent book-entries in
that country or operates a transnational system for the
central handling of securities or equivalent book-entries;
b. when securities held for an Account are deposited in a
securities depository or clearing agency by the Bank, the
Bank shall identify on its books as belonging to State
Street as agent for such Account, the securities so
deposited.
3. The Bank represents that either:
a. It currently has stockholders' equity in excess of $200
million (U.S. dollars or the equivalent of U.S. dollars
computed in accordance with generally accepted U.S.
accounting principles) and will promptly inform State
Street in the event that there
<PAGE> 50
appears to be substantial likelihood that its stockholders'
equity will decline below $200 million, or in any event, at
such time, as its stockholders' equity in fact declines
below $200 million; or
b. It is the subject of an exemptive order issued by the
United States Securities and Exchange Commission, which
order permits State Street to employ the Bank as a sub
custodian, notwithstanding the fact that the Bank's
stockholders' equity is currently below $200 million or may
in the future decline below $200 million due to currency
fluctuation.
4. Upon the written instructions of State Street, as permitted by
Paragraph 8, the Bank is authorized to pay cash from the
Account and to sell, assign, transfer, deliver or exchange, or
to purchase for the Account, any and all stocks, shares,
bonds, debentures, notes and other securities ("Securities')
bullion, coin and any other property, but only as provided in
such written instructions. The Bank shall not be held liable
for any act or omission to act on instructions given or
purported to be given should there by any error in such
instructions.
5. Unless the Bank receives written instructions of State Street
to the contrary, the Bank is authorized:
a. To maintain securities registered in such name as State
Street may instruct or in the name of State Street or any
nominee of State Street or in the name of any nominee of
the Bank which nominee shall be assigned exclusively to
such name as State Street shall instruct, unless State
Street has authorized in writing the appointment of a
nominee to be used in common with other entities named in
State Street's instructions. All securities accepted by
the Bank on behalf of State Street under the terms of this
Contract shall be in "street name" or other good delivery
form.
b. To promptly receive and collect all income and principal
with respect to the Property and to credit cash receipts to
the Account;
c. To promptly exchange securities where the exchange is
purely ministerial (including, without limitation, the
exchange of temporary securities for those in definitive
form and the exchange of warrants, or other documents of
entitlement to securities, for the securities themselves);
<PAGE> 51
d. To promptly surrender securities at maturity or when called
for redemption upon receiving payment therefor;
e. Whenever notification of a rights entitlement or a
fractional interest resulting from a rights issue, stock
dividend or stock split is received for the Account and
such rights entitlement or fractional interest bears an
expiration date, the Bank will endeavor to obtain State
Street Bank's instructions, but should these not be
received in time for the Bank to take timely actions, the
Bank is authorized to sell such rights entitlements or
fractional interest and to credit the Account;
f. To hold registered in the name of the nominee of the Bank
or its agents such Securities as are ordinarily held in
registered form;
g. To execute in State Street's name for the Account, whenever
the Bank deems it appropriate, such ownership an other
certificates as may be required to obtain the payment of
income from the Property; and
h. To pay or cause to be paid, from the Account any and all
taxes and levies in the nature of taxes imposed on such
assets by any governmental authority and shall use
reasonable efforts, to promptly reclaim any foreign
withholding tax relating to the Account.
6. If the Bank shall receive any proxies, notices, reports or
other communications relative to any of the Securities of the
account in connection with tender offers, reorganization,
mergers, consolidations, or similar events which may have an
impact upon the issuer thereof, the Bank shall promptly
transmit any such communication to State Street by such means
as will permit State Street to take timely action with respect
thereto.
7. The Bank is authorized in its discretion to appoint brokers
and agents in connection with the Bank's handling of
transactions relating to the Property provided that any such
appointment shall not relieve the Bank of any of its
responsibilities or liabilities hereunder.
8. Written instructions shall include (i) instructions in writing
signed by such persons
<PAGE> 52
as are designated in writing by State Street; (ii) telex or
tested telex instructions of State Street; (iii) other forms
of instruction in computer readable form as shall be
customarily utilized for the transmission of like information;
and (iv) such other forms of communication as from time to
time shall be agreed upon by State Street and the Bank.
9. The Bank shall supply periodic reports with respect to the
safekeeping of assets held by it under this agreement. The
content of such reports shall include but not be limited to
any transfer to or from any account held by the Bank hereunder
and such other information as State Street may reasonably
request.
10. In addition to its obligations under Section 2B hereof, the
Bank shall maintain such other records as may be necessary to
identify the assets hereunder as belonging to each Fund
identified in our Schedule attached to this agreement and each
additional account which is identified to this agreement.
11. The Bank agrees that its books and records relating to its
actions under this Agreement shall be opened to the physical,
on-premises inspection and audit at reasonable times by
officers of, auditors employed by or other representatives of
State Street (including to the extent permitted under law the
independent public accountants for any entity whose Property
is being held hereunder) and shall be retained for such period
as shall be agreed by State Street and the Bank.
12. The Bank shall be entitled to reasonable compensation for its
services and expenses as custodian under this Agreement, as
agreed upon from time to time by the Bank and State Street.
13. The Bank shall exercise reasonable care in the performance of
its duties, as are set forth or contemplated herein or
contained in instructions given to the Bank which are not
contrary to this Agreement, shall maintain adequate insurance
and agrees to indemnify and hold harmless, State Street and
each Account from and against any loss, damage, cost, expense,
liability or claim arising out of or in connection with the
Bank's performance of its obligations hereunder.
14. The Bank agrees (i) the Property held hereunder is not subject
to any right, charge, security interest, lien or claim of any
kind in favor of the Bank or any of its agents or its
creditors
<PAGE> 53
except a claim of payment for their safe custody and
administration and (ii) the beneficial ownership of the
Property shall be freely transferable without the payment of
money or other value other than for safe custody or
administration.
15. The Bank agrees to meet State Street Operating Requirements
(See Exhibit A).
16. This Agreement may be terminated by the Bank or State Street
by 60 days' written notice to the other, sent by registered
mail or express courier. The Bank, upon the date this
Agreement terminate pursuant to notice which has been given in
a timely fashion, shall deliver the Property to the beneficial
owner unless the Bank has received from the beneficial owner
60 days' prior to the date on which this Agreement is to be
terminated written instructions of State Street specifying the
name(s) of the person(s) to whom the Property shall be
delivered.
17. The Bank and State Street shall each use its best efforts to
maintain the confidentiality of the Property in each Account,
subject, however, to the provisions of any laws requiring the
disclosure of the Property.
18. Unless otherwise specified in this Agreement, all notices with
respect to matters contemplated by this Agreement, shall be
deemed duly given when received in writing or by confirmed
telex by the Bank or State Street at their respective
addresses set forth below or at such other address as be
specified in each case-in a notice similarly given:
To State Street Master Trust Division, Global Custody STATE
STREET BANK AND TRUST COMPANY
P.O. Box 1713
Boston, Massachusetts 02105 U.S.A.
To the Bank
19. This Agreement shall be governed by and construed in
accordance with the laws of except to the extent that such
laws are preempted by the laws of the United States of
America.
<PAGE> 54
Please acknowledge your agreement to the foregoing by executing a copy of this
letter,
Very truly yours,
STATE STREET BANK AND TRUST
COMPANY
By:_________________________________
Vice President
Date:_______________________________
Agreed to by:
By:_________________________________
Date:_______________________________
<PAGE> 1
EXHIBIT (8)(b)
AMENDMENT TO CUSTODIAN CONTRACT DATED JULY 29, 1988 BETWEEN
REGISTRANT AND STATE STREET BANK AND TRUST COMPANY
<PAGE> 2
AMENDMENT TO CUSTODIAN CONTRACT
Agreement made by and between State Street Bank and Trust Company (the
"Custodian") and The One Group (formerly the Helmsman Fund) (the "Fund").
WHEREAS, the Custodian and the Fund are parties to a custodian contract
dated July 29, 1988 (the "Custodian Contract") governing the terms and
conditions under which the Custodian maintains custody of the securities and
other assets of the Fund; and
WHEREAS, the Custodian and the Fund desire to amend the terms and
conditions under which the Custodian maintains the Fund's securities and other
non-cash property in the custody of certain foreign sub-custodians in conformity
with the requirements of Rule 17f-5 under the Investment Company Act of 1940, as
amended;
NOW THEREFORE, in consideration of the premises and covenants contained
herein, the Custodian and the Fund hereby amend the Custodian Contract by the
addition of the following terms and provisions;
1. Notwithstanding any provisions to the contrary set forth in the
Custodian Contract, the Custodian may hold securities and other non-cash
property for all of its customers, including the Fund, with a foreign
sub-custodian in a single account that is identified as belonging to the
Custodian for the benefit of its customers, provided however, that (i) the
records of the Custodian with respect to securities and other non-cash property
of the Fund which are maintained in such account shall identify by book-entry
those securities and other non-cash property belonging to the Fund and (ii) the
Custodian shall require that securities and other non-cash property so held by
the foreign sub-custodian be held separately from any assets of the foreign
sub-custodian or of others.
2. Except as specifically superseded or modified herein, the terms and
provisions of the Custodian Contract shall continue to apply with full force and
effect.
IN WITNESS WHEREOF, each of the parties has caused this instrument to
be executed as a sealed instrument in its name and behalf by its duly authorized
representative this 29th day of July, 1998.
THE ONE GROUP
By: /s/ MARK S. REDMAN
-----------------------------------
Title: Vice President
--------------------------------
STATE STREET BANK AND TRUST COMPANY
By: /s/ CHARLES R. WHITTEMORE, JR.
-----------------------------------
Title: Vice President
--------------------------------
<PAGE> 1
EXHIBIT (8)(d)
FIRST AMENDMENT TO THE SUBCUSTODIAN AGREEMENT DATED AS OF DECEMBER, 1996
BETWEEN
STATE STREET BANK AND TRUST COMPANY,
BANK ONE TRUST COMPANY, N.A. AND THE REGISTRANT
<PAGE> 2
FIRST AMENDMENT TO THE SUBCUSTODIAN AGREEMENT
This First Amendment to the Subcustodian Agreement (the "Subcustodian
Agreement") by and between State Street Bank and Trust Company, a Massachusetts
trust company (the "Custodian") and Bank One Trust Company, N.A. (the
"Subcustodian") and The One Group(R), an open-end management investment company
registered under the Investment Company Act of 1940 ("The One Group") is hereby
made this __ day of December, 1996. The parties hereto hereby agree to amend the
Subcustodian Agreement by deleting Section 4 in its entirety and substituting
the following in its place:
"Section 4. Accounts. Securities shall be held in a separate Securities
Lending Account for each Fund of The One Group and, except for securities held
in a Securities Depository or Book Entry Account as defined below, physically
segregated at all times from those of any other persons, firms, or corporations.
All securities received as Collateral in connection with loans of securities or
investments of Cash Collateral may be held in the Securities Lending Account
established for the particular Fund of The One Group or commingled in a
collateral account established for the Securities Lending Program. The
Subcustodian may hold securities in: (i) the bank vault of Subcustodian; (ii)
such other banks or trust companies as have been approved by The One Group and
pursuant to a written agreement between such other banks or trust companies and
the Subcustodian; (iii) its accounts with a clearing agency registered with the
Securities and Exchange Commission under Section 17A of the Securities Exchange
Act of 1934, which acts as a securities depository (the "Securities
Depository"); or (iv) a book-entry account which is maintained for the
Subcustodian by a Federal Reserve Bank (the "Book Entry Account").
So long as Subcustodian maintains any account pursuant to (iii) or (iv)
above for The One Group, Subcustodian shall: (i) identify as belonging to The
One Group a quantity of such securities in the fungible bulk of securities (A)
registered in the name of Subcustodian or its nominee, or (B) shown on
Subcustodian's account on the books of the Securities Depository, the Book-Entry
Account, or Subcustodian's agent; (ii) promptly send to the Custodian reports it
receives from the appropriate Federal Reserve Bank or Securities Depository on
its system of internal accounting control; and (iii) send to the Custodian such
reports of the systems of internal accounting control of Subcustodian and its
agents through which
-1-
<PAGE> 3
such securities are deposited as are available and as the Custodian may
reasonably request from time to time."
IN WITNESS WHEREOF, each of the parties has caused this Agreement to be
executed this __ day of December, 1996.
THE ONE GROUP
By: /s/ MARK A. REDMAN
---------------------------------
Title: Vice President
------------------------------
BANK ONE TRUST COMPANY, N.A.
(as Subcustodian)
By: /s/ STEVEN E. CUTLER
---------------------------------
Title: Vice President
------------------------------
STATE STREET BANK AND TRUST COMPANY
(as Custodian)
By: /s/ CHARLES R. WHITTEMORE, JR.
---------------------------------
Title: Vice President
------------------------------
-2-
<PAGE> 1
EXHIBIT (9)(c)
TRANSFER AGENCY AND SERVICE AGREEMENT, DATED AS OF JULY 29,1988
BETWEEN THE REGISTRANT AND STATE STREET BANK AND TRUST COMPANY
<PAGE> 2
TRANSFER AGENCY AND SERVICE AGREEMENT
between
The Helmsman Fund
and
STATE STREET BANK AND TRUST COMPANY
Winsbury
Revised 2/9/88
ASA2 05/86
Standard series Trust
<PAGE> 3
TABLE OF CONTENTS
Page
----
Article 1 Terms of Appointment; Duties of the Bank...........................2
Article 2 Fees and Expenses ................................................5
Article 3 Representations and Warranties of the Bank.........................6
Article 4 Representations and Warranties of the Fund.........................6
Article 5 indemnification ..................................................7
Article 6 Covenants of the Fund and the Bank ...............................10
Article 7 Termination of Agreement .........................................11
Article 8 Additional Funds .................................................11
Article 9 Assignment .......................................................12
Article 10 Amendment ........................................................12
Article 11 Massachusetts Law to Apply .......................................12
Article 12 Merger of Agreement ..............................................12
Article 13 Names.............................................................12
<PAGE> 4
TRANSFER AGENCY AND SERVICE AGREEMENT
AGREEMENT made as of the 29th day of July, 1988, by and between The
Helmsman Fund a Massachusetts business trust, having its principal office and
place of business at 33 North Third Street, Columbus, Ohio 43215 (the "Fund"),
and STATE STREET BANK AND TRUST COMPANY, a Massachusetts Trust Company having
its principal office and place of business at 225 Franklin Street, Boston,
Massachusetts 02110 (the "Bank").
WITNESSETH
WHEREAS, the Fund is authorized to issue shares in separate series,
with each such series representing interests in a separate Portfolio of
securities and other assets; and
WHEREAS, the Fund intends to initially offers shares in five (5)
series, the Helmsman Prime Obligation on Portfolio, Helmsman Government
Portfolio, Helmsman Income Portfolio, Helmsman Tax Free obligations Portfolio
and Helmsman Value Equity Portfolio (each such series, together with all other
series subsequently established by the Fund and made subject to this Agreement
in accordance with Article 8, being herein referred to, as a Portfolio, and
collectively to the "Portfolios";
WHEREAS, the Fund, on behalf of the Portfolios desires to appoint the
Bank as its transfer agent, dividend disbursing agent and agent in connection
with certain other activities, and the Bank desires to accept such appointment;
NOW THEREFORE, in consideration of the mutual covenants therein
container the parties hereto agree as follows:
Article I Terms of Appointment; Duties of the Bank
1.01 Subject to the terms and conditions set forth in this Agreement,
the Fund, on behalf of the Portfolios, hereby employs and appoints the Bank to
act as, and the Bank agrees to act as, transfer agent for the authorized and
issued shares of beneficial interest of the Fund representing interests in each
of the respective Portfolios ("Shares"), dividend disbursing agent and agent in
connection with any
<PAGE> 5
accumulation, open-account or similar plans provided to the shareholders of each
of the respective Portfolios of the ("Shareholders") and set out in the
currently effective prospectus and statement of additional information
("Prospectus") of the Fund on behalf of the applicable Portfolio, including
without limitation any periodic investment plan or periodic withdrawal program.
1.02 Than Bank agrees that it will perform the following services:
(a) In accordance with procedures established from time to time by
agreement between the Fund on behalf of each of the Portfolios, as applicable,
and the Bank, the Bank shall:
(i) Receive for acceptance, orders for the purchase of Shares, and
promptly deliver payment and appropriate documentation
therefor to the Custodian of the Fund authorized pursuant to
the Declaration of Trust of the Fund (the "Custodian");
(ii) Pursuant to purchase orders, issue the appropriate number of
Shares and hold such Shares in the appropriate Shareholder
account;
(iii) Receive for acceptance, retention requests and redemption
directions and deliver the appropriate documentation therefor
to the Custodian;
(iv) At the appropriate time as and when it receives monies paid to
it by the Custodian with respect to any redemption, pay over
or, cause to be paid over in the appropriate manner such
monies as instructed by the redeeming Shareholders;
(v) Effect transfers of Shares by the registered owners thereof
upon receipt of appropriate instructions;
(vi) Prepare and transmit payments for dividends and distributions
declared by the Fund on behalf of the applicable Portfolio;
(vii) Maintain records of account for and advise the Fund and its
Shareholders as to the foregoing; and
(viii) Record the issuance of Shares and maintain pursuant to SEC
Rule 17Ad-10(e) a record of the total number of Shares which
are authorized, based upon data provided to it by the
<PAGE> 6
Fund, as issued and outstanding. Bank shall also provide the
Fund on a regular basis with the total number of Shares which
are authorized and issued and outstanding and shall have no
obligation, when recording the issuance of Shares, to monitor
the issuance of such Shares or to take cognizance of any laws
relating to the issue or sale of such Shares, which functions
shall be the sole responsibility of the Fund.
(b) In addition to and not in lieu of the services set forth in the
above paragraph (a), the Bank shall: (i) perform all of the customary services
of a transfer, agent, dividend disbursing agent and, as relevant, agent in
connection with accumulation, open-account or similar plans (including
withdrawal program); including but not limited to: maintaining all Shareholder
accounts, preparing Shareholder meeting lists, mailing proxies, receiving and
tabulating proxies, mailing Shareholder reports and prospectuses to current
Shareholders, withholding taxes on U.S. resident and non-resident alien
accounts, preparing and filing U.S. Treasury Department Forms 1099 and other
appropriate forms required with respect to dividends and distributions by
federal authorities for all registered Shareholders, preparing and mailing
confirmation forms and statements of account to Shareholders for all purchases
and redemptions of Shares and other confirmable transactions in Shareholder
accounts, preparing and mailing activity statements for Shareholders, and
providing Shareholder account information and, (ii) provide a system which will
enable the Fund to monitor the total number of Shares sold in each state.
(c) In addition the Fund shall (i) identify to the Bank in writing
those transactions and assets to be treated as exempt from the blue sky
reporting to the Fund for each State and (ii) verify the establishment of
transactions for each State on the system prior to activation and thereafter
monitor the daily activity for each State. The responsibility of the Bank for
the Fund's blue sky State registration status is solely limited to the initial
establishment of transactions subject to blue sky compliance by the Fund and the
reporting of such transactions to the Fund as provided above.
Procedures applicable to certain of these services may be established
from time to time by agreement between the Fund and the Bank.
<PAGE> 7
Article 2 Fees and Expenses
2.01 For performance by the Bank pursuant to this Agreement, the Fund
agrees on behalf of each of the Portfolios, to pay the Bank an annual
maintenance fee for each Shareholder account as set out in the initial fee
schedule attached hereto. Such fees and out-of-pocket expenses and advances
identified under Section 2.02 below may be changed from time to time subject to
mutual written agreement between the Fund and the Bank.
2.02 In addition to the fee paid under Section 2.01 above, the Fund
agrees on behalf of each of the Portfolios, to reimburse the Bank for
out-of-pocket expenses or advances incurred by the Bank for the items set out in
the fee schedule attached hereto. in addition, any other expenses incurred by
the Bank at the request or with the consent of the Fund, will be reimbursed by
the Fund on behalf of the applicable Portfolio.
2.03 The Fund agrees on behalf of each of the Portfolios, to pay all
fees and reimbursable expenses within five days following the mailing of the
respective billing notice. Postage for mailing of dividends, proxies, Fund
reports and other mailings to all Shareholder accounts shall be advanced to the
Bank by the Fund at least seven (7) days prior to the mailing date of such
materials.
Article 3 Representations and Warranties of the Bank
The Bank represents and warrants to the Fund that:
3.01 It is a trust company duly organized and existing and in good
standing under the laws of the Commonwealth of Massachusetts.
3.02 It is duly qualified to carry on its business in the Commonwealth
of Massachusetts.
3.03 It is empowered under applicable laws and by its charter and
by-laws to enter into and perform this Agreement.
3.04 All requisite corporate proceedings have been taken to authorize
it to enter into and perform this Agreement.
3.05 It has and will continue to have access to the necessary
facilities, equipment and
<PAGE> 8
personnel to perform its duties and obligations under this Agreement.
Article 4 Representations and Warranties of the Fund
The Fund represents and warrants to the Bank that:
4.01 It is a business trust duly organized and existing and in good
standing under the laws of Massachusetts.
4.02 It is empowered under applicable laws and by its Declaration of
Trust and By-Laws to enter into and perform this Agreement.
4.03 All proceedings required by said Declaration of Trust and By-Laws
have been taken to authorize it to enter into and perform this Agreement.
4.04 It is an open-end and diversified investment company registered
under the Investment Company Act of 1940.
4.05 A registration statement under the Securities Act of 1933 on
behalf of each of the Portfolios, is currently effective and will remain
effective, and appropriate state securities law filings have been made and will
continue to be made, with respect to all Shares being offered for sale.
Article 5 Indemnification
5.05 The Bank shall not be responsible for, and the Fund shall on
behalf of the applicable Portfolio, indemnify and hold the Bank harmless from
and against, any and all losses, damages, costs, charges, counsel fees,
payments, expenses and liability arising out of or attributable to:
(a) All actions of the Bank or its agent or subcontractors required to
be taken pursuant to this Agreement, provided that such actions are taken in
good faith and without negligence or willful misconduct.
(b) The Fund's refusal or failure to comply with the terms of this
Agreement, or which arise out of the Fund's lack of good faith, negligence, or
willful misconduct or which arise out of the breach of any representation or
warranty of the Fund hereunder.
(c) The reliance on or use by the Bank or its agents or subcontractors
of information, records
<PAGE> 9
and documents which (i) are received by the Bank or its agents or subcontractors
and furnished to it by or on behalf of the Fund, and (ii) have been prepaid
and/or maintained by the Fund or any other person or firm on behalf of the Fund.
(d) The reliance on, or the carrying out by the Bank or its agents or
subcontractors of, any instructions or requests of the Fund on behalf of the
applicable Portfolio.
(e) The offer or sale of Shares in violation of any requirement under
the federal securities laws or regulations or the securities laws or regulations
of any state that such Shares be registered in such state or in violation of any
stop order or other determination or ruling by any federal agency or any state
with respect to the offer or sale of such Shares in such state.
5.02 The Bank shall indemnify and hold the Fund harmless from and
against any and all losses, damages, costs, charges, counsel fees, payments,
expenses and liability arising out of or attributed to any action or failure or
omission to act by the Bank as a result of the Bank's lack of good faith,
negligence or willful misconduct.
5.03 At any time the Bank may apply to any officer of the Fund for
instructions, and may consult with legal counsel with respect to any matter
arising in connection with the services to be performed by the Bank under this
Agreement, and the Bank and its agents or subcontractors shall not be liable and
shall be indemnified by the Fund on behalf of the applicable Portfolio, for any
action taken or omitted by it in reliance upon such instructions or upon the
opinion of such counsel. The Bank, its agents and subcontractors shall be
protected and indemnified in acting upon any paper or document furnished by or
on behalf of the Fund, reasonably believed to be genuine and to have been signed
by the proper person or persons, or upon any instruction, information, data,
records or documents provided the Bank or its agents or subcontractors by
machine readable input, telex, CRT data entry or other similar means authorized
by the Fund, and shall not be held to have notice of any change of authority of
any person, until receipt of written notice thereof from the Fund. The Bank, its
agents and subcontractors shall also be protected and indemnified in recognizing
stock certificates which are reasonably believed to bear the
<PAGE> 10
proper manual or facsimile signatures of the officer of the Fund, and the proper
countersignature of any former transfer agent or registrar, or of a co-transfer
agent or co-registrar.
5.04 In the event either party is unable to perform its obligations
under the terms of this Agreement because of acts of God, strikes, equipment or
transmission failure or damage reasonably beyond its control, or other causes
reasonably beyond its control, such party shall not be liable for damages to the
other for any damages resulting from such failure to perform or otherwise from
such causes.
5.05 Neither party to this Agreement shall be liable to the other party
for consequential damages under any provision of this Agreement or for any act
of failure to act hereunder.
5.06 In order that the indemnification provisions contained in this
Article 5 shall apply, upon the assertion of a claim for which either party may
be required to indemnify the other, the party seeking indemnification shall
promptly notify the other party of such assertion, and shall keep the other
party advised with respect to all developments concerning such claim. The party
who may be required to indemnify shall have the option to participate with the
party seeking indemnification in the defense of such claim. The party seeking
indemnification shall in no case confess any claim or make any compromise in any
case in which the other party may be required to indemnify it except with the
other party's prior written consent.
Article 6 Covenants of the Fund and the Bank
6.01 The Fund shall, on behalf of each of the Portfolios, promptly
furnish to the Bank the following:
(a) A certified copy of the resolution of the Board of Directors of the
Fund authorizing the appointment of the Bank and the execution and delivery of
this Agreement.
(b) A copy of the Declaration of Trust and By-Laws of the Fund and all
amendments thereto.
6.02 The Bank hereby agrees to establish and maintain facilities and
procedures reasonably acceptable to the Fund for safekeeping of stock
certificates, check forms and facsimile signature
<PAGE> 11
imprinting devices, if any; and for the preparation or use, and for keeping
account of, such certificates, forms and devices.
6.03 The Bank shall keep records relating to the services to be
performed hereunder, in the form and manner as it may deem advisable. To the
extent required by Section 31 of the Investment Company Act of 1940, as amended,
and the Rules thereunder, the Bank agrees that all such records prepared or
maintained by the Bank relating to the services to be performed by the Bank
hereunder are the property of the Fund and will be preserved, maintained and
made available in accordance with such Section and Rules, and will be
surrendered to the Fund on and in accordance with its request.
6.04 The Bank and the Fund agree that all books, records, information
and data pertaining to the business of the other party which are exchanged or
received pursuant to the negotiation or the carrying out of this Agreement shall
remain confidential, and shall not be voluntarily disclosed to any other person,
except as may be required by law.
6.05 In case of any requests or demands for the inspection of the
Shareholder records of the Fund, the Bank will endeavor to notify the Fund and
to secure instructions from an authorized officer of the Fund as to such
inspection. The Bank reserves the right, however, to exhibit the Shareholder
records to any person whenever it is advised by its counsel that it may be held
liable for the failure to exhibit the Shareholder records to such person.
Article 7 Termination of Agreement
7.01 This Agreement may be terminated by either party upon one hundred
twenty (120) days written notice to the other.
7.02 Should the Fund exercise its right to terminate, all out-of-pocket
expenses associated with the movement of records and material will be borne by
the Fund, on behalf of the applicable Portfolios. Additionally, the Bank
reserves the right to charge for any other reasonable expenses associated with
such termination
Article 8 Additional Funds
<PAGE> 12
8.01 In the event that the Fund establishes one or more series of
shares in addition to the Helmsman Prime Obligation Portfolio, Helmsman
Government Portfolio, Helmsman Income Portfolio, Helmsman Tax Free Obligations
Portfolio and Helmsman Value Equity Portfolio with respect to which it desires
to have the Bank render services as transfer agent under the terms hereof, it
shall so notify the Bank in writing, and if the Bank agrees in writing to
provide such services, such series of Shares shall become a Portfolio hereunder.
Article 9 Assignment
9.01 Neither this Agreement nor any rights or obligations hereunder may
be assigned by either party without the written consent of the other party.
9.02 This Agreement shall inure to the benefit of and be binding upon
the parties and their respective permitted successors and assigns.
Article 10 Amendment
10.01 This Agreement may be amended or modified by a written agreement
executed by both parties and authorized or approved by a resolution of the
Trustees of the Fund.
Article 11 Massachusetts Law to Apply
11.01 This Agreement shall be construed and the provisions thereof
interpreted under and in accordance with the laws of the Commonwealth of
Massachusetts.
Article 12 Merger of Agreement
12.01 This Agreement constitutes the entire agreement between the
parties hereto with respect to the subject matter hereof and supersedes any
prior agreement with respect to the subject matter hereof whether oral or
written.
Article 13 Names
12.02 The names The Helmsman Fund and Trustees of The Helmsman Fund
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 which is hereby referred to and a copy of which is on
<PAGE> 13
file at the office of the State Secretary of the Commonwealth of Massachusetts
and at the principal office of the Trust. The obligations of The Helmsman Fund
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 Trust Property, and all persons dealing
with any class of shares cf the Trust must look solely to the Trust property
belonging to such class for the enforcement of any claims against the Trust.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
executed in their name and on their behalf under their seals by and through
their duly authorized officers, as of the day and year first above written.
THE HELMSMAN FUND
By: /s/ MARK A. DILLON
--------------------------------
Attest: /s/ RENE S. ANDERSON
----------------------------
STATE STREET BANK AND TRUST COMPANY
By: /s/
--------------------------------
Vice President
Attest: /s/
----------------------------
Assistant Secretary
<PAGE> 1
EXHIBIT (9)(d)
AMENDMENT TO THE TRANSFER AGENCY AND SERVICE AGREEMENT DATED AS OF FEBRUARY 6,
1992 BETWEEN THE REGISTRANT AND STATE STREET BANK AND TRUST COMPANY.
<PAGE> 2
AMENDMENT TO THE TRANSFER AGENCY
AND SERVICE AGREEMENT
THIS AMENDMENT, made as of February 6, 1992 between The Helmsman Fund (the
"Fund") and State Street Bank and Trust Company, (the "Bank") to the Transfer
Agency and Service Agreement between the Fund and the Bank dated July 29, 1988
(the "Agreement").
WITNESSETH THAT
WHEREAS, the Fund and the Bank desire that the Bank be authorized to
subcontract for the performance of its duties and obligations under the
Agreement:
NOW THEREFORE, the Fund and the Bank agree as follows:
Article 9.01 shall be hereby amended to read as follows:
9.01 Except as provided in Section 8.03 below, neither this Agreement
nor any rights or obligations hereunder may be assigned by either party without
the written consent of the other party.
Article 9.03 shall hereby be inserted and shall read as follows:
9.03 The Bank may, without further consent on the part of the Fund,
subcontract for the performance hereof with Boston Financial Data Services,
Inc., a Massachusetts corporation ("BFDS") which is duly registered as a
transfer agent pursuant to Section 17(c)(1) of the Securities and Exchange Act
of 1934, as amended ("Section 17(c)(1)"); provided however that the Bank shall
be as fully responsible to the Fund for the acts and omissions of any
subcontractor as it is for its own acts and omissions.
IN WITNESS WHEREOF, the parties hereto have caused this amendment to be
executed in their names And on their behalf by and through there duly authorized
officers, as of the above reference day and year.
ATTEST: STATE STREET BANK AND TRUST COMPANY
/s/ By: /s/ W. J. HAYES
- ------------------------------ --------------------------------
Assistant Secretary Vice President
ATTEST: THE HELMSMAN FUND
/s/ BY: /s/
- ------------------------------ --------------------------------
<PAGE> 1
Exhibit 9(p)
SECURITIES LENDING AGREEMENT FOR NON-ERISA
ACCOUNTS DATED AS OF AUGUST, 1995 BETWEEN THE
REGISTRANT, BANC ONE INVESTMENT ADVISORS CORPORATION
AND BANK ONE TRUST COMPANY, NA
<PAGE> 2
SECURITIES LENDING AGREEMENT
FOR NON-ERISA ACCOUNTS
This Securities Lending Agreement (the "Agreement") is entered into as
of August __, 1995 by and between The One Group(R), an open-end management
investment company formed under the Investment Company Act of 1940 (the
"Lender"), Banc One Investment Advisors Corporation, an investment adviser under
the Investment Advisers Act of 1940 (the "Advisee"), and Bank One Trust Company,
N.A., a national banking association (the "Subcustodian").
Background Information
----------------------
A. The Adviser serves as investment adviser to the Lender pursuant to
an Investment Advisory Agreement dated January 11, 1995, as amended
from time to time.
B. The Adviser in conjunction with the Subcustodian has developed a
securities lending program (the "Securities Lending Program"), (the
exact terms and conditions of which are contained in, and subject to
this Agreement) pursuant to which Adviser will provide lending agent
services to Lender for purposes of lending Lender's securities.
C. The Lender desires to appoint the Adviser as its lending agent and
Subcustodian as its custodian for the purpose of lending securities.
The Adviser has agreed to act as agent for the Lender and the
Subcustodian has agreed to act as custodian for the Lender in
accordance with the terms of this Agreement. The Lender has established
a securities lending account for each fund of the Lender (collectively,
the "Accounts") with the Subcustodian which will, from time to time,
hold the securities which are the subject of, and can be loaned
pursuant to the terms and conditions of this Agreement.
Statement of Agreement
----------------------
The parties hereby acknowledge the accuracy of the foregoing background
information and hereby agree as follows:
Section 1. APPOINTMENT. The Lender hereby appoints the Adviser as its
agent to act as set forth in this Agreement and the Adviser hereby accepts the
appointment as agent and agrees to so act. The Lender agrees that the Adviser is
acting as a fully disclosed agent and not as principal in connection with the
Securities Lending Program. The Adviser and the Subcustodian shall have the
right to disclose the identity of the Lender to any Borrower as defined herein
or give notice that such identity is available upon request.
Lender is a series investment company consisting of a variety of
investment portfolios and is entering this Agreement on behalf of the investment
portfolios identified on Exhibit A attached hereto and incorporated hereby by
reference ("Funds"). Any reference to Lender in this Agreement shall be deemed a
reference solely to the particular Fund to which a given lending transaction
under this Agreement relates. Under no circumstances shall the rights,
obligations, or remedies with respect to a particular Fund constitute a right,
obligation or remedy applicable to any other Fund. In particular and without
limiting the generality of the foregoing: (a) any event of default regarding one
Fund shall not create any right or obligation with respect to any other Fund,
(b) Advisor and the Subcustodian shall have no right to set off claims of a Fund
by applying property of any other Fund, and (c) no Fund shall have the right to
set off against assets or property held by a Borrower or Subcustodian for any
other Fund.
Lender was created under as a Massachusetts Business Trust under a
Declaration of Trust filed on May 23, 1985 ("Trust Agreement"). The Trust
Agreement provides, among other things, that trustees of Lender are responsible
for the actions of Lender in their capacity as trustees and not personally.
Adviser expressly acknowledges and agrees that the obligations of Lender
hereunder shall not be binding upon any of the shareholders, trustees, officers,
employees or agents of Lender, but shall only bind the trust property of Lender,
as provided in the Trust Agreement. The execution and delivery of this Agreement
by an officer of the Lender has
<PAGE> 3
been approved by the trustees of the Lender, and neither the authorization nor
the execution and delivery 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 Lender as provided in the Trust Agreement.
Section 2. AUTHORIZATION AND APPROVAL OF BORROWERS. The Adviser has
reviewed and approved the standard form of Master Securities Loan Agreement
attached hereto as Exhibit B and substantially similar agreements heretofore
executed by the Subcustodian for the lending of customer securities and
substantially similar agreements hereafter approved by Adviser and executed by
the Subcustodian (the "Loan Agreement" or "Loan Agreements"). The Lender hereby
authorizes the Adviser to lend securities delivered to the Subcustodian in
accordance with the Loan Agreements to any of the Borrowers specified by Adviser
on the list attached hereto as Exhibit C as amended from time to time by the
Adviser (each a "Borrower").
The Adviser is authorized to negotiate rebates with the Borrower to be
paid to the Borrower for the use of Cash Collateral (as defined in section 8(c))
as well as the fees to be paid to the Lender for the loan of securities
collateralized by Collateral other than Cash Collateral.
Section 3. LENDER'S REPRESENTATIONS. In order to permit the Adviser and
the Subcustodian to make such representations as may be required by the Loan
Agreement, the Lender hereby represents and warrants to the Adviser, which
representations and warranties shall be deemed to be continuing and to be
reaffirmed on any day that a loan under this Agreement is outstanding, that:
(a) This Agreement is, and each loan will be, legally and validly
entered into, does not, and will not, violate any statute, regulation, rule,
order, or judgment binding on the Lender, or any agreement binding on the Lender
or affecting its property, and is enforceable against the Lender in accordance
with its terms, except as may be limited by bankruptcy, insolvency, or similar
laws, or by equitable principles relating to or limiting creditors' rights
generally;
(b) The person executing this Agreement and any other persons
designated from time to time by the Lender in writing (each such person, an
"Authorized Person") are duly and properly authorized to act on behalf of the
Lender or the Adviser, respectively;
(c) The Lender owns the securities held in each Account or subject to a
loan under this Agreement free and clear of all liens, claims, security
interests and encumbrances and no such security has been sold. Lender agrees to
immediately notify the Adviser and identify any of the Securities which are no
longer subject to the representations set forth in this paragraph (c) or which
are otherwise being withdrawn from participation in the Securities Lending
Program;
(d) The Lender is acting as principal with respect to loans made under
this Agreement; and
(e) The Lender is not subject to the Employee Retirement Income
Security Act of 1974, as amended ("ERISA") with respect to this Agreement and
the securities held in the Account.
Section 4. LOAN OPPORTUNITIES. The Lender acknowledges and agrees that
the Adviser or the Subcustodian may lend securities owned by other of the
Adviser's or the Subcustodian's customers to Borrowers. The Lender agrees that
it shall have no claim against the Adviser or the Subcustodian based on, or
relating to, loans made for other customers or loan opportunities refused
hereunder, whether or not the Adviser has made fewer or more loans for any other
customer than for the Lender, and whether or not any loan for another customer,
or the opportunity refused, could have resulted in loans made under this
Agreement.
Section 5. MAKING OF LOANS. The Adviser will notify Borrowers that it
is prepared to lend securities of the Lender held in the Account. If the Adviser
determines, in response to a Borrower's orally advising the
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<PAGE> 4
Adviser of its desire to borrow securities, to lend securities of the Lender
pursuant to a Loan Agreement, the Adviser will instruct the Subcustodian to
deliver the securities, and is hereby authorized to take such actions to effect
the loan as are required by the Loan Agreement; provided, however, that the
Adviser shall lend no more than 33% of the securities owned by a Fund. For each
Borrower, the Adviser shall establish a maximum limit on the amount of
securities that will be delivered to each Borrower in connection with loans of
the Lender's securities (the "Borrower Limit"). The Subcustodian shall not
deliver Lender's securities to a Borrower when the value of the loan exceeds the
Borrower Limit.
Section 6. LOAN TERMINATION. The Adviser shall, subject to the terms of
the Loan Agreement, terminate a loan made to a Borrower whenever the Adviser
shall actually receive:
(a) oral or written instructions to terminate the loan from a person
believed by the Adviser to be an Authorized Person of the Lender;
(b) oral or written notice from the Lender that the loaned security is
no longer subject to the representations set form in section 3(c) or that the
securities are no longer eligible for participation in the Securities Lending
Program;
(c) a written instruction from an Authorized Person or a person
believed by the Adviser to be an Authorized Person of the Lender that the
Borrower with whom the loan is outstanding is to be deleted from the list
referred to in Section 2 hereof,
(d) actual notice of a default under any Loan Agreement pursuant to
which securities have been loaned; or
(e) termination of this Agreement.
Notwithstanding the foregoing or any other provision in this Agreement,
the Adviser may at any time terminate any loan in its absolute discretion.
Section 7. OUTSTANDING LOANS. Subject to the supervision of the
Adviser, the Subcustodian shall perform the following acts in connection with
loans of securities hereunder:
(a) enter into Loan Agreements on such terms as approved by the
Adviser;
(b) receive and release Collateral as provided in the applicable Loan
Agreement;
(c) receive distributions on loaned securities;
(d) accept substitutions of Collateral and execute and deliver or send
any receipts required under the Loan Agreement in connection therewith;
(e) deliver and receive securities in accordance with instructions from
the Adviser;
(f) make investments of Cash Collateral in accordance with instructions
of the Adviser;
(g) take such action upon termination of a loan as may be directed by
the Adviser; and
(h) within a reasonable time after learning of a default, give notice
thereof to the Adviser, and thereafter take such actions, if any, as may be
specified by the Adviser.
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<PAGE> 5
The Adviser shall perform the following acts in connection with loans of
securities hereunder:
(a) select Borrowers with whom loans of securities may be made
hereunder;
(b) negotiate the terms of the loans;
(c) invest Cash Collateral in accordance with Section 8 hereof;
(d) prepare each business day a mark-to-market valuation of the then
fair market value of the loaned securities, including income accrued but unpaid
thereon and instruct the Subcustodian to receive and release Collateral as
provided in the applicable Loan Agreement;
(e) within a reasonable time after learning of a default, give notice
thereof to the Lender, and thereafter take such actions, if any, as may be
specified in written instructions actually received from a person believed by
the Adviser to be an Authorized Person of the Lender. In the absence of
instructions from the Lender to the Adviser, Adviser is authorized, without
notice to Lender, to exercise such rights of Lender and to pursue such available
remedies of Lender under the appropriate Loan Agreement as it deems appropriate;
provided, however, nothing herein shall require Adviser or the Subcustodian to
expend their own funds to exercise such fights or pursue such remedies; and
(f) take such action upon termination of a loan as may be required by
the Loan Agreement.
Section 8. COLLATERAL.
(a) In connection with loans of securities made on behalf of the
Lender, the Adviser agrees to limit collateral accepted and investments of cash
collateral to those securities in which the Fund of the Lender owning the loaned
securities could invest and, subject to this requirement, the Lender authorizes
the Adviser: (i) to accept collateral of the types which are designated on
Exhibit D with such changes as recommended from time to time by the Adviser with
the approval of the Lender (the "Collateral"); and (ii) to invest cash received
as collateral for a loan of securities in any of the types of investments
specified on Exhibit D as modified from time to time. Where a loan of securities
is to be collateralized by a letter of credit, the Adviser shall instruct the
Subcustodian to accept only an irrevocable letter of credit that contains an
immediate draw-down capability from the financial institution. The Lender hereby
authorizes the Adviser to purchase or sell investments of Cash Collateral to or
from other accounts advised by the Adviser or held by its affiliates.
(b) All uncertificated U.S. government or agency securities, and any
other securities received by the Subcustodian as Collateral in connection with
any transactions involving Cash Collateral (as defined below), shall be
segregated by a separate recordation hereunder on the books of the Subcustodian,
and may be held as the Subcustodian may determine in any form or manner in which
the Subcustodian is permitted to hold securities including, without limitation,
by depositing the same in the Federal Reserve/Treasury Book-Entry System (the
"Book-Entry System") or the Depository Trust Company (the "Depository"), or
their respective successors or nominees.
(c) All money received as, or with respect to, Collateral, including
money received with respect to investment of the same, or upon the maturity,
sale, or liquidation of any such investments ("Cash Collateral"), may, in the
Adviser's sole discretion, be invested and reinvested in the types of
investments listed in Exhibit D as modified from time to time.
(d) Notwithstanding the foregoing, or any other provision contained in
this Agreement, the Adviser shall at all times have: (i) the right to cause the
Subcustodian to hold in the Subcustodian Account a portion of the
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<PAGE> 6
Cash Collateral uninvested without any obligation to pay interest thereon
whenever the Adviser, in its sole discretion, deems it advisable, provided the
Adviser uses its best efforts to minimize such amount, and (ii) the absolute
right, without obtaining any approval of the Lender, to liquidate any investment
or reinvestment and cause the net proceeds to be credited to the Account.
(e) The Subcustodian shall maintain the notifications required by
applicable law with respect to securities transactions involving Cash Collateral
and shall furnish monthly activity statements. The Subcustodian shall comply
with all applicable legal requirements regarding the custody of the Lender's
securities under the Investment Company Act of 1940 and the rules and
regulations promulgated thereunder including, if applicable, Rule 17f-2.
(f) The Subcustodian shall execute, as agent for the Lender, any
certificates of ownership, declarations or other certificates required under the
tax laws or pursuant to any other law or governmental regulation now or
hereafter in effect with respect to securities held as Collateral. The
Subcustodian shall, in addition, supply any information regarding Collateral
transactions required by any applicable law or governmental regulation without
first giving notice to the Lender or the Adviser.
(g) The Adviser shall take such actions with respect to the Collateral
as are required from time to time pursuant to any Loan Agreement.
(h) All investments of Cash Collateral made in accordance with this
Agreement shall be for the account and risk of the Lender. To the extent that
any loss arising out of such investments of Cash Collateral results in a
deficiency in the amount of Cash Collateral available for return to a Borrower
pursuant to the Loan Agreement, the Lender agrees to pay the Subcustodian on
demand cash in an amount equal to such deficiency. In addition, the Subcustodian
shall be entitled to charge the Lender's accounts for such deficiency in
accordance with Section 10 of this Agreement.
(i) All Collateral and securities or other property acquired through
the investment of Cash Collateral shall be controlled by, and subject to the
instructions of, the Adviser; provided, however, that the Adviser shall comply
with any instructions of the Lender with respect to the same.
Section 9. SUBCUSTODIAN'S FEES. The Lender shall in connection with
each loan hereunder pay to the Subcustodian the fee (the "Subcustodian's Fee")
as specified on Exhibit E, which Subcustodian Fee shall accrue daily. The
Adviser shall not receive a fee in connection with the services it performs
hereunder; provided, however, the Adviser may be reimbursed for the salaries and
wages of its securities lending personnel to the extent permitted by Section
17(e)(1) of the Investment Company Act of 1940.
Section 10. THE COLLATERAL ACCOUNT. The Adviser and the Subcustodian
shall act as follows with respect to the account in which the Subcustodian holds
Collateral on behalf of the Lender (the "Collateral Account"):
(a) The Subcustodian shall monthly: (i) credit the Collateral Account
with all amounts, if any, paid by a Borrower in connection with a loan
collateralized in whole or in part with Collateral other than Cash Collateral;
(ii) credit the Collateral Account with the earnings, if any, arising from the
investment of Cash Collateral; (iii) debit the Collateral Account by an amount
equal to the amounts to be paid to the Borrower pursuant to the Loan Agreement;
and (iv) debit the Collateral Account in an amount equal to the accrued
Subcustodian's Fees described in Section 9 hereof,
(b) Whenever the Loan Agreement requires a return of Cash Collateral,
the Subcustodian shall debit the Collateral Account by the amount so returned;
(c) In the event debits to the Collateral Account pursuant to the
foregoing subsections 10 (a) and 10 (b) produce a deficit therein, the
Subcustodian shall sell or otherwise liquidate investments made with Cash
Collateral and credit the net proceeds of such sale or liquidation to satisfy
the deficit. In the event the foregoing does not eliminate the deficit, the
Subcustodian shall have the right to charge the deficiency to any other account
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<PAGE> 7
or accounts maintained by the Lender with the Subcustodian; provided, however,
that the Subcustodian shall not have the right to charge any accounts maintained
for one Fund (as defined in section I hereof) for the obligations of another
Fund.
(d) If the Subcustodian, in its sole discretion, advances funds on
behalf of the Lender in order to eliminate a deficiency created under the
foregoing subsections 10(a), 10(b), or 10(c), the Subcustodian shall notify the
Adviser. Upon receipt of such notice by the Adviser, the Lender agrees to repay
the Subcustodian upon demand the amount of any advance described herein plus
accrued interest at a rate per annum (based on a 360- day year for the actual
number of days involved) not to exceed the fed funds rate as publicly announced
to be in effect from time to time, such rate to be adjusted on the effective
date of any change in the fed funds rate.
(e) Except with respect to amounts representing the crediting of a Loan
Fee as defined in the Loan Agreement, if any, paid by a Borrower, money from
time to time held in the Collateral Account shall be controlled by, and subject
to the instructions of, the Adviser; provided, however, that the Adviser shall
comply with any instructions of the Lender with respect to the same.
Section 11. RIGHTS OF BORROWERS WITH RESPECT TO LOANED SECURITIES.
Until a loan is terminated in accordance with Section 6, the Borrower shall
exercise all of the incidents of ownership of the loaned securities, including
the right to transfer the loaned securities to others; provided, however, that
the Lender shall be entitled to receive distributions, dividends, and other
payments made on or in connection with the loaned securities to the extent
provided and in accordance with the terms of the applicable Loan Agreement. The
Lender hereby expressly waives the right to vote any securities that are subject
to a loan.
Section 12. RESPONSIBILITY. The Adviser and the Subcustodian undertake
to perform such duties and only such duties as are specifically set forth in
this Agreement. The Adviser and the Subcustodian shall not be liable for any
loss or damage, including counsel fees and court costs, whether or not resulting
from their acts or omissions to act hereunder or otherwise, unless the loss or
damage arises out of the Adviser's or the Subcustodian's own negligence. Except
for any liability, loss, or expense arising from or connected with the Adviser's
or the Subcustodian's own negligence, the Lender agrees to reimburse and hold
the Adviser and the Subcustodian harmless from and against any liability, loss
and expense, including counsel fees and expenses and court costs, arising in
connection with this Agreement or any Loan Agreement or arising from or
connected with claims of any third parties, including any Borrower, from and
against all taxes and other governmental charges, and from and against any
out-of-pocket or incidental expenses. The Subcustodian may charge any amounts to
which it or the Adviser is entitled hereunder against the Account. Without
limiting the generality of the foregoing, the Lender agrees: (i) that the
Adviser and the Subcustodian shall not be responsible for any statements,
representations, or warranties which any Borrower makes in connection with any
securities loans hereunder, if reasonably relied upon in good faith, or for the
performance by any Borrower of the terms of the Loan Agreement, or any agreement
related thereto; (ii) that the Adviser and the Subcustodian shall be fully
protected in acting in accordance with the oral or written instructions of any
person reasonably believed by, them to be an Authorized Person; (iii) that in
the event of a default by a Borrower under the Loan Agreement, the Adviser and
the Subcustodian shall be fully protected in acting in accordance with this
Agreement; and (iv) that the Adviser and the Subcustodian shall not be under any
duty or obligation to advance or expend their own funds to take action to effect
payment by a Borrower of any amounts owed by the Borrower pursuant to the Loan
Agreement, provided the Subcustodian timely advises the Adviser of the
non-payment by the Borrower of any such amount. The indemnification provided to
Adviser and the Subcustodian hereunder shall survive termination of this
Agreement. The Lender acknowledges and agrees that all investments of Cash
Collateral shall be for the account of the Lender and any reinvestment risk
associated with Cash Collateral shall be borne solely by the Lender and that
neither the Adviser nor the Subcustodian shall provide indemnification to the
Lender in connection with this Agreement or the Securities Lending Program.
Section 13. SEVERABILITY. If any provisions of this Agreement shall be
held or made invalid by a statute, rule, regulation, decision of a tribunal or
otherwise, the remainder of this Agreement shall not be affected thereby and, to
this extent, the provisions of this Agreement shall be deemed to be severable.
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<PAGE> 8
Section 14. EXCLUSIVITY. The Lender agrees that it shall not enter into
any other securities loan agreement with any other bank or securities
broker/dealer whereby the other bank or broker/dealer is permitted to make loans
on behalf of the Lender of securities held by the Subcustodian as the Lender's
custodian.
Section 15. CONFLICTS OF INTEREST AND DISCLOSURE. NOTHING IN THIS
AGREEMENT SHALL PRECLUDE THE ADVISER, THE SUBCUSTODIAN, OR THEIR AFFILIATES FROM
ENTERING INTO SEPARATE ARRANGEMENTS OR AGREEMENTS WITH BORROWERS INVOLVING THE
PROVISION OF PRODUCTS OR SERVICES INCLUDING, WITHOUT LIMITATION, DEPOSITS,
LOANS, OR BROKERAGE SERVICES. THE ADVISER AND THE SUBCUSTODIAN HEREBY DISCLOSE
THAT THEY OR THEIR AFFILIATES MAY RECEIVE COMPENSATION OR REMUNERATION FROM THE
BORROWERS TN CONNECTION WITH SUCH SEPARATE ARRANGEMENTS OR AGREEMENTS,
INCLUDING, WITHOUT LIMITATION, VOLUME DISCOUNTS AND DISCOUNTED PERIODICAL
SUBSCRIPTIONS. THE ADVISER AND THE SUBCUSTODIAN FURTHER DISCLOSE THAT
INVESTMENTS OF CASH COLLATERAL MADE PURSUANT TO SECTION 8 MAY HAVE THEIR OWN
FEES AND EXPENSES WHICH MAY REDUCE THE EARNINGS PAYABLE TO LENDER PURSUANT TO
THIS AGREEMENT.
Section 16. STATEMENT. The Subcustodian will at least monthly furnish
the Lender with statements relating to loans hereunder, and other information
reasonably requested by the Lender.
Section 17. NOTICES, ASSIGNMENTS, AMENDMENT, CONSTRUCTION.
(a) Any notice, instruction, other instrument or writing, authorized or
required to be given hereunder to the Subcustodian shall be sufficiently given
only if and when actually received by the Subcustodian, including receipt by
telefax, at its offices at:
Bank One Trust Company, NA
235 West Schrock Road
Columbus, OH 43271-1075
Attn: Securities Lending
or at such other place as the Subcustodian may, from time to time, designate in
writing and, except as expressly provided to the contrary herein, signed by an
Authorized Person; and any notice, other instrument, writing, report or advice
authorized or required by the Agreement to be given to the Lender shall be
sufficiently given only if and when actually received by the Lender, including
receipt by telefax, at its offices at:
The One Group
c/o Banc One Investment Advisors Corporation, as Sub-administrator
774 Park Meadow
Columbus, Ohio 43271-0211
Attn: Mark Beeson
or at such other place as the Lender may from time to time designate in writing;
and any notice, instruction, other instrument or writing authorized or required
by the Agreement to be given to the Adviser shall be sufficiently given only if
and when actually received by the Adviser, including receipt by telefax, at its
offices at:
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<PAGE> 9
Banc One Investment Advisors Corporation
774 Park Meadow
Columbus, Ohio 43271-0211
Attn.: Steven E. Cutler
or at such other place as the Adviser may from time to time designate in
writing.
(b) This Agreement shall not be assignable by the parties hereto
without the written consent of the other parties. This Agreement shall be
binding upon each party and its respective successors and permitted assigns;
(c) This Agreement constitutes the entire agreement between the parties
hereto with respect to the transactions contemplated hereby and supersedes all
prior discussions, understandings, agreements and negotiations between the
parties hereto with respect to such transactions. This Agreement shall not be
amended or modified in any manner except by a written agreement executed by the
parties hereto with the same formality as this Agreement;
(d) This Agreement shall be governed by and construed in accordance
with the laws of the State of Ohio;
(e) The headings in this Agreement are for convenience only and shall
not be used in construing this Agreement; and
(f) Either the Lender or the Adviser may terminate this Agreement by
delivering to the other party a written notice specifying a date of termination,
not earlier than the date of receipt of such notice by the other party, provided
that this Agreement shall continue in full force and effect with respect to all
loans of securities in effect on the date of termination.
Section 18. CUSTODY. Lender acknowledges that the Adviser is only
performing the securities lending services described in this Agreement and that
the Adviser retains no custody or possession of the securities, assets, and/or
cash in the Account and performs no depository services with respect to the
Account.
Section 19. ARBITRATION. Any controversy or claim arising out of or
relating to this Agreement, or the breach of the same, shall be settled through
consultation and negotiation in good faith and a spirit of mutual cooperation.
However, if those attempts fail, the parties agree that any misunderstandings
or disputes arising from this Agreement shall be decided by arbitration which
shall be conducted, upon request by either party, before three (3) arbitrators
(unless both parties agree upon one (1) arbitrator), designated by the American
Arbitration Association (the "AAA", in accordance with the terms of the
Commercial Arbitration Rules of the AAA, and, to the maximum extent applicable,
the United States Arbitration Act (Title 9 of the United States Code), or if
such Act is not applicable, any substantially equivalent state law. The parties
further agree that the arbitrator(s) will decide which party must bear the
expenses of the arbitration proceedings.
Section 20. SIPA NOTICE. THE PROVISIONS OF THE SECURITIES INVESTOR
PROTECTION ACT OF 1970 MAY NOT PROTECT THE LENDER WITH RESPECT TO LOANS
HEREUNDER AND, THEREFORE, THE COLLATERAL DELIVERED TO THE SUBCUSTODIAN AS
SUBCUSTODIAN FOR THE LENDER MAY CONSTITUTE THE ONLY SOURCE OF SATISFACTION OF A
BORROWER'S OBLIGATION IN THE EVENT SUCH BORROWER FAILS TO RETURN THE LOANED
SECURITIES.
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<PAGE> 10
IN WITNESS WHEREOF, the Lender, the Adviser, and the Subcustodian have
caused this Agreement to be duly executed as of the date first above written.
The One Group
("Lender")
By: /s/ MARK A. DILLON
------------------------------------
(Authorized Signature)
Banc One Investment Advisors Corporation
("Advisor")
By: /s/ MARK A. BEESON
------------------------------------
(Authorized Signature)
Bank One Trust Company, N.A.
("Subcustodian")
By: /s/ STEVEN E. CUTLER
------------------------------------
(Authorized Signature)
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<PAGE> 11
SECURITIES LENDING AGREEMENT
EXHIBIT A
Participating Portfolios
Asset Allocation Fund
Disciplined Value Fund Equity Index Fund
Government Bond Fund
Government Money Market Fund
Income Bond Fund
Income Equity Fund
Intermediate Bond Fund
Large Company Growth Fund
Large Company Value Fund
Limited Volatility Fund
Prime Money Market Fund
Small Company Growth Fund
Treasury Only Money Market Fund
U.S. Treasury Securities Money Market Fund
<PAGE> 12
Public Securities Association
40 Broad Street. New York. NY 10004-2373
Telephone (212) 809-7000
MASTER SECURITIES LOAN AGREEMENT
Dated as of _________________
Between:
Bank One Trust Company, NA
___________________________
and
___________________________
This Agreement sets forth the terms and conditions under which one
party ("Lender") may. from time to time, lend to the other party ("Borrower")
certain securities against a pledge of collateral. Capitalized terms not
otherwise defined herein shall have the meanings provided in Section 26.
The parties hereto agree as follows:
1. Loans of Securities.
1.1 Subject to the terms and conditions of this Agreement, Borrower or
Lender may. from time to time. orally seek to initiate a transaction in which
Lender will lend securities to Borrower. Borrower and Lender shall agree orally
on the terms of each Loan, including the issuer of the securities, the amount of
securities to be lent, the basis of compensation, and the amount of Collateral
to be transferred by Borrower, which terms may be amended during the Loan.
1.2 Notwithstanding any other provision in this Agreement regarding
when a Loan commences. a Loan hereunder shall not occur until the Loaned
Securities and the Collateral therefor have been transferred in accordance with
Section 16.
1.3 WITHOUT WAIVING ANY RIGHTS GIVEN TO LENDER HEREUNDER, IT IS
UNDERSTOOD AND AGREED THAT THE PROVISIONS OF THE SECURITIES INVESTOR PROTECTION
ACT OF 1970 MAY NOT PROTECT LENDER WITH RESPECT TO LOANED SECURITIES HEREUNDER
AND THAT. THEREFORE, THE COLLATERAL DELIVERED TO LENDER MAY CONSTITUTE THE ONLY
SOURCE OF SATISFACTION OF BORROWER'S OBLIGATIONS IN THE EVENT BORROWER FAILS TO
RETURN THE LOANED SECURITIES.
2. Transfer of Loaned Securities.
2.1 Unless otherwise agreed. Lender shall transfer Loaned Securities to
Borrower hereunder on or before the Cutoff Time on the date agreed to by
Borrower and Lender for the commencement of the Loan.
2.2 Unless otherwise agreed, Borrower shall provide Lender. in each
Loan in which Lender is a Customer, with a schedule and receipt listing the
Loaned Securities. Such schedule and receipt may consist of (a) a schedule
provided to Borrower by Lender and executed and returned by Borrower when the
Loaned Securities are received, (b) in the case of securities transferred
through a Clearing Organization which provides transferors with a notice
evidencing such transfer, such notice, or (c) a confirmation or other document
provided to Lender by Borrower.
<PAGE> 13
3. Collateral.
3.1 Unless otherwise agreed, Borrower shall, prior to or concurrently
with the transfer of the Loaned Securities to Borrower, but in no case later
than the close of business on the day of such transfer, transfer to Lender
Collateral with a market value at least equal to a percentage of the market
value of the Loaned Securities agreed to by Borrower and Lender (which shall be
not less than 100% of the market value of the Loaned Securities) (the "Margin
Percentage").
3.2 The Collateral transferred by Borrower to Lender, as adjusted
pursuant to Section 8, shall be security for Borrowers obligations in respect of
such Loan and for any other obligations of Borrower to Lender. Borrower hereby
pledges with, assigns to, and grants Lender a continuing first security interest
in, and a lien upon, the Collateral. which shall attach upon the transfer of the
Loaned Securities by Lender to Borrower and which shall cease upon the transfer
of the Loaned Securities by Borrower to Lender. In addition to the rights and
remedies given to Lender hereunder, Lender shall have all the rights and
remedies of a secured party under the New York Uniform Commercial Code. It is
understood that Lender may use or invest the Collateral, if such consists of
cash, at its own risk, but that (unless Lender is a Broker-Dealer) Lender shall,
during the term of any Loan hereunder, segregate Collateral from all securities
or other assets in its possession. Lender may pledge, repledge, hypothecate,
rehypothecate, lend, relend, Sell or otherwise transfer the Collateral, or
re-register Collateral evidenced by physical certificates in any name other than
Borrower's, only (a) if Lender is Broker-Dealer or (b) in the event of a Default
by Borrower. Segregation of Collateral may be accomplished by appropriate
identification on the books and records of Lender if it is a "financial
intermediary" or a "clearing corporation" within the meaning of the New York
Uniform Commercial Code.
3.3 Except as otherwise provided herein, upon transfer to Lender of the
Loaned Securities on the day a Loan is terminated pursuant to Section 5, Lender
shall be obligated to transfer the Collateral (as adjusted pursuant to Section
8) to Borrower no later than the Cutoff Time on such day or, it such day is not
a day on which a transfer of such Collateral may be effected under Section 16,
the next day on which such a transfer may be effected.
3.4 If Borrower transfers Collateral to Lender, as provided in Section
3.1, and Lender does not transfer the Loaned Securities to Borrower, Borrower
shall have the absolute right to the return of the Collateral: and if Lender
transfers Loaned Securities to Borrower and Borrower does not transfer
Collateral to Lender as provided in Section 3.1, Lender shall have the absolute
right to the return of the Loaned Securities.
3.5 Borrower may, upon reasonable notice to Lender (taking into account
all relevant factors, including industry practice, the type of Collateral to be
substituted and the applicable method of transfer), substitute Collateral for
Collateral securing any Loan or Loans, provided, however, that such substituted
Collateral shall (a) consist only of cash, securities or other property that
Borrower and Lender agreed would be acceptable Collateral prior to the Loan or
Loans and (b) have a market value such that the aggregate market value of such
substituted Collateral, together with all other Collateral for Loans in which
the party substituting such Collateral is acting as Borrower, shall equal or
exceed the agreed upon Margin Percentage of the market value of the Loaned
Securities. Prior to the expiration of any letter of credit supporting
Borrower's obligations hereunder, Borrower shall, no later than the Cutoff Time
on the date such letter of credit expires, obtain an extension of the expiration
of such letter of credit or replace such letter of credit by providing Lender
with a substitute letter of credit in an amount at least equal to the amount of
the letter of credit for which A is substituted.
3.6 Lender acknowledges that, in connection with Loans of Government
Securities and as otherwise permitted by applicable law, some securities
provided by Borrower as Collateral under this Agreement may not be guaranteed by
the United States.
4. Fees for Loan.
4.1 Unless otherwise agreed. (a) Borrower agrees to pay Lender a loan
fee (a "Loan Fee"), computed daily on each Loan to the extent such Loan is
secured by Collateral other than cash, based on the aggregate par value (in the
case of Loans of Government Securities) or the aggregate market value (in the
case of all other Loans) of the
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Loaned Securities on the day for which such Loan Fee is being computed, and (b)
Lender agrees to pay Borrower a fee or rebate (a "Cash Collateral Fee") on
Collateral consisting of cash, computed daily based on the amount of cash held
by Lender as Collateral, in the case of each of the Loan Fee and the Cash
Collateral Fee at such rates as Borrower and Lender may agree. Except as
Borrower and Lender may otherwise agree (in the event that cash Collateral is
transferred by clearing house funds or otherwise), Loan Fees shall accrue from
and including the date on which the Loaned Securities are transferred to
Borrower to, but excluding, the date on which such Loaned Securities are
returned to Lender, and Cash Collateral Fees shall accrue from and including the
date on which the cash Collateral is transferred to Lender to, but excluding,
the date on which such cash Collateral is returned to Borrower.
4.2 Unless otherwise agreed, any Loan Fee or Cash Collateral Fee
payable hereunder shall be payable:
(a) in the case of any Loan of securities other than Government
Securities, upon the earlier of (i) the fifteenth day of the
month following the calendar month in which such fee was
incurred or (ii) the termination of all Loans hereunder (or,
if a transfer of cash in accordance with Section 16 may not be
effected on such fifteenth day or the day of such termination,
as the case may be, the next day on which such a transfer may
be effected); and
(b) in the case of any Loan of Government Securities, upon the
termination of such Loan.
Notwithstanding the foregoing, all Loan Fees shall be payable by Borrower
immediately in the event of a Default hereunder by Borrower and all Cash
Collateral Fees shall be payable immediately by Lender in the event of a Default
by Lender.
5. Termination of the Loan. Unless otherwise agreed, (a) Borrower may terminate
a Loan on any Business Day by giving notice to Lender and transferring the
Loaned Securities to Lender before the Cutoff time on such Business Day, and (b)
Lender may terminate a Loan on a termination date established by notice given to
Borrower prior to the close of business on a Business Day. The termination date
established by a termination notice given by Lender to Borrower shall be a date
no earlier than the standard settlement date for trades of the Loaned Securities
entered into on the date of such notice, which date shall, unless Borrower and
Lender agree to the contrary, be (i) in the case of Government Securities, the
next Business Day following such notice and (ii) in the case of all other
securities, the fifth Business Day following such notice. Unless otherwise
agreed, Borrower shall, on or before the Cutoff Time on the termination date of
a Loan, transfer the Loaned Securities to Lender: provided, however, that upon
such transfer by Borrower, Lender shall transfer the Collateral (as adjusted
pursuant to Section 8) to Borrower in accordance with Section 3.3.
6. Rights of Borrower in Respect of the Loaned Securities. Except as set forth
in Sections 7.1 and 7.2 and as otherwise agreed by Borrower and Lender, until
Loaned Securities are required to be redelivered to Lender upon termination of a
Loan hereunder, Borrower shall have all of the incidents of ownership of the
Loaned Securities, including the right to transfer the Loaned Securities to
others. Lender hereby waives the right to vote, or to provide any consent or to
take any similar action with respect to, the Loaned Securities in the event that
the record date or deadline for such vote, consent or other action falls during
the term of the Loan.
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<PAGE> 15
7. Dividends, Distributions, Etc.
7.1 Lender shall be entitled to receive all distributions made on or in
respect of the Loaned Securities which are not otherwise received by Lender, to
the full extent it would be so entitled if the Loaned Securities had not been
lent to Borrower, including, but not limited to: (a) cash and all other
property, (b) stock dividends, (c) securities received as a result of split ups
of the Loaned Securities and distributions in respect thereof, (d) interest
payments, and (e) all rights to purchase additional securities.
7.2 Any cash distributions made on or in respect of the Loaned
Securities, which Lender is entitled to receive pursuant to Section 7.1, shall
be paid by the transfer of cash to Lender by Borrower, on the date any such
distribution is paid, in an amount equal to such cash distribution. so long as
Lender is not in Default at the time of such payment. Non-cash distributions
received by Borrower shall be added to the Loaned Securities on the date of
distribution and shall be considered such for all purposes, except that if the
Loan has terminated, Borrower shall forthwith transfer the same to Lender.
7.3 Borrower shall be entitled to receive all cash distributions made
on or in respect of non-cash Collateral which are not otherwise received by
Borrower, to the full extent it would be so entitled if the Collateral had not
been transferred to Lender. Any distributions of cash made on or in respect of
such Collateral which Borrower is entitled to receive hereunder shall be paid by
the transfer of cash to Borrower by Lender, on the date any such distribution is
paid, in an amount equal to such cash distribution, so long as Borrower is not
in Default at the time of such payment.
7.4 (a) Unless otherwise agreed, it (i) Borrower is required to make a
payment (a "Borrower Payment") with respect to cash distributions on Loaned
Securities under Sections 7.1 and 7.2 ("Securities Distributions"), or (ii)
Lender is required to make a payment (a 'Lender Payment") with respect to cash
distributions on Collateral under Section 7.3 (" Collateral Distributions"), and
(iii) Borrower or Lender, as the case may be ("Payee"), shall be required by law
to collect any withholding or other tax, duty, fee, levy or charge required to
be deducted or withheld from such Borrower Payment or Lender Payment ("Tax"),
then Payor shall (subject to subsections (b) and (c) below), pay such additional
amounts as may be necessary in order that the net amount of the Borrower Payment
or Lender Payment received by the Lender or Borrower, as the case may be
("Payee"), after payment of such Tax equals the net amount of the Securities
Distribution or Collateral Distribution that would have been received if such
Securities Distribution or Collateral Distribution had been paid directly to the
Payee.
(b) No additional amounts shall be payable to a Payee under
subsection (a) above to the extent that Tax would have been imposed on a
Securities Distribution or Collateral Distribution paid directly to the Payee.
(c) No additional amounts shall be payable to a Payee under
subsection (a) above to the extent that such Payee is entitled to an exemption
from, or reduction in the rate of, Tax on a Borrower Payment or Lender Payment
subject to the provision of a certificate or other documentation, but has failed
timely to provide such certificate or other documentation.
(d) Each party hereto shall be deemed to represent that, as of
the commencement of any Loan hereunder, no Tax would be imposed on any cash
distribution paid to it with respect to (i) Loaned Securities subject to a Loan
in which it is acting as Lender or (ii) Collateral for any Loan in which it is
acting as Borrower, unless such party has given notice to the contrary to the
other party hereto (which notice shall specify the rate at which such Tax would
be imposed). Each party agrees to notify the other of any change that occurs
during the term of a Loan in the rate of any Tax that would be imposed on any
such cash distributions payable to it.
7.5 To the extent that, under the provisions of Sections 7.1 through
7.4 (a) a transfer of cash or other property by Borrower would give rise to a
Margin Excess (as defined in Section 8.3 below) or (b) a transfer of cash or
other property by Lender would give rise to a Margin Deficit (as
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<PAGE> 16
(defined in Section 8.2 below). Borrower or Lender (as the case may be) shall
not be obligated to make such transfer of cash or other property in accordance
with such Sections, but shall in lieu of such transfer immediately credit the
amounts that would have been transferable under such Sections to the account of
Lender or Borrower (as the case may be).
8. Mark to Market.
8.1 Borrower shall daily mark to market any Loan hereunder and in the
event that at the close of trading on any Business Day the market value of the
Collateral for any Loan to Borrower shall be less than 100% of the market value
of all the outstanding Loaned Securities subject to such Loan, Borrower shall
transfer additional Collateral no later than the close of the next Business Day
so that the market value of such additional Collateral, when added to the market
value of the other Collateral for such Loan, shall equal 100% of the market
value of the Loaned Securities.
8.2 In addition to any rights of Lender under Section 8.1, in the event
that at the close of trading on any Business Day the aggregate market value of
all Collateral for Loans by Lender shall be less than the Margin Percentage of
the market value of all the outstanding Loaned Securities subject to such Loans
(a "Margin Deficit"), Lender may, by notice to Borrower, demand that Borrower
transfer to Lender additional Collateral so that the market value of such
additional Collateral, when added to the market value of all other Collateral
for such Loans, shall equal or exceed the agreed upon Margin Percentage of the
market value of the Loaned Securities. Unless otherwise agreed, such transfer is
to be made no later than the close of the next Business Day following the day of
Lender's notice to Borrower.
8.3 In the event that at the close of trading on any Business Day the
market value of all Collateral for Loans to Borrower shall be greater than the
Margin Percentage of the market value of all the outstanding Loaned Securities
subject to such Loans (a "Margin Excess"), Borrower may, by notice to Lender,
demand that Lender transfer to Borrower such amount of the Collateral selected
by Borrower so that the market value of the Collateral for such Loans, after
deduction of such amounts, shall thereupon not exceed the Margin Percentage of
the market value of the Loaned Securities. Unless otherwise agreed, such
transfer is to be made no later than the close of the next Business Day
following the day of Borrower's notice to Lender.
8.4 Borrower and Lender may agree, with respect to one or more Loans
hereunder, to mark the values to market pursuant to Sections 8.2 and 8.3 by
separately valuing the Loaned Securities lent and the Collateral given in
respect thereof an a Loan-by-Loan basis.
8.5 Borrower and Lender may agree, with respect to any or all Loans
hereunder, that the respective rights of Lender and Borrower under Sections 8.2
and 8.3 maybe exercised only where a Margin Excess or Margin Deficit exceeds a
specified dollar amount or a specified percentage of the market value of the
Loaned Securities under such Loans (which amount or percentage shall be agreed
to by Borrower and Lender prior to entering into any such Loans).
9. Representations. Each party to this Agreement hereby makes the following
representations and warranties, which shall continue during the term of any Loan
hereunder:
9.1 Each party hereto represents and warrants that (a) it has the power
to execute and deliver this Agreement, to enter into the Loans contemplated
hereby and to perform its obligations hereunder; (b) it has taken all necessary
action to authorize such execution, delivery and performance; and (c) this
Agreement constitutes a legal, valid and binding obligation enforceable against
it in accordance with its terms.
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<PAGE> 17
9.2 Each party hereto represents and warrants that the execution,
delivery and performance by it of this Agreement and each Loan hereunder will at
all times comply with all applicable laws and regulations including those of
applicable regulatory and self-regulatory organizations.
9.3 Each party hereto represents and warrants and that it has not
relied on the other for any tax or accounting advice concerning this Agreement
and that it has made its own determination as to the tax and accounting
treatment of any Loan and any dividends, remuneration or other funds received
hereunder.
9.4 Borrower represents and warrants that it is acting for its own
account. Lender represents and warrants that it is acting for its own account
unless it expressly specifies otherwise in writing and complies with Section
10.3(b).
9.5 Borrower represents and warrants that (a) it has, or will have at
the time of transfer of any Collateral, the right to grant a first security
interest therein subject to the terms and conditions hereof, and (b) it (or the
person to whom it relends the Loaned Securities) is borrowing or will borrow the
Loaned Securities (except for Loaned Securities that quality as "exempted
securities" under Regulation T of the Board of Governors of the Federal Reserve
System) for the purpose of making delivery of such securities in the case of
short sales, failure to receive securities required to be delivered, or as
otherwise permitted pursuant to Regulation T as in effect from time to time.
9.6 Lender represents and warrants that it has, or will have at the
time of transfer of any Loaned Securities, the right to transfer the Loaned
Securities subject to the terms and conditions hereof.
10. Covenants.
10.1 Each party hereto agrees and acknowledges that (a) each Loan
hereunder is a "securities contract," as such term is defined in Section 741(7)
of Title 11 of the United States Code (the "Bankruptcy Code"), (b) each and
every transfer of funds, securities and other property under this Agreement and
each Loan hereunder is a "settlement payment" or a "margin payment," as such
terms are used in Sections 362(b)(6) and 546(e) of the Bankruptcy Code, and (c)
the rights given to Borrower and Lender hereunder upon a Default by the other
constitute the right to cause the liquidation of a securities contract and the
right to set off mutual debts and claims in connection with a securities
contract, as such terms are used in Sections 555 and 362(b)(6) of the Bankruptcy
Code. Each party hereto further agrees and acknowledges that if a party hereto
is an "insured depository institution," as such term is defined in the Federal
Deposit Insurance Act, as amended ("FOIA"), then each Loan hereunder is a
"securities contract " and "qualified financial contract," as such terms are
defined in the FOIA and any rules, orders or policy statements thereunder.
10.2 Borrower agrees to be liable as principal with respect to its
obligations hereunder.
10.3 Lender agrees either (a) to be liable as principal with respect to
its obligations hereunder or (b) to execute and comply fully with the provisions
of Annex I (the terms and conditions of which Annex are incorporated herein and
made a part hereof.
10.4 Promptly upon (and in any event within seven (7) Business Days
after) demand by Lender, Borrower shall furnish Lender with Borrower's most
recent publicly-available financial statements and any other financial
statements mutually agreed upon by Borrower and Lender. Unless otherwise agreed,
if Borrower is subject to the requirements of Rule 17a-5(c) under the Exchange
Act, it may satisfy the requirements of this Section by furnishing Lender with
its most recent statement required to be furnished to customers pursuant to such
Rule.
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<PAGE> 18
10.5 Except to the extent required by applicable law or regulation or
as otherwise agreed, Borrower and Lender agree that Loans hereunder shall in no
event be "exchange contracts" for purposes of the rules of any securities
exchange and that Loans hereunder shall not be governed by the buy-in or similar
rules of any such exchange, registered national securities or other
self-regulatory organization.
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<PAGE> 19
11. Events. All Loans hereunder may, at the option of the non-defaulting party
exercised by notice to the defaulting party (which option shall be deemed to
have been exercised. even if no notice is given, immediately upon the occurrence
of an event specified in subsection (e) below), be terminated immediately upon
the occurrence of any one or more of the following events (individually, a
"Default"):
(a) if any Loaned Securities shall not be transferred to Lender
upon termination of the Loan as required by Section 5;
(b) if any Collateral shall not be transferred to Borrower upon
termination of the Loan as required by Sections 3.3 and 5;
(c) if either party shall fail to transfer Collateral as required
by Section 8;
(d) if either party (i) shall fail to transfer to the other party
amounts in respect of distributions required to be transferred
by Section 7, (ii) shall have received notice of such failure
from the non-defaulting party, and (iii) shall not have cured
such default by the Cutoff Time on the next day after such
notice on which a transfer of cash may be effected in
accordance with Section 16;
(e) if (i) either party shall commence as debtor any case or
proceeding under any bankruptcy, insolvency, reorganization,
liquidation, dissolution or similar law, or seek the
appointment of a receiver, conservator, trustee, custodian or
similar official for such party or any substantial part of its
property, (ii) any such case or proceeding shall be commenced
against either party, or another shall seek such an
appointment, or any application shall be filed against either
party for a protective decree under the provisions of the
Securities Investor Protection Act of 1970, which (A) is
consented to or not timely contested by such party, (B)
results in the entry of an order for relief, such an
appointment, the issuance of such a protective decree or the
en" of an order having a similar effect, or (C) is not
dismissed within 15 days, (iii) either party shall make a
general assignment for the benefit of creditors, or (iv)
either party shall admit in writing its inability to pay its
debts as they become due;
(f) if either party shall have been suspended or expelled from
membership or participation in any national securities
exchange or registered national securities association of
which it is a member or other self-regulatory organization to
whose rules it is subject or if it is suspended from dealing
in securities by any federal or state government agency
thereof.
(g) if either party shall have its license, charter, or other
authorization necessary to conduct a material portion of its
business withdrawn, suspended or revoked by any applicable
federal or state government or agency thereof',
(h) if any representation made by either party in respect of this
Agreement or any Loan or Loans hereunder shall be incorrect or
untrue in any material respect during the term of any Loan
hereunder;
(i) if either party notifies the other, orally or in writing, of
its inability to or its intention not to perform its
obligations hereunder or otherwise disaffirms, rejects or
repudiates any of its obligations hereunder; or
(j) if either party (i) shall fail to perform any material
obligation under this Agreement not specifically set forth in
clauses (a) through (i) above, including but not limited to
the payment of fees as required by Section 4, and the payment
of transfer taxes as required by Section 14, (ii) shall have
received notice of such failure from the nondefaulting party
and (iii) shall not have cured such failure by the Cutoff Time
on the next day after such notice on which a transfer of cash
may be effected under Section 16.
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<PAGE> 20
12. Lender's Remedies. Upon the occurrence of a Default under Section 11
entitling Lender to terminate all Loans hereunder, Lender shall have the right
(without further notice to Borrower), in addition to any other remedies provided
herein or under applicable law, (a) to purchase a like amount of Loaned
Securities ("Replacement Securities") in the principal market for such
securities in a commercially reasonable manner, (b) to sell any Collateral in
the principal market for such Collateral in a commercially reasonable manner and
(c) to apply and set off the Collateral and any proceeds thereof (including any
amounts drawn under a letter of credit supporting any Loan) against the payment
of the purchase price for such Replacement Securities and any amounts due to
Lender under Sections 4, 7, 14 and 17. In the event Lender shall exercise such
rights. Borrower's obligation to return a like amount of the Loaned Securities
shall terminate. Lender may similarly apply the Collateral and any proceeds
thereof to any other obligation of Borrower under this Agreement, including
Borrower's obligations with respect to distributions paid to Borrower (and not
forwarded to Lender) in respect of Loaned Securities. In the event that (i) the
purchase price of Replacement Securities (plus all other amounts, if any, due to
Lender hereunder) exceeds (ii) the amount of the Collateral, Borrower shall be
liable to Lender for the amount of such excess together with interest thereon at
a rate equal to (A) in the case of purchases of Foreign Securities, LIBOR, (B)
in the case of purchases of any other securities (or other amounts, if any, due
to Lender hereunder), the Federal Funds Rate or (c) such other rate as may be
specified in Schedule B, in each case as such rate fluctuates from day to day,
from the date of such purchase until the date of payment of such excess. As
security for Borrower's obligation to pay such excess, Lender shall have, and
Borrower hereby grants, a security interest in any property of Borrower then
held by or for Lender and a right of set off with respect to such property and
any other amount payable by Lender to Borrower. The purchase price of
Replacement Securities purchased under this Section 12 shall include, and the
proceeds of any sale of Collateral shall be determined after deduction of,
broker's fees and commissions and all other reasonable costs, fees and expenses
related to such purchase or sale (as the case may be). In the event Lender
exercises its rights under this Section 12. Lender may elect in its sole
discretion, in lieu of purchasing all or a portion of the Replacement Securities
or selling all or a portion of the Collateral, to be deemed to have made,
respectively, such purchase of Replacement Securities or sale of Collateral for
an amount equal to the price therefor on the date of such exercise obtained from
a generally recognized source or the most recent closing bid quotation from such
a source. Subject to Section 19, upon the satisfaction of all obligations
hereunder, any remaining Collateral shall be returned to Borrower.
13. Borrower's Remedies. Upon the occurrence of a Default under Section 11
entitling Borrower to terminate all Loans hereunder, Borrower shall have the
right (without further notice to Lender), in addition to any other remedies
provided herein or under applicable law, (a) to purchase a like amount of
Collateral ("Replacement Collateral") in the principal market far such
Collateral in a commercially reasonable manner, (b) to sell a like amount of the
Loaned Securities in the principal market for such securities in a commercially
reasonable manner and (c) to apply and set off the Loaned Securities and any
proceeds thereof against (i) the payment of the purchase price for such
Replacement Collateral (ii) Lender's obligation to return any cash or other
Collateral and (iii) any amounts due to Borrower under Sections 4, 7 and 17. In
such event, Borrower may treat the Loaned Securities as its own and Lender's
obligation to return a like amount of the Collateral shall terminate; provided,
however, that Lender shall immediately return any letters of credit supporting
any Loan upon the exercise or deemed exercise by Borrower of its termination
rights under Section 1 1. Borrower may similarly apply the Loaned Securities and
any proceeds thereof to any other obligation of Lender under this Agreement,
including Lender's obligations with respect to distributions paid to Lender (and
not forwarded to Borrower) in respect of Collateral. In the event that (i) the
sales price received from such Loaned Securities is less than (ii) the purchase
price of Replacement Collateral (plus the amount of any cash or other Collateral
not replaced by Borrower and all other amounts, if any, due to Borrower
hereunder), Lender shall be liable to Borrower for the amount of any such
deficiency, together with interest on such amounts at a rate equal to (A) in the
case of Collateral consisting of Foreign Securities, LIBOR, (B) in the case of
Collateral consisting of any other securities (or other amounts due, if any, to
Borrower hereunder), the Federal Funds Rate or (C) such other rate as may be
specified in Schedule B, in each case as such rate fluctuates from day to day,
from the date of such sale until the date at payment at such deficiency. As
security for Lender's obligation to pay such deficiency, Borrower shall have,
and Lender hereby grants, a
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<PAGE> 21
security interest in any property of Lender then held by or for
Borrower and a right of setoff with respect to such property and any
other amount payable by Borrower to Lender. The purchase price of any
Replacement Collateral purchased under this Section 13 shall include,
and the proceeds of any sale of Loaned Securities shall be determined
after deduction of broker's fees and commissions and all other
reasonable costs, fees and expenses related to such purchase or sale
(as the case may be). In the event Borrower exercises its rights under
this Section 13, Borrower may elect in its sole discretion, in lieu of
purchasing all or a portion of the Replacement Collateral or selling
all or a portion at the Loaned Securities, to be deemed to have made,
respectively, such purchase of Replacement Collateral or sale of Loaned
Securities for an amount equal to the price therefor on the date of
such exercise obtained from a generally recognized source or the most
recent closing bid quotation from such a source. Subject to Section 19,
upon the satisfaction of all Lender's obligations hereunder. any
remaining Loaned Securities (or remaining cash proceeds thereof shall
be returned to Lender. Without limiting the foregoing, the parties
hereto agree that they intend the Loans hereunder to be loans of
securities. If, however, any Loan is deemed to be a loan of money by
Borrower to Lender, then Borrower shall have, and Lender shall be
deemed to have granted, a security interest in the Loaned Securities
and the proceeds thereof.
14. Transfer Taxes. All transfer taxes with respect to the transfer of the
Loaned Securities by Lender to Borrower and by Borrower to Lender upon
termination of the Loan shall be paid by Borrower.
15. Market Value.
15.1 Unless otherwise agreed, if the principal market for the
securities to be valued is a national securities exchange in the United States,
their market value shall be determined by their last sale price on such exchange
on the preceding Business Day or, if there was no sale on that day, by the last
sale price an the next preceding Business Day on which there was a sale on such
exchange, all as quoted on the Consolidated Tape or, if not quoted on, the
Consolidated Tape, then as quoted by such exchange.
15.2 Except as provided in Section 15.3 or 15.4 or as otherwise agreed,
if the principal market for the securities to be valued is the over-the-counter
market, their market value shall be determined as follows. If the securities are
quoted on the National Association of Securities Dealers Automated Quotations
System ("NASDAQ"), their market value shall be the closing sale price on NASDAQ
on the preceding Business Day or, if the securities are issues for which last
sale prices are not quoted on NASDAQ, the closing bid price on such day. It the
securities to be valued are not quoted on NASDAQ, their market value shall be
the highest bid quotation as quoted in any of The Wall Street Journal, the
National Quotation Bureau pink sheets, the Salomon Brothers quotation sheets,
quotations sheets of registered market makers and, if necessary, dealers'
telephone quotations on the preceding Business Day. In each case, if the
relevant quotation did not exist on such day, then the relevant quotation an the
next preceding Business Day in which there was such a quotation shall be the
market value.
15.3 Unless otherwise agreed, if the securities to be valued are
Government Securities, their market value shall be the average of the bid and
ask prices as quoted on Prophesy at 3:30 P.M. New York time on the Business Day
preceding the date on which such determination is made. If the securities are
not so quoted on such day, their market value shall be determined as of the next
preceding Business Day on which they were so quoted. If the securities to be
valued are Government Securities that are not quoted on Prophesy, their market
value shall be determined as of the close of business on the preceding Business
Day in accordance with market practice for such securities.
15.4 Unless otherwise agreed, it the securities to be valued are
Foreign Securities, their market value shall be determined as of the close of
business an the preceding Business Day in accordance with market practice in the
principal market for such securities.
15.5 Unless otherwise agreed, the market value of a letter of credit
shall be the undrawn amount thereof.
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<PAGE> 22
15.6 All determinations of market value under Sections 15.1, 15.2, 15.3
and 15.4 shall include, where applicable, accrued interest to the extent not
already included therein (other than any interest transferred to the other party
pursuant to Section 7), unless market practice with respect to the valuation of
such securities in connection with securities loans is to the contrary. All
determinations of market value that are required to be made at the close of
trading on any Business Day pursuant to Section 8 or otherwise hereunder shall
be made as if being determined at the commencement of trading on the next
Business Day. The determinations of market value provided for in this Section 15
shall apply for all purposes under this Agreement, except for purposes of
Sections 12 and 13.
16. Transfers.
16.1 All transfers of securities hereunder shall be by (a) physical
delivery of certificates representing such securities together with duly
executed stock and bond transfer powers, as the case may be, with signatures
guaranteed by a bank or a member firm of the New York Stock Exchange, Inc., (b)
transfer an the books of a Clearing Organization, or (c) such other means as
Borrower and Lender may agree. In every transfer of securities hereunder, the
transferor shall take all steps necessary (i) to effect a "transfer" under
Section 8-313 of the New York Uniform Commercial Code or, where applicable,
under any U.S. federal regulation governing transfers of securities and (ii) to
provide the transferee with comparable rights under any applicable foreign law
or regulation.
16.2 All transfers of cash Collateral hereunder shall be by (a) wire
transfer in immediately available, freely transferable funds or (b) such other
means as Borrower and Lender may agree. All other transfers of cash hereunder
shall be made in accordance with the preceding sentence or by delivery of a
certified or official bank check representing next day New York Clearing House
Funds.
16.3 All transfers of a letter of credit from Borrower to Lender shall
be made by physical delivery to Lender of an irrevocable letter of credit issued
by a "bank" as defined in Section 3(a)(6)(A)-(C) of the Exchange Act. Transfer
of a letter of credit from Lender to Borrower shall be made by causing such
letter of credit to be returned or by causing the amount of such letter of
credit to be reduced to the amount required after such transfer.
16.4 A transfer of securities, cash or letters of credit may be
effected under this Section 16 on any day except (a) a day on which the
transferee is closed for business at its address set forth in Schedule A hereto
or (b) a day on which a Clearing Organization or wire transfer system is closed,
it the facilities of such Clearing Organization or wire transfer system are
required to effect such transfer.
17. Contractual Currency.
17.1 Borrower and Lender agree that: (a) any payment in respect of a
distribution under Section 7 shall be made in the currency in which the
underlying distribution of cash was made; (b) any return of cash shall be made
in the currency in which the underlying transfer of cash was made and (c) any
other payment of cash in connection with a Loan under this Agreement shall be in
the currency agreed upon by Borrower and Lender in connection with such Loan
(the currency established under clause (a), (b) or (c) hereinafter referred to
as the "Contractual Currency"). Notwithstanding the foregoing, the payee of any
such payment may, at its option, accept tender thereof in any other currency:
provided, however, that, to the extent permitted by applicable law.
the obligation of the payor to make such payment will be discharged only to the
extent of the amount of Contractual Currency that such payee may, consistent
with normal banking procedures, purchase with such other currency (after
deduction of any premium and costs of exchange) on the banking day next
succeeding its receipt of such currency.
17.2 If for any reason the amount in the Contractual Currency received
under Section 17.1, including amounts received after conversion of any recovery
under any judgment or order expressed in a currency other than the Contractual
Currency, falls short of the amount in the Contractual Currency due in respect
of this Agreement, the party required to make the payment will (unless a Default
has occurred and such party is the non-defaulting
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<PAGE> 23
party) as a separate and independent obligation and to the extent permitted by
applicable law, immediately pay such additional amount in the Contractual
Currency as may be necessary to compensate for the shortfall.
17.3 If for any reason the amount in the Contractual Currency received
under Section 17.1 exceeds the amount in the Contractual Currency due in respect
of this Agreement, then the party receiving the payment will (unless a Default
has occurred and such party is the non-defaulting party) refund promptly the
amount of such excess.
18. ERISA. Lender shall, if any of the securities transferred to the Borrower
hereunder for any Loan have been or shall be obtained, directly or indirectly,
from or using the assets of any Plan, so notify Borrower in writing upon the
execution of the Agreement or upon initiation of such Loan under Section 1.1. If
Lender so notifies Borrower, then Borrower and Lender shall conduct the Loan in
accordance with the terms and conditions of Department of Labor Prohibited
Transaction Exemption 81-6 (46 Fed. Reg. 7527, Jan. 23, 1981; as amended, 52
Fed. Reg. 18754, May 19, 1987), or any successor thereto (unless Borrower and
Lender have agreed prior to entering into a Loan that such Loan will be
conducted in reliance on another exemption, or without relying on any exemption,
from the prohibited transaction provisions of Section 406 of the Employee
Retirement Income Security Act of 1974, as amended, and Section 4975 of the
Internal Revenue Code of 1986, as amended). Without limiting the foregoing and
notwithstanding any other provision of this Agreement. if the Loan will be
conducted in accordance with Prohibited Transaction Exemption 81-6, then:
(a) Borrower represents and warrants to Lender that it is either
(i) a bank subject to federal or state supervision, (ii) a
broker-dealer registered under the Exchange Act or (iii)
exempt from registration under Section 15(a)(1) of the
Exchange Act as a dealer in Government Securities.
(b) Borrower represents and warrants that, during the term of any
Loan hereunder, neither Borrower nor any affiliate of Borrower
has any discretionary authority or control with respect to the
investment of the assets of the Plan involved in the Loan or
renders investment advice (within the meaning of 29 C.F.R.
Section 2510.321(c)) with respect to the assets of the Plan
involved in the Loan. Lender agrees that, prior to or at the
commencement of any Loan hereunder, it will communicate to
Borrower information regarding the Plan sufficient to identify
to Borrower any person or persons that have discretionary
authority or control with respect to the investment of the
assets of the Plan involved in the Loan or that render
investment advice (as defined in the preceding sentence) with
respect to the assets of the Plan involved in the Loan. In the
event Lender fails to communicate and keep current during the
term of any Loan such information, Lender rather than Borrower
shall be deemed to have made the representation and warranty
in the first sentence of this clause (b).
(c) Borrower and Lender agree that:
(i) the term "Collateral" shall mean cash, securities
issued or guaranteed by the United States government
or its agencies or instrumentalities, or irrevocable
bank letters of credit issued by a person other than
Borrower or an affiliate thereof;
(ii) prior to the making of any Loans hereunder, Borrower
shall provide Lender with (A) the most recent
available audited statement of Borrower's financial
condition and (B) the most recent available unaudited
statement of Borrower's financial condition (if more
recent than the most recent audited statement), and
each Loan made hereunder shall be deemed a
representation by Borrower that there has been no
material adverse change in Borrower's financial
condition subsequent to the date of the latest
financial statements or information furnished in
accordance herewith;
(iii) the Loan may be terminated by Lender at any time,
whereupon Borrower shall deliver the Loaned
Securities to Lender within the lesser of (A) the
customary delivery period for such
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<PAGE> 24
securities; (B) five Business Days and (c) the time
negotiated for such delivery between Borrower and
Lender; provided, however, that Borrower and Lender
may agree to a longer period only if permitted by
Prohibited Transaction Exemption 81-6; and
(iv) the Collateral transferred shall be security only for
obligations of Borrower to the Plan with respect to
Loans, and shall not be security for any obligation
of Borrower to any agent or affiliate of the Plan.
19. Single Agreement. Borrower and Lender acknowledge that, and have entered
into this Agreement in reliance on the fact that, all Loans hereunder constitute
a single business and contractual relationship and have been entered into in
consideration of each other. Accordingly, Borrower and Lender hereby agree that
payments, deliveries and other transfers made by either of them in respect of
any Loan shall be deemed to have been made in consideration of payments,
deliveries and other transfers in respect of any other Loan hereunder, and the
obligations to make any such payments, deliveries and other transfers may be
applied against each other and netted. In addition, Borrower and Lender
acknowledge that, and have entered into this Agreement in reliance an the fact
that, all Loans hereunder have been entered into in consideration of each other.
Accordingly, Borrower and Lender hereby agree that (a) each shall perform all of
its obligations in respect of each Loan hereunder, and that a default in the
performance of any such obligation by Borrower or by Lender (the "Defaulting
Party") in any Loan hereunder shall constitute a default by the Defaulting Party
under all such Loans hereunder, and (b) the nondefaulting party shall be
entitled to set off claims and apply property held by it in respect of any Loan
hereunder against obligations owing to A in respect of any other Loan with the
Defaulting Party.
20. THIS AGREEMENT SHALL BE GOVERNED AND CONSTRUED IN ACCORDANCE WITH THE LAWS
OF THE STATE OF NEW YORK WITHOUT GIVING EFFECT TO THE CONFLICT OF LAW PRINCIPLES
THEREOF.
21. Waiver. The failure of a party to this Agreement to insist upon strict
adherence to any term of this Agreement on any occasion shall not be considered
a waiver or deprive that party of the right thereafter to insist upon strict
adherence to that term or any other term of this Agreement. All waivers in
respect of a Default must be in writing.
22. Remedies. All remedies hereunder and all obligations with respect to any
Loan shall survive the termination of the relevant Loan, return of Loaned
Securities or Collateral and termination of this Agreement.
23. Notices and Other Communications. Unless another address is specified in
writing by the respective party to whom any notice or other communication is to
be given hereunder, all such notices or communications shall be in writing or
confirmed in writing and delivered at the respective addresses set forth in
Schedule A attached hereto. All notices shall be effective upon actual receipt,
provided, however, that if any notice shall be received by a party on a day on
which such party is not open for business at its office located at the address
set forth in Schedule A. Such notice shall be deemed to have been received by
such party at the opening of business an the next day on which such party is
open for business at such address.
24. SUBMISSION TO JURISDICTION; WAIVER OF JURY TRIAL.
24.1 EACH PARTY HERETO IRREVOCABLY AND UNCONDITIONALLY (A) SUBMITS TO
THE NON-EXCLUSIVE JURISDICTION OF ANY UNITED STATES FEDERAL OR NEW YORK STATE
COURT SITTING IN NEW YORK CITY, AND ANY APPELLATE COURT FROM ANY SUCH COURT,
SOLELY FOR THE PURPOSE OF ANY SUIT, ACTION OR PROCEEDING BROUGHT TO ENFORCE ITS
OBLIGATIONS HEREUNDER OR RELATING IN ANY WAY TO THIS AGREEMENT OR ANY LOAN
HEREUNDER AND (B) WAIVES, TO THE FULLEST EXTENT IT MAY EFFECTIVELY DO SO, ANY
DEFENSE OF AN INCONVENIENT FORUM TO THE MAINTENANCE OF SUCH ACTION OR PROCEEDING
IN ANY SUCH
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<PAGE> 25
COURT AND ANY RIGHT OF JURISDICTION ON ACCOUNT OF ITS PLACE OF RESIDENCE OR
DOMICILE.
24.2 EACH PARTY HERETO HEREBY IRREVOCABLY WAIVES ANY RIGHT THAT IT MAY
HAVE TO TRIAL BY JURY IN ANY ACTION, PROCEEDING OR COUNTERCLAIM ARISING OUT OF
OR RELATING TO THIS AGREEMENT OR THE TRANSACTIONS CONTEMPLATED HEREBY.
25. Miscellaneous. This Agreement supersedes any other agreement between the
parties hereto concerning loans of securities between Borrower and Lender. This
Agreement shall not be assigned by either party without the prior written
consent of the other party and any attempted assignment without such consent
shall be null and void. Subject to the foregoing, this Agreement shall be
binding upon and shall ensure to the benefit of Borrower and Lender and their
respective heirs, representatives, successors and assigns. This Agreement may be
terminated by either party upon written notice to the other, subject only to
fulfillment of any obligations then outstanding. This Agreement shall not be
modified, except by an instrument in writing signed by the party against whom
enforcement is sought. The parties hereto acknowledge and agree that, in
connection with this Agreement and each Loan hereunder, time is of the essence.
Each provision and agreement herein shall be treated as separate and independent
from any other provision herein and shall be enforceable notwithstanding the
unenforceability of any such other provision or agreement.
26. Definitions. For the purposes hereof:
26.1 " Broker-Dealer" shall mean any person that is a broker (including
a municipal securities broker), dealer, municipal securities dealer, government
securities broker or government securities dealer as defined in the Exchange
Act, regardless of whether the activities of such person are conducted; in the
United States or otherwise require such person to register with the Securities
and Exchange Commission or other regulatory body.
26.2 "Business Day" shall mean, with respect to any Loan hereunder, a
day on which regular trading occurs in the principal market for the Loaned
Securities subject to such Loan, provided, however, that for purposes of Section
15, such term shall mean a day on which regular trading occurs in the principal
market for the securities whose value is being determined. Notwithstanding the
foregoing, (i) for purposes of Section 8,"Business Day" shall mean any day on
which regular trading occurs in the principal market tar any Loaned Securities
or for any securities Collateral under any outstanding Loan hereunder and "next
Business Day" shall mean the next day on which a transfer of Collateral may be
effected in accordance with Section 16; and (ii) in no event shall a Saturday or
Sunday be considered a Business Day.
26.3 "Clearing Organization" shall mean The Depository Trust Company,
or, if agreed to by Borrower and Lender, such other clearing agency at which
Borrower (or Borrower's agent) and Lender (or Lender's agent) maintain accounts,
or a book-entry system maintained by a Federal Reserve Bank.
26.4 "Collateral" shall mean, whether now owned or hereafter acquired
and to the extent permitted by applicable law, (a) any property which Borrower
and Lender agree shall be acceptable collateral prior to the Loan and which is
transferred to Lender pursuant to Section 3 or 8 (including as collateral, for
definitional purposes, any letters of credit mutually acceptable to Lender and
Borrower), (b) any property substituted therefor pursuant to Section 3.5, (c)
all accounts in which such property is deposited and all securities and the like
in which any cash collateral is invested or reinvested, and (d) any proceeds of
any of the foregoing. For purposes of return of Collateral by Lender or purchase
or sale of securities pursuant to Section 12 or 13, such term shall include
securities of the same issuer, class and quantity as the Collateral initially
transferred by Borrower to Lender.
26.5 "Customer" shall mean any person that is a customer of Borrower
under Rule 15c3-3 under the Exchange Act or any comparable regulation of the
Secretary of the Treasury under Section 15C of the Exchange Act (to the extent
that Borrower is subject to such Rule or comparable regulation).
- 14 -
<PAGE> 26
26.6 "Cutoff Time" shall mean a time on a Business Day by which a
transfer of cash, securities or other property must be made by Borrower or
Lender to the other, as shall be agreed by Borrower and Lender in Schedule B or
otherwise orally or in writing or, in the absence of any such agreement, as
shall be determined in accordance with market practice.
26.7 "Default" shall have the meaning assigned in Section 11.
26.8 "Exchange Act" shall mean the Securities Exchange Act of 1934, as
amended.
26.9 "Federal Funds Rate" shall mean the rate of interest (expressed as
an annual rate), as published in Federal Reserve Statistical Release H.15(519)
or any publication substituted therefor, charged for federal funds (dollars in
immediately available funds borrowed by banks an overnight unsecured basis) on
that day or, if that day is not a banking day in New York City, on the next
preceding banking day.
26.10 "Foreign Securities" shall mean, unless otherwise agreed,
securities that are principally cleared and settled outside the United States.
26.11 "Government Securities" shall mean government securities as
defined in Section 3(a)(42)(A)-(C) of the Exchange Act.
26.12 "LIBOR" shall mean for any date, the offered rate for deposits in
U.S. dollars for a period of three months which appears an the Reuters Screen
LIBO page as of 11:00 A.M., London time, an such date (or, if at least two such
rates appear, the arithmetic mean of such rates).
26.13 "Loan" shall mean a loan of securities hereunder.
26.14 "Loaned Security" shall mean any security which is a security as
defined in the Exchange Act, transferred in a Loan hereunder until such security
(or an identical security) is transferred back to Lender hereunder, except that,
if any new or different security shall be exchanged for any Loaned Security by
recapitalization, merger, consolidation or other corporate action, such new or
different security shall, effective upon such exchange, be deemed to become a
Loaned Security in substitution for the former Loaned Security for which such
exchange is made. For purposes of return of Loaned Securities by Borrower or
purchase or sale of securities pursuant to Section 12 or 13, such term shall
include securities of the same issuer, class and quantity as the Loaned
Securities, as adjusted pursuant to the preceding sentence.
26.15 "Plan" shall mean (a) any "employee benefit plan" as defined in
Section 3(3) of the Employee Retirement Income Security Act of 1974 which is
subject to Pan 4 of Subtitle B of Title 1 of such Act: (b) any "plan" as defined
in Section 4975(e)(1) of the Internal Revenue Code of 1986; or (c) any entity
the assets of which are deemed to be assets of any such "employee benefit plan"
or "plan" by reason of the Department of Labor's plan asset regulation. 29
C.F.R. Section 2510.3101.
- 15 -
<PAGE> 27
Bank One Trust Company, NA
By:_______________________________
Title:____________________________
Date:_____________________________
By:_______________________________
Title:____________________________
Date:_____________________________
- 16 -
<PAGE> 28
ANNEX 1
Lender Acting as Agent
This Annex sets forth the terms and conditions governing all
transactions in which a party lending securities ("Agent") in a Loan is acting
as agent for one or more third parties (each a "Principal"). Unless otherwise
defined, capitalized terms used in this Annex shall have the meanings assigned
in the Securities Loan Agreement of which it forms a part (such agreement,
together with this Annex and any other schedules or exhibits, referred to as the
"Agreement") and, unless otherwise specified, all section references herein are
intended to refer to sections of such Securities Loan Agreement.
1. Additional Representations and Warranties. In addition to the
representations and warranties set forth in Section 9 of the Agreement, Agent
hereby makes the following representations and warranties, which shall continue
during the term of any Loan; Principal has duly authorized Agent to execute and
deliver the Agreement an its behalf. has the power to so authorize Agent and to
enter into the Loans contemplated by the Agreement and to perform the
obligations of Lender under such Loans, and has taken all necessary action to
authorize such execution and delivery by Agent and such performance by it.
2. Identification. Agent agrees (a) to provide Borrower prior to any
Loan under the Agreement with a written list of Principals for which it intends
to act as Agent (which list may be amended in writing from time to time with the
consent of Borrower), and (b) to provide Borrower, before the close of business
on the next Business Day after orally agreeing to enter into a Loan, with notice
of the specific Principal or Principals for whom it is acting in connection with
such Loan. If (i) Agent fails to identify such Principal or Principals prior to
the close of business an such next Business Day or (ii) Borrower shall determine
in its sole discretion that any Principal or Principals identified by Agent are
not acceptable to R. Borrower may reject and rescind any Loan with such
Principal or Principals, return to Agent any Loaned Securities previously
transferred to Borrower and refuse any further performance under such Loan, and
Agent shall immediately return to Borrower any Collateral previously transferred
to Agent in connection with such Loan; provided, however, that (A) Borrower
shall promptly (and in any event within one Business Day) notify Agent of its
determination to reject and rescind such Loan and (B) to the extent that any
performance was rendered by any party under any Loan rejected by Borrower, such
party shall remain entitled to any fees or other amounts that would have been
payable to it with respect to such performance if such Loan had not been
rejected. Borrower acknowledges that Agent shall not have any obligation to
provide R with confidential information regarding the financial status of its
Principals; Agent agrees, however, that it will assist Borrower in obtaining
from Agent's Principals such information regarding the financial status of such
Principals as Borrower may reasonably request.
3. Limitation of Agent's Liability. The parties expressly acknowledge
that if the representations and warranties of Agent under the Agreement,
including this Annex, are true and correct in all material respects during the
term of any Loan and Agent otherwise complies with the provisions of this Annex,
then (a) Agent's obligations under the Agreement shall not include a guarantee
of performance by As Principal or Principals and (b) Borrowers remedies shall
not include a right of set off against obligations, if any, of Agent arising in
other transactions in which Agent is acting as principal.
4. Multiple Principals.
(a) In the event that Agent proposes to act for more than one Principal
hereunder, Borrower and Agent shall elect whether (i) to treat Loans under this
Agreement as transactions entered into on behalf of separate Principals or (ii)
to aggregate such Loans as if they were transactions by a single Principal.
Failure to make such an election in writing shall be deemed an election to treat
Loans under this Agreement as transactions on behalf of separate Principals.
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<PAGE> 29
(b) In the event that Borrower and Agent elect (or are deemed to elect)
to treat Loans under the Agreement as transactions on behalf of separate
Principals. the parties agree that (i) Agent will provide Borrower, together
with the notice described in Section 2(b) of this Annex, notice specifying the
portion of each Loan allocable to the account of each of the Principals for
which it is acting (to the extent that any such Loan is allocable to the account
of more than one Principal); (ii) the portion of any individual Loan allocable
to each Principal shall be deemed a separate Loan under the Agreement; (iii) the
mark to market obligations of Borrower and Lender under Section 8 of the
Agreement shall be determined on a Loan-by-Loan basis (unless the parties agree
to determine such obligations on a Principal-by-Principal basis); and (iv)
Borrower's and Lender's remedies under the Agreement upon the occurrence of a
Default shall be determined as if Agent had entered into a separate Agreement
with Borrower on behalf of each of its Principals.
(c) In the event that Borrower and Agent elect to treat Loans under
this Agreement as if they were transactions by a single Principal, the parties
agree that (i) Agent's notice under Section 2(b) of this Annex need only
identify the names of its Principals but not the portion of each Loan allocable
to each Principal's account; (ii) the mark to market obligations of Borrower and
Lender under Section a shall, subject to any greater requirement imposed by
applicable law, be determined on an aggregate basis for all Loans entered into
by Agent on behalf of any Principal; and (iii) Borrower's and Lender's remedies
upon the occurrence of a Default shall be determined as if all Principals were a
single Lender.
(d) Notwithstanding any other provision of the Agreement (including
without limitation this Annex), the parties agree that any transactions by Agent
on behalf of a Plan shall be treated as transactions on behalf of separate
Principals in accordance with Section 4(b) of this Annex (and all mark to market
obligations of the parties shall be determined on a Loan-by-Loan basis).
5. Interpretation of Terms. All references to "Lender" in the Agreement
shall, subject to the provisions of this Annex (including among other provisions
the limitations on Agent's liability in Section 3 of this Annex), be construed
to reflect that (i) each Principal shall have, in connection with any Loan or
Loans entered into by Agent on its behalf, the rights, responsibilities,
privileges and obligations of a "Lender" directly entering into such Loan or
Loans with Borrower under the Agreement, and (ii) Agent's Principal or
Principals have designated Agent as their sole Agent for performance of Lender's
obligations to Borrower and for receipt of performance by Borrower of its
obligations to Lender in connection with any Loan or Loans under the Agreement
(including, among other things, as agent for each Principal in connection with
transfers of securities, cash or other property and as agent for giving and
receiving all notices under the Agreement). Both Agent and its Principal or
Principals shall be deemed parties" to the Agreement and all references to a
"party" or "either party" in the Agreement shall be deemed revised accordingly
(and any Default by Agent under paragraph (e) or any other applicable provision
of Section 11 shall be deemed a Default by Lender).
Bank One Trust Company, NA
By:_______________________________
Title:____________________________
Date:_____________________________
By:_______________________________
Title:____________________________
Date:_____________________________
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<PAGE> 30
Schedule A
NAMES AND ADDRESSES FOR COMMUNICATIONS
- 19 -
<PAGE> 31
AMENDMENT TO MASTER
SECURITIES LOAN AGREEMENT
This Amendment to the Master Securities Loan Agreement (the
"Agreement") is entered into by and between Bank One Trust Company, NA in its
capacity as agent for its customers' securities lending accounts (the "Lender")
and _________________________who hereby agree to amend the agreement as follows:
1. Section 3.1 of the Agreement is hereby amended by deleting the reference
to "100%" and replacing it with " 102%."
2. Section 3.6 is hereby deleted in its entirety and the following new
section 3.6 is substituted in its place:
3.6 Except as otherwise provided in an agreement entered into by Borrower
and Lender pursuant to Section 1. 1 or Section 3.5(b), Lender acknowledges that,
in connection with Loans of Government Securities and as otherwise permitted by
applicable law, some securities provided by Borrower as Collateral under this
Agreement may not be guaranteed by the United States.
3. Section 5 is hereby deleted in its entirety and the following new
Section 5 is substituted in its place:
5. Termination of the Loan. Unless otherwise agreed, (a) Borrower may
terminate a loan on any Business Day by giving notice to Lender prior to 10:00
a.m. in the case of government securities and prior to 11:30 a.m. in the case of
all other securities on such Business Day and transferring the Loaned Securities
to Lender before the Cutoff Time on such Business Day, and (b) Lender may
terminate a loan on a termination date established by a notice given by Lender
to Borrower prior to the close of business on a Business Day. The termination
date established by a termination notice given by Lender to Borrower shall be a
date no earlier than the standard settlement date for trades of the Loaned
Securities entered into on the date of such notice, which date shall, unless
Borrower and Lender agree to the contrary, be (i) in the case of government
securities, the next Business Day following such notice, and (ii) in the case of
all other securities, the next Business Day following such notice if the loan is
terminated prior to June 1, 1995 and the third Business Day if the loan is
terminated on or after June 1, 1995. Unless otherwise agreed, Borrower shall, on
or before the Cutoff Time on the termination date of a Loan, transfer the Loaned
Securities to Lender, provided, however, that upon such transfer by Borrower,
Lender shall transfer the Collateral (as adjusted pursuant to Section 8) to
Borrower in accordance with Section 3.3.
4. Section 8. 1 is hereby amended by deleting the reference to "100%" in the
last line and replacing it with 102%."
5. Section 24.1 is hereby amended by deleting the reference to "New York" and
replacing it with "Ohio" and by deleting the reference to "New York City" and
replacing it with "Columbus, Ohio."
6. The second sentence of Section 25 is hereby deleted it is entirety and the
following new sentence is substituted in its place:
This Agreement shall not be assigned by either party without the prior
written consent of the other party and any attempted assignment without such
consent shall be null and void except that Lender may assign this Agreement to
another affiliate of BANC ONE CORPORATION without the consent of the Borrower.
1
<PAGE> 32
7. Section 26.6 is hereby deleted in entirety and the following new Section
26.6 is substituted in its place:
"Cutoff Time" shall mean a time on a Business Day by which transfer of
cash, securities or other property must be made by Borrower or Lender to the
other, which for loans of government securities, shall mean the official Fed
wire dealer close on the termination date and which for loans of all other
securities, shall mean the close of the appropriate depository on the
termination date or such other times as shall be agreed upon by Borrower and
Lender orally or in writing.
8. The Agreement as amended by this Amendment constitutes the entire agreement
between the parties hereto with respect to the transactions contemplated hereby
and supersedes all prior discussions, understandings, agreements and
negotiations between the parties hereto with respect to such transactions. The
headings in this Amendment are for convenience only and shall not be used in
construing this Amendment.
IN WITNESS WHEREOF, this Amendment to the Agreement is executed by Bank One
Trust Company, NA in its capacity as agent for its Customers' Securities Lending
Accounts and ___________________________________.
BANK ONE TRUST COMPANY, N.A.
- ---------------------------- ------------------------------
BY: BY:
------------------------- ---------------------------
2
<PAGE> 33
SECURITIES LENDING AGREEMENT
EXHIBIT C
Approved Borrowers
BT Securities Corporation
Barclays de Zoete Wedd Securities, Inc.
Bear Steams & Co., Inc./Bear Steams Securities Corporation
CS First Boston Corporation
Chase Securities, Inc.
Dean Witter Reynolds, Inc.
Deutsche Bank Securities
Donaldson, Lufkin & Jenrette Securities Corp.
First Chicago Capital Markets Inc.
Fuji Securities Inc.
Goldman, Sachs & Co.
Greenwich Capital Markets, Inc.
HSBC Securities, Inc.
Lehman Brothers Inc./Lehman Government Securities Inc.
Merrill Lynch, Pierce, Fenner & Smith, Inc./Merrill Lynch Government
Securities Inc.
J. P. Morgan Securities Inc.
Morgan Stanley & Co./MS Securities Services
Nomura Securities International, Inc.
PaineWebber, Inc.
Paloma Securities, L. P.
Prudential Securities, Inc.
SBC Capital Markets, Inc.
Salomon Brothers, Inc.
Shelby Cullom Davis & Co.
Smith Barney Shearson Inc.
Societe Generale Securities Corporation
<PAGE> 34
SECURITIES LENDING AGREEMENT
EXHIBIT D
Asset Allocation Fund
Disciplined Value Fund
Equity Index Fund
Income Equity Fund
Large Company Growth Fund
Large Company Value Fund
Small Company Growth Fund
When securities are loaned pursuant to the Securities Lending Agreement dated
August , 1995, between The One Group (the "Lender"), Banc One Investment
Advisors Corporation (the "Adviser") and Bank One Trust Company, N.A. (the
"Subcustodian"), the Lender instructs as follows:
1. Types of Collateral. The Adviser may instruct the Subcustodian to accept
the types of collateral checked below when securities are loaned subject
to the terms of the above described Securities Lending Agreement.
[X] Cash
[X] Securities issued or guaranteed by the United States
Government or its agencies
[X] A letter or letters of credit
2. Investment of Cash Collateral In making the investments of cash received
as collateral discussed in the Securities Lending Agreement, including
income received from such collateral, the Adviser is authorized and
directed to use any of the types of investments (the "Permitted
Investments") checked below:
A. Short term obligations of corporations, including but not limited to
commercial paper, promissory notes, master variable demand notes, and
private placements, whose:
[X] Commercial paper is rated in the highest category of at least
two nationally recognized securities rating organizations at
the time of purchase, or if the corporation has not received a
rating from any nationally recognized securities organization,
the security must meet such standards as may be necessary to
be assigned a "highest category" rating as determined by the
Adviser.
[ ] Commercial paper is rated not less than the second highest
category of all nationally recognized securities rating
organizations at the time of purchase.
B. Loan participation certificates of corporations whose:
[ ] Commercial paper is rated in the highest category of at least
two nationally recognized securities rating organizations at
the time of purchase, or if the corporation has not received a
rating from any nationally recognized securities organization,
the security must meet such standards as may be necessary to
be assigned a "highest category" rating as determined by the
Adviser.
[ ] Commercial paper is rated not less than the second highest
category of all nationally rated securities
ratio-organizations at the time of purchase.
C. [X] Short term obligations of banks, including, but not limited
to, certificates of deposit, bankers' acceptances, and time
deposits, including without limitations any such instrument
issued by the Subcustodian or one of its affiliates.
<PAGE> 35
D. [X] Short term obligations of the United States Government or its
agencies.
E. [X] Repurchase agreements.
F. [X] Money market mutual funds or other securities of any open-end
or closed-end investment company or investment trust
registered under the Investment Company Act of 1940, as
amended.
G. [ ] Collective short-term investment funds organized and operated
by the Adviser or its affiliates for Employee Benefit Trusts
only.
3. Maturity of Collateral Investments, The Adviser may instruct the
Subcustodian to make Permitted Investments as authorized in Section 2 that
may be of longer or shorter maturity than the term of any transaction to
which they relate, it being understood that "short term" Permitted
Investments shall include Permitted Investments with such maturities as
are described in this section. The maturity of each Permitted Investment
will be based upon Lender instructions, if any, the Adviser's estimate of
the volume of securities that is likely to be loaned on a continuous
basis, the rates available on alternate investments, interest rate trends,
and overall market conditions. The average weighted maturity of Permitted
Investments shall not exceed 90 days, and in no case shall the final
maturity of a Permitted Investment exceed 12 months in the case of fixed
rate investments and 36 months in the case of floating rate investments.
The difference between the average weighted maturity of loan transactions
and the average weighted maturity of Permitted Investments shall not
exceed 90 days. For the purpose of calculating the average weighted
maturity of loan transactions, maturity shall, in the case of "term"
loans, mean the number of days remaining until the termination of the loan
transaction, or in the case of "open" loans, one day. For the purpose of
calculating the average weighted maturity of Permitted Investments,
maturity shall mean: (1) one day in the case of money market mutual funds,
master notes, and other instruments that may be liquidated without notice,
(2) the number of days remaining to the next reset date in the case of
floating rate securities, (3) the number of days remaining until the next
put date in the case of securities subject to unconditional and
irrevocable puts of the issue to the obligor, or (4) the actual number of
days remaining until the maturity date for all other Permitted
Investments.
4. When the Lender has authorized the Adviser to direct the Subcustodian to
accept a letter of credit as collateral for securities loans, such standby
letter of credit shall be clean, unconditional, and irrevocable. The
Adviser shall accept letters from banks whose:
[ ] Certificates of deposit or commercial paper is rated in the
highest category of at least two nationally recognized securities
rating organizations.
[ ] Certificates of deposit or commercial paper is rated not less than
the second highest category of all nationally recognized
securities rating organizations.
The One Group
-------------
("Lender")
By: /s/ MARK A. DILLON
------------------------------------
Banc One Investment Advisors Corporation
----------------------------------------
("Adviser")
By: /s/ MARK A. BEESON
------------------------------------
Bank One Trust Company, N.A.
----------------------------------------
("Subcustodian")
By: /s/ STEVEN E. CUTLER
------------------------------------
<PAGE> 36
SECURITIES LENDING AGREEMENT
EXHIBIT D
Government Bond Fund
Income Bond Fund
Intermediate Bond Fund
Limited Volatility Fund
When securities are loaned pursuant to the Securities Lending Agreement dated
August __, 1995, between The One Group (the "Lender"), Banc One Investment
Advisors Corporation (the "Adviser") and Bank One Trust Company, N.A. (the
"Subcustodian"), the Lender instructs as follows:
1. Types of Collateral. The Adviser may instruct the Subcustodian to accept
the types of collateral checked below when securities are loaned subject
to the terms of the above described Securities Lending Agreement.
[X] Cash
[X] Securities issued or guaranteed by the United States
Government or its agencies
[ ] A letter or letters of credit
2. Investment of Cash Collateral. In making the investments of cash received
as collateral discussed in the Securities Lending Agreement, including
income received from such collateral, the Adviser is authorized and
directed to use any of the types of investments (the "Permitted
Investments") checked below:
A. Short term obligations of corporations, including but not limited
to commercial paper, promissory notes, master variable demand
notes, and private placements, whose:
[X] Commercial paper is rated in the highest category of
at least two nationally recognized securities rating
organizations at the time of purchase, or if the
corporation has not received a rating from any
nationally recognized securities organization, the
security must meet such standards as may be necessary
to be assigned a "highest category" rating as
determined by the Adviser.
[ ] Commercial paper is rated not less than the second
highest category of all nationally recognized
securities rating organizations at the time of
purchase.
B. Loan participation certificates of corporations whose:
[ ] Commercial paper is rated in the highest category of
at least two nationally recognized securities rating
organizations at the time of purchase, or if the
corporation has not received a rating from any
nationally recognized securities organization, the
security must meet such standards as may be necessary
to be assigned a "highest category" rating as
determined by the Adviser.
[ ] Commercial paper is rated not less than the second
highest category of all nationally rated securities
rating organizations at the time of purchase.
C. [X] Short term obligations of banks, including, but
not limited to, certificates of deposit, bankers'
acceptances, and time deposits, including without
limitations any such instrument issued by the
Subcustodian or one of its affiliates.
D. [X] Short term obligations of the United States
Government or its agencies.
E. [X] Repurchase agreements.
F. [X] Money market mutual funds or other securities of
any open-end or closed-end investment company or
investment trust registered under the Investment
Company Act of 1940, as amended.
<PAGE> 37
G. [ ] Collective short-term investment funds organized and
operated by the Adviser or its affiliates for
Employee Benefit Trusts only.
3. Maturity of Collateral Investments, The Adviser may instruct the
Subcustodian to make Permitted Investments as authorized in Section 2 that
may be of longer or shorter maturity than the term of any transaction to
which they relate, it being understood that "short term" Permitted
Investments shall include Permitted Investments with such maturities as
are described in this section. The maturity of each Permitted Investment
will be based upon Lender instructions, if any, the Adviser's estimate of
the volume of securities that is likely to be loaned on a continuous
basis, the rates available on alternate investments, interest rate trends,
and overall market conditions. The average weighted maturity of Permitted
Investments shall not exceed 90 days, and in no case shall the final
maturity of a Permitted Investment exceed 12 months in the case of fixed
rate investments and 36 months in the case of floating rate investments.
The difference between the average weighted maturity of loan transactions
and the average weighted maturity of Permitted Investments shall not
exceed 90 days. For the purpose of calculating the average weighted
maturity of loan transactions, maturity shall, in the case of "term"
loans, mean the number of days remaining until the termination of the loan
transaction, or in the case of "open" loans, one day. For the purpose of
calculating the average weighted maturity of Permitted Investments,
maturity shall mean: (1) one day in the case of money market mutual funds,
master notes, and other instruments that may be liquidated without notice,
(2) the number of days remaining to the next reset date in the case of
floating rate securities, (3) the number of days remaining until the next
put date in the case of securities subject to unconditional and
irrevocable puts of the issue to the obligor, or (4) the actual number of
days remaining until the maturity date for all other Permitted
Investments.
4. When the Lender has authorized the Adviser to direct the Subcustodian to
accept a letter of credit as collateral for securities loans, such standby
letter of credit shall be clean, unconditional, and irrevocable. The
Adviser shall accept letters from banks whose:
[ ] Certificates of deposit or commercial paper is rated in the
highest category of at least two nationally recognized
securities rating organizations.
[ ] Certificates of deposit or commercial paper is rated not less
than the second highest category of all nationally recognized
securities rating organizations.
The One Group
-------------
("Lender")
By: /s/ MARK A. DILLON
------------------------------------
Banc One Investment Advisors Corporation
----------------------------------------
("Adviser")
By: /s/ MARK A. BEESON
------------------------------------
Bank One Trust Company, N.A.
----------------------------------------
("Subcustodian")
By: /s/ STEVEN E. CUTLER
------------------------------------
<PAGE> 38
SECURITIES LENDING AGREEMENT
EXHIBIT D
U.S. Treasury Securities Money Market Fund
When securities are loaned pursuant to the Securities Lending Agreement dated
August __, 1995, between The One Group (the "Lender"), Banc One Investment
Advisors Corporation (the "Adviser") and Bank One Trust Company, N.A. (the
"Subcustodian"), the Lender instructs as follows:
1. Types of Collateral. The Adviser may instruct the Subcustodian to accept
the types of collateral checked below when securities are loaned subject
to the terms of the above described Securities Lending Agreement.
[X] Cash
[X] Securities issued or guaranteed by the United States
Government
[ ] A letter or letters of credit
2. Investment of Cash Collateral. In making the investments of cash received
as collateral discussed in the Securities Lending Agreement, including
income received from such collateral, the Adviser is authorized and
directed to use any of the types of investments (the "Permitted
Investments") checked below:
A. Short term obligations of corporations, including but not limited
to commercial paper, promissory notes, master variable demand
notes, and private placements, whose:
[ ] Commercial paper is rated in the highest category of at least
two nationally recognized securities rating organizations at
the time of purchase, or if the corporation has not received a
rating from any nationally recognized securities organization,
the security must meet such standards as may be necessary to
be assigned a "highest category" rating as determined by the
Adviser.
[ ] Commercial paper is rated not less than the second highest
category of all nationally recognized securities rating
organizations at the time of purchase.
B. Loan participation certificates of corporations whose:
[ ] Commercial paper is rated in the highest category of at least
two nationally recognized securities rating organizations at
the time of purchase, or if the corporation has not received a
rating from any nationally recognized securities organization,
the security must meet such standards as may be necessary to
be assigned a "highest category" rating as determined by the
Adviser.
[ ] Commercial paper is rated not less than the second highest
category of all nationally rated securities rating
organizations at the time of purchase.
C. [ ] Short term obligations of banks, including, but not
limited to, certificates of deposit, bankers' acceptances, and
time deposits, including without limitations any such
instrument issued by the Subcustodian or one of its
affiliates.
D. [X] Short term obligations of the United States Government.
E. [X] Repurchase agreements collateralized by securities issued or
guaranteed by the United States Government.
<PAGE> 39
F. [X] Money market mutual funds or other securities of any open-end
or closed-end investment company or investment trust
registered under the Investment Company Act of 1940, as
amended, which invest solely in securities issued or
guaranteed by the United States Government and repurchase
agreements collateralized by such securities.
G. [ ] Collective short-term investment funds organized and
operated by the Adviser or its affiliates for Employee Benefit
Trusts only.
3. Maturity of Collateral Investments. The Adviser may instruct the
Subcustodian to make Permitted Investments as authorized in Section 2 that
may be of longer or shorter maturity than the term of any transaction to
which they relate, it being understood that "short term" Permitted
Investments shall include Permitted Investments with such maturities as
are described in this section. The maturity of each Permitted Investment
will be based upon Lender instructions, if any, the Adviser's estimate of
the volume of securities that is likely to be loaned on a continuous
basis, the rates available on alternate investments, interest rate trends,
and overall market conditions. The average weighted maturity of Permitted
Investments shall not exceed 60 days, and in no case shall the final
maturity of a Permitted Investment exceed 12 months. The difference
between the average weighted maturity of loan transactions and the average
weighted maturity of Permitted Investments shall not exceed 60 days. For
the purpose of calculating the average weighted maturity of loan
transactions, maturity shall, in the case of "term" loans, mean the number
of days remaining until the termination of the loan transaction, or in the
case of "open" loans, one day. For the purpose of calculating the average
weighted maturity of Permitted Investments, maturity shall mean: (1) one
day in the case of money market mutual funds, master notes, and other
instruments that may be liquidated without notice, (2) the number of days
remaining to the next reset date in the case of floating rate securities,
(3) the number of days remaining until the next put date in the case of
securities subject to unconditional and irrevocable puts of the issue to
the obligor, or (4) the actual number of days remaining until the maturity
date for all other Permitted Investments.
4. When the Lender has authorized the Adviser to direct the Subcustodian to
accept a letter of credit as collateral for securities loans, such standby
letter of credit shall be clean, unconditional, and irrevocable. The
Adviser shall accept letters from banks whose:
[ ] Certificates of deposit or commercial paper is rated in the
highest category of at least two nationally recognized
securities rating organizations.
[ ] Certificates of deposit or commercial paper is rated not less
than the second highest category of all nationally recognized
securities rating organizations.
The One Group
-------------
("Lender")
By: /s/ MARK A. DILLON
------------------------------------
Banc One Investment Advisors Corporation
----------------------------------------
("Adviser")
By: /s/ MARK A. BEESON
------------------------------------
Bank One Trust Company, N.A.
----------------------------------------
("Subcustodian")
By: /s/ STEVEN E. CUTLER
------------------------------------
<PAGE> 40
SECURITIES LENDING AGREEMENT
EXHIBIT D
Treasury Only Money Market Fund
When securities are loaned pursuant to the Securities Lending Agreement dated
August __, 1995, between The One Group (the "Lender"), Banc One Investment
Advisors Corporation (the "Adviser") and Bank One Trust Company, N.A. (the
"Subcustodian"), the Lender instructs as follows:
1. Types of Collateral. The Adviser may instruct the Subcustodian to accept
the types of collateral checked below when securities are loaned subject
to the terms of the above described Securities Lending Agreement.
[X] Cash
[X] Securities issued or guaranteed by the United States Government
[ ] A letter or letters of credit
2. Investment of Cash Collateral. In making the investments of cash received
as collateral discussed in the Securities Lending Agreement, including
income received from such collateral, the Adviser is authorized and
directed to use any of the types of investments (the "Permitted
Investments") checked below:
A. Short term obligations of corporations, including but not limited
to commercial paper, promissory notes, master variable demand
notes, and private placements, whose:
[ ] Commercial paper is rated in the highest category of at least
two nationally recognized securities rating organizations at
the time of purchase, or if the corporation has not received a
rating from any nationally recognized securities organization,
the security must meet such standards as may be necessary to
be assigned a "highest category" rating as determined by the
Adviser.
[ ] Commercial paper is rated not less than the second highest
category of all nationally recognized securities rating
organizations at the time of purchase.
B. Loan participation certificates of corporations whose:
[ ] Commercial paper is rated in the highest category of at least
two nationally recognized securities rating organizations at
the time of purchase, or if the corporation has not received a
rating from any nationally recognized securities organization,
the security must meet such standards as may be necessary to
be assigned a "highest category" rating as determined by the
Adviser.
[ ] Commercial paper is rated not less than the second highest
category of all nationally rated securities rating
organizations at the time of purchase.
C. [ ] Short term obligations of banks, including, but not limited
to, certificates of deposit, bankers' acceptances, and
time deposits, including without limitations any such
instrument issued by the Subcustodian or one of its
affiliates.
D. [X] Short term obligations of the United States Government.
E. [ ] Repurchase agreements.
<PAGE> 41
F. [ ] Money market mutual funds or other securities of any
open-end or closed-end investment company or investment trust
registered under the Investment Company Act of 1940, as
amended.
G. [ ] Collective short-term investment funds organized and operated
by the Adviser or its affiliates for Employee Benefit Trusts
only.
3. Maturity of Collateral Investments. The Adviser may instruct the
Subcustodian to make Permitted Investments as authorized in Section 2 that
may be of longer or shorter maturity than the term of any transaction to
which they relate, it being understood that "short term" Permitted
Investments shall include Permitted Investments with such maturities as
are described in this section. The maturity of each Permitted Investment
will be based upon Lender instructions, if any, the Adviser's estimate of
the volume of securities that is likely to be loaned on a continuous
basis, the rates available on alternate investments, interest rate trends,
and overall market conditions. The average weighted maturity of Permitted
Investments shall not exceed 60 days, and in no case shall the final
maturity of a Permitted Investment exceed 12 months. The difference
between the average weighted maturity of loan transactions and the average
weighted maturity of Permitted Investments shall not exceed 60 days. For
the purpose of calculating the average weighted maturity of loan
transactions, maturity shall, in the case of "term" loans, mean the number
of days remaining until the termination of the loan transaction, or in the
case of "open" loans, one day. For the purpose of calculating the average
weighted maturity of Permitted Investments, maturity shall mean: (1) one
day in the case of money market mutual funds, master notes, and other
instruments that may be liquidated without notice, (2) the number of days
remaining to the next reset date in the case of floating rate securities,
(3) the number of days remaining until the next put date in the case of
securities subject to unconditional and irrevocable puts of the issue to
the obligor, or (4) the actual number of days remaining until the maturity
date for all other Permitted Investments.
4. When the Lender has authorized the Adviser to direct the Subcustodian to
accept a letter of credit as collateral for securities loans, such standby
letter of credit shall be clean, unconditional, and irrevocable. The
Adviser shall accept letters from banks whose:
[ ] Certificates of deposit or commercial paper is rated in the
highest category of at least two nationally recognized
securities rating organizations.
[ ] Certificates of deposit or commercial paper is rated not less
than the second highest category of all nationally recognized
securities rating organizations.
The One Group
-------------
("Lender")
By: /s/ MARK A. DILLON
------------------------------------
Banc One Investment Advisors Corporation
----------------------------------------
("Adviser")
By: /s/ MARK A. BEESON
------------------------------------
Bank One Trust Company, N.A.
----------------------------------------
("Subcustodian")
By: /s/ STEVEN E. CUTLER
------------------------------------
<PAGE> 42
SECURITIES LENDING AGREEMENT
EXHIBIT D
Government Money Market Fund
When securities are loaned pursuant to the Securities Lending Agreement dated
August __, 1995, between The One Group (the "Lender), Banc One Investment
Advisors Corporation (the "Adviser") and Bank One Trust Company, N.A. (the
"Subcustodian"), the Lender instructs as follows:
1. Types of Collateral. The Adviser may instruct the Subcustodian to accept
the types of collateral checked below when securities are loaned subject
to the terms of the above described Securities Lending Agreement.
[X] Cash
[X] Securities issued or guaranteed by the United States Government
or its agencies
[ ] A letter or letters of credit
2. Investment of Cash Collateral. In making the investments of cash received
as collateral discussed in the Securities Lending Agreement, including
income received from such collateral, the Adviser is authorized and
directed to use any of the types of investments (the "Permitted
Investments") checked below:
A. Short term obligations of corporations, including but not limited
to commercial paper, promissory notes, master variable demand
notes, and private placements, whose:
[ ] Commercial paper is rated in the highest category of at least
two nationally recognized securities rating organizations at
the time of purchase, or if the corporation has not received a
rating from any nationally recognized securities organization,
the security must meet such standards as may be necessary to
be assigned a "highest category" rating as determined by the
Adviser.
[ ] Commercial paper is rated not less than the second highest
category of all nationally recognized securities rating
organizations at the time of purchase.
B. Loan participation certificates of corporations whose:
[ ] Commercial paper is rated in the highest category of at least
two nationally recognized securities rating organizations at
the time of purchase, or if the corporation has not received a
rating from any nationally recognized securities organization,
the security must meet such standards as may be necessary to
be assigned a "highest category" rating as determined by the
Adviser.
[ ] Commercial paper is rated not less than the second highest
category of all nationally rated securities rating
organizations at the time of purchase.
C. [ ] Short term obligations of banks, including, but not
limited to, certificates of deposit, bankers' acceptances, and
time deposits, including without limitations any such
instrument issued by the Subcustodian or one of its
affiliates.
D. [X] Short term obligations of the United States Government or its
agencies.
E. [X] Repurchase agreements collateralized by securities issued or
guaranteed by the United States Government or its agencies.
F. [X] Money market mutual funds or other securities of any open-end
or closed-end
<PAGE> 43
investment company or investment trust registered under the
Investment Company Act of 1940, as amended, which invest
solely in securities issued or guaranteed by the United States
Government or its agencies and repurchase agreements
collateralized by such securities.
G. [ ] Collective short-term investment funds organized and
operated by the Adviser or its affiliates for Employee Benefit
Trusts only.
3. Maturity of Collateral Investments. The Adviser may instruct the
Subcustodian to make Permitted Investments as authorized in Section 2 that
may be of longer or shorter maturity than the term of any transaction to
which they relate, it being understood that "short term" Permitted
Investments shall include Permitted Investments with such maturities as
are described in this section. The maturity of each Permitted Investment
will be based upon Lender instructions, if any, the Adviser's estimate of
the volume of securities that is likely to be loaned on a continuous
basis, the rates available on alternate investments, interest rate trends,
and overall market conditions. The average weighted maturity of Permitted
Investments shall not exceed 60 days, and in no case shall the final
maturity of a Permitted Investment exceed 12 months. The difference
between the average weighted maturity of loan transactions and the average
weighted maturity of Permitted Investments shall not exceed 60 days. For
the purpose of calculating the average weighted maturity of loan
transactions, maturity shall, in the case of "term" loans, mean the number
of days remaining until the termination of the loan transaction, or in the
case of "open" loans, one day. For the purpose of calculating the average
weighted maturity of Permitted Investments, maturity shall mean: (1) one
day in the case of money market mutual funds, master notes, and other
instruments that may be liquidated without notice, (2) the number of days
remaining to the next reset date in the case of floating rate securities,
(3) the number of days remaining until the next put date in the case of
securities subject to unconditional and irrevocable puts of the issue to
the obligor, or (4) the actual number of days remaining until the maturity
date for all other Permitted Investments.
4. When the Lender has authorized the Adviser to direct the Subcustodian to
accept a letter of credit as collateral for securities loans, such standby
letter of credit shall be clean, unconditional, and irrevocable. The
Adviser shall accept letters from banks whose:
[ ] Certificates of deposit or commercial paper is rated in the
highest category of at least two nationally recognized
securities rating organizations.
[ ] Certificates of deposit or commercial paper is rated not less
than the second highest category of all nationally recognized
securities rating organizations.
The One Group
-------------
("Lender")
By: /s/ MARK A. DILLON
------------------------------------
Banc One Investment Advisors Corporation
----------------------------------------
("Adviser")
By: /s/ MARK A. BEESON
------------------------------------
Bank One Trust Company, N.A.
----------------------------------------
("Subcustodian")
By: /s/ STEVEN E. CUTLER
------------------------------------
<PAGE> 44
SECURITIES LENDING AGREEMENT
EXHIBIT D
Prime Money Market Fund
When securities are loaned pursuant to the Securities Lending Agreement dated
August __, 1995, between The One Group (the "Lender"), Banc One Investment
Advisors Corporation (the "Adviser") and Bank One Trust Company, N.A. (the
"Subcustodian"), the Lender instructs as follows:
1. Types of Collateral. The Adviser may instruct the Subcustodian to accept
the types of collateral checked below when securities are loaned subject
to the terms of the above described Securities Lending Agreement.
[X] Cash
[X] Securities issued or guaranteed by the United States Government
or its agencies
[ ] A letter or letters of credit
2. Investment of Cash Collateral. In making the investments of cash received
as collateral discussed in the Securities Lending Agreement, including
income received from such collateral, the Adviser is authorized and
directed to use any of the types of investments (the "Permitted
Investments") checked below:
A. Short term obligations of corporations, including but not limited
to commercial paper, promissory notes, master variable demand
notes, and private placements, whose:
[X] Commercial paper is rated in the highest category of at least
two nationally recognized securities rating organizations at
the time of purchase, or if the corporation has not received a
rating from any nationally recognized securities organization,
the security must meet such standards as may be necessary to
be assigned a "highest category" rating as determined by the
Adviser.
[ ] Commercial paper is rated not less than the second highest
category of all nationally recognized securities rating
organizations at the time of purchase.
B. Loan participation certificates of corporations whose:
[ ] Commercial paper is rated in the highest category of at least
two nationally recognized securities rating organizations at
the time of purchase, or if the corporation has not received a
rating from any nationally recognized securities organization,
the security must meet such standards as may be necessary to
be assigned a "highest category" rating as determined by the
Adviser.
[ ] Commercial paper is rated not less than the second highest
category of all nationally rated securities rating
organizations at the time of purchase.
C. [X] Short term obligations of banks, including, but not limited
to, certificates of deposit, bankers' acceptances, and time
deposits, including without limitations any such instrument
issued by the Subcustodian or one of its affiliates.
D. [X] Short term obligations of the United States Government or its
agencies.
E. [X] Repurchase agreements.
<PAGE> 45
F. [X] Money market mutual funds or other securities of any open-end
or closed-end investment company or investment trust
registered under the Investment Company Act of 1940, as
amended.
G. [ ] Collective short-term investment funds organized and operated
by the Adviser or its affiliates for Employee Benefit Trusts
only.
3. Maturity of Collateral Investments. The Adviser may instruct the
Subcustodian to make Permitted Investments as authorized in Section 2 that
may be of longer or shorter maturity than the term of any transaction to
which they relate, it being understood that "short term" Permitted
Investments shall include Permitted Investments with such maturities as
are described in this section. The maturity of each Permitted Investment
will be based upon Lender instructions, if any, the Adviser's estimate of
the volume of securities that is likely to be loaned on a continuous
basis, the rates available on alternate investments, interest rate trends,
and overall market conditions. The average weighted maturity of Permitted
Investments shall not exceed 90 days, and in no case shall the final
maturity of a Permitted Investment exceed 12 months in the case of fixed
rate investments and 36 months in the case of floating rate investments.
The difference between the average weighted maturity of loan transactions
and the average weighted maturity of Permitted Investments shall not
exceed 90 days. For the purpose of calculating the average weighted
maturity of loan transactions, maturity shall, in the case of "term"
loans, mean the number of days remaining until the termination of the loan
transaction, or in the case of "open" loans, one day. For the purpose of
calculating the average weighted maturity of Permitted Investments,
maturity shall mean: (1) one day in the case of money market mutual funds,
master notes, and other instruments that may be liquidated without notice,
(2) the number of days remaining to the next reset date in the case of
floating rate securities, (3) the number of days remaining until the next
put date in the case of securities subject to unconditional and
irrevocable puts of the issue to the obligor, or (4) the actual number of
days remaining until the maturity date for all other Permitted
Investments.
4. When the Lender has authorized the Adviser to direct the Subcustodian to
accept a letter of credit as collateral for securities loans, such standby
letter of credit shall be clean, unconditional, and irrevocable. The
Adviser shall accept letters from banks whose:
[ ] Certificates of deposit or commercial paper is rated in the
highest category of at least two nationally recognized
securities rating organizations.
[ ] Certificates of deposit or commercial paper is rated not less
than the second highest category of all nationally recognized
securities rating organizations.
The One Group
-------------
("Lender")
By: /s/ MARK A. DILLON
------------------------------------
Banc One Investment Advisors Corporation
----------------------------------------
("Adviser")
By: /s/ MARK A. BEESON
------------------------------------
Bank One Trust Company, N.A.
----------------------------------------
("Subcustodian")
By: /s/ STEVEN E. CUTLER
------------------------------------
<PAGE> 46
SECURITIES LENDING AGREEMENT
EXHIBIT E
Schedule of Fees
U. S. Government and Agency Securities
The subcustodian shall be paid a fee of 5 basis points, calculated on an annual
basis and accrued daily, based upon the value of collateral received from the
Borrower for each loan under this Agreement.
Equities and Corporate Bonds
The subcustodian shall be paid a fee of 10 basis points, calculated on an annual
basis and accrued daily, based upon the value of collateral received from the
Borrower for each loan under this Agreement.
<PAGE> 1
EXHIBIT 9(q)
AMENDMENT TO SECURITIES LENDING AGREEMENT
FOR NON-ERISA ACCOUNTS DATED AS OF
JANUARY 21, 1997 BETWEEN THE REGISTRANT,
BANC ONE INVESTMENT ADVISORS CORPORATION AND
BANK ONE TRUST COMPANY, NA
<PAGE> 2
AMENDMENT TO SECURITIES LENDING AGREEMENT
The Securities Lending Agreement dated August 1995 by and between The One Group,
an open-end management investment company formed under the Investment Company
Act of 1940 (the "Lender"), Banc One Investment Advisors Corporation, an
investment adviser under the Investment Advisers Act of 1490 (the "Adviser") and
Bank One Trust Company, NA, a national banking association (the "Subcustodian")
is hereby amended by deleting Section 8(b) in its entirety and replacing it with
the following:
(b) All uncertificated U.S. government or agency securities, and any other
securities received by the Subcustodian as Collateral in connection with any
transactions involving Cash Collateral (as defined below), shall be segregated
by a separate recordation hereunder on the books of the Subcustodian, and may be
held as the Subcustodian may determine in any form or manner in which the
Subcustodian is permitted to hold securities including, without limitation, by
depositing the same with a subcustodian or agent as have been approved by the
Lender or in the Federal Reserve/Treasury Book-Entry System (the "Book-Entry
System") or the Depository Trust Company (the "Depository"), or their respective
successors or nominees. Subcustodian is hereby authorized to enter into such
agreements as are necessary to appoint such agents, subcustodians, and
Depositories.
Agreed to this 21st day of January, 1997.
Bank One Trust Company, N.A. The One Group
By: /s/ STEVEN E. CUTLER By: Mark A. Dillon
------------------------ -----------------
Banc One Investment Advisors Corporation
By: /s/ MARK A. BEESON
-------------------------------------
<PAGE> 1
EXHIBIT 9(r)
SECOND AMENDMENT TO THE SECURITIES LENDING AGREEMENT
(DOMESTICE SECURITIES), EFFECTIVE MAY 21, 1998, BETWEEN THE REGISTRANT,
BANC ONE INVESTMENT ADVISORS CORPORATION AND BANK ONE TRUST COMPANY, N.A.
<PAGE> 2
SECOND AMENDMENT TO THE SECURITIES LENDING AGREEMENT
(DOMESTIC SECURITIES)
This Second Amendment to the Securities Lending Agreement is hereby made
effective May __, 1998, by and between The One Group(R), an open-end management
investment company formed under the Investment Company Act of 1940 (the
"Lender"), Banc One Investment Advisors Corporation, an investment adviser under
the Investment Advisers Act of 1940 (the "Adviser"), and Bank One Trust Company,
N.A., a national banking association (the "Subcustodian").
BACKGROUND INFORMATION
Pursuant to the Securities Lending Agreement, dated as of August 1995 as
amended by the Amendment to Securities Lending Agreement, dated as of January
21, 1997 (the "Agreement"), the Lender participates in a Securities Lending
Program developed by the Adviser in conjunction with the Subcustodian. The
Lender, the Adviser, and the Subcustodian desire to amend the Agreement to: (i)
clarify the amount of securities which may be lent to Borrowers and (ii)
authorize the use of letters of credit as collateral for loans of securities.
STATEMENT OF AGREEMENT
The Lender, the Adviser, and the Subcustodian hereby acknowledge the
accuracy of the above Background Information and agree to amend the Agreement by
deleting Section 5 and Section 8(a) in their entirety and substituting the
following in their place:
"Section 5. MAKING OF LOANS. The Adviser will notify Borrowers that it is
prepared to lend securities of the Lender held in the Account. If the Adviser
determines, in response to a Borrower's orally advising the Adviser of its
desire to borrow securities, to lend securities of the Lender pursuant to a Loan
Agreement, the Adviser will instruct the Subcustodian to deliver the securities,
and is hereby authorized to take such actions to effect the loan as are required
by the Loan Agreement; provided, however, that the Adviser shall lend no more
than 33-1/3% of the Fund's total assets. For each Borrower, the Adviser shall
establish a maximum limit on the amount of securities that will be delivered to
each Borrower in connection with loans of the Lender's securities (the "Borrower
Limit"). The Subcustodian shall not deliver Lender's securities to a Borrower
when the value of the loan when added to all outstanding loans with the Borrower
exceeds the Borrower Limit."
"Section 8. COLLATERAL.
(a) In connection with loans of securities made on behalf of the Lender
that are secured by Collateral other than letters of credit, the Adviser agrees
to limit Collateral accepted and investments of Cash Collateral to those
securities in which the Fund of the Lender owning the loaned securities could
invest and, subject to this requirement, the Lender authorizes the Adviser: (i)
to accept Collateral of the types which are designated on EXHIBIT D with such
changes as recommended from time to time by the Adviser with the approval of the
Lender (the "Collateral"); and (ii) to invest cash received as collateral for a
loan of securities in any of the types of investments specified on EXHIBIT D as
modified from time to time. Where a loan of securities is to be collateralized
by a letter of credit, the Adviser shall instruct the Subcustodian to accept
only an irrevocable letter of credit that contains an immediate draw-down
capability from a financial institution listed on the Advisor's Bank Approved
List(s). The Lender hereby authorizes the Adviser to purchase or sell
investments of Cash Collateral to or from other accounts advised by the Adviser
or held by its affiliates."
[SIGNATURE PAGE FOLLOWS]
<PAGE> 3
IN WITNESS WHEREOF, this Second Amendment to the Securities Lending Agreement
is executed by Lender, the Adviser, and the Subcustodian.
THE ONE GROUP
By: /s/ MARK S. REDMAN
----------------------------------------
Mark S. Redman, President
BANC ONE INVESTMENT ADVISORS CORPORATION
By: /s/ MARK A. BEESON
----------------------------------------
Mark A. Beeson, Senior Managing Director
BANK ONE TRUST COMPANY, N.A.
By: /s/ STEVEN E. CUTLER
----------------------------------------
Steven E. Cutler, Officer
<PAGE> 1
EXHIBIT 9(s)
SECURITIES LENDING AGREEMENT FOR NON-ERISA ACCOUNTS DATED AS OF
JANUARY 8, 1998 BETWEEN THE REGISTRANT, BANC ONE INVESTMENT ADVISORS
CORPORATION AND BANK ONE TRUST COMPANY, N.A.
<PAGE> 2
SECURITIES LENDING AGREEMENT
FOR NON-ERISA ACCOUNTS
This Securities Lending Agreement (the "Agreement") is entered into as
of January 8, 1998 by and between The One Group(R), an open-end management
investment company formed under the Investment Company Act of 1940 (the
"Lender"), Banc One Investment Advisors Corporation, an investment advisor under
the Investment Advisers Act of 1940 (the "Advisor"), and Bank One Trust Company,
N.A., a national banking association (the "Subcustodian").
BACKGROUND INFORMATION
----------------------
A. The Advisor serves as investment advisor to the Lender pursuant to
an Investment Advisory Agreement dated January 11, 1995, as amended
from time to time.
B. The Advisor in conjunction with the Subcustodian has developed an
international securities lending program (the "International Securities
Lending Program"), (the exact terms and conditions of which are
contained in, and subject to this Agreement) pursuant to which Advisor
will provide lending agent services to Lender for purposes of lending
Lender's foreign securities (the "Foreign Securities").
C. The Foreign Securities are held in custody by State Street Bank and
Trust Company (the "Custodian") or its foreign sub-custodians pursuant
to a Custodian Agreement (the "Custodian Agreement").
D. The Lender desires to appoint the Advisor as its lending agent and
Subcustodian as its custodian for the purpose of holding collateral
received in connection with loans of Foreign Securities. The Advisor
has agreed to act as agent for the Lender and the Subcustodian has
agreed to act as custodian for the Lender in accordance with the terms
of this Agreement. The Lender has established one or more collateral
accounts (each, a "Collateral Account"; collectively, the "Collateral
Accounts") with the Subcustodian which will, from time to time, hold
the cash and securities received as collateral (the "Collateral") in
connection with loans of Foreign Securities which are the subject of,
and can be loaned pursuant to the terms and conditions of this
Agreement.
STATEMENT OF AGREEMENT
----------------------
The parties hereby acknowledge the accuracy of the foregoing background
information and hereby agree as follows:
Section l. APPOINTMENT. The Lender hereby appoints the Advisor as its
agent to act as set forth in this Agreement and the Advisor hereby accepts the
appointment as agent and agrees to so act. The Lender agrees that the Advisor is
acting as a fully disclosed agent and not as principal in connection with the
International Securities Lending Program. The Advisor and the Subcustodian shall
have the right to disclose the identity of the Lender to any Borrower as defined
herein or give notice that such identity is available upon request.
Lender is a series investment company consisting of a variety of
investment portfolios and is entering this Agreement on behalf of the investment
portfolios identified on EXHIBIT A attached hereto and incorporated hereby by
reference ("Funds"). Any reference to Lender in this Agreement shall be deemed a
reference solely to the particular Fund to which a given lending transaction
under this Agreement relates. Under no circumstances shall the rights,
obligations, or remedies with respect to a particular Fund constitute a right,
obligation or remedy applicable to any other Fund. In particular and without
limiting the generality of the foregoing: (a) any event of default regarding one
Fund shall not create any right or obligation with respect to any other Fund,
(b) Advisor and the Subcustodian shall have no right to set off claims of a Fund
by applying property of any other Fund, and (c) no Fund shall have the right to
set off against assets or property held by a Borrower or Subcustodian for any
other Fund.
Lender was created as a Massachusetts Business Trust under a
Declaration of Trust filed on May 23, 1985 ("Trust Agreement"). The Trust
Agreement provides, among other things, that trustees of Lender are responsible
for the actions of Lender in their capacity as trustees and not personally. The
parties hereto expressly acknowledge and agree that
<PAGE> 3
the obligations of Lender hereunder shall not be binding upon any of the
shareholders, trustees, officers, employees or agents of Lender, but shall only
bind the trust property of Lender, as provided in the Trust Agreement. The
execution and delivery of this Agreement by an officer of the Lender has been
approved by the trustees of the Lender, and neither the authorization nor the
execution and delivery 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 Lender as provided in the Trust Agreement.
Section 2. AUTHORIZATION AND APPROVAL OF BORROWERS. The Advisor has
reviewed and approved the standard form of Master Securities Loan Agreement
attached hereto as EXHIBIT B and substantially similar agreements heretofore
executed by the Subcustodian for the lending of customer securities and
substantially similar agreements hereafter approved by Advisor and executed by
the Subcustodian (the "Loan Agreement" or "Loan Agreements"). The Lender hereby
authorizes the Advisor to lend Foreign Securities in accordance with the Loan
Agreements to any of the Borrowers specified by Advisor on the list attached
hereto as EXHIBIT C as amended from time to time by the Advisor (each a
"Borrower").
The Advisor is authorized to negotiate rebates with the Borrower to be paid to
the Borrower for the use of Cash Collateral (as defined in section 8(c)) as well
as the fees to be paid to the Lender for the loan of securities collateralized
by Collateral other than Cash Collateral.
Section 3. LENDER'S REPRESENTATIONS. In order to permit the Advisor and
the Subcustodian to make such representations as may be required by the Loan
Agreement, the Lender hereby represents and warrants to the Advisor, which
representations and warranties shall be deemed to be continuing and to be
reaffirmed on any day that a loan under this Agreement is outstanding, that:
(a) This Agreement is, and each loan will be, legally and validly
entered into, does not, and will not, violate any statute, regulation, rule,
order, or judgment binding on the Lender, or any agreement binding on the Lender
or affecting its property, and is enforceable against the Lender in accordance
with its terms, except as may be limited by bankruptcy, insolvency, or similar
laws, or by equitable principles relating to or limiting creditors' rights
generally;
(b) The person executing this Agreement and any other persons
designated from time to time by the Lender in writing (each such person, an
"Authorized Person") are duly and properly authorized to act on behalf of the
Lender or the Advisor, respectively;
(c) The Lender owns the Foreign Securities held by the Custodian or the
Custodian's foreign sub-custodians under the Custodian Agreement or subject to a
loan under this Agreement free and clear of all liens, claims, security
interests and encumbrances and no such security has been sold. Lender agrees to
immediately notify the Advisor and identify any of the Foreign Securities which
are no longer subject to the representations set forth in this paragraph (c) or
which are otherwise being withdrawn from participation in the International
Securities Lending Program;
(d) The Lender is acting as principal with respect to loans made under
this Agreement; and
(e) The Lender is not subject to the Employee Retirement Income
Security Act of 1974, as amended ("ERISA") with respect to this Agreement and
the Foreign Securities.
Section 4. LOAN OPPORTUNITIES. The Lender acknowledges and agrees that
the Advisor or the Subcustodian may lend securities (including, without
limitation, foreign securities) owned by other of the Advisor's or the
Subcustodian's customers to Borrowers. The Lender agrees that it shall have no
claim against the Advisor or the Subcustodian based on, or relating to, loans
made for other customers or loan opportunities refused hereunder, whether or not
the Advisor has made fewer or more loans for any other customer than for the
Lender, and whether or not any loan for another customer, or the opportunity
refused, could have resulted in loans made under this Agreement.
- 2 -
<PAGE> 4
Section 5. MAKING OF LOANS. The Advisor will notify Borrowers that it
is prepared to lend Foreign Securities of the Lender. If the Advisor determines,
in response to a Borrower's orally advising the Advisor of its desire to borrow
Foreign Securities, to lend Foreign Securities of the Lender pursuant to a Loan
Agreement, the Advisor will instruct the Subcustodian to receive such Collateral
as required by the Loan Agreement. Upon receipt of verification from the
Subcustodian that it has received the Collateral required by the Loan Agreement,
the Advisor shall instruct the Custodian to deliver the Foreign Securities to
the applicable Borrower, and is hereby authorized to take such actions to effect
the loan as are required by the Loan Agreement; provided, however, that the
Advisor shall lend no more than 33% of the securities owned by a Fund and verify
that the such loans are secured by Collateral equal to at least 100% of the
market value plus accrued interest on the Foreign Securities lent. For each
Borrower, the Advisor shall establish a maximum limit on the amount of
securities that will be delivered to each Borrower in connection with loans of
the Lender's securities, including Foreign Securities (the "Borrower Limit").
The Subcustodian shall not deliver Lender's Foreign Securities to a Borrower
when the value of the loan exceeds the Borrower Limit for all securities of the
Lender.
Section 6. LOAN TERMINATION. The Advisor shall, subject to the terms of
the Loan Agreement, terminate a loan made to a Borrower whenever the Advisor
shall actually receive:
(a) oral or written instructions to terminate the loan from a
person believed by the Advisor to be an Authorized Person of
the Lender;
(b) oral or written notice from the Lender that the loaned Foreign
Security is no longer subject to the representations set form
in section 3(c) or that the Foreign Securities are no longer
eligible for participation in the International Securities
Lending Program;
(c) a written instruction from an Authorized Person or a person
believed by the Advisor to be an Authorized Person of the
Lender that the Borrower with whom the loan is outstanding is
to be deleted from the list referred to in Section 2 hereof;
(d) actual notice of a default under any Loan Agreement pursuant
to which Foreign Securities have been loaned; or
(e) termination of this Agreement.
Notwithstanding the foregoing or any other provision in this Agreement,
the Advisor may at any time terminate any loan in its absolute discretion.
Section 7. OUTSTANDING LOANS. Subject to the supervision of the
Advisor, the Subcustodian shall perform the following acts in connection with
loans of Foreign Securities hereunder:
(a) enter into Loan Agreements on such terms as approved by the
Advisor;
(b) establish one or more Collateral Accounts to hold cash and
other securities received from Borrowers under the Loan
Agreement;
(c) notify the Advisor upon receipt of Collateral from the
Borrower as required by the applicable Loan Agreement;
(d) prepare each business day a mark-to-market valuation of the
then fair market value of the loaned Foreign Securities,
including income accrued but unpaid thereon;
(e) receive and release Collateral as provided in the applicable
Loan Agreement;
- 3 -
<PAGE> 5
(f) accept substitutions of Collateral and execute and deliver or
send any receipts required under the Loan Agreement in
connection therewith;
(g) make investments of Cash Collateral in accordance with
instructions of the Advisor;
(h) take such action upon termination of a loan as may be
directed by the Advisor; and
(i) monitor compliance with the terms of the Loan Agreement and
within a reasonable time after learning of a default, give
notice thereof to the Advisor, and thereafter take such
actions, if any, as may be specified by the Advisor.
The Advisor shall perform the following acts in connection with loans of Foreign
Securities hereunder:
(a) select Borrowers with whom loans of securities may be made
hereunder;
(b) negotiate the terms of the loans;
(c) invest Cash Collateral in accordance with Section 8 hereof;
(d) notify Subcustodian that a Borrower has returned a loaned
Foreign Security upon receiving notice thereof from Custodian;
(e) within a reasonable time after learning of a default, give
notice thereof to the Subcustodian and the Lender, and
thereafter take such actions, if any, as may be specified in
written instructions actually received from a person believed
by the Advisor to be an Authorized Person of the Lender. In
the absence of instructions from the Lender to the Advisor,
Advisor is authorized, without notice to Lender, to exercise
such rights of Lender and to pursue such available remedies of
Lender under the appropriate Loan Agreement as it deems
appropriate; provided, however, nothing herein shall require
Advisor or the Subcustodian to expend their own funds to
exercise such rights or pursue such remedies; and
(f) take such action upon termination of a loan as may be required
by the Loan Agreement.
Section 8. COLLATERAL.
(a) In connection with loans of Foreign Securities made on behalf of
the Lender, the Advisor agrees to limit Collateral accepted and investments of
Cash Collateral to those securities in which the Fund of the Lender owning the
loaned Foreign Securities could invest and, subject to this requirement, the
Lender authorizes the Advisor: (i) to accept Collateral of the types which are
designated on EXHIBIT D with such changes as recommended from time to time by
the Advisor with the approval of the Lender; and (ii) to invest cash received as
Collateral for a loan of Foreign Securities in any of the types of investments
specified on EXHIBIT D as modified from time to time. The Lender hereby
authorizes the Advisor to purchase or sell investments of Cash Collateral to or
from other accounts advised by the Advisor or held by its affiliates.
(b) All uncertificated U.S. government or agency securities, and any
other securities received by the Subcustodian as Collateral in connection with
any transactions involving Cash Collateral (as defined below), shall be
segregated by a separate recordation hereunder on the books of the Subcustodian,
and may be held as the Subcustodian may determine in any form or manner in which
the Subcustodian is permitted to hold securities including, without limitation,
by depositing the same with such subcustodians or agents as have been approved
by the Lender or in the Federal Reserve/Treasury Book-Entry System (the
"Book-Entry System") or the Depository Trust Company (the "Depository"), or
their respective successors or nominees. Subcustodian is hereby authorized to
enter into such agreements as are necessary to appoint such agents,
subcustodians, and Depositories.
- 4 -
<PAGE> 6
(c) All money received as, or with respect to, Collateral, including
money received with respect to investment of the same, or upon the maturity,
sale, or liquidation of any such investments ("Cash Collateral"), may, in the
Advisor's sole discretion, be invested and reinvested in the types of
investments listed in EXHIBIT D as modified from time to time.
(d) Notwithstanding the foregoing, or any other provision contained in
this Agreement, the Advisor shall at all times have: (i) the right to cause the
Subcustodian to hold in the Collateral Account a portion of the Cash Collateral
uninvested without any obligation to pay interest thereon whenever the Advisor,
in its sole discretion, deems it advisable, provided the Advisor uses its best
efforts to minimize such amount, and (ii) the absolute right, without obtaining
any approval of the Lender, to liquidate any investment or reinvestment and
cause the net proceeds to be credited to the Collateral Account.
(e) The Subcustodian shall maintain the notifications required by
applicable law with respect to securities transactions involving Cash Collateral
and shall furnish monthly activity statements. The Subcustodian shall comply
with all applicable legal requirements regarding the custody of the Lender's
securities under the Investment Company Act of 1940 and the rules and
regulations promulgated thereunder including, if applicable, Rule 17f-2.
(f) The Subcustodian shall execute, as agent for the Lender, any
certificates of ownership, declarations or other certificates required under the
tax laws or pursuant to any other law or governmental regulation now or
hereafter in effect with respect to securities held as Collateral. The
Subcustodian shall, in addition, supply any information regarding Collateral
transactions required by any applicable law or governmental regulation without
first giving notice to the Lender or the Advisor.
(g) The Advisor shall take such actions with respect to the Collateral
as are required from time to time pursuant to any Loan Agreement.
(h) All investments of Cash Collateral made in accordance with this
Agreement shall be for the account and risk of the Lender. To the extent that
any loss arising out of such investments of Cash Collateral results in a
deficiency in the amount of Cash Collateral available for return to a Borrower
pursuant to the Loan Agreement, the Lender agrees to pay the Subcustodian on
demand cash in an amount equal to such deficiency. In addition, the Subcustodian
shall be entitled to charge the Lender's accounts for such deficiency in
accordance with Section 10 of this Agreement.
(i) All Collateral and securities or other property acquired through
the investment of Cash Collateral shall be controlled by, and subject to the
instructions of, the Advisor; provided, however, that the Advisor shall comply
with any instructions of the Lender with respect to the same.
Section 9. SUBCUSTODIAN'S FEES. The Lender shall in connection with
each loan hereunder pay to the Subcustodian the fee (the "Subcustodian's Fee")
as specified on EXHIBIT E, which Subcustodian Fee shall accrue daily.
Section 10. THE COLLATERAL ACCOUNT. The Advisor and the Subcustodian
shall act as follows with respect to the Collateral Account in which the
Subcustodian holds Collateral on behalf of the Lender:
(a) The Subcustodian shall monthly: (i) credit the Collateral Account
with all amounts, if any, paid by a Borrower in connection with a loan
collateralized in whole or in part with Collateral other than Cash Collateral;
(ii) credit the Collateral Account with the earnings, if any, arising from the
investment of Cash Collateral; (iii) debit the Collateral Account by an amount
equal to the amounts to be paid to the Borrower pursuant to the Loan Agreement;
and (iv) debit the Collateral Account in an amount equal to the accrued
Subcustodian's Fees described in Section 9 hereof;
(b) Whenever the Loan Agreement requires a return of Cash Collateral,
the Subcustodian shall debit the Collateral Account by the amount so returned;
- 5 -
<PAGE> 7
(c) In the event debits to the Collateral Account pursuant to the
foregoing subsections 10(a) and 10(b) produce a deficit therein, the
Subcustodian shall sell or otherwise liquidate investments made with Cash
Collateral and credit the net proceeds of such sale or liquidation to satisfy
the deficit. In the event the foregoing does not eliminate the deficit, the
Subcustodian shall have the right to charge the deficiency to any other account
or accounts maintained by the Lender with the Subcustodian; provided, however,
that the Subcustodian shall not have the right to charge any accounts maintained
for one Fund (as defined in section 1 hereof) for the obligations of another
Fund.
(d) If the Subcustodian, in its sole discretion, advances funds on
behalf of the Lender in order to eliminate a deficiency created under the
foregoing subsections 10(a), 10(b), or 10(c), the Subcustodian shall notify the
Advisor. Upon receipt of such notice by the Advisor, the Lender agrees to repay
the Subcustodian upon demand the amount of any advance described herein plus
accrued interest at a rate per annum (based on a 360-day year for the actual
number of days involved) not to exceed the fed funds rate as publicly announced
to be in effect from time to time, such rate to be adjusted on the effective
date of any change in the fed funds rate.
(e) Except with respect to amounts representing the crediting of a Loan
Fee as defined in the Loan Agreement, if any, paid by a Borrower, money from
time to time held in the Collateral Account shall be controlled by, and subject
to the instructions of, the Advisor; provided, however, that the Advisor shall
comply with any instructions of the Lender with respect to the same.
Section 11. RIGHTS OF BORROWERS WITH RESPECT TO LOANED FOREIGN
SECURITIES. Until a loan is terminated in accordance with Section 6, the
Borrower shall exercise all of the incidents of ownership of the loaned Foreign
Securities, including the right to transfer the loaned Foreign Securities to
others; provided, however, that the Lender shall be entitled to receive
distributions, dividends, and other payments made on or in connection with the
loaned Foreign Securities to the extent provided and in accordance with the
terms of the applicable Loan Agreement. The Lender hereby expressly waives the
right to vote any Foreign Securities that are subject to a loan.
Section 12. RESPONSIBILITY. The Advisor and the Subcustodian undertake
to perform such duties and only such duties as are specifically set forth in
this Agreement. The Advisor and the Subcustodian shall not be liable for any
loss or damage, including counsel fees and court costs, whether or not resulting
from their acts or omissions to act hereunder or otherwise, unless the loss or
damage arises out of the Advisor's or the Subcustodian's own negligence. Except
for any liability, loss, or expense arising from or connected with the Advisor's
or the Subcustodian's own negligence, the Lender agrees to reimburse and hold
the Advisor and the Subcustodian harmless from and against any liability, loss
and expense, including counsel fees and expenses and court costs, arising in
connection with this Agreement or any Loan Agreement or arising from or
connected with claims of any third parties, including any Borrower, from and
against all taxes and other governmental charges, and from and against any
out-of-pocket or incidental expenses. The Subcustodian may charge any amounts to
which it or the Advisor is entitled hereunder against the Collateral Account.
Without limiting the generality of the foregoing, the Lender agrees: (i) that
the Advisor and the Subcustodian shall not be responsible for any statements,
representations, or warranties which any Borrower makes in connection with any
Foreign Securities loans hereunder, if reasonably relied upon in good faith, or
for the performance by any Borrower of the terms of the Loan Agreement, or any
agreement related thereto; (ii) that the Advisor and the Subcustodian shall be
fully protected in acting in accordance with the oral or written instructions of
any person reasonably believed by them to be an Authorized Person; (iii) that in
the event of a default by a Borrower under the Loan Agreement, the Advisor and
the Subcustodian shall be fully protected in acting in accordance with this
Agreement; and (iv) that the Advisor and the Subcustodian shall not be under any
duty or obligation to advance or expend their own funds to take action to effect
payment by a Borrower of any amounts owed by the Borrower pursuant to the Loan
Agreement, provided the Subcustodian timely advises the Advisor of the
non-payment by the Borrower of any such amount. The indemnification provided to
Advisor and the Subcustodian hereunder shall survive termination of this
Agreement. The Lender acknowledges and agrees that all investments of Cash
Collateral shall be for the account of the Lender and any reinvestment risk
associated with Cash Collateral shall be borne solely by the Lender and that
neither the Advisor nor the Subcustodian shall provide indemnification to the
Lender in connection with this Agreement or the International Securities Lending
Program.
- 6 -
<PAGE> 8
Section 13. SEVERABILITY. If any provisions of this Agreement shall be
held or made invalid by a statute, rule, regulation, decision of a tribunal or
otherwise, the remainder of this Agreement shall not be affected thereby and, to
this extent, the provisions of this Agreement shall be deemed to be severable.
Section 14. EXCLUSIVITY. The Lender agrees that it shall not enter into
any other securities loan agreement with any other bank or securities
broker/dealer whereby the other bank or broker/dealer is permitted to make loans
on behalf of the Lender of Foreign Securities which are the subject of this
Agreement.
Section 15. CONFLICTS OF INTEREST AND DISCLOSURE. NOTHING IN THIS
AGREEMENT SHALL PRECLUDE THE ADVISOR, THE SUBCUSTODIAN, OR THEIR AFFILIATES FROM
ENTERING INTO SEPARATE ARRANGEMENTS OR AGREEMENTS WITH BORROWERS INVOLVING THE
PROVISION OF PRODUCTS OR SERVICES INCLUDING, WITHOUT LIMITATION, DEPOSITS,
LOANS, OR BROKERAGE SERVICES. THE ADVISOR AND THE SUBCUSTODIAN HEREBY DISCLOSE
THAT THEY OR THEIR AFFILIATES MAY RECEIVE COMPENSATION OR REMUNERATION FROM THE
BORROWERS IN CONNECTION WITH SUCH SEPARATE ARRANGEMENTS OR AGREEMENTS,
INCLUDING, WITHOUT LIMITATION, VOLUME DISCOUNTS AND DISCOUNTED PERIODICAL
SUBSCRIPTIONS. THE ADVISOR AND THE SUBCUSTODIAN FURTHER DISCLOSE THAT
INVESTMENTS OF CASH COLLATERAL MADE PURSUANT TO SECTION 8 MAY HAVE THEIR OWN
FEES AND EXPENSES WHICH MAY REDUCE THE EARNINGS PAYABLE TO LENDER PURSUANT TO
THIS AGREEMENT.
Section 16. STATEMENTS. The Subcustodian will at least monthly furnish
the Lender with statements relating to loans hereunder, and other information
reasonably requested by the Lender.
Section 17. NOTICES, ASSIGNMENTS, AMENDMENT, CONSTRUCTION.
(a) Any notice, instruction, other instrument or writing, authorized or
required to be given hereunder to the Subcustodian shall be sufficiently given
only if and when actually received by the Subcustodian, including receipt by
telefax, at its offices at:
Bank One Trust Company, NA
235 West Schrock Road
Columbus, OH 43271-1075
Attn: Securities Lending
or at such other place as the Subcustodian may, from time to time, designate in
writing and, except as expressly provided to the contrary herein, signed by an
Authorized Person; and any notice, other instrument, writing, report or advice
authorized or required by the Agreement to be given to the Lender shall be
sufficiently given only if and when actually received by the Lender, including
receipt by telefax, at its offices at:
The One Group
c/o Banc One Investment Advisors Corporation, as Subadministrator
1111 Polaris Parkway
Columbus, Ohio 43240
Attn: Mark A. Beeson
or at such other place as the Lender may from time to time designate in writing;
and any notice, instruction, other instrument or writing authorized or required
by the Agreement to be given to the Advisor shall be sufficiently given only if
and when actually received by the Advisor, including receipt by telefax, at its
offices at:
Banc One Investment Advisors Corporation
1111 Polaris Parkway
Columbus, Ohio 43240
Attn.: Steven E. Cutler
- 7 -
<PAGE> 9
or at such other place as the Advisor may from time to time designate in
writing.
(b) This Agreement shall not be assignable by the parties hereto
without the written consent of the other parties. This Agreement shall be
binding upon each party and its respective successors and permitted assigns;
(c) This Agreement constitutes the entire agreement between the parties
hereto with respect to the transactions contemplated hereby and supersedes all
prior discussions, understandings, agreements and negotiations between the
parties hereto with respect to such transactions. This Agreement shall not be
amended or modified in any manner except by a written agreement executed by the
parties hereto with the same formality as this Agreement;
(d) This Agreement shall be governed by and construed in accordance
with the laws of the State of Ohio;
(e) The headings in this Agreement are for convenience only and shall
not be used in construing this Agreement; and
(f) Either the Lender or the Advisor may terminate this Agreement by
delivering to the other party a written notice specifying a date of termination,
not earlier than the date of receipt of such notice by the other party, provided
that this Agreement shall continue in full force and effect with respect to all
loans of securities in effect on the date of termination.
Section 18. CUSTODY. Lender acknowledges that the Advisor is only
performing the securities lending services described in this Agreement and that
the Advisor retains no custody or possession of the securities, assets, and/or
cash in the Collateral Account and performs no depository services with respect
to the Collateral Account.
Section 19. ARBITRATION Any controversy or claim arising out of or
relating to this Agreement, or the breach of the same, shall be settled through
consultation and negotiation in good faith and a spirit of mutual cooperation.
However, if those attempts fail, the parties agree that any misunderstandings or
disputes arising from this Agreement shall be decided by arbitration which shall
be conducted, upon request by either party, before three (3) arbitrators (unless
both parties agree upon one (1) arbitrator), designated by the American
Arbitration Association (the "AAA"), in accordance with the terms of the
Commercial Arbitration Rules of the AAA, and, to the maximum extent applicable,
the United States Arbitration Act (Title 9 of the United States Code), or if
such Act is not applicable, any substantially equivalent state law. The parties
further agree that the arbitrator(s) will decide which party must bear the
expenses of the arbitration proceedings.
Section 20. SIPA NOTICE. THE PROVISIONS OF THE SECURITIES INVESTOR
PROTECTION ACT OF 1970 MAY NOT PROTECT THE LENDER WITH RESPECT TO LOANS
HEREUNDER AND, THEREFORE, THE COLLATERAL DELIVERED TO THE SUBCUSTODIAN AS
SUBCUSTODIAN FOR THE LENDER MAY CONSTITUTE THE ONLY SOURCE OF SATISFACTION OF A
BORROWER'S OBLIGATION IN THE EVENT SUCH BORROWER FAILS TO RETURN THE LOANED
FOREIGN SECURITIES.
- 8 -
<PAGE> 10
IN WITNESS WHEREOF, the Lender, the Advisor, and the Subcustodian have
caused this Agreement to be duly executed as of the date first above written.
The One Group
("Lender")
By: /s/ MARK S. REDMAN
-----------------------------------
(Authorized Signature)
Banc One Investment Advisors Corporation
("Advisor")
By: /s/ MARK A. BEESON
-----------------------------------
(Authorized Signature)
Bank One Trust Company, N.A.
("Subcustodian")
By: /s/ STEVEN E. CUTLER
-----------------------------------
(Authorized Signature)
6294.04
<PAGE> 11
SECURITIES LENDING AGREEMENT
EXHIBIT A
PARTICIPATING PORTFOLIOS
International Equity Index Fund
PSA
Exhibit B
Public Securities Association
40 Broad Street. New York. NY 10004-2373
Telephone (212) 809-7000
MASTER SECURITIES LOAN AGREEMENT
Dated as of _________________
Between:
Bank One Trust Company, NA
- --------------------------
and
- --------------------------
This Agreement sets forth the terms and conditions under which one
party ("Lender") may. from time to time, lend to the other party ("Borrower")
certain securities against a pledge of collateral. Capitalized terms not
otherwise defined herein shall have the meanings provided in Section 26.
The parties hereto agree as follows:
1. Loans of Securities.
-------------------
1.1 Subject to the terms and conditions of this Agreement, Borrower or
Lender may. from time to time. orally seek to initiate a transaction in which
Lender will lend securities to Borrower. Borrower and Lender shall agree orally
on the terms of each Loan, including the issuer of the securities, the amount of
securities to be lent, the basis of compensation, and the amount of Collateral
to be transferred by Borrower, which terms may be amended during the Loan.
1.2 Notwithstanding any other provision in this Agreement regarding
when a Loan commences. a Loan hereunder shall not occur until the Loaned
Securities and the Collateral therefor have been transferred in accordance with
Section 16.
1.3 WITHOUT WAIVING ANY RIGHTS GIVEN TO LENDER HEREUNDER, IT IS
UNDERSTOOD AND AGREED THAT THE PROVISIONS OF THE SECURITIES INVESTOR PROTECTION
ACT OF 1970 MAY NOT PROTECT LENDER WITH RESPECT TO LOANED SECURITIES HEREUNDER
AND THAT. THEREFORE, THE COLLATERAL DELIVERED TO LENDER MAY CONSTITUTE THE ONLY
SOURCE OF SATISFACTION OF BORROWER'S OBLIGATIONS IN THE EVENT BORROWER FAILS TO
RETURN THE LOANED SECURITIES.
2. Transfer of Loaned Securities.
-----------------------------
2.1 Unless otherwise agreed. Lender shall transfer Loaned Securities to
Borrower hereunder on or before the Cutoff Time on the date agreed to by
Borrower and Lender for the commencement of the Loan.
2.2 Unless otherwise agreed, Borrower shall provide Lender. in each
Loan in which Lender is a Customer, with a schedule and receipt listing the
Loaned Securities. Such schedule and receipt may consist of (a) a schedule
provided to Borrower by Lender and executed and returned by Borrower when the
Loaned Securities are received, (b) in the case of securities transferred
through a Clearing Organization which provides transferors with a notice
evidencing such transfer, such notice, or (c) a confirmation or other document
provided to Lender by Borrower.
<PAGE> 12
3. Collateral.
----------
3.1 Unless otherwise agreed, Borrower shall, prior to or concurrently
with the transfer of the Loaned Securities to Borrower, but in no case later
than the close of business on the day of such transfer, transfer to Lender
Collateral with a market value at least equal to a percentage of the market
value of the Loaned Securities agreed to by Borrower and Lender (which shall be
not less than 100% of the market value of the Loaned Securities) (the "Margin
Percentage").
3.2 The Collateral transferred by Borrower to Lender, as adjusted
pursuant to Section 8, shall be security for Borrowers obligations in respect of
such Loan and for any other obligations of Borrower to Lender. Borrower hereby
pledges with, assigns to, and grants Lender a continuing first security interest
in, and a lien upon, the Collateral. which shall attach upon the transfer of the
Loaned Securities by Lender to Borrower and which shall cease upon the transfer
of the Loaned Securities by Borrower to Lender. In addition to the rights and
remedies given to Lender hereunder, Lender shall have all the rights and
remedies of a secured party under the New York Uniform Commercial Code. It is
understood that Lender may use or invest the Collateral, if such consists of
cash, at its own risk, but that (unless Lender is a Broker-Dealer) Lender shall,
during the term of any Loan hereunder, segregate Collateral from all securities
or other assets in its possession. Lender may pledge, repledge, hypothecate,
rehypothecate, lend, relend, Sell or otherwise transfer the Collateral, or
re-register Collateral evidenced by physical certificates in any name other than
Borrower's, only (a) if Lender is Broker-Dealer or (b) in the event of a Default
by Borrower. Segregation of Collateral may be accomplished by appropriate
identification on the books and records of Lender if it is a "financial
intermediary" or a "clearing corporation" within the meaning of the New York
Uniform Commercial Code.
3.3 Except as otherwise provided herein, upon transfer to Lender of the
Loaned Securities on the day a Loan is terminated pursuant to Section 5, Lender
shall be obligated to transfer the Collateral (as adjusted pursuant to Section
8) to Borrower no later than the Cutoff Time on such day or, it such day is not
a day on which a transfer of such Collateral may be effected under Section 16,
the next day on which such a transfer may be effected.
3.4 If Borrower transfers Collateral to Lender, as provided in Section
3.1, and Lender does not transfer the Loaned Securities to Borrower, Borrower
shall have the absolute right to the return of the Collateral: and if Lender
transfers Loaned Securities to Borrower and Borrower does not transfer
Collateral to Lender as provided in Section 3.1, Lender shall have the absolute
right to the return of the Loaned Securities.
3.5 Borrower may, upon reasonable notice to Lender (taking into account
all relevant factors, including industry practice, the type of Collateral to be
substituted and the applicable method of transfer), substitute Collateral for
Collateral securing any Loan or Loans, provided, however, that such substituted
Collateral shall (a) consist only of cash, securities or other property that
Borrower and Lender agreed would be acceptable Collateral prior to the Loan or
Loans and (b) have a market value such that the aggregate market value of such
substituted Collateral, together with all other Collateral for Loans in which
the party substituting such Collateral is acting as Borrower, shall equal or
exceed the agreed upon Margin Percentage of the market value of the Loaned
Securities. Prior to the expiration of any letter of credit supporting
Borrower's obligations hereunder, Borrower shall, no later than the Cutoff Time
on the date such letter of credit expires, obtain an extension of the expiration
of such letter of credit or replace such letter of credit by providing Lender
with a substitute letter of credit in an amount at least equal to the amount of
the letter of credit for which A is substituted.
3.6 Lender acknowledges that, in connection with Loans of Government
Securities and as otherwise permitted by applicable law, some securities
provided by Borrower as Collateral under this Agreement may not be guaranteed by
the United States.
4. Fees for Loan.
-------------
4.1 Unless otherwise agreed. (a) Borrower agrees to pay Lender a loan
fee (a "Loan Fee"), computed daily on each Loan to the extent such Loan is
secured by Collateral other than cash, based on the aggregate par value (in the
case of Loans of Government Securities) or the aggregate market value (in the
case of all other Loans) of the Loaned Securities on the day for which such Loan
Fee is being computed, and (b) Lender agrees to pay Borrower a fee or rebate (a
"Cash Collateral Fee") on Collateral consisting of cash, computed daily based on
the amount of cash held by Lender as Collateral, in the case of each of the Loan
Fee and the Cash Collateral Fee at such rates as Borrower and Lender may agree.
Except as Borrower and Lender may otherwise agree (in the event that cash
Collateral is transferred by clearing house funds or otherwise), Loan Fees shall
accrue from and including the date on which the Loaned Securities are
transferred to Borrower
- 2 -
<PAGE> 13
to, but excluding, the date on which such Loaned Securities are returned to
Lender, and Cash Collateral Fees shall accrue from and including the date on
which the cash Collateral is transferred to Lender to, but excluding, the date
on which such cash Collateral is returned to Borrower.
4.2 Unless otherwise agreed, any Loan Fee or Cash Collateral Fee
payable hereunder shall be payable:
(a) in the case of any Loan of securities other than Government
Securities, upon the earlier of (i) the fifteenth day of the
month following the calendar month in which such fee was
incurred or (ii) the termination of all Loans hereunder (or,
if a transfer of cash in accordance with Section 16 may not be
effected on such fifteenth day or the day of such termination,
as the case may be, the next day on which such a transfer may
be effected); and
(b) in the case of any Loan of Government Securities, upon the
termination of such Loan.
Notwithstanding the foregoing, all Loan Fees shall be payable by Borrower
immediately in the event of a Default hereunder by Borrower and all Cash
Collateral Fees shall be payable immediately by Lender in the event of a Default
by Lender.
5. Termination of the Loan.
------------------------
Unless otherwise agreed, (a) Borrower may terminate a Loan on any
Business Day by giving notice to Lender and transferring the Loaned Securities
to Lender before the Cutoff time on such Business Day, and (b) Lender may
terminate a Loan on a termination date established by notice given to Borrower
prior to the close of business on a Business Day. The termination date
established by a termination notice given by Lender to Borrower shall be a date
no earlier than the standard settlement date for trades of the Loaned Securities
entered into on the date of such notice, which date shall, unless Borrower and
Lender agree to the contrary, be (i) in the case of Government Securities, the
next Business Day following such notice and (ii) in the case of all other
securities, the fifth Business Day following such notice. Unless otherwise
agreed, Borrower shall, on or before the Cutoff Time on the termination date of
a Loan, transfer the Loaned Securities to Lender: provided, however, that upon
such transfer by Borrower, Lender shall transfer the Collateral (as adjusted
pursuant to Section 8) to Borrower in accordance with Section 3.3.
6. Rights of Borrower in Respect of the Loaned Securities.
-------------------------------------------------------
Except as set forth in Sections 7.1 and 7.2 and as otherwise agreed by
Borrower and Lender, until Loaned Securities are required to be redelivered to
Lender upon termination of a Loan hereunder, Borrower shall have all of the
incidents of ownership of the Loaned Securities, including the right to transfer
the Loaned Securities to others. Lender hereby waives the right to vote, or to
provide any consent or to take any similar action with respect to, the Loaned
Securities in the event that the record date or deadline for such vote, consent
or other action falls during the term of the Loan.
- 3 -
<PAGE> 14
7. Dividends, Distributions, Etc.
-----------------------------
7.1 Lender shall be entitled to receive all distributions made on or in
respect of the Loaned Securities which are not otherwise received by Lender, to
the full extent it would be so entitled if the Loaned Securities had not been
lent to Borrower, including, but not limited to: (a) cash and all other
property, (b) stock dividends, (c) securities received as a result of split ups
of the Loaned Securities and distributions in respect thereof, (d) interest
payments, and (e) all rights to purchase additional securities.
7.2 Any cash distributions made on or in respect of the Loaned
Securities, which Lender is entitled to receive pursuant to Section 7.1, shall
be paid by the transfer of cash to Lender by Borrower, on the date any such
distribution is paid, in an amount equal to such cash distribution. so long as
Lender is not in Default at the time of such payment. Non-cash distributions
received by Borrower shall be added to the Loaned Securities on the date of
distribution and shall be considered such for all purposes, except that if the
Loan has terminated, Borrower shall forthwith transfer the same to Lender.
7.3 Borrower shall be entitled to receive all cash distributions made
on or in respect of non-cash Collateral which are not otherwise received by
Borrower, to the full extent it would be so entitled if the Collateral had not
been transferred to Lender. Any distributions of cash made on or in respect of
such Collateral which Borrower is entitled to receive hereunder shall be paid by
the transfer of cash to Borrower by Lender, on the date any such distribution is
paid, in an amount equal to such cash distribution, so long as Borrower is not
in Default at the time of such payment.
7.4 (a) Unless otherwise agreed, it (i) Borrower is required to make a
payment (a "Borrower Payment") with respect to cash distributions on Loaned
Securities under Sections 7.1 and 7.2 ("Securities Distributions"), or (ii)
Lender is required to make a payment (a 'Lender Payment") with respect to cash
distributions on Collateral under Section 7.3 (" Collateral Distributions"), and
(iii) Borrower or Lender, as the case may be ("Payee"), shall be required by law
to collect any withholding or other tax, duty, fee, levy or charge required to
be deducted or withheld from such Borrower Payment or Lender Payment ("Tax"),
then Payor shall (subject to subsections (b) and (c) below), pay such additional
amounts as may be necessary in order that the net amount of the Borrower Payment
or Lender Payment received by the Lender or Borrower, as the case may be
("Payee"), after payment of such Tax equals the net amount of the Securities
Distribution or Collateral Distribution that would have been received if such
Securities Distribution or Collateral Distribution had been paid directly to the
Payee.
(b) No additional amounts shall be payable to a Payee under
subsection (a) above to the extent that Tax would have been imposed on a
Securities Distribution or Collateral Distribution paid directly to the Payee.
(c) No additional amounts shall be payable to a Payee under
subsection (a) above to the extent that such Payee is entitled to an exemption
from, or reduction in the rate of, Tax on a Borrower Payment or Lender Payment
subject to the provision of a certificate or other documentation, but has failed
timely to provide such certificate or other documentation.
(d) Each party hereto shall be deemed to represent that, as of
the commencement of any Loan hereunder, no Tax would be imposed on any cash
distribution paid to it with respect to (i) Loaned Securities subject to a Loan
in which it is acting as Lender or (ii) Collateral for any Loan in which it is
acting as Borrower, unless such party has given notice to the contrary to the
other party hereto (which notice shall specify the rate at which such Tax would
be imposed). Each party agrees to notify the other of any change that occurs
during the term of a Loan in the rate of any Tax that would be imposed on any
such cash distributions payable to it.
7.5 To the extent that, under the provisions of Sections 7.1 through
7.4 (a) a transfer of cash or other property by Borrower would give rise to a
Margin Excess (as defined in Section 8.3 below) or (b) a transfer of cash or
other property by Lender would give rise to a Margin Deficit (as defined in
Section 8.2 below). Borrower or Lender (as the case may be) shall not be
obligated to make such transfer of cash or other property in accordance with
such Sections, but shall in lieu of such transfer immediately credit the amounts
that would have been transferable under such Sections to the account of Lender
or Borrower (as the case may be).
- 4 -
<PAGE> 15
8. Mark to Market.
--------------
8.1 Borrower shall daily mark to market any Loan hereunder and in the
event that at the close of trading on any Business Day the market value of the
Collateral for any Loan to Borrower shall be less than 100% of the market value
of all the outstanding Loaned Securities subject to such Loan, Borrower shall
transfer additional Collateral no later than the close of the next Business Day
so that the market value of such additional Collateral, when added to the market
value of the other Collateral for such Loan, shall equal 100% of the market
value of the Loaned Securities.
8.2 In addition to any rights of Lender under Section 8.1, in the event
that at the close of trading on any Business Day the aggregate market value of
all Collateral for Loans by Lender shall be less than the Margin Percentage of
the market value of all the outstanding Loaned Securities subject to such Loans
(a "Margin Deficit"), Lender may, by notice to Borrower, demand that Borrower
transfer to Lender additional Collateral so that the market value of such
additional Collateral, when added to the market value of all other Collateral
for such Loans, shall equal or exceed the agreed upon Margin Percentage of the
market value of the Loaned Securities. Unless otherwise agreed, such transfer is
to be made no later than the close of the next Business Day following the day of
Lender's notice to Borrower.
8.3 In the event that at the close of trading on any Business Day the
market value of all Collateral for Loans to Borrower shall be greater than the
Margin Percentage of the market value of all the outstanding Loaned Securities
subject to such Loans (a "Margin Excess"), Borrower may, by notice to Lender,
demand that Lender transfer to Borrower such amount of the Collateral selected
by Borrower so that the market value of the Collateral for such Loans, after
deduction of such amounts, shall thereupon not exceed the Margin Percentage of
the market value of the Loaned Securities. Unless otherwise agreed, such
transfer is to be made no later than the close of the next Business Day
following the day of Borrower's notice to Lender.
8.4 Borrower and Lender may agree, with respect to one or more Loans
hereunder, to mark the values to market pursuant to Sections 8.2 and 8.3 by
separately valuing the Loaned Securities lent and the Collateral given in
respect thereof an a Loan-by-Loan basis.
8.5 Borrower and Lender may agree, with respect to any or all Loans
hereunder, that the respective rights of Lender and Borrower under Sections 8.2
and 8.3 maybe exercised only where a Margin Excess or Margin Deficit exceeds a
specified dollar amount or a specified percentage of the market value of the
Loaned Securities under such Loans (which amount or percentage shall be agreed
to by Borrower and Lender prior to entering into any such Loans).
9. Representations. Each party to this Agreement hereby makes the following
representations and warranties, which shall continue during the term of any Loan
hereunder:
9.1 Each party hereto represents and warrants that (a) it has the power
to execute and deliver this Agreement, to enter into the Loans contemplated
hereby and to perform its obligations hereunder; (b) it has taken all necessary
action to authorize such execution, delivery and performance; and (c) this
Agreement constitutes a legal, valid and binding obligation enforceable against
it in accordance with its terms.
9.2 Each party hereto represents and warrants that the execution,
delivery and performance by it of this Agreement and each Loan hereunder will at
all times comply with all applicable laws and regulations including those of
applicable regulatory and self-regulatory organizations.
9.3 Each party hereto represents and warrants and that it has not
relied on the other for any tax or accounting advice concerning this Agreement
and that it has made its own determination as to the tax and accounting
treatment of any Loan and any dividends, remuneration or other funds received
hereunder.
9.4 Borrower represents and warrants that it is acting for its own
account. Lender represents and warrants that it is acting for its own account
unless it expressly specifies otherwise in writing and complies with Section
10.3(b).
- 5 -
<PAGE> 16
9.5 Borrower represents and warrants that (a) it has, or will have at
the time of transfer of any Collateral, the right to grant a first security
interest therein subject to the terms and conditions hereof, and (b) it (or the
person to whom it relends the Loaned Securities) is borrowing or will borrow the
Loaned Securities (except for Loaned Securities that quality as "exempted
securities" under Regulation T of the Board of Governors of the Federal Reserve
System) for the purpose of making delivery of such securities in the case of
short sales, failure to receive securities required to be delivered, or as
otherwise permitted pursuant to Regulation T as in effect from time to time.
9.6 Lender represents and warrants that it has, or will have at the
time of transfer of any Loaned Securities, the right to transfer the Loaned
Securities subject to the terms and conditions hereof.
10. Covenants.
---------
10.1 Each party hereto agrees and acknowledges that (a) each Loan
hereunder is a "securities contract," as such term is defined in Section 741(7)
of Title 11 of the United States Code (the "Bankruptcy Code"), (b) each and
every transfer of funds, securities and other property under this Agreement and
each Loan hereunder is a "settlement payment" or a "margin payment," as such
terms are used in Sections 362(b)(6) and 546(e) of the Bankruptcy Code, and (c)
the rights given to Borrower and Lender hereunder upon a Default by the other
constitute the right to cause the liquidation of a securities contract and the
right to set off mutual debts and claims in connection with a securities
contract, as such terms are used in Sections 555 and 362(b)(6) of the Bankruptcy
Code. Each party hereto further agrees and acknowledges that if a party hereto
is an "insured depository institution," as such term is defined in the Federal
Deposit Insurance Act, as amended ("FOIA"), then each Loan hereunder is a
"securities contract " and "qualified financial contract," as such terms are
defined in the FOIA and any rules, orders or policy statements thereunder.
10.2 Borrower agrees to be liable as principal with respect to its
obligations hereunder.
10.3 Lender agrees either (a) to be liable as principal with respect to
its obligations hereunder or (b) to execute and comply fully with the provisions
of Annex I (the terms and conditions of which Annex are incorporated herein and
made a part hereof.
10.4 Promptly upon (and in any event within seven (7) Business Days
after) demand by Lender, Borrower shall furnish Lender with Borrower's most
recent publicly-available financial statements and any other financial
statements mutually agreed upon by Borrower and Lender. Unless otherwise agreed,
if Borrower is subject to the requirements of Rule 17a-5(c) under the Exchange
Act, it may satisfy the requirements of this Section by furnishing Lender with
its most recent statement required to be furnished to customers pursuant to such
Rule.
10.5 Except to the extent required by applicable law or regulation or
as otherwise agreed, Borrower and Lender agree that Loans hereunder shall in no
event be "exchange contracts" for purposes of the rules of any securities
exchange and that Loans hereunder shall not be governed by the buy-in or similar
rules of any such exchange, registered national securities or other
self-regulatory organization.
- 6 -
<PAGE> 17
11. Events.
-------
All Loans hereunder may, at the option of the non-defaulting party
exercised by notice to the defaulting party (which option shall be deemed to
have been exercised. even if no notice is given, immediately upon the occurrence
of an event specified in subsection (e) below), be terminated immediately upon
the occurrence of any one or more of the following events (individually, a
"Default"):
(a) if any Loaned Securities shall not be transferred to Lender
upon termination of the Loan as required by Section 5;
(b) if any Collateral shall not be transferred to Borrower upon
termination of the Loan as required by Sections 3.3 and 5;
(c) if either party shall fail to transfer Collateral as required
by Section 8;
(d) if either party (i) shall fail to transfer to the other party
amounts in respect of distributions required to be transferred
by Section 7, (ii) shall have received notice of such failure
from the non-defaulting party, and (iii) shall not have cured
such default by the Cutoff Time on the next day after such
notice on which a transfer of cash may be effected in
accordance with Section 16;
(e) if (i) either party shall commence as debtor any case or
proceeding under any bankruptcy, insolvency, reorganization,
liquidation, dissolution or similar law, or seek the
appointment of a receiver, conservator, trustee, custodian or
similar official for such party or any substantial part of its
property, (ii) any such case or proceeding shall be commenced
against either party, or another shall seek such an
appointment, or any application shall be filed against either
party for a protective decree under the provisions of the
Securities Investor Protection Act of 1970, which (A) is
consented to or not timely contested by such party, (B)
results in the entry of an order for relief, such an
appointment, the issuance of such a protective decree or the
en" of an order having a similar effect, or (C) is not
dismissed within 15 days, (iii) either party shall make a
general assignment for the benefit of creditors, or (iv)
either party shall admit in writing its inability to pay its
debts as they become due;
(f) if either party shall have been suspended or expelled from
membership or participation in any national securities
exchange or registered national securities association of
which it is a member or other self-regulatory organization to
whose rules it is subject or if it is suspended from dealing
in securities by any federal or state government agency
thereof.
(g) if either party shall have its license, charter, or other
authorization necessary to conduct a material portion of its
business withdrawn, suspended or revoked by any applicable
federal or state government or agency thereof;
(h) if any representation made by either party in respect of this
Agreement or any Loan or Loans hereunder shall be incorrect or
untrue in any material respect during the term of any Loan
hereunder;
(i) if either party notifies the other, orally or in writing, of
its inability to or its intention not to perform its
obligations hereunder or otherwise disaffirms, rejects or
repudiates any of its obligations hereunder; or
(j) if either party (i) shall fail to perform any material
obligation under this Agreement not specifically set forth in
clauses (a) through (i) above, including but not limited to
the payment of fees as required by Section 4, and the payment
of transfer taxes as required by Section 14, (ii) shall have
received notice of such failure from the nondefaulting party
and (iii) shall not have cured such failure by the Cutoff Time
on the next day after such notice on which a transfer of cash
may be effected under Section 16.
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<PAGE> 18
12. Lender's Remedies.
------------------
Upon the occurrence of a Default under Section 11 entitling Lender to
terminate all Loans hereunder, Lender shall have the right (without further
notice to Borrower), in addition to any other remedies provided herein or under
applicable law, (a) to purchase a like amount of Loaned Securities ("Replacement
Securities") in the principal market for such securities in a commercially
reasonable manner, (b) to sell any Collateral in the principal market for such
Collateral in a commercially reasonable manner and (c) to apply and set off the
Collateral and any proceeds thereof (including any amounts drawn under a letter
of credit supporting any Loan) against the payment of the purchase price for
such Replacement Securities and any amounts due to Lender under Sections 4, 7,
14 and 17. In the event Lender shall exercise such rights. Borrower's obligation
to return a like amount of the Loaned Securities shall terminate. Lender may
similarly apply the Collateral and any proceeds thereof to any other obligation
of Borrower under this Agreement, including Borrower's obligations with respect
to distributions paid to Borrower (and not forwarded to Lender) in respect of
Loaned Securities. In the event that (i) the purchase price of Replacement
Securities (plus all other amounts, if any, due to Lender hereunder) exceeds
(ii) the amount of the Collateral, Borrower shall be liable to Lender for the
amount of such excess together with interest thereon at a rate equal to (A) in
the case of purchases of Foreign Securities, LIBOR, (B) in the case of purchases
of any other securities (or other amounts, if any, due to Lender hereunder), the
Federal Funds Rate or (c) such other rate as may be specified in Schedule B, in
each case as such rate fluctuates from day to day, from the date of such
purchase until the date of payment of such excess. As security for Borrower's
obligation to pay such excess, Lender shall have, and Borrower hereby grants, a
security interest in any property of Borrower then held by or for Lender and a
right of set off with respect to such property and any other amount payable by
Lender to Borrower. The purchase price of Replacement Securities purchased under
this Section 12 shall include, and the proceeds of any sale of Collateral shall
be determined after deduction of, broker's fees and commissions and all other
reasonable costs, fees and expenses related to such purchase or sale (as the
case may be). In the event Lender exercises its rights under this Section 12.
Lender may elect in its sole discretion, in lieu of purchasing all or a portion
of the Replacement Securities or selling all or a portion of the Collateral, to
be deemed to have made, respectively, such purchase of Replacement Securities or
sale of Collateral for an amount equal to the price therefor on the date of such
exercise obtained from a generally recognized source or the most recent closing
bid quotation from such a source. Subject to Section 19, upon the satisfaction
of all obligations hereunder, any remaining Collateral shall be returned to
Borrower.
13. Borrower's Remedies.
--------------------
Upon the occurrence of a Default under Section 11 entitling Borrower to
terminate all Loans hereunder, Borrower shall have the right (without further
notice to Lender), in addition to any other remedies provided herein or under
applicable law, (a) to purchase a like amount of Collateral ("Replacement
Collateral") in the principal market far such Collateral in a commercially
reasonable manner, (b) to sell a like amount of the Loaned Securities in the
principal market for such securities in a commercially reasonable manner and (c)
to apply and set off the Loaned Securities and any proceeds thereof against (i)
the payment of the purchase price for such Replacement Collateral (ii) Lender's
obligation to return any cash or other Collateral and (iii) any amounts due to
Borrower under Sections 4, 7 and 17. In such event, Borrower may treat the
Loaned Securities as its own and Lender's obligation to return a like amount of
the Collateral shall terminate; provided, however, that Lender shall immediately
return any letters of credit supporting any Loan upon the exercise or deemed
exercise by Borrower of its termination rights under Section 1 1. Borrower may
similarly apply the Loaned Securities and any proceeds thereof to any other
obligation of Lender under this Agreement, including Lender's obligations with
respect to distributions paid to Lender (and not forwarded to Borrower) in
respect of Collateral. In the event that (i) the sales price received from such
Loaned Securities is less than (ii) the purchase price of Replacement Collateral
(plus the amount of any cash or other Collateral not replaced by Borrower and
all other amounts, if any, due to Borrower hereunder), Lender shall be liable to
Borrower for the amount of any such deficiency, together with interest on such
amounts at a rate equal to (A) in the case of Collateral consisting of Foreign
Securities, LIBOR, (B) in the case of Collateral consisting of any other
securities (or other amounts due, if any, to Borrower hereunder), the Federal
Funds Rate or (c) such other rate as may be specified in Schedule B, in each
case as such rate fluctuates from day to day, from the date of such sale until
the date at payment at such deficiency. As security for Lender's obligation to
pay such deficiency, Borrower shall have, and Lender hereby grants, a security
interest in any property of Lender then held by or for Borrower and a right of
setoff with respect to such property and any other amount payable by Borrower to
Lender. The purchase price of any Replacement Collateral purchased under this
Section 13 shall include, and the proceeds of any sale of Loaned Securities
shall be determined after deduction of broker's fees and commissions and all
other reasonable costs, fees and expenses related to such purchase or sale (as
the case may be). In the event Borrower exercises its rights under this Section
13, Borrower may elect in its sole discretion,
- 8 -
<PAGE> 19
in lieu of purchasing all or a portion of the Replacement Collateral or selling
all or a portion at the Loaned Securities, to be deemed to have made,
respectively, such purchase of Replacement Collateral or sale of Loaned
Securities for an amount equal to the price therefor on the date of such
exercise obtained from a generally recognized source or the most recent closing
bid quotation from such a source. Subject to Section 19, upon the satisfaction
of all Lender's obligations hereunder. any remaining Loaned Securities (or
remaining cash proceeds thereof shall be returned to Lender. Without limiting
the foregoing, the parties hereto agree that they intend the Loans hereunder to
be loans of securities. If, however, any Loan is deemed to be a loan of money by
Borrower to Lender, then Borrower shall have, and Lender shall be deemed to have
granted, a security interest in the Loaned Securities and the proceeds thereof.
14. Transfer Taxes.
--------------
All transfer taxes with respect to the transfer of the Loaned
Securities by Lender to Borrower and by Borrower to Lender upon termination of
the Loan shall be paid by Borrower.
15. Market Value.
------------
15.1 Unless otherwise agreed, if the principal market for the
securities to be valued is a national securities exchange in the United States,
their market value shall be determined by their last sale price on such exchange
on the preceding Business Day or, if there was no sale on that day, by the last
sale price an the next preceding Business Day on which there was a sale on such
exchange, all as quoted on the Consolidated Tape or, if not quoted on, the
Consolidated Tape, then as quoted by such exchange.
15.2 Except as provided in Section 15.3 or 15.4 or as otherwise agreed,
if the principal market for the securities to be valued is the over-the-counter
market, their market value shall be determined as follows. If the securities are
quoted on the National Association of Securities Dealers Automated Quotations
System ("NASDAQ"), their market value shall be the closing sale price on NASDAQ
on the preceding Business Day or, if the securities are issues for which last
sale prices are not quoted on NASDAQ, the closing bid price on such day. It the
securities to be valued are not quoted on NASDAQ, their market value shall be
the highest bid quotation as quoted in any of The Wall Street Journal, the
National Quotation Bureau pink sheets, the Salomon Brothers quotation sheets,
quotations sheets of registered market makers and, if necessary, dealers'
telephone quotations on the preceding Business Day. In each case, if the
relevant quotation did not exist on such day, then the relevant quotation an the
next preceding Business Day in which there was such a quotation shall be the
market value.
15.3 Unless otherwise agreed, if the securities to be valued are
Government Securities, their market value shall be the average of the bid and
ask prices as quoted on Prophesy at 3:30 P.M. New York time on the Business Day
preceding the date on which such determination is made. If the securities are
not so quoted on such day, their market value shall be determined as of the next
preceding Business Day on which they were so quoted. If the securities to be
valued are Government Securities that are not quoted on Prophesy, their market
value shall be determined as of the close of business on the preceding Business
Day in accordance with market practice for such securities.
15.4 Unless otherwise agreed, it the securities to be valued are
Foreign Securities, their market value shall be determined as of the close of
business an the preceding Business Day in accordance with market practice in the
principal market for such securities.
15.5 Unless otherwise agreed, the market value of a letter of credit
shall be the undrawn amount thereof.
15.6 All determinations of market value under Sections 15.1, 15.2, 15.3
and 15.4 shall include, where applicable, accrued interest to the extent not
already included therein (other than any interest transferred to the other party
pursuant to Section 7), unless market practice with respect to the valuation of
such securities in connection with securities loans is to the contrary. All
determinations of market value that are required to be made at the close of
trading on any Business Day pursuant to Section 8 or otherwise hereunder shall
be made as if being determined at the commencement of trading on the next
Business Day. The determinations of market value provided for in this Section 15
shall apply for all purposes under this Agreement, except for purposes of
Sections 12 and 13.
- 9 -
<PAGE> 20
16. Transfers.
---------
16.1 All transfers of securities hereunder shall be by (a) physical
delivery of certificates representing such securities together with duly
executed stock and bond transfer powers, as the case may be, with signatures
guaranteed by a bank or a member firm of the New York Stock Exchange, Inc., (b)
transfer an the books of a Clearing Organization, or (c) such other means as
Borrower and Lender may agree. In every transfer of securities hereunder, the
transferor shall take all steps necessary (i) to effect a "transfer" under
Section 8-313 of the New York Uniform Commercial Code or, where applicable,
under any U.S. federal regulation governing transfers of securities and (ii) to
provide the transferee with comparable rights under any applicable foreign law
or regulation.
16.2 All transfers of cash Collateral hereunder shall be by (a) wire
transfer in immediately available, freely transferable funds or (b) such other
means as Borrower and Lender may agree. All other transfers of cash hereunder
shall be made in accordance with the preceding sentence or by delivery of a
certified or official bank check representing next day New York Clearing House
Funds.
16.3 All transfers of a letter of credit from Borrower to Lender shall
be made by physical delivery to Lender of an irrevocable letter of credit issued
by a "bank" as defined in Section 3(a)(6)(A)-(C) of the Exchange Act. Transfer
of a letter of credit from Lender to Borrower shall be made by causing such
letter of credit to be returned or by causing the amount of such letter of
credit to be reduced to the amount required after such transfer.
16.4 A transfer of securities, cash or letters of credit may be
effected under this Section 16 on any day except (a) a day on which the
transferee is closed for business at its address set forth in Schedule A hereto
or (b) a day on which a Clearing Organization or wire transfer system is closed,
it the facilities of such Clearing Organization or wire transfer system are
required to effect such transfer.
17. Contractual Currency.
--------------------
17.1 Borrower and Lender agree that: (a) any payment in respect of a
distribution under Section 7 shall be made in the currency in which the
underlying distribution of cash was made; (b) any return of cash shall be made
in the currency in which the underlying transfer of cash was made and (c) any
other payment of cash in connection with a Loan under this Agreement shall be in
the currency agreed upon by Borrower and Lender in connection with such Loan
(the currency established under clause (a), (b) or (c) hereinafter referred to
as the "Contractual Currency"). Notwithstanding the foregoing, the payee of any
such payment may, at its option, accept tender thereof in any other currency:
provided, however, that, to the extent permitted by applicable law.
the obligation of the payor to make such payment will be discharged only to the
extent of the amount of Contractual Currency that such payee may, consistent
with normal banking procedures, purchase with such other currency (after
deduction of any premium and costs of exchange) on the banking day next
succeeding its receipt of such currency.
17.2 If for any reason the amount in the Contractual Currency received
under Section 17.1, including amounts received after conversion of any recovery
under any judgment or order expressed in a currency other than the Contractual
Currency, falls short of the amount in the Contractual Currency due in respect
of this Agreement, the party required to make the payment will (unless a Default
has occurred and such party is the non-defaulting party) as a separate and
independent obligation and to the extent permitted by applicable law,
immediately pay such additional amount in the Contractual Currency as may be
necessary to compensate for the shortfall.
17.3 If for any reason the amount in the Contractual Currency received
under Section 17.1 exceeds the amount in the Contractual Currency due in respect
of this Agreement, then the party receiving the payment will (unless a Default
has occurred and such party is the non-defaulting party) refund promptly the
amount of such excess.
18. ERISA.
-----
Lender shall, if any of the securities transferred to the Borrower
hereunder for any Loan have been or shall be obtained, directly or indirectly,
from or using the assets of any Plan, so notify Borrower in writing upon the
execution of the Agreement or upon initiation of such Loan under Section 1.1. If
Lender so notifies Borrower, then Borrower and
- 10 -
<PAGE> 21
Lender shall conduct the Loan in accordance with the terms and conditions of
Department of Labor Prohibited Transaction Exemption 81-6 (46 Fed. Reg. 7527,
Jan. 23, 1981; as amended, 52 Fed. Reg. 18754, May 19, 1987), or any successor
thereto (unless Borrower and Lender have agreed prior to entering into a Loan
that such Loan will be conducted in reliance on another exemption, or without
relying on any exemption, from the prohibited transaction provisions of Section
406 of the Employee Retirement Income Security Act of 1974, as amended, and
Section 4975 of the Internal Revenue Code of 1986, as amended). Without limiting
the foregoing and notwithstanding any other provision of this Agreement. if the
Loan will be conducted in accordance with Prohibited Transaction Exemption 81-6,
then:
(a) Borrower represents and warrants to Lender that it is either
(i) a bank subject to federal or state supervision, (ii) a
broker-dealer registered under the Exchange Act or (iii)
exempt from registration under Section 15(a)(1) of the
Exchange Act as a dealer in Government Securities.
(b) Borrower represents and warrants that, during the term of any
Loan hereunder, neither Borrower nor any affiliate of Borrower
has any discretionary authority or control with respect to the
investment of the assets of the Plan involved in the Loan or
renders investment advice (within the meaning of 29 C.F.R.
Section 2510.321(c)) with respect to the assets of the Plan
involved in the Loan. Lender agrees that, prior to or at the
commencement of any Loan hereunder, it will communicate to
Borrower information regarding the Plan sufficient to identify
to Borrower any person or persons that have discretionary
authority or control with respect to the investment of the
assets of the Plan involved in the Loan or that render
investment advice (as defined in the preceding sentence) with
respect to the assets of the Plan involved in the Loan. In the
event Lender fails to communicate and keep current during the
term of any Loan such information, Lender rather than Borrower
shall be deemed to have made the representation and warranty
in the first sentence of this clause (b).
(c) Borrower and Lender agree that:
(i) the term "Collateral" shall mean cash, securities
issued or guaranteed by the United States government
or its agencies or instrumentalities, or irrevocable
bank letters of credit issued by a person other than
Borrower or an affiliate thereof;
(ii) prior to the making of any Loans hereunder, Borrower
shall provide Lender with (A) the most recent
available audited statement of Borrower's financial
condition and (B) the most recent available unaudited
statement of Borrower's financial condition (if more
recent than the most recent audited statement), and
each Loan made hereunder shall be deemed a
representation by Borrower that there has been no
material adverse change in Borrower's financial
condition subsequent to the date of the latest
financial statements or information furnished in
accordance herewith;
(iii) the Loan may be terminated by Lender at any time,
whereupon Borrower shall deliver the Loaned
Securities to Lender within the lesser of (A) the
customary delivery period for such securities; (B)
five Business Days and (c) the time negotiated for
such delivery between Borrower and Lender; provided,
however, that Borrower and Lender may agree to a
longer period only if permitted by Prohibited
Transaction Exemption 81-6; and
(iv) the Collateral transferred shall be security only for
obligations of Borrower to the Plan with respect to
Loans, and shall not be security for any obligation
of Borrower to any agent or affiliate of the Plan.
19. Single Agreement. Borrower and Lender acknowledge that, and have entered
into this Agreement in reliance on the fact that, all Loans hereunder constitute
a single business and contractual relationship and have been entered into in
consideration of each other. Accordingly, Borrower and Lender hereby agree that
payments, deliveries and other transfers made by either of them in respect of
any Loan shall be deemed to have been made in consideration of payments,
deliveries and other transfers in respect of any other Loan hereunder, and the
obligations to make any such payments, deliveries and
- 11 -
<PAGE> 22
other transfers may be applied against each other and netted. In addition,
Borrower and Lender acknowledge that, and have entered into this Agreement in
reliance an the fact that, all Loans hereunder have been entered into in
consideration of each other. Accordingly, Borrower and Lender hereby agree that
(a) each shall perform all of its obligations in respect of each Loan hereunder,
and that a default in the performance of any such obligation by Borrower or by
Lender (the "Defaulting Party") in any Loan hereunder shall constitute a default
by the Defaulting Party under all such Loans hereunder, and (b) the
nondefaulting party shall be entitled to set off claims and apply property held
by it in respect of any Loan hereunder against obligations owing to A in respect
of any other Loan with the Defaulting Party.
20. THIS AGREEMENT SHALL BE GOVERNED AND CONSTRUED IN ACCORDANCE WITH THE LAWS
OF THE STATE OF NEW YORK WITHOUT GIVING EFFECT TO THE CONFLICT OF LAW PRINCIPLES
THEREOF.
21. Waiver. The failure of a party to this Agreement to insist upon strict
adherence to any term of this Agreement on any occasion shall not be considered
a waiver or deprive that party of the right thereafter to insist upon strict
adherence to that term or any other term of this Agreement. All waivers in
respect of a Default must be in writing.
22. Remedies. All remedies hereunder and all obligations with respect to any
Loan shall survive the termination of the relevant Loan, return of Loaned
Securities or Collateral and termination of this Agreement.
23. Notices and Other Communications. Unless another address is specified in
writing by the respective party to whom any notice or other communication is to
be given hereunder, all such notices or communications shall be in writing or
confirmed in writing and delivered at the respective addresses set forth in
Schedule A attached hereto. All notices shall be effective upon actual receipt,
provided, however, that if any notice shall be received by a party on a day on
which such party is not open for business at its office located at the address
set forth in Schedule A. Such notice shall be deemed to have been received by
such party at the opening of business an the next day on which such party is
open for business at such address.
24. SUBMISSION TO JURISDICTION; WAIVER OF JURY TRIAL.
24.1 EACH PARTY HERETO IRREVOCABLY AND UNCONDITIONALLY (A) SUBMITS TO
THE NONEXCLUSIVE JURISDICTION OF ANY UNITED STATES FEDERAL OR NEW YORK STATE
COURT SITTING IN NEW YORK CITY, AND ANY APPELLATE COURT FROM ANY SUCH COURT,
SOLELY FOR THE PURPOSE OF ANY SUIT, ACTION OR PROCEEDING BROUGHT TO ENFORCE ITS
OBLIGATIONS HEREUNDER OR RELATING IN ANY WAY TO THIS AGREEMENT OR ANY LOAN
HEREUNDER AND (B) WAIVES, TO THE FULLEST EXTENT IT MAY EFFECTIVELY DO SO, ANY
DEFENSE OF AN INCONVENIENT FORUM TO THE MAINTENANCE OF SUCH ACTION OR PROCEEDING
IN ANY SUCH COURT AND ANY RIGHT OF JURISDICTION ON ACCOUNT OF ITS PLACE OF
RESIDENCE OR DOMICILE.
24.2 EACH PARTY HERETO HEREBY IRREVOCABLY WAIVES ANY RIGHT THAT IT MAY
HAVE TO TRIAL BY JURY IN ANY ACTION, PROCEEDING OR COUNTERCLAIM ARISING OUT OF
OR RELATING TO THIS AGREEMENT OR THE TRANSACTIONS CONTEMPLATED HEREBY.
25. Miscellaneous. This Agreement supersedes any other agreement between the
parties hereto concerning loans of securities between Borrower and Lender. This
Agreement shall not be assigned by either party without the prior written
consent of the other party and any attempted assignment without such consent
shall be null and void. Subject to the foregoing, this Agreement shall be
binding upon and shall ensure to the benefit of Borrower and Lender and their
respective heirs, representatives, successors and assigns. This Agreement may be
terminated by either party upon written notice to the other, subject only to
fulfillment of any obligations then outstanding. This Agreement shall not be
modified, except by an instrument in writing signed by the party against whom
enforcement is sought. The parties hereto acknowledge and agree that, in
connection with this Agreement and each Loan hereunder, time is of the essence.
Each provision and agreement herein shall be treated as separate and independent
from any other provision herein and shall be enforceable notwithstanding the
unenforceability of any such other provision or agreement.
- 12 -
<PAGE> 23
26. Definitions. For the purposes hereof:
26.1 " Broker-Dealer" shall mean any person that is a broker (including
a municipal securities broker), dealer, municipal securities dealer, government
securities broker or government securities dealer as defined in the Exchange
Act, regardless of whether the activities of such person are conducted; in the
United States or otherwise require such person to register with the Securities
and Exchange Commission or other regulatory body.
26.2 "Business Day" shall mean, with respect to any Loan hereunder, a
day on which regular trading occurs in the principal market for the Loaned
Securities subject to such Loan, provided, however, that for purposes of Section
15, such term shall mean a day on which regular trading occurs in the principal
market for the securities whose value is being determined. Notwithstanding the
foregoing, (i) for purposes of Section 8,"Business Day" shall mean any day on
which regular trading occurs in the principal market tar any Loaned Securities
or for any securities Collateral under any outstanding Loan hereunder and "next
Business Day" shall mean the next day on which a transfer of Collateral may be
effected in accordance with Section 16; and (ii) in no event shall a Saturday or
Sunday be considered a Business Day.
26.3 "Clearing Organization" shall mean The Depository Trust Company,
or, if agreed to by Borrower and Lender, such other clearing agency at which
Borrower (or Borrower's agent) and Lender (or Lender's agent) maintain accounts,
or a book-entry system maintained by a Federal Reserve Bank.
26.4 "Collateral" shall mean, whether now owned or hereafter acquired
and to the extent permitted by applicable law, (a) any property which Borrower
and Lender agree shall be acceptable collateral prior to the Loan and which is
transferred to Lender pursuant to Section 3 or 8 (including as collateral, for
definitional purposes, any letters of credit mutually acceptable to Lender and
Borrower), (b) any property substituted therefor pursuant to Section 3.5, (c)
all accounts in which such property is deposited and all securities and the like
in which any cash collateral is invested or reinvested, and (d) any proceeds of
any of the foregoing. For purposes of return of Collateral by Lender or purchase
or sale of securities pursuant to Section 12 or 13, such term shall include
securities of the same issuer, class and quantity as the Collateral initially
transferred by Borrower to Lender.
26.5 "Customer" shall mean any person that is a customer of Borrower
under Rule 15c3-3 under the Exchange Act or any comparable regulation of the
Secretary of the Treasury under Section 15C of the Exchange Act (to the extent
that Borrower is subject to such Rule or comparable regulation).
26.6 "Cutoff Time" shall mean a time on a Business Day by which a
transfer of cash, securities or other property must be made by Borrower or
Lender to the other, as shall be agreed by Borrower and Lender in Schedule B or
otherwise orally or in writing or, in the absence of any such agreement, as
shall be determined in accordance with market practice.
26.7 "Default" shall have the meaning assigned in Section 11.
26.8 "Exchange Act" shall mean the Securities Exchange Act of 1934, as
amended.
26.9 "Federal Funds Rate" shall mean the rate of interest (expressed as
an annual rate), as published in Federal Reserve Statistical Release H.15(519)
or any publication substituted therefor, charged for federal funds (dollars in
immediately available funds borrowed by banks an overnight unsecured basis) on
that day or, if that day is not a banking day in New York City, on the next
preceding banking day.
26.10 "Foreign Securities" shall mean, unless otherwise agreed,
securities that are principally cleared and settled outside the United States.
26.11 "Government Securities" shall mean government securities as
defined in Section 3(a)(42)(A)-(C) of the Exchange Act.
26.12 "LIBOR" shall mean for any date, the offered rate for deposits in
U.S. dollars for a period of three months which appears an the Reuters Screen
LIBO page as of 11:00 A.M., London time, an such date (or, if at least two such
rates appear, the arithmetic mean of such rates).
- 13 -
<PAGE> 24
26.13 "Loan" shall mean a loan of securities hereunder.
26.14 "Loaned Security" shall mean any security which is a security as
defined in the Exchange Act, transferred in a Loan hereunder until such security
(or an identical security) is transferred back to Lender hereunder, except that,
if any new or different security shall be exchanged for any Loaned Security by
recapitalization, merger, consolidation or other corporate action, such new or
different security shall, effective upon such exchange, be deemed to become a
Loaned Security in substitution for the former Loaned Security for which such
exchange is made. For purposes of return of Loaned Securities by Borrower or
purchase or sale of securities pursuant to Section 12 or 13, such term shall
include securities of the same issuer, class and quantity as the Loaned
Securities, as adjusted pursuant to the preceding sentence.
26.15 "Plan" shall mean (a) any "employee benefit plan" as defined in
Section 3(3) of the Employee Retirement Income Security Act of 1974 which is
subject to Pan 4 of Subtitle B of Title 1 of such Act: (b) any "plan" as defined
in Section 4975(e)(1) of the Internal Revenue Code of 1986; or (c) any entity
the assets of which are deemed to be assets of any such "employee benefit plan"
or "plan" by reason of the Department of Labor's plan asset regulation. 29
C.F.R. Section 2510.3101.
Bank One Trust Company, NA
By:_______________________________
Title:____________________________
Date:_____________________________
By:_______________________________
Title:____________________________
Date:_____________________________
- 14 -
<PAGE> 25
ANNEX 1
-------
Lender Acting as Agent
- ----------------------
This Annex sets forth the terms and conditions governing all
transactions in which a party lending securities ("Agent") in a Loan is acting
as agent for one or more third parties (each a "Principal"). Unless otherwise
defined, capitalized terms used in this Annex shall have the meanings assigned
in the Securities Loan Agreement of which it forms a part (such agreement,
together with this Annex and any other schedules or exhibits, referred to as the
"Agreement") and, unless otherwise specified, all section references herein are
intended to refer to sections of such Securities Loan Agreement.
1. Additional Representations and Warranties. In addition to the
representations and warranties set forth in Section 9 of the Agreement, Agent
hereby makes the following representations and warranties, which shall continue
during the term of any Loan; Principal has duly authorized Agent to execute and
deliver the Agreement an its behalf. has the power to so authorize Agent and to
enter into the Loans contemplated by the Agreement and to perform the
obligations of Lender under such Loans, and has taken all necessary action to
authorize such execution and delivery by Agent and such performance by it.
2. Identification. Agent agrees (a) to provide Borrower prior to any
Loan under the Agreement with a written list of Principals for which it intends
to act as Agent (which list may be amended in writing from time to time with the
consent of Borrower), and (b) to provide Borrower, before the close of business
on the next Business Day after orally agreeing to enter into a Loan, with notice
of the specific Principal or Principals for whom it is acting in connection with
such Loan. If (i) Agent fails to identify such Principal or Principals prior to
the close of business an such next Business Day or (ii) Borrower shall determine
in its sole discretion that any Principal or Principals identified by Agent are
not acceptable to R. Borrower may reject and rescind any Loan with such
Principal or Principals, return to Agent any Loaned Securities previously
transferred to Borrower and refuse any further performance under such Loan, and
Agent shall immediately return to Borrower any Collateral previously transferred
to Agent in connection with such Loan; provided, however, that (A) Borrower
shall promptly (and in any event within one Business Day) notify Agent of its
determination to reject and rescind such Loan and (B) to the extent that any
performance was rendered by any party under any Loan rejected by Borrower, such
party shall remain entitled to any fees or other amounts that would have been
payable to it with respect to such performance if such Loan had not been
rejected. Borrower acknowledges that Agent shall not have any obligation to
provide R with confidential information regarding the financial status of its
Principals; Agent agrees, however, that it will assist Borrower in obtaining
from Agent's Principals such information regarding the financial status of such
Principals as Borrower may reasonably request.
3. Limitation of Agent's Liability. The parties expressly acknowledge
that if the representations and warranties of Agent under the Agreement,
including this Annex, are true and correct in all material respects during the
term of any Loan and Agent otherwise complies with the provisions of this Annex,
then (a) Agent's obligations under the Agreement shall not include a guarantee
of performance by As Principal or Principals and (b) Borrowers remedies shall
not include a right of set off against obligations, if any, of Agent arising in
other transactions in which Agent is acting as principal.
4. Multiple Principals.
(a) In the event that Agent proposes to act for more than one Principal
hereunder, Borrower and Agent shall elect whether (i) to treat Loans under this
Agreement as transactions entered into on behalf of separate Principals or (ii)
to aggregate such Loans as if they were transactions by a single Principal.
Failure to make such an election in writing shall be deemed an election to treat
Loans under this Agreement as transactions on behalf of separate Principals.
- 1 -
<PAGE> 26
(b) In the event that Borrower and Agent elect (or are deemed to elect)
to treat Loans under the Agreement as transactions on behalf of separate
Principals. the parties agree that (i) Agent will provide Borrower, together
with the notice described in Section 2(b) of this Annex, notice specifying the
portion of each Loan allocable to the account of each of the Principals for
which it is acting (to the extent that any such Loan is allocable to the account
of more than one Principal); (ii) the portion of any individual Loan allocable
to each Principal shall be deemed a separate Loan under the Agreement; (iii) the
mark to market obligations of Borrower and Lender under Section 8 of the
Agreement shall be determined on a Loan-by-Loan basis (unless the parties agree
to determine such obligations on a Principal-by-Principal basis); and (iv)
Borrower's and Lender's remedies under the Agreement upon the occurrence of a
Default shall be determined as if Agent had entered into a separate Agreement
with Borrower on behalf of each of its Principals.
(c) In the event that Borrower and Agent elect to treat Loans under
this Agreement as if they were transactions by a single Principal, the parties
agree that (i) Agent's notice under Section 2(b) of this Annex need only
identify the names of its Principals but not the portion of each Loan allocable
to each Principal's account; (ii) the mark to market obligations of Borrower and
Lender under Section a shall, subject to any greater requirement imposed by
applicable law, be determined on an aggregate basis for all Loans entered into
by Agent on behalf of any Principal; and (iii) Borrower's and Lender's remedies
upon the occurrence of a Default shall be determined as if all Principals were a
single Lender.
(d) Notwithstanding any other provision of the Agreement (including
without limitation this Annex), the parties agree that any transactions by Agent
on behalf of a Plan shall be treated as transactions on behalf of separate
Principals in accordance with Section 4(b) of this Annex (and all mark to market
obligations of the parties shall be determined on a Loan-by-Loan basis).
5. Interpretation of Terms. All references to "Lender" in the Agreement
shall, subject to the provisions of this Annex (including among other provisions
the limitations on Agent's liability in Section 3 of this Annex), be construed
to reflect that (i) each Principal shall have, in connection with any Loan or
Loans entered into by Agent on its behalf, the rights, responsibilities,
privileges and obligations of a "Lender" directly entering into such Loan or
Loans with Borrower under the Agreement, and (ii) Agent's Principal or
Principals have designated Agent as their sole Agent for performance of Lender's
obligations to Borrower and for receipt of performance by Borrower of its
obligations to Lender in connection with any Loan or Loans under the Agreement
(including, among other things, as agent for each Principal in connection with
transfers of securities, cash or other property and as agent for giving and
receiving all notices under the Agreement). Both Agent and its Principal or
Principals shall be deemed parties" to the Agreement and all references to a
"party" or "either party" in the Agreement shall be deemed revised accordingly
(and any Default by Agent under paragraph (e) or any other applicable provision
of Section 11 shall be deemed a Default by Lender).
Bank One Trust Company, NA
By:_______________________________
Title:____________________________
Date:_____________________________
By:_______________________________
Title:____________________________
Date:_____________________________
- 2 -
<PAGE> 27
Schedule A
----------
NAMES AND ADDRESSES FOR COMMUNICATIONS
If to Lender: Bank One Trust Company, N.A.
Attn: Securities Lending
1111 Polaris Parkway
Columbus, Ohio 43240
or, if by postal service,
P.O. Box 710211
Columbus, OH 43271-0211
IF TO BORROWER:
- 3 -
<PAGE> 28
AMENDMENT TO MASTER
SECURITIES LOAN AGREEMENT
This Amendment to the Master Securities Loan Agreement (the
"Agreement") is entered into by and between Bank One Trust Company, N. A. in its
capacity as agent for its customers and not individually (the "Lender") and
____________________________________ (the "Borrower") who hereby agree to amend
the Agreement as follows:
1. Section 3.1 of the Agreement is hereby deleted in its entirety and the
following is substituted in its place:
3.1 Unless otherwise agreed, Borrower shall, prior to the transfer of
the Loaned Securities to Borrower, but in no case later than the close
of business on the day that such transfer is to occur, transfer to
Lender Collateral with a market value at least equal to a percentage of
the market value of the Loaned Securities agreed to by Borrower and
Lender (which shall be not less than 105% of the market value of the
Loaned Securities if the Loaned Securities are Foreign Securities and
102% of the market value of the Loaned Securities if the Loaned
Securities are securities other than Foreign Securities) (the "Margin
Percentage").
2. Section 3.6 is hereby deleted in its entirety and the following new section
3.6 is substituted in its place:
3.6 Except as otherwise provided in an agreement entered into by
Borrower and Lender pursuant to Section 1.1 or Section 3.5(b), Lender
acknowledges that, in connection with Loans of Government Securities and as
otherwise permitted by applicable law, some securities provided by Borrower as
Collateral under this Agreement may not be guaranteed by the United States.
Section 5 is hereby deleted in its entirety and the following new Section 5 is
substituted in its place:
5. Termination of the Loan. Unless otherwise agreed, (a) Borrower may
terminate a loan on any Business Day by giving notice to Lender prior to 10:00
a.m. in the case of government securities and prior to 11:30 a.m. in the case of
all other securities on such Business Day and transferring the Loaned Securities
to Lender before the Cutoff Time on such Business Day, and (b) Lender may
terminate a loan on a termination date established by a notice given by Lender
to Borrower prior to the close of business on a Business Day. The termination
date established by a termination notice given by Lender to Borrower shall be a
date no earlier than the standard settlement date for trades of the Loaned
Securities entered into on the date of such notice, which date shall, unless
Borrower and Lender agree to the contrary, be (i) in the case of government
securities, the next Business Day following such notice, (ii) in the case of
Foreign Securities, the fifth Business Day following such notice, and (iii) in
the case of all other securities, the third Business Day following such notice.
Unless otherwise agreed, Borrower shall, on or before the Cutoff Time on the
termination date of a Loan, transfer the Loaned Securities to Lender, provided,
however, that after such transfer
- 4 -
<PAGE> 29
by Borrower, Lender shall transfer the Collateral (as adjusted pursuant to
Section 8) to Borrower in accordance with Section 3.3
4. Section 8.1 is hereby deleted in its entirety and substituting the following
is substituted in its place:
8.1 Borrower shall daily mark to market any Loan hereunder and in the
event that at the close of trading on any Business Day the market value
of the Collateral for any Loan to Borrower shall be less than: (i) 102%
of the market value of all the outstanding Loaned Securities which are
Foreign Securities subject to such Loan, and (ii) 100% of the market
value of all the outstanding Loaned Securities other than Foreign
Securities subject to such Loan, Borrower shall transfer additional
Collateral no later than the close of the next Business Day so that the
market value of such additional Collateral, when added to the market
value of the other Collateral for such Loan, shall equal: (i) 105% of
the market value of the Loaned Securities if the Loaned Securities are
Foreign Securities, and (ii) 102% of the market value of the Loaned
Securities if the Loaned Securities are not Foreign Securities.
5. Section 15.3 is hereby amended by deleting the references to "Prophesy" and
replacing them with "Bloomberg."
6. Section 24.1 is hereby amended by deleting the reference to "New York" and
replacing it with "Ohio" and by deleting the reference to "New York City" and
replacing it with "Columbus, Ohio."
7. The second sentence of Section 25 is hereby deleted it is entirety and the
following new sentence is substituted in its place:
This Agreement shall not be assigned by either party without the prior
written consent of the other party and any attempted assignment without such
consent shall be null and void except that Lender may assign this Agreement to
another affiliate of BANC ONE CORPORATION in its capacity as agent for its
customers and not individually without the consent of the Borrower.
8. Section 26.2 shall be deleted in its entirety and the following shall be
substituted in its place:
26.2 "Business Day" shall mean, with respect to any Loan hereunder, a
day on which regular trading occurs in the principal market for the
Loaned Securities subject to such Loan, provided, however, that for
purpose of Section 15, such term shall mean a day on which regular
trading occurs in the principal market for the securities whose value
is being determined. Notwithstanding the foregoing, (i) if the
securities are Foreign Securities, "Business Day" shall in no event
include a day on which the Lender or its agent are not open for
business; (ii) in no event shall a Saturday or Sunday be considered a
Business Day; and (iii) subject to sections (i) and (ii) above, for
purposes of Section 8, "Business Day" shall mean any day on which
regular trading occurs in the principal market for any Loaned
Securities or for any securities Collateral under any outstanding Loan
hereunder and subject to sections (i) and (ii)
- 5 -
<PAGE> 30
above, "next Business Day" shall mean the next day on which a transfer
of Collateral may be effected in accordance with Section 16.
9. Section 26.6 is hereby deleted in entirety and the following new Section 26.6
is substituted in its place:
"Cutoff Time" shall mean a time on a Business Day by which transfer of
cash, securities or other property must be made by Borrower or Lender to the
other, which for loans of government securities, shall mean the official Fed
wire dealer close on the termination date and which for loans of all other
securities, shall mean the close of the appropriate depository on the
termination date or such other times as shall be agreed upon by Borrower and
Lender orally or in writing.
10. The Agreement as amended by this Amendment constitutes the entire agreement
between the parties hereto with respect to the transactions contemplated hereby
and supersedes all prior discussions, understandings, agreements and
negotiations between the parties hereto with respect to such transactions. The
headings in this Amendment are for convenience only and shall not be used in
construing this Amendment.
IN WITNESS WHEREOF, this Amendment to the Agreement is executed by Bank One
Trust Company, N. A. in its capacity as agent for its Customers and not
individually and _____________________________________________.
BANK ONE TRUST COMPANY, N. A.
- ----------------------------- ___________________________________
AS AGENT FOR ITS CUSTOMERS
AND NOT INDIVIDUALLY
BY:_____________________________
BY:________________________________
psaamend: 10/1/97
- 6 -
<PAGE> 31
One
Group Intl.
1/8/98
SECURITIES LENDING AGREEMENT
EXHIBIT C
Approved Borrowers
BT Alex. Brown, Inc. (fka BT Securities Corporation)/Bankers Trust
Company
Bear Steams & Co., Inc./Bear Steams Securities Corporation
Credit Suisse First Boston Corporation
Donaldson, Lufkin & Jenrette Securities Corp.
Goldman, Sachs & Co.
Lehman Brothers Inc.
Maple Partners U.S.A., Inc. (Fka First Marathon America)
Merrill Lynch, Pierce, Fenner & Smith, Inc./Merrill Lynch Government
Securities Inc.
J. P. Morgan Securities Inc.
Morgan Stanley & Co./MS Securities Services
Nomura Securities International, Inc.
PaineWebber, Inc.
Paloma Securities, L. P.
Prudential Securities, Inc.
SBC Warburg Dillon Read
Salomon Brothers, Inc.
Societe Generale Securities Corporation
UBS Securities Corp.
U.S. Clearing Corp.
<PAGE> 32
SECURITIES LENDING AGREEMENT
EXHIBIT D
International Equity Index Fund
When securities are loaned pursuant to the Securities Lending Agreement dated
January 8, 1998, between The One Group (the "Lender"), Banc One Investment
Advisors Corporation (the "Adviser") and Bank One Trust Company, N.A. (the
"Subcustodian"), the Lender instructs as follows:
1. Types of Collateral. The Adviser may instruct the Subcustodian to
accept the types of collateral checked below when securities are loaned
subject to the terms of the above described Securities Lending
Agreement.
A. Cash
B. Securities issued or guaranteed by the United States
Government or its agencies
2. Investment of Cash Collateral In making the investments of cash
received as collateral discussed in the Securities Lending Agreement,
including income received from such collateral, the Adviser is
authorized and directed to use any of the types of investments (the
"Permitted Investments") checked below:
A. Short term obligations of banks limited to certificates of
deposit and time deposits, including without limitations any
such instrument issued by the Subcustodian or one of its
affiliates.
B. Short term obligations of the United States Government or its
agencies.
C. Repurchase agreements.
D. Money market mutual funds or other securities of any open-end
or closed-end investment company or investment trust
registered under the Investment Company Act of 1940, as
amended., including funds for which Banc One Investment
Advisors serves as investment advisor or administrator.
E. Commercial paper of foreign issuers and obligations of foreign
banks, overseas branches of U.S. banks, and supranational
entities
F. Obligations of supranational agencies.
<PAGE> 33
3. Maturity of Collateral Investments, The Adviser may instruct the
Subcustodian to make Permitted Investments as authorized in Section 2
that may be of longer or shorter maturity than the term of any
transaction to which they relate, it being understood that "short term"
Permitted Investments shall include Permitted Investments with such
maturities as are described in this section. The maturity of each
Permitted Investment will be based upon Lender instructions, if any,
the Adviser's estimate of the volume of securities that is likely to be
loaned on a continuous basis, the rates available on alternate
investments, interest rate trends, and overall market conditions. The
average weighted maturity of Permitted Investments shall not exceed 90
days, and in no case shall the final maturity of a Permitted Investment
exceed 12 months in the case of fixed rate investments and 36 months in
the case of floating rate investments. The difference between the
average weighted maturity of loan transactions and the average weighted
maturity of Permitted Investments shall not exceed 90 days. For the
purpose of calculating the average weighted maturity of loan
transactions, maturity shall, in the case of "term" loans, mean the
number of days remaining until the termination of the loan transaction,
or in the case of "open" loans, one day. For the purpose of calculating
the average weighted maturity of Permitted Investments, maturity shall
mean: (1) one day in the case of money market mutual funds, master
notes, and other instruments that may be liquidated without notice, (2)
the number of days remaining until the next put date in the case of
securities subject to unconditional and irrevocable puts of the issue
to the obligor, or (3) the actual number of days remaining until the
maturity date for all other Permitted Investments.
The One Group
-------------
("Lender")
By: /s/ MARK A. REDMAN
------------------------------------
Banc One Investment Advisors Corporation
----------------------------------------
("Adviser")
By: /s/ MARK A. BEESON
------------------------------------
Bank One Trust Company, N.A.
----------------------------------------
("Subcustodian")
By: /s/ STEVEN E. CUTLER
------------------------------------
<PAGE> 34
SECURITIES LENDING AGREEMENT
EXHIBIT E
Schedule of Fees
International
The subcustodian shall be paid a fee of 15 basis points, calculated on an annual
basis and accrued daily, based upon the value of collateral received from the
Borrower for each loan under this Agreement.
<PAGE> 1
EXHIBIT 9(t)
AMENDMENT TO THE SECURITIES LENDING AGREEMENT (FOREIGN SECURITIES) EFFECTIVE
MAY 21, 1998 BETWEEN THE REGISTRANT, BANC ONE INVESTMENT ADVISORS CORPORATION
AND BANK ONE TRUST COMPANY, N.A.
<PAGE> 2
AMENDMENT TO THE SECURITIES LENDING AGREEMENT
(FOREIGN SECURITIES)
This Amendment to the Securities Lending Agreement is hereby made
effective May 21, 1998, by and between The One Group(R), an open-end management
investment company formed under the Investment Company Act of 1940 (the
"Lender"), Banc One Investment Advisors Corporation, an investment adviser under
the Investment Advisers Act of 1940 (the "Advisor"), and Bank One Trust Company,
N.A., a national banking association (the "Subcustodian").
BACKGROUND INFORMATION
Pursuant to the Securities Lending Agreement, dated as of January 8,
1998 (the "Agreement"), the Lender participates in an International Securities
Lending Program developed by the Advisor in conjunction with the Subcustodian.
The Lender, the Advisor, and the Subcustodian desire to amend the Agreement to:
(i) clarify the amount of Foreign Securities which may be lent to Borrowers and
(ii) authorize the use of letters of credit as collateral for loans of Foreign
Securities.
STATEMENT OF AGREEMENT
The Lender, the Advisor, and the Subcustodian hereby acknowledge the
accuracy of the above Background Information and agree to amend the Agreement by
deleting Section 5 and Section 8(a) in their entirety and substituting the
following in their place:
"Section 5. MAKING OF LOANS. The Advisor will notify Borrowers that it
is prepared to lend Foreign Securities of the Lender. If the Advisor determines,
in response to a Borrower's orally advising the Advisor of its desire to borrow
Foreign Securities, to lend Foreign Securities of the Lender pursuant to a Loan
Agreement, the Advisor will instruct the Subcustodian to receive such Collateral
as required by the Loan Agreement. Upon receipt of verification from the
Subcustodian that it has received the Collateral required by the Loan Agreement,
the Advisor shall take such actions to effect the loan as are required by the
Loan Agreement; provided that the Advisor shall lend no more than 33-1/3% of the
Fund's total assets and verify that such loans are secured by Collateral equal
to at least 100% of the market value plus accrued interest on the Foreign
Securities lent. For each Borrower, the Advisor shall establish a maximum limit
on the amount of securities that will be delivered to each Borrower in
connection with loans of the Lender's securities, including Foreign Securities
(the "Borrower Limit"). Foreign Securities shall not be loaned to a Borrower
when the value of the loan when added to all outstanding loans with the Borrower
exceeds the Borrower Limit."
"Section 8. COLLATERAL.
(a) In connection with loans of Foreign Securities made on behalf of
the Lender that are secured by Collateral other than letters of credit, the
Advisor agrees to limit Collateral accepted and investments of Cash Collateral
to those securities in which the Fund of the Lender owning the loaned Foreign
Securities could invest and, subject to this requirement, the Lender authorizes
the Advisor: (i) to accept Collateral of the types which are designated on
EXHIBIT D with such changes as recommended from time to time by the Advisor with
the approval of the Lender (the "Collateral"); and (ii) to invest cash received
as collateral for a loan of Foreign Securities in any of the types of
investments specified on EXHIBIT D as modified from time to time. Where a loan
of securities is to be collateralized by a letter of credit, the Advisor shall
instruct the Subcustodian to accept only an irrevocable letter of credit that
contains an immediate draw-down capability from a financial institution listed
on the Advisor's Bank Approved Lists(s). The Lender hereby authorizes the
Advisor to purchase or sell investments of Cash Collateral to or from other
accounts advised by the Advisor or held by its affiliates."
<PAGE> 3
IN WITNESS WHEREOF, this Amendment to the Securities Lending Agreement is
executed by Lender, the Advisor, and the Subcustodian.
THE ONE GROUP
By: /s/ MARK S. REDMAN
----------------------------------------
Mark S. Redman, President
BANC ONE INVESTMENT ADVISORS CORPORATION
By: /s/ MARK A. BEESON
----------------------------------------
Mark A. Beeson, Senior Managing Director
BANK ONE TRUST COMPANY, N.A.
By: /s/ STEVEN E. CUTLER
-----------------------------------------
Steven E. Cutler, Officer
2
<PAGE> 1
Exhibit 10
OPINION OF COUNSEL
<PAGE> 2
August 26, 1998
The One Group(R)
3435 Stelzer Road
Columbus, Ohio 43219
Ladies and Gentlemen:
You have registered under the Securities Act of 1933, as amended (the "1933
Act") an indefinite number of shares of beneficial interest ("Shares") of The
One Group ("Trust"), as permitted by Rule 24f-2 under the Investment Company Act
of 1940, as amended (the "1940 Act"). You propose to file a post-effective
amendment on Form N-1A (the "Post-Effective Amendment") to your Registration
Statement in order to register under the 1933 Act and the 1940 Act shares of the
Funds of the Trust.
We have examined your Agreement and Declaration of Trust on file in the
office of the Secretary of The Commonwealth of Massachusetts and the Clerk of
the City of Boston. We have also examined a copy of your Code of Regulations and
such other documents, receipts and records as we have deemed necessary for the
purpose of this opinion.
Based on the foregoing, we are of the opinion that the issue and sale of
authorized but unissued Shares of the Funds have been duly authorized under
Massachusetts law. Upon the original issue and sale of your authorized but
unissued Shares and upon receipt of the authorized consideration therefor in an
amount not less than the net asset value of the Shares established and in force
at the time of their sale, the Shares issued will be validly issued, fully paid
and non-assessable.
The Trust is an entity of the type commonly known as a "Massachusetts
business trust". Under Massachusetts law, shareholders could, under certain
circumstances, be held personally liable for the obligations of the Trust.
However, the Agreement and Declaration of Trust provides for indemnification out
of the property of a particular series of Shares for all loss and expenses of
any shareholder of that series held personally liable solely by reason of his
being or having been a shareholder. Thus, the risk of shareholder liability is
limited to circumstances in which that series of Shares itself would be unable
to meet its obligations.
We understand that this opinion is to be used in connection with the filing
of the Post-Effective Amendment. We consent to the filing of this opinion with
and as part of your Post-Effective Amendment.
Sincerely,
/s/ ROPES & GRAY
- ----------------
Ropes & Gray
<PAGE> 1
EXHIBIT 11
Consent of Ropes & Gray
<PAGE> 2
CONSENT OF COUNSEL
We hereby consent to the use of our name and the references to our firm
under the caption "Legal Counsel" and "Experts" included in or made a part of
Post-Effective Amendment No. 45 to the Registration Statement of The One
Group(R) (Nos. 2-95973 and 811-4236) on Form N-1A under the Securities Act of
1933, as amended.
/s/ ROPES & GRAY
- ----------------
ROPES & GRAY
Washington, D.C.
August 26 1998
<PAGE> 1
EXHIBIT 13
PURCHASE AGREEMENT DATED JULY 18, 1985
BETWEEN REGISTRANT AND PHYSICIANS INSURANCE COMPANY OF OHIO
<PAGE> 2
Exhibit 13
PURCHASE AGREEMENT
------------------
The Helmsman Fund (the "Fund"), a Massachusetts business trust, and
Physicians Insurance Company of Ohio ("PICO"), an Ohio corporation, hereby agree
with each other as follows:
1. The Fund hereby offers PICO and PICO hereby purchases 90,000 Series
A units of beneficial interest and 10,000 Series B units of beneficial interest
of the Fund (such units of beneficial interest being hereinafter collectively
known as "Shares") at a price of $1.00 per Share. PICO hereby acknowledges
purchase of the Shares and the Fund hereby acknowledges receipt from PICO of
funds in the amount of $100,000 in full payment for the Shares.
2. PICO represents and warrants to the Fund that the Shares are being
acquired for investment purposes and not with a view to the distribution
thereof.
3. PICO agrees that if it or any direct or indirect transferee of any
of the Shares redeems any of the Shares prior to the second anniversary of the
date the Fund begins it investment activities, PICO will pay to the Fund an
amount equal to the number resulting from multiplying the Fund's total
unamortized organizational expenses by a fraction, the numerator of which is
equal to the number of Shares redeemed by PICO or such transferee and the
denominator of which is equal to the number of Shares outstanding as of the date
of such redemption, as long as the administrative position of the staff of the
Securities and Exchange Commission requires such reimbursement.
IN WITNESS WHEREOF, the parties hereto have executed this Agreement as
of the 18th day of July, 1985.
Attest: THE HELMSMAN FUND
/s/ Rene Anderson By: /s/
- ----------------------- ---------------------------------------
(SEAL)
Attest: PHYSICIANS INSURANCE COMPANY OF OHIO
/s/ Beth A. Hoover By: /s/
- ----------------------- ---------------------------------------
Executive Vice President
