<PAGE> 1
As filed with the Securities and Exchange Commission on October 19, 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 /
----
----
POST-EFFECTIVE AMENDMENT NO. 46 / 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. 47 / 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 BANK 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
X on November 1, 1998 pursuant to paragraph(b)
-----
60 days after filing pursuant to paragraph(a)(1)
-----
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.
-----
If appropriate, check the following box:
----- post-effective amendment designates a new effective date for a
previously filed post- effective amendment.
Title of Securities Being Registered: Shares of Beneficial Interest.
<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 Incorporated by reference
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
[GRAPHIC]
EQUITY FUNDS
COMBINED PROSPECTUS
NOVEMBER 1, 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 BANK 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 OR ANY STATE SECURITIES COMMISSION NOR HAS THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED UPON THE
ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION
TO THE CONTRARY IS A CRIMINAL OFFENSE.
<PAGE> 6
TABLE OF CONTENTS
<TABLE>
<S> <C>
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............... 5
The One Group(R) Large Company Value Fund................ 8
The One Group(R) Growth Opportunities Fund............... 11
The One Group(R) International Equity Index Fund......... 14
The One Group(R) Disciplined Value Fund.................. 17
The One Group(R) Equity Index Fund....................... 20
The One Group(R) Income Equity Fund...................... 23
The One Group(R) Value Growth Fund....................... 26
The One Group(R) Small Capitalization Fund............... 29
MORE ABOUT THE FUNDS........................................ 32
HOW TO DO BUSINESS WITH THE ONE GROUP....................... 33
Purchasing Fund Shares................................... 33
Sales Charges............................................ 35
Sales Charge Reductions and Waivers...................... 36
Exchanging Fund Shares................................... 38
Redeeming Fund Shares.................................... 39
SHAREHOLDER INFORMATION..................................... 41
Voting Rights............................................ 41
Dividend Policies........................................ 42
Tax Treatment of the Funds............................... 43
Tax Treatment of Shareholders............................ 43
Shareholder Inquiries.................................... 43
ORGANIZATION AND MANAGEMENT OF THE FUNDS.................... 44
The Funds................................................ 44
The Board of Trustees.................................... 44
The Advisor.............................................. 44
The Sub-Advisor.......................................... 44
The Distributor.......................................... 45
The Administrator and Sub-Administrator.................. 45
The Transfer Agent, Custodian and Sub-Custodian.......... 45
Year 2000................................................ 45
DETAILS ABOUT THE FUNDS' INVESTMENT PRACTICES AND
POLICIES.................................................. 46
Investment Practices..................................... 46
Investment Risks......................................... 49
Investment Policies...................................... 50
APPENDIX: DESCRIPTION OF RATINGS............................ 51
</TABLE>
<PAGE> 7
1
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 Bank 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
Bank 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 Bank 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."
<PAGE> 8
The One Group(R)
Asset Allocation Fund
[LOGO] INVESTMENT OBJECTIVE
The Fund seeks to provide total
return while preserving capital.
[LOGO] 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.
[LOGO] 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."
[LOGO] 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 that
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."
[LOGO] 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.
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) .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:
<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.
2
<PAGE> 9
The One Group(R) Asset Allocation Fund Financial Highlights
The Financial Highlights are intended to help you understand the Fund's
financial performance over 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 $ 12.98 $ 11.71 $ 10.73 $ 9.64 $ 10.06 $ 10.00
- ---------------------------------------------------------------------------------------------------------------------------------
Investment Activities:
Net investment income 0.40 0.43 0.41 0.38 0.29 0.07
Net realized and unrealized gains
(losses) from investments 2.24 1.81 1.16 1.12 (0.38) 0.06
- ---------------------------------------------------------------------------------------------------------------------------------
Total from Investment Activities 2.64 2.24 1.57 1.50 (0.09) 0.13
- ---------------------------------------------------------------------------------------------------------------------------------
Distributions:
From net investment income (0.39) (0.43) (0.41) (0.37) (0.29) (0.07)
From net realized gains (1.43) (0.54) (0.18) (0.04) (0.04) --
- ---------------------------------------------------------------------------------------------------------------------------------
Total Distributions (1.82) (0.97) (0.59) (0.41) (0.33) (0.07)
- ---------------------------------------------------------------------------------------------------------------------------------
NET ASSET VALUE, END OF PERIOD $ 13.80 $ 12.98 $ 11.71 $ 10.73 $ 9.64 $ 10.06
- ---------------------------------------------------------------------------------------------------------------------------------
Total Return 22.12% 20.16% 14.87% 16.06% (1.01)% 5.45%(b)
RATIOS/SUPPLEMENTARY DATA:
Net Assets at end of period (000) $105,243 $94,971 $50,323 $37,658 $42,751 $30,441
Ratio of expenses to average net
assets 0.85% 0.80% 0.94% 1.06% 1.06% 0.90%(b)
Ratio of net investment income to
average net assets 3.03% 3.55% 3.58% 3.72% 2.91% 3.03%(b)
Ratio of expenses to average net
assets* 1.03% 1.00% 1.19% 1.31% 1.33% 1.34%(b)
Ratio of net investment income to
average net assets* 2.85% 3.35% 3.33% 3.47% 2.64% 2.59%(b)
Portfolio turnover (c) 46.04% 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) Class I 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.
<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 $ 13.00 $ 11.72 $ 10.74 $ 9.65 $ 10.06 $ 10.00
- ---------------------------------------------------------------------------------------------------------------------------------
Investment Activities:
Net investment income 0.36 0.39 0.37 0.35 0.27 0.05
Net realized and unrealized gains
(losses) from investments 2.24 1.83 1.16 1.13 (0.38) 0.07
- ---------------------------------------------------------------------------------------------------------------------------------
Total from Investment Activities 2.60 2.22 1.53 1.48 (0.11) 0.12
- ---------------------------------------------------------------------------------------------------------------------------------
Distributions:
From net investment income (0.36) (0.40) (0.37) (0.34) (0.26) (0.06)
In excess of net investment income -- -- -- (0.01) -- --
From net realized gains (1.43) (0.54) (0.18) (0.04) (0.04) --
- ---------------------------------------------------------------------------------------------------------------------------------
Total Distributions (1.79) (0.94) (0.55) (0.39) (0.30) (0.06)
- ---------------------------------------------------------------------------------------------------------------------------------
NET ASSET VALUE, END OF PERIOD $ 13.81 $ 13.00 $ 11.72 $ 10.74 $ 9.65 $10.06
- ---------------------------------------------------------------------------------------------------------------------------------
Total Return (Excludes Sales Charge) 21.71% 19.85% 14.48% 15.76% (1.19)% 5.23%(b)
RATIOS/SUPPLEMENTARY DATA:
Net Assets at end of period (000) $50,456 $31,379 $17,849 $4,745 $1,691 $571
Ratio of expenses to average net
assets 1.10% 1.05% 1.19% 1.31% 1.33% 1.15%(b)
Ratio of net investment income to
average net assets 2.77% 3.30% 3.33% 3.57% 2.68% 2.84%(b)
Ratio of expenses to average net
assets* 1.38% 1.34% 1.54% 1.66% 1.67% 1.62%(b)
Ratio of net investment income to
average net assets* 2.49% 3.01% 2.98% 3.22% 2.34% 2.37%(b)
Portfolio turnover (c) 46.04% 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.
3
<PAGE> 10
4
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 $ 13.04 $ 11.76 $ 10.76 $ 9.67 $ 10.37
- ---------------------------------------------------------------------------------------------------------------------------------
Investment Activities:
Net investment income 0.26 0.30 0.28 0.27 0.08
Net realized and unrealized gains (losses) from
investments 2.26 1.83 1.18 1.14 (0.70)
- ---------------------------------------------------------------------------------------------------------------------------------
Total from Investment Activities 2.52 2.13 1.46 1.41 (0.62)
- ---------------------------------------------------------------------------------------------------------------------------------
Distributions:
From net investment income (0.26) (0.31) (0.28) (0.27) (0.08)
In excess of net investment income -- -- -- (0.01) --
From net realized gains (1.43) (0.54) (0.18) (0.04) --
- ---------------------------------------------------------------------------------------------------------------------------------
Total Distributions (1.69) (0.85) (0.46) (0.32) (0.08)
- ---------------------------------------------------------------------------------------------------------------------------------
NET ASSET VALUE, END OF PERIOD $ 13.87 $ 13.04 $ 11.76 $ 10.76 $ 9.67
- ---------------------------------------------------------------------------------------------------------------------------------
Total Return (Excludes Sales Charge) 20.95% 18.90% 13.79% 14.90% (5.98)%(b)
RATIOS/SUPPLEMENTARY DATA:
Net Assets at end of period (000) $114,957 $ 43,900 $ 18,575 $ 3,019 $ 1,862
Ratio of expenses to average net assets 1.85% 1.81% 1.94% 2.07% 2.40%(c)
Ratio of net investment income to average net assets 2.01% 2.54% 2.58% 2.77% 1.99%(c)
Ratio of expenses to average net assets* 2.03% 2.01% 2.19% 2.31% 2.40%(c)
Ratio of net investment income to average net assets* 1.83% 2.34% 2.33% 2.52% 1.99%(c)
Portfolio turnover (d) 46.04% 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.
<PAGE> 11
The One Group(R)
Large Company Growth Fund
[LOGO] INVESTMENT OBJECTIVE
The Fund seeks long-term capital
appreciation and growth of income by
investing primarily in equity
securities.
[LOGO] 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").*
[LOGO] 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."
[LOGO] 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."
[LOGO] 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.
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 .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%
<CAPTION>
</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 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.
5
<PAGE> 12
6
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 $ 19.44 $ 15.44 $ 13.47 $ 11.32 $ 10.92 $ 9.85 $ 10.00
- ---------------------------------------------------------------------------------------------------------------------------------
Investment Activities:
Net investment income 0.04 0.12 0.18 0.20 0.20 0.23 0.08
Net realized and unrealized gains
(losses) from investments 6.13 4.79 2.14 3.04 0.67 1.12 (0.16)
- ---------------------------------------------------------------------------------------------------------------------------------
Total from Investment Activities 6.17 4.91 2.32 3.24 0.87 1.35 (0.08)
- ---------------------------------------------------------------------------------------------------------------------------------
Distributions:
From net investment income (0.02) (0.11) (0.18) (0.20) (0.20) (0.23) (0.07)
From net realized gains (2.88) (0.80) (0.17) (0.89) (0.27) (0.05) --
- ---------------------------------------------------------------------------------------------------------------------------------
Total Distributions (2.90) (0.91) (0.35) (1.09) (0.47) (0.28) (0.07)
- ---------------------------------------------------------------------------------------------------------------------------------
NET ASSET VALUE, END OF PERIOD $ 22.71 $ 19.44 $ 15.44 $ 13.47 $ 11.32 $ 10.92 $ 9.85
- ---------------------------------------------------------------------------------------------------------------------------------
Total Return 35.75% 33.11% 17.36% 21.85% 8.04% 13.92% .(080)%(c)
RATIOS/SUPPLEMENTARY DATA:
Net Assets at end of period (000) $1,510,521 $1,142,864 $745,986 $531,595 $150,035 $41,317 $25,019
Ratio of expenses to average net
assets 0.99% 0.99% 0.96% 1.00% 0.78% 0.39% 0.30%(c)
Ratio of net investment income to
average net assets 0.21% 0.69% 1.20% 1.72% 1.87% 2.24% 2.37%(c)
Ratio of expenses to average net
assets* 0.99% 0.99% 0.99% 1.00% 1.13% 1.43% 1.49%(c)
Ratio of net investment income to
average net assets* 0.21% 0.69% 1.17% 1.72% 1.52% 1.21% 1.12%(c)
Portfolio turnover (a) 117.34% 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.
<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 $ 19.92 $ 15.83 $ 13.83 $ 11.62 $ 11.78
- -----------------------------------------------------------------------------------------------------------------------
Investment Activities:
Net investment income (0.01) 0.08 0.14 0.17 0.04
Net realized and unrealized gains (losses) from
investments 6.30 4.88 2.17 3.10 (0.16)
- -----------------------------------------------------------------------------------------------------------------------
Total from Investment Activities 6.29 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) -- -- (0.01) --
From net realized gains (2.88) (0.80) (0.17) (0.89) --
- -----------------------------------------------------------------------------------------------------------------------
Total Distributions (2.89) (0.87) (0.31) (1.06) (0.04)
- -----------------------------------------------------------------------------------------------------------------------
NET ASSET VALUE, END OF PERIOD $ 23.32 $ 19.92 $ 15.83 $ 13.83 $ 11.62
- -----------------------------------------------------------------------------------------------------------------------
Total Return (Excludes Sales Charge) 35.43% 32.57% 16.85% 21.52% .(102)%(b)
RATIOS/SUPPLEMENTARY DATA:
Net Assets at end of period (000) $ 199,052 $125,910 $75,114 $27,428 $368
Ratio of expenses to average net assets 1.24% 1.24% 1.21% 1.26% 1.25%(c)
Ratio of net investment income to average net assets (0.04)% 0.44% 0.95% 1.49% 1.78%(c)
Ratio of expenses to average net assets* 1.34% 1.32% 1.34% 1.36% 1.35%(c)
Ratio of net investment income to average net assets* (0.14)% 0.36% 0.82% 1.39% 1.68%(c)
Portfolio turnover (d) 117.34% 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.
<PAGE> 13
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 $ 19.61 $ 15.63 $ 13.63 $ 11.47 $ 11.57
- ---------------------------------------------------------------------------------------------------------------------------------
Investment Activities:
Net investment income (loss) (0.10) (0.04) 0.05 0.09 0.03
Net realized and unrealized gains (losses) from
investments 6.10 4.82 2.17 3.06 (0.10)
- ---------------------------------------------------------------------------------------------------------------------------------
Total from Investment Activities 6.00 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 (2.88) (0.80) (0.17) (0.89) --
- ---------------------------------------------------------------------------------------------------------------------------------
Total Distributions (2.88) (0.80) (0.22) (0.99) (0.03)
- ---------------------------------------------------------------------------------------------------------------------------------
NET ASSET VALUE, END OF PERIOD $ 22.73 $ 19.61 $ 15.63 $ 13.63 $ 11.47
- ---------------------------------------------------------------------------------------------------------------------------------
Total Return (Excludes Sales Charge) 34.39% 31.74% 16.41% 20.65% (0.66)%(b)
RATIOS/SUPPLEMENTARY DATA:
Net Assets at end of period (000) $280,563 $132,268 $56,261 $6,918 $334
Ratio of expenses to average net assets 1.99% 2.00% 1.96% 2.01% 1.99%(c)
Ratio of net investment income (loss) to average net
assets (0.80)% (0.33)% 0.20% 0.74% 0.96%(c)
Ratio of expenses to average net assets* 1.99% 2.00% 1.99% 2.01% 1.99%(c)
Ratio of net investment income (loss) to average net
assets* (0.80)% (0.33)% 0.17% 0.74% 0.96%(c)
Portfolio turnover (d) 117.34% 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.
<TABLE>
<CAPTION>
NOVEMBER 4,
1997 TO
JUNE 30,
CLASS C 1998(a)
<S> <C>
NET ASSET VALUE, BEGINNING OF PERIOD $ 18.98
- ----------------------------------------------------------------------------
Investment Activities:
Net investment income (loss) (0.06)
Net realized and unrealized gains from investments 4.99
- ----------------------------------------------------------------------------
Total from Investment Activities 4.93
- ----------------------------------------------------------------------------
Distributions:
Net realized gains (1.34)
- ----------------------------------------------------------------------------
Total Distributions (1.34)
- ----------------------------------------------------------------------------
NET ASSET VALUE, END OF PERIOD $ 22.57
- ----------------------------------------------------------------------------
Total Return (Excludes Sales Charge) 27.63%(b)
RATIOS/SUPPLEMENTARY DATA:
Net Assets at end of period (000) $492
Ratio of expenses to average net assets 1.98%(c)
Ratio of net investment income to average net assets (0.87)%(c)
Portfolio turnover (d) 117.34%
</TABLE>
(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> 14
8
The One Group(R)
Large Company Value Fund
- ------------------------
[LOGO] INVESTMENT OBJECTIVE
The Fund seeks capital appreciation with the incidental goal of achieving
current income by investing primarily in equity securities.
[LOGO] 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.
[LOGO] 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."
[LOGO] 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."
[LOGO] 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.
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 .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:
<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.
<PAGE> 15
9
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
- ------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
NET ASSET VALUE, BEGINNING OF PERIOD $ 14.79 $ 12.83 $ 12.87 $ 11.34 $ 11.64 $ 11.34
- ------------------------------------------------------------------------------------------------------------------------
Investment Activities:
Net investment income 0.21 0.27 0.31 0.31 0.20 0.18
Net realized and unrealized gains
(losses) from investments 2.84 3.01 1.20 2.18 (0.01) 0.58
- ------------------------------------------------------------------------------------------------------------------------
Total from Investment Activities 3.05 3.28 1.51 2.49 0.19 0.76
- ------------------------------------------------------------------------------------------------------------------------
Distributions:
From net investment income (0.21) (0.26) (0.31) (0.32) (0.19) (0.18)
From net realized gains (0.93) (1.06) (1.24) (0.64) (0.30) (0.28)
- ------------------------------------------------------------------------------------------------------------------------
Total Distributions (1.14) (1.32) (1.55) (0.96) (0.49) (0.46)
- ------------------------------------------------------------------------------------------------------------------------
NET ASSET VALUE, END OF PERIOD $ 16.70 $ 14.79 $ 12.83 $ 12.87 $ 11.34 $ 11.64
- ------------------------------------------------------------------------------------------------------------------------
Total Return 21.46% 27.10% 12.71% 23.42% (1.59)% 6.73%
RATIOS/SUPPLEMENTARY DATA:
Net Assets at end of period (000) $ 792,649 $ 686,156 $ 584,527 $ 365,376 $ 169,127 $ 132,833
Ratio of expenses to average net
assets 0.95% 0.97% 0.97% 1.00% 0.95% 0.86%
Ratio of net investment income to
average net assets 1.34% 1.99% 2.43% 2.74% 1.72% 1.62%
Ratio of expenses to average net
assets* 0.95% 0.97% 0.98% 1.01% 1.02% 1.12%
Ratio of net investment income to
average net assets* 1.34% 1.99% 2.42% 2.73% 1.65% 1.36%
Portfolio turnover (a) 47.35% 77.05% 186.84% 203.13% 111.72% 51.75%
<CAPTION>
YEAR ENDED JUNE 30,
-----------------------
CLASS I 1992 1991(c)
- ------------------------------------------------------------------
<S> <C> <C>
NET ASSET VALUE, BEGINNING OF PERIOD $ 10.07 $ 10.00
- ------------------------------------------------------------------
Investment Activities:
Net investment income 0.21 0.08
Net realized and unrealized gains
(losses) from investments 1.34 0.07
- ------------------------------------------------------------------
Total from Investment Activities 1.55 0.15
- ------------------------------------------------------------------
Distributions:
From net investment income (0.21) (0.08)
From net realized gains (0.07) --
- ------------------------------------------------------------------
Total Distributions (0.28) (0.08)
- ------------------------------------------------------------------
NET ASSET VALUE, END OF PERIOD $ 11.34 $ 10.07
- ------------------------------------------------------------------
Total Return 15.53% 4.47%(b)
RATIOS/SUPPLEMENTARY DATA:
Net Assets at end of period (000) $ 62,075 $ 36,237
Ratio of expenses to average net
assets 0.82% 0.52%(b)
Ratio of net investment income to
average net assets 1.91% 2.48%(b)
Ratio of expenses to average net
assets* 1.34% 1.26%(b)
Ratio of net investment income to
average net assets* 1.39% 1.74%(b)
Portfolio turnover (a) 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.
<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 $ 14.85 $ 12.87 $ 12.89 $ 11.34 $ 11.64 $ 11.33 $ 11.42
- ---------------------------------------------------------------------------------------------------------------------------------
Investment Activities:
Net investment income 0.18 0.23 0.27 0.28 0.17 0.16 0.07
Net realized and unrealized
gains (losses) from
investments 2.84 3.04 1.22 2.20 (0.01) 0.59 (0.08)
- ---------------------------------------------------------------------------------------------------------------------------------
Total from Investment Activities 3.02 3.27 1.49 2.48 0.16 0.75 (0.01)
- ---------------------------------------------------------------------------------------------------------------------------------
Distributions:
From net investment income (0.17) (0.23) (0.27) (0.27) (0.16) (0.16) (0.08)
In excess of net investment
income -- -- -- (0.02) -- -- --
From net realized gains (0.93) (1.06) (1.24) (0.64) (0.30) (0.28) --
- ---------------------------------------------------------------------------------------------------------------------------------
Total Distributions (1.10) (1.29) (1.51) (0.93) (0.46) (0.44) (0.08)
- ---------------------------------------------------------------------------------------------------------------------------------
NET ASSET VALUE, END OF PERIOD $ 16.77 $ 14.85 $ 12.87 $ 12.89 $ 11.34 $ 11.64 $ 11.33
- ---------------------------------------------------------------------------------------------------------------------------------
Total Return (Excludes Sales
Charge) 21.14% 26.90% 12.40% 22.64% 1.35% 6.64% (0.33%)(c)
RATIOS/SUPPLEMENTARY DATA:
Net Assets at end of period
(000) $ 15,699 $ 14,832 $ 9,380 $ 3,481 $ 698 $ 451 $ 12
Ratio of expenses to average net
assets 1.20% 1.22% 1.22% 1.25% 1.20% 1.10% 1.02%(c)
Ratio of net investment income
to average net assets 1.10% 1.72% 2.18% 2.52% 1.57% 1.41% 2.12%(c)
Ratio of expenses to average net
assets* 1.30% 1.31% 1.33% 1.37% 1.37% 1.50% 1.22%(c)
Ratio of net investment income
to average net assets* 1.00% 1.63% 2.07% 2.41% 1.40% 1.01% 1.92%(c)
Portfolio turnover (a) 47.35% 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.
<PAGE> 16
10
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 $ 14.95 $ 12.98 $ 12.96 $ 11.41 $ 11.87
- ---------------------------------------------------------------------------------------------------------------------------------
Investment Activities:
Net investment income 0.07 0.14 0.18 0.17 0.05
Net realized and unrealized gains (losses) from
investments 2.84 3.04 1.26 2.19 (0.46)
- ---------------------------------------------------------------------------------------------------------------------------------
Total from Investment Activities 2.91 3.18 1.44 2.36 (0.41)
- ---------------------------------------------------------------------------------------------------------------------------------
Distributions:
From net investment income (0.09) (0.15) (0.18) (0.17) (0.05)
From net realized gains (0.93) (1.06) (1.24) (0.64) --
- ---------------------------------------------------------------------------------------------------------------------------------
Total Distributions (1.02) (1.21) (1.42) (0.81) (0.05)
- ---------------------------------------------------------------------------------------------------------------------------------
NET ASSET VALUE, END OF PERIOD $ 16.84 $ 14.95 $ 12.98 $ 12.96 $ 11.41
- ---------------------------------------------------------------------------------------------------------------------------------
Total Return (Excludes Sales Charge) 20.18% 25.86% 11.95% 22.28% 3.48%(b)
RATIOS/SUPPLEMENTARY DATA:
Net Assets at end of period (000) $ 17,154 $ 9,288 $ 4,135 $ 861 $ 182
Ratio of expenses to average net assets 1.95% 1.97% 1.97% 2.00% 2.00%(c)
Ratio of net investment income to average net assets 0.33% 0.96% 1.43% 1.74% 1.06%(c)
Ratio of expenses to average net assets* 1.95% 1.97% 1.98% 2.01% 2.00%(c)
Ratio of net investment income to average net assets* 0.33% 0.96% 1.42% 1.72% 1.06%(c)
Portfolio turnover (d) 47.35% 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.
<PAGE> 17
11
The One Group(R)
Growth Opportunities Fund
- -------------------------
[LOGO] INVESTMENT OBJECTIVE
The Fund seeks growth of capital and secondarily, current income by investing
primarily in equity securities.
[LOGO] 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.
[LOGO] 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."
[LOGO] 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."
[LOGO] 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.
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 .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:
<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.
<PAGE> 18
The One Group(R) Growth Opportunities Fund Financial Highlights
The Financial Highlights are intended to help you understand the Fund's
financial performance over 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
- ---------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
NET ASSET VALUE, BEGINNING OF PERIOD $ 19.46 $ 18.81 $ 18.40 $ 15.96 $ 16.96 $ 14.54
- --------------------------------------------------------------------------------------------------------------------------
Investment Activities:
Net investment income (0.07) 0.25 0.20 0.06 0.07 0.06
Net realized and unrealized gains (losses) from
investments 5.70 3.59 3.83 2.98 (0.05) 2.99
- --------------------------------------------------------------------------------------------------------------------------
Total from Investment Activities 5.63 3.84 4.03 3.04 0.02 3.05
- --------------------------------------------------------------------------------------------------------------------------
Distributions:
From net investment income -- (0.25) (0.20) (0.06) (0.07) (0.06)
In excess of net investment -- (0.02) -- -- -- --
From net realized gains (2.58) (2.92) (3.42) (0.54) (0.95) (0.57)
- --------------------------------------------------------------------------------------------------------------------------
Total Distributions (2.58) (3.19) (3.62) (0.60) (1.02) (0.63)
- --------------------------------------------------------------------------------------------------------------------------
NET ASSET VALUE, END OF PERIOD $ 22.51 $ 19.46 $ 18.81 $ 18.40 $ 15.96 $ 16.96
==========================================================================================================================
Total Return 31.11% 22.75% 24.63% 19.75% (0.16)% 21.36%
RATIOS/SUPPLEMENTARY DATA:
Net Assets at end of period (000) $ 868,901 $ 623,911 $ 532,525 $ 413,518 $ 389,567 $ 232,898
Ratio of expenses to average net assets 1.00% 0.99% 1.00% 0.98% 0.98% 0.89%
Ratio of net investment income to average net
assets (0.36)% 1.32% 1.15% 0.38% 0.42% 0.41%
Ratio of expenses to average net assets* 1.00% 0.99% 1.01% 0.98% 1.03% 1.11%
Ratio of net investment income to average net
assets* (0.36)% 1.32% 1.14% 0.38% 0.37% 0.19%
Portfolio turnover (a) 158.43% 301.35% 435.30% 132.63% 70.67% 64.64%
<CAPTION>
YEAR ENDED JUNE 30,
---------------------------------------------------------------------
CLASS I 1992 1991 1990 1989(b)
---------------------------------------------------------------------
<S> <C> <C> <C> <C>
NET ASSET VALUE, BEGINNING OF PERIOD $ 12. 92 $ 12.14 $ 10.71 $ 10.00
- --------------------------------------------------------------------------------------------------------------------------
Investment Activities:
Net investment income 0.09 0.21 0.19 0.11
Net realized and unrealized gains (losses) from
investments 1.87 0.92 1.97 0.71
- --------------------------------------------------------------------------------------------------------------------------
Total from Investment Activities 1.96 1.13 2.16 0.82
- --------------------------------------------------------------------------------------------------------------------------
Distributions:
From net investment income (0.08) (0.21) (0.19) (0.11)
In excess of net investment -- -- -- --
From net realized gains (0.26) (0.14) (0.54) --
- --------------------------------------------------------------------------------------------------------------------------
Total Distributions (0.34) (0.35) (0.73) (0.11)
- --------------------------------------------------------------------------------------------------------------------------
NET ASSET VALUE, END OF PERIOD $ 14.54 $ 12.92 $ 12.14 $ 10.71
==========================================================================================================================
Total Return 15.15% 9.85% 20.83% 24.86%(c)
RATIOS/SUPPLEMENTARY DATA:
Net Assets at end of period (000) $ 131,533 $ 53,831 $ 31,804 $ 22,753
Ratio of expenses to average net assets 0.75% 0.45% 0.41% 0.38%(c)
Ratio of net investment income to average net
assets 1.23% 1.75% 1.65% 3.20%(c)
Ratio of expenses to average net assets* 0.51% 1.19% 1.15% 1.12%(c)
Ratio of net investment income to average net
assets* 0.03% 1.01% 0.91% 2.46%(c)
Portfolio turnover (a) 42.77% 68.83% 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.
<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 $ 19.37 $ 18.76 $ 18.36 $ 15.93 $ 16.96 $ 14.54 $ 16.53
- ---------------------------------------------------------------------------------------------------------------------------------
Investment Activities:
Net investment income (0.08) 0.21 0.17 0.02 0.04 0.03 0.01
Net realized and unrealized
gains (losses) from
investments 5.65 3.58 3.80 2.98 (0.08) 3.00 (1.99)
- ---------------------------------------------------------------------------------------------------------------------------------
Total from Investment Activities 5.57 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 (2.58) (2.92) (3.42) (0.54) (0.95) (0.57) --
- ---------------------------------------------------------------------------------------------------------------------------------
Total Distributions (2.58) (3.18) (3.57) (0.57) (0.99) (0.61) (0.01)
- ---------------------------------------------------------------------------------------------------------------------------------
NET ASSET VALUE, END OF PERIOD $ 22.36 $ 19.37 $ 18.76 $ 18.36 $ 15.93 $ 16.96 $ 14.54
=================================================================================================================================
Total Return (Excludes Sales
Charge) 30.95% 22.52% 24.32% 19.50% (0.52)% 21.70%(a) (34.00)%(a)
RATIOS/SUPPLEMENTARY DATA:
Net Assets at end of period
(000) $ 95,647 $ 43,370 $ 28,052 $ 11,178 $ 8,097 $ 5,757 $ 84
Ratio of expenses to average net
assets 1.25% 1.25% 1.25% 1.23% 1.22% 1.11%(a) 1.31%(a)
Ratio of net investment income
to average net assets (0.60)% 0.92% 0.90% 0.12% 0.27% 0.25%(a) 0.12%(a)
Ratio of expenses to average net
assets* 1.35% 1.34% 1.36% 1.33% 1.38% 1.48%(a) 1.50%(a)
Ratio of net investment income
(loss) to average net assets* (0.70)% 0.83% 0.79% 0.02% 0.11% (0.12)%(a) (0.07)%(a)
Portfolio turnover (b) 158.43% 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.
12
<PAGE> 19
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 $ 18.82 $ 18.43 $ 18.14 $ 15.85 $ 17.44
- ---------------------------------------------------------------------------------------------------------------------------------
Investment Activities:
Net investment income (loss) (0.15) 0.11 0.09 (0.07) (0.02)
Net realized and unrealized gains (losses) from
investments 5.35 3.44 3.69 2.90 (1.56)
- ---------------------------------------------------------------------------------------------------------------------------------
Total from Investment Activities 5.20 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 (2.58) (2.92) (3.42) (0.54) --
- ---------------------------------------------------------------------------------------------------------------------------------
Total Distributions (2.58) (3.16) (3.49) (0.54) (0.01)
- ---------------------------------------------------------------------------------------------------------------------------------
NET ASSET VALUE, END OF PERIOD $ 21.44 $ 18.82 $ 18.43 $ 18.14 $ 15.85
=================================================================================================================================
Total Return (Excludes Sales Charge) 29.79% 21.73% 23.53% 18.47% (9.07)%(b)
RATIOS/SUPPLEMENTARY DATA:
Net Assets at end of period (000) $90,930 $37,409 $12,910 $ 2,787 $ 1,131
Ratio of expenses to average net assets 2.00% 2.00% 2.00% 1.98% 2.12%(c)
Ratio of net investment income (loss) to average net
assets (1.35)% 0.01% 0.15% (0.63)% (0.55)%(c)
Ratio of expenses to average net assets* 2.00% 2.00% 2.01% 1.98% 2.12%(c)
Ratio of net investment income (loss) to average net
assets* (1.35)% 0.01% 0.14% (0.63)% (0.55)%(c)
Portfolio turnover (d) 158.43% 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.
<TABLE>
<CAPTION>
NOVEMBER 4,
1997 TO
JUNE 30,
CLASS C 1998(a)
<S> <C>
NET ASSET VALUE, BEGINNING OF PERIOD $ 21.47
- ----------------------------------------------------------------------------
Investment Activities:
Net investment income (loss) (0.04)
Net realized and unrealized gains from investments 2.77
- ----------------------------------------------------------------------------
Total from Investment Activities 2.73
- ----------------------------------------------------------------------------
Distributions:
Net realized gains (1.78)
- ----------------------------------------------------------------------------
Total Distributions (1.78)
- ----------------------------------------------------------------------------
NET ASSET VALUE, END OF PERIOD $ 22.42
============================================================================
Total Return (Excludes Sales Charge) 14.27%(b)
RATIOS/SUPPLEMENTARY DATA:
Net Assets at end of period (000) $ 1,088
Ratio of expenses to average net assets 2.01%(c)
Ratio of net investment income to average net assets (1.31)%(c)
Portfolio turnover (d) 158.43%
</TABLE>
(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.
13
<PAGE> 20
The One Group(R)
International Equity Index Fund
[LOGO] 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.*
[LOGO] 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.
[LOGO] 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."
[LOGO] 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."
[LOGO] 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.
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 .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%
<CAPTION>
</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.
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> 21
15
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 $ 16.89 $ 15.17 $ 13.93 $ 13.46 $ 11.80 $ 10.00
- ---------------------------------------------------------------------------------------------------------------------------------
Investment Activities:
Net investment income 0.21 0.15 0.11 0.13 0.11 0.06
Net realized and unrealized
gains from investments 1.32 2.02 1.43 0.46 1.68 1.75
- ---------------------------------------------------------------------------------------------------------------------------------
Total from Investment Activities 1.53 2.17 1.54 0.59 1.79 1.81
- ---------------------------------------------------------------------------------------------------------------------------------
Distributions:
From net investment income (0.02) (0.17) (0.16) (0.08) (0.11) (0.01)
In excess of net investment
income -- (0.13) (0.02) -- -- --
From net realized gains (0.43) (0.15) (0.12) (0.04) (0.01) --
In excess of net realized gains -- -- -- -- (0.01) --
- ---------------------------------------------------------------------------------------------------------------------------------
Total Distributions (0.45) (0.45) (0.30) (0.12) (0.13) (0.01)
- ---------------------------------------------------------------------------------------------------------------------------------
NET ASSET VALUE, END OF PERIOD $ 17.97 $ 16.89 $ 15.17 $ 13.93 $ 13.46 $ 11.80
- ---------------------------------------------------------------------------------------------------------------------------------
Total Return 9.54% 14.64% 11.22% 4.20% 15.44% 26.96%(b)
RATIOS/SUPPLEMENTARY DATA:
Net Assets at end of period
(000) $ 586,741 $ 449,949 $ 347,790 $ 218,299 $ 145,640 $ 35,384
Ratio of expenses to average
net assets 0.88% 0.86% 0.97% 1.04% 1.02% 1.22%(b)
Ratio of net investment income
to average net assets 1.29% 1.00% 1.04% 1.25% 1.27% 1.37%(b)
Ratio of expenses to average
net assets* 0.88% 0.86% 1.00% 1.04% 1.02% 2.34%(b)
Ratio of net investment income
to average net assets* 1.29% 1.00% 1.01% 1.25% 1.27% 0.25%(b)
Portfolio turnover (c) 9.90% 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.
<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 $ 16.92 $ 15.16 $ 13.92 $ 13.49 $ 11.8 $ 11.74
- ---------------------------------------------------------------------------------------------------------------------------------
Investment Activities:
Net investment income 0.19 0.11 0.14 0.12 0.09 0.02
Net realized and unrealized
gains from investments 1.31 2.03 1.40 0.43 1.67 0.04
- ---------------------------------------------------------------------------------------------------------------------------------
Total from Investment Activities 1.50 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 (0.43) (0.15) (0.12) (0.04) (0.02) --
- ---------------------------------------------------------------------------------------------------------------------------------
Total Distributions (0.43) (0.38) (0.30) (0.12) (0.07) --
- ---------------------------------------------------------------------------------------------------------------------------------
NET ASSET VALUE, END OF PERIOD $ 17.99 $ 16.92 $ 15.16 $ 13.92 $ 13.49 $ 11.80
- ---------------------------------------------------------------------------------------------------------------------------------
Total Return (Excludes Sales
Charge) 9.34% 14.31% 11.20% 3.87% 15.18% 2.87%(b)
RATIOS/SUPPLEMENTARY DATA:
Net Assets at end of period
(000) $ 24,060 $ 12,562 $ 10,789 $ 5,028 $ 2,395 $ 153
Ratio of expenses to average
net assets 1.13% 1.11% 1.22% 1.28% 1.26% 1.47%(b)
Ratio of net investment income
to average net assets 1.11% 0.73% 0.79% 1.09% 1.15% 2.10%(b)
Ratio of expenses to average
net assets* 1.23% 1.19% 1.35% 1.38% 1.36% 2.35%(b)
Ratio of net investment income
to average net assets* 1.01% 0.65% 0.66% 0.99% 1.05% 1.22%(b)
Portfolio turnover (c) 9.90% 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.
<PAGE> 22
16
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 $ 16.44 $ 14.79 $ 13.73 $ 13.40 $ 13.00
- ---------------------------------------------------------------------------------------------------------------------------------
Investment Activities:
Net investment income 0.08 0.09 0.03 0.03 0.06
Net realized and unrealized gains from investments 1.24 1.86 1.32 0.41 0.34
- ---------------------------------------------------------------------------------------------------------------------------------
Total from Investment Activities 1.32 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 (0.43) (0.15) (0.12) (0.04) --
- ---------------------------------------------------------------------------------------------------------------------------------
Total Distributions (0.43) (0.30) (0.29) (0.11) --
- ---------------------------------------------------------------------------------------------------------------------------------
NET ASSET VALUE, END OF PERIOD $ 17.33 $ 16.44 $ 14.79 $ 13.73 $ 13.40
- ---------------------------------------------------------------------------------------------------------------------------------
Total Return (Excludes Sales Charge) 8.48% 13.37% 9.97% 3.17% 3.23%(b)
RATIOS/SUPPLEMENTARY DATA:
Net Assets at end of period (000) $ 13,307 $ 10,033 $ 5,856 $ 3,687 $ 1,872
Ratio of expenses to average net assets 1.88% 1.86% 1.97% 2.04% 2.00%(c)
Ratio of net investment income to average net assets 0.26% 0.08% 0.04% 0.25% 1.37%(c)
Ratio of expenses to average net assets* 1.88% 1.86% 2.00% 2.04% 2.00%(c)
Ratio of net investment income to average net assets* 0.26% 0.08% 0.01% 0.25% 1.37%(c)
Portfolio turnover (d) 9.90% 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.
<TABLE>
<CAPTION>
NOVEMBER 4,
1997 TO
JUNE 30,
CLASS C 1998(a)
- ----------------------------------------------------------------------------
<S> <C>
NET ASSET VALUE, BEGINNING OF PERIOD $ 15.70
- ----------------------------------------------------------------------------
Investment Activities:
Net investment income (loss) 0.06
Net realized and unrealized gains from investments
(losses) 2.45
- ----------------------------------------------------------------------------
Total from Investment Activities 2.51
- ----------------------------------------------------------------------------
Distributions:
Net realized gains (0.30)
- ----------------------------------------------------------------------------
Total Distributions (0.30)
- ----------------------------------------------------------------------------
NET ASSET VALUE, END OF PERIOD $ 17.91
- ----------------------------------------------------------------------------
Total Return (Excludes Sales Charge) 16.34%(b)
RATIOS/SUPPLEMENTARY DATA:
Net Assets at end of period (000) $ 119
Ratio of expenses to average net assets 1.87%(c)
Ratio of net investment income to average net assets 2.88%(c)
Portfolio turnover (d) 9.90%
</TABLE>
(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.
<PAGE> 23
17
The One Group(R)
Disciplined Value Fund
- ----------------------
[LOGO] INVESTMENT OBJECTIVE
The Fund seeks capital appreciation with the secondary goal of achieving current
income by investing primarily in equity securities.
[LOGO] 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.
[LOGO] 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."
[LOGO] 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."
[LOGO] 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.
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 .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.
<PAGE> 24
18
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 1993
- --------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
NET ASSET VALUE, BEGINNING OF PERIOD $ 15.65 $ 14.69 $ 13.20 $ 11.90 $ 12.76 $ 11.49
- --------------------------------------------------------------------------------------------------------------------------
Investment Activities:
Net investment income 0.14 0.22 0.29 0.28 0.26 0.28
Net realized and unrealized gains from investments 3.99 2.57 2.27 1.57 0.29 1.27
- --------------------------------------------------------------------------------------------------------------------------
Total from Investment Activities 4.13 2.79 2.56 1.85 0.55 1.55
- --------------------------------------------------------------------------------------------------------------------------
Distributions:
From net investment income (0.14) (0.22) (0.29) (0.27) (0.26) (0.28)
From net realized gains (2.74) (1.61) (0.78) (0.28) (1.15) --
- --------------------------------------------------------------------------------------------------------------------------
Total Distributions (2.88) (1.83) (1.07) (0.55) (1.41) (0.28)
- --------------------------------------------------------------------------------------------------------------------------
NET ASSET VALUE, END OF PERIOD $ 16.90 $ 15.65 $ 14.69 $ 13.20 $ 11.90 $ 12.76
- --------------------------------------------------------------------------------------------------------------------------
Total Return 28.27% 20.56% 20.10% 16.03% 4.04% 13.58%
RATIOS/SUPPLEMENTARY DATA:
Net Assets at end of period (000) $ 634,672 $ 562,302 $ 522,474 $ 448,530 $ 418,238 $ 211,785
Ratio of expenses to average net assets 0.96% 0.98% 0.99% 1.00% 0.93% 0.89
Ratio of net investment income to average net
assets 0.85% 1.52% 2.04% 2.21% 2.14% 2.30%
Ratio of expenses to average net assets* 0.96% 0.98% 1.00% 1.10% 0.98% 1.08%
Ratio of net investment income to average net
assets* 0.85% 1.52% 2.03% 2.11% 2.09% 2.11%
Portfolio turnover (a) 106.41% 92.66% 90.55% 176.66% 56.33% 108.79%
</TABLE>
<TABLE>
<CAPTION>
YEAR ENDED JUNE 30,
----------------------------------------------------
CLASS I 1992 1991 1990 1989(b)
- ---------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
NET ASSET VALUE, BEGINNING OF PERIOD $ 10.20 $ 10.42 $ 10.85 $ 10.00
- ---------------------------------------------------------------------------------------------------------
Investment Activities:
Net investment income 0.34 0.39 0.48 0.14
Net realized and unrealized gains from investments 1.29 (0.23) (0.09) 0.85
- ---------------------------------------------------------------------------------------------------------
Total from Investment Activities 1.63 0.16 0.39 0.99
- ---------------------------------------------------------------------------------------------------------
Distributions:
From net investment income (0.34) (0.38) (0.48) (0.14)
From net realized gains -- (0.34) --
- ---------------------------------------------------------------------------------------------------------
Total Distributions (0.34) (0.38) (0.82) (0.14)
- ---------------------------------------------------------------------------------------------------------
NET ASSET VALUE, END OF PERIOD $ 11.49 $ 10.20 $ 10.42 $ 10.85
- ---------------------------------------------------------------------------------------------------------
Total Return 16.24% 1.75% 3.49% 29.90%(c)
RATIOS/SUPPLEMENTARY DATA:
Net Assets at end of period (000) $ 155,234 $ 74,481 $ 59,992 $ 45,872
Ratio of expenses to average net assets 0.69% 0.41% 0.35% 0.33%(c)
Ratio of net investment income to average net
assets 3.17% 3.92% 4.36% 3.95%(c)
Ratio of expenses to average net assets* 1.23% 1.15% 1.09% 1.07%(c)
Ratio of net investment income to average net
assets* 2.63% 3.18% 3.62% 3.21%(c)
Portfolio turnover (a) 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.
<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 $ 15.68 $ 14.72 $ 13.22 $ 11.91 $ 12.75 $ 11.49 $ 11.45
- ---------------------------------------------------------------------------------------------------------------------------------
Investment Activities:
Net investment income 0.10 0.19 0.25 0.24 0.24 0.25 0.12
Net realized and unrealized gains from
investments 3.99 2.57 2.28 1.59 0.30 1.26 0.06
- ---------------------------------------------------------------------------------------------------------------------------------
Total from Investment Activities 4.09 2.76 2.53 1.83 0.54 1.51 0.18
- ---------------------------------------------------------------------------------------------------------------------------------
Distributions:
From net investment income (0.10) (0.19) (0.25) (0.24) (0.23) (0.25) (0.14)
From net realized gains (2.74) (1.61) (0.78) (0.26) (1.10) -- --
In excess of net realized gains -- -- -- (0.02) (0.05) -- --
- ---------------------------------------------------------------------------------------------------------------------------------
Total Distributions (2.84) (1.80) (1.03) (0.52) (1.38) (0.25) (0.14)
- ---------------------------------------------------------------------------------------------------------------------------------
NET ASSET VALUE, END OF PERIOD $ 16.93 $ 15.68 $ 14.72 $ 13.22 $ 11.91 $ 12.75 $ 11.49
- ---------------------------------------------------------------------------------------------------------------------------------
Total Return (Excludes Sales Charge) 27.90% 20.21% 19.80% 15.43% 3.95% 13.27% 1.56%(c)
RATIOS/SUPPLEMENTARY DATA:
Net Assets at end of period (000) $ 29,443 $ 23,909 $ 20,838 $ 13,560 $ 10,448 $ 3,435 $ 35
Ratio of expenses to average net assets 1.21% 1.23% 1.24% 1.26% 1.18% 1.12% 1.29%(c)
Ratio of net investment income to average
net assets 0.60% 1.26% 1.79% 1.99% 2.00% 2.06% 2.43%(c)
Ratio of expenses to average net assets* 1.31% 1.31% 1.35% 1.36% 1.33% 1.46% 1.49%(c)
Ratio of net investment income to average
net assets* 0.50% 1.18% 1.68% 1.89% 1.85% 1.72% 2.23%(c)
Portfolio turnover (a) 106.41% 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.
<PAGE> 25
19
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 $ 15.64 $ 14.69 $ 13.19 $ 11.90 $ 12.60
- ---------------------------------------------------------------------------------------------------------------------------------
Investment Activities:
Net investment income (0.02) 0.08 0.15 0.15 0.07
Net realized and unrealized gains (losses) from
investments 3.98 2.55 2.27 1.58 (0.70)
- ---------------------------------------------------------------------------------------------------------------------------------
Total from Investment Activities 3.96 2.63 2.42 1.73 (0.63)
- ---------------------------------------------------------------------------------------------------------------------------------
Distributions:
From net investment income (0.01) (0.07) (0.14) (0.15) (0.06)
In excess of net investment income -- -- -- (0.01) (0.01)
From net realized gains (2.74) (1.61) (0.78) (0.28) --
- ---------------------------------------------------------------------------------------------------------------------------------
Total Distributions (2.75) (1.68) (0.92) (0.44) (0.07)
- ---------------------------------------------------------------------------------------------------------------------------------
NET ASSET VALUE, END OF PERIOD $ 16.85 $ 15.64 $ 14.69 $ 13.19 $ 11.90
- ---------------------------------------------------------------------------------------------------------------------------------
Total Return (Excludes Sales Charge) 26.97% 19.19% 18.93% 14.92% (5.00)%(b)
RATIOS/SUPPLEMENTARY DATA:
Net Assets at end of period (000) $ 30,094 $ 20,499 $ 16,305 $ 11,222 $ 5,356
Ratio of expenses to average net assets 1.96% 1.98% 1.99% 2.00% 1.96%(c)
Ratio of net investment income to average net assets (0.15)% 0.51% 1.04% 1.26% 1.80%(c)
Ratio of expenses to average net assets* 1.96% 1.98% 2.00% 2.01% 1.96%(c)
Ratio of net investment income to average net assets* (0.15)% 0.51% 1.03% 1.25% 1.80%(c)
Portfolio turnover (d) 106.41% 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.
<PAGE> 26
20
The One Group(R)
Equity Index Fund
- -----------------
[LOGO] 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").*
[LOGO] 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.
[LOGO] 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."
[LOGO] 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."
[LOGO] 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.
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)
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>
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.
<PAGE> 27
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 $ 21.80 $ 16.66 $ 14.03 $ 11.59 $ 11.92 $ 10.92 $ 10.00
- ---------------------------------------------------------------------------------------------------------------------------------
Investment Activities:
Net investment income 0.33 0.35 0.33 0.32 0.29 0.30 0.26
Net realized and
unrealized gains
(losses) from
investments 5.98 5.27 3.16 2.59 (0.20) 1.13 0.95
- ---------------------------------------------------------------------------------------------------------------------------------
Total from Investment
Activities 6.31 5.62 3.49 2.91 0.09 1.43 1.21
- ---------------------------------------------------------------------------------------------------------------------------------
Distributions:
From net investment income (0.32) (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 (0.63) (0.15) (0.52) (0.16) (0.09) (0.13) (0.03)
- ---------------------------------------------------------------------------------------------------------------------------------
Total Distributions (0.95) (0.48) (0.86) (0.47) (0.42) (0.43) (0.29)
- ---------------------------------------------------------------------------------------------------------------------------------
NET ASSET VALUE, END OF
PERIOD $ 27.16 $ 21.80 $ 16.66 $ 14.03 $ 11.59 $ 11.92 $ 10.92
=================================================================================================================================
Total Return 29.73% 34.30% 25.47% 25.79% 0.63% 13.04% 12.14%(c)
RATIOS/SUPPLEMENTARY DATA:
Net Assets at end of
period(000) $ 671,422 $ 480,819 $ 321,058 $ 234,895 $ 165,370 $ 96,446 $ 62,150
Ratio of expenses to
average net assets 0.35% 0.30% 0.30% 0.33% 0.46% 0.50% 0.73%(c)
Ratio of net investment
income to average net
assets 1.37% 1.87% 2.18% 2.57% 2.44% 2.46% 2.43%(c)
Ratio of expenses to
average net assets* 0.62% 0.61% 0.59% 0.66% 0.59% 0.87% 1.16%(c)
Ratio of net investment
income to average net
assets* 1.10% 1.56% 1.89% 2.24% 2.31% 2.09% 2.00%(c)
Portfolio turnover (a) 4.32% 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.
<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 $ 21.81 $ 16.67 $ 14.02 $ 11.59 $ 11.91 $ 10.92 $ 10.94
- ---------------------------------------------------------------------------------------------------------------------------------
Investment Activities:
Net investment income 0.26 0.29 0.27 0.29 0.28 0.30 0.08
Net realized and
unrealized gains
(losses) from
investments 5.97 5.28 3.18 2.58 (0.20) 1.10 --
- ---------------------------------------------------------------------------------------------------------------------------------
Total from Investment
Activities 6.23 5.57 3.45 2.87 0.08 1.40 0.08
- ---------------------------------------------------------------------------------------------------------------------------------
Distributions:
From net investment income (0.26) (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 (0.63) (0.15) (0.52) (0.16) (0.09) (0.13) --
- ---------------------------------------------------------------------------------------------------------------------------------
Total Distributions (0.89) (0.43) (0.80) (0.44) (0.40) (0.41) (0.10)
- ---------------------------------------------------------------------------------------------------------------------------------
NET ASSET VALUE, END OF
PERIOD $ 27.15 $ 21.81 $ 16.67 $ 14.02 $ 11.59 $ 11.91 $ 10.92
=================================================================================================================================
Total Return (Excludes Sales
Charge) 29.33% 33.94% 25.16% 25.43% 0.56% 12.75% 1.32%(c)
RATIOS/SUPPLEMENTARY DATA:
Net Assets at end of
period(000) $ 218,518 $ 98,338 $ 32,186 $ 3,003 $ 1,416 $ 512 $ 5
Ratio of expenses to
average net assets 0.60% 0.55% 0.55% 0.56% 0.62% 0.52% 1.09%(c)
Ratio of net investment
income to average net
assets 1.11% 1.59% 1.93% 2.38% 2.37% 2.51% 1.97%(c)
Ratio of expenses to
average net assets* 0.96% 0.95% 0.94% 1.01% 0.94% 0.99% 1.27%(c)
Ratio of net investment
income to average net
assets* 0.75% 1.19% 1.54% 1.94% 2.05% 2.04% 1.79%(c)
Portfolio turnover (a) 4.32% 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.
21
<PAGE> 28
22
The One Group(R) 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 $ 21.80 $ 16.68 $ 14.05 $ 11.61 $ 12.39
- ------------------------------------------------------------------------------------------------------------------------------------
Investment Activities:
Net investment income 0.10 0.16 0.16 0.18 0.09
Net realized and unrealized gains (losses) from
investments 5.97 5.27 3.16 2.61 (0.78)
- ------------------------------------------------------------------------------------------------------------------------------------
Total from Investment Activities 6.07 5.43 3.32 2.79 (0.69)
- ------------------------------------------------------------------------------------------------------------------------------------
Distributions:
From net investment income (0.11) (0.16) (0.16) (0.19) (0.09)
In excess of net investment income -- -- (0.01) -- --
From net realized gains (0.63) (0.15) (0.52) (0.16) --
- ------------------------------------------------------------------------------------------------------------------------------------
Total Distributions (0.74) (0.31) (0.69) (0.35) (0.09)
- ------------------------------------------------------------------------------------------------------------------------------------
NET ASSET VALUE, END OF PERIOD $ 27.13 $ 21.80 $ 16.68 $ 14.05 $ 11.61
- ------------------------------------------------------------------------------------------------------------------------------------
Total Return (Excludes Sales Charge) 28.47% 32.93% 24.05% 24.58% (5.57)%(b)
RATIOS/SUPPLEMENTARY DATA:
Net Assets at end of period (000) $ 351,624 $ 168,699 $ 38,538 $ 1,408 $ 248
Ratio of expenses to average net assets 1.35% 1.30% 1.30% 1.34% 1.10%(c)
Ratio of net investment income to average net assets 0.36% 0.83% 1.18% 1.60% 2.08%(c)
Ratio of expenses to average net assets* 1.61% 1.61% 1.59% 1.67% 1.15%(c)
Ratio of net investment income to average net
assets* 0.10% 0.52% 0.89% 1.27% 2.03%(c)
Portfolio turnover (d) 4.32% 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.
<TABLE>
<CAPTION>
NOVEMBER 4,
1997 TO
JUNE 30,
CLASS C 1998(a)
- -------------------------------------------------------------------------------
<S> <C>
NET ASSET VALUE, BEGINNING OF PERIOD $ 22.60
- -------------------------------------------------------------------------------
Investment Activities:
Net investment income 0.07
Net realized and unrealized gains (losses) from
investments 4.67
- -------------------------------------------------------------------------------
Total from Investment Activities 4.74
- -------------------------------------------------------------------------------
Distributions:
Net investment income (0.08)
Net realized gains (0.12)
- -------------------------------------------------------------------------------
Total Distributions (0.20)
- -------------------------------------------------------------------------------
NET ASSET VALUE, END OF PERIOD $ 27.14
- -------------------------------------------------------------------------------
Total Return (Excludes Sales Charge) 21.07%(b)
RATIOS/SUPPLEMENTARY DATA:
Net Assets at end of period (000) $ 3,214
Ratio of expenses to average net assets 1.35%(c)
Ratio of net investment income to average net assets 0.27%(c)
Ratio of expenses to average net assets* 1.60%(c)
Ratio of net investment income to average net assets* 0.02%(c)
Portfolio turnover (d) 4.32%
</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) 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.
<PAGE> 29
23
The One Group(R)
Income Equity Fund
- --------------------------------------------------------------------------------
[LOGO] 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.
[LOGO] 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.
[LOGO] 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."
[LOGO] 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."
[LOGO] 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.
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 .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:
<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.
<PAGE> 30
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 1991
<S> <C> <C> <C> <C> <C> <C> <C> <C>
NET ASSET VALUE, BEGINNING OF
PERIOD $ 21.93 $ 17.65 $ 15.13 $ 13.22 $ 13.21 $ 12.24 $ 11.35 $ 11.06
- --------------------------------------------------------------------------------------------------------------------------------
Investment Activities:
Net investment income 0.32 0.36 0.40 0.40 0.39 0.43 0.49 0.54
Net realized and unrealized
gains from investments 4.36 4.89 3.22 2.28 0.01 0.97 0.90 0.26
- --------------------------------------------------------------------------------------------------------------------------------
Total from Investment Activities 4.68 5.25 3.62 2.68 0.40 1.40 1.39 (0.51)
- --------------------------------------------------------------------------------------------------------------------------------
Distributions:
From net investment income (0.31) (0.36) (0.40) (0.40) (0.39) (0.43) (0.50) --
From net realized gains (2.23) (0.61) (0.70) (0.37) -- -- -- (0.51)
- --------------------------------------------------------------------------------------------------------------------------------
Total Distributions (2.54) (0.97) (1.10) (0.77) (0.39) (0.43) (0.50) (0.51)
- --------------------------------------------------------------------------------------------------------------------------------
NET ASSET VALUE, END OF PERIOD $ 24.07 $ 21.93 $ 17.65 $ 15.13 $ 13.22 $ 13.21 $ 12.24 $ 11.35
================================================================================================================================
Total Return 23.18% 30.90% 24.53% 21.04% 3.27% 11.56% 12.36% 7.48%
RATIOS/SUPPLEMENTARY DATA:
Net Assets at end of period
(000) $ 691,878 $ 649,007 $ 321,827 $ 170,919 $ 198,787 $ 153,144 $ 125,050 $ 73,552
Ratio of expenses to average
net assets 1.00% 1.00% 0.98% 1.01% 0.98% 0.90% 0.70% 0.42%
Ratio of net investment income
to average net assets 1.39% 1.91% 2.44% 2.85% 3.18% 3.37% 4.12% 4.80%
Ratio of expenses to average
net assets* 1.00% 1.00% 1.01% 1.01% 1.05% 1.07% 1.23% 1.16%
Ratio of net investment income
to average net assets* 1.39% 1.91% 2.41% 2.85% 3.11% 3.20% 3.59% 4.06%
Portfolio turnover (a) 14.64% 28.18% 14.92% 4.03% 22.69% 7.53% 5.99% 9.36%
<CAPTION>
YEAR ENDED JUNE 30,
---------------------
CLASS I 1990 1989(b)
<S> <C> <C>
NET ASSET VALUE, BEGINNING OF
PERIOD $ 10.32 $ 9.10
- ------------------------------------------------------------------
Investment Activities:
Net investment income 0.53 0.45
Net realized and unrealized
gains from investments 0.77 1.22
- ------------------------------------------------------------------
Total from Investment Activities (0.56) (0.45)
- ------------------------------------------------------------------
Distributions:
From net investment income -- --
From net realized gains (0.56) (0.45)
- ------------------------------------------------------------------
Total Distributions (0.56) (0.45)
- ------------------------------------------------------------------
NET ASSET VALUE, END OF PERIOD $ 11.06 $ 10.32
==================================================================
Total Return 12.79% 18.59%
RATIOS/SUPPLEMENTARY DATA:
Net Assets at end of period
(000) $ 37,056 $ 24,591
Ratio of expenses to average
net assets 0.49% 0.66%
Ratio of net investment income
to average net assets 4.94% 5.35%
Ratio of expenses to average
net assets* 1.23% 1.42%
Ratio of net investment income
to average net assets* 4.20% 4.59%
Portfolio turnover (a) 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.
<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 $ 21.90 $ 17.64 $ 15.11 $ 13.20 $ 13.20 $ 12.23 $ 12.34
- ---------------------------------------------------------------------------------------------------------------------------------
Investment Activities:
Net investment income 0.25 0.31 0.38 0.03 0.36 0.40 0.20
Net realized and unrealized gains from
investments 4.37 4.87 3.20 2.29 -- 0.98 (0.10)
- ---------------------------------------------------------------------------------------------------------------------------------
Total from Investment Activities 4.62 5.18 3.58 2.32 0.36 1.38 0.10
- ---------------------------------------------------------------------------------------------------------------------------------
Distributions:
From net investment income (0.25) (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 (2.23) (0.61) (0.70) (0.37) -- -- --
- ---------------------------------------------------------------------------------------------------------------------------------
Total Distributions (2.48) (0.92) (1.05) (0.41) (0.36) (0.41) (0.21)
- ---------------------------------------------------------------------------------------------------------------------------------
NET ASSET VALUE, END OF PERIOD $ 24.04 $ 21.90 $ 17.64 $ 15.11 $ 13.20 $ 13.20 $ 12.23
=================================================================================================================================
Total Return (Excludes Sales Charge) 22.91% 30.39% 24.23% 20.79% 2.95% 11.38% 2.16%(c)
RATIOS/SUPPLEMENTARY DATA:
Net Assets at end of period (000) $ 117,682 $ 78,976 $ 44,284 $ 13,793 $ 12,054 $ 9,513 $ 118
Ratio of expenses to average net assets 1.25% 1.25% 1.23% 1.26% 1.23% 1.11% 1.29%(c)
Ratio of net investment income to average
net assets 1.15% 1.65% 2.19% 2.61% 3.01% 3.32% 3.97%(c)
Ratio of expenses to average net assets* 1.35% 1.34% 1.36% 1.36% 1.40% 1.43% 1.49%(c)
Ratio of net investment income to average
net assets* 1.05% 1.56% 2.06% 2.51% 2.84% 3.00% 3.77%(c)
Portfolio turnover (a) 14.64% 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.
24
<PAGE> 31
25
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 $ 21.95 $ 17.68 $ 15.14 $ 13.23 $ 13.83
- ------------------------------------------------------------------------------------------------------------------------------------
Investment Activities:
Net investment income 0.26 0.17 0.24 0.26 0.11
Net realized and unrealized gains (losses) from
investments 4.36 4.89 3.23 2.29 (0.60)
- ------------------------------------------------------------------------------------------------------------------------------------
Total from Investment Activities 4.62 5.06 3.47 2.55 (0.49)
- ------------------------------------------------------------------------------------------------------------------------------------
Distributions:
From net investment income (0.26) (0.18) (0.23) (0.25) (0.11)
In excess of net investment income -- -- -- (0.02) --
From net realized gains (2.23) (0.61) (0.70) (0.37) --
- ------------------------------------------------------------------------------------------------------------------------------------
Total Distributions (2.49) (0.79) (0.93) (0.64) (0.11)
- ------------------------------------------------------------------------------------------------------------------------------------
NET ASSET VALUE, END OF PERIOD $ 24.08 $ 21.95 $ 17.68 $ 15.14 $ 13.23
- ------------------------------------------------------------------------------------------------------------------------------------
Total Return (Excludes Sales Charge) 21.97% 29.48% 23.41% 19.91% (3.37)%(b)
RATIOS/SUPPLEMENTARY DATA:
Net Assets at end of period (000) $ 165,813 $ 79,518 $ 29,169 $ 3,468 $ 1,714
Ratio of expenses to average net assets 1.99% 2.00% 1.98% 2.01% 1.95%(c)
Ratio of net investment income to average net
assets 0.39% 0.89% 1.44% 1.88% 2.70%(c)
Ratio of expenses to average net assets* 1.99% 2.00% 2.01% 2.02% 1.95%(c)
Ratio of net investment income to average net
assets* 0.39% 0.89% 1.41% 1.87% 2.70%(c)
Portfolio turnover (d) 14.64% 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.
<TABLE>
<CAPTION>
NOVEMBER 4,
1997 TO
JUNE 30,
CLASS C 1998(a)
- -------------------------------------------------------------------------------
<S> <C>
NET ASSET VALUE, BEGINNING OF PERIOD $ 21.40
- -------------------------------------------------------------------------------
Investment Activities:
Net investment income 0.06
Net realized and unrealized gains (losses) from
investments 3.39
- -------------------------------------------------------------------------------
Total from Investment Activities 3.45
- -------------------------------------------------------------------------------
Distributions:
Net investment income (0.07)
Net realized gains (0.70)
- -------------------------------------------------------------------------------
Total Distributions (0.77)
- -------------------------------------------------------------------------------
NET ASSET VALUE, END OF PERIOD $ 24.08
- -------------------------------------------------------------------------------
Total Return (Excludes Sales Charge) 16.57%(b)
RATIOS/SUPPLEMENTARY DATA:
Net Assets at end of period (000) $ 795
Ratio of expenses to average net assets 1.98%(c)
Ratio of net investment income to average net assets 0.38%(c)
Portfolio turnover (d) 14.64%
</TABLE>
(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.
<PAGE> 32
26
The One Group(R)
Value Growth Fund
- --------------------------------------------------------------------------------
[LOGO] 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.
[LOGO] 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.
[LOGO] 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."
[LOGO] 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."
[LOGO] 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.
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 .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:
<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.
<PAGE> 33
27
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,
YEAR ENDED JUNE 30, 1996 TO
-------------------------- JUNE 30,
CLASS I 1998 1997 1996(a)
- --------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
NET ASSET VALUE, BEGINNING OF PERIOD $ 11.51 $ 10.39 $ 10.00
- --------------------------------------------------------------------------------------------------------------
Investment Activities:
Net investment income 0.08 0.11 0.03
Net realized and unrealized gains from investments 3.36 2.85 0.39
- --------------------------------------------------------------------------------------------------------------
Total from Investment Activities 3.44 2.96 0.42
- --------------------------------------------------------------------------------------------------------------
Distributions:
From net investment income (0.08) (0.11) (0.03)
From net realized gains (1.36) (1.73) --
- --------------------------------------------------------------------------------------------------------------
Total Distributions (1.44) (1.84) (0.03)
- --------------------------------------------------------------------------------------------------------------
NET ASSET VALUE, END OF PERIOD $ 13.51 $ 11.51 $ 10.39
- --------------------------------------------------------------------------------------------------------------
Total Return 32.26% 31.97% 10.49%(b)(c)
RATIOS/SUPPLEMENTARY DATA:
Net Assets at end of period(000) $630,340 $430,837 $191,212
Ratio of expenses to average net assets 0.98% 0.98% 0.95%(d)
Ratio of net investment income to average net assets 0.66% 1.06% 1.13%(d)
Ratio of expenses to average net assets* 0.98% 1.00% 1.04%(d)
Ratio of net investment income to average net assets* 0.66% 1.04% 1.04%(d)
Portfolio turnover (e) 62.37% 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.
<TABLE>
<CAPTION>
YEAR ENDED SEVEN MONTHS
JUNE 30, ENDED YEAR ENDED JUNE 30,
----------------------- JUNE 30, ----------------------------------
CLASS A 1998 1997 1996(a) 1995 1994 1993
- ----------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
NET ASSET VALUE, BEGINNING OF PERIOD $ 11.50 $ 10.39 $ 11.15 $ 9.00 $ 10.02 $ 9.42
- ----------------------------------------------------------------------------------------------------------------------------
Investment Activities:
Net investment income 0.05 0.09 0.94 0.12 0.13 0.11
Net realized and unrealized gains
(losses) from investments 3.36 2.83 0.08 2.44 (0.56) 0.83
- ----------------------------------------------------------------------------------------------------------------------------
Total from Investment Activities 3.41 2.92 1.02 2.56 (0.43) 0.94
- ----------------------------------------------------------------------------------------------------------------------------
Distributions:
From net investment income (0.05) (0.08) (0.94) (0.12) (0.14) (0.12)
In excess of net investment income -- -- (0.01) -- -- --
From net realized gains (1.36) (1.73) (0.83) (0.29) (0.45) (0.22)
- ----------------------------------------------------------------------------------------------------------------------------
Total Distributions (1.41) (1.81) (1.78) (0.41) (0.59) (0.34)
- ----------------------------------------------------------------------------------------------------------------------------
NET ASSET VALUE, END OF PERIOD $ 13.50 $ 11.50 $ 10.39 $ 11.15 $ 9.00 $ 10.02
- ----------------------------------------------------------------------------------------------------------------------------
Total Return (Excludes Sales Charge) 31.96% 31.53% 10.40%(b) 29.57% (4.32)% 10.13%
RATIOS/SUPPLEMENTARY DATA:
Net Assets at end of period (000) $80,500 $47,306 $35,984 $217,978 $173,198 $171,141
Ratio of expenses to average net assets 1.23% 1.23% 0.97%(c) 0.95% 0.96% 0.96%
Ratio of net investment income to average
net assets 0.40% 0.83% 0.85%(c) 1.25% 1.34% 1.21%
Ratio of expenses to average net assets* 1.33% 1.34% 1.05%(c) 0.95% 0.96% 0.96%
Ratio of net investment income to average
net assets* 0.30% 0.72% 0.77%(c) 1.25% 1.34% 1.21%
Portfolio turnover (d) 62.37% 113.17% 65.21% 77.00% 53.00% 66.00%
<CAPTION>
YEAR ENDED JUNE 30,
---------------------
CLASS A 1992 1991
- ------------------------------------------------------------------
<S> <C> <C>
NET ASSET VALUE, BEGINNING OF PERIOD $ 7.80 $ 6.39
- ------------------------------------------------------------------
Investment Activities:
Net investment income 0.11 0.12
Net realized and unrealized gains
(losses) from investments 1.75 1.44
- ------------------------------------------------------------------
Total from Investment Activities 1.86 1.56
- ------------------------------------------------------------------
Distributions:
From net investment income (0.10) (0.14)
In excess of net investment income -- --
From net realized gains (0.14) (0.01)
- ------------------------------------------------------------------
Total Distributions (0.24) (0.15)
- ------------------------------------------------------------------
NET ASSET VALUE, END OF PERIOD $ 9.42 $ 7.80
- ------------------------------------------------------------------
Total Return (Excludes Sales Charge) 24.27% 24.97%
RATIOS/SUPPLEMENTARY DATA:
Net Assets at end of period (000) $133,614 $93,400
Ratio of expenses to average net assets 0.97% 0.95%
Ratio of net investment income to average
net assets 1.25% 1.73%
Ratio of expenses to average net assets* 0.97% 1.02%
Ratio of net investment income to average
net assets* 1.25% 1.66%
Portfolio turnover (d) 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.
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.
<PAGE> 34
28
The One Group(R) Value Growth Fund Financial Highlights
<TABLE>
<CAPTION>
YEAR ENDED SEVEN MONTHS SEPTEMBER 9,
JUNE 30, ENDED YEAR ENDED 1994 TO
----------------------- JUNE 30, NOVEMBER 30, NOVEMBER 30,
CLASS B 1998 1997 1996(a) 1995 1994(b)
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
NET ASSET VALUE, BEGINNING OF PERIOD $ 11.47 $ 10.39 $ 11.16 $ 9.01 $ 9.85
- ------------------------------------------------------------------------------------------------------------------------------------
Investment Activities:
Net investment income (0.02) 0.01 0.91 0.05 0.02
Net realized and unrealized gains (losses)
from investments 3.31 2.82 0.07 2.46 (0.84)
- ------------------------------------------------------------------------------------------------------------------------------------
Total from Investment Activities 3.29 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 (1.36) (1.73) (0.83) (0.29) --
- ------------------------------------------------------------------------------------------------------------------------------------
Total Distributions (1.36) (1.75) (1.75) (0.36) (0.02)
- ------------------------------------------------------------------------------------------------------------------------------------
NET ASSET VALUE, END OF PERIOD $ 13.40 $ 11.47 $ 10.39 $11.16 $ 9.01
- ------------------------------------------------------------------------------------------------------------------------------------
Total Return (Excludes Sales Charge) 30.89% 30.52% 9.96%(c) 28.74% (8.31)%(c)
RATIOS/SUPPLEMENTARY DATA:
Net Assets at end of period (000) $25,501 $10,517 $ 4,673 $2,923 $412
Ratio of expenses to average net assets 1.98% 1.98% 1.86%(d) 1.70% 1.71%(d)
Ratio of net investment income to average
net assets (0.35)% 0.07% 0.13%(d) 0.38% 0.76%(d)
Ratio of expenses to average net assets* 1.98% 2.00% 1.94%(d) 1.70% 1.71%(d)
Ratio of net investment income to average
net assets* (0.35)% 0.05% 0.05%(d) 0.38% 0.76%(d)
Portfolio turnover (e) 62.37% 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.
<TABLE>
<CAPTION>
NOVEMBER 4,
1997 TO
JUNE 30,
CLASS C 1998(a)
- ------------------------------------------------------------------------------
<S> <C>
NET ASSET VALUE, BEGINNING OF PERIOD $11.76
- ------------------------------------------------------------------------------
Investment Activities:
Net realized and unrealized gains (losses) from
investments 2.35
- ------------------------------------------------------------------------------
Total from Investment Activities 2.35
- ------------------------------------------------------------------------------
Distributions:
Net investment income (0.01)
Net realized gains (0.63)
- ------------------------------------------------------------------------------
Total Distributions (0.64)
- ------------------------------------------------------------------------------
NET ASSET VALUE, END OF PERIOD $13.47
- ------------------------------------------------------------------------------
Total Return (Excludes Sales Charge) 20.87%(b)
RATIOS/SUPPLEMENTARY DATA:
Net Assets at end of period (000) $1,234
Ratio of expenses to average net assets 1.99%(c)
Ratio of net investment income to average net assets (0.43)%(c)
Portfolio turnover (d) 62.37 %
</TABLE>
(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.
<PAGE> 35
29
The One Group(R)
Small Capitalization Fund
- --------------------------------------------------------------------------------
[LOGO] 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.
[LOGO] 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.
[LOGO] 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."
[LOGO] 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."
[LOGO] 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.
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 .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:
<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.
<PAGE> 36
30
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>
YEAR ENDED MARCH 26,
JUNE 30, 1996 TO
---------------------------- JUNE 30,
CLASS I 1998 1997 1996(a)
- --------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
NET ASSET VALUE, BEGINNING OF PERIOD $ 10.94 $ 10.75 $10.00
- --------------------------------------------------------------------------------------------------------------------------
Investment Activities:
Net investment income (loss) -- (0.02) --
Net realized and unrealized gains from investments 2.44 1.31 0.78
- --------------------------------------------------------------------------------------------------------------------------
Total from Investment Activities 2.44 1.29 0.78
- --------------------------------------------------------------------------------------------------------------------------
Distributions:
From net realized gains (1.33) (1.10) (0.03)
- --------------------------------------------------------------------------------------------------------------------------
Total Distributions (1.33) (1.10) (0.03)
- --------------------------------------------------------------------------------------------------------------------------
NET ASSET VALUE, END OF PERIOD $ 12.05 $ 10.94 $10.75
- --------------------------------------------------------------------------------------------------------------------------
Total Return 23.58% 13.44% 13.39%(b)(c)
RATIOS/SUPPLEMENTARY DATA:
Net Assets at end of period (000) $114,951 $78,318 $83,371
Ratio of expenses to average net assets 1.06% 1.02% 0.96%(d)
Ratio of net investment income (loss) to average net
assets (0.05)% (0.16)% (0.16)%(d)
Ratio of expenses to average net assets* 1.09% 1.12% 1.05%(d)
Ratio of net investment income (loss) to average net
assets* (0.08)% (0.26)% (0.25)%(d)
Portfolio turnover (e) 83.77% 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.
<TABLE>
<CAPTION>
YEAR ENDED SEVEN MONTHS
JUNE 30, ENDED YEAR ENDED NOVEMBER 30,
---------------------- JUNE 30, -----------------------------------------------
CLASS A 1998 1997 1996(a) 1995 1994 1993 1992
- ----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
NET ASSET VALUE, BEGINNING OF PERIOD $ 10.94 $ 10.73 $ 11.50 $ 9.36 $ 10.11 $ 9.48 $ 7.38
- ----------------------------------------------------------------------------------------------------------------------------------
Investment Activities:
Net investment income (loss) (0.03) (0.04) (0.07) (0.04) (0.04) (0.02) 0.01
Net realized and unrealized gains
(losses) from investments 2.44 1.35 1.40 2.35 (0.63) 0.88 2.10
- ----------------------------------------------------------------------------------------------------------------------------------
Total from Investment Activities 2.41 1.31 1.33 2.31 (0.67) 0.86 2.11
- ----------------------------------------------------------------------------------------------------------------------------------
Distributions:
From net investment income -- -- -- -- -- (0.01) (0.01)
From net realized gains (1.33) (1.10) (2.10) (0.17) (0.08) (0.22) --
- ----------------------------------------------------------------------------------------------------------------------------------
Total Distributions (1.33) (1.10) (2.10) (0.17) (0.08) (0.23) (0.01)
- ----------------------------------------------------------------------------------------------------------------------------------
NET ASSET VALUE, END OF PERIOD $ 12.02 $ 10.94 $ 10.73 $ 11.50 $ 9.36 $ 10.11 $ 9.48
- ----------------------------------------------------------------------------------------------------------------------------------
Total Return (Excludes Sales Charge) 23.28 % 13.52 % 12.85 %(b) 25.07 % (6.66)% 9.10 % 28.59 %
RATIOS/SUPPLEMENTARY DATA:
Net Assets at end of period (000) $21,634 $17,299 $18,356 $95,467 $77,540 $74,982 $55,719
Ratio of expenses to average net
assets 1.31 % 1.27 % 1.05 %(c) 1.03 % 1.00 % 1.01 % 1.00 %
Ratio of net investment income (loss)
to average net assets (0.31)% (0.41)% (0.33)%(c) (0.36)% (0.38)% (0.21)% 0.15 %
Ratio of expenses to average net
assets* 1.44 % 1.45 % 1.07 %(c) 1.03 % 1.00 % 1.01 % 1.00 %
Ratio of net investment income (loss)
to average net assets* (0.44)% (0.59)% (0.35)%(c) (0.36)% (0.38)% (0.21)% 0.15 %
Portfolio turnover (d) 83.77 % 92.01 % 59.57 % 65.00 % 51.00 % 59.00 % 42.00 %
<CAPTION>
FIVE MONTHS
ENDED
NOVEMBER 30,
CLASS A 1991(e)
- ----------------------------------------------------
<S> <C>
NET ASSET VALUE, BEGINNING OF PERIOD $ 6.37
- ----------------------------------------------------
Investment Activities:
Net investment income (loss) 0.01
Net realized and unrealized gains
(losses) from investments 1.01
- ----------------------------------------------------
Total from Investment Activities 1.02
- ----------------------------------------------------
Distributions:
From net investment income (0.01
From net realized gains --
- ----------------------------------------------------
Total Distributions (0.01
- ----------------------------------------------------
NET ASSET VALUE, END OF PERIOD $ 7.38
- ----------------------------------------------------
Total Return (Excludes Sales Charge) 16.12 %(b)
RATIOS/SUPPLEMENTARY DATA:
Net Assets at end of period (000) $34,546
Ratio of expenses to average net
assets 1.05 %(c)
Ratio of net investment income (loss)
to average net assets 0.31 %(c)
Ratio of expenses to average net
assets* 1.05 %(c)
Ratio of net investment income (loss)
to average net assets* 0.31 %(c)
Portfolio turnover (d) 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.
<PAGE> 37
The One Group(R) Small Capitalization Fund Financial Highlights
<TABLE>
<CAPTION>
SEVEN
YEAR ENDED Months Year September 12,
JUNE 30, ended ended 1994 to
----------------------- June 30, November 30, November 30,
CLASS B 1998 1997 1996(a) 1995 1994(b)
<S> <C> <C> <C> <C> <C>
NET ASSET VALUE, BEGINNING OF PERIOD $ 10.84 $ 10.72 $ 11.56 $ 9.47 $ 10.40
- ---------------------------------------------------------------------------------------------------------------------------------
Investment Activities:
Net investment loss (0.03) (0.10) (0.06) (0.07) (0.01)
Net realized and unrealized gains (losses) from
investments 2.31 1.32 1.35 2.33 (0.92)
- ---------------------------------------------------------------------------------------------------------------------------------
Total from Investment Activities 2.28 1.22 1.29 2.26 (0.93)
- ---------------------------------------------------------------------------------------------------------------------------------
Distributions:
From net realized gains (1.33) (1.10) (2.13) (0.17) --
- ---------------------------------------------------------------------------------------------------------------------------------
Total Distributions (1.33) (1.10) (2.13) (0.17) --
- ---------------------------------------------------------------------------------------------------------------------------------
NET ASSET VALUE, END OF PERIOD $ 11.79 $ 10.84 $ 10.72 $ 11.56 $ 9.47
- ---------------------------------------------------------------------------------------------------------------------------------
Total Return (Excludes Sales Charge) 22.24 % 12.74 % 12.47 %(c) 24.21 % (9.08)%(c)
RATIOS/SUPPLEMENTARY DATA:
Net Assets at end of period (000) $8,567 $3,835 $2,545 $1,814 $231
Ratio of expenses to average net assets 2.06 % 2.02 % 1.87 %(d) 1.78 % 1.75 %(d)
Ratio of net investment income (loss) to average
net assets (1.02)% (1.16)% (1.10)%(d) (1.16)% (0.90)%(d)
Ratio of expenses to average net assets* 2.09 % 2.12 % 1.92 %(d) 1.78 % 1.75 %(d)
Ratio of net investment income (loss) to average
net assets* (1.05)% (1.26)% (1.15)%(d) (1.16)% (0.90)%(d)
Portfolio turnover (e) 83.77 % 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.
<TABLE>
<CAPTION>
NOVEMBER 4,
1997 TO
JUNE 30,
CLASS C 1998(a)
<S> <C>
NET ASSET VALUE, BEGINNING OF PERIOD $ 13.03
- ----------------------------------------------------------------------------
Investment Activities:
Net investment income (loss) (0.02)
Net realized and unrealized gains (losses) from
investments 0.29
- ----------------------------------------------------------------------------
Total from Investment Activities 0.27
- ----------------------------------------------------------------------------
Distributions:
Net realized gains (1.33)
- ----------------------------------------------------------------------------
Total Distributions (1.33)
- ----------------------------------------------------------------------------
NET ASSET VALUE, END OF PERIOD $ 11.97
- ----------------------------------------------------------------------------
Total Return (Excludes Sales Charge) 3.08%(b)
RATIOS/SUPPLEMENTARY DATA:
Net Assets at end of period (000) $90
Ratio of expenses to average net assets 2.05%(c)
Ratio of net investment income to average net assets (0.85)%(c)
Ratio of expenses to average net assets* 2.07%(c)
Ratio of net investment income to average net assets* (0.87)%(c)
Portfolio turnover (d) 83.77%
</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) 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.
31
<PAGE> 38
more about the funds
32
Portfolio Quality
- ----------------------------------------------------
The Funds only purchase securities that meet certain rating criteria.
- - >If the Funds invest in municipal bonds, the bonds must be rated as investment
grade.
- - >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.
- - >Corporate bonds generally will be rated in one of the three highest
investment grade categories.
- - >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 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 include:
- - >options, futures contracts, and options on futures contracts
- - >warrants
- - >mortgage-backed securities, including collateralized mortgage obligations and
Real Estate Mortgage Investment Conduits (CMOs and REMICs) and stripped
mortgage-backed securities (IOs and POs)
- - >asset-backed securities
- - >swap, cap and floor transactions
- - >new financial products
- - >currency forwards
- - >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 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. Fixed income securities also are subject to the
risk that the issuer of the security will be unable to meet its repayment
obligation.
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.
<PAGE> 39
how to do business with The One Group
33
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 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."
- - If you intend to hold your shares for six or more years, Class B shares may be
more 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 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 Bank One
Corporation and its affiliates).
- Subsequent investments must be at least $100 ($25 for employees of Bank 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.
<PAGE> 40
34
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 and 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)
- - 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.
- - 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.
<PAGE> 41
35
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 %
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:
<TABLE>
<CAPTION>
----------------------------------------------
CDSC AS A % OF DOLLAR
YEARS SINCE PURCHASE AMOUNT SUBJECT TO CHARGE
----------------------------------------------
<S> <C>
0-1 5.00%
1-2 4.00%
2-3 3.00%
3-4 3.00%
4-5 2.00%
5-6 1.00%
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>
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.
<PAGE> 42
36
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 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.
- - 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 (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:
- The One Group.
- Bank One Corporation and its subsidiaries and affiliates.
<PAGE> 43
37
- 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 Bank 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 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.
<PAGE> 44
38
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.
- - 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.
- - Exchange activity is excessive if it EXCEEDS TWO SUBSTANTIVE EXCHANGE
REDEMPTIONS (WITHIN
<PAGE> 45
39
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.
- - 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.
- -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.
<PAGE> 46
40
- - 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 Bank One Corporation and its affiliates.
- - 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.
- - 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.
<PAGE> 47
shareholder information
41
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.
Bank One Corporation (One First National Plaza, Chicago Illinois, 60670),
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, Bank 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> <C>
Dean Witter For The Benefit Of Selma Large Company Growth Fund 30.88% Record
J Berry & Colin G Berry JTTEN Class C
Church St. Station B PO Box 250
New York, NY 10008-0250
Strafe & Co. Large Company Growth Fund 90.89% Record
Attn: Mutual Funds 0393 Class I
100 E. Broad Street
Columbus, OH 43215-3607
Strafe & Co. Disciplined Value Fund 86.48% Record
Attn: Mutual Funds 0393 Class I
100 E. Broad Street
Columbus, OH 43215-3607
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
Dean Witter For The Benefit Of McKee Income Equity Fund 71.70% Record
Char TR/Lynn A. Hammond & Clare W. Class C
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
</TABLE>
<PAGE> 48
42
<TABLE>
<CAPTION>
PERCENTAGE OF TYPE OF
NAME AND ADDRESS FUND/CLASS OWNERSHIP OWNERSHIP
<S> <C> <C> <C> <C>
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
Banc One Securities Corp. FBO International Equity Index Fund 49.22% Beneficial
The One Investment Solution Class C
733 Greencrest Dr.
Westerville, OH 43081-4903
Dean Witter For The Benefit Of International Equity Index Fund 26.58% Record
Robert M. Lynch & Class C
PO Box 250 Church Street Station
New York, NY 1008-0250
Strafe & Co. International Equity Index Fund 87.62% Record
Attn: Mutual Funds 0393 Class I
100 E. Broad Street
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
</TABLE>
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.
<PAGE> 49
43
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.
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.
-----------------------------------------------------------------------------
<PAGE> 50
organization and management of the funds
44
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 Bank One
Corporation, managed over $59 billion in assets.
For the fiscal year ended June 30, 1998, the Funds paid advisory fees at the
following rates:
<TABLE>
<CAPTION>
---------------------------------------------------------------------------
Annual Rate As Percentage
fund name of Average Daily 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
fund assets of Average Daily 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>
<PAGE> 51
45
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
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 1999 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 anticipates 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 move to Year 2000 will
not have a material impact on its operations.
<PAGE> 52
details about the funds' investment practices and policies
46
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
- --------------------------------------------------------------------------------------------------
<S> <C> <C>
U.S. TREASURY OBLIGATIONS: Bills, notes, bonds, STRIPS, and 1-10 Market
CUBES.
TREASURY RECEIPTS: TRS, TIGRs, and CATS. 1-10 Market
U.S. GOVERNMENT AGENCY SECURITIES: Securities issued by 1-10 Market
agencies and instrumentalities of the U.S. Government. These Credit
include Ginnie Mae, Fannie Mae, and Freddie Mac.
CERTIFICATES OF DEPOSIT: Negotiable instruments with a 1-10 Market
stated 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 Market
at an agreed upon price on an agreed upon date. This is Liquidity
treated as a loan.
REVERSE REPURCHASE AGREEMENT: The sale of a security and the 1-10 Market
simultaneous commitment to buy the security back at an Leverage
agreed 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 1-10 Credit
Fund's total assets. In return the Fund will receive cash, Market
other securities, and/or letters of credit as collateral. Leverage
WHEN-ISSUED SECURITIES AND FORWARD COMMITMENTS: Purchase or 1-10 Market
contract to purchase securities at a fixed price for Leverage
delivery at 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 1-10 Market
convert to common stock. Credit
</TABLE>
<PAGE> 53
47
<TABLE>
<CAPTION>
- ----------------------------------------------------------------------------------------------------
INSTRUMENT FUND CODE RISK TYPE
- ----------------------------------------------------------------------------------------------------
<S> <C> <C>
CALL AND PUT OPTIONS: A call option gives the buyer the 1-10 Management
right to buy, and obligates the seller of the option to Liquidity
sell, a security at a specified price. A put option gives Credit
the buyer the right to sell, and obligates the seller of the Market
option to buy, a security at a specified price. The Funds Leverage
will sell only covered call and secured put options.
FUTURES AND RELATED OPTIONS: A contract providing for the 1-10 Management
future sale and purchase of a specified amount of a Market
specified security, class of securities, or an index at a Credit
specified time in the 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 Management
estate or real estate related loans or interest. Market
Regulatory
Tax
Pre-payment
BANKERS' ACCEPTANCES: Bills of exchange or time drafts drawn 1-10 Credit
on and accepted by a commercial bank. Maturities are Liquidity
generally six months or less. Market
COMMERCIAL PAPER: Secured and unsecured short-term 1-10 Credit
promissory notes issued by corporations and other entities. Liquidity
Maturities generally vary from a few days to nine months. Market
FOREIGN SECURITIES: Stocks issued by foreign companies, as 1-9 Market
well as commercial paper of foreign issuers and obligations Political
of foreign banks, overseas branches of U.S. banks and Liquidity
supranational entities. Includes American Depository Foreign Investment
Receipts.
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 Liquidity
some other period and which may be payable to the Fund on Market
demand.
WARRANTS: Securities, typically issued with preferred stock 1-3, 7-10 Market
or bonds, that give the holder the right to buy a Credit
proportionate amount of common stock at a specified price.
PREFERRED STOCK: A class of stock that generally pays a 1-10 Market
dividend 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 Market
collateralized mortgage obligations ("CMOs"), Real Estate Credit
Mortgage Investment Conduits ("REMICs") and Stripped Regulatory
Mortgage-Backed Securities ("SMBS").
CORPORATE DEBT SECURITIES: Corporate bonds and 1 Market
non-convertible debt securities. Credit
DEMAND FEATURES: Securities that are subject to puts and 1 Market
standby commitments to purchase the securities at a fixed Liquidity
price (usually with accrued interest) within a fixed period Management
of time following demand by a Fund.
ASSET-BACKED SECURITIES: Securities secured by company 1 Pre-payment
receivables, home equity loans, truck and auto loans, Market
leases, credit card receivables and other securities backed Credit
by other 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 Market
simultaneously contracts with the same party to repurchase Regulatory
similar but not 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 Market
rate for a specified period of time, after which the rate Credit
may be subject to periodic adjustments. Regulatory
SWAPS, CAPS AND FLOORS: A Fund may enter into these 1-10 Management
transactions to manage its exposure to changing interest Credit
rates and other factors. Swaps involve an exchange of Liquidity
obligations by two parties. Caps and floors entitle a Market
purchaser to a principal 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.
</TABLE>
<PAGE> 54
48
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------
INSTRUMENT FUND CODE RISK TYPE
- ------------------------------------------------------------------------------------------------------
<S> <C> <C>
NEW FINANCIAL PRODUCTS: New options and futures contracts 1-10 Management
and other financial products continue to be developed and Credit
the Funds may invest in such options, contracts and Market
products. Liquidity
STRUCTURED INSTRUMENTS: Debt securities issued by agencies 1 Market
and instrumentalities of the U.S. government, banks, Liquidity
municipalities, corporations and other businesses whose Management
interest and/or principal payments are indexed to foreign Credit
currency exchange rates, interest rates, or one or more Foreign Investment
other referenced indices.
MUNICIPAL SECURITIES: Securities issued by a state or 1 Market
political subdivision to obtain funds for various public Credit
purposes. Municipal securities include private activity Political
bonds and industrial development bonds, as well as General Tax
Obligation 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 Investment
development and are supported by various governments and
governmental agencies.
CURRENCY FUTURES AND RELATED OPTIONS: The Funds may engage 9 Management
in transactions in financial futures and related options, Liquidity
which are generally described above. The Funds will enter Credit
into these transactions in foreign currencies for hedging Market
purposes only. Political
Leverage
Foreign Investment
FORWARD FOREIGN EXCHANGE TRANSACTIONS: Contractual agreement 9 Management
to purchase or sell one specified currency for another Liquidity
currency at a specified future date and price. The Funds Credit
will enter into forward foreign exchange transactions for Market
hedging purposes only. Political
Leverage
Foreign Investment
STANDARD & POOR'S DEPOSITORY RECEIPTS ("SPDRS"): SPDRs 1-8, 10 Market
represent 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>
<PAGE> 55
49
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. 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
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.
- - 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. 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.
- - 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.
<PAGE> 56
50
- - 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.
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:
- - Securities issued by the U.S. Government, its agencies and instrumentalities
- - Repurchase Agreements
- - Certificates of Deposit
- - Bankers' Acceptances
- - Commercial Paper (rated in one of the two highest rating categories)
- - Variable Rate Master Demand Notes
- - 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.
<PAGE> 57
appendix
51
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 INC. ("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.
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.
<PAGE> 58
52
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
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
<PAGE> 59
53
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 & Short-term municipal securities rated MIG1 or VMIG1 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 & These Short-term municipal securities are of high quality. Margins of
VMIG2 protection are ample although not so large as in the preceding group.
MIG3 & Favorable quality. All security elements are accounted for, but the
VMIG3 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 ad-
<PAGE> 60
54
verse 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
<PAGE> 61
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.
75 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 8500
Boston, MA 02266-8500
LEGAL COUNSEL
Ropes & Gray
One Franklin Square
1301 K Street, N.W.
Suite 800 East
Washington, D.C. 20005
INDEPENDENT ACCOUNTANTS
PricewaterhouseCoopers LLP
100 East Broad Street
Columbus, OH 43215
THE STATEMENT OF ADDITIONAL INFORMATION CON-
TAINS 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.COM) THAT CONTAINS THE
STATEMENT OF ADDITIONAL INFORMATION, MATERIALS
INCORPORATED BY REFERENCE AND OTHER INFORMATION
REGARDING THE ONE GROUP (R).
TOG-F-121
<PAGE> 62
THE ONE GROUP(R) FAMILY OF MUTUAL FUNDS
[GRAPHIC]
BOND FUNDS
COMBINED PROSPECTUS
NOVEMBER 1, 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 mutual funds with a variety of investment
objectives, including income, capital preservation, 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 BANK 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 OR ANY STATE SECURITIES COMMISSION NOR HAS THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED UPON THE
ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION
TO THE CONTRARY IS A CRIMINAL OFFENSE.
O69385
<PAGE> 63
<TABLE>
<S> <C>
A BRIEF PREVIEW OF THE FUNDS................................ 1
ABOUT THE FUNDS............................................. 2
The One Group(R) Intermediate Bond Fund.................. 2
The One Group(R) Income Bond Fund........................ 5
The One Group(R) Government Bond Fund.................... 8
The One Group(R) Ultra Short-Term Income Fund............ 11
The One Group(R) Limited Volatility Bond Fund............ 14
The One Group(R) Treasury & Agency Fund.................. 17
The One Group(R) High Yield Bond Fund.................... 20
MORE ABOUT THE FUNDS........................................ 22
HOW TO DO BUSINESS WITH THE ONE GROUP....................... 25
Purchasing Fund Shares................................... 25
Sales Charges............................................ 27
Sales Charge Reductions and Waivers...................... 29
Exchanging Fund Shares................................... 31
Redeeming Fund Shares.................................... 32
SHAREHOLDER INFORMATION..................................... 34
Voting Rights............................................ 34
Dividend Policies........................................ 35
Tax Treatment of the Funds............................... 35
Tax Treatment of Shareholders............................ 35
Shareholder Inquiries.................................... 36
ORGANIZATION AND MANAGEMENT OF THE FUNDS.................... 37
The Funds................................................ 37
The Board of Trustees.................................... 37
The Advisor.............................................. 37
The Sub-Advisor.......................................... 37
Banc One High Yield Partners--Prior Performance of
Pacholder Associates, Inc.............................. 37
The Distributor.......................................... 39
The Administrator and Sub-Administrator.................. 39
The Transfer Agent, Custodian and Sub-Custodian.......... 39
Year 2000................................................ 39
DETAILS ABOUT THE FUNDS' INVESTMENT PRACTICES AND
POLICIES.................................................. 40
Investment Practices..................................... 40
Investment Risks......................................... 43
Investment Policies...................................... 44
APPENDIX: DESCRIPTION OF RATINGS............................ 45
</TABLE>
table of contents
<PAGE> 64
1
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. Fixed income securities
also are subject to the risk that the issuer of the security
will be unable to meet its payment obligation. 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 Bank 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
Bank 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."
WHO MANAGES THE FUNDS?
Banc One Investment Advisors Corporation ("Banc One Investment
Advisors"), an indirect subsidiary of Bank 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."
<PAGE> 65
The One Group(R)
Intermediate Bond Fund
LOGO 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.
LOGO 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.
LOGO 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."
LOGO 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."
LOGO 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.
SHAREHOLDER EXPENSES
<TABLE>
<CAPTION>
SHAREHOLDER TRANSACTION EXPENSES (1) CLASS A CLASS B CLASS C
<S> <C> <C> <C>
Maximum Sales Charge Imposed on
Purchases (as a percentage of
offering price) 4.50% none none
Maximum Contingent Deferred Sales
Charge (as a percentage of
original purchase price or
redemption proceeds, as
applicable) none(2) 5.00% 1.00%
Redemption Fees none none none
Exchange Fees 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%
12b-1 Fees (after fee waiver) (5) .25% .90% .90%
Other Expenses .22% .22% .22%
Total Fund Operating
Expenses (after fee
waivers) (6) .87% 1.52% 1.52%
<CAPTION>
CLASS I
<S> <C>
none
none
none
none
.40%
none
.22%
.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>
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
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.
2
<PAGE> 66
3
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>
YEAR 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 $ 9.92 $ 9.84 $ 10.01 $ 9.72 $ 10.51 $ 10.09 $ 10.00
- ------------------------------------------------------------------------------------------------------------------------------------
Investment Activities:
Net investment income 0.64 0.65 0.66 0.66 0.60 0.63 0.22
Net realized and unrealized gains (losses)
from investments and futures 0.20 0.08 (0.17) 0.29 (0.67) 0.42 0.08
- ------------------------------------------------------------------------------------------------------------------------------------
Total from Investment Activities 0.84 0.73 0.49 0.95 (0.07) 1.05 0.30
- ------------------------------------------------------------------------------------------------------------------------------------
Distributions:
Net investment income (0.64) (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 (0.64) (0.65) (0.66) (0.66) (0.72) (0.63) (0.21)
- ------------------------------------------------------------------------------------------------------------------------------------
NET ASSET VALUE, END OF PERIOD $ 10.12 $ 9.92 $ 9.84 $ 10.01 $ 9.72 $ 10.51 $ 10.09
- ------------------------------------------------------------------------------------------------------------------------------------
Total Return 8.71% 7.68% 4.95% 10.15% (0.74)% 10.67% 3.00%(d)
RATIOS/SUPPLEMENTARY DATA:
Net Assets at end of period (000) $ 680,800 $ 522,423 $ 230,812 $ 191,216 $ 98,483 $ 44,252 $ 23,457
Ratio of expenses to average net assets 0.56% 0.54% 0.54% 0.56% 0.32% 0.39% 0.36%(b)
Ratio of net investment income to average
net assets 6.37% 6.63% 6.56% 6.88% 6.04% 6.14% 6.99%(b)
Ratio of expenses to average net assets* 0.83% 0.81% 0.87% 0.99% 0.87% 1.17% 1.33%(b)
Ratio of net investment income to average
net assets* 6.10% 6.36% 6.23% 6.45% 5.49% 5.36% 6.02%(b)
Portfolio Turnover (a) 60.08% 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.
<TABLE>
<CAPTION>
YEAR ENDED JUNE 30,
-------------------------------------------------------
CLASS A 1998 1997 1996 1995(a)
- ---------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
NET ASSET VALUE, BEGINNING OF PERIOD $ 9.95 $ 9.87 $ 10.04 $ 9.45
- ---------------------------------------------------------------------------------------------------------------------
Investment Activities:
Net investment income 0.62 0.63 0.64 0.37
Net realized and unrealized gains (losses) from
investments and futures 0.20 0.08 (0.17) 0.59
- ---------------------------------------------------------------------------------------------------------------------
Total from Investment Activities 0.82 0.71 0.47 0.96
- ---------------------------------------------------------------------------------------------------------------------
Distributions:
Net investment income (0.62) (0.63) (0.64) (0.37)
- ---------------------------------------------------------------------------------------------------------------------
Total Distributions (0.62) (0.63) (0.64) (0.37)
- ---------------------------------------------------------------------------------------------------------------------
NET ASSET VALUE, END OF PERIOD $ 10.15 $ 9.95 $ 9.87 $ 10.04
- ---------------------------------------------------------------------------------------------------------------------
Total Return (Excludes Sales Charge) 8.47% 7.40% 4.77% 10.29%(b)
RATIOS/SUPPLEMENTARY DATA:
Net Assets at end of period (000) $ 44,567 $ 18,763 $ 13,706 $ 4,941
Ratio of expenses to average net assets 0.81% 0.78% 0.79% 0.83%(c)
Ratio of net investment income to average net assets 6.12% 6.35% 6.31% 6.64%(c)
Ratio of expenses to average net assets* 1.18% 1.16% 1.22% 1.66%(c)
Ratio of net investment income to average net assets* 5.75% 5.97% 5.88% 5.81%(c)
Portfolio Turnover (d) 60.08% 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.
<PAGE> 67
4
THE ONE GROUP(R) INTERMEDIATE BOND FUND FINANCIAL HIGHLIGHTS
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
YEAR ENDED JUNE 30,
------------------------------------------------------------
CLASS B 1998 1997 1996 1995(a)
- --------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
NET ASSET VALUE, BEGINNING OF PERIOD $ 9.92 $ 9.83 $ 10.01 $ 9.45
- --------------------------------------------------------------------------------------------------------------------------
Investment Activities:
Net investment income 0.55 0.56 0.58 0.23
Net realized and unrealized gains (losses) from
investments and futures 0.20 0.09 (0.18) 0.56
- --------------------------------------------------------------------------------------------------------------------------
Total from Investment Activities 0.75 0.65 0.40 0.79
- --------------------------------------------------------------------------------------------------------------------------
Distributions:
Net investment income (0.55) (0.56) (0.58) (0.23)
- --------------------------------------------------------------------------------------------------------------------------
Total Distributions (0.55) (0.56) (0.58) (0.23)
- --------------------------------------------------------------------------------------------------------------------------
NET ASSET VALUE, END OF PERIOD $ 10.12 $ 9.92 $ 9.83 $ 10.01
- --------------------------------------------------------------------------------------------------------------------------
Total Return (Excludes Sales Charge) 7.78% 6.83% 4.10% 8.22%(b)
RATIOS/SUPPLEMENTARY DATA:
Net Assets at end of period (000) $ 19,924 $ 10,152 $ 6,077 $ 266
Ratio of expenses to average net assets 1.46% 1.44% 1.44% 1.51%(c)
Ratio of net investment income to average net assets 5.47% 5.71% 5.66% 6.15%(c)
Ratio of expenses to average net assets* 1.83% 1.81% 1.87% 2.34%(c)
Ratio of net investment income to average net assets* 5.10% 5.34% 5.23% 5.31%(c)
Portfolio Turnover (d) 60.08% 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.
<TABLE>
<CAPTION>
NOVEMBER 4,
1997 TO
JUNE 30,
CLASS C 1998(a)
- -------------------------------------------------------------------------------
<S> <C>
NET ASSET VALUE, BEGINNING OF PERIOD $ 10.07
- -------------------------------------------------------------------------------
Investment Activities:
Net investment income 0.73
Net realized and unrealized gains (losses) from
investments and futures 0.07
- -------------------------------------------------------------------------------
Total from Investment Activities 0.80
- -------------------------------------------------------------------------------
Distributions:
Net investment income (0.73)
- -------------------------------------------------------------------------------
Total Distributions (0.73)
- -------------------------------------------------------------------------------
NET ASSET VALUE, END OF PERIOD $ 10.14
- -------------------------------------------------------------------------------
Total Return (Excludes Sales Charge) 8.20%(b)
RATIOS/SUPPLEMENTARY DATA:
Net Assets at end of period (000) $ 868
Ratio of expenses to average net assets 1.46%(c)
Ratio of net investment income to average net assets 5.44%(c)
Ratio of expenses to average net assets* 1.82%(c)
Ratio of net investment income to average net assets* 5.08%
Portfolio Turnover (d) 60.08%
</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.
<PAGE> 68
5
The One Group(R)
INCOME BOND FUND
- --------------------------------------------------------------------------------
[LOGO] 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.
[LOGO] 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.
[LOGO] 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."
[LOGO] 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."
[LOGO] 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.
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 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.
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.
<PAGE> 69
6
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>
YEAR ENDED JUNE 30,
----------------------------------------------------------------------
CLASS I 1998 1997 1996 1995 1994 1993
- ---------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
NET ASSET VALUE, BEGINNING OF PERIOD $ 9.42 $ 9.33 $ 9.54 $ 9.23 $ 10.43 $ 10.18
- ---------------------------------------------------------------------------------------------------------------------------
Investment Activities:
Net investment income 0.64 0.64 0.65 0.64 0.54 0.66
Net realized and unrealized gains (losses) from
investments and futures 0.09 0.09 (0.21) 0.35 (0.74) 0.38
- ---------------------------------------------------------------------------------------------------------------------------
Total from Investment Activities 0.73 0.73 0.44 0.99 (0.20) 1.04
- ---------------------------------------------------------------------------------------------------------------------------
Distributions:
Net investment income (0.64) (0.64) (0.65) (0.64) (0.57) (0.66)
Net realized gains -- -- -- (0.04) (0.43) (0.13)
- ---------------------------------------------------------------------------------------------------------------------------
Total Distributions (0.64) (0.64) (0.65) (0.68) (1.00) (0.79)
- ---------------------------------------------------------------------------------------------------------------------------
NET ASSET VALUE, END OF PERIOD $ 9.51 $ 9.42 $ 9.33 $ 9.54 $ 9.23 $ 10.43
- ---------------------------------------------------------------------------------------------------------------------------
Total Return 7.97% 8.10% 4.62% 11.29% (2.54)% 10.62%
RATIOS/SUPPLEMENTARY DATA:
Net Assets at end of period (000) $ 898,263 $ 730,754 $ 520,239 $ 474,124 $ 560,071 $ 483,291
Ratio of expenses to average net assets 0.61% 0.60% 0.59% 0.59% 0.53% 0.56%
Ratio of net investment income to average net
assets 6.73% 6.85% 6.76% 6.94% 5.35% 6.44%
Ratio of expenses to average net assets* 0.81% 0.80% 0.81% 0.86% 0.85% 0.90%
Ratio of net investment income to average net
assets* 6.53% 6.65% 6.54% 6.67% 5.03% 6.10%
Portfolio Turnover (a) 30.83% 55.18% 95.52% 262.25% 131.04% 143.52%
</TABLE>
<TABLE>
<CAPTION>
YEAR ENDED JUNE 30,
----------------------------------------------
CLASS I 1992 1991 1990 1989
- ---------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
NET ASSET VALUE, BEGINNING OF PERIOD $ 9.59 $ 9.49 $ 9.92 $ 9.88
- ---------------------------------------------------------------------------------------------------
Investment Activities:
Net investment income 0.71 0.79 0.80 0.64
Net realized and unrealized gains (losses) from
investments and futures 0.59 0.06 (0.20) 0.04
- ---------------------------------------------------------------------------------------------------
Total from Investment Activities 1.30 0.85 0.60 0.68
- ---------------------------------------------------------------------------------------------------
Distributions:
Net investment income (0.71) (0.75) (0.80) (0.64)
Net realized gains -- -- (0.23) --
- ---------------------------------------------------------------------------------------------------
Total Distributions (0.71) (0.75) (1.03) (0.64)
- ---------------------------------------------------------------------------------------------------
NET ASSET VALUE, END OF PERIOD $ 10.18 $ 9.59 $ 9.49 $ 9.92
- ---------------------------------------------------------------------------------------------------
Total Return 13.85% 9.20% 6.37% 7.32%
RATIOS/SUPPLEMENTARY DATA:
Net Assets at end of period (000) $ 376,898 $ 269,856 $ 57,308 $ 49,128
Ratio of expenses to average net assets 0.49% 0.29% 0.40% 0.45%
Ratio of net investment income to average net
assets 7.18% 7.88% 8.27% 8.66%
Ratio of expenses to average net assets* 1.04% 0.89% 1.00% 1.06%
Ratio of net investment income to average net
assets* 6.63% 7.28% 7.67% 8.05%
Portfolio Turnover (a) 32.50% 39.63% 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.
<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 $ 9.41 $ 9.32 $ 9.54 $ 9.22 $ 10.43 $ 10.16 $ 10.06
- ------------------------------------------------------------------------------------------------------------------------------------
Investment Activities:
Net investment income 0.62 0.62 0.63 0.61 0.52 0.63 0.26
Net realized and unrealized gains (losses)
from investments and futures 0.10 0.09 (0.23) 0.36 (0.75) 0.41 0.11
- ------------------------------------------------------------------------------------------------------------------------------------
Total from Investment Activities 0.72 0.71 0.40 0.97 (0.23) 1.04 0.37
- ------------------------------------------------------------------------------------------------------------------------------------
Distributions:
Net investment income (0.62) (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) (0.62) (0.65) (0.98) (0.77) (0.27)
- ------------------------------------------------------------------------------------------------------------------------------------
NET ASSET VALUE, END OF PERIOD $ 9.51 $ 9.41 $ 9.32 $ 9.54 $ 9.22 $ 10.43 $ 10.16
- ------------------------------------------------------------------------------------------------------------------------------------
Total Return (Excludes Sales Charge) 7.82% 7.85% 4.26% 10.90% (2.33)% 10.58% 10.16%(b)
RATIOS/SUPPLEMENTARY DATA:
Net Assets at end of period (000) $ 14,738 $ 14,325 $ 10,127 $ 6,796 $ 5,347 $ 7,064 $ 188
Ratio of expenses to average net assets 0.86% 0.85% 0.84% 1.01% 0.78% 0.77% 0.97%(b)
Ratio of net investment income to average
net assets 6.49% 6.59% 6.51% 6.57% 5.25% 6.12% 6.58%(b)
Ratio of expenses to average net assets* 1.16% 1.15% 1.16% 1.38% 1.20% 1.26% 1.27%(b)
Ratio of net investment income to average
net assets* 6.19% 6.29% 6.19% 6.20% 4.83% 5.63% 6.28%(b)
Portfolio Turnover (a) 30.83% 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.
<PAGE> 70
7
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 $ 9.49 $ 9.40 $ 9.62 $ 9.29 $ 9.97
- ----------------------------------------------------------------------------------------------------------------------------
Investment Activities:
Net investment income 0.56 0.56 0.56 0.56 0.17
Net realized and unrealized gains (losses) from
investments and futures 0.10 0.09 (0.21) 0.38 (0.70)
- ----------------------------------------------------------------------------------------------------------------------------
Total from Investment Activities 0.66 0.65 0.35 0.94 (0.53)
- ----------------------------------------------------------------------------------------------------------------------------
Distributions:
Net investment income (0.56) (0.56) (0.57) (0.57) (0.15)
Net realized gains -- -- -- (0.04) --
- ----------------------------------------------------------------------------------------------------------------------------
Total Distributions (0.56) (0.56) (0.57) (0.61) (0.15)
- ----------------------------------------------------------------------------------------------------------------------------
NET ASSET VALUE, END OF PERIOD $ 9.59 $ 9.49 $ 9.40 $ 9.62 $ 9.29
- ----------------------------------------------------------------------------------------------------------------------------
Total Return (Excludes Sales Charge) 7.13% 7.15% 3.65% 10.63% (5.29)%(b)
RATIOS/SUPPLEMENTARY DATA:
Net Assets at end of period (000) $ 15,511 $ 10,873 $ 6,110 $ 1,887 $ 723
Ratio of expenses to average net assets 1.51% 1.50% 1.49% 1.49% 1.45%(c)
Ratio of net investment income to average net assets 5.83% 5.95% 5.86% 6.16% 5.20%(c)
Ratio of expenses to average net assets* 1.81% 1.80% 1.81% 1.86% 1.84%(c)
Ratio of net investment income to average net assets* 5.53% 5.65% 5.54% 5.80% 4.81%(c)
Portfolio Turnover (d) 30.83% 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.
<PAGE> 71
The One Group(R)
Government Bond Fund
LOGO INVESTMENT OBJECTIVE
The Fund seeks a high level of
current income with liquidity and
safety of principal.
LOGO 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.
LOGO 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."
LOGO 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."
LOGO 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.
SHAREHOLDER EXPENSES
<TABLE>
<CAPTION>
SHAREHOLDER TRANSACTION EXPENSES (1) CLASS A CLASS B CLASS C
<S> <C> <C> <C>
Maximum Sales Charge Imposed on
Purchases (as a percentage of
offering price) 4.50% none none
Maximum Contingent Deferred Sales
Charge (as a percentage of
original purchase price or
redemption proceeds, as
applicable) none(2) 5.00% 1.00%
Redemption Fees none none none
Exchange Fees none none none
ANNUAL OPERATING EXPENSES (3)
(as a percentage of average daily
net assets)
Investment Advisory Fees .45% .45% .45%
12b-1 Fees (after fee waiver) (4) .25% .90% .90%
Other Expenses .24% .24% .24%
Total Fund Operating Expenses (after
fee waiver) (5) .94% 1.59% 1.59%
<CAPTION>
CLASS I
<S> <C>
none
none
none
none
.45%
none
.24%
.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>
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.
8
<PAGE> 72
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 $ 9.69 $ 9.56 $ 9.81 $ 9.35 $ 10.15 $ 10.00
- ---------------------------------------------------------------------------------------------------------------------------------
Investment Activities:
Net investment income 0.60 0.62 0.62 0.62 0.51 0.20
Net realized and unrealized gains (losses)
from investments and futures 0.42 0.13 (0.25) 0.46 (0.77) 0.15
- ---------------------------------------------------------------------------------------------------------------------------------
Total from Investment Activities 1.02 0.75 0.37 1.08 (0.26) 0.35
- ---------------------------------------------------------------------------------------------------------------------------------
Distributions:
Net investment income (0.60) (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 (0.60) (0.62) (0.62) (0.62) (0.54) (0.20)
- ---------------------------------------------------------------------------------------------------------------------------------
NET ASSET VALUE, END OF PERIOD $ 10.11 $ 9.69 $ 9.56 $ 9.81 $ 9.35 $ 10.15
- ---------------------------------------------------------------------------------------------------------------------------------
Total Return 10.81% 8.10% 3.81% 12.04% (2.73)% 9.03%(b)
RATIOS/SUPPLEMENTARY DATA:
Net Assets at end of period (000) $851,517 $724,423 $677,326 $379,826 $209,692 $52,152
Ratio of expenses to average net assets 0.62% 0.62% 0.68% 0.71% 0.68% 0.69%(b)
Ratio of net investment income to average net
assets 6.05% 6.45% 6.34% 6.65% 5.13% 5.43%(b)
Ratio of expenses to average net assets* 0.67% 0.68% 0.69% 0.73% 0.71% 1.05%(b)
Ratio of net investment income to average net
assets* 6.00% 6.39% 6.33% 6.63% 5.10% 5.07%(b)
Portfolio Turnover (c) 91.49% 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.
<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 $ 9.69 $ 9.56 $ 9.81 $ 9.35 $ 10.17 $ 10.22
- ---------------------------------------------------------------------------------------------------------------------------------
Investment Activities:
Net investment income 0.58 0.60 0.60 0.61 0.48 0.17
Net realized and unrealized gains (losses)
from investments and futures 0.42 0.13 (0.25) 0.45 (0.79) (0.05)
- ---------------------------------------------------------------------------------------------------------------------------------
Total from Investment Activities 1.00 0.73 0.35 1.06 (0.31) 0.12
- ---------------------------------------------------------------------------------------------------------------------------------
Distributions:
Net investment income (0.58) (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 (0.58) (0.60) (0.60) (0.60) (0.51) (0.17)
- ---------------------------------------------------------------------------------------------------------------------------------
NET ASSET VALUE, END OF PERIOD $ 10.11 $ 9.69 $ 9.56 $ 9.81 $ 9.35 $ 10.17
- ---------------------------------------------------------------------------------------------------------------------------------
Total Return (Excludes Sales Charge) 10.54% 7.83% 3.58% 11.84% (3.16)% 5.35%(b)
RATIOS/SUPPLEMENTARY DATA:
Net Assets at end of period (000) $31,548 $34,727 $38,800 $8,130 $1,690 $840
Ratio of expenses to average net assets 0.87% 0.87% 0.93% 0.97% 0.92% 0.95%(b)
Ratio of net investment income to average net
assets 5.80% 6.20% 6.09% 6.46% 4.84% 5.56%(b)
Ratio of expenses to average net assets* 1.02% 1.03% 1.04% 1.09% 1.05% 1.44%(b)
Ratio of net investment income to average net
assets* 5.65% 6.04% 5.98% 6.34% 4.71% 5.07%(b)
Portfolio Turnover (c) 91.49% 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.
9
<PAGE> 73
10
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 $ 9.69 $ 9.56 $ 9.81 $ 9.35 $ 10.04
- ------------------------------------------------------------------------------------------------------------------------------------
Investment Activities:
Net investment income 0.52 0.54 0.54 0.55 0.18
Net realized and unrealized gains (losses) from
investments and futures 0.42 0.13 (0.25) 0.46 (0.69)
- ------------------------------------------------------------------------------------------------------------------------------------
Total from Investment Activities 0.94 0.67 0.29 1.01 (0.51)
- ------------------------------------------------------------------------------------------------------------------------------------
Distributions:
Net investment income (0.52) (0.54) (0.54) (0.55) (0.16)
In excess of net investment income -- -- -- -- (0.02)
- ------------------------------------------------------------------------------------------------------------------------------------
Total Distributions (0.52) (0.54) (0.54) (0.55) (0.18)
- ------------------------------------------------------------------------------------------------------------------------------------
NET ASSET VALUE, END OF PERIOD $ 10.11 $ 9.69 $ 9.56 $ 9.81 $ 9.35
- ------------------------------------------------------------------------------------------------------------------------------------
Total Return (Excludes Sales Charge) 9.86% 7.14% 2.95% 11.20% (4.99)%(b)
RATIOS/SUPPLEMENTARY DATA:
Net Assets at end of period (000) $ 20,922 $ 11,729 $ 10,782 $ 2,513 $ 656
Ratio of expenses to average net assets 1.52% 1.52% 1.58% 1.62% 1.52%(c)
Ratio of net investment income to average net assets 5.14% 5.55% 5.44% 5.76% 4.60%(c)
Ratio of expenses to average net assets* 1.67% 1.68% 1.69% 1.74% 1.63%(c)
Ratio of net investment income to average net assets 4.99% 5.39% 5.33% 5.64% 4.49%(c)
Portfolio Turnover (d) 91.49% 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.
<PAGE> 74
The One Group(R)
Ultra Short-Term Income Fund
LOGO 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.
LOGO 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.
LOGO 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."
LOGO 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."
LOGO 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.
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 (3)
(as a percentage of average daily
net assets)
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:
<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.
11
<PAGE> 75
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 $ 9.87 $ 9.79 $ 9.84 $ 9.85 $ 10.03 $ 10.00
- ---------------------------------------------------------------------------------------------------------------------------------
Investment Activities:
Net investment income 0.59 0.62 0.62 0.55 0.36 0.17
Net realized and unrealized gains (losses)
from investments and futures (0.01) 0.05 (0.07) (0.05) (0.15) 0.03
- ---------------------------------------------------------------------------------------------------------------------------------
Total from Investment Activities 0.58 0.67 0.55 0.50 0.21 0.20
- ---------------------------------------------------------------------------------------------------------------------------------
Distributions:
Net investment income (0.58) (0.59) (0.60) (0.48) (0.37) (0.17)
In excess of net investment income -- -- -- (0.03) (0.02) --
- ---------------------------------------------------------------------------------------------------------------------------------
Total Distributions (0.58) (0.59) (0.60) (0.51) (0.39) (0.17)
- ---------------------------------------------------------------------------------------------------------------------------------
NET ASSET VALUE, END OF PERIOD $ 9.87 $ 9.87 $ 9.79 $ 9.84 $ 9.85 $ 10.03
- ---------------------------------------------------------------------------------------------------------------------------------
Total Return 6.00% 7.14% 5.71% 5.14% 2.16% 4.93%(b)
RATIOS/SUPPLEMENTARY DATA:
Net Assets at end of period (000) $188,133 $114,413 $57,276 $51,050 $139,593 $154,413
Ratio of expenses to average net assets 0.30% 0.35% 0.45% 0.61% 0.65% 0.58%(b)
Ratio of net investment income to average net
assets 5.92% 6.02% 6.20% 5.18% 3.70% 4.71%(b)
Ratio of expenses to average net assets* 0.81% 0.81% 1.06% 1.01% 0.81% 1.03%(b)
Ratio of net investment income to average net
assets* 5.41% 5.56% 5.59% 4.78% 3.54% 4.26%(b)
Portfolio Turnover (c) 41.15% 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 $ 9.87 $ 9.78 $ 9.83 $ 9.84 $ 10.03 $ 10.00
- ---------------------------------------------------------------------------------------------------------------------------------
Investment Activities:
Net investment income 0.56 0.58 0.58 0.52 0.36 0.14
Net realized and unrealized gains (losses)
from investments and futures (0.01) 0.09 (0.06) (0.06) (0.17) 0.03
- ---------------------------------------------------------------------------------------------------------------------------------
Total from Investment Activities 0.55 0.67 0.52 0.46 0.19 0.17
- ---------------------------------------------------------------------------------------------------------------------------------
Distributions:
Net investment income (0.55) (0.58) (0.57) (0.46) (0.34) (0.14)
In excess of net investment income -- -- -- (0.01) (0.04) --
- ---------------------------------------------------------------------------------------------------------------------------------
Total Distributions (0.55) (0.58) (0.57) (0.47) (0.38) (0.14)
- ---------------------------------------------------------------------------------------------------------------------------------
NET ASSET VALUE, END OF PERIOD $ 9.87 $ 9.87 $ 9.78 $ 9.83 $ 9.84 $ 10.03
- ---------------------------------------------------------------------------------------------------------------------------------
Total Return (Excludes Sales Charge) 5.75% 7.00% 5.42% 4.84% 1.95% 4.78%(b)
RATIOS/SUPPLEMENTARY DATA:
Net Assets at end of period (000) $24,747 $29,643 $3,969 $4,631 $19,053 $3,106
Ratio of expenses to average net assets 0.54% 0.61% 0.70% 0.86% 0.89% 0.81%(b)
Ratio of net investment income to average net
assets 5.66% 5.78% 5.95% 4.88% 3.54% 4.47%(b)
Ratio of expenses to average net asset* 1.15% 1.17% 1.41% 1.36% 1.14% 1.34%(b)
Ratio of net investment income to average net
asset* 5.05% 5.22% 5.24% 4.38% 3.29% 3.95%(b)
Portfolio Turnover (c) 41.15% 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 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.
12
<PAGE> 76
13
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 $ 9.81 $ 9.76 $ 9.84 $ 9.86 $ 9.98
- ------------------------------------------------------------------------------------------------------------------------------------
Investment Activities:
Net investment income 0.52 0.54 0.52 0.47 0.12
Net realized and unrealized gains (losses) from
investments and futures (0.01) 0.05 (0.07) (0.04) (0.11)
- ------------------------------------------------------------------------------------------------------------------------------------
Total from Investment Activities 0.51 0.59 0.45 0.43 0.01
- ------------------------------------------------------------------------------------------------------------------------------------
Distributions:
Net investment income (0.51) (0.54) (0.53) (0.45) (0.12)
In excess of net investment income -- -- -- -- (0.01)
- ------------------------------------------------------------------------------------------------------------------------------------
Total Distributions (0.51) (0.54) (0.53) (0.45) (0.13)
- ------------------------------------------------------------------------------------------------------------------------------------
NET ASSET VALUE, END OF PERIOD $ 9.81 $ 9.81 $ 9.76 $ 9.84 $ 9.86
- ------------------------------------------------------------------------------------------------------------------------------------
Total Return (Excludes Sales Charge 5.32% 6.22% 4.63% 4.77% (0.09)%(b)
RATIOS/SUPPLEMENTARY DATA:
Net Assets at end of period (000) $ 4,531 $ 2,818 $ 1,144 $ 160 $ 15
Ratio of expenses to average net assets 0.99% 1.07% 1.20% 1.31% 1.41%(c)
Ratio of net investment income to average net assets 5.23% 5.18% 5.45% 4.91% 3.49%(c)
Ratio of expenses to average net assets* 1.75% 1.81% 2.06% 1.96% 1.83%(c)
Ratio of net investment income to average net assets* 4.47% 4.44% 4.59% 4.26% 3.07%(c)
Portfolio Turnover (d) 41.15% 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.
<PAGE> 77
The One Group(R)
Limited Volatility Bond Fund
LOGO INVESTMENT OBJECTIVE
The Fund seeks current income
consistent with preservation of
capital through investment in high
and medium-grade fixed-income
securities.
LOGO 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.
LOGO 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."
LOGO 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. Also, 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."
LOGO 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.
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 (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% .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:
<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.
14
<PAGE> 78
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
<S> <C> <C> <C> <C> <C> <C>
NET ASSET VALUE, BEGINNING OF PERIOD $ 10.47 $ 10.42 $ 10.53 $ 10.33 $ 10.87 $ 10.72
- ------------------------------------------------------------------------------------------------------------------------
Investment Activities:
Net investment income 0.63 0.63 0.64 0.60 0.54 0.61
Net realized and unrealized gains
(losses) from investments and
futures 0.04 0.05 (0.11) 0.19 (0.45) 0.25
- ------------------------------------------------------------------------------------------------------------------------
Total from Investment Activities 0.67 0.68 0.53 0.79 0.09 0.86
- ------------------------------------------------------------------------------------------------------------------------
Distributions:
Net investment income (0.63) (0.63) (0.64) (0.59) (0.55) (0.62)
In excess of net investment income -- -- -- -- (0.02) --
Net realized gains -- -- -- -- (0.06) (0.09)
- ------------------------------------------------------------------------------------------------------------------------
Total Distributions (0.63) (0.63) (0.64) (0.59) (0.63) (0.71)
- ------------------------------------------------------------------------------------------------------------------------
NET ASSET VALUE, END OF PERIOD $ 10.51 $ 10.47 $ 10.42 $ 10.53 $ 10.33 $ 10.87
- ------------------------------------------------------------------------------------------------------------------------
Total Return 6.59% 6.75% 5.13% 7.96% 0.79% 8.27%
RATIOS/SUPPLEMENTARY DATA:
Net Assets at end of period (000) $592,669 $563,979 $604,916 $410,746 $447,394 $397,820
Ratio of expenses to average net
assets 0.53% 0.51% 0.51% 0.52% 0.50% 0.56%
Ratio of net investment income to
average net assets 6.01% 6.06% 6.06% 5.82% 5.10% 5.70%
Ratio of expenses to average net
assets* 0.82% 0.81% 0.82% 0.85% 0.85% 0.90%
Ratio of net investment income to
average net assets* 5.72% 5.76% 5.75% 5.49% 4.75% 5.36%
Portfolio Turnover (a) 56.99% 66.61% 75.20% 76.43% 30.61% 40.28%
<CAPTION>
YEAR ENDED JUNE 30,
-----------------------
CLASS I 1992 1991
<S> <C> <C>
NET ASSET VALUE, BEGINNING OF PERIOD $ 10.26 $ 10.00
- ---------------------------------------------------------------------------
Investment Activities:
Net investment income 0.70 0.58
Net realized and unrealized gains
(losses) from investments and
futures 0.47 0.25
- --------------------------------------------------------------------------------------
Total from Investment Activities 1.17 0.83
- -------------------------------------------------------------------------------------------------
Distributions:
Net investment income (0.70) (0.57)
In excess of net investment income -- --
Net realized gains (0.01) --
- ------------------------------------------------------------------------------------------------------------
Total Distributions (0.71) (0.57)
- -----------------------------------------------------------------------------------------------------------------------
NET ASSET VALUE, END OF PERIOD $ 10.72 $ 10.26
- ------------------------------------------------------------------------------------------------------------------------
Total Return 11.75% 9.76%(b)
RATIOS/SUPPLEMENTARY DATA:
Net Assets at end of period (000) $301,907 $154,991
Ratio of expenses to average net
assets 0.52% 0.32%(b)
Ratio of net investment income to
average net assets 6.63% 7.49%(b)
Ratio of expenses to average net
assets* 1.04% 0.92%(b)
Ratio of net investment income to
average net assets* 6.11% 6.89%(b)
Portfolio Turnover (a) 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.
<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 $ 10.46 $ 10.41 $ 10.52 $ 10.32 $ 10.87 $ 10.72 $ 10.61
- ---------------------------------------------------------------------------------------------------------------------------------
Investment Activities:
Net investment income 0.61 0.61 0.63 0.56 0.52 0.59 0.24
Net realized and unrealized
gains (losses) from
investments and futures 0.04 0.05 (0.13) 0.21 (0.46) 0.24 0.13
- ---------------------------------------------------------------------------------------------------------------------------------
Total from Investment Activities 0.65 0.66 0.50 0.77 0.06 0.83 0.37
- ---------------------------------------------------------------------------------------------------------------------------------
Distributions:
Net investment income (0.61) (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) (0.61) (0.57) (0.61) (0.68) (0.26)
- ---------------------------------------------------------------------------------------------------------------------------------
NET ASSET VALUE, END OF PERIOD $ 10.50 $ 10.46 $ 10.41 $ 10.52 $ 10.32 $ 10.87 $ 10.72
- ---------------------------------------------------------------------------------------------------------------------------------
Total Return (Excludes Sales
Charge) 6.32% 6.47% 4.86% 7.67% 0.49% 8.04% 9.84%(b)
RATIOS/SUPPLEMENTARY DATA:
Net Assets at end of period
(000) $15,582 $20,055 $21,343 $12,516 $15,216 $15,719 $161
Ratio of expenses to average net
assets 0.78% 0.76% 0.76% 0.77% 0.75% 0.76% 0.99%(b)
Ratio of net investment income
to average net assets 5.77% 5.81% 5.81% 5.57% 4.92% 5.35% 5.95%(b)
Ratio of expenses to average net
assets* 1.17% 1.16% 1.17% 1.20% 1.20% 1.27% 1.29%(b)
Ratio of net investment income
to average net assets* 5.38% 5.41% 5.40% 5.14% 4.47% 4.84% 5.65%(b)
Portfolio Turnover (a) 56.99% 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.
15
<PAGE> 79
16
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> <C>
NET ASSET VALUE, BEGINNING OF PERIOD $ 10.53 $ 10.49 $ 10.60 $ 10.40 $ 10.78
- ------------------------------------------------------------------------------------------------------------------------------------
Investment Activities:
Net investment income 0.58 0.55 0.55 0.53 0.17
Net realized and unrealized gains (losses) from
investments and futures 0.04 0.04 (0.10) 0.19 (0.37)
- ------------------------------------------------------------------------------------------------------------------------------------
Total from Investment Activities 0.62 0.59 0.45 0.72 (0.20)
- ------------------------------------------------------------------------------------------------------------------------------------
Distributions:
Net investment income (0.58) (0.55) (0.56) (0.52) (0.15)
In excess of net realized gains -- -- -- -- (0.03)
- ------------------------------------------------------------------------------------------------------------------------------------
Total Distributions (0.58) (0.55) (0.56) (0.52) (0.18)
- ------------------------------------------------------------------------------------------------------------------------------------
NET ASSET VALUE, END OF PERIOD $ 10.57 $ 10.53 $ 10.49 $ 10.60 $ 10.40
- ------------------------------------------------------------------------------------------------------------------------------------
Total Return (Excludes Sales Charge) 5.98% 5.74% 4.28% 7.18% (1.81)%(b)
RATIOS/SUPPLEMENTARY DATA:
Net Assets at end of period (000) $ 4,851 $ 4,920 $ 4,923 $ 2,906 $ 1,974
Ratio of expenses to average net assets 1.11% 1.20% 1.26% 1.28% 1.26%(c)
Ratio of net investment income to average net assets 5.44% 5.21% 5.31% 5.10% 4.39%(c)
Ratio of expenses to average net assets* 1.64% 1.81% 1.82% 1.86% 1.86%(c)
Ratio of net investment income to average net assets* 4.91% 4.60% 4.75% 4.52% 3.79%(c)
Portfolio Turnover (d) 56.99% 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.
<PAGE> 80
17
The One Group(R)
TREASURY & AGENCY FUND
- --------------------------------------------------------------------------------
[LOGO] 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.
[LOGO] 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.
[LOGO] 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."
[LOGO] 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."
[LOGO] 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.
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 (3) (as a
percentage of average daily net
assets)
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.
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.
<PAGE> 81
18
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> <C>
NET ASSET VALUE, BEGINNING OF PERIOD $ 9.99 $ 10.00
- -----------------------------------------------------------------------------------------------------------
Investment Activities:
Net investment income 0.62 0.28
Net realized and unrealized gains (losses) from
investments and futures 0.15 (0.01)
- -----------------------------------------------------------------------------------------------------------
Total from Investment Activities 0.77 0.27
- -----------------------------------------------------------------------------------------------------------
Distributions:
Net investment income (0.62) (0.28)
Net realized gains (0.05) --
- -----------------------------------------------------------------------------------------------------------
Total Distributions (0.67) (0.28)
- -----------------------------------------------------------------------------------------------------------
NET ASSET VALUE, END OF PERIOD $ 10.09 $ 9.99
- -----------------------------------------------------------------------------------------------------------
Total Return (Excludes Sales Charge) 7.91% 2.78%(b)
RATIOS/SUPPLEMENTARY DATA:
Net Assets at end of period (000) $ 95,073 $ 110,084
Ratio of expenses to average net assets 0.35% 0.45%(c)
Ratio of net investment income to average net assets 6.16% 6.44%(c)
Ratio of expenses to average net assets* 0.65% 0.78%(c)
Ratio of net investment income to average net assets* 5.86% 6.11%(c)
Portfolio Turnover (d) 41.60% 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.
<TABLE>
<CAPTION>
JANUARY 20, 1997
YEAR ENDED THROUGH
CLASS A JUNE 30, 1998 JUNE 30, 1997(a)
- -----------------------------------------------------------------------------------------------------------
<S> <C> <C>
NET ASSET VALUE, BEGINNING OF PERIOD $ 9.98 $ 10.00
- -----------------------------------------------------------------------------------------------------------
Investment Activities:
Net investment income 0.63 0.29
Net realized and unrealized gains (losses) from
investments and futures 0.16 (0.02)
- -----------------------------------------------------------------------------------------------------------
Total from Investment Activities 0.79 0.27
- -----------------------------------------------------------------------------------------------------------
Distributions:
Net investment income (0.63) (0.29)
Net realized gains (0.05) --
- -----------------------------------------------------------------------------------------------------------
Total Distributions (0.68) (0.29)
- -----------------------------------------------------------------------------------------------------------
NET ASSET VALUE, END OF PERIOD $ 10.09 $ 9.98
- -----------------------------------------------------------------------------------------------------------
Total Return (Excludes Sales Charge) 8.10% 2.78%(b)
RATIOS/SUPPLEMENTARY DATA:
Net Assets at end of period (000) $ 35,213 $ 94
Ratio of expenses to average net assets 0.58% 0.71%(c)
Ratio of net investment income to average net assets 5.87% 6.47%(c)
Ratio of expenses to average net assets* 0.98% 1.15%(c)
Ratio of net investment income to average net assets* 5.47% 6.03%(c)
Portfolio Turnover (d) 41.60% 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.
<PAGE> 82
19
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> <C>
NET ASSET VALUE, BEGINNING OF PERIOD $ 9.99 $ 10.00
- ------------------------------------------------------------------------------------------------------------
Investment Activities:
Net investment income 0.58 0.26
Net realized and unrealized gains (losses) from
investments and futures 0.14 (0.01)
- ------------------------------------------------------------------------------------------------------------
Total from Investment Activities 0.72 0.25
- ------------------------------------------------------------------------------------------------------------
Distributions:
Net investment income (0.58) (0.26)
Net realized gains (0.05) --
- ------------------------------------------------------------------------------------------------------------
Total Distributions (0.63) (0.26)
- ------------------------------------------------------------------------------------------------------------
NET ASSET VALUE, END OF PERIOD $ 10.08 $ 9.99
- ------------------------------------------------------------------------------------------------------------
Total Return (Excludes Sales Charge) 7.33% 2.58%(b)
RATIOS/SUPPLEMENTARY DATA:
Net Assets at end of period (000) $ 12,483 $ 80
Ratio of expenses to average net assets 1.08% 1.23%(c)
Ratio of net investment income to average net assets 5.39% 6.30%(c)
Ratio of expenses to average net assets* 1.63% 1.81%(c)
Ratio of net investment income to average net assets* 4.84% 5.72%(c)
Portfolio Turnover (d) 41.60% 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.
<PAGE> 83
The One Group(R)
High Yield Bond Fund
LOGO 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.
LOGO 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.
LOGO 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."
LOGO 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."
LOGO 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
Pacholder Fund, Inc. since 1994 and
as a high yield research analyst
with Pacholder Associates, Inc.
since 1987.
SHAREHOLDER EXPENSES
<TABLE>
<CAPTION>
SHAREHOLDER TRANSACTION EXPENSES (1) CLASS A CLASS B CLASS C
<S> <C> <C> <C>
Maximum Sales Charge Imposed on
Purchases (as a percentage of
offering price) 4.50% none none
Maximum Contingent Deferred Sales
Charge (as a percentage of
original purchase price or
redemption proceeds, as
applicable) none(2) 5.00% 1.00%
Redemption Fees none none none
Exchange Fees none none none
ANNUAL OPERATING EXPENSES (as a
percentage of average daily net
assets)
Investment Advisory Fees (after fee
waiver) (3) .60% .60% .60%
12b-1 Fees (after fee waiver) (4) .25% .90% .90%
Other Expenses (5) .35% .35% .35%
Total Fund Operating Expenses (after
fee waivers) (6) 1.20% 1.85% 1.85%
<CAPTION>
CLASS I
<S> <C>
none
none
none
none
.60%
none
.35%
.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) 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 1.45% for Class A shares, 2.10% for
Class B shares, 2.10% for Class C shares and 1.10% 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.
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.
20
<PAGE> 84
21
THE ONE GROUP(R) HIGH YIELD BOND FUND 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.
<PAGE> 85
more about the funds
22
WHEN THE PROSPECTUS REFERS TO "BONDS," WHAT TYPES OF INVESTMENTS ARE INCLUDED?
"Bonds" include debt instruments with maturities of one year or more 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
- - 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.
- - 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.
- - 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
- - 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.
- - The Income Bond Fund and the High Yield Bond Fund may invest in preferred
stock in any rating category.
MUNICIPAL SECURITIES
- - The Intermediate Bond Fund, 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.
- - 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 which 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.
- - The Income Bond Fund and the High Yield Bond Fund may invest in municipal
securities rated in ANY category.
COMMERCIAL PAPER
- - 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.
- - 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.
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. Fixed income securities also are subject to the
risk that the issuer of the security will be unable to meet its repayment
obligation.
<PAGE> 86
DERIVATIVES: Some of the Funds 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 include:
- - options, futures contracts, and options on futures contracts
- - mortgage-backed securities, including collateralized mortgage obligations and
Real Estate Mortgage Investment Conduits (CMOs and REMICs) and stripped
mortgage-backed securities (IOs and POs)
- - asset-backed securities
- - swap, cap and floor transactions
- - new financial products
- - structured instruments
- - 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.
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
23
<PAGE> 87
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
manager has been responsible for the day-to-day management of the Pacholder
Fund, Inc. since 1994. The 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 Pacholder Fund, Inc. The Sub-Advisor, 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.
24
<PAGE> 88
how to do business with The One Group
25
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 Year's 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 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."
- - 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?
- - 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 for all Funds except the Treasury & Agency
Fund is $1,000 ($100 for employees of Bank One Corporation and its
affiliates). The minimum initial investment for the Treasury & Agency Fund
is $50,000.
- Subsequent investments for all Funds except the Treasury & Agency Fund must
be at least $100 ($25 for employees of Bank One Corporation and its
affiliates). Subsequent investments for the Treasury & Agency Fund must be
at least $1,000.
- You may purchase no more than $250,000 of Class B shares at one time.
- The One Group Services Company may waive these minimums.
<PAGE> 89
26
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 Intermediate Bond 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, 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:
- - 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
CONVERSION FEATURE
- - Your Class B shares automatically convert to Class A shares.
- - 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.
- - Conversion periods are measured from the end of the month in which the Class B
shares were purchased.
<PAGE> 90
27
- - 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 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 % SALES CHARGE AS A % COMMISSION AS A %
AMOUNT OF PURCHASE OF THE OFFERING PRICE OF YOUR INVESTMENT OF OFFERING 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 % SALES CHARGE AS A % COMMISSION AS A %
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.
<PAGE> 91
28
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:
<TABLE>
<CAPTION>
CDSC AS A % OF DOLLAR
AMOUNT SUBJECT TO
YEARS SINCE PURCHASE CHARGE
<S> <C>
0-1 5.00%
1-2 4.00%
2-3 3.00%
3-4 3.00%
4-5 2.00%
5-6 1.00%
more than 6 None
</TABLE>
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:
<TABLE>
<CAPTION>
CDSC AS A % OF DOLLAR
YEARS SINCE PURCHASE AMOUNT SUBJECT TO CHARGE
<S> <C>
0-1 3.00%
1-2 3.00%
2-3 2.00%
3-4 1.00%
more than 4 None
</TABLE>
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:
<TABLE>
<CAPTION>
CDSC AS A % OF DOLLAR
YEARS SINCE PURCHASE AMOUNT SUBJECT TO CHARGE
<S> <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
<PAGE> 92
29
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, 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.
- - 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% 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.
- - 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:
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.
- Bank One Corporation and its subsidiaries and affiliates.
<PAGE> 93
30
- 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 Bank 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 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.
<PAGE> 94
31
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.
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.
- - 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 do 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.
- - Exchange activity is excessive if it EXCEEDS TWO SUBSTANTIVE EXCHANGE
REDEMPTIONS (WITHIN 30 DAYS OF EACH OTHER) WITHIN A TWELVE MONTH PERIOD.
<PAGE> 95
32
- - 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.
- - 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.
- - 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
<PAGE> 96
33
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.
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 Bank One Corporation and its affiliates.
- - 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.
- - 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.
<PAGE> 97
shareholder information
34
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.
Bank One Corporation (One First National Plaza, Chicago Illinois, 60670),
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, Bank 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> <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 St.
Columbus, OH 43215-3607
Strafe & Co. Ultra Short-Term 89.12% Record
Attn: Mutual Funds 0393 Income Fund
100 E. Broad St. 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 Class I
100 E. Broad St.
Columbus, OH 43215-3607
Strafe & Co. Treasury & Agency Fund 99.87% Record
Attn: Mutual Funds Class I
100 E. Broad St.
Columbus, OH 43215-3607
</TABLE>
<PAGE> 98
35
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 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
<PAGE> 99
36
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.
<PAGE> 100
organization and management of the funds
fund name
37
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.
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 Bank 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:
<TABLE>
<CAPTION>
Annual Rate As Percentage
of Average Daily Net Assets
<S> <C> <C> <C>
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%
</TABLE>
THE SUB-ADVISOR
Banc One High Yield Partners, LLC ("Banc One High Yield Partners") 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 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 Partners 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 Partners' 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 -- PRIOR PERFORMANCE OF PACHOLDER ASSOCIATES, INC.
Banc One High Yield 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 High Yield 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.
(1) Prior to August 21, 1998, Pacholder was responsible for advising the
Pacholder Fund through a partnership known as Pacholder & Company.
<PAGE> 101
38
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.
PACHOLDER FUND HISTORICAL PERFORMANCE(1)
<TABLE>
<CAPTION>
TOTAL RETURN
ASSUMING
COMMON STOCK IS
COMMON NOT LEVERAGED
SHAREHOLDERS' THROUGH ISSUANCE CS FIRST BOSTON
RETURN BASED ON OF PREFERRED HIGH YIELD
NAV(2) STOCK(3) INDEX
<S> <C> <C> <C> <C>
1989(4) NA NA
1990 -0.87% -0.87%(2)(5) -6.38%
1991 36.71% 36.71%(2)(5) 43.75%
1992 18.78% 19.38% 16.66%
1993 20.27% 18.40% 18.91%
1994 0.72% 2.21% -0.97%
1995 10.68% 10.41% 17.38%
1996 20.40% 16.63% 12.42%
1997 15.44% 12.00% 12.63%
1/1/98-9/30/98 -6.61% -3.32% -2.10%
1 YR Average Annual -5.50% -2.06% -0.52%
Return(6)
3 YR Average Annual 9.15% 8.36% 8.44%
Return(6)
5 YR Average Annual 8.51% 8.11% 8.51%
Return(6)
Average Annual Return since 12.49% 12.16% 11.97%
1990(4)(6)
</TABLE>
(1) Performance information is provided net of Fund expenses. The net investment
performance represents total return, assuming reinvestment of all dividends
and proceeds from capital transactions.
(2) 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 through December 31, 1997 were audited by the
Pacholder Fund's independent auditor in conjunction with the audit of the
Pacholder Fund.
(3) 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.
(4) 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.
(5) No preferred stock was issued prior to April 6, 1992.
(6) For period ended September 30, 1998.
<PAGE> 102
39
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 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 1999 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 anticipates 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 move to Year 2000 will
not have a material impact on its operations.
<PAGE> 103
40
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 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>
<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 1-7 Market
agencies and instrumentalities of the U.S. Government. These Credit
include Ginnie Mae, Fannie Mae, and Freddie Mac.
CERTIFICATES OF DEPOSIT: Negotiable instruments with a 1, 2, 4, Credit
stated maturity. 5, 7 Market
Liquidity
TIME DEPOSITS: Non-negotiable receipts issued by a bank in 1, 2, 4, Market
exchange for the deposit of funds. 5, 7 Liquidity
Credit
REPURCHASE AGREEMENTS: The purchase of a security and the 1-7 Credit
simultaneous commitment to return the security to the seller Market
at an agreed upon price on an agreed upon date. This is Liquidity
treated as a loan.
REVERSE REPURCHASE AGREEMENT: The sale of a security and the 1-7 Market
simultaneous commitment to buy the security back at an Leverage
agreed 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 1-7 Credit
Fund's total assets. In return the Fund will receive cash, Market
other securities, 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 Leverage
delivery at 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 1, 2, 4, 7 Market
convert to common stock. Credit
CALL AND PUT OPTIONS: A call option gives the buyer the 1-4, 7 Management
right to buy, and obligates the seller of the option to Liquidity
sell, a security at a specified price. A put option gives Credit
the buyer the right to sell, and obligates the seller of the Market
option to buy, a security at a specified price. The Funds Leverage
will sell covered call and secured put options.
- -----------------------------------------------------------------------------------------------------
</TABLE>
<PAGE> 104
41
<TABLE>
<CAPTION>
INSTRUMENT FUND CODE RISK TYPE
<S> <C> <C>
FUTURES AND RELATED OPTIONS: A contract providing for the 1-4, 5, 7 Management
future sale and purchase of a specified amount of a Market
specified security, class of securities, or an index at a Credit
specified time in the 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 Management
estate or real estate related loans or interest. Market
Pre-payment
Tax
Regulatory
BANKERS' ACCEPTANCES: Bills of exchange or time drafts drawn 1, 2, 4, Credit
on and accepted by a commercial bank. Maturities are 5, 7 Liquidity
generally six months or less. Market
COMMERCIAL PAPER: Secured and unsecured short-term
promissory
notes issued by corporations and other entities. Maturities
generally vary from
a few days to nine months. 1, 2, 4, Credit
5, 7 Liquidity
Market
FOREIGN SECURITIES: Debt issued by foreign governments, 1, 2, 4, Market
foreign corporations, domestic subsidiaries of foreign 5, 7 Political
corporations, and foreign banks, as well as commercial paper Liquidity
of foreign issuers and obligations of foreign banks and Investment
overseas branches of U.S. Foreign 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, Liquidity
Securities Act of 1933, such as privately placed commercial 5, 7 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 Credit
some other period and which may be payable to the Fund on Liquidity
demand. The 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 2, 7 Market
or bonds that give the holder the right to buy a Credit
proportionate amount of common stock at a specified price.
PREFERRED STOCK: A class of stock that generally pays a 1, 2, 4, Market
dividend at a specified rate and has preference over common 5, 7
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 Market
collateralized mortgage obligations ("CMOs") and Real Estate Credit
Mortgage Investment Conduits ("REMICs"). Regulatory
CORPORATE DEBT SECURITIES: Corporate bonds and 1, 2, 4, Market
non-convertible debt securities. 5, 7 Credit
DEMAND FEATURES: Securities that are subject to puts and 1, 2, 4, Market
standby commitments to purchase the securities at a fixed 5, 7 Liquidity
price (usually with accrued interest) within a fixed period Management
of time following demand by a Fund.
ASSET-BACKED SECURITIES: Securities secured by company 1, 2, 4, Pre-payment
receivables, home equity loans truck and auto loans, leases, 5, 7 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 1-7 Pre-payment
securities for delivery in a current month and Market
simultaneously contracts with the same party to repurchase Regulatory
similar but not 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 Market
rate for a specified period of time, after which the rate Credit
may be subject to periodic adjustments. The Treasury & Regulatory
Agency Fund will only buy Government ARMs.
SWAPS, CAPS AND FLOORS: A Fund may enter into these 1-4, 5, 7 Management
transactions to manage its exposure to changing interest Credit
rates and other factors. Swaps involve an exchange of Liquidity
obligations by two parties. Caps and floors entitle a Market
purchaser to a principal 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.
</TABLE>
<PAGE> 105
42
<TABLE>
<CAPTION>
INSTRUMENT FUND CODE RISK TYPE
- -----------------------------------------------------------------------------------------------------
<S> <C> <C>
NEW FINANCIAL PRODUCTS: New options and futures contracts 1-4, 7 Management
and other financial products continue to be developed and Credit
the Fund may invest in such options, contracts and products. Market
Liquidity
STRUCTURED INSTRUMENTS: Debt securities issued by agencies 1-7 Market
and instrumentalities of the U.S. government, banks, Liquidity
municipalities, corporations and other businesses whose Management
interest and/or principal payments are indexed to foreign Credit
currency exchange rates, interest rates, or one or more Foreign Investment
other referenced indices.
MUNICIPAL SECURITIES: Securities issued by a state or 1, 2, 4, Credit
political subdivision to obtain funds for various public 5, 7 Political
purposes Municipal securities include private activity bonds Tax
and industrial development bonds, as well as General Market
Obligation 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 1-7 Credit
no interest, but are issued at a discount from their value Market
at maturity. When held to maturity, their entire return Zero Coupon
equals the difference between their issue price and their
maturity value.
ZERO-FIXED-COUPON DEBT SECURITIES: Zero coupon debt 1-7 Credit
securities which convert on a specified date to interest Market
bearing debt securities. Zero Coupon
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 1-4, 7 Market
debt instruments with interest rates that reset in the Leverage
opposite direction from the market rate of interest to which Credit
the inverse floater is indexed.
LOAN PARTICIPATIONS AND ASSIGNMENTS: Participations in, or 1, 2, 4, Credit
assignments of all or a portion of loans to corporations or 5, 7 Political
to governments, including governments of the less developed Liquidity
countries ("LDC's"). Foreign Investment
Market
FIXED RATE MORTGAGE LOANS: Investments in fixed rate 1-7 Credit
mortgage loans or mortgage pools which bear simple interest Pre-payment
at fixed annual rates and have original terms ranging from 5 Regulatory
to 40 years. Market
SHORT-TERM FUNDING AGREEMENTS: Investments in short-term 1, 2, 4, Credit
funding agreements issued by banks and highly rated U.S. 5, 7 Liquidity
insurance companies such as Guaranteed Investment Contracts Market
("GIC's") and Bank Investment Contracts ("BIC's").
COMMON STOCK: Shares of ownership of a company. 7 Market
- -----------------------------------------------------------------------------------------------------
</TABLE>
<PAGE> 106
43
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. 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.
- 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.
- - 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. 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.
- - 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.
- - 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.
<PAGE> 107
44
- - 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.
- - 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.
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.
<PAGE> 108
appendix
45
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.
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, INC. ("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.
<PAGE> 109
46
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.
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.
<PAGE> 110
47
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.
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.
C Obligations which are currently in default.
<PAGE> 111
48
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 in
the 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.
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 & Short-term municipal securities rated MIG1 or VMIG1 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.
<PAGE> 112
49
MIG2 & These short-term municipal securities rated are of high quality.
VMIG2 Margins of protection are ample although not so large as in the
preceding group.
MIG3 & Favorable quality. All security elements are accounted for, but the
VMIG3 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 & This denotes adequate quality protection commonly regarded as required
VMIG4 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.
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.
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
<PAGE> 113
50
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.
NR 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
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.
<PAGE> 114
51
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.
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.
<PAGE> 115
INVESTMENT ADVISOR AND SUB-ADMINISTRATOR
Banc One Investment Advisors Corporation
1111 Polaris Parkway
P.O. Box 710211
Columbus, OH 43271-0211
SUB-INVESTMENT 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 8500
Boston, MA 02266-8500
LEGAL COUNSEL
Ropes & Gray
One Franklin Square
1301 K Street, N.W.
Suite 800 East
Washington, D.C. 20005
INDEPENDENT ACCOUNTANTS
PricewaterhouseCoopers LLP
100 East Broad Street
Columbus, OH 43215
THE STATEMENT OF ADDITIONAL INFORMATION CON-
TAINS 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.com) THAT CONTAINS THE
STATEMENT OF ADDITIONAL INFORMATION, MATERIALS
INCORPORATED BY REFERENCE AND OTHER INFORMATION
REGARDING THE ONE GROUP(R).
TOG-F-123
<PAGE> 116
THE ONE GROUP(R) FAMILY OF MUTUAL FUNDS
[GRAPHIC]
MUNICIPAL BOND FUNDS
COMBINED PROSPECTUS
NOVEMBER 1, 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 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 BANK 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 OR ANY STATE SECURITIES COMMISSION NOR HAS THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED UPON THE
ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION
TO THE CONTRARY IS A CRIMINAL OFFENSE.
<PAGE> 117
TABLE OF CONTENTS
<TABLE>
<S> <C>
A BRIEF PREVIEW OF THE FUNDS................................ 1
ABOUT THE FUNDS............................................. 2
The One Group(R) Intermediate Tax-Free Bond Fund......... 2
The One Group(R) Municipal Income Fund................... 5
The One Group(R) Arizona Municipal Bond Fund............. 8
The One Group(R) West Virginia Municipal Bond Fund....... 11
The One Group(R) Louisiana Municipal Bond Fund........... 14
The One Group(R) Ohio Municipal Bond Fund................ 17
The One Group(R) Kentucky Municipal Bond Fund............ 20
MORE ABOUT THE FUNDS........................................ 23
HOW TO DO BUSINESS WITH THE ONE GROUP....................... 24
Purchasing Fund Shares................................... 24
Sales Charges............................................ 26
Sales Charge Reductions and Waivers...................... 28
Exchanging Fund Shares................................... 30
Redeeming Fund Shares.................................... 31
SHAREHOLDER INFORMATION..................................... 33
Voting Rights............................................ 33
Dividend Policies........................................ 34
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
Year 2000................................................ 37
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> 118
1
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. Fixed income securities also are
subject to the risk that the issuer of the security will be
unable to meet its repayment obligation. 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 Bank 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
Bank 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."
WHO MANAGES THE FUNDS?
Banc One Investment Advisors Corporation ("Banc One Investment
Advisors"), an indirect subsidiary of Bank 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."
<PAGE> 119
The One Group(R)
Intermediate Tax-Free Bond Fund
LOGO 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.
LOGO 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.
LOGO 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."
LOGO 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."
LOGO 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.
LOGO 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.
SHAREHOLDER EXPENSES
<TABLE>
<CAPTION>
SHAREHOLDER TRANSACTION EXPENSES (1) CLASS A CLASS B CLASS C
<S> <C> <C> <C>
Maximum Sales Charge Imposed on
Purchases (as a percentage of
offering price) 4.50% none none
Maximum Contingent Deferred Sales
Charge (as a percentage of
original purchase price or
redemption proceeds, as
applicable) none(2) 5.00% 1.00%
Redemption Fees none none none
Exchange Fees 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%
12b-1 Fees (after fee waiver) (5) .25% .90% .90%
Other Expenses .24% .24% .24%
Total Fund Operating Expenses (after
fee waivers) (6) .91% 1.56% 1.56%
</TABLE>
<TABLE>
<CAPTION>
CLASS I
<S> <C>
none
none
none
none
.42%
none
.24%
.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
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 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.
2
<PAGE> 120
3
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>
YEAR ENDED JUNE 30,
------------------------------------------------------------------------------
CLASS I 1998 1997 1996 1995 1994 1993
- ------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
NET ASSET VALUE, BEGINNING OF PERIOD $ 10.92 $ 10.67 $ 10.64 $ 10.49 $ 11.15 $ 10.69
- ------------------------------------------------------------------------------------------------------------------------
Investment Activities:
Net investment income 0.52 0.54 0.52 0.54 0.52 0.53
Net realized and unrealized gains
(losses) from investments 0.31 0.27 0.04 0.15 (0.52) 0.49
- ------------------------------------------------------------------------------------------------------------------------
Total from Investment Activities 0.83 0.81 0.56 0.69 0.00 1.02
- ------------------------------------------------------------------------------------------------------------------------
Distributions:
Net investment income (0.52) (0.54) (0.51) (0.54) (0.53) (0.52)
In excess of net investment income -- -- -- -- (0.01) --
Net realized gains (0.08) (0.02) (0.02) -- (0.01) (0.04)
In excess of net realized gains -- -- -- -- (0.11) --
- ------------------------------------------------------------------------------------------------------------------------
Total Distributions (0.60) (0.56) (0.53) (0.54) (0.66) (0.56)
- ------------------------------------------------------------------------------------------------------------------------
NET ASSET VALUE, END OF PERIOD $ 11.15 $ 10.92 $ 10.67 $ 10.64 $ 10.49 $ 11.15
- ------------------------------------------------------------------------------------------------------------------------
Total Return 7.74% 7.76% 5.39% 6.75% (0.11)% 9.79%
RATIOS/SUPPLEMENTARY DATA:
Net Assets at end of period (000) $493,686 $451,089 $217,201 $211,229 $182,611 $166,489
Ratio of expenses to average net assets 0.60% 0.58% 0.54% 0.53% 0.48% 0.54%
Ratio of net investment income to
average net assets 4.70% 5.05% 4.87% 5.17% 4.78% 4.93%
Ratio of expenses to average net
assets* 0.81% 0.81% 0.87% 0.88% 0.84% 0.94%
Ratio of net investment income to
average net assets* 4.49% 4.82% 4.54% 4.82% 4.42% 4.53%
Portfolio turnover (a) 109.03% 86.89% 111.58% 199.76% 105.98% 31.99%
<CAPTION>
YEAR ENDED JUNE 30,
--------------------------
CLASS I 1992 1991(c)
- --------------------------------------------------------------------
<S> <C> <C>
NET ASSET VALUE, BEGINNING OF PERIOD $ 10.28 $ 10.00
- --------------------------------------------------------------------
Investment Activities:
Net investment income 0.55 0.49
Net realized and unrealized gains
(losses) from investments 0.42 0.27
- --------------------------------------------------------------------
Total from Investment Activities 0.97 0.76
- --------------------------------------------------------------------
Distributions:
Net investment income (0.55) (0.48)
In excess of net investment income -- --
Net realized gains (0.01) --
In excess of net realized gains -- --
- --------------------------------------------------------------------
Total Distributions (0.56) (0.48)
- --------------------------------------------------------------------
NET ASSET VALUE, END OF PERIOD $ 10.69 $ 10.28
- --------------------------------------------------------------------
Total Return 9.54% 9.49%(b)
RATIOS/SUPPLEMENTARY DATA:
Net Assets at end of period (000) $142,672 $82,192
Ratio of expenses to average net assets 0.55% 0.30%(b)
Ratio of net investment income to
average net assets 5.28% 6.04%(b)
Ratio of expenses to average net
assets* 1.07% 0.90%(b)
Ratio of net investment income to
average net assets* 4.77% 5.44%(b)
Portfolio turnover (a) 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.
<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 $ 10.91 10.67 10.63 $ 10.48 $ 11.14 $ 10.69 10.57
- -----------------------------------------------------------------------------------------------------------------------------------
Investment Activities:
Net investment income 0.50 0.51 0.50 0.51 0.50 0.55 0.15
Net realized and unrealized gains
(losses) from investments 0.31 0.26 0.05 0.15 (0.52) 0.44 0.18
- -----------------------------------------------------------------------------------------------------------------------------------
Total from Investment Activities 0.81 0.77 0.55 0.66 (0.02) 0.99 0.33
- -----------------------------------------------------------------------------------------------------------------------------------
Distributions:
From net investment income (0.50) (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 (0.08) (0.02) (0.02) -- -- (0.04) --
In excess of net realized gains -- -- -- -- (0.11) -- --
- -----------------------------------------------------------------------------------------------------------------------------------
Total Distributions (0.58) (0.53) (0.51) (0.51) (0.64) (0.54) (0.21)
- -----------------------------------------------------------------------------------------------------------------------------------
NET ASSET VALUE, END OF PERIOD $ 11.14 10.91 10.67 $ 10.63 $ 10.48 $ 11.14 10.69
- -----------------------------------------------------------------------------------------------------------------------------------
Total Return (Excludes Sales
Charge) 7.50% 7.39% 5.28% 6.49% (0.33)% 9.47% 8.68%(b)
RATIOS/SUPPLEMENTARY DATA:
Net Assets at end of period (000) $14,515 $8,457 $6,622 $5,614 $5,556 $5,480 $5
Ratio of expenses to average net
assets 0.85% 0.83% 0.79% 0.78% 0.73% 0.71% 1.02%(b)
Ratio of net investment income to
average net assets 4.45% 4.75% 4.62% 4.91% 4.57% 4.77% 4.91%(b)
Ratio of expenses to average net
assets* 1.16% 1.15% 1.22% 1.23% 1.19% 1.27% 1.32%(b)
Ratio of net investment income to
average net assets* 4.14% 4.43% 4.19% 4.46% 4.11% 4.21% 4.61%(b)
Portfolio turnover (a) 109.03% 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.
<PAGE> 121
4
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 $10.93 $10.68 $10.65 $10.50 $ 11.18
- -----------------------------------------------------------------------------------------------------------------------------------
Investment Activities:
Net investment income 0.43 0.45 0.43 0.46 0.17
Net realized and unrealized gains (losses) from
investments 0.31 0.27 0.04 0.14 (0.67)
- -----------------------------------------------------------------------------------------------------------------------------------
Total from Investment Activities 0.74 0.72 0.47 0.60 (0.50)
- -----------------------------------------------------------------------------------------------------------------------------------
Distributions:
From net investment income (0.43) (0.45) (0.42) (0.45) (0.17)
Net realized gains (0.08) (0.02) (0.02) -- --
In excess of net realized gains -- -- -- -- (0.01)
- -----------------------------------------------------------------------------------------------------------------------------------
Total Distributions (0.51) (0.47) (0.44) (0.45) (0.18)
- -----------------------------------------------------------------------------------------------------------------------------------
NET ASSET VALUE, END OF PERIOD $11.16 $10.93 $10.68 $10.65 $ 10.50
- -----------------------------------------------------------------------------------------------------------------------------------
Total Return (Excludes Sales Charge) 6.81% 6.82% 4.48% 5.89% (4.48)%(b)
RATIOS/SUPPLEMENTARY DATA:
Net Assets at end of period (000) $5,659 $3,307 $2,439 $1,116 $ 549
Ratio of expenses to average net assets 1.50% 1.47% 1.44% 1.43% 1.40%(c)
Ratio of net investment income to average net assets 3.80% 4.09% 3.97% 4.29% 4.08%(c)
Ratio of expenses to average net assets* 1.81% 1.78% 1.87% 1.88% 1.85%(c)
Ratio of net investment income to average net assets* 3.49% 3.78% 3.54% 3.84% 3.63%(c)
Portfolio turnover (d) 109.03% 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.
<PAGE> 122
The One Group(R)
Municipal Income Fund
LOGO INVESTMENT OBJECTIVE
The Fund is a diversified fund that
seeks current income exempt from
Federal income taxes.
LOGO 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.
LOGO 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."
LOGO 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."
LOGO 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.
LOGO 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.
SHAREHOLDER EXPENSES
<TABLE>
<CAPTION>
SHAREHOLDER TRANSACTION EXPENSES (1) CLASS A CLASS B CLASS C
<S> <C> <C> <C>
Maximum Sales Charge Imposed on
Purchases (as a percentage of
offering price) 4.50% none none
Maximum Contingent Deferred Sales
Charge (as a percentage of
original purchase price or
redemption proceeds, as
applicable) none(2) 5.00% 1.00%
Redemption Fees none none none
Exchange Fees none none none
ANNUAL OPERATING EXPENSES (3) (as a
percentage of average daily net
assets)
Investment Advisory Fees (after fee
waiver) (4) .35% .35% .35%
12b-1 Fees (after fee waiver) (5) .25% .90% .90%
Other Expenses .27% .27% .27%
Total Fund Operating Expenses (after
fee waivers) (6) .87% 1.52% 1.52%
</TABLE>
<TABLE>
<CAPTION>
CLASS I
<S> <C>
none
none
none
none
.35%
none
.27%
.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:
<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.
5
<PAGE> 123
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>
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 $ 9.84 $ 9.66 $ 9.69 $ 9.66 $ 10.11 $ 10.00
- ---------------------------------------------------------------------------------------------------------------------------------
Investment Activities:
Net investment income 0.51 0.53 0.56 0.57 0.56 0.19
Net realized and unrealized gains
(losses) from investments 0.27 0.18 (0.03) 0.03 (0.42) 0.11
- ---------------------------------------------------------------------------------------------------------------------------------
Total from Investment Activities 0.78 0.71 0.53 0.60 0.14 0.30
- ---------------------------------------------------------------------------------------------------------------------------------
Distributions:
Net investment income (0.51) (0.53) (0.56) (0.57) (0.56) (0.19)
In excess of net realized gains -- -- -- -- (0.03) --
- ---------------------------------------------------------------------------------------------------------------------------------
Total Distributions (0.51) (0.53) (0.56) (0.57) (0.59) (0.19)
- ---------------------------------------------------------------------------------------------------------------------------------
NET ASSET VALUE, END OF PERIOD $ 10.11 $ 9.84 $ 9.66 $ 9.69 $ 9.66 $ 10.11
- ---------------------------------------------------------------------------------------------------------------------------------
Total Return 8.09% 7.49% 5.54% 6.46% 1.36% 5.18%(b)
RATIOS/SUPPLEMENTARY DATA:
Net Assets at end of period (000) $617,885 $408,577 $241,115 $185,916 $152,763 $40,777
Ratio of expenses to average net
assets 0.57% 0.57% 0.56% 0.56% 0.54% 0.54%(b)
Ratio of net investment income to
average net assets 5.08% 5.38% 5.70% 6.02% 5.61% 5.66%(b)
Ratio of expenses to average net
assets* 0.67% 0.68% 0.76% 0.74% 0.71% 1.01%(b)
Ratio of net investment income to
average net assets* 4.98% 5.27% 5.50% 5.84% 5.44% 5.19%(b)
Portfolio turnover (c) 69.76% 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.
<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 $ 9.87 $ 9.69 $ 9.72 $ 9.67 $ 10.12 $ 10.06
- ---------------------------------------------------------------------------------------------------------------------------------
Investment Activities:
Net investment income 0.49 0.51 0.55 0.55 0.55 0.19
Net realized and unrealized gains
(losses) from investments 0.27 0.18 (0.04) 0.05 (0.43) 0.05
- ---------------------------------------------------------------------------------------------------------------------------------
Total from Investment Activities 0.76 0.69 0.51 0.60 0.12 0.24
- ---------------------------------------------------------------------------------------------------------------------------------
Distributions:
Net investment income (0.49) (0.51) (0.54) (0.55) (0.54) (0.18)
In excess of net realized gains -- -- -- -- (0.03) --
- ---------------------------------------------------------------------------------------------------------------------------------
Total Distributions (0.49) (0.51) (0.54) (0.55) (0.57) (0.18)
- ---------------------------------------------------------------------------------------------------------------------------------
NET ASSET VALUE, END OF PERIOD $ 10.14 $ 9.87 $ 9.69 $ 9.72 $ 9.67 $ 10.12
- ---------------------------------------------------------------------------------------------------------------------------------
Total Return (Excludes Sales Charge) 7.84% 7.24% 5.35% 6.21% 1.34% 6.86%
RATIOS/SUPPLEMENTARY DATA:
Net Assets at end of period (000) $101,805 $41,829 $25,787 $11,462 $10,725 $4,106
Ratio of expenses to average net
assets 0.82% 0.82% 0.81% 0.81% 0.79% 0.80%(b)
Ratio of net investment income to
average net assets 4.83% 5.13% 5.45% 5.76% 5.44% 5.71%(b)
Ratio of expenses to average net
assets* 1.02% 1.03% 1.11% 1.09% 1.06% 1.36%(b)
Ratio of net investment income to
average net assets* 4.63% 4.92% 5.15% 5.48% 5.17% 5.15%(b)
Portfolio turnover (c) 69.76% 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.
6
<PAGE> 124
The One Group(R) Municipal 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 $ 9.84 $ 9.66 $ 9.69 $ 9.62 $ 10.10
- ---------------------------------------------------------------------------------------------------------------------------------
Investment Activities:
Net investment income 0.42 0.44 0.47 0.49 0.24
Net realized and unrealized gains (losses) from
investments 0.26 0.18 (0.03) 0.07 (0.48)
- ---------------------------------------------------------------------------------------------------------------------------------
Total from Investment Activities 0.68 0.62 0.44 0.56 (0.24)
- ---------------------------------------------------------------------------------------------------------------------------------
Distributions:
Net investment income (0.42) (0.44) (0.47) (0.49) (0.24)
- ---------------------------------------------------------------------------------------------------------------------------------
Total Distributions (0.42) (0.44) (0.47) (0.49) (0.24)
- ---------------------------------------------------------------------------------------------------------------------------------
NET ASSET VALUE, END OF PERIOD $ 10.10 $ 9.84 $ 9.66 $ 9.69 $ 9.62
- ---------------------------------------------------------------------------------------------------------------------------------
Total Return (Excludes Sales Charge) 7.04% 6.55% 4.65% 5.58% (1.98)%(b)
RATIOS/SUPPLEMENTARY DATA:
Net Assets at end of period (000) $56,911 $36,258 $23,204 $8,326 $4,855
Ratio of expenses to average net assets 1.47% 1.47% 1.46% 1.46% 1.41%(c)
Ratio of net investment income to average net assets 4.18% 4.48% 4.80% 5.14% 4.95%(c)
Ratio of expenses to average net assets* 1.67% 1.67% 1.76% 1.74% 1.62%(c)
Ratio of net investment income to average net
assets* 3.98% 4.28% 4.50% 4.86% 4.74%(c)
Portfolio turnover (d) 69.76% 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.
<TABLE>
<CAPTION>
NOVEMBER 4,
1997 TO
JUNE 30,
CLASS C 1998(a)
<S> <C>
NET ASSET VALUE, BEGINNING OF PERIOD $ 9.96
- ----------------------------------------------------------------------------
Investment Activities:
Net investment income 0.68
Net realized and unrealized gains (losses) from
investments 0.13
- ----------------------------------------------------------------------------
Total from Investment Activities 0.81
- ----------------------------------------------------------------------------
Distributions:
Net investment income (0.68)
- ----------------------------------------------------------------------------
Total Distributions (0.68)
- ----------------------------------------------------------------------------
NET ASSET VALUE, END OF PERIOD $ 10.09
- ----------------------------------------------------------------------------
Total Return (Excludes Sales Charge) 8.28%(b)
RATIOS/SUPPLEMENTARY DATA:
Net Assets at end of period (000) $2,216
Ratio of expenses to average net assets 1.47%(c)
Ratio of net investment income to average net assets 4.18%(c)
Ratio of expenses to average net assets* 1.67%(c)
Ratio of net investment income to average net assets* 3.98%(c)
Portfolio turnover (d) 69.76%
</TABLE>
* During the period certain fees were voluntarily reduced. If such voluntary fee
reductions had not occurred, the ratios would have been as
indicated. (a) 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> 125
The One Group(R)
Arizona Municipal Bond Fund
LOGO 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.
LOGO 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.
LOGO 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."
LOGO 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."
LOGO 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.
LOGO 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.
SHAREHOLDER EXPENSES
<TABLE>
<CAPTION>
SHAREHOLDER TRANSACTION EXPENSES (1) CLASS A CLASS B CLASS C
<S> <C> <C> <C>
Maximum Sales Charge Imposed on
Purchases (as a percentage of
offering price) 4.50% none none
Maximum Contingent Deferred Sales
Charge (as a percentage of
original purchase price or
redemption proceeds, as
applicable) none(2) 5.00% 1.00%
Redemption Fees none none none
Exchange Fees 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%
12b-1 Fees (after fee waiver) (5) .25% .90% .90%
Other Expenses .32% .32% .32%
Total Fund Operating Expenses (after
fee waivers) (6) .97% 1.62% 1.62%
<CAPTION>
CLASS I
<S> <C>
none
none
none
none
.40%
none
.32%
.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
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.
8
<PAGE> 126
The One Group(R) Arizona Municipal Bond Fund Financial Highlights
The Financial Highlights are intended to help you understand the Fund's
financial performance over 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,
YEAR 1997
ENDED THROUGH
JUNE 30, JUNE 30,
CLASS I 1998 1997(A)
<S> <C> <C>
NET ASSET VALUE, BEGINNING OF PERIOD $ 10.06 $ 10.00
- -------------------------------------------------------------------------------------------
Investment Activities:
Net investment income 0.49 0.23
Net realized and unrealized gains from investments 0.16 0.06
- -------------------------------------------------------------------------------------------
Total from Investment Activities 0.65 0.29
- -------------------------------------------------------------------------------------------
Distributions:
Net investment income (0.49) (0.23)
Net realized gain (0.07) --
- -------------------------------------------------------------------------------------------
Total Distributions (0.56) (0.23)
- -------------------------------------------------------------------------------------------
NET ASSET VALUE, END OF PERIOD $ 10.15 $ 10.06
- -------------------------------------------------------------------------------------------
Total Return 6.58% 2.90%(b)
RATIOS/SUPPLEMENTARY DATA:
Net Assets at end of period (000) $248,590 $255,755
Ratio of expenses to average net assets 0.59% 0.59%(c)
Ratio of net investment income to average net assets 4.79% 5.09%(c)
Ratio of expenses to average net assets* 0.65% 0.66%(c)
Ratio of net investment income to average net assets* 4.73% 5.02%(c)
Portfolio turnover (d) 20.89% 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.
<TABLE>
<CAPTION>
JAN. 20,
YEAR 1997
ENDED THROUGH
JUNE 30, JUNE 30,
CLASS A 1998 1997(A)
<S> <C> <C>
NET ASSET VALUE, BEGINNING OF PERIOD $ 9.99 $ 10.00
- -------------------------------------------------------------------------------------------
Investment Activities:
Net investment income 0.46 0.15
Net realized and unrealized gains (losses) from
investments 0.16 (0.01)
- -------------------------------------------------------------------------------------------
Total from Investment Activities 0.62 0.14
- -------------------------------------------------------------------------------------------
Distributions:
Net investment income (0.46) (0.15)
Net realized gain (0.07) --
- -------------------------------------------------------------------------------------------
Total Distributions (0.53) (0.15)
- -------------------------------------------------------------------------------------------
NET ASSET VALUE, END OF PERIOD $10.08 $ 9.99
- -------------------------------------------------------------------------------------------
Total Return (Excludes Sales Charge) 6.30% 1.40%(b)
RATIOS/SUPPLEMENTARY DATA:
Net Assets at end of period (000) $1,321 $1,500
Ratio of expenses to average net assets 0.84% 0.85%(c)
Ratio of net investment income to average net assets 4.53% 4.90%(c)
Ratio of expenses to average net assets* 1.01% 0.96%(c)
Ratio of net investment income to average net assets* 4.36% 4.79%(c)
Portfolio turnover (d) 20.89% 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.
9
<PAGE> 127
The One Group(R) Arizona Municipal Bond Fund Financial Highlights
<TABLE>
<CAPTION>
YEAR JAN. 20, 1997
ENDED THROUGH
JUNE 30, JUNE 30,
CLASS B 1998 1997(A)
<S> <C> <C>
NET ASSET VALUE, BEGINNING OF PERIOD $10.09 $10.00
- -----------------------------------------------------------------------------------------------
Investment Activities:
Net investment income 0.13 0.00
Net realized and unrealized gains (losses) from
investments 0.14 0.09
- -----------------------------------------------------------------------------------------------
Total from Investment Activities 0.27 0.09
- -----------------------------------------------------------------------------------------------
Distributions:
Net investment income (0.13) --
Net realized gains (0.07) --
- -----------------------------------------------------------------------------------------------
Total Distributions (0.20) --
- -----------------------------------------------------------------------------------------------
NET ASSET VALUE, END OF PERIOD $10.16 $10.09
- -----------------------------------------------------------------------------------------------
Total Return (Excludes Sales Charge) 2.67% 0.90%(b)
RATIOS/SUPPLEMENTARY DATA:
Net Assets at end of period (000) $290 --(c)
Ratio of expenses to average net assets 1.50% --(d)
Ratio of net investment income to average net assets 3.88% --(d)
Ratio of expenses to average net assets* 1.64% --(d)
Ratio of net investment income to average net assets* 3.74% --(d)
Portfolio turnover (e) 20.89% 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.
10
<PAGE> 128
The One Group(R)
West Virginia Municipal Bond Fund
[LOGO] 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.
[LOGO] 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.
[LOGO] 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."
[LOGO] 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."
[LOGO] 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.
[LOGO] 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.
SHAREHOLDER EXPENSES
<TABLE>
<CAPTION>
SHAREHOLDER TRANSACTION EXPENSES (1) CLASS A CLASS B CLASS C
<S> <C> <C> <C>
Maximum Sales Charge Imposed on
Purchases (as a percentage of
offering price) 4.50% none none
Maximum Contingent Deferred Sales
Charge (as a percentage of
original purchase price or
redemption proceeds, as
applicable) none(2) 5.00% 1.00%
Redemption Fees none none none
Exchange Fees 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%
12b-1 Fees (after fee waiver) (5) .25% .90% .90%
Other Expenses .32% .32% .32%
Total Fund Operating Expenses (after
fee waivers) (6) .97% 1.62% 1.62%
<CAPTION>
CLASS I
<S> <C>
none
none
none
none
.40%
none
.32%
.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
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.
11
<PAGE> 129
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>
YEAR JAN. 20, 1997
ENDED THROUGH
JUNE 30, JUNE 30,
CLASS I 1998 1997(A)
<S> <C> <C>
NET ASSET VALUE, BEGINNING OF PERIOD $ 10.06 $ 10.00
- ------------------------------------------------------------------------------------------------
Investment Activities:
Net investment income 0.50 0.22
Net realized and unrealized gains from investments 0.22 0.06
- ------------------------------------------------------------------------------------------------
Total from Investment Activities 0.72 0.28
- ------------------------------------------------------------------------------------------------
Distributions:
Net investment income (0.50) (0.22)
- ------------------------------------------------------------------------------------------------
Total Distributions (0.50) (0.22)
- ------------------------------------------------------------------------------------------------
NET ASSET VALUE, END OF PERIOD $ 10.28 $ 10.06
- ------------------------------------------------------------------------------------------------
Total Return 7.36% 2.84%(b)
RATIOS/SUPPLEMENTARY DATA:
Net Assets at end of period (000) $102,413 $96,270
Ratio of expenses to average net assets 0.60% 0.59%(c)
Ratio of net investment income to average net assets 4.93% 5.04%(c)
Ratio of expenses to average net assets* 0.72% 0.67%(c)
Ratio of net investment income to average net assets* 4.81% 4.96%(c)
Portfolio turnover (d) 16.69% 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.
<TABLE>
<CAPTION>
YEAR JAN. 20, 1997
ENDED THROUGH
JUNE 30, JUNE 30,
CLASS A 1998 1997(A)
<S> <C> <C>
NET ASSET VALUE, BEGINNING OF PERIOD $ 10.15 $ 10.00
- ------------------------------------------------------------------------------------------------
Investment Activities:
Net investment income 0.48 0.16
Net realized and unrealized gains from investments 0.21 0.15
- ------------------------------------------------------------------------------------------------
Total from Investment Activities 0.69 0.31
- ------------------------------------------------------------------------------------------------
Distributions:
Net investment income (0.48) (0.16)
- ------------------------------------------------------------------------------------------------
Total Distributions (0.48) (0.16)
- ------------------------------------------------------------------------------------------------
NET ASSET VALUE, END OF PERIOD $ 10.36 $ 10.15
- ------------------------------------------------------------------------------------------------
Total Return (Excludes Sales Charge) 6.98% 3.08%(b)
RATIOS/SUPPLEMENTARY DATA:
Net Assets at end of period (000) $2,024 $808
Ratio of expenses to average net assets 0.85% 0.84%(c)
Ratio of net investment income to average net assets 4.68% 4.94%(c)
Ratio of expenses to average net assets* 1.07% 0.97%(c)
Ratio of net investment income to average net assets* 4.46% 4.81%(c)
Portfolio turnover (d) 16.69% 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.
12
<PAGE> 130
13
THE ONE GROUP(R) WEST VIRGINIA MUNICIPAL BOND FUND FINANCIAL HIGHLIGHTS
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
YEAR JAN. 20, 1997
ENDED THROUGH
JUNE 30, JUNE 30,
CLASS B 1998 1997(a)
- -----------------------------------------------------------------------------------------------
<S> <C> <C>
NET ASSET VALUE, BEGINNING OF PERIOD $10.12 $10.00
- -----------------------------------------------------------------------------------------------
Investment Activities:
Net investment income 0.42 0.14
Net realized and unrealized gains from investments 0.23 0.12
- -----------------------------------------------------------------------------------------------
Total from Investment Activities 0.65 0.26
- -----------------------------------------------------------------------------------------------
Distributions:
Net investment income (0.42) (0.14)
- -----------------------------------------------------------------------------------------------
Total Distributions (0.42) (0.14)
- -----------------------------------------------------------------------------------------------
NET ASSET VALUE, END OF PERIOD $10.35 $10.12
- -----------------------------------------------------------------------------------------------
Total Return (Excludes Sales Charge) 6.57% 2.64%(b)
RATIOS/SUPPLEMENTARY DATA:
Net Assets at end of period (000) $3,352 $ 614
Ratio of expenses to average net assets 1.50% 1.49%(c)
Ratio of net investment income to average net assets 4.05% 4.08%(c)
Ratio of expenses to average net assets* 1.72% 1.62%(c)
Ratio of net investment income to average net assets* 3.83% 3.95%(c)
Portfolio turnover (d) 16.69% 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.
<PAGE> 131
14
The One Group(R)
LOUISIANA MUNICIPAL BOND FUND
- --------------------------------------------------------------------------------
[LOGO] 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.
[LOGO] 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.
[LOGO] 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."
[LOGO] 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."
[LOGO] 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.
[LOGO] 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.
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 .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>
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.
<PAGE> 132
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> <C>
NET ASSET VALUE, BEGINNING OF PERIOD $ 10.10 $ 9.93 $ 10.00
- --------------------------------------------------------------------------------------------------------
Investment Activities:
Net investment income 0.50 0.49 0.13
Net realized and unrealized gains (losses) from
investments 0.16 0.17 (0.07)
- --------------------------------------------------------------------------------------------------------
Total from Investment Activities 0.66 0.66 0.06
- --------------------------------------------------------------------------------------------------------
Distributions:
Net investment income (0.50) (0.49) (0.13)
- --------------------------------------------------------------------------------------------------------
Total Distributions (0.50) (0.49) (0.13)
- --------------------------------------------------------------------------------------------------------
NET ASSET VALUE, END OF PERIOD $ 10.26 $ 10.10 $ 9.93
- --------------------------------------------------------------------------------------------------------
Total Return 6.62% 6.81% 0.90%(b)(c)
RATIOS/SUPPLEMENTARY DATA:
Net Assets at end of period (000) $ 92,690 $113,338 $136,041
Ratio of expenses to average net assets 0.60% 0.62% 0.71%(d)
Ratio of net investment income to average net assets 4.85% 4.91% 4.76%(d)
Ratio of expenses to average net assets* 0.83% 0.84% 0.86%(d)
Ratio of net investment income to average net assets* 4.62% 4.69% 4.61%(d)
Portfolio turnover (e) 12.03% 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.
<TABLE>
<CAPTION>
SEVEN
YEAR ENDED MONTHS
JUNE 30, ENDED YEAR ENDED NOVEMBER 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 $ 10.10 $ 9.93 $ 10.09 $ 9.38 $ 10.27 $ 9.92 $ 9.73 $ 9.51
- ---------------------------------------------------------------------------------------------------------
Investment Activities:
Net investment income 0.47 0.47 0.24 0.50 0.49 0.52 0.55 0.56
Net realized and unrealized gains
(losses) from investments 0.16 0.17 (0.16) 0.71 (0.79) 0.42 0.26 0.22
- ---------------------------------------------------------------------------------------------------------
Total from Investment Activities 0.63 0.64 0.08 1.21 (0.30) 0.94 0.82 0.78
- ---------------------------------------------------------------------------------------------------------
Distributions:
Net investment income (0.47) (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) (0.47) (0.24) (0.50) (0.59) (0.59) (0.62) (0.56)
- ---------------------------------------------------------------------------------------------------------
NET ASSET VALUE, END OF PERIOD $ 10.26 $ 10.10 $ 9.93 $ 10.09 $ 9.38 $ 10.27 $ 9.92 $ 9.73
- ---------------------------------------------------------------------------------------------------------
Total Return (Excludes Sales Charge) 6.35% 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) $47,078 $48,498 $53,479 $206,119 $196,820 $196,534 $135,692 $ 88,503
Ratio of expenses to average net
assets 0.85% 0.87% 0.69%(c) 0.62% 0.65% 0.62% 0.58% 0.61%
Ratio of net investment income to
average net assets 4.60% 4.66% 4.71%(c) 5.07% 4.97% 5.07% 5.70% 5.86%
Ratio of expenses to average net
assets* 1.18% 1.19% 0.86%(c) 0.77% 0.80% 0.78% 0.83% 0.86%
Ratio of net investment income to
average net assets* 4.27% 4.34% 4.54%(c) 4.92% 4.82% 4.91% 5.45% 5.61%
Portfolio turnover (d) 12.03% 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.
15
<PAGE> 133
The One Group(R) Louisiana Municipal Bond Fund Financial Highlights
<TABLE>
<CAPTION>
YEAR ENDED SEVEN MONTHS SEPT. 16, 1994
JUNE 30, ENDED YEAR ENDED THROUGH
----------------- 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 $10.10 $ 9.93 $10.09 $ 9.36 $ 9.73
- --------------------------------------------------------------------------------------------------------------
Investment Activities:
Net investment income 0.41 0.40 0.21 0.42 0.08
Net realized and unrealized gains (losses) from
investments 0.16 0.17 (0.16) 0.73 (0.37)
- --------------------------------------------------------------------------------------------------------------
Total from Investment Activities 0.57 0.57 0.05 1.15 (0.29)
- --------------------------------------------------------------------------------------------------------------
Distributions:
Net investment income (0.41) (0.40) (0.21) (0.42) (0.08)
- --------------------------------------------------------------------------------------------------------------
Total Distributions (0.41) (0.40) (0.21) (0.42) (0.08)
- --------------------------------------------------------------------------------------------------------------
NET ASSET VALUE, END OF PERIOD $10.26 $10.10 $ 9.93 $10.09 $ 9.36
- --------------------------------------------------------------------------------------------------------------
Total Return (Excludes Sales Charge) 5.69% 5.87% 0.48%(c) 12.52% (2.94)%(c)
RATIOS/SUPPLEMENTARY DATA:
Net Assets at end of period (000) $5,474 $3,835 $3,223 $2,115 $ 204
Ratio of expenses to average net assets 1.50% 1.51% 1.50%(d) 1.37% 1.41%(d)
Ratio of net investment income to average net assets 3.95% 4.02% 3.98%(d) 4.27% 4.45%(d)
Ratio of expenses to average net assets* 1.83% 1.85% 1.70%(d) 1.52% 1.56%(d)
Ratio of net investment income to average net assets* 3.62% 3.68% 3.78%(d) 4.12% 4.30%(d)
Portfolio turnover (e) 12.03% 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.
16
<PAGE> 134
The One Group(R)
Ohio Municipal Bond Fund
[LOGO] 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.
[LOGO] 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.
[LOGO] 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 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."
[LOGO] 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."
[LOGO] 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.
[LOGO] 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.
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>
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.
17
<PAGE> 135
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>
YEAR 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 $ 10.88 $ 10.69 $ 10.65 $ 10.58 $ 11.11 $ 10.48 $ 10.00
- --------------------------------------------------------------------------------------------------------------------
Investment Activities:
Net investment income 0.56 0.56 0.56 0.55 0.51 0.54 0.56
Net realized and unrealized gains
(losses) from investments 0.20 0.19 0.04 0.07 (0.50) 0.62 0.47
- --------------------------------------------------------------------------------------------------------------------
Total from Investment Distributions: 0.76 0.75 0.60 0.62 0.01 -- --
- --------------------------------------------------------------------------------------------------------------------
Distributions:
Net investment income (0.56) (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) (0.56) (0.55) (0.54) (0.53) (0.55)
- --------------------------------------------------------------------------------------------------------------------
NET ASSET VALUE, END OF PERIOD $ 11.08 $ 10.88 $ 10.69 $ 10.65 $ 10.58 $ 11.11 $ 10.48
- --------------------------------------------------------------------------------------------------------------------
Total Return 7.13% 7.22% 5.69% 6.07% 0.07% 11.43% 10.64%
RATIOS/SUPPLEMENTARY DATA:
Net Assets at end of period (000) $149,890 $133,172 $80,611 $79,993 $93,261 $74,792 $45,199
Ratio of expenses to average net
assets 0.54% 0.54% 0.57% 0.58% 0.53% 0.55% 0.63%(b)
Ratio of net investment income to
average net assets 5.09% 5.24% 5.17% 5.29% 4.76% 5.14% 5.61%(b)
Ratio of expenses to average net
assets* 0.83% 0.84% 0.95% 0.91% 0.86% 0.94% 1.21%(b)
Ratio of net investment income to
average net assets* 4.80% 4.94% 4.79% 4.96% 4.43% 4.75% 5.03%(b)
Portfolio turnover (a) 10.49% 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.
<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 $ 10.91 $ 10.72 $ 10.68 $ 10.61 $ 11.13 $ 10.48 $10.29
- ----------------------------------------------------------------------------------------------------------------
Investment Activities:
Net investment income 0.54 0.54 0.55 0.53 0.50 0.52 0.20
Net realized and unrealized gains
(losses) from investments 0.20 0.19 0.03 0.07 (0.48) 0.64 0.21
- ----------------------------------------------------------------------------------------------------------------
Total from Investment Activities 0.74 0.73 0.58 0.60 0.02 1.16 0.41
- ----------------------------------------------------------------------------------------------------------------
Distributions:
Net investment income (0.54) (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) (0.54) (0.53) (0.54) (0.51) (0.22)
- ----------------------------------------------------------------------------------------------------------------
NET ASSET VALUE, END OF PERIOD $ 11.11 $ 10.91 $ 10.72 $ 10.68 $ 10.61 $ 11.13 $10.48
- ----------------------------------------------------------------------------------------------------------------
Total Return (Excludes Sales Charge) 6.87% 6.95% 5.44% 5.79% (0.05)% 11.40% 10.85%(b)
RATIOS/SUPPLEMENTARY DATA:
Net Assets at end of period (000) $17,297 $16,114 $16,507 $12,006 $14,883 $13,092 $ 41
Ratio of expenses to average net
assets 0.79% 0.79% 0.82% 0.82% 0.78% 0.77% 1.01%(b)
Ratio of net investment income to
average net assets 4.83% 4.96% 4.92% 5.01% 4.63% 4.85% 5.16%(b)
Ratio of expenses to average net
assets* 1.18% 1.19% 1.30% 1.25% 1.21% 1.25% 1.40%(b)
Ratio of net investment income to
average net assets* 4.44% 4.56% 4.44% 4.58% 4.20% 4.37% 4.77%(b)
Portfolio turnover (a) 10.49% 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.
18
<PAGE> 136
The One Group(R) Ohio Municipal 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 $ 10.98 $ 10.79 $ 10.75 $ 10.68 $ 11.31
- -----------------------------------------------------------------------------------------------------------------------------
Investment Activities:
Net investment income 0.47 0.47 0.48 0.43 0.17
Net realized and unrealized gains (losses) from
investments 0.20 0.19 0.03 0.07 (0.62)
- -----------------------------------------------------------------------------------------------------------------------------
Total from Investment Activities 0.67 0.66 0.51 0.50 (0.45)
- -----------------------------------------------------------------------------------------------------------------------------
Distributions:
Net investment income (0.47) (0.47) (0.47) (0.43) (0.17)
In excess of net investment income -- -- -- -- (0.01)
- -----------------------------------------------------------------------------------------------------------------------------
Total Distributions (0.47) (0.47) (0.47) (0.43) (0.18)
- -----------------------------------------------------------------------------------------------------------------------------
NET ASSET VALUE, END OF PERIOD $ 11.18 $ 10.98 $ 10.79 $ 10.75 $ 10.68
- -----------------------------------------------------------------------------------------------------------------------------
Total Return (Excludes Sales Charge) 6.20% 6.26% 4.79% 5.17% (4.02)%(b)
RATIOS/SUPPLEMENTARY DATA:
Net Assets at end of period (000) $26,138 $14,316 $ 8,854 $ 3,209 $ 2,043
Ratio of expenses to average net assets 1.44% 1.44% 1.47% 1.48% 1.28%(c)
Ratio of net investment income to average net assets 4.19% 4.33% 4.27% 4.40% 4.23%(c)
Ratio of expenses to average net assets* 1.83% 1.84% 1.95% 1.91% 1.68%(c)
Ratio of net investment income to average net assets* 3.80% 3.93% 3.79% 3.97% 3.83%(c)
Portfolio turnover (d) 10.49% 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.
19
<PAGE> 137
The One Group(R)
Kentucky Municipal Bond Fund
[LOGO] 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.
[LOGO] 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.
[LOGO] 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 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."
[LOGO] 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."
[LOGO] 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.
[LOGO] 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.
SHAREHOLDER EXPENSES
<TABLE>
<CAPTION>
SHAREHOLDER TRANSACTION EXPENSES (1) CLASS A CLASS B CLASS C
<S> <C> <C> <C>
Maximum Sales Charge Imposed on
Purchases (as a percentage of
offering price) 4.50% none none
Maximum Contingent Deferred Sales
Charge (as a percentage of
original purchase price or
redemption proceeds, as
applicable) none(2) 5.00% 1.00%
Redemption Fees none none none
Exchange Fees 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%
12b-1 Fees (after fee waiver) (5) .25% .90% .90%
Other Expenses .32% .32% .32%
Total Fund Operating Expenses (after
fee waivers) (6) .97% 1.62% 1.62%
<CAPTION>
CLASS I
<S> <C>
none
none
none
none
.40%
none
.32%
.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
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.
20
<PAGE> 138
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 JUNE 30, 1995 TO 1994 TO 1993 TO
----------------------------------------- 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 $ 10.20 $ 10.04 $ 9.92 $ 9.49 $ 10.45 $ 10.00
- ---------------------------------------------------------------------------------------------------------------------------------
Investment Activities:
Net investment income 0.51 0.50 0.50 0.20 0.41 0.36
Net realized and unrealized
gains (losses) from
investments 0.20 0.16 0.12 0.43 (0.95) 0.43
- ---------------------------------------------------------------------------------------------------------------------------------
Total from Investment Activities 0.71 0.66 0.62 0.63 (0.54) 0.79
- ---------------------------------------------------------------------------------------------------------------------------------
Distributions:
Net investment income (0.51) (0.50) (0.50) (0.20) (0.42) (0.34)
- ---------------------------------------------------------------------------------------------------------------------------------
Total Distributions (0.51) (0.50) (0.50) (0.20) (0.42) (0.34)
- ---------------------------------------------------------------------------------------------------------------------------------
NET ASSET VALUE, END OF PERIOD $ 10.40 $ 10.20 $ 10.04 $ 9.92 $ 9.49 $ 10.45
- ---------------------------------------------------------------------------------------------------------------------------------
Total Return 7.11% 6.74% 6.35% 6.56%(d) (5.17)%(d) 8.05%(d)
RATIOS/SUPPLEMENTARY DATA:
Net Assets at end of period
(000) $122,220 $116,830 $30,300 $32,520 $41,953 $64,663
Ratio of expenses to average
net assets 0.60% 0.59% 0.68% 0.65%(e) 1.03%(e) 0.70%(e)
Ratio of net investment income
to average net assets 4.94% 5.12% 4.60% 4.70%(e) 4.27%(e) 4.19%(e)
Ratio of expenses to average
net assets* 0.69% 0.72% 1.02% 0.97%(e) 1.05%(e) 0.91%(e)
Ratio of net investment income
to average net assets* 4.85% 4.99% 4.26% 4.38%(e) 4.25%(e) 3.98%(e)
Portfolio turnover (f) 5.81% 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.
<TABLE>
<CAPTION>
JANUARY 20,
YEAR ENDED JUNE 30, 1995 TO
----------------------------------------- JUNE 30,
CLASS A 1998 1997 1996 1995(A)
<S> <C> <C> <C> <C>
NET ASSET VALUE, BEGINNING OF PERIOD $ 10.21 $ 10.05 $ 9.93 $ 9.49
- -------------------------------------------------------------------------------------------------------------------------
Investment Activities:
Net investment income 0.49 0.48 0.44 0.19
Net realized and unrealized gains from investments 0.20 0.16 0.12 0.44
- -------------------------------------------------------------------------------------------------------------------------
Total from Investment Activities 0.69 0.64 0.56 0.63
- -------------------------------------------------------------------------------------------------------------------------
Distributions:
Net investment income (0.49) (0.48) (0.44) (0.19)
- -------------------------------------------------------------------------------------------------------------------------
Total Distributions (0.49) (0.48) (0.44) (0.19)
- -------------------------------------------------------------------------------------------------------------------------
NET ASSET VALUE, END OF PERIOD $ 10.41 $ 10.21 $ 10.05 $ 9.93
- -------------------------------------------------------------------------------------------------------------------------
Total Return (Excludes Sales Charge) 6.86% 6.46% 5.70% 5.66%(b)
RATIOS/SUPPLEMENTARY DATA:
Net Assets at end of period (000) $7,899 $5,554 $8,178 $8,818
Ratio of expenses to average net assets 0.85% 0.84% 0.93% 0.90%(c)
Ratio of net investment income to average net assets 4.69% 4.66% 4.35% 4.44%(c)
Ratio of expenses to average net assets* 1.04% 1.04% 1.37% 1.33%(c)
Ratio of net investment income to average net assets* 4.50% 4.46% 3.91% 4.01%(c)
Portfolio turnover (d) 5.81% 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.
21
<PAGE> 139
The One Group(R) Kentucky Municipal Bond Fund Financial Highlights
<TABLE>
<CAPTION>
YEAR ENDED JUNE 30, MARCH 16, 1995
--------------------------------------- TO
CLASS B 1998 1997 1996 JUNE 30, 1995(A)
<S> <C> <C> <C> <C>
NET ASSET VALUE, BEGINNING OF PERIOD $ 10.15 $ 9.99 $ 9.87 $ 9.75
- ----------------------------------------------------------------------------------------------------------------------------
Investment Activities:
Net investment income 0.42 0.41 0.38 0.14
Net realized and unrealized gains from investments 0.20 0.16 0.13 0.12
- ----------------------------------------------------------------------------------------------------------------------------
Total from Investment Activities 0.62 0.57 0.51 0.26
- ----------------------------------------------------------------------------------------------------------------------------
Distributions:
Net investment income (0.42) (0.41) (0.39) (0.14)
- ----------------------------------------------------------------------------------------------------------------------------
Total Distributions (0.42) (0.41) (0.39) (0.14)
- ----------------------------------------------------------------------------------------------------------------------------
NET ASSET VALUE, END OF PERIOD $ 10.35 $ 10.15 $ 9.99 $ 9.87
- ----------------------------------------------------------------------------------------------------------------------------
Total Return (Excludes Sales Charge) 6.20% 5.81% 5.16% 2.63%(b)
RATIOS/SUPPLEMENTARY DATA:
Net Assets at end of period (000) $5,581 $2,399 $1,457 $79
Ratio of expenses to average net assets 1.51% 1.47% 1.58% 1.58%(c)
Ratio of net investment income to average net assets 4.04% 4.05% 3.70% 3.89%(c)
Ratio of expenses to average net assets* 1.70% 1.70% 2.02% 2.21%(c)
Ratio of net investment income to average net assets* 3.85% 3.82% 3.26% 3.25%(c)
Portfolio turnover (d) 5.81% 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.
22
<PAGE> 140
more about the funds
23
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:
- - Municipal Securities that are bonds must be rated as investment grade.
- - 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.
- - 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.
- - 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. Fixed income securities also are subject to the
risk that the issuer of the security will be unable to meet its repayment
obligation.
DERIVATIVES: Some of the Funds 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 include:
- - options
- - futures contracts
- - options on futures contracts
- - mortgage-backed securities, including collateralized mortgage obligations and
Real Estate Mortgage Investment Conduits (CMOs and REMICs) and stripped
mortgage-backed securities (IOs and POs)
- - structured instruments
- - swaps, caps and floors
- - new financial products
- - 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. 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,
<PAGE> 141
how to do business with The One Group
24
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. In addition,
agriculture is an important segment of the Ohio economy, and the state has
instituted several programs to provide financial assistance to farmers.
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. While revenues in recent years have been
adequate, an aging population and little or no population growth have put
increase financial pressure on state and local governments.
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.
As of June 30, 1998, the Kentucky unemployment rate was below the national
average, and the state showed a surplus in its General Fund for the prior fiscal
year. However, 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.
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 4:00 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.
<PAGE> 142
25
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 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. 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 BANK ONE
CORPORATION and its affiliates).
- Subsequent investments must be at least $100 ($25 for employees of Bank 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.
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 Intermediate Tax-Free Bond
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.
<PAGE> 143
26
- - 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
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.
<PAGE> 144
27
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 %
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:
<TABLE>
<CAPTION>
CDSC AS A % OF DOLLAR
YEARS SINCE PURCHASE AMOUNT SUBJECT TO CHARGE
- ------------------------------------------------------------
<S> <C>
0-1 5.00%
1-2 4.00%
2-3 3.00%
3-4 3.00%
4-5 2.00%
5-6 1.00%
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>
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.
<PAGE> 145
28
- - 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.
<PAGE> 146
29
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, 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. 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 (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.
- Bank 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 Bank 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
<PAGE> 147
30
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.
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.
<PAGE> 148
31
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.
- - 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.
- - 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
<PAGE> 149
32
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
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.
<PAGE> 150
33
- - 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 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 Bank 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.
<PAGE> 151
shareholder information
34
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. Bank One Corporation (One First National Plaza,
Chicago, Illinois, 60670), 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, Bank 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> <C>
Northern Trust Bank of AZ Ttee Arizona Municipal Bond Fund 33.72% Record
For Thomas A. Brand & Rev Trust Class A
PO Box 92956
Chicago, IL 60675-2956
Carolyn S. Ward Arizona Municipal Bond Fund Class 25.81% Beneficial
James D. Ward JT TEN B
825 W. Annadale
Tucson, AZ 85737-6923
Strafe & Co. Arizona Municipal Bond Fund 100.00% Record
Attn: Mutual Funds 0393 Class I
100 E. Broad Street Columbus, OH
43215-3607
Strafe & Co. c/o Bank One Trust Co. Income Bond Fund 88.91% Record
Attn Mutual Funds Class I
100 E. Broad St.
Columbus, OH 43215-3607
Strafe & Co. Ohio Municipal Bond Fund 98.98% Record
Attn: Mutual Funds 0393 Class I
100 E. Broad Street
Columbus, OH 43215-3607
Strafe & Co. Louisiana Municipal Bond Fund 98.38% Record
Attn: Mutual Funds 0393 Class I
100 E. Broad Street
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
Dean Witter for the Benefit of Municipal Income Fund 25.64% Record
Gale R. Hershberger & Linda L. Class C
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 Bond Fund 26.33% Record
Stephen A. Lewis Class A
3720 Noyles Avenue
5 World Trade Center 6th Floor
New York, NY 10048-0205
Strafe & Co. West Virginia Municipal Bond Fund 98.52% Record
Attn: Mutual Funds 0393 Class I
100 E. Broad Street
Columbus, OH 43215-3607
</TABLE>
<PAGE> 152
35
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.")
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,
<PAGE> 153
36
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.
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.
<PAGE> 154
ORGANIZATION AND MANAGEMENT OF THE FUNDS
37
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.
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 Bank 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:
<TABLE>
<CAPTION>
ANNUAL RATE AS PERCENTAGE
FUND NAME OF AVERAGE DAILY NET ASSETS
- ---------------------------------------------------------------------------------------
<S> <C>
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%
</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 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 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.
<PAGE> 155
38
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 1999 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 anticipates 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 move to Year 2000 will
not have a material impact on its operations.
<PAGE> 156
DETAILS ABOUT THE FUNDS' INVESTMENT PRACTICES AND POLICIES
39
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 CUBES. 1-7 Market
TREASURY RECEIPTS: TRS, TIGRS, and CATS. 1-7 Market
U.S. GOVERNMENT AGENCY SECURITIES: Securities issued by 1-7 Market
agencies and instrumentalities of the U.S. Government. These
include Credit Ginnie Mae, Fannie Mae and Freddie Mac.
CERTIFICATES OF DEPOSIT: Negotiable instruments with a 1-7 Market
stated 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 Market
at an agreed upon price on an agreed upon date. This is Liquidity
treated as a loan.
REVERSE REPURCHASE AGREEMENT: The sale of a security and the 1-7 Market
simultaneous commitment to buy the security back at an Leverage
agreed 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 1-7 Credit
total assets. In return the Fund will receive cash, other Market
securities, 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 Leverage
delivery at a future date. Liquidity
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 1-7 Management
right to buy, and obligates the seller of the option to Liquidity
sell, a security at a specified price. A put option gives Credit
the buyer the right to sell, and obligates the seller of the Market
option to buy, a security at a specified price. The Funds Leverage
will sell only covered call and secured put options.
FUTURES AND RELATED OPTIONS: A contract providing for the 1-7 Management
future sale and purchase of a specified amount of a Market
specified security, class of securities, or an index at a Credit
specified time in the future and at a specified price. Liquidity
Leverage
BANKERS' ACCEPTANCES: Bills of exchange or time drafts drawn 1-7 Credit
on and accepted by a commercial bank. Maturities are Liquidity
generally six months or less. Market
</TABLE>
<PAGE> 157
40
<TABLE>
<CAPTION>
INSTRUMENT FUND CODE RISK TYPE
- ------------------------------------------------------------------------------------------------
<S> <C> <C>
COMMERCIAL PAPER: Secured and unsecured short-term 1-7 Credit
promissory notes issued by corporations and other entities. Liquidity
Maturities 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 Credit
some other period and which may be payable to the Fund on Liquidity
demand.
MORTGAGE-BACKED SECURITIES: Debt obligations secured by real 1-7 Pre-payment
estate loans and pools of loans. These include Market
collateralized mortgage obligations ("CMOs"), and Real Credit
Estate Mortgage Investment Conduits ("REMICs"). Regulatory
DEMAND FEATURES: Securities that are subject to puts and 1-7 Market
standby commitments to purchase the securities at a fixed Liquidity
price (usually with accrued interest) within a fixed period Management
of time following 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 Market
simultaneously contracts with the same party to repurchase Regulatory
similar but not identical securities on a specified future
date.
SWAPS, CAPS AND FLOORS: A Fund may enter into these 1-7 Management
transactions to manage its exposure to changing interest Credit
rates and other factors. Swaps involve an exchange of Liquidity
obligations by two parties. Caps and floors entitle a Market
purchaser to a principal 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 1-7 Management
and other financial products continue to be developed and Credit
the Fund may invest in such options, contracts and products. Market
Liquidity
STRUCTURED INSTRUMENTS: Debt securities issued by agencies 1-7 Market
and instrumentalities of the U.S. government, banks, Liquidity
municipalities, corporations and other businesses whose Management
interest and/or principal payments are indexed to foreign Credit
currency exchange rates, interest rates, or one or more Foreign Investment
other referenced indices.
MUNICIPAL SECURITIES: Securities issued by a state or 1-7 Credit
political subdivision to obtain funds for various public Political
purposes. Municipal securities include private activity Tax
bonds and industrial development bonds, as well as General Market
Obligation 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, Market
leases, credit card receivables and other securities backed Credit
by other types of receivables or other assets.
ZERO-COUPON DEBT SECURITIES: Bonds and other debt that pay 1-7 Credit
no interest, but are issued at a discount from their value Market
at 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 1-7 Credit
debt instruments with interest rates that reset in the Market
opposite direction from the market rate of interest to which Leverage
the inverse floater is indexed.
LOAN PARTICIPATIONS AND ASSIGNMENTS: Participations in, or 1-7 Market
assignments of municipal securities, including municipal Credit
leases. Political
Liquidity
Tax
</TABLE>
<PAGE> 158
41
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.
- - 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. 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 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
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.
<PAGE> 159
42
- - 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.
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:
- Obligations issued or guaranteed by the U.S. government or its agencies and
instrumentalities and repurchase agreements involving such securities;
- Municipal Securities; and
- 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.
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.
<PAGE> 160
43
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.
<PAGE> 161
appendix
44
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, INC. ("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.
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.
<PAGE> 162
45
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 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.
<PAGE> 163
46
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
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.
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.
<PAGE> 164
47
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.
<PAGE> 165
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 8500
Boston, MA 02266-8500
LEGAL COUNSEL
Ropes & Gray
One Franklin Square
1301 K Street, N.W.
Suite 800 East
Washington, D.C. 20005
INDEPENDENT ACCOUNTANTS
PricewaterhouseCoopers LLP
100 East Broad Street
Columbus, OH 43215
THE STATEMENT OF ADDITIONAL INFORMATION CON-
TAINS 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.COM) THAT CONTAINS THE
STATEMENT OF ADDITIONAL INFORMATION, MATERIALS
INCORPORATED BY REFERENCE AND OTHER INFORMATION
REGARDING THE ONE GROUP (R).
TOG-F-123
<PAGE> 166
THE ONE GROUP(R) FAMILY OF MUTUAL FUNDS
[GRAPHIC]
THE ONE GROUP(R) INVESTOR FUNDS
COMBINED PROSPECTUS
NOVEMBER 1, 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 BANK 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 OR ANY STATE SECURITIES COMMISSION NOR HAS THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED UPON THE
ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION
TO THE CONTRARY IS A CRIMINAL OFFENSE.
<PAGE> 167
TABLE OF CONTENTS
<TABLE>
<S> <C>
A BRIEF PREVIEW OF THE FUNDS................................ 1
ABOUT THE FUNDS............................................. 2
The One Group(R) Investor Growth Fund.................... 2
The One Group(R) Investor Growth & Income Fund........... 5
The One Group(R) Investor Balanced Fund.................. 8
The One Group(R) Investor Conservative Growth Fund....... 11
MORE ABOUT THE FUNDS........................................ 14
HOW TO DO BUSINESS WITH THE ONE GROUP....................... 15
Purchasing Fund Shares................................... 15
Sales Charges............................................ 17
Sales Charge Reductions and Waivers...................... 18
Exchanging Fund Shares................................... 20
Redeeming Fund Shares.................................... 21
SHAREHOLDER INFORMATION..................................... 23
Voting Rights............................................ 23
Dividend Policies........................................ 23
Tax Treatment of the Funds............................... 24
Tax Treatment of Shareholders............................ 24
Shareholder Inquiries.................................... 24
ORGANIZATION AND MANAGEMENT OF THE FUNDS.................... 25
The Funds................................................ 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
Year 2000................................................ 25
DETAILS ABOUT THE FUNDS' INVESTMENT PRACTICES AND
POLICIES.................................................. 27
Investment Practices..................................... 27
Investment Policies...................................... 30
APPENDIX A: DETAILS ABOUT THE UNDERLYING FUNDS' INVESTMENT
PRACTICES................................................. 31
APPENDIX B: DESCRIPTION OF RATINGS.......................... 36
</TABLE>
<PAGE> 168
1
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:
<TABLE>
<S> <C>
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
</TABLE>
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 Bank 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 Bank 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. 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.
<PAGE> 169
The One Group(R)
Investor Growth Fund
LOGO 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.
LOGO 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.
LOGO PORTFOLIO SECURITIES
The Fund will invest in the
underlying mutual funds within the
following range:
<TABLE>
<S> <C>
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%
</TABLE>
LOGO 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
<S> <C> <C> <C>
Maximum Sales Charge Imposed on
Purchases (as a percentage of
offering price) 4.50% none none
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%
Redemption Fees none none none
Exchange Fees none none none
ANNUAL OPERATING EXPENSES (as a
percentage of average daily net
assets) (3)
Investment Advisory Fees .05% .05% .05%
12b-1 Fees (after fee waiver) (4) .25% 1.00% 1.00%
Other Expenses .15% .15% .15%
Total Fund Operating Expenses
(after fee waivers) (5) .45% 1.20% 1.20%
<CAPTION>
CLASS I
<S> <C>
none
none
none
none
.05
none
.15%
.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.
[CAPTION]
<TABLE>
<CAPTION>
NAME OF UNDERLYING FUND EXPENSE RATIO
<S> <C>
<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>
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 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 $113 $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 this 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.
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> 170
3
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>
DECEMBER 10, 1996
YEAR ENDED THROUGH
CLASS I JUNE 30, 1998 June 30, 1997(a)
- ------------------------------------------------------------------------------------------------
<S> <C> <C>
NET ASSET VALUE, BEGINNING OF PERIOD $ 11.25 $ 10.00
- ------------------------------------------------------------------------------------------------
Investment Activities:
Net investment income 0.12 0.09
Net realized and unrealized gains (losses) from
investments 2.49 1.25
- ------------------------------------------------------------------------------------------------
Total from Investment Activities 2.61 1.34
- ------------------------------------------------------------------------------------------------
Distributions:
From net investment income (0.12) (0.09)
Net realized gain (0.35) --
- ------------------------------------------------------------------------------------------------
Total Distributions (0.47) (0.09)
- ------------------------------------------------------------------------------------------------
NET ASSET VALUE, END OF PERIOD $ 13.39 $ 11.25
- ------------------------------------------------------------------------------------------------
Total Return 23.81% 13.50%(b)
RATIOS/SUPPLEMENTARY DATA:
Net Assets at end of period (000) $ 86,355 $ 31,318
Ratio of expenses to average net assets 0.20% 0.20%(c)
Ratio of net investment income to average net assets 1.04% 1.70%(c)
Ratio of expenses to average net assets* 0.36% 0.77%(c)
Ratio of net investment income to average net assets* 0.88% 1.13%(c)
Portfolio turnover (d) 4.05% 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.
<TABLE>
<CAPTION>
DECEMBER 10, 1996
YEAR ENDED THROUGH
CLASS A JUNE 30, 1998 June 30, 1997(a)
- ------------------------------------------------------------------------------------------------
<S> <C> <C>
NET ASSET VALUE, BEGINNING OF PERIOD $ 11.21 $ 10.00
- ------------------------------------------------------------------------------------------------
Investment Activities:
Net investment income 0.10 0.07
Net realized and unrealized gains (losses) from
investments 2.47 1.21
- ------------------------------------------------------------------------------------------------
Total from Investment Activities 2.57 1.28
- ------------------------------------------------------------------------------------------------
Distributions:
From net investment income (0.10) (0.07)
Net realized gain (0.35) --
- ------------------------------------------------------------------------------------------------
Total Distributions (0.45) (0.07)
- ------------------------------------------------------------------------------------------------
NET ASSET VALUE, END OF PERIOD $ 13.33 $ 11.21
- ------------------------------------------------------------------------------------------------
Total Return (Excludes Sales Charge) 23.44% 12.84%(b)
RATIOS/SUPPLEMENTARY DATA:
Net Assets at end of period (000) $ 55,057 $ 4,439
Ratio of expenses to average net assets 0.45% 0.46%(c)
Ratio of net investment income to average net assets 0.78% 1.82%(c)
Ratio of expenses to average net assets* 0.70% 1.62%(c)
Ratio of net investment income to average net assets* 0.53% 0.66%(c)
Portfolio turnover (d) 4.05% 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.
<PAGE> 171
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> <C>
NET ASSET VALUE, BEGINNING OF PERIOD $ 11.34 $ 10.00
- ----------------------------------------------------------------------------------------------------
Investment Activities:
Net investment income 0.02 0.04
Net realized and unrealized gains (losses) from
investments 2.48 1.34
- ----------------------------------------------------------------------------------------------------
Total from Investment Activities 2.50 1.38
- ----------------------------------------------------------------------------------------------------
Distributions:
From net investment income (0.02) (0.04)
Net realized gains (0.35) --
- ----------------------------------------------------------------------------------------------------
Total Distributions (0.37) (0.04)
- ----------------------------------------------------------------------------------------------------
NET ASSET VALUE, END OF PERIOD $ 13.47 $ 11.34
- ----------------------------------------------------------------------------------------------------
Total Return (Excludes Sales Charge) 22.52% 13.88%(b)
RATIOS/SUPPLEMENTARY DATA:
Net Assets at end of period (000) $ 70,515 $ 7,651
Ratio of expenses to average net assets 1.20% 1.20%(c)
Ratio of net investment income to average net assets 0.04% 0.97%(c)
Ratio of expenses to average net assets* 1.35% 2.18%(c)
Ratio of net investment income to average net assets* (0.11)% (0.01%)(c)
Portfolio turnover (d) 4.05% 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.
<TABLE>
<CAPTION>
YEAR
ENDED
JUNE 30,
CLASS C 1998(a)
<S> <C>
NET ASSET VALUE, BEGINNING OF PERIOD $ 11.25
- ----------------------------------------------------------------------------
Investment Activities:
Net investment income 0.02
Net realized and unrealized gains (losses) from
investments 2.45
- ----------------------------------------------------------------------------
Total from Investment Activities 2.47
- ----------------------------------------------------------------------------
Distributions:
Net investment income (0.03)
Net realized gains (0.35)
- ----------------------------------------------------------------------------
Total Distributions (0.38)
- ----------------------------------------------------------------------------
NET ASSET VALUE, END OF PERIOD $ 13.34
- ----------------------------------------------------------------------------
Total Return (Excludes Sales Charge) 22.42%(b)
RATIOS/SUPPLEMENTARY DATA:
Net Assets at end of period (000) $8,772
Ratio of expenses to average net assets 1.20%
Ratio of net investment income to average net assets 0.04%
Ratio of expenses to average net assets* 1.35%
Ratio of net investment income to average net assets* (0.11)%
Portfolio turnover (b) 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) Period from commencement of operations on July 1,
1997. (b) Portfolio turnover is calculated on the basis of the Fund as a
whole without distinguishing among the classes of shares issued.
4
<PAGE> 172
5
The One Group(R)
INVESTOR GROWTH & INCOME FUND
- --------------------------------------------------------------------------------
[LOGO] 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.
[LOGO] 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.
[LOGO] PORTFOLIO SECURITIES
The Fund will invest in the underlying mutual funds within the following ranges:
<TABLE>
<S> <C>
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%
</TABLE>
[LOGO] 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
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.
<TABLE>
<CAPTION>
NAME OF UNDERLYING FUND EXPENSE 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>
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%.
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. THESE
EXAMPLES SHOULD NOT BE CONSIDERED A REPRESENTATION OF PAST OR FUTURE EXPENSES
AND ACTUAL EXPENSES MAY BE GREATER OR LESS THAN THOSE SHOWN.
<PAGE> 173
6
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>
DECEMBER 10, 1996
YEAR ENDED THROUGH
CLASS I JUNE 30, 1998 JUNE 30, 1997(a)
- --------------------------------------------------------------------------------------------------------
<S> <C> <C>
NET ASSET VALUE, BEGINNING OF PERIOD $ 10.93 $ 10.00
- --------------------------------------------------------------------------------------------------------
Investment Activities:
Net investment income 0.25 0.15
Net realized and unrealized gains from investments 1.92 0.93
- --------------------------------------------------------------------------------------------------------
Total from Investment Activities 2.17 1.08
- --------------------------------------------------------------------------------------------------------
Distributions:
From net investment income (0.25) (0.15)
Net realized gain (0.28) --
- --------------------------------------------------------------------------------------------------------
Total Distributions (0.53) (0.15)
- --------------------------------------------------------------------------------------------------------
NET ASSET VALUE, END OF PERIOD $ 12.57 $ 10.93
- --------------------------------------------------------------------------------------------------------
Total Return 20.34% 10.87%(b)
RATIOS/SUPPLEMENTARY DATA:
Net Assets at end of period (000) $98,060 $43,660
Ratio of expenses to average net assets 0.20% 0.20%(c)
Ratio of net investment income to average net assets 2.17% 2.78%(c)
Ratio of expenses to average net assets* 0.34% 0.66%(c)
Ratio of net investment income to average net assets* 2.03% 2.32%(c)
Portfolio turnover (d) 11.38% 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>
DECEMBER 10, 1996
YEAR ENDED THROUGH
CLASS A JUNE 30, 1998 JUNE 30, 1997(a)
- --------------------------------------------------------------------------------------------------------
<S> <C> <C>
NET ASSET VALUE, BEGINNING OF PERIOD $ 11.02 $ 10.00
- --------------------------------------------------------------------------------------------------------
Investment Activities:
Net investment income 0.22 0.12
Net realized and unrealized gains from investments 1.95 1.02
- --------------------------------------------------------------------------------------------------------
Total from Investment Activities 2.17 1.14
- --------------------------------------------------------------------------------------------------------
Distributions:
From net investment income (0.22) (0.12)
Net realized gain (0.28) --
- --------------------------------------------------------------------------------------------------------
Total Distributions (0.50) (0.12)
- --------------------------------------------------------------------------------------------------------
\NET ASSET VALUE, END OF PERIOD $ 12.69 $ 11.02
- --------------------------------------------------------------------------------------------------------
Total Return (Excludes Sales Charge) 20.18% 11.50%(b)
RATIOS/SUPPLEMENTARY DATA:
Net Assets at end of period (000) $39,874 $4,262
Ratio of expenses to average net assets 0.45% 0.46%(c)
Ratio of net investment income to average net assets 1.91% 2.67%(c)
Ratio of expenses to average net assets* 0.67% 1.26%(c)
Ratio of net investment income to average net assets* 1.69% 1.87%(c)
Portfolio turnover (d) 11.38% 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.
<PAGE> 174
7
THE ONE GROUP(R) INVESTOR GROWTH & INCOME FUND FINANCIAL HIGHLIGHTS
- -------------------------------------------------------------------------------
<TABLE>
<CAPTION>
DECEMBER 10, 1996
YEAR ENDED THROUGH
CLASS B JUNE 30, 1998 JUNE 30, 1997(a)
- --------------------------------------------------------------------------------------------------------
<S> <C> <C>
NET ASSET VALUE, BEGINNING OF PERIOD $ 11.00 $ 10.00
- --------------------------------------------------------------------------------------------------------
Investment Activities:
Net investment income 0.14 0.09
Net realized and unrealized gains from investments 1.92 1.00
- --------------------------------------------------------------------------------------------------------
Total from Investment Activities 2.06 1.09
- --------------------------------------------------------------------------------------------------------
Distributions:
From net investment income (0.14) (0.09)
Net realized gain (0.28) --
- --------------------------------------------------------------------------------------------------------
Total Distributions (0.42) (0.09)
- --------------------------------------------------------------------------------------------------------
NET ASSET VALUE, END OF PERIOD $ 12.64 $ 11.00
- --------------------------------------------------------------------------------------------------------
Total Return (Excludes Sales Charge) 19.13% 11.02%(b)
RATIOS/SUPPLEMENTARY DATA:
Net Assets at end of period (000) $ 85,468 $ 8,896
Ratio of expenses to average net assets 1.20% 1.21%(c)
Ratio of net investment income to average net assets 1.15% 1.94%(c)
Ratio of expenses to average net assets* 1.32% 1.89%(c)
Ratio of net investment income to average net assets* 1.03% 1.26%(c)
Portfolio turnover (d) 11.38% 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>
YEAR
ENDED
JUNE 30,
CLASS C 1998(a)
- --------------------------------------------------------------------------
<S> <C>
NET ASSET VALUE, BEGINNING OF PERIOD $ 10.93
- --------------------------------------------------------------------------
Investment Activities:
Net investment income 0.14
Net realized and unrealized gains (losses) from
investments 1.90
- --------------------------------------------------------------------------
Total from Investment Activities 2.04
- --------------------------------------------------------------------------
Distributions:
Net investment income (0.15)
Net realized gains (0.28)
- --------------------------------------------------------------------------
Total Distributions (0.43)
- --------------------------------------------------------------------------
NET ASSET VALUE, END OF PERIOD $ 12.54
- --------------------------------------------------------------------------
Total Return (Excludes Sales Charge) 19.08%
RATIOS/SUPPLEMENTARY DATA:
Net Assets at end of period (000) $6,429
Ratio of expenses to average net assets 1.20%
Ratio of net investment income to average net assets 1.14%
Ratio of expenses to average net assets* 1.31%
Ratio of net investment income to average net assets* 1.03%
Portfolio turnover (b) 11.38%
</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 on July 1,
1997. (b) Portfolio turnover is calculated on the basis of the Fund as a
whole without distinguishing among the classes of shares issued.
<PAGE> 175
8
The One Group(R)
INVESTOR BALANCED FUND
- --------------------------------------------------------------------------------
[LOGO] 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.
[LOGO] 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.
[LOGO] PORTFOLIO SECURITIES
The Fund will invest in the underlying mutual funds within the following range:
<TABLE>
<S> <C>
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%
</TABLE>
[LOGO] 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."
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.
<TABLE>
<CAPTION>
NAME OF UNDERLYING FUND EXPENSE 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) 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>
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>
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. THESE
EXAMPLES SHOULD NOT BE CONSIDERED A REPRESENTATION OF PAST OR FUTURE EXPENSES
AND ACTUAL EXPENSES MAY BE GREATER OR LESS THAN THOSE SHOWN.
<PAGE> 176
9
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>
DECEMBER 10, 1996
YEAR ENDED THROUGH
CLASS I JUNE 30, 1998 JUNE 30, 1997(a)
- --------------------------------------------------------------------------------------------------
<S> <C> <C>
NET ASSET VALUE, BEGINNING OF PERIOD $ 10.63 $ 10.00
- --------------------------------------------------------------------------------------------------
Investment Activities:
Net investment income 0.37 0.21
Net realized and unrealized gains from investments 1.39 0.63
- --------------------------------------------------------------------------------------------------
Total from Investment Activities 1.76 0.84
- --------------------------------------------------------------------------------------------------
Distributions:
From net investment income (0.36) (0.21)
Net realized gains (0.22) --
- --------------------------------------------------------------------------------------------------
Total Distributions (0.58) (0.21)
- --------------------------------------------------------------------------------------------------
NET ASSET VALUE, END OF PERIOD $ 11.81 $ 10.63
- --------------------------------------------------------------------------------------------------
Total Return 17.02% 8.48%(b)
RATIOS/SUPPLEMENTARY DATA:
Net Assets at end of period (000) $93,557 $ 72,155
Ratio of expenses to average net assets 0.20% 0.20%(c)
Ratio of net investment income to average net assets 3.31% 3.84%(c)
Ratio of expenses to average net assets* 0.32% 0.56%(c)
Ratio of net investment income to average net assets* 3.19% 3.48%(c)
Portfolio turnover (d) 9.71% 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>
DECEMBER 10, 1996
YEAR ENDED THROUGH
CLASS A JUNE 30, 1998 JUNE 30, 1997(a)
- --------------------------------------------------------------------------------------------------
<S> <C> <C>
NET ASSET VALUE, BEGINNING OF PERIOD $ 10.66 $ 10.00
- --------------------------------------------------------------------------------------------------
Investment Activities:
Net investment income 0.34 0.17
Net realized and unrealized gains from investments 1.39 0.66
- --------------------------------------------------------------------------------------------------
Total from Investment Activities 1.73 0.83
- --------------------------------------------------------------------------------------------------
Distributions:
From net investment income (0.34) (0.17)
Net realized gains (0.22) --
- --------------------------------------------------------------------------------------------------
Total Distributions (0.56) (0.17)
- --------------------------------------------------------------------------------------------------
NET ASSET VALUE, END OF PERIOD $ 11.83 $ 10.66
- --------------------------------------------------------------------------------------------------
Total Return (Excludes Sales Charge) 16.62% 8.41%(b)
RATIOS/SUPPLEMENTARY DATA:
Net Assets at end of period (000) $32,605 $ 2,176
Ratio of expenses to average net assets 0.45% 0.47%(c)
Ratio of net investment income to average net assets 3.01% 3.78%(c)
Ratio of expenses to average net assets* 0.66% 1.12%(c)
Ratio of net investment income to average net assets* 2.80% 3.13%(c)
Portfolio turnover (d) 9.71% 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.
<PAGE> 177
10
THE ONE GROUP(R) INVESTOR BALANCED FUND FINANCIAL HIGHLIGHTS
- ------------------------------------------------------------------------------
<TABLE>
<CAPTION>
DECEMBER 10, 1996
YEAR ENDED THROUGH
CLASS B JUNE 30, 1998 JUNE 30, 1997(a)
- --------------------------------------------------------------------------------------------------
<S> <C> <C>
NET ASSET VALUE, BEGINNING OF PERIOD $ 10.65 $ 10.00
- --------------------------------------------------------------------------------------------------
Investment Activities:
Net investment income 0.26 0.16
Net realized and unrealized gains from investments 1.39 0.65
- --------------------------------------------------------------------------------------------------
Total from Investment Activities 1.65 0.81
- --------------------------------------------------------------------------------------------------
Distributions:
From net investment income (0.26) (0.16)
Net realized gains (0.22) --
- --------------------------------------------------------------------------------------------------
Total Distributions (0.48) (0.16)
- --------------------------------------------------------------------------------------------------
NET ASSET VALUE, END OF PERIOD $ 11.82 $ 10.65
- --------------------------------------------------------------------------------------------------
Total Return (Excludes Sales Charge) 15.85% 8.22%(b)
RATIOS/SUPPLEMENTARY DATA:
Net Assets at end of period (000) $70,463 $ 5,672
Ratio of expenses to average net assets 1.20% 1.22%(c)
Ratio of net investment income to average net assets 2.26% 2.93%(c)
Ratio of expenses to average net assets* 1.31% 1.73%(c)
Ratio of net investment income to average net assets* 2.15% 2.42%(c)
Portfolio turnover (d) 9.71% 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>
YEAR
ENDED
JUNE 30,
CLASS C 1998(a)
- --------------------------------------------------------------------------
<S> <C>
NET ASSET VALUE, BEGINNING OF PERIOD $ 10.63
- --------------------------------------------------------------------------
Investment Activities:
Net investment income 0.26
Net realized and unrealized gains (losses) from
investments 1.37
- --------------------------------------------------------------------------
Total from Investment Activities 1.63
- --------------------------------------------------------------------------
Distributions:
Net investment income (0.27)
Net realized gains (0.22)
- --------------------------------------------------------------------------
Total Distributions (0.49)
- --------------------------------------------------------------------------
NET ASSET VALUE, END OF PERIOD $ 11.77
- --------------------------------------------------------------------------
Total Return (Excludes Sales Charge) 15.66%
RATIOS/SUPPLEMENTARY DATA:
Net Assets at end of period (000) $6,653
Ratio of expenses to average net assets 1.20%
Ratio of net investment income to average net assets 2.24%
Ratio of expenses to average net assets* 1.30%
Ratio of net investment income to average net assets* 2.14%
Portfolio turnover (b) 9.71%
</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) Period from commencement of operations on July 1,
1997. (b) Portfolio turnover is calculated on the basis of the Fund as a
whole without distinguishing among the classes of shares issued.
<PAGE> 178
11
The One Group(R)
INVESTOR CONSERVATIVE GROWTH FUND
- --------------------------------------------------------------------------------
[LOGO] 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.
[LOGO] 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.
[LOGO] PORTFOLIO SECURITIES
The Fund will invest in the underlying mutual funds within the following range:
<TABLE>
<S> <C>
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%
</TABLE>
[LOGO] 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."
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.
<TABLE>
<CAPTION>
NAME OF UNDERLYING FUND EXPENSE 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) 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>
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>
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. THESE
EXAMPLES SHOULD NOT BE CONSIDERED A REPRESENTATION OF PAST OR FUTURE EXPENSES
AND ACTUAL EXPENSES MAY BE GREATER OR LESS THAN THOSE SHOWN.
<PAGE> 179
12
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>
DECEMBER 10, 1996
YEAR ENDED THROUGH
CLASS I JUNE 30, 1998 JUNE 30, 1997(a)
- --------------------------------------------------------------------------------------------------
<S> <C> <C>
NET ASSET VALUE, BEGINNING OF PERIOD $ 10.33 $ 10.00
- --------------------------------------------------------------------------------------------------
Investment Activities:
Net investment income 0.46 0.26
Net realized and unrealized gains (losses) from
investments 0.82 0.33
- --------------------------------------------------------------------------------------------------
Total from Investment Activities 1.28 0.59
- --------------------------------------------------------------------------------------------------
Distributions:
From net investment income (0.45) (0.26)
Net realized gains (0.10) --
- --------------------------------------------------------------------------------------------------
Total Distributions (0.55) (0.26)
- --------------------------------------------------------------------------------------------------
NET ASSET VALUE, END OF PERIOD $ 11.06 $ 10.33
- --------------------------------------------------------------------------------------------------
Total Return 12.73% 6.00%(b)
RATIOS/SUPPLEMENTARY DATA:
Net Assets at end of period (000) $30,352 $ 15,038
Ratio of expenses to average net assets 0.20% 0.20%(c)
Ratio of net investment income to average net assets 4.43% 4.92%(c)
Ratio of expenses to average net assets* 0.56% 1.46%(c)
Ratio of net investment income to average net assets* 4.07% 3.66%(c)
Portfolio turnover (d) 3.22% 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>
DECEMBER 10, 1996
YEAR ENDED THROUGH
CLASS A JUNE 30, 1998 JUNE 30, 1997(a)
- --------------------------------------------------------------------------------------------------
<S> <C> <C>
NET ASSET VALUE, BEGINNING OF PERIOD $ 10.32 $ 10.00
- --------------------------------------------------------------------------------------------------
Investment Activities:
Net investment income 0.43 0.22
Net realized and unrealized gains (losses) from
investments 0.82 0.32
- --------------------------------------------------------------------------------------------------
Total from Investment Activities 1.25 0.54
- --------------------------------------------------------------------------------------------------
Distributions:
From net investment income (0.43) (0.22)
Net realized gains (0.10) --
- --------------------------------------------------------------------------------------------------
Total Distributions (0.53) (0.22)
- --------------------------------------------------------------------------------------------------
NET ASSET VALUE, END OF PERIOD $ 11.04 $ 10.32
- --------------------------------------------------------------------------------------------------
Total Return (Excludes Sales Charge) 12.38% 5.46%(b)
RATIOS/SUPPLEMENTARY DATA:
Net Assets at end of period (000) $12,538 $ 1,299
Ratio of expenses to average net assets 0.45% 0.47%(c)
Ratio of net investment income to average net assets 4.12% 4.76%(c)
Ratio of expenses to average net assets* 0.82% 3.05%(c)
Ratio of net investment income to average net assets* 3.75% 2.18%(c)
Portfolio turnover (d) 3.22% 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.
<PAGE> 180
13
THE ONE GROUP(R) INVESTOR CONSERVATIVE GROWTH FUND FINANCIAL HIGHLIGHTS
- ------------------------------------------------------------------------------
<TABLE>
<CAPTION>
DECEMBER 10, 1996
YEAR ENDED THROUGH
CLASS B JUNE 30, 1998 JUNE 30, 1997(a)
- --------------------------------------------------------------------------------------------------
<S> <C> <C>
NET ASSET VALUE, BEGINNING OF PERIOD $ 10.33 $ 10.00
- --------------------------------------------------------------------------------------------------
Investment Activities:
Net investment income 0.37 0.19
Net realized and unrealized gains (losses) from
investments 0.81 0.33
- --------------------------------------------------------------------------------------------------
Total from Investment Activities 1.18 0.52
- --------------------------------------------------------------------------------------------------
Distributions:
From net investment income (0.36) (0.19)
Net realized gains (0.10) --
- --------------------------------------------------------------------------------------------------
Total Distributions (0.46) (0.19)
- --------------------------------------------------------------------------------------------------
NET ASSET VALUE, END OF PERIOD $ 11.05 $ 10.33
- --------------------------------------------------------------------------------------------------
Total Return (Excludes Sales Charge) 11.53% 5.30%(b)
RATIOS/SUPPLEMENTARY DATA:
Net Assets at end of period (000) $39,489 $ 2,616
Ratio of expenses to average net assets 1.20% 1.21%(c)
Ratio of net investment income to average net assets 3.37% 4.06%(c)
Ratio of expenses to average net assets* 1.47% 3.52%(c)
Ratio of net investment income to average net assets* 3.10% 1.75%(c)
Portfolio turnover (d) 3.22% 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>
YEAR
ENDED
JUNE 30,
CLASS C 1998(a)
- --------------------------------------------------------------------------
<S> <C>
NET ASSET VALUE, BEGINNING OF PERIOD $ 10.33
- --------------------------------------------------------------------------
Investment Activities:
Net investment income 0.35
Net realized and unrealized gains (losses) from
investments 0.81
- --------------------------------------------------------------------------
Total from Investment Activities 1.16
- --------------------------------------------------------------------------
Distributions:
Net investment income (0.36)
Net realized gains (0.10)
- --------------------------------------------------------------------------
Total Distributions (0.46)
- --------------------------------------------------------------------------
NET ASSET VALUE, END OF PERIOD $ 11.03
- --------------------------------------------------------------------------
Total Return (Excludes Sales Charge) 11.48%
RATIOS/SUPPLEMENTARY DATA:
Net Assets at end of period (000) $3,788
Ratio of expenses to average net assets 1.20%
Ratio of net investment income to average net assets 3.39%
Ratio of expenses to average net assets* 1.47%
Ratio of net investment income to average net assets* 3.12%
Portfolio turnover (b) 3.22%
</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 on July 1,
1997. (b) Portfolio turnover is calculated on the basis of the Fund as a
whole without distinguishing among the classes of shares issued.
<PAGE> 181
more about the funds
14
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. Fixed income securities also are subject to the
risk that the issuer of the security will be unable to meet its repayment
obligation.
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.
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.
<PAGE> 182
how to do business with The One Group
15
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 Year's 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 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 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.
- - 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 Bank One
Corporation and its affiliates).
- Subsequent investments must be at least $100 ($25 for employees of Bank 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.
<PAGE> 183
16
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 Investor Balanced 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
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.
<PAGE> 184
17
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 AS A % SALES CHARGE AS A % COMMISSION AS A %
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:
<TABLE>
<CAPTION>
CDSC AS A % OF DOLLAR
YEARS SINCE PURCHASE AMOUNT SUBJECT TO CHARGE
- ------------------------------------------------
<S> <C>
0-1 5.00%
1-2 4.00%
2-3 3.00%
3-4 3.00%
4-5 2.00%
5-6 1.00%
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>
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.
<PAGE> 185
18
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%.
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:
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.
<PAGE> 186
19
- Bank 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 Bank 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.
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.
<PAGE> 187
20
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.
- - 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.
<PAGE> 188
21
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
- - 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 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.
<PAGE> 189
22
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 Bank 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.
<PAGE> 190
shareholder information
23
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.
Bank One Corporation (One First National Plaza, Chicago, Illinois, 60670),
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, Bank 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> <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
Attn: Mutual Funds Class I
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>
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
<PAGE> 191
24
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 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.
<PAGE> 192
ORGANIZATION AND MANAGEMENT OF THE FUNDS
25
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 Bank 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.
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.
<PAGE> 193
26
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 1999 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 anticipates 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 move to Year 2000 will
not have a material impact on its operations.
<PAGE> 194
DETAILS ABOUT THE FUNDS' INVESTMENT PRACTICES AND POLICIES
27
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
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.
<PAGE> 195
28
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.
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
<PAGE> 196
29
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.
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
- ---------------
(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.
<PAGE> 197
30
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.
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.
- ---------------
(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.
<PAGE> 198
APPENDIX A
31
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>
<CAPTION>
FUND NAME
FUND CODE
- ------------------------------------------------------------------------------
<S> <C> <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) 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>
<TABLE>
<CAPTION>
INSTRUMENT FUND CODE RISK TYPE
<S> <C> <C>
U.S. TREASURY OBLIGATIONS: Bills, notes, bonds, STRIPS, and CUBES 1-16 Market
TREASURY RECEIPTS: TRS, TIGRs, and CATS. 1-16 Market
U.S. GOVERNMENT AGENCY SECURITIES: Securities issued by 1-16 Market
agencies and instrumentalities of the U.S. Government. These Credit
include Ginnie Mae, Fannie Mae, and Freddie Mac.
CERTIFICATES OF DEPOSIT: Negotiable instruments with a 1-5, 7-16 Market
stated 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 Market
at an agreed upon price on an agreed upon date. This is Liquidity
treated as a loan.
REVERSE REPURCHASE AGREEMENT: The sale of a security and the 1-16 Market
simultaneous commitment to buy the security back at an Leverage
agreed 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 a Fund's 1-16 Credit
total assets. In return the Fund will receive cash, other Market
securities, 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 Leverage
delivery at 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 3-5, 7-16 Market
convert to common stock. Credit
</TABLE>
<PAGE> 199
32
<TABLE>
<S> <C> <C>
CALL AND PUT OPTIONS: A call option gives the buyer the right to buy, and 3-16 Management
obligates the seller of the option to sell, a security at a specified price. A put Liquidity
option gives the buyer the right to sell, and obligates the seller of the option Credit
to buy, a security at a specified price. The Funds will sell only covered call Market
and secured put options. Leverage
FUTURES AND RELATED OPTIONS: A contract providing for the future sale and purchase 2-16 Management
of a specified amount of a specified security, class of securities, or an index at Market
a specified time in the future and at a specified price. Credit
Liquidity
Leverage
REAL ESTATE INVESTMENT TRUSTS ("REITS"): Pooled investment vehicles which invest 2-16 Liquidity
primarily in income producing real estate or real estate related loans or Management
interest. Market
Pre-payment
Tax
Regulatory
BANKERS' ACCEPTANCES: Bills of exchange or time drafts drawn on and accepted by a 1-5, 7, Credit
commercial bank. Maturities are generally six months or less. 8, Liquidity
10-16 Market
COMMERCIAL PAPER: Secured and unsecured short-term promissory notes issued by 1-5, 7, Credit
corporations and other entities. Maturities generally vary from a few days to nine 8, Liquidity
months. 10-16 Market
FOREIGN SECURITIES: Stocks or debt issued by foreign companies, as well as 1-5, 7-15 Market
commercial paper of foreign issuers and obligations of foreign banks, overseas Political
branches of U.S. banks and supranational entities. Includes American Depository Liquidity
Receipts. Foreign Investment
RESTRICTED SECURITIES: Securities not registered under the Securities Act of 1933, 1-5, 7-15 Liquidity
such as privately placed commercial paper and Rule 144A securities. Market
VARIABLE AND FLOATING RATE INSTRUMENTS: Obligations with interest rates which are 1-8, Market
reset daily, weekly, quarterly or some other period and which may be payable to 10-15 Credit
the Fund on demand. Liquidity
WARRANTS: Securities, typically issued with preferred stock or bonds, that give 1, 4, 5, Market
the holder the right to buy a proportionate amount of common stock at a specified 9-11, 13, Credit
price. 14, 16
PREFERRED STOCK: A class of stock that generally pays a dividend at a specified 2-5, 9, Market
rate and has preference over common stock in the payment of dividends and in 11, 14,
liquidation. 15
MORTGAGE-BACKED SECURITIES: Debt obligations secured by real estate loans and 1-7 Pre-payment
pools of loans. These include collateralized mortgage obligations ("CMOs"), Real Market
Estate Investment Conduits ("REMICs"), and Stripped Mortgage-Backed Securities Credit
("SMBS"). Regulatory
DEMAND FEATURES: Securities that are subject to puts and standby commitments to 1-5, 7 Market
purchase the securities at a fixed price (usually with accrued interest) within a Liquidity
fixed period of time following demand by a Fund. Management
ASSET-BACKED SECURITIES: Securities secured by company receivables, home equity 1-5, 7 Pre-payment
loans, truck and auto loans, leases, credit card receivables and other securities Market
backed by other types of receivable or other assets. Credit
MORTGAGE DOLLAR ROLLS: A transaction in which a Fund sells securities for delivery 2-7 Pre-payment
in a current month and simultaneously contracts with the same party to repurchase Market
similar but not identical securities on a specified future date. Regulatory
ADJUSTABLE RATE MORTGAGE LOANS ("ARMS"): Loans in a mortgage pool which provide 2-7 Pre-payment
for a fixed initial mortgage interest rate for a specified period of time, after Market
which the rate may be subject to periodic adjustments. Credit
Regulatory
CORPORATE DEBT SECURITIES: Corporate bonds and non-convertible debt securities. 3-5, 7 Market
Credit
SWAPS, CAPS AND FLOORS: A Fund may enter into these transactions to manage its 2-16 Market
exposure to changing interest rates and other factors. Swaps involve an exchange Management
of obligations by two parties. Caps and floors entitle a purchaser to a principal Credit
amount from the seller of the cap or floor to the extent that a specified index Liquidity
exceeds or falls below a predetermined interest rate or amount.
NEW FINANCIAL PRODUCTS: New options and futures contracts, and other financial 3-16 Management
products continue to be developed and the Fund may invest in such options, Credit
contracts and products. Market
Liquidity
</TABLE>
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33
<TABLE>
<S> <C> <C>
STRUCTURED INSTRUMENTS: Debt securities issued by agencies and 3-7 Market
instrumentalities of the U.S. government, banks, municipalities, corporations Liquidity
and other businesses whose interest and/or principal payments are indexed to Management
foreign currency exchange rates, interest rates, or one or more other Credit
referenced indices. Foreign Investment
MUNICIPAL SECURITIES: Securities issued by a state or political subdivision 2-5, 7 Market
to obtain funds for various public purposes. Municipal securities include Credit
private activity bonds and industrial development bonds, as well as General Political
Obligation Notes, Tax Anticipation Notes, Bond Anticipation Notes, Revenue Tax
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 supranational agencies 9 Credit
who are chartered to promote economic development and are supported by Foreign Investment
various governments and governmental agencies.
CURRENCY FUTURES AND RELATED OPTIONS: The Fund may engage in transactions in 9 Management
financial futures and related options, which are generally described above. Liquidity
The Fund will enter into these transactions in foreign currencies and for Credit
hedging purposes only. Market
Political
Leverage
Foreign Investment
FORWARD FOREIGN EXCHANGE TRANSACTIONS: Contractual agreement to purchase or 9 Management
sell one specified currency for another currency at a specified future date Liquidity
and price. The Fund will enter into forward foreign exchange transactions for Credit
hedging purposes only. Market
Political
Leverage
Foreign Investment
ZERO COUPON DEBT SECURITIES: Bonds and other debt that pay no interest, but 2-5, 7 Credit
are issued at a discount from their value at maturity. When held to maturity, Market
their entire returns equals the difference between their issue price and Zero Coupon
their maturity value.
ZERO-FIXED-COUPON DEBT SECURITIES: Zero-coupon debt securities which convert 2-5, 7 Credit
on a specified date to interest-bearing debt securities. Market
Zero Coupon
STRIPPED MORTGAGE-BACKED SECURITIES: Derivative multi-class mortgage 3-7 Pre-payment
securities which are usually structured with two classes of shares that Market
receive different proportions of the interest and principal from a pool of Credit
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 instruments 3-7 Market
with interest rates that reset in the opposite direction from the market rate Leverage
of interest to which the inverse floater is indexed. Credit
LOAN PARTICIPATIONS AND ASSIGNMENTS: Participations in, or assignments of all 2-5, 7 Credit
or a portion of loans to corporations or to governments of the less developed Political
countries ("LDCs"). Foreign Investment
Market
Liquidity
FIXED RATE MORTGAGE LOANS: Investments in fixed rate mortgage loans or 2-5, 7 Credit
mortgage pools which bear simple interest at fixed annual rates and have Pre-payment
original terms ranging from 5 to 40 years. Regulatory
Market
SHORT-TERM FUNDING AGREEMENTS: Investments in short-term funding agreements 1-5, 7 Credit
issued by banks and highly rated U.S. insurance companies such as Guaranteed Liquidity
Investment Contracts (GICs) and Bank Investment Contracts (BICs). Market
STANDARD & POOR'S DEPOSITORY RECEIPTS ("SPDRS"): SPDRs represent ownership in 8, 10-16 Market
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.
PARTICIPATION INTERESTS: Investments in municipal securities, including 1 Credit
municipal leases, from financial institutions such as commercial and Market
investment banks, savings and loan associations and insurance companies. Tax
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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34
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.
- - 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 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, 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.
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35
- - 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.
- - 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.
<PAGE> 203
appendix b
36
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.
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, INC. ("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.
<PAGE> 204
37
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.
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 condi-
<PAGE> 205
38
tions, 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.
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.
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
<PAGE> 206
39
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.
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 in
the 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.
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.
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40
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.
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.
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
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41
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.
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.
<PAGE> 209
42
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. 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.
<PAGE> 210
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 02266-85
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 CON-
TAINS 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.COM) THAT CONTAINS THE
STATEMENT OF ADDITIONAL INFORMATION, MATERIALS
INCORPORATED BY REFERENCE AND OTHER INFORMATION
REGARDING THE ONE GROUP(R).
<PAGE> 211
THE ONE GROUP(R) FAMILY OF MUTUAL FUNDS
[GRAPHIC]
MONEY MARKET FUNDS
COMBINED PROSPECTUS
NOVEMBER 1, 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 BANK 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.
THE ONE GROUP OHIO MUNICIPAL MONEY MARKET FUND MAY INVEST A SIGNIFICANT PORTION
OF ITS ASSETS IN THE SECURITIES OF A SINGLE ISSUER. AS A RESULT, AN INVESTMENT
IN THE FUND MAY ENTAIL MORE RISKS THAN AN INVESTMENT IN ANOTHER TYPE OF MONEY
MARKET FUND.
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.
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED UPON THE
ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION
TO THE CONTRARY IS A CRIMINAL OFFENSE.
<PAGE> 212
TABLE OF CONTENTS
<TABLE>
<S> <C>
A BRIEF PREVIEW OF THE FUNDS................................ 1
ABOUT THE FUNDS............................................. 2
The One Group(R) Prime Money Market Fund................. 2
The One Group(R)Municipal Money Market Fund.............. 5
The One Group(R)Ohio Municipal Money Market Fund......... 7
The One Group(R)U.S. Treasury Securities Money Market
Fund................................................... 9
MORE ABOUT THE FUNDS........................................ 12
HOW TO DO BUSINESS WITH THE ONE GROUP....................... 13
Purchasing Fund Shares................................... 13
Sales Charges............................................ 15
Sales Charge Reductions and Waivers...................... 16
Exchanging Fund Shares................................... 17
Redeeming Fund Shares.................................... 18
SHAREHOLDER INFORMATION..................................... 20
Voting Rights............................................ 20
Dividend Policies........................................ 21
Tax Treatment of the Funds............................... 21
Tax Treatment of Shareholders............................ 21
Shareholder Inquiries.................................... 22
ORGANIZATION AND MANAGEMENT OF THE FUNDS.................... 23
The Funds................................................ 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
Year 2000 ............................................... 23
DETAILS ABOUT THE FUNDS' INVESTMENT PRACTICES AND
POLICIES.................................................. 25
Investment Practices..................................... 25
Investment Risks......................................... 27
Investment Policies...................................... 27
APPENDIX: DESCRIPTION OF RATINGS............................ 29
</TABLE>
<PAGE> 213
1
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 Bank 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 Bank 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.
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 Bank 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."
<PAGE> 214
The One Group(R)
Prime Money Market Fund
[LOGO] INVESTMENT OBJECTIVE
The Fund is a diversified money
market fund that seeks current
income with liquidity and stability
of principal.
[LOGO] 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."
[LOGO] 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 a 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 B CLASS C
<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 5.00% 1.00%
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 .35% .35% .35%
12b-1 Fees (after fee waiver) (3) .25% 1.00% 1.00%
Other Expenses .17% .17% .17%
Total Fund Operating Expenses (after
fee waivers) (4) .77% 1.52% 1.52%
<CAPTION>
SERVICE
CLASS CLASS I
<C> <C>
none none
none none
none none
none none
.35% .35%
.55% none
.17% .17%
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.
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.
2
<PAGE> 215
3
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
- ----------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
NET ASSET VALUE, BEGINNING OF PERIOD $ 1.000 $ 1.000 $ 1.000 $ 1.000 $ 1.000 $ 1.000
- ----------------------------------------------------------------------------------------------------------------------
Investment Activities:
Net investment income 0.053 0.051 0.054 0.052 0.031 0.030
- ----------------------------------------------------------------------------------------------------------------------
Less: Distributions
Net investment income (0.053) (0.051) (0.054) (0.052) (0.031) (0.030)
- ----------------------------------------------------------------------------------------------------------------------
NET ASSET VALUE, END OF PERIOD $ 1.000 $ 1.000 $ 1.000 $ 1.000 $ 1.000 $ 1.000
- ----------------------------------------------------------------------------------------------------------------------
Total Return 5.39% 5.20% 5.49% 5.34% 3.19% 3.09%
RATIOS/SUPPLEMENTARY DATA:
Net Assets at end of period (000) $2,616,698 $2,563,768 $2,186,562 $1,965,416 $1,600,876 $979,275
Ratio of expenses to average net
assets 0.51% 0.48% 0.44% 0.41% 0.40% 0.44%
Ratio of net investment income to
average net assets 5.26% 5.08% 5.34% 5.27% 3.18% 3.05%
Ratio of expenses to average net
assets* 0.58% 0.56% 0.55% 0.57% 0.59% 0.62%
Ratio of net investment income
average net assets* 5.19% 5.00% 5.23% 5.12% 2.99% 2.87%
</TABLE>
<TABLE>
<CAPTION>
YEARS ENDED JUNE 30,
---------------------------------
CLASS I 1992 1991 1990
- ------------------------------------------------------------------------
<S> <C> <C> <C>
NET ASSET VALUE, BEGINNING OF PERIOD $ 1.000 $ 1.000 $ 1.000
- ------------------------------------------------------------------------
Investment Activities:
Net investment income 0.045 0.069 0.080
- ------------------------------------------------------------------------
Less: Distributions
Net investment income (0.045) (0.069) (0.080)
- ------------------------------------------------------------------------
NET ASSET VALUE, END OF PERIOD $ 1.000 $ 1.000 $ 1.000
- ------------------------------------------------------------------------
Total Return 4.64% 7.12% 8.33%
RATIOS/SUPPLEMENTARY DATA:
Net Assets at end of period (000) $946,504 $760,726 $562,680
Ratio of expenses to average net
assets 0.59% 0.68% 0.64%
Ratio of net investment income to
average net assets 4.49% 6.86% 8.02%
Ratio of expenses to average net
assets* 0.76% 0.83% 0.79%
Ratio of net investment income
average net assets* 4.32% 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.
<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 $ 1.000
- ------------------------------------------------------------------------------------------------------------------------------------
Investment Activities:
Net investment income 0.050 0.048 0.051 0.050 0.027 0.030 0.013
- ------------------------------------------------------------------------------------------------------------------------------------
Less: Distributions
Net investment income (0.050) (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 $ 1.000
- ------------------------------------------------------------------------------------------------------------------------------------
Total Return 5.13% 4.94% 5.22% 5.08% 2.93% 2.83% 3.51%(b)
RATIOS/SUPPLEMENTARY DATA:
Net Assets at end of period (000) $605,291 $332,646 $315,374 $201,968 $74,759 $61,106 $ 511
Ratio of expenses to average net assets 0.76% 0.73% 0.69% 0.67% 0.65% 0.65% 0.79%(b)
Ratio of net investment income to average
net assets 5.01% 4.83% 5.09% 5.02% 2.92% 2.67% 3.40%(b)
Ratio of expenses to average net assets* 0.83% 0.91% 0.90% 0.92% 0.90% 0.99% 0.94%(b)
Ratio of net investment income to average
net assets* 4.94% 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.
<PAGE> 216
4
THE ONE GROUP(R) PRIME MONEY MARKET FUND FINANCIAL HIGHLIGHTS
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
YEARS ENDED
JUNE 30, 1998
--------------
NOVEMBER 21,
TO
JUNE 30, JUNE 30,
CLASS B 1998 1997(a)
- ------------------------------------------------------------------------------------------
<S> <C> <C>
NET ASSET VALUE, BEGINNING OF PERIOD $ 1.000 $ 1.000
- ------------------------------------------------------------------------------------------
Investment Activities:
Net investment income 0.043 0.026
- ------------------------------------------------------------------------------------------
Less: Distributions
Net investment income (0.043) (0.026)
- ------------------------------------------------------------------------------------------
NET ASSET VALUE, END OF PERIOD $ 1.000 $ 1.000
- ------------------------------------------------------------------------------------------
Total Return (excludes sales charge) 4.35% 2.63%(b)
RATIOS/SUPPLEMENTARY DATA:
Net Assets at end of period (000) $ 1,912 $ 618
Ratio of expenses to average net assets 1.51% 1.51%(c)
Ratio of net investment income to average net assets 4.25% 4.16%(c)
Ratio of expenses to average net assets* 1.57% 1.59%(c)
Ratio of net investment income to average net assets* 4.19% 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.
<PAGE> 217
The One Group(R)
Municipal Money Market Fund
[LOGO] 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.
[LOGO] 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."
[LOGO] 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 a
significantly greater price and
yield volatility than traditional
fixed-income securities. Before you
invest, please read "More
Information 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 .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.
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.
5
<PAGE> 218
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
<S> <C> <C> <C> <C> <C> <C>
NET ASSET VALUE, BEGINNING OF PERIOD $ 1.000 $ 1.000 $ 1.000 $ 1.000 $ 1.000 $ 1.000
- ----------------------------------------------------------------------------------------------------------------
Investment Activities:
Net investment income 0.032 0.031 0.033 0.032 0.021 0.021
- ----------------------------------------------------------------------------------------------------------------
Less: Distributions
Net investment income (0.032) (0.031) (0.033) (0.032) (0.021) (0.021)
- ----------------------------------------------------------------------------------------------------------------
NET ASSET VALUE, END OF PERIOD $ 1.000 $ 1.000 $ 1.000 $ 1.000 $ 1.000 $ 1.000
- ----------------------------------------------------------------------------------------------------------------
Total Return 3.27% 3.19% 3.34% 3.28% 2.16% 2.15%
RATIOS/SUPPLEMENTARY DATA:
Net Assets at end of period (000) $498,127 $467,420 $459,807 $437,743 $352,702 $175,277
Ratio of expenses to average net assets 0.45% 0.43% 0.41% 0.41% 0.40% 0.46%
Ratio of net investment income to
average net assets 3.22% 3.16% 3.29% 3.26% 2.13% 2.12%
Ratio of expenses to average net assets* 0.56% 0.55% 0.59% 0.59% 0.60% 0.66%
Ratio of net investment income to
average net assets* 3.11% 3.04% 3.11% 3.08% 1.93% 1.92%
<CAPTION>
YEARS ENDED JUNE 30,
--------------------------------
CLASS I 1992 1991 1990
<S> <C> <C> <C>
NET ASSET VALUE, BEGINNING OF PERIOD $ 1.000 $ 1.000 $ 1.000
- -------------------------------------------------------------------------------------
Investment Activities:
Net investment income 0.034 0.050 0.057
- -----------------------------------------------------------------------------------------------
Less: Distributions
Net investment income (0.034) (0.050) (0.057)
- ---------------------------------------------------------------------------------------------------------
NET ASSET VALUE, END OF PERIOD $ 1.000 $ 1.000 $ 1.000
- ----------------------------------------------------------------------------------------------------------------
Total Return 3.47% 5.17% 5.82%
RATIOS/SUPPLEMENTARY DATA:
Net Assets at end of period (000) $170,961 $166,200 $145,712
Ratio of expenses to average net assets 0.43% 0.32% 0.36%
Ratio of net investment income to
average net assets 3.41% 5.04% 5.66%
Ratio of expenses to average net assets* 0.80% 0.67% 0.76%
Ratio of net investment income to
average net assets* 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 $ 1.000
- ---------------------------------------------------------------------------------------------------------------------------------
Investment Activities:
Net investment income 0.030 0.029 0.030 0.030 0.021 0.019 0.009
- ---------------------------------------------------------------------------------------------------------------------------------
Less: Distributions
Net investment income (0.030) (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 $ 1.000
- ---------------------------------------------------------------------------------------------------------------------------------
Total Return 3.01% 2.97% 3.08% 3.02% 1.96% 1.89% 2.48%(b)
RATIOS/SUPPLEMENTARY DATA:
Net Assets at end of period (000) $104,809 $48,185 $50,720 $56,518 $41,595 $18,932 $ 122
Ratio of expenses to average net assets 0.70% 0.68% 0.66% 0.66% 0.65% 0.66% 0.84%(b)
Ratio of net investment income to average net
assets 2.97% 2.91% 3.04% 3.01% 1.92% 1.82% 2.44%(b)
Ratio of expenses to average net assets* 0.81% 0.90% 0.94% 0.94% 0.91% 1.01% 0.99%(b)
Ratio of net investment income to average net
assets* 2.86% 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.
6
<PAGE> 219
The One Group(R)
Ohio Municipal Money Market Fund
[LOGO] 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.
[LOGO] 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."
[LOGO] 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 a
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.
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.
7
<PAGE> 220
8
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>
JUNE 9,
YEARS ENDED JUNE 30, 1993 TO
---------------------------------------------------- JUNE 30,
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 $ 1.000
- ---------------------------------------------------------------------------------------------------------------------------------
Investment Activities:
Net investment income 0.033 0.032 0.033 0.032 0.022 0.013
- ---------------------------------------------------------------------------------------------------------------------------------
Less: Distributions
Net investment income (0.033) (0.032) (0.032) (0.032) (0.022) (0.013)
In excess of net investment income -- -- (0.001) -- -- --
- ---------------------------------------------------------------------------------------------------------------------------------
Total Distributions (0.033) (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 $ 1.000
- ---------------------------------------------------------------------------------------------------------------------------------
Total Return 3.31% 3.22% 3.34% 3.20% 2.25% 2.14%(b)
RATIOS/SUPPLEMENTARY DATA:
Net Assets at end of period (000) $77,224 $56,442 $55,915 $51,806 $55,375 $ 3,500
Ratio of expenses to average net assets 0.40% 0.40% 0.41% 0.41% 0.34% 0.08%(b)
Ratio of net investment income to average
net assets 3.27% 3.17% 3.19% 3.13% 2.29% 2.07%(b)
Ratio of expenses to average net assets* 0.53% 0.53% 0.71% 0.60% 0.57% 0.51%(b)
Ratio of net investment income to average
net assets* 3.14% 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>
JUNE 9,
YEARS ENDED JUNE 30, 1993 TO
------------------------------------------------------ JUNE 30,
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 $ 1.000
- ---------------------------------------------------------------------------------------------------------------------------------
Investment Activities:
Net investment income 0.030 0.029 0.030 0.029 0.021 0.009
- ---------------------------------------------------------------------------------------------------------------------------------
Less: Distributions
Net investment income (0.030) (0.029) (0.029) (0.029) (0.021) (0.009)
In excess of net investment income -- -- (0.001) -- -- --
- ---------------------------------------------------------------------------------------------------------------------------------
Total Distributions (0.030) (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 $ 1.000
- ---------------------------------------------------------------------------------------------------------------------------------
Total Return 3.06% 2.96% 3.08% 2.98% 2.09% 2.34%(b)
RATIOS/SUPPLEMENTARY DATA:
Net Assets at end of period (000) $ 39,100 $30,479 $41,132 $35,790 $ 37,356 $25,125
Ratio of expenses to average net
assets 0.65% 0.65% 0.66% 0.63% 0.44% 0.26%(b)
Ratio of net investment income to
average net assets 2.98% 2.90% 2.94% 2.91% 2.05% 2.03%(b)
Ratio of expenses to average net
assets* 0.78% 0.88% 1.06% 0.95% 0.94% 0.92%(b)
Ratio of net investment income to
average net assets* 2.85% 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.
<PAGE> 221
The One Group(R)
U.S. Treasury Securities Money Market Fund
[LOGO] INVESTMENT OBJECTIVE
The Fund is a diversified money
market fund that seeks current
income with liquidity and stability
of principal.
[LOGO] 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."
[LOGO] RISK CONSIDERATIONS
Before you invest, please read "More
About the Funds" and "Investment
Risks."
SHAREHOLDER EXPENSES
<TABLE>
<CAPTION>
SHAREHOLDER TRANSACTION EXPENSES (1) CLASS A CLASS B CLASS C
<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 5.00% 1.00%
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 .35% .35% .35%
12b-1 Fees (after fee waiver) (3) .25% 1.00% 1.00%
Other Expenses .17% .17% .17%
Total Fund Operating Expenses (after
fee waivers) (4) .77% 1.52% 1.52%
<CAPTION>
SERVICE
CLASS CLASS I
<C> <C>
none none
none none
none none
none none
.35% .35%
.55% none
.17% .17%
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.
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 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 $ 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.
9
<PAGE> 222
10
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 $ 1.000
- -------------------------------------------------------------------------------------------------------------------------------
Investment Activities:
Net investment income 0.051 0.050 0.052 0.050 0.030 0.029 0.043
- -------------------------------------------------------------------------------------------------------------------------------
Less: Distributions
Net investment income (0.051) (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 $ 1.000
- -------------------------------------------------------------------------------------------------------------------------------
Total Return 5.19% 5.07% 5.34% 5.07% 3.01% 2.89% 4.40%
RATIOS/SUPPLEMENTARY DATA:
Net Assets at end of period
(000) $3,025,608 $2,243,376 $1,844,590 $1,178,091 $969,326 $492,862 $410,146
Ratio of expenses to average
net assets 0.52% 0.46% 0.42% 0.41% 0.40% 0.45% 0.55%
Ratio of net investment
income to average net
assets 5.07% 4.95% 5.17% 4.96% 3.02% 2.85% 4.25%
Ratio of expenses to average
net assets* 0.60% 0.57% 0.56% 0.59% 0.58% 0.67% 0.77%
Ratio of net investment
income to average net
assets* 4.99% 4.84% 5.03% 4.78% 2.84% 2.63% 4.04%
</TABLE>
<TABLE>
<CAPTION>
YEARS ENDED JUNE 30,
----------------------
CLASS I 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.
<TABLE>
<CAPTION>
YEARS ENDED JUNE 30,
-------------------------------------------------------------------------
CLASS A 1998 1997 1996 1995 1994
- ---------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
NET ASSET VALUE, BEGINNING OF PERIOD $ 1.000 $ 1.000 $ 1.000 $ 1.000 $ 1.000
- ---------------------------------------------------------------------------------------------------------------------
Investment Activities:
Net investment income 0.048 0.047 0.050 0.047 0.027
- ---------------------------------------------------------------------------------------------------------------------
Less: Distributions
Net investment income (0.048) (0.047)(a) (0.050) (0.047) (0.027)
- ---------------------------------------------------------------------------------------------------------------------
NET ASSET VALUE, END OF PERIOD $ 1.000 $ 1.000 $ 1.000 $ 1.000 $ 1.000
- ---------------------------------------------------------------------------------------------------------------------
Total Return 4.92% 4.81% 5.08% 4.81% 2.76%
RATIOS/SUPPLEMENTARY DATA:
Net Assets at end of period (000) $861,350 $530,164 $110,864 $ 98,723 $ 53,423
Ratio of expenses to average net assets 0.77% 0.72% 0.67% 0.66% 0.63%
Ratio of net investment income to
average net assets 4.82% 4.71% 4.92% 4.71% 2.81%
Ratio of expenses to average net assets* 0.86% 0.93% 0.91% 0.94% 0.87%
Ratio of net investment income to
average net assets* 4.73% 4.50% 4.68% 4.43% 2.57%
</TABLE>
<TABLE>
<CAPTION>
YEARS ENDED JUNE 30,
-------------------------
CLASS A 1993 1992(b)
- ------------------------------------------------------------------------
<S> <C> <C>
NET ASSET VALUE, BEGINNING OF PERIOD $ 1.000 $ 1.000
- ------------------------------------------------------------------------
Investment Activities:
Net investment income 0.026 0.012
- ------------------------------------------------------------------------
Less: Distributions
Net investment income (0.026) (0.012)
- ------------------------------------------------------------------------
NET ASSET VALUE, END OF PERIOD $ 1.000 $ 1.000
- ------------------------------------------------------------------------
Total Return 2.63% 3.38%(c)
RATIOS/SUPPLEMENTARY DATA:
Net Assets at end of period (000) $ 30,759 $ 6
Ratio of expenses to average net assets 0.65% 0.59%(c)
Ratio of net investment income to
average net assets 2.52% 2.51%(c)
Ratio of expenses to average net assets* 1.02% 0.71%(c)
Ratio of net investment income to
average net assets* 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.
<PAGE> 223
11
THE ONE GROUP(R) U.S. TREASURY SECURITIES MONEY MARKET FUND FINANCIAL
HIGHLIGHTS
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
YEAR NOVEMBER 21,
ENDED 1996 TO
JUNE 30, JUNE 30,
CLASS B 1998 1997(a)
- -------------------------------------------------------------------------------------------
<S> <C> <C>
NET ASSET VALUE, BEGINNING OF PERIOD $ 1.000 $ 1.000
- -------------------------------------------------------------------------------------------
Investment Activities:
Net investment income 0.041 0.024
- -------------------------------------------------------------------------------------------
Less: Distributions
Net investment income (0.041) (0.024)(b)
- -------------------------------------------------------------------------------------------
NET ASSET VALUE, END OF PERIOD $ 1.000 $ 1.000
- -------------------------------------------------------------------------------------------
Total Return (excludes sales charge) 4.14% 2.44%(c)
RATIOS/SUPPLEMENTARY DATA:
Net Assets at end of period (000) $ 181 $ 49
Ratio of expenses to average net assets 1.52% 1.48%(d)
Ratio of net investment income to average net assets 4.06% 3.97%(d)
Ratio of expenses to average net assets* 1.60% 1.59%(d)
Ratio of net investment income to average net assets* 3.98% 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.
<TABLE>
<CAPTION>
FEBRUARY 18,
1998 TO
JUNE 30,
CLASS C 1998(a)
- -------------------------------------------------------------------------------
<S> <C>
NET ASSET VALUE, BEGINNING OF PERIOD $ 1.000
- -------------------------------------------------------------------------------
Investment Activities:
Net investment income 0.015
- -------------------------------------------------------------------------------
Less: Distributions:
Net investment income (0.015)
- -------------------------------------------------------------------------------
NET ASSET VALUE, END OF PERIOD $ 1.000
- -------------------------------------------------------------------------------
Total Return 1.47%(b)
RATIOS/SUPPLEMENTARY DATA:
Net Assets at end of period (000) $ 1
Ratio of expenses to average net assets 1.57%(c)
Ratio of net investment income to average net assets 4.01%(c)
</TABLE>
(a) Period from commencement of operations. (b) Not annualized.
(c) Annualized.
<PAGE> 224
more about the funds
12
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. Fixed income securities also are subject to the
risk that the issuer of the security will be unable to meet its repayment
obligation.
DERIVATIVES: Some of the Funds 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
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."
<PAGE> 225
how to do business with The One Group
13
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 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.
- - 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
(iii) before 4:00 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.
- - 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 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."
- - Service Class shares are available to Intermediaries purchasing shares on
behalf of investors requiring additional administrative or accounting services
such as sweep processing.
- - 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?
- - Shares are sold at net asset value ("NAV").
- - 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.
- - 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.
<PAGE> 226
14
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 Bank One Corporation and its affiliates).
- Subsequent investments must be at least $100 ($25 for employees of Bank One
Corporation and its affiliates).
- 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 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
MAY I WRITE CHECKS ON MY ACCOUNT?
Class A and Class C shareholders may write checks for $250 or more.
<PAGE> 227
15
- - Checks may be payable to any person and your account will continue to earn
dividends until the check clears.
- - Checks are free, but your bank or the payee may charge you for stop payment
orders, insufficient funds, or other valid reasons.
- - You can not use this option to close your account because of the difficulty of
determining the exact value of your account.
- - You must wait ten (10) calendar days before you can write a check against
shares purchased by a check.
TO SELECT THIS OPTION:
- - Select the "Check Writing" option on the Account Application Form.
- - 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).
- - 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 tax.
- - 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:
<TABLE>
<CAPTION>
CDSC AS A % OF DOLLAR
YEARS 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 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>
<PAGE> 228
16
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
- - 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 net amount redeemed.
- - A sales charge is not 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 brokers and other 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 .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%.
4. 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
- ----------------------------------------------------
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 C 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.
<PAGE> 229
17
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.
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.
- - 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:
- - 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.
- - 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.
<PAGE> 230
18
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:
State Street Bank and Trust Company
c/o The One Group
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 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.
- - 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?
- - 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.
- - 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?"
<PAGE> 231
19
- - 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.
- - 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. 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
- - 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.
- - 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 Bank 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; or 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.
<PAGE> 232
shareholder information
20
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.
Bank One Corporation (One First National Plaza, Chicago, Illinois, 60670),
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, Bank 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 those classes of
the Funds.
<TABLE>
<CAPTION>
PERCENTAGE OF TYPE OF
NAME AND ADDRESS FUND/CLASS OWNERSHIP OWNERSHIP
<S> <C> <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 Fund
3435 Stelzer Road Suite 1000 Class A
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
3435 Stelzer Road Suite 1000 Class A
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
3435 Stelzer Road Suite 1000 Class A
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 58.27% Record
Banc One Securities Market Fund
PO Box 250 Class A
Church Street Station
New York, NY 10013-0250
</TABLE>
<PAGE> 233
21
<TABLE>
<CAPTION>
PERCENTAGE OF TYPE OF
NAME AND ADDRESS FUND/CLASS OWNERSHIP OWNERSHIP
<S> <C> <C> <C> <C>
BISYS Fund Services Inc. Municipal Money 38.79% Record
FBO Banc One Corporate Sweep Market Fund
3435 Stelzer Road Suite 1000 Class A
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>
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.")
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,
<PAGE> 234
22
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.
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.
<PAGE> 235
organization and management of the funds
fund name
23
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 Bank 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 Net Assets
<S> <C> <C> <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
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,
<PAGE> 236
24
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 1999 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 anticipates 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 move to Year 2000 will
not have a material impact on its operations.
<PAGE> 237
details about the funds' investment practices and policies
fund name
25
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 code
<S> <C> <C> <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 1-3 Market
agencies and instrumentalities of the U.S. Government. These Credit
include Ginnie Mae, Fannie Mae, and Freddie Mac.
CERTIFICATES OF DEPOSIT: Negotiable instruments with a 1-3 Market
stated 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 1-4 Credit
simultaneous commitment to return the security to the seller Market
at an agreed upon price on an agreed upon date. This is Liquidity
treated as a loan.
REVERSE REPURCHASE AGREEMENT: The sale of a security and the 1-2 Market
simultaneous commitment to buy the security back at an Leverage
agreed 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 1-4 Credit
securities owned by a Fund. In return the Fund will receive Market
cash and/or other securities as collateral. Leverage
WHEN-ISSUED SECURITIES AND FORWARD COMMITMENTS: Purchase or 1-4 Market
contract to purchase securities at a fixed price for Leverage
delivery at a future date. Liquidity
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 1-3 Credit
on and accepted by a commercial bank. Maturities are Liquidity
generally six months or less. Market
COMMERCIAL PAPER: Secured and unsecured short-term 1-3 Credit
promissory notes issued by corporations and other entities. Liquidity
Maturities generally vary from a few days to nine months. Market
</TABLE>
<PAGE> 238
26
<TABLE>
<CAPTION>
INSTRUMENT FUND CODE RISK TYPE
- ---------------------------------------------------------------------------------------------------
<S> <C> <C>
FOREIGN SECURITIES: Commercial paper of foreign issuers and 1 Market
obligations of foreign banks, overseas branches of U.S. Political
banks 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 Credit
some other period and which may be payable to the Fund on Liquidity
demand.
MORTGAGE-BACKED SECURITIES: Debt obligations secured by real 1-3 Pre-payment
estate loans and pools of loans. These include Market
collateralized mortgage obligations ("CMOs") and Real Estate Credit
Mortgage Investment Conduits ("REMICs"). Regulatory
DEMAND FEATURES: Securities that are subject to puts and 1-3 Market
standby commitments to purchase the securities at a fixed Liquidity
price (usually with accrued interest) within a fixed period Management
of time following demand by a Fund.
MUNICIPAL SECURITIES: Securities issued by a state or 1-3 Market
political subdivision to obtain funds for various public Credit
purposes. Municipal securities include private activity Political
bonds and industrial development bonds, as well as General Tax
Obligation 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 1 Market
and highly rated insurance companies such as Guaranteed Credit
Investment Contracts ("GICs") and Bank Investment Contracts Liquidity
("BICs").
PARTICIPATION INTERESTS: Interests in municipal securities, 1-3 Credit
including municipal leases, from financial institutions such Tax
as commercial and investment banks, savings and loan Market
associations and insurance companies. These interests may
take the form of participations, beneficial interests in a
trust, partnership interests or any other form of indirect
ownership that allows the 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, Market
leases, credit card receivables and other securities backed Credit
by other types of receivables or other assets. Regulatory
- ---------------------------------------------------------------------------------------------------
</TABLE>
<PAGE> 239
27
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.
- - 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.
- - 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. 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. 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
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.
<PAGE> 240
28
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.
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.
<PAGE> 241
appendix
29
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, INC ("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.
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.
<PAGE> 242
30
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
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
<PAGE> 243
31
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 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.
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 ad-
<PAGE> 244
32
verse 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.
<PAGE> 245
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 8500
Boston, MA 02266-8500
LEGAL COUNSEL
Ropes & Gray
One Franklin Square
1301 K Street, N.W.
Suite 800 East
Washington, D.C. 20005
INDEPENDENT ACCOUNTANTS
PricewaterhouseCoopers LLP
100 East Broad Street
Columbus, OH 43215
THE STATEMENT OF ADDITIONAL INFORMATION CON-
TAINS 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.COM) THAT CONTAINS THE
STATEMENT OF ADDITIONAL INFORMATION, MATERIALS
INCORPORATED BY REFERENCE AND OTHER INFORMATION
REGARDING THE ONE GROUP.
TOG-F-124
<PAGE> 246
THE ONE GROUP(R) FAMILY OF MUTUAL FUNDS
[GRAPHIC]
INSTITUTIONAL MONEY MARKET FUNDS
COMBINED PROSPECTUS
NOVEMBER 1, 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: o ARE NOT DEPOSITS OR OBLIGATIONS OF,
OR GUARANTEED BY BANK 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.
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.
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED UPON THE
ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION
TO THE CONTRARY IS A CRIMINAL OFFENSE.
<PAGE> 247
TABLE OF CONTENTS
<TABLE>
<S> <C>
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......... 4
MORE ABOUT THE FUNDS........................................ 6
HOW TO DO BUSINESS WITH THE ONE GROUP....................... 7
Purchasing Fund Shares................................... 7
Exchanging Fund Shares................................... 8
Redeeming Fund Shares.................................... 9
SHAREHOLDER INFORMATION..................................... 11
Voting Rights............................................ 11
Dividend Policies........................................ 11
Tax Treatment of the Funds............................... 11
Tax Treatment of Shareholders............................ 11
Shareholder Inquiries.................................... 11
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
Year 2000................................................ 12
DETAILS ABOUT THE FUNDS' INVESTMENT PRACTICES AND POLICIES.. 13
Investment Practices..................................... 13
Investment Risks......................................... 14
Investment Policies...................................... 14
APPENDIX: DESCRIPTION OF RATINGS............................ 16
</TABLE>
<PAGE> 248
1
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 Bank 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 Bank 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."
<PAGE> 249
2
The One Group(R)
Government Money Market Fund
- ---------------------------------------
[LOGO] INVESTMENT OBJECTIVE
The Fund seeks high current income
with liquidity and stability of
principal.
[LOGO] 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."
[LOGO] 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."
SHAREHOLDER EXPENSES
<TABLE>
<CAPTION>
SHAREHOLDER TRANSACTION EXPENSES (1)
<S> <C>
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%
</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.
(2) Expense information has been restated to reflect current fees.
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>
$ 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.
<PAGE> 250
3
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,
YEAR ENDED JUNE 30, 1993 TO
------------------------------------------------------------------------------- JUNE 30,
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 $ 1.000
- ----------------------------------------------------------------------------------------------------------------------------------
Investment Activities:
Net investment income 0.055 0.053 0.055 0.053 0.033 0.001
- ----------------------------------------------------------------------------------------------------------------------------------
Distributions:
Net investment income (0.055) (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 $ 1.000
- ----------------------------------------------------------------------------------------------------------------------------------
Total Return 5.64% 5.43% 5.61% 5.41% 3.40% 3.28%(b)
RATIOS/SUPPLEMENTARY DATA:
Net Assets at end of period
(000) $3,712,252 $1,083,438 $855,613 $720,699 $692,253 $244,991
Ratio of expenses to average
net assets 0.15% 0.14% 0.18% 0.21% 0.11% 0.07%(b)
Ratio of net investment
income to average net
assets 5.48% 5.31% 5.46% 5.28% 3.41% 3.13%(b)
Ratio of expenses to average
net assets* 0.15% 0.14% 0.18% 0.22% 0.20% 0.33%(b)
Ratio of net investment
income to average net
assets* 5.48% 5.31% 5.46% 5.27% 3.32% 2.87%(b)
</TABLE>
* During the period certain fees were voluntarily reduced. If such voluntary fee
reductions had not occurred, the ratios would have been as indicated.
(a) Period from commencement of operations. (b) Annualized.
<PAGE> 251
4
The One Group(R)
Treasury Only Money Market Fund
- ---------------------------------------
[LOGO] 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.
[LOGO] 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."
[LOGO] RISK CONSIDERATIONS
Before you invest, please read "More
About the Funds" and "Investment
Risks."
SHAREHOLDER EXPENSES
<TABLE>
<CAPTION>
SHAREHOLDER TRANSACTION EXPENSES (1)
<S> <C>
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%
</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) Expense information has been restated to reflect current fees.
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>
$ 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.
<PAGE> 252
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,
YEAR ENDED JUNE 30, 1993 TO
-------------------------------------------------------------------- JUNE 30,
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 $ 1.000
- -------------------------------------------------------------------------------------------------------------------------------
Investment Activities:
Net investment income 0.052 0.051 0.052 0.051 0.032 0.006
- -------------------------------------------------------------------------------------------------------------------------------
Distributions:
Net investment income (0.052) (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 $ 1.000
- -------------------------------------------------------------------------------------------------------------------------------
Total Return 5.30% 5.24% 5.38% 5.22% 3.23% 2.96%(b)
RATIOS/SUPPLEMENTARY DATA:
Net Assets at end of period (000) $719,570 $480,860 $415,961 $288,697 $217,725 $ 60,330
Ratio of expenses to average net
assets 0.15% 0.15% 0.17% 0.20% 0.15% 0.07%(b)
Ratio of net investment income to
average net assets 5.18% 5.12% 5.23% 5.14% 3.23% 2.95%(b)
Ratio of expenses to average net
assets* 0.15% 0.15% 0.17% 0.21% 0.22% 0.33%(b)
Ratio of net investment income to
average net assets* 5.18% 5.12% 5.23% 5.13% 3.16% 2.69%(b)
</TABLE>
* During the period certain fees were voluntarily reduced. If such voluntary
fee reductions had not occurred, the ratios would have been as indicated.
(a) Period from commencement of operations. (b) Annualized.
5
<PAGE> 253
more about the funds
6
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.
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. Fixed income securities also are subject to the
risk that the issuer of the security will be unable to meet its repayment
obligation.
DERIVATIVES: The Government Money Market 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). 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."
<PAGE> 254
7
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 my be purchased by:
- - Commercial and retail institutional investors, including affiliates of Bank
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 1-800-280-4111.
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").
- - 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.
<PAGE> 255
8
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
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.
<PAGE> 256
9
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:
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.
- - 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.
<PAGE> 257
10
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.
<PAGE> 258
shareholder information
11
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.
Bank One Corporation (One First National Plaza, Chicago, Illinois, 60670),
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, Bank 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.
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.
<PAGE> 259
organization and management of the funds
12
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 Bank 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 1999 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 anticipates 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 move to Year 2000 will
not have a material impact on its operations.
<PAGE> 260
13
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
</TABLE>
<TABLE>
<CAPTION>
INSTRUMENT FUND CODE RISK TYPE
- -------------------------------------------------------------------------------------------------
<S> <C> <C>
U.S. TREASURY OBLIGATIONS: Bills, notes, and bonds. 1-2 Market
U.S. GOVERNMENT AGENCY SECURITIES: Securities issued by 1 Market
agencies and instrumentalities of the U.S. Government. These Credit
include Ginnie Mae, Fannie Mae, and Freddie Mac.
REPURCHASE AGREEMENTS: The purchase of a security and the 1 Credit
simultaneous commitment to return the security to the seller Market
at an agreed upon price on an agreed upon date. This is Liquidity
treated as a loan.
PUT OPTIONS: A put option gives the buyer the right to sell, 1 Liquidity
and obligates the seller to buy, a security at a specified Management
price. The Fund will sell only secured put options. Market
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, Market
other securities, and/or letters of credit. Leverage
WHEN-ISSUED SECURITIES AND FORWARD COMMITMENTS: Purchase or 1-2 Market
contract to purchase securities at a fixed price for Leverage
delivery at a future date. Liquidity
INVESTMENT COMPANY SECURITIES: Shares of other mutual funds, 1 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.
VARIABLE AND FLOATING RATE INSTRUMENTS: Obligations with 1 Market
interest rates which are reset daily, weekly, quarterly or Credit
some other period and which may be payable to the Fund on Liquidity
demand.
MORTGAGE-BACKED SECURITIES: Debt obligations secured by real 1 Pre-Payment
estate loans and pools of loans. These include Market
collateralized mortgage obligations ("CMOs") and Real Estate Credit
Mortgage Investment Conduits ("REMICs"). Regulatory
</TABLE>
<PAGE> 261
14
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.
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.
<PAGE> 262
15
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.
<PAGE> 263
appendix
16
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, INC. ("FITCH")
F-1 Highest capacity for timely repayment. Those issues rated F-1+ possess
a particularly strong credit feature.
F-2 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.
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.
<PAGE> 264
17
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
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
<PAGE> 265
18
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 Short-term municipal securities rated MIG1 or VMIG1 are of the best
MIG1 & quality. They have strong protection from established cash flows,
VMIG1 superior liquidity support or demonstrated broad-based access to the
market for refinancing.
MIG2 & These Short-term municipal securities are of high quality. Margins of
VMIG2 protection are ample although not so large as in the preceding group.
MIG3 & Favorable quality. All security elements are accounted for, but the
VMIG3 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."
<PAGE> 266
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 8500
Boston, MA 02266-8500
LEGAL COUNSEL
Ropes & Gray
One Franklin Square
1301 K Street, N.W.
Suite 800 East
Washington, D.C. 20005
INDEPENDENT ACCOUNTANTS
PricewaterhouseCoopers LLP
100 East Broad Street
Columbus, OH 43215
THE STATEMENT OF ADDITIONAL INFORMATION CON-
TAINS 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.COM) THAT CONTAINS THE
STATEMENT OF ADDITIONAL INFORMATION, MATERIALS
INCORPORATED BY REFERENCE AND OTHER INFORMATION
REGARDING THE ONE GROUP(R).
<PAGE> 267
The One Group(R) family of mutual funds
INSTITUTIONAL PRIME MONEY MARKET FUND
PROSPECTUS
November 1, 1998
This prospectus describes one money market mutual fund. The 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: - Are not deposits or obligations of,
or guaranteed by BANK 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.
There is no assurance that the Fund will meet its investment objective or be
able to maintain a net asset value of $1.00 per share on a continuous basis.
These securities have not been approved or disapproved by the Securities and
Exchange Commission or any state securities commission nor has the Securities
and Exchange Commission or any state securities commission passed upon
the accuracy or adequacy of this prospectus.
Any representation to the contrary is a criminal offense.
<PAGE> 268
TABLE OF CONTENTS
<TABLE>
<S> <C>
A BRIEF PREVIEW OF THE FUND................................. 1
ABOUT THE FUND.............................................. 2
MORE ABOUT THE FUND......................................... 3
HOW TO DO BUSINESS WITH THE ONE GROUP....................... 4
Purchasing Fund Shares.................................... 4
Exchanging Fund Shares.................................... 6
Redeeming Fund Shares..................................... 7
SHAREHOLDER INFORMATION..................................... 9
Voting Rights............................................. 9
Dividend Policies......................................... 9
Tax Treatment of the Fund................................. 9
Tax Treatment of Shareholders............................. 9
Shareholder Inquiries..................................... 10
ORGANIZATION & MANAGEMENT OF THE FUND....................... 10
The Fund.................................................. 10
The Board of Trustees..................................... 10
The Advisor............................................... 10
The Distributor........................................... 10
The Administrator and Sub-Administrator................... 10
The Transfer Agent, Custodian and Sub-Custodian........... 11
Year 2000................................................. 11
DETAILS ABOUT THE FUND'S INVESTMENT PRACTICES AND POLICIES.. 12
Investment Practices...................................... 12
Investment Risks.......................................... 14
Investment Policies....................................... 15
APPENDIX: DESCRIPTION OF RATINGS............................ 16
</TABLE>
<PAGE> 269
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 Bank 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 Bank 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."
<PAGE> 270
THE ONE GROUP(R)
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
<TABLE>
<CAPTION>
SHAREHOLDER TRANSACTION EXPENSES (1)
------------------------------------
<S> <C>
Maximum Sales Charge Imposed on Purchases (as a percentage
of offering price) none
Maximum Contingent Deferred Sales Charge (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%
</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.
(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.
<TABLE>
<CAPTION>
1 YEAR 3 YEARS
- ------ -------
<S> <C>
$2 $6
</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> 271
THE ONE GROUP(R)
INSTITUTIONAL PRIME MONEY MARKET FUND
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.
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. Fixed income securities also are subject to the
risk that the issuer of the security will be unable to meet its repayment
obligation.
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."
3
<PAGE> 272
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
Bank 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
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.
4
<PAGE> 273
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.
- 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 the 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 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)
5
<PAGE> 274
- 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.
- 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 generally results in a
capital gain or loss for Federal income tax purposes.
- You should talk to your tax advisor before making an exchange.
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<PAGE> 275
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?
- 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; 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.
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<PAGE> 276
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.
- 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.
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<PAGE> 277
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
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.
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<PAGE> 278
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.
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 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
Bank 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
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
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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 1999 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 anticipates 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 move to Year 2000 will
not have a material impact on its operations.
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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 Market
CUBES.
TREASURY RECEIPTS: TRS, TIGRs, and CATS. Market
U.S. GOVERNMENT AGENCY SECURITIES: Securities issued by Market
agencies and instrumentalities of the U.S. Government. These Credit
include Ginnie Mae, Fannie Mae, and Freddie Mac.
CERTIFICATES OF DEPOSIT: Negotiable instruments with a Market
stated maturity. Credit
Liquidity
TIME DEPOSITS: Non-negotiable receipts issued by a bank in Liquidity
exchange for the deposit of funds. Credit
Market
REPURCHASE AGREEMENTS: The purchase of a security and the Credit
simultaneous commitment to return the security to the seller Market
at an agreed upon price on an agreed upon date. This is Liquidity
treated as a loan.
REVERSE REPURCHASE AGREEMENT: The sale of a security and the Market
simultaneous commitment to buy the security back at an Leverage
agreed 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 Credit
Fund's total assets. In return the Fund will receive cash, Market
other securities and/or letters of credit as collateral. Leverage
WHEN-ISSUED SECURITIES AND FORWARD COMMITMENTS: Purchase or Market
contract to purchase securities at a fixed price for Leverage
delivery at 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.
</TABLE>
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<TABLE>
<CAPTION>
INSTRUMENT RISK TYPE
---------- ---------
<S> <C>
BANKERS' ACCEPTANCES: Bills of exchange or time drafts drawn Credit
on and accepted by a commercial bank. Maturities are Liquidity
generally six months or less. Market
COMMERCIAL PAPER: Secured and unsecured short-term Credit
promissory notes issued by corporations and other entities. Liquidity
Maturities generally vary from a few days to nine months. Market
FOREIGN SECURITIES: Commercial paper of foreign issuers and Market
obligations of foreign banks, overseas branches of U.S. Political
banks and supranational entities. Liquidity
Foreign
Investment
RESTRICTED SECURITIES: Securities not registered under the Liquidity
Securities Act of 1933, such as privately placed commercial Market
paper and Rule 144A securities.
VARIABLE AND FLOATING RATE NOTES: Obligations with interest Market
rates which are reset daily, weekly, quarterly or some other Credit
period and which may be payable to the Fund on demand. Liquidity
MORTGAGE-BACKED SECURITIES: Debt obligations secured by real Pre-payment
estate loans and pools of loans. These include Market Credit
collateralized mortgage obligations ("CMOs") and Real Estate Regulatory
Mortgage Investment Conduits ("REMICs").
DEMAND FEATURES: Securities that are subject to puts and Market
standby commitments to purchase the securities at a fixed Liquidity
price (usually with accrued interest) within a fixed period Management
of time following demand by a Fund.
MUNICIPAL SECURITIES: Securities issued by a state or Market
political subdivision to obtain funds for various public Credit
purposes. Municipal securities include private activity Political
bonds and industrial development bonds, as well as General Tax
Obligation 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 Market
and highly rated insurance companies such as Guaranteed Credit
Investment Contracts ("GICs") and Bank Investment Contracts Liquidity
("BICs").
PARTICIPATION INTERESTS: Interests in municipal securities, Credit
including municipal leases, from financial institutions such Tax
as commercial and investment banks, savings and loan Market
associations and insurance companies. These interests may
take the form of participations, beneficial interests in a
trust, partnership interests or any other form of indirect
ownership that allows the Fund to treat the income from the
investment as exempt from Federal Income Tax.
</TABLE>
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<TABLE>
<CAPTION>
INSTRUMENT RISK TYPE
---------- ---------
<S> <C>
ASSET-BACKED SECURITIES: Securities secured by company Pre-payment
receivables, home equity loans, truck and auto loans, Market
leases, credit card receivables and other securities backed Credit
by other types of receivables or other assets. Regulatory
</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 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.
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<PAGE> 283
- 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. 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
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> 284
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, INC. ("FITCH")
F-1 Highest capacity for timely repayment. Those issues rated F-1+
possess a particularly strong credit feature.
F-2 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> 285
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.
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.
17
<PAGE> 286
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.
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.
18
<PAGE> 287
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.
SP-2 Satisfactory capacity to pay principal and interest.
SP-3 Speculative capacity to pay principal and interest.
19
<PAGE> 288
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.
20
<PAGE> 289
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 8500
Boston, MA 02266-8500
Legal Counsel
Ropes & Gray
One Franklin Square
1301 K Street, N.W.
Suite 800 East
Washington, D.C. 20005
Independent Accountants
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.com) that contains the Statement of Additional Information, materials
incorporated by reference and other information regarding The One Group(R).
TOG-F-223
<PAGE> 290
THE ONE GROUP(R) FAMILY OF MUTUAL FUNDS
[GRAPHIC]
THE ONE GROUP(R)
EQUITY INDEX FUND
PROSPECTUS
NOVEMBER 1, 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 BANK 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 OR ANY STATE SECURITIES COMMISSION NOR HAS THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED UPON THE
ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION
TO THE CONTRARY IS A CRIMINAL OFFENSE.
O69394 #2
<PAGE> 291
TABLE OF CONTENTS
<TABLE>
<S> <C>
A BRIEF PREVIEW OF THE FUND................................. 1
ABOUT THE FUND.............................................. 2
MORE ABOUT THE FUND......................................... 5
HOW TO DO BUSINESS WITH THE ONE GROUP....................... 6
Purchasing Fund Shares................................... 6
Sales Charges............................................ 8
Sales Charge Reductions and Waivers...................... 9
Exchanging Fund Shares................................... 11
Redeeming Fund Shares.................................... 12
SHAREHOLDER INFORMATION..................................... 14
Voting Rights............................................ 14
Dividend Policies........................................ 14
Tax Treatment of the Fund................................ 15
Tax Treatment of Shareholders............................ 15
Shareholder Inquiries.................................... 15
ORGANIZATION AND MANAGEMENT OF THE ONE GROUP................ 16
The One Group............................................ 16
The Board of Trustees.................................... 16
The Advisor.............................................. 16
The Distributor.......................................... 16
The Administrator and Sub-Administrator.................. 16
The Transfer Agent, Custodian and Sub-Custodian.......... 16
Year 2000................................................ 16
DETAILS ABOUT THE ONE GROUP EQUITY INDEX FUND'S INVESTMENT
PRACTICES AND POLICIES.................................... 18
Investment Practices..................................... 18
Investment Risks......................................... 20
Investment Policies...................................... 20
APPENDIX: DESCRIPTION OF RATINGS............................ 22
</TABLE>
<PAGE> 292
1
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 FUNDS' 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 INlVESTING 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 Bank 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
Bank 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 Bank 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.
<PAGE> 293
The One Group(R)
Equity Index Fund
LOGO INVESTMENT OBJECTIVE
The Fund seeks investment results that
correspond to the aggregate price and
dividend performance of securities in
the S&P 500 Index.*
LOGO 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.
LOGO 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."
LOGO 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."
LOGO 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.
SHAREHOLDER EXPENSES
<TABLE>
<CAPTION>
SHAREHOLDER TRANSACTION EXPENSES (1) CLASS A CLASS B CLASS C
<S> <C> <C> <C>
Maximum Sales Charge Imposed on
Purchases
(as a percentage of offering
price) 4.50% none none
Maximum Contingent Deferred Sales
Charge
(as a percentage of original
purchase price or redemption
proceeds, as applicable) none(2) 5.00% 1.00%
Redemption Fees none none none
Exchange Fees 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%
12b-1 Fees (after fee waiver) (5) .25% 1.00% 1.00%
Other Expenses .25% .25% .25%
Total Fund Operating Expenses (after
fee waivers) (6) .75% 1.50% 1.50%
<CAPTION>
CLASS I
<S> <C>
none
none
none
none
.25%
none
.25%
.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>
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.
2
<PAGE> 294
The One Group(R) Equity Index Fund Financial Highlights
The Financial Highlights are intended to help you understand the Fund's
financial performance over 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 $ 21.80 $ 16.66 $ 14.03 $ 11.59 $ 11.92
- --------------------------------------------------------------------------------------------------------------------
Investment Activities:
Net investment income 0.33 0.35 0.33 0.32 0.29
Net realized and unrealized gains
(losses) from investments 5.98 5.27 3.16 2.59 (0.20)
- --------------------------------------------------------------------------------------------------------------------
Total from Investment Activities 6.31 5.62 3.49 2.91 0.09
- --------------------------------------------------------------------------------------------------------------------
Distributions:
From net investment income (0.32) (0.33) (0.33) (0.29) (0.29)
In excess of net investment income -- -- (0.01) (0.02) (0.04)
From net realized gains (0.63) (0.15) (0.52) (0.16) (0.09)
- --------------------------------------------------------------------------------------------------------------------
Total Distributions (0.95) (0.48) (0.86) (0.47) (0.42)
- --------------------------------------------------------------------------------------------------------------------
NET ASSET VALUE, END OF PERIOD $ 27.16 $ 21.80 $ 16.66 $ 14.03 $ 11.59
- --------------------------------------------------------------------------------------------------------------------
Total Return 29.73% 34.30% 25.47% 25.79% 0.63%
RATIOS/SUPPLEMENTARY DATA:
Net Assets at end of period (000) $671,422 $480,819 $321,058 $234,895 $165,370
Ratio of expenses to average net assets 0.35% 0.30% 0.30% 0.33% 0.46%
Ratio of net investment income to
average net assets 1.37% 1.87% 2.18% 2.57% 2.44%
Ratio of expenses to average net assets* 0.62% 0.61% 0.59% 0.66% 0.59%
Ratio of net investment income to
average net assets* 1.10% 1.56% 1.89% 2.24% 2.31%
Portfolio turnover (a) 4.32% 5.81% 9.08% 2.71% 11.81%
<CAPTION>
YEAR ENDED JUNE 30,
------------------------
CLASS I 1993 1992(B)
<S> <C> <C>
NET ASSET VALUE, BEGINNING OF PERIOD $ 10.92 $ 10.00
- --------------------------------------------------------------------
Investment Activities:
Net investment income 0.30 0.26
Net realized and unrealized gains
(losses) from investments 1.13 0.95
- --------------------------------------------------------------------
Total from Investment Activities 1.43 1.21
- --------------------------------------------------------------------
Distributions:
From net investment income (0.30) (0.26)
In excess of net investment income -- --
From net realized gains (0.13) (0.03)
- --------------------------------------------------------------------
Total Distributions (0.43) (0.29)
- --------------------------------------------------------------------
NET ASSET VALUE, END OF PERIOD $ 11.92 $ 10.92
- --------------------------------------------------------------------
Total Return 13.04% 12.14%(c)
RATIOS/SUPPLEMENTARY DATA:
Net Assets at end of period (000) $96,446 $62,150
Ratio of expenses to average net assets 0.50% 0.73%(c)
Ratio of net investment income to
average net assets 2.46% 2.43%(c)
Ratio of expenses to average net assets* 0.87% 1.16%(c)
Ratio of net investment income to
average net assets* 2.09% 2.00%(c)
Portfolio turnover (a) 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.
<TABLE>
<CAPTION>
YEAR ENDED JUNE 30,
-------------------------------------------------------------------------
CLASS A 1998 1997 1996 1995 1994
<S> <C> <C> <C> <C> <C>
NET ASSET VALUE, BEGINNING OF PERIOD $ 21.81 $ 16.67 $ 14.02 $ 11.59 $ 11.91
- ---------------------------------------------------------------------------------------------------------------------
Investment Activities:
Net investment income 0.26 0.29 0.27 0.29 0.28
Net realized and unrealized gains
(losses) from investments 5.97 5.28 3.18 2.58 (0.20)
- ---------------------------------------------------------------------------------------------------------------------
Total from Investment Activities 6.23 5.57 3.45 2.87 0.08
- ---------------------------------------------------------------------------------------------------------------------
Distributions:
From net investment income (0.26) (0.28) (0.27) (0.28) (0.27)
In excess of net investment income -- -- (0.01) -- (0.04)
From net realized gains (0.63) (0.15) (0.52) (0.16) (0.09)
- ---------------------------------------------------------------------------------------------------------------------
Total Distributions (0.89) (0.43) (0.80) (0.44) (0.40)
- ---------------------------------------------------------------------------------------------------------------------
NET ASSET VALUE, END OF PERIOD $ 27.15 $ 21.81 $ 16.67 $ 14.02 $ 11.59
- ---------------------------------------------------------------------------------------------------------------------
Total Return (Excludes Sales Charge) 29.33% 33.94% 25.16% 25.43% 0.56%
RATIOS/SUPPLEMENTARY DATA:
Net Assets at end of period (000) $218,518 $98,338 $32,186 $3,003 $1,416
Ratio of expenses to average net assets 0.60% 0.55% 0.55% 0.56% 0.62%
Ratio of net investment income to
average net assets 1.11% 1.59% 1.93% 2.38% 2.37%
Ratio of expenses to average net assets* 0.96% 0.95% 0.94% 1.01% 0.94%
Ratio of net investment income to
average net assets* 0.75% 1.19% 1.54% 1.94% 2.05%
Portfolio turnover (a) 4.32% 5.81% 9.08% 2.71% 11.81%
<CAPTION>
YEAR ENDED JUNE 30,
------------------------
CLASS A 1993 1992(B)
<S> <C> <C>
NET ASSET VALUE, BEGINNING OF PERIOD $ 10.92 $ 10.94
- --------------------------------------------------------------------
Investment Activities:
Net investment income 0.30 0.08
Net realized and unrealized gains
(losses) from investments 1.10 --
- --------------------------------------------------------------------
Total from Investment Activities 1.40 0.08
- --------------------------------------------------------------------
Distributions:
From net investment income (0.28) (0.10)
In excess of net investment income -- --
From net realized gains (0.13) --
- --------------------------------------------------------------------
Total Distributions (0.41) (0.10)
- --------------------------------------------------------------------
NET ASSET VALUE, END OF PERIOD $ 11.91 $ 10.92
- --------------------------------------------------------------------
Total Return (Excludes Sales Charge) 12.75% 1.32%(c)
RATIOS/SUPPLEMENTARY DATA:
Net Assets at end of period (000) $512 $5
Ratio of expenses to average net assets 0.52% 1.09%(c)
Ratio of net investment income to
average net assets 2.51% 1.97%(c)
Ratio of expenses to average net assets* 0.99% 1.27%(c)
Ratio of net investment income to
average net assets* 2.04% 1.79%(c)
Portfolio turnover (a) 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.
3
<PAGE> 295
The One Group(R) 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 $ 21.80 $ 16.68 $ 14.05 $11.61 $ 12.39
- ---------------------------------------------------------------------------------------------------------------------------------
Investment Activities:
Net investment income 0.10 0.16 0.16 0.18 0.09
Net realized and unrealized gains (losses) from
investments 5.97 5.27 3.16 2.61 (0.78)
- ---------------------------------------------------------------------------------------------------------------------------------
Total from Investment Activities 6.07 5.43 3.32 2.79 (0.69)
- ---------------------------------------------------------------------------------------------------------------------------------
Distributions:
From net investment income (0.11) (0.16) (0.16) (0.19) (0.09)
In excess of net investment income -- -- (0.01) -- --
From net realized gains (0.63) (0.15) (0.52) (0.16) --
- ---------------------------------------------------------------------------------------------------------------------------------
Total Distributions (0.74) (0.31) (0.69) (0.35) (0.09)
- ---------------------------------------------------------------------------------------------------------------------------------
NET ASSET VALUE, END OF PERIOD $ 27.13 $ 21.80 $ 16.68 $14.05 $ 11.61
- ---------------------------------------------------------------------------------------------------------------------------------
Total Return (Excludes Sales Charge) 28.47% 32.93% 24.05% 24.58% (5.57)%(b)
RATIOS/SUPPLEMENTARY DATA:
Net Assets at end of period (000) $351,624 $168,699 $38,538 $1,408 $ 248
Ratio of expenses to average net assets 1.35% 1.30% 1.30% 1.34% 1.10%(c)
Ratio of net investment income to average net assets 0.36% 0.83% 1.18% 1.60% 2.08%(c)
Ratio of expenses to average net assets* 1.61% 1.61% 1.59% 1.67% 1.15%(c)
Ratio of net investment income to average net assets* 0.10% 0.52% 0.89% 1.27% 2.03%(c)
Portfolio turnover(d) 4.32% 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.
<TABLE>
<CAPTION>
NOVEMBER 4, 1997
TO JUNE 30,
CLASS C 1998(A)
<S> <C>
NET ASSET VALUE, BEGINNING OF PERIOD $22.60
- ------------------------------------------------------------------------------------
Investment Activities:
Net investment income 0.07
Net realized and unrealized gains (losses) from
investments 4.67
- ------------------------------------------------------------------------------------
Total from Investment Activities 4.74
- ------------------------------------------------------------------------------------
Distributions:
Net investment income (0.08)
Net realized gains (0.12)
- ------------------------------------------------------------------------------------
Total Distributions (0.20)
- ------------------------------------------------------------------------------------
NET ASSET VALUE, END OF PERIOD $27.14
- ------------------------------------------------------------------------------------
Total Return (Excludes Sales Charge) 21.07%(b)
RATIOS/SUPPLEMENTARY DATA:
Net Assets at end of period (000) $3,214
Ratio of expenses to average net assets 1.35%(c)
Ratio of net investment income to average net assets 0.27%(c)
Ratio of expenses to average net assets* 1.60%(c)
Ratio of net investment income to average net assets* 0.02%(c)
Portfolio turnover(d) 4.32%
</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) 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.
4
<PAGE> 296
5
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.
<PAGE> 297
how to do business with The One Group
6
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 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 interest 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.
- - 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 Bank One
Corporation and its affiliates).
- Subsequent investments must be at least $100 ($25 for employees of Bank 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.
<PAGE> 298
7
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
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.
<PAGE> 299
8
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 %
AMOUNT OF PURCHASE OF THE OFFERING PRICE OF YOUR INVESTMENT OF THE 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:
<TABLE>
<CAPTION>
CDSC AS A % OF DOLLAR
YEARS SINCE PURCHASE AMOUNT SUBJECT TO CHARGE
- ----------------------------------------------
<S> <C>
0-1 5.00%
1-2 4.00%
2-3 3.00%
3-4 3.00%
4-5 2.00%
5-6 1.00%
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>
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.
<PAGE> 300
9
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%.
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.
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.
- Bank One Corporation and its subsidiaries and affiliates.
<PAGE> 301
10
- 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 Bank 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.
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 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
<PAGE> 302
11
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.
- - 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).
- - 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 have 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.
<PAGE> 303
12
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 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.
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.
<PAGE> 304
13
- - 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 Bank 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.
<PAGE> 305
shareholder information
14
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.
Bank One Corporation (One First National Plaza, Chicago, Illinois 60670),
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, Bank 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.
<TABLE>
<CAPTION>
PERCENTAGE OF TYPE OF
NAME AND ADDRESS FUND/CLASS OWNERSHIP OWNERSHIP
<S> <C> <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.")
<PAGE> 306
15
TAX TREATMENT OF THE FUNDS
- --------------------------------------------------------------------------------
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.
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.
<PAGE> 307
16
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 Bank 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
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
<PAGE> 308
17
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 1999 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 anticipates 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 move to Year 2000 will
not have a material impact on its operations.
<PAGE> 309
18
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 Market
at an agreed upon price on an agreed upon date. This is Liquidity
treated as a loan.
REVERSE REPURCHASE AGREEMENT: The sale of a security and the Market
simultaneous commitment to buy the security back at an Leverage
agreed 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 Credit
Fund's total assets. In return the Fund will receive cash, Market
other securities, and/or letters of credit as collateral. Leverage
WHEN-ISSUED SECURITIES AND FORWARD COMMITMENTS: Purchase or Market
contract to purchase securities at a fixed price for Leverage
delivery at 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 Market
convert to common stock. Credit
CALL AND PUT OPTIONS: A call option gives the buyer the Market
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 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 Management
future sale and purchase of a specified amount of a Market
specified security, class of securities, or an index at a Credit
specified time in the future and at a specified price. Liquidity
Leverage
REAL ESTATE INVESTMENT TRUSTS ("REITS"): Pooled investment Liquidity
vehicles which invest primarily in income producing real Management
estate or real estate related loans or interest. Market
BANKERS ACCEPTANCES: Bills of exchange or time drafts drawn Regulatory
on and accepted by a commercial bank. Maturities are Tax
generally six months or less. Pre-payment
Credit
Liquidity
Market
COMMERCIAL PAPER: Secured and unsecured short-term Credit
promissory notes issued by corporations and other entities. Liquidity
Maturities generally vary from a few days to nine months. Market
U.S. TREASURY OBLIGATIONS: Bills, notes, bonds, STRIPS, and Market
CUBES.
TREASURY RECEIPTS: TRS, TIGRs, and CATS. Market
U.S. GOVERNMENT AGENCY SECURITIES: Securities issued by Market
agencies and instrumentalities of the U.S. Government. These Credit
include Ginnie Mae, Fannie Mae, and Freddie Mac.
CERTIFICATES OF DEPOSIT: Negotiable instruments with a Market
stated maturity. Credit
Liquidity
TIME DEPOSITS: Non-negotiable receipts issued by a bank in Liquidity
exchange for the deposit of funds. Credit
Market
</TABLE>
<PAGE> 310
19
<TABLE>
<CAPTION>
INSTRUMENT RISK TYPE
<S> <C>
RESTRICTED SECURITIES: Securities not registered under the Liquidity
Securities Act of 1933, such as privately placed commercial Market
paper and Rule 144A securities.
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 Management
transactions to manage its exposure to changing interest Credit
rates and other factors. Swaps involve an exchange of Liquidity
obligations by two parties. Caps and floors entitle a Market
purchaser to a principal 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 Management
and other financial products, continue to be developed and Credit
the Fund may invest in such options, contracts and products. Market
Liquidity
STANDARD & POOR'S DEPOSITORY RECEIPTS ("SPDRS"): SPDRs Market
represent 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.
VARIABLE AND FLOATING RATE INSTRUMENTS: Obligations with Market
interest rates which are reset daily, weekly, quarterly or Credit
some other period and which may be payable to the Fund on Liquidity
demand.
WARRANTS: Securities, typically issued with preferred stock Market
or bonds, that give the holder the right to buy a Credit
proportionate amount of common stock at a specified price.
</TABLE>
<PAGE> 311
20
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.
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.
<PAGE> 312
21
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
- - 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.
<PAGE> 313
appendix
22
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, INC. ("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")
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
<PAGE> 314
23
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.
<PAGE> 315
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 8500
Boston, MA 02266-8500
LEGAL COUNSEL
Ropes & Gray
One Franklin Square
1301 K Street, N.W.
Suite 800 East
Washington, D.C. 20005
INDEPENDENT ACCOUNTANTS
PricewaterhouseCoopers LLP
100 East Broad Street
Columbus, OH 43215
THE STATEMENT OF ADDITIONAL INFORMATION CON-
TAINS 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.COM) THAT CONTAINS THE
STATEMENT OF ADDITIONAL INFORMATION, MATERIALS
INCORPORATED BY REFERENCE AND OTHER INFORMATION
REGARDING THE ONE GROUP(R).
TOG-F-120
<PAGE> 316
THE ONE GROUP(R)
FAMILY OF MUTUAL FUNDS
3435 Stelzer Road
Columbus, Ohio 43219-3035
(800) 480-4111
November 1, 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 BANK 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> 317
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> 318
[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 BANK
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 BANK 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 BANK ONE CORPORATION, serves as
the advisor of the Fund. Banc One Investment
- 3 -
<PAGE> 319
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> 320
(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> 321
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> 322
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> 323
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> 324
- - 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
BANK ONE CORPORATION and its affiliates).
- Subsequent investments must be at least $100 ($25 for employees
of BANK 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> 325
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> 326
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> 327
* 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.
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- - 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.
- BANK 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 BANK 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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- 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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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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- - 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> 333
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> 334
- - 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> 335
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 BANK ONE CORPORATION and its
affiliates.
- - The One Group may suspend your ability to redeem when:
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<PAGE> 336
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> 337
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> 338
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
BANK 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 1999 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 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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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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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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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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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>
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<PAGE> 344
<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> 345
<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> 346
<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> 347
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> 348
- - 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> 349
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> 350
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> 351
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> 352
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> 353
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.
-38-
<PAGE> 354
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> 356
[THIS PAGE INTENTIONALLY LEFT BLANK]
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<PAGE> 357
[THIS PAGE INTENTIONALLY LEFT BLANK]
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<PAGE> 358
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
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> 359
THE ONE GROUP(R)
FAMILY OF MUTUAL FUNDS
3435 Stelzer Road
Columbus, Ohio 43219-3035
(800) 480-4111
November 1, 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 BANK 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> 360
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> 361
[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 BANK
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 BANK 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
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<PAGE> 362
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 BANK 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> 363
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.
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<PAGE> 364
(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> 365
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> 366
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> 367
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> 368
- - 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
BANK ONE CORPORATION and its affiliates).
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<PAGE> 369
- Subsequent investments must be at least $100 ($25 for employees
of BANK 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> 370
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> 371
- - 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> 372
<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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<PAGE> 373
- - 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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<PAGE> 374
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.
- BANK 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 BANK 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.
- 16 -
<PAGE> 375
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.
- 17 -
<PAGE> 376
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> 377
- - 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> 378
- - 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.
- 20 -
<PAGE> 379
- - 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.
- 21 -
<PAGE> 380
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 BANK 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> 381
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> 382
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> 383
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
BANK 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 1999 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> 384
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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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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(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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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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(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> 389
<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> 390
<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> 391
<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> 392
<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
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<PAGE> 393
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.
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<PAGE> 394
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> 395
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
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<PAGE> 396
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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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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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> 400
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> 401
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> 402
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> 403
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> 404
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> 405
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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<PAGE> 409
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
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> 410
THE ONE GROUP(R)
FAMILY OF MUTUAL FUNDS
3435 Stelzer Road
Columbus, Ohio 43219-3035
(800) 480-4111
November 1, 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 BANK 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> 411
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> 412
[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 BANK 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 BANK 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> 413
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> 414
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> 415
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.
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> 416
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.
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<PAGE> 417
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> 418
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.
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<PAGE> 419
- - 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.
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<PAGE> 420
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.
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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 BANK 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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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 1999 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, 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>
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<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> 425
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> 426
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> 427
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> 428
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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<PAGE> 429
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> 430
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> 431
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
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24
<PAGE> 434
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> 435
THE ONE GROUP(R)
FAMILY OF MUTUAL FUNDS
3435 Stelzer Road
Columbus, Ohio 43219-3035
(800) 480-4111
November 1, 1998
THE ONE GROUP(R) TEXAS MUNICIPAL 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 BANK 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> 436
TABLE OF CONTENTS
A BRIEF PREVIEW OF THE FUND 3
ABOUT THE FUND 4
The One Group(R) Texas Municipal 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> 437
[LOGO-(CLOCK)] A BRIEF PREVIEW OF THE FUND
WHAT IS THE GOAL OF THE TEXAS MUNICIPAL 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 BANK 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 BANK 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 BANK 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> 438
THE ONE GROUP TEXAS 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.
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 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.
- -----------------------------------------------------------------------------
<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> 439
(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> 440
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."
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<PAGE> 441
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. In
the late 1980's, weakness in the oil, gas and agriculture sectors of the Texas
economy adversely affected consumer spending, financial institutions and real
estate values within the State. Consequently, the State and many of its local
governments increased tax rates to maintain revenues. In the past two years,
however, the Texas economy has improved, and most financial institutions have
been recapitalized and bank failures have generally ceased. 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."
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<PAGE> 442
- - 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 BANK
ONE CORPORATION and its affiliates).
- Subsequent investments must be at least $100 ($25 for employees of
BANK 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.
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<PAGE> 443
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
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<PAGE> 444
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:
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<PAGE> 445
<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%.
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<PAGE> 446
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.
- BANK ONE CORPORATION and its subsidiaries and affiliates.
- The One Group Services Company and its subsidiaries and
affiliates.
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<PAGE> 447
- 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 BANK 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.
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<PAGE> 448
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.
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<PAGE> 449
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> 450
- - 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
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<PAGE> 451
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> 452
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 BANK 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> 453
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> 454
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 BANK 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> 455
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 1999 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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<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>
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<PAGE> 457
<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> 458
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 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 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> 459
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> 460
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.
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<PAGE> 461
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.
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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.
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<PAGE> 463
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.
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<PAGE> 464
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> 465
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
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33
<PAGE> 468
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> 469
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 MUNICIPAL BOND FUND (THE "TEXAS MUNICIPAL 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")
NOVEMBER 1, 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> 470
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> 471
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> 472
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), 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 Municipal 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 Municipal 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.
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<PAGE> 473
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> 474
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. (Equity securities such as common stock will generally
comprise no more than 10% of the High Yield Bond Fund's total assets).
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
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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, the High Yield 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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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> 477
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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<PAGE> 478
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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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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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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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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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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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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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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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 Municipal Bond Fund, the Kentucky Municipal
Bond Fund,
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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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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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<PAGE> 510
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> 511
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> 512
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> 513
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> 514
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.
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<PAGE> 515
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> 516
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>
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<PAGE> 517
** 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.
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<PAGE> 518
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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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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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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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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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 BANK 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).
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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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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 BANK 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.
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MANAGEMENT OF THE TRUST
TRUSTEES & OFFICERS
Overall responsibility for management of the Trust rests with the Board
of Trustees 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> 527
<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, $47,500 N/A N/A $50,500
Chairman
Charles I. Post, $45,500 N/A N/A $48,500
Trustee
John S. Randall, $45,500 N/A N/A $48,500
Trustee
Frederick W. Ruebeck, $45,500 N/A N/A $48,500
Trustee
Robert A. Oden, Jr. $46,260 N/A N/A $49,250
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 their 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> 528
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> 529
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
BANK ONE CORPORATION, a bank holding company incorporated in the state of
Delaware. BANK ONE CORPORATION has affiliate banking organizations in Arizona,
Colorado, Illinois, Indiana, Kentucky, Louisiana, Michigan, Ohio, Oklahoma,
Texas, Utah, West Virginia and Wisconsin. In addition, BANK 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.
Banc One Investment Advisors represents a consolidation of the
investment advisory staffs of a number of bank affiliates of BANK 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> 530
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> 531
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> 532
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 BANK 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> 533
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 BANK 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> 534
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 $ 570,303 $1,953,193 $ 0
Prime Money Market $2,909,462 $ 499,662 $1,964,556 $ 0
Municipal Money Market $ 545,873 $ 67,499 $ 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 $1,589,738 $ 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> 535
<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 $ 58,836 $ 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> 536
<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> 537
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> 538
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> 539
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. $ 1,870,320 $ 1,370 $ 4 -
Prime Money Market One Group Ser. $ 1,336,837 $ 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 $ 253,701 - -
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 $ 1,952,771 $ 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. $ 176,867 $ 413,746 $ 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 - -
Intermediate Bond One Group Ser. $ 79,016 $ 131,932 $ 2,254 -
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> 540
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> 541
EXPERTS
The financial statements of the Trust for the fiscal year ended June
30, 1998 are incorporated by reference into this Statement of Additional
Information, have been audited by PricewaterhouseCoopers LLP, independent
accountants as indicated in their reports with respect thereto, and are
incorporated by reference in reliance upon such reports and on the authority of
such firm as experts in auditing and accounting.
The financial statements for the predecessor funds of the Intermediate
Bond Fund and Large Company Growth Fund, Sun Eagle Intermediate Fixed Income
Fund and Sun Eagle Equity Growth Fund, respectively, for the fiscal year ended
June 30, 1993 and for the period from February 28, 1992 (commencement of
operations of each Fund) to June 30, 1992, 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 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 BANK ONE CORPORATION and its
subsidiary banks.
70
<PAGE> 542
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 Municipal 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> 543
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> 544
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> 545
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 Municipal Bond Fund.
74
<PAGE> 546
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> 547
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 6.59% 6.16% 5.41% - 7.03% 5.75%
Intermediate Tax-Free(2) 09/04/90 7.74% 6.96% 5.46% - 6.95% 4.15%
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% 16.29% 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 31.11% 26.11% 19.12% - 18.35% -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% 19.63% - 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> 548
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) 02/18/92 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% 5.63%
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 6.35% 6.07% 5.14% - 6.74% 3.65%
With Sales Charge 1.53% 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 8.10% 6.22% 6.16% 7.21% 7.18% 4.96%
With Sales Charge 4.85% 5.14% 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% NA
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 02/22/94 35.43% 28.01% - - 23.70% NA
</TABLE>
77
<PAGE> 549
<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% NA
With Sales Charge 17.69% 17.32% 13.37% - 16.25%
Value Growth 12/29/89 31.96% 31.96% 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% 5.75% - - 4.05% 3.29%
With Sales Charge 2.20% 4.85% - - 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 7.78% 6.23% - - 7.59% 5.00%
With Sales Charge 3.78% 5.33% - - 6.90%
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 2.67% 3.48% 3.41% 5.60 6.13 2.93
With Sales Charge (1.33)% 2.53% 3.24% 5.60 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> 550
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% NA
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 28.47% 28.43% - - 22.74% .21%
With Sales Charge 24.47% 27.82% - - 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% 24.89% - - 18.09% NA
With Sales Charge 25.79% 24.25% - - 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% NA
With Sales Charge 30.39% 26.63% - - 22.26%
Small Capitalization 09/09/94 22.24% 18.23% - - 15.88% NA
With Sales Charge 18.24% 17.51% - - 15.35%
Value Growth 09/09/94 30.89% 27.05% - - 23.28% NA
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 12/10/96 11.53% 10.90%
With Sales Charge 7.53% NA NA NA 8.46% NA
Investor Balanced 12/10/96 15.85% 15.67%
With Sales Charge 11.85% NA NA NA 13.28% NA
Investor Growth & Income 12/10/96 19.13% 19.72%
With Sales Charge 15.13% NA NA NA 17.38% NA
Investor Growth 12/10/96 22.52% NA NA NA 23.91% NA
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> 551
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% NA
With Sales Charge 13.27%
International Equity
Index(3) 11/04/97 - - - - 16.34% NA
With Sales Charge 15.34%
Large Company Growth 11/04/97 - - - - 27.63% NA
With Sales Charge 26.63%
Small Capitalization 11/04/97 - - - - 3.08% NA
With Sales Charge 2.16%
Value Growth 11/04/97 - - - - 20.87% NA
With Sales Charge 19.87%
</TABLE>
80
<PAGE> 552
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> 553
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> 554
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> 555
As of July 30, 1998, BANK 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, BANK 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> 556
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> 557
<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> 558
<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> 559
<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> 560
<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> 561
<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> 562
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> 563
<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
Bank One Corporation Large Company Growth Fund 11.44% Beneficial
100 E Broad Street Class I
Columbus, OH 43215-3607
</TABLE>
92
<PAGE> 564
<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
Bank 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
Bank 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> 565
<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> 566
<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> 567
<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> 568
<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> 569
<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> 570
<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
Bank 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> 571
<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
Bank 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
<PAGE> 572
<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 Capitalization 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 Capitalization Fund 7.87% Beneficial
The One Group Services Company Class I
3435 Stelzer Road
Columbus OH 43219-6004
</TABLE>
101
<PAGE> 573
<TABLE>
<S> <C> <C> <C>
Firstar Trust Company Small Capitalization 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> 574
<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
<PAGE> 575
<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> 576
<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> 577
<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> 578
<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> 579
<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> 580
<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> 581
As a group, the Trustee and Officers of the Trust owned less than 1% of the
Shares of each class of the Trust.
The financial statements of the Trust are incorporated by reference
into this Statement of Additional Information. The financial statements have
been audited by PricewaterhouseCoopers LLP, independent public accountants to
the Trust, as indicated in their reports with respect thereto, and are
incorporated herein by reference in reliance upon the authority of said firm as
experts in accounting and auditing in giving said reports. A copy of the annual
reports to shareholders must accompany the delivery of this Statement of
Additional Information.
110
<PAGE> 582
Registration Statement
of The One Group(R)
on Form N-1A
PART C
Item 24. FINANCIAL STATEMENTS AND EXHIBITS
(a) Financial Statements:
Included in Part A
-- Financial Highlights
Included in Part B
The following financial statements have been incorporated into
the Statement of Additional Information by reference to the
Annual Report to Shareholders for The One Group, for the
fiscal year end June 30, 1998:
-- Reports of Independent Accountants for The One Group
dated August 18, 1998.
-- Statements of Assets and Liabilities at June 30, 1998
(audited).
-- Statements of Operations for the year ended June 30,
1998 (audited).
-- Statements of Changes in Net Assets for the year
ended June 30, 1998 (audited).
-- Statements of Cash Flows for the year ended June 30,
1998 (audited)
-- Schedules of Portfolio Investments at June 30, 1998
(audited).
-- Notes to Financial Statements dated June 30, 1998
(audited).
-- Financial Highlights for the periods or years ended
June 30, 1994, June 30, 1995, June 30, 1996, June 30,
1997 and June 30, 1998 (audited).
(b) Exhibits:
(1) Amended and Restated Declaration of Trust dated 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.
1
<PAGE> 583
(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) RIGHTS OF SHAREHOLDERS.
The following portions of Registrant's Declaration of Trust
incorporated as Exhibit (1) hereto, define the rights of
shareholders:
5.1 SHARES IN THE SERIES OR CLASSES OF THE TRUST.
A. The Trustees shall have full power and authority, in their
sole discretion, without obtaining the prior approval of the
Shareholders (either with respect to the Trust as a whole or
with respect to any series or classes of the Trust) by vote or
otherwise, to establish one or more series of Shares of the
Trust. The establishment of any such series shall be effective
upon the adoption by a majority of the Trustees then in office
of a resolution establishing such series and setting the
voting rights, preferences, designations, conversion or other
rights, restrictions, limitations as to distributions,
conditions of redemption, qualifications, or other terms of
the Shares of such series. The beneficial interest in each
series of the Trust shall at all times be divided into an
unlimited number of full and fractional transferable Shares
without par value. The investment objective, policies, and
restrictions governing the management and operations of each
series of the Trust, including the management of assets
belonging to any particular series, may from time to time be
changed or supplemented by the Trustees, subject to the
requirements of the Act. The Trustees may from time to time
divide or combine the outstanding Shares of any one or more
series of the Trust into a greater or lesser number without
thereby changing their proportionate beneficial interests in
the Trust assets allocated or belonging to such series.
Subject to the respective voting rights, preferences,
designations, conversion or other rights, restrictions,
limitations as to distributions, conditions of redemption,
qualifications, or other terms of the Shares of each series of
the Trust, the Trustees may, without Shareholder approval,
divide the Shares of any series into two or more classes,
Shares of each such class having such voting rights,
preferences, designations, conversion or other rights,
restrictions, limitations as to distributions, conditions of
redemption, qualifications, or other terms applicable to
Shares of such class as the Trustees may determine.
B. The holder of each Share shall be entitled to one vote for
each full Share, and a proportionate fractional vote for each
fractional Share, irrespective of the series or class, then
recorded in his name on the books of the Trust. On any matter
submitted
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to a vote of Shareholders, all Shares then issued and
outstanding and entitled to vote, irrespective of the series
or class, shall be voted in the aggregate and not by series or
class except: (1) as otherwise required by the Act; or (2)
when the matter, as conclusively determined by the Trustees,
affects only the interests of the Shareholders of a particular
series or class of the Trust (in which case only Shareholders
of the affected series or class shall be entitled to vote
thereon).
C. Shares of each series or class of the Trust shall have the
following preferences, participating or other special rights,
qualifications, restrictions and limitations:
(1) ASSETS BELONGING TO A SERIES OR CLASS. All
consideration received by the Trust for the issue or
sale of Shares of any series or class, together with
all assets in which such consideration is invested or
reinvested, including any proceeds derived from the
sale, exchange, or liquidation of such assets, and
any funds or payments derived from any reinvestment
of such proceeds in whatever form the same may be,
shall be referred to as "assets belonging to" that
series or class. In addition, any assets, income,
earnings, profits or proceeds thereof, or funds or
payments which are not readily identifiable as
belonging to a particular series or class shall be
allocated by the Trustees to one or more series or
class (such allocation to be conclusive and binding
upon the Shareholders of all series or class for all
purposes) in such manner as they, in their sole
discretion, deem fair and equitable, and shall also
be referred to as "assets belonging to" such series
or class. Such assets belonging to a particular
series or class shall irrevocably belong for all
purposes to the Shares of the series or class, and
shall be so handled upon the books of account of the
Trust. Such assets and the income, earnings, profits,
and proceeds thereof, including any proceeds derived
from the sale, exchange, or liquidation thereof, and
any funds or payments derived from any reinvestment
of such proceeds in whatever form, are herein
referred to as "assets belonging to" such a series or
class. Shareholders of any series or class shall have
no right, title or interest in or to the assets
belonging to any other series or class.
(2) LIABILITIES BELONGING TO A SERIES OR CLASS. The
assets belonging to any series or class of the Trust
shall be charged with the direct liabilities in
respect of such series or class and with all
expenses, costs, charges, and reserves attributable
to such series or class, and shall also be charged
with the share of such series or class of the general
liabilities, expenses, costs, charges, and reserves
of the Trust which are not readily identifiable as
belonging to a particular series or class in
proportion to the relative net assets of the
respective series or class, as determined at such
time or times as may be authorized by the Trustees.
Any such determination by the Trustees shall be
conclusive and binding upon the Shareholders of all
series or class for all
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purposes; PROVIDED, HOWEVER, that under no
circumstances shall the assets allocated or belonging
to any series or class of the Trust be charged with
liabilities directly attributable to any other series
or class. The liabilities so charged to a series or
class are herein referred to as "liabilities
belonging to" such series or class. All persons who
may have extended credit to a particular series or
class or who have contracts or claims with respect to
a particular series or class shall look only to the
assets of that particular series or class for payment
of such contracts or claims.
(3) LIQUIDATING DISTRIBUTIONS. In the event of the
termination of the Trust or a particular series or
class thereof and the winding up of its affairs, the
Shareholders of the Trust or such particular series
or class shall be entitled to receive out of the
assets of the Trust or belonging to the particular
series or class, as the case may be, available for
distribution to Shareholders, but other than general
assets not belonging to any particular series or
class of the Trust, the assets belonging to such
series or class; and the assets so distributable to
the Shareholders of any series or class shall be
distributed among such Shareholders in proportion to
the number of Shares of such series or class held by
them and recorded in their names on the books of the
Trust. In the event that there are any general assets
not belonging to any particular series or class of
the Trust available for distribution, such
distribution shall be made to the Shareholders of all
series or class subject to such termination and
winding up in proportion to the relative net assets
of the respective series or class determined as
hereinafter provided and the number of Shares of such
series or class held by them and recorded in their
names on the books of the Trust.
(4) DIVIDENDS AND DISTRIBUTIONS. Shares of each
series or class shall be entitled to such dividends
and distributions in Shares or in cash or both, as
may be declared from time to time by the Trustees,
acting in their sole discretion, with respect to such
series or class, PROVIDED, HOWEVER, that dividends
and distributions on Shares of a particular series or
class shall be paid only out of the lawfully
available "assets belonging to" such series or class
as such term is defined in this Declaration of Trust.
5.2 PURCHASE OF SHARES. The Trustees may accept investments in
each series or class of the Trust from such Persons for such
consideration and on such other terms as they may from time to
time authorize. The Trust may reject any order for, or refuse
to give effect on the books of the Trust to the transfer of,
any Shares as permitted under the Act. Each such investment
shall be credited to the Shareholder's account in the form of
full and fractional Shares of the appropriate series or class
of the Trust, at the net asset value per Share next computed
after receipt of the investment.
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5.3 NET ASSET VALUE PER SHARE. The net asset value per Share
of each series or class of the Trust shall be computed at such
time or times as the Trustees may specify pursuant to the Act.
Assets shall be valued and net asset value per Share shall be
determined by such Person or Persons as the Trustees may
appoint under the supervision of the Trustees in such manner
not inconsistent with the Act and any orders of the Securities
and Exchange Commission received by the Trust, as the Trustees
may determine.
5.4 OWNERSHIP OF SHARES. The ownership of Shares shall be
recorded separately with respect to each series or class on
the record books of the Trust. Certificates for Shares shall
be issued to holders of such Shares only upon the
authorization of the Trustees, in their discretion, to issue
such Shares, and shall be issued, if at all, subject to such
rules and regulations as the Trustees may determine. The
Trustees may make such rules as they consider appropriate for
the transfer of Shares and similar matters. The record books
of the Trust shall be conclusive as to the identity of
holders of Shares and as to the number of Shares of each
series or class held by each Shareholder.
5.5 PREEMPTIVE RIGHTS. Shareholders shall have no preemptive
or other rights to subscribe to any additional Shares or other
securities issued by the Trust or by the Trustees.
5.6 REDEMPTION OF SHARES. To the extent of the assets of the
Trust legally available for such redemptions, a Shareholder of
any series or class of the Trust shall have the right, subject
to the provisions of Section 5.7 hereof, to require the Trust
to redeem his full and fractional Shares of any series or
class out of assets belonging to such series or class at a
redemption price equal to the net asset value per Share next
determined after receipt of a request to redeem in proper form
as determined by the Trustees. The Trustees shall establish
such rules and procedures as they deem appropriate for
redemption of Shares; PROVIDED, HOWEVER, that all redemptions
shall be in accordance with the Act. Without limiting the
generality of the foregoing, the Trust shall, to the extent
permitted by applicable law, have the right at any time to
redeem the Shares owned by any holder thereof (i) if the value
of such Shares in an account maintained by the Trust or its
transfer agent for any Shareholder with respect to any series
or class of the Trust is $1,000 or less; PROVIDED, HOWEVER,
that any such Shareholder shall be notified that the value of
his account is $1,000 or less, and shall be allowed sixty days
to make additional purchases of Shares of the appropriate
series or class so that the value of his account will exceed
$1,000 before any such involuntary redemption is processed by
the Trust; or (ii) if the net income with respect to any
particular series or class of the Trust should be negative or
it should otherwise be appropriate to carry out the Trust's
responsibilities under the Act, in each case subject to such
further terms and conditions as the Board of Trustees of the
Trust may from time to time adopt. The redemption price of
Shares of any series or
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class of the Trust shall, except as otherwise provided in this
section, be the net asset value thereof as determined by the
Board of Trustees of the Trust from time to time in accordance
with the provisions of applicable law, less such redemption
fee or other charge, if any, as may be fixed by resolution of
the Board of Trustees of the Trust. When the net income with
respect to any particular series or class of the Trust is
negative or whenever deemed appropriate by the Board of
Trustees of the Trust in order to carry out the Trust's
responsibilities under the Act, any series or class of the
Trust may, without payment of compensation but in
consideration of the interests of the Trust or a particular
series or class thereof and of the Shareholders of the Trust
or of such series or class in maintaining a constant net asset
value per Share with respect to such series or class, redeem
pro rata from each holder of record on such day such number of
full and fractional Shares of such series or class as may be
necessary to reduce the aggregate number of outstanding Shares
of such series or class in order to permit the net asset value
thereof to remain constant. Payment of the redemption price,
if any, shall be made in cash by the appropriate series or
class of the Trust at such time and in such manner as may be
determined from time to time by the Board of Trustees of the
Trust unless, in the opinion of the Board of Trustees, which
shall be conclusive and binding upon the Shareholders for all
purposes, conditions exist which make payment wholly in cash
unwise or undesirable; in such event the appropriate series or
class of the Trust may make payment in the assets belonging or
allocable to such series or class, the value of which shall be
determined as provided herein.
5.7 SUSPENSION OF RIGHT OF REDEMPTION. The Trustees may
suspend the right of redemption by Shareholders or postpone
the date of payment or the recordation of transfer of Shares
of any series or class, as permitted under the Act or
applicable law. Such suspension or postponement shall take
effect at such time as the Trustees shall specify but not
later than the close of business on the business day following
the declaration of suspension or postponement, and thereafter
there shall be no right of redemption or payment or transfer
until the Trustees shall declare the suspension at an end. In
case of suspension of the right of redemption, a Shareholder
may either withdraw his request for redemption or receive
payment based on the net asset value existing after the
termination of the suspension.
5.8 CONVERSION RIGHTS. The Trustees shall have the authority
to provide from time to time that the holders of Shares of any
series or class shall have the right to convert or exchange
said Shares for or into Shares of one or more other series or
class in accordance with such requirements and procedures as
may be established from time to time by the Trustees.
8.1 VOTING POWERS. The Shareholders shall have power to vote
(a) for the election or removal of Trustees; (b) with respect
to the amendment of this Declaration of Trust as provided in
Section 10.8 hereof; (c) with respect to the approval of
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investment advisory and distribution agreements entered into
on behalf of the Trust or one or more series or class thereof,
and with respect to such other matters relating to the Trust
as may be required by law, by this Declaration of Trust, the
Regulations of the Trust, by any requirements applicable to or
agreement of the Trust, and as the Trustees may consider
desirable; and (d) to the same extent as the shareholders of a
Massachusetts business corporation, when considering whether a
court action, proceeding, or claim should or should not be
brought or maintained derivatively or as a class action on
behalf of the Trust or the Shareholders; PROVIDED, HOWEVER,
that no Shareholder of a particular series or class shall be
entitled to bring, or to vote in respect of, any class or
derivative action not on behalf of the series or class of the
Trust in respect of which the Shareholder owns Shares. Every
Shareholder of record shall have the right to one vote for
every whole Share (other than Shares held in the treasury of
the Trust) standing in his name on the books of the Trust, and
to have a proportional fractional vote for any fractional
Share, as to any matter on which the Shareholder is entitled
to vote. There shall be no cumulative voting. Shares may be
voted in person or by proxy. On any matter submitted to a vote
of the Shareholders, all Shares shall be voted in the
aggregate and not by individual series or class, except (i)
where required by the Act, Shares shall be voted by individual
series or class, and (ii) if the Trustees shall have
determined that a matter affects the interests only of one or
more series or class, then only the Shareholders of such
affected series or class shall be entitled to vote thereon.
Until Shares are issued, the Trustees may exercise all rights
of Shareholders and may take any action required or permitted
to be taken by Shareholders by law, this Declaration of Trust,
or the Regulations.
8.2 MEETINGS. Meetings of Shareholders may be called by the
Trustees as provided in the Regulations, and shall be called
by the Trustees upon the written request of Shareholders
owning at least twenty percent of the outstanding Shares
entitled to vote.
8.3 QUORUM AND REQUIRED VOTE. At any meeting of the
Shareholders, a quorum for the transaction of business shall
consist of a majority of the Shares of each series or class
outstanding and entitled to vote with respect to a matter
appearing in person or by proxy; PROVIDED, HOWEVER, that at
any meeting at which the only actions to be taken are actions
required by the Act to be taken by vote of all outstanding
Shares of all series or class entitled to vote thereon,
irrespective of series or class, a quorum shall consist of a
majority of Shares (without regard to series or class)
entitled to vote thereon, and that at any meeting at which the
only actions to be taken shall have been determined by the
Board of Trustees to affect the rights and interests of one or
more but not all series or classes of the Trust, a quorum
shall consist of a majority of the outstanding Shares of the
series or class so affected; and PROVIDED, FURTHER, that
reasonable adjournments of such meeting until a quorum is
obtained may be made by vote of the Shares present in person
or by proxy. A majority of the Shares voted shall decide any
question and a plurality shall elect a Trustee, subject to any
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applicable requirements of law or of this Declaration of Trust
or the Regulations; PROVIDED, HOWEVER, that when any provision
of law or of this Declaration of Trust requires the holders of
Shares of any particular series or class to vote by series or
class and not in the aggregate with respect to a matter, then
the vote of the majority of the outstanding Shares of that
series or class shall decide such matter insofar as that
particular series or class shall be concerned.
8.4 SHAREHOLDER ACTION BY WRITTEN CONSENT. Any action which
may be taken by Shareholders may be taken without a meeting if
the holders of not less than two-thirds of the Shares entitled
to be voted with respect to the matter consent to the action
in writing and the written consent is filed with the records
of the meetings of Shareholders. Such consent shall be treated
for all purposes as a vote taken at a meeting of Shareholders.
8.5 CODE OF REGULATIONS. The Regulations may include further
provisions not inconsistent with this Declaration of Trust for
Shareholders' meetings, votes, record dates, notices of
meetings, and related matters.
9.4 LIMITATION OF SHAREHOLDER LIABILITY. Shareholders shall
not be subject to any personal liability in connection with
the assets of the Trust for the acts or obligations of the
Trust. The Trustees shall have no power to bind any
Shareholder personally or to call upon any Shareholder for the
payment of any sum of money or assessment whatsoever other
than such as the Shareholder may at any time personally agree
to pay by way of subscription to any Share or otherwise. Every
obligation, contract, instrument, certificate, Share, other
security or undertaking of the Trust, and every other act
whatsoever executed in connection with the Trust shall be
conclusively presumed to have been executed or done by the
executors thereof only in their capacities as Trustees under
this Declaration of Trust or in their capacity as officers,
employees, or agents of the Trust, and not individually. Every
note, bond, contract, order, or other undertaking issued by or
on behalf of the Trust or the Trustees relating to the Trust
or to any series or class of the Trust, and the stationery
used by the Trust, shall include a recitation limiting the
obligation represented thereby to the Trust and its assets
(but the omission of such a recitation shall not operate to
bind any Shareholder), as follows:
"The names 'THE ONE(R) GROUP(SM)' and 'Trustees of
THE ONE(R) GROUP(SM)' refer respectively to the
Trust created and the Trustees, as trustees but not
individually or personally, acting from time to time
under a Declaration of Trust dated May 23, 1985 to
which reference is hereby made and a copy of which
is on file at the office of the Secretary of the
Commonwealth of Massachusetts and elsewhere as
required by law, and to any and all amendments
thereto so filed or hereafter filed. The obligations
of 'THE ONE(R) GROUP(SM)' entered into in the name
or on behalf thereof by any
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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 rights accruing to a Shareholder under this Section 9.4
shall not exclude any other right to which such Shareholder
may be lawfully entitled, nor shall anything herein contained
restrict the right of the Trust to indemnify or reimburse a
Shareholder in any appropriate situation even though not
specifically provided for herein, PROVIDED, HOWEVER, that a
Shareholder of any series or class of the Trust shall be
indemnified only from assets belonging to that series or
class.
9.5 INDEMNIFICATION OF SHAREHOLDERS. In case any Shareholder
or former Shareholder shall be held to be personally liable
solely by reason of his being or having been a Shareholder and
not because of his acts or omissions or for some other reason,
the Shareholder or former Shareholder (or his heirs,
executors, administrators, or other legal representatives, or,
in the case of a corporation or other entity, its corporate or
other general successor) shall be entitled out of the Trust
estate to be held harmless from and indemnified against all
loss and expense arising from such liability. The Trust shall,
upon request by the Shareholder, assume the defense of any
claim made against any Shareholder for any act or obligations
of the Trust, and shall satisfy any judgment thereon.
9.6 LIABILITIES OF A SERIES OR CLASS. Liabilities belonging to
any series or class of the Trust, including, without
limitation, expenses, fees, charges, taxes, and liabilities
incurred or arising in connection with a particular series or
class, or in connection with the management thereof, shall be
paid only from the assets belonging to that series or class.
10.3 TERMINATION OF TRUST. This Trust shall continue without
limitation of time; PROVIDED, HOWEVER, that:
A. The Trustees, with the vote of a majority of the
outstanding Shares of any series or class of the Trust, may
sell and convey the assets belonging to such series or class
to another trust or corporation organized under the laws of
any state of the United States, which is a management
investment company as defined in the Act, for an adequate
consideration which may include the assumption of all
outstanding obligations, taxes, and other liabilities, accrued
or contingent, of the series or class and which may include
beneficial interests of such trust or stock of such
corporation. Upon making provision for the payment of all such
liabilities, by such assumption
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or otherwise, the Trustees shall distribute the remaining
proceeds ratably among the holders of the Shares of the series
or class then outstanding.
B. The Trustees, with the vote of a majority of the
outstanding Shares of any series or class of the Trust, may
sell and convert into money all the assets belonging to such
series or class. Upon making provision for the payment of all
outstanding obligations, taxes, and other liabilities, accrued
or contingent, of the series or class, the Trustees shall
distribute the remaining assets belonging to such series or
class ratably among the holders of the outstanding Shares of
the series or class.
C. Without the vote of a majority of outstanding Shares of any
series or class of the Trust (unless Shareholder approval is
otherwise required by applicable law), the Trustees may
combine the assets belonging to any two or more series or
classes into a single series or class if the Trustees
reasonably determine that such combination will not have a
material adverse effect on the Shareholders of each series or
class affected thereby.
D. After the effective date of the determination of the
Trustees under paragraph A or B above,
(1) The Trust shall carry on no business relating to
the assets of such series or class except for the
purpose of winding up the affairs of such series or
class.
(2) The Trustees shall proceed to wind up the affairs
of such series or class and all of the powers of the
Trustees under this Declaration of Trust shall
continue until the affairs of such series or class
shall have been wound up, including the power to
fulfill or discharge the contracts of the Trust
relating to such series or class, to collect assets
of such series or class, to sell, convey, assign,
exchange, transfer, or otherwise dispose of all or
any part of the remaining assets of such series or
class to one or more Persons at public or private
sale for consideration that may consist in whole or
in part of cash, securities, or other property of any
kind, to discharge or pay its liabilities, and to do
all other acts appropriate to liquidate the business
of such series or class.
Upon completion of the distribution of the remaining proceeds
or the remaining assets as provided in paragraphs A and B of
this section, the Trustees may authorize the termination of
that series or class of the Trust. Such termination shall be
effective upon filing with the State Secretary of the
Commonwealth of Massachusetts of an instrument setting forth
such termination, at which time the Trustees shall be
discharged of any and all further liabilities and duties
hereunder relating to such series or class and the right,
title and interest of all parties shall be cancelled and
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discharged with respect to such series or class. Such
instrument shall constitute an amendment to this Declaration
of Trust when filed with the State Secretary of the
Commonwealth of Massachusetts as provided in this Title X.
10.8 AMENDMENT PROCEDURE.
A. This Declaration of Trust may be amended by the affirmative
vote of the holders of not less than a majority of the
outstanding Shares of each series affected thereby (as the
Trustees shall determine) or by any larger vote as may be
required by any provisions of applicable law.
B. Notwithstanding any other provisions hereof, until such
time as a Registration Statement under the Securities Act of
1933, as amended, covering the first public offering of
securities of the Trust shall have become effective, this
Declaration of Trust may be terminated or amended in any
respect by the affirmative vote of a majority of the Trustees.
C. The Trustees may also amend this Declaration without the
vote of Shareholders to cure any error or ambiguity or to
change the name of the Trust or, if they deem it necessary, to
conform this Declaration of Trust to the requirements of
applicable state or federal laws or regulations or the
requirements of the regulated investment company provisions of
the Internal Revenue Code, but the Trustees shall not be
liable for failing to do so.
The following portions of Registrant's Code of Regulations incorporated
as Exhibit (2) hereto, define the rights of shareholders:
1.1 PLACE. An Annual Meeting of Shareholders may be held for a
calendar year if called by the Trustees acting in their sole
discretion, and any such annual or Special Meetings of
Shareholders shall be held at such place, date, and time as
the Trustees may designate.
1.2 SPECIAL MEETING. Special Meetings of Shareholders may be
called by the Trustees, and shall be called by the Trustees
upon the written request of holders of at least twenty percent
of the outstanding units of beneficial interest in the Trust
("Shares") entitled to vote.
1.3 NOTICE. Written notice, stating the place, day and hour of
each meeting of Shareholders and, in the case of Special
Meetings, the general nature of the business to be transacted,
shall be given by, or at the direction of, the person calling
the meeting to each Shareholder of record entitled to vote at
the meeting at least ten days prior to the day named for the
meeting, unless in a particular case a longer period of notice
is required by law.
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1.4 SHAREHOLDER'S LIST. The officer or agent having charge of
the transfer books for shares of the Trust shall make, at
least five days before each meeting of Shareholders, a
complete list of the Shareholders entitled to vote at the
meeting, arranged in alphabetical order with the address of
and the number of Shares held by each such Shareholder. The
list shall be kept on file at the office of the Trust and
shall be subject to inspection by any Shareholders at any time
during usual business hours, and shall also be produced and
kept open at the time and place of each meeting of
Shareholders and shall be subject to the inspection of any
Shareholder during each meeting of Shareholders.
1.5 RECORD DATE. The Trustees may fix a time (during which
they may close the Share transfer books of the Trust) not more
than ninety (90) days prior to the date of any meeting of
Shareholders, or the date fixed for the payment of any
dividend, or the date of the allotment of rights or the date
when any change or conversion or exchange of Shares shall go
into effect, as a record date for the determination of the
Shareholders entitled to notice of, or to vote at, any such
meeting, or entitled to receive payment of any such dividend,
or to receive any such allotment of rights, or to exercise
such rights, as the case may be. In such case, only such
Shareholders as shall be shareholders of record at the close
of business on the date so fixed shall be entitled to notice
of, or to vote at, such meeting or to receive payment of such
dividend, or to receive such allotment of rights, or to
exercise such rights, as the case may be, notwithstanding any
transfer of any Shares on the books of the Trust after any
record date, as aforesaid.
3. 1 FORM. Notices to Shareholders shall be in writing and
delivered personally or mailed to the Shareholders at their
addresses appearing on the books of the Trust.
3.2 WAIVER. Whenever any notice of the time, place, or purpose
of any meeting of Shareholders, Trustees, or committee is
required to be given under the provisions of Massachusetts law
or under the provisions of the Declaration of Trust or these
Regulations, a waiver thereof in writing, signed by the person
or persons entitled to such notice and filed with the record
of the meeting, whether before or after the holding thereof,
or actual attendance at the meeting of Shareholders in person
or by proxy, or at the meeting of Trustees or committee in
person, shall be deemed equivalent to the giving of such
notice to such persons.
(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.
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(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. 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 incorporated by reference to
Exhibit (5)(d) to Post-Effective Amendment No. 45 (filed
August 26, 1998) to Registrant's Registration Statement on
Form N-1A.
(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).
13
<PAGE> 595
(7) Deferred Compensation Plan for Trustees of The One Group is
incorporated by reference to Exhibit (7) to Post Effective
Amendment No. 45 (filed August 26, 1998) to Registrant's
Registration Statement on Form N-1A.
(8)(a) Custodian Contract dated as of July 29, 1988 between
Registrant and State Street Bank and Trust Company is
incorporated by reference to Exhibit (8)(a) to Post Effective
Amendment No. 45 (filed August 26, 1998) to Registrant's
Registration Statement on Form N-1A.
(8)(b) Amendment to Custodian Contract dated as of July 29, 1988
between Registrant and State Street Bank and Trust Company is
incorporated by reference to Exhibit (8)(b) to Post Effective
Amendment No. 45 (filed August 26, 1998) to Registrant's
Registration Statement on Form N-1A.
(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 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
incorporated by reference to Exhibit (8)(d) to Post Effective
Amendment No. 45 (filed August 26, 1998) to Registrant's
Registration Statement on Form N-1A.
(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 February 9,
1988 between the Registrant and State Street Bank and Trust
Company is incorporated by reference to Exhibit (9)(c) to Post
Effective Amendment No. 45 (filed August 26, 1998) to
Registrant's Registration Statement on Form N-1A.
14
<PAGE> 596
(9)(d) Amendment to the Transfer Agency and Service Agreement dated
as of February 6, 1996 is incorporated by reference to Exhibit
(9)(d) to Post-Effective Amendment No. 45 (filed August 26,
1998) to the Registrant's Registration Statement on Form N-1A.
(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 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.
15
<PAGE> 597
(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 is incorporated by reference to Exhibit (9)(p)
to Post Effective Amendment No. 45 (filed August 26, 1998) to
Registrant's Registration Statement on Form N-1A.
(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 incorporated by reference to Exhibit (9)(q)
to Post Effective Amendment No. 45 (filed August 26, 1998) to
Registrant's Registration Statement on Form N-1A.
(9)(r) Second Amendment to the Securities Lending Agreement (Domestic
Securities), effective May 21, 1998, between the Registrant,
Banc One Investment Advisors, and Bank One Trust Company, N.A.
is incorporated by reference to Exhibit (9)(r) to Post
Effective Amendment No. 45 (filed August 26, 1998) to
Registrant's Registration Statement on Form N-1A.
(9)(s) Securities Lending Agreement for Non-ERISA Accounts dated as
of January 8, 1998 between the Registrant, Banc One Investment
Advisors, and Bank One Trust Company, N.A. is incorporated by
reference to Exhibit (9)(s) to Post Effective Amendment No. 45
(filed August 26, 1998) to Registrant's Registration Statement
on Form N-1A.
(9)(t) Amendment to the Securities Lending Agreement (Foreign
Securities) effective May 21, 1998 is incorporated by
reference to Exhibit (9)(t) to Post Effective Amendment
No. 45 (filed August 26, 1998) to Registrant's Registration
Statement on Form N- 1A.
16
<PAGE> 598
(10) Opinion and consent of counsel is filed herewith.
(11)(a) Consent of PricewaterhouseCoopers LLP is filed herewith.
(11)(b) 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 incorporated by
reference to Exhibit (13) to Post Effective Amendment No. 45
(filed August 26, 1998) to Registrant's Registration
Statement on Form N-1A.
(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 Registrant's
Registration Statement on Form N-1A.
<TABLE>
<CAPTION>
(17) Financial Data schedules for:
<S> <C> <C> <C>
17.1 Prime Money Market (011) Class I 6/30/98
17.2 Prime Money Market (012) Class A 6/30/98
17.3 Prime Money Market (013) Class B 6/30/98
17.4 U.S. Treasury Securities Money Market (021) Class I 6/30/98
17.5 U.S. Treasury Securities Money Market (022) Class A 6/30/98
17.6 U.S. Treasury Securities Money Market (023) Class B 6/30/98
17.7 U.S. Treasury Securities Money Market (024) Class C 6/30/98
17.8 Municipal Money Market (031) Class I 6/30/98
17.9 Municipal Money Market (032) Class A 6/30/98
17.10 Income Equity (041) Class I 6/30/98
17.11 Income Equity (042) Class A 6/30/98
17.12 Income Equity (043) Class B 6/30/98
17.13 Income Equity (044) Class C 6/30/98
17.14 Income Bond (051) Class I 6/30/98
17.15 Income Bond (052) Class A 6/30/98
17.16 Income Bond (053) Class B 6/30/98
17.17 Intermediate Tax-Free Bond (061) Class I 6/30/98
17.18 Intermediate Tax-Free Bond (062) Class A 6/30/98
17.19 Intermediate Tax-Free Bond (063) Class B 6/30/98
17.20 Disciplined Value (071) Class I 6/30/98
17.21 Disciplined Value (072) Class A 6/30/98
17.22 Disciplined Value (073) Class B 6/30/98
17.23 Growth Opportunities (081) Class I 6/30/98
17.24 Growth Opportunities (082) Class A 6/30/98
17.25 Growth Opportunities (083) Class B 6/30/98
17.26 Growth Opportunities (084) Class C 6/30/98
17.27 Limited Volatility (101) Class I 6/30/98
17.28 Limited Volatility (102) Class A 6/30/98
17.29 Limited Volatility (103) Class B 6/30/98
17.30 Equity Index (111) Class I 6/30/98
17.31 Equity Index (112) Class A 6/30/98
17.32 Equity Index (113) Class B 6/30/98
17.33 Equity Index (114) Class C 6/30/98
17.34 Large Company Value (121) Class I 6/30/98
17.35 Large Company Value (122) Class A 6/30/98
17.36 Large Company Value (123) Class B 6/30/98
17.37 Ohio Municipal Bond (131) Class I 6/30/98
17.38 Ohio Municipal Bond (132) Class A 6/30/98
17.39 Ohio Municipal Bond (133) Class B 6/30/98
17.40 International Equity Index (141) Class I 6/30/98
17.41 International Equity Index (142) Class A 6/30/98
17.42 International Equity Index (143) Class B 6/30/98
17.43 International Equity Index (144) Class C 6/30/98
17.44 Treasury Only Money Market (151) Class I 6/30/98
17.45 Government Money Market (161) Class I 6/30/98
17.46 Asset Allocation (171) Class I 6/30/98
17.47 Asset Allocation (172) Class A 6/30/98
17.48 Asset Allocation (173) Class B 6/30/98
17.49 Government Bond (181) Class I 6/30/98
17.50 Government Bond (182) Class A 6/30/98
17.51 Government Bond (183) Class B 6/30/98
17.52 Ultra Short-Term Income (191) Class I 6/30/98
17.53 Ultra Short-Term Income (192) Class A 6/30/98
17.54 Ultra Short-Term Income (193) Class B 6/30/98
17.55 Municipal Income (201) Class I 6/30/98
17.56 Municipal Income (202) Class A 6/30/98
17.57 Municipal Income (203) Class B 6/30/98
17.58 Municipal Income (204) Class C 6/30/98
17.59 Ohio Municipal Money Market (211) Class I 6/30/98
17.60 Ohio Municipal Money Market (212) Class A 6/30/98
17.61 Intermediate Bond (221) Class I 6/30/98
17.62 Intermediate Bond (222) Class A 6/30/98
17.63 Intermediate Bond (223) Class B 6/30/98
17.64 Intermediate Bond (224) Class C 6/30/98
17.65 Large Company Growth (231) Class I 6/30/98
17.66 Large Company Growth (232) Class A 6/30/98
17.67 Large Company Growth (233) Class B 6/30/98
17.68 Large Company Growth (234) Class C 6/30/98
17.69 Kentucky Municipal Bond (241) Class I 6/30/98
17.70 Kentucky Municipal Bond (242) Class A 6/30/98
17.71 Kentucky Municipal Bond (243) Class B 6/30/98
17.72 Louisiana Municipal Bond (251) Class I 6/30/98
17.73 Louisiana Municipal Bond (252) Class A 6/30/98
17.74 Louisiana Municipal Bond (253) Class B 6/30/98
17.75 Small Capitalization (261) Class I 6/30/98
17.76 Small Capitalization (262) Class A 6/30/98
17.77 Small Capitalization (263) Class B 6/30/98
17.78 Small Capitalization (264) Class C 6/30/98
17.79 Value Growth (271) Class I 6/30/98
17.80 Value Growth (272) Class A 6/30/98
17.81 Value Growth (273) Class B 6/30/98
17.82 Value Growth (274) Class C 6/30/98
17.83 West Virginia Municipal Bond (291) Class I 6/30/98
17.84 West Virginia Municipal Bond (292) Class A 6/30/98
17.85 West Virginia Municipal Bond (293) Class B 6/30/98
17.86 Arizona Municipal Bond (301) Class I 6/30/98
17.87 Arizona Municipal Bond (302) Class A 6/30/98
17.88 Arizona Municipal Bond (303) Class B 6/30/98
17.89 Investor Growth (351) Class I 6/30/98
17.90 Investor Growth (352) Class A 6/30/98
17.91 Investor Growth (353) Class B 6/30/98
17.92 Investor Growth (354) Class C 6/30/98
17.93 Investor Growth & Income (361) Class I 6/30/98
17.94 Investor Growth & Income (362) Class A 6/30/98
17.95 Investor Growth & Income (363) Class B 6/30/98
17.96 Investor Growth & Income (364) Class C 6/30/98
17.97 Investor Conservative Growth (391) Class I 6/30/98
17.98 Investor Conservative Growth (392) Class A 6/30/98
17.99 Investor Conservative Growth (393) Class B 6/30/98
17.100 Investor Conservative Growth (394) Class C 6/30/98
17.101 Investor Balanced (401) Class I 6/30/98
17.102 Investor Balanced (402) Class A 6/30/98
17.103 Investor Balanced (403) Class B 6/30/98
17.104 Investor Balanced (404) Class C 6/30/98
17.105 Treasury & Agency (411) Class I 6/30/98
17.106 Treasury & Agency (412) Class A 6/30/98
17.107 Treasury & Agency (413) Class B 6/30/98
</TABLE>
(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).
17
<PAGE> 599
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.
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.
18
<PAGE> 600
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 Bond Fund.
Banc One Investment Advisors is an indirect wholly-owned
subsidiary of BANK ONE CORPORATION, a bank holding company
incorporated in the state of Ohio. BANK ONE CORPORATION
now operates affiliate banking organizations in Arizona,
Colorado, Illinois, Indiana, Kentucky, Louisiana,
Michigan, Ohio, Oklahoma, Texas, Utah, West Virginia and
Wisconsin. In addition, BANK 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.
19
<PAGE> 601
BANC ONE INVESTMENT ADVISORS
<TABLE>
<CAPTION>
Position with Other Substantial Type of
BANC ONE INVESTMENT ADVISORS OCCUPATION BUSINESS
<S> <C> <C>
David J. Kundert, Chairman and Chairman, Bank One Investment
CEO Trust Company, NA, 100
East Broad Street,
Columbus, Ohio 43215
Frederick L. Cullen, Director Chairman/CEO Bank Banking
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, Banc Banking
One Capital Corporation,
150 East Gay Street,
Columbus, Ohio 43215
David R. Meuse, Director Chairman/CEO Banc Investment
One Capital Holding
Corporation, 150 East
Gay Street, Columbus,
Ohio 43215
Michael J. McMennamin, Director Executive VP & Chief Banking
Financial Officer, BANK
ONE CORPORATION,
100 East Broad Street,
Columbus, Ohio 43215
</TABLE>
The principal business address of the principal executive officer and directors
of Banc One Investment Advisors is 1111 Polaris Parkway, P.O. Box 710211,
Columbus, Ohio 43271-0211.
20
<PAGE> 602
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.
<TABLE>
<CAPTION>
Position with Other Substantial Type of
Banc One Partners Occupation Business
- ----------------- ----------------- ----------
<S> <C> <C>
James P. Shanahan, Manager Pacholder Associates, Investment
Inc., Managing
Director & General
Counsel, 8044
Montgomery Road,
Suite #382, Cincinnati,
Ohio 45236
William J. Morgan, Manager Pacholder Associates, Investment
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
</TABLE>
21
<PAGE> 603
<TABLE>
<CAPTION>
<S> <C> <C>
Gary Madich, Manager Banc One Investment Investment
Advisors, Senior
Managing Director,
1111 Polaris Parkway,
Columbus, Ohio 43271
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 Associates, Investment
President -- Portfolio Manager Inc., Executive Vice
President, 8044
Montgomery Road,
Suite #382, Cincinnati,
Ohio 45236
</TABLE>
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.
<TABLE>
<CAPTION>
Positions and Offices
with The One Group Positions and
Name Services Company With Registrant
- ---- --------------------- ---------------
<S> <C> <C>
Lynn J. Mangum Chairman and Chief None
Executive Officer
Dennis Sheehan Director None
Kevin J. Dell Vice President/Secretary/ None
General Counsel
Michael D. Burns Vice President None
Steven Ludwig Compliance Officer None
</TABLE>
22
<PAGE> 604
<TABLE>
<CAPTION>
<S> <C> <C>
Robert Tuch Assistant Secretary None
David P. Blackmore Vice President/ None
Chief Financial Officer
Mark S. Redman President President
Mark J. Ryberczyk Senior Vice President None
William J. Tonko Senior Vice President Treasurer
</TABLE>
(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).
23
<PAGE> 605
Item 31. MANAGEMENT SERVICES
N/A
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.
24
<PAGE> 606
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933 and the Investment
Company Act of 1940, the Registrant certifies that it meets all of the
requirements for effectiveness of this Registration Statement pursuant to Rule
485(b) under the Securities Act of 1933 and has duly caused this Post-Effective
Amendment No. 46 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
16th day of October, 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.
<TABLE>
<CAPTION>
SIGNATURE TITLE DATE
<S> <C> <C>
/s/ Mark S. Redman President October 16, 1998
* Mark S. Redman
/S/ WILLIAM J. TOMKO Treasurer October 16, 1998
- ---------------------
*William J. Tomko
/S/ PETER C. MARSHALL Trustee October 16, 1998
- ---------------------
*Peter C. Marshall
/S/ CHARLES I. POST Trustee October 16, 1998
- --------------------
*Charles I. Post
/S/ JOHN S. RANDALL Trustee October 16, 1998
- --------------------
*John S. Randall
/S/ FREDERICK W. RUEBECK Trustee October 16, 1998
- -------------------------
*Frederick W. Ruebeck
/S/ ROBERT A ODEN, JR. Trustee October 16, 1998
- ----------------------
*Robert A Oden, Jr.
/S/ JOHN F. FINN Trustee October 16, 1998
- ----------------
*John F. Finn
By: /s/ ALAN G. PRIEST
------------------
Alan G. Priest
Attorney-in-Fact
</TABLE>
25
<PAGE> 607
EXHIBIT INDEX
Exhibit No. Description
- ----------- -----------
10 Opinion of Counsel
11(a) Consent of PricewaterhouseCoopers LLP
11(b) Consent of Ropes & Gray
27 Financial Data schedules for:
<TABLE>
<CAPTION>
<S> <C> <C> <C>
27.1 Prime Money Market (011) Class I 6/30/98
27.2 Prime Money Market (012) Class A 6/30/98
27.3 Prime Money Market (013) Class B 6/30/98
27.4 U.S. Treasury Securities Money Market (021) Class I 6/30/98
27.5 U.S. Treasury Securities Money Market (022) Class A 6/30/98
27.6 U.S. Treasury Securities Money Market (023) Class B 6/30/98
27.7 U.S. Treasury Securities Money Market (024) Class C 6/30/98
27.8 Municipal Money Market (031) Class I 6/30/98
27.9 Municipal Money Market (032) Class A 6/30/98
27.10 Income Equity (041) Class I 6/30/98
27.11 Income Equity (042) Class A 6/30/98
27.12 Income Equity (043) Class B 6/30/98
27.13 Income Equity (044) Class C 6/30/98
27.14 Income Bond (051) Class I 6/30/98
27.15 Income Bond (052) Class A 6/30/98
27.16 Income Bond (053) Class B 6/30/98
27.17 Intermediate Tax-Free Bond (061) Class I 6/30/98
27.18 Intermediate Tax-Free Bond (062) Class A 6/30/98
27.19 Intermediate Tax-Free Bond (063) Class B 6/30/98
27.20 Disciplined Value (071) Class I 6/30/98
27.21 Disciplined Value (072) Class A 6/30/98
27.22 Disciplined Value (073) Class B 6/30/98
27.23 Growth Opportunities (081) Class I 6/30/98
27.24 Growth Opportunities (082) Class A 6/30/98
27.25 Growth Opportunities (083) Class B 6/30/98
27.26 Growth Opportunities (084) Class C 6/30/98
27.27 Limited Volatility (101) Class I 6/30/98
27.28 Limited Volatility (102) Class A 6/30/98
27.29 Limited Volatility (103) Class B 6/30/98
27.30 Equity Index (111) Class I 6/30/98
27.31 Equity Index (112) Class A 6/30/98
27.32 Equity Index (113) Class B 6/30/98
27.33 Equity Index (114) Class C 6/30/98
27.34 Large Company Value (121) Class I 6/30/98
27.35 Large Company Value (122) Class A 6/30/98
27.36 Large Company Value (123) Class B 6/30/98
27.37 Ohio Municipal Bond (131) Class I 6/30/98
27.38 Ohio Municipal Bond (132) Class A 6/30/98
27.39 Ohio Municipal Bond (133) Class B 6/30/98
27.40 International Equity Index (141) Class I 6/30/98
27.41 International Equity Index (142) Class A 6/30/98
27.42 International Equity Index (143) Class B 6/30/98
27.43 International Equity Index (144) Class C 6/30/98
27.44 Treasury Only Money Market (151) Class I 6/30/98
27.45 Government Money Market (161) Class I 6/30/98
27.46 Asset Allocation (171) Class I 6/30/98
27.47 Asset Allocation (172) Class A 6/30/98
27.48 Asset Allocation (173) Class B 6/30/98
27.49 Government Bond (181) Class I 6/30/98
27.50 Government Bond (182) Class A 6/30/98
27.51 Government Bond (183) Class B 6/30/98
27.52 Ultra Short-Term Income (191) Class I 6/30/98
27.53 Ultra Short-Term Income (192) Class A 6/30/98
27.54 Ultra Short-Term Income (193) Class B 6/30/98
27.55 Municipal Income (201) Class I 6/30/98
27.56 Municipal Income (202) Class A 6/30/98
27.57 Municipal Income (203) Class B 6/30/98
27.58 Municipal Income (204) Class C 6/30/98
27.59 Ohio Municipal Money Market (211) Class I 6/30/98
27.60 Ohio Municipal Money Market (212) Class A 6/30/98
27.61 Intermediate Bond (221) Class I 6/30/98
27.62 Intermediate Bond (222) Class A 6/30/98
27.63 Intermediate Bond (223) Class B 6/30/98
27.64 Intermediate Bond (224) Class C 6/30/98
27.65 Large Company Growth (231) Class I 6/30/98
27.66 Large Company Growth (232) Class A 6/30/98
27.67 Large Company Growth (233) Class B 6/30/98
27.68 Large Company Growth (234) Class C 6/30/98
27.69 Kentucky Municipal Bond (241) Class I 6/30/98
27.70 Kentucky Municipal Bond (242) Class A 6/30/98
27.71 Kentucky Municipal Bond (243) Class B 6/30/98
27.72 Louisiana Municipal Bond (251) Class I 6/30/98
27.73 Louisiana Municipal Bond (252) Class A 6/30/98
27.74 Louisiana Municipal Bond (253) Class B 6/30/98
27.75 Small Capitalization (261) Class I 6/30/98
27.76 Small Capitalization (262) Class A 6/30/98
27.77 Small Capitalization (263) Class B 6/30/98
27.78 Small Capitalization (264) Class C 6/30/98
27.79 Value Growth (271) Class I 6/30/98
27.80 Value Growth (272) Class A 6/30/98
27.81 Value Growth (273) Class B 6/30/98
27.82 Value Growth (274) Class C 6/30/98
27.83 West Virginia Municipal Bond (291) Class I 6/30/98
27.84 West Virginia Municipal Bond (292) Class A 6/30/98
27.85 West Virginia Municipal Bond (293) Class B 6/30/98
27.86 Arizona Municipal Bond (301) Class I 6/30/98
27.87 Arizona Municipal Bond (302) Class A 6/30/98
27.88 Arizona Municipal Bond (303) Class B 6/30/98
27.89 Investor Growth (351) Class I 6/30/98
27.90 Investor Growth (352) Class A 6/30/98
27.91 Investor Growth (353) Class B 6/30/98
27.92 Investor Growth (354) Class C 6/30/98
27.93 Investor Growth & Income (361) Class I 6/30/98
27.94 Investor Growth & Income (362) Class A 6/30/98
27.95 Investor Growth & Income (363) Class B 6/30/98
27.96 Investor Growth & Income (364) Class C 6/30/98
27.97 Investor Conservative Growth (391) Class I 6/30/98
27.98 Investor Conservative Growth (392) Class A 6/30/98
27.99 Investor Conservative Growth (393) Class B 6/30/98
27.100 Investor Conservative Growth (394) Class C 6/30/98
27.101 Investor Balanced (401) Class I 6/30/98
27.102 Investor Balanced (402) Class A 6/30/98
27.103 Investor Balanced (403) Class B 6/30/98
27.104 Investor Balanced (404) Class C 6/30/98
27.105 Treasury & Agency (411) Class I 6/30/98
27.106 Treasury & Agency (412) Class A 6/30/98
27.107 Treasury & Agency (413) Class B 6/30/98
</TABLE>
26
<PAGE> 1
EXHIBIT 10
October 16, 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(a)
CONSENT OF INDEPENDENT ACCOUNTANTS
We consent to the incorporation by reference in this Post-Effective Amendment
No. 46 to the Registration Statement on Form N-1A (File No. 2-95973) of The One
Group, of our reports dated August 18, 1998 on our audits of the financial
statements and financial highlights of the U.S. Treasury Securities Money Market
Fund, the Prime Money Market Fund, the Municipal Money Market Fund, the Ohio
Municipal Money Market Fund, the Ultra Short-Term Bond Fund, the Limited
Volatility Bond Fund, the Intermediate Bond Fund, the Government Bond Fund, the
Income Bond Fund, the Treasury & Agency Fund, the Intermediate Tax-Free Bond
Fund, the Municipal Income Fund, the Kentucky Municipal Bond Fund, the Ohio
Municipal Bond Fund, the Louisiana Municipal Bond Fund, the West Virginia
Municipal Bond Fund, the Arizona Municipal Bond Fund, the Treasury Only Money
Market Fund, the Government Money Market Fund, the Asset Allocation Fund, the
Income Equity Fund, the Equity Index Fund, the Value Growth Fund, the Large
Company Value Fund, the Disciplined Value Fund, the Large Company Growth Fund,
the Growth Opportunities Fund, the Gulf South Growth Fund, the International
Equity Index Fund, the Investor Growth Fund, the Investor Growth & Income Fund,
the Investor Balanced Fund, and the Investor Conservative Growth Fund
constituting The One Group, which reports are included in the Annual Reports to
Shareholders for the year ended June 30, 1998. We also consent to the references
to our Firm under the caption "Financial Highlights" in the Prospectuses and
"Experts" in the Statement of Additional Information relating to The One Group
which are incorporated by reference in this Post-Effective Amendment No. 46 to
the Registration Statement on Form N-1A (File No. 2-95973).
/s/PricewaterhouseCoopers LLP
PricewaterhouseCoopers LLP
Columbus, Ohio
October 16, 1998
<PAGE> 1
EXHIBIT 11(b)
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. 46 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.
October 16, 1998
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<FN>
<F1>CLASS A
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<CIK> 0000763852
<NAME> THE ONE GROUP FAMILY OF MUTUAL FUNDS
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<NUMBER> 023
<NAME> THE ONE GROUP US TREASURY SECURITIES MM FUND
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<FN>
<F1>CLASS B
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</TABLE>
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<CIK> 0000763852
<NAME> THE ONE GROUP FAMILY OF MUTUAL FUNDS
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<NUMBER> 024
<NAME> THE ONE GROUP US TREASURY SECURITIES MM FUND
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<F1>CLASS C
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</TABLE>
<TABLE> <S> <C>
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<CIK> 0000763852
<NAME> THE ONE GROUP FAMILY OF MUTUAL FUNDS
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<NUMBER> 031
<NAME> THE ONE GROUP MUNICIPAL MONEY MARKET FUND
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<S> <C>
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<F1>FIDUCIARY CLASS
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</TABLE>
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<CIK> 0000763852
<NAME> THE ONE GROUP FAMILY OF MUTUAL FUNDS
<SERIES>
<NUMBER> 032
<NAME> THE ONE GROUP MUNICIPAL MONEY MARKET FUND
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<NAME> THE ONE GROUP FAMILY OF MUTUAL FUNDS
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<NUMBER> 041
<NAME> THE ONE GROUP INCOME EQUITY FUND
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<F1>FIDUCIARY CLASS
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</TABLE>
<TABLE> <S> <C>
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<CIK> 0000763852
<NAME> THE ONE GROUP FAMILY OF MUTUAL FUNDS
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<NUMBER> 042
<NAME> THE ONE GROUP INCOME EQUITY FUND
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<NAME> THE ONE GROUP FAMILY OF MUTUAL FUNDS
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<NAME> THE ONE GROUP INCOME EQUITY FUND
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<FN>
<F1>CLASS B
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</TABLE>
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<NAME> THE ONE GROUP FAMILY OF MUTUAL FUNDS
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<NAME> THE ONE GROUP INCOME EQUITY FUND
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<GROSS-EXPENSE> 10417
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<PER-SHARE-NII> .06<F1>
<PER-SHARE-GAIN-APPREC> 3.39<F1>
<PER-SHARE-DIVIDEND> .07<F1>
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<EXPENSE-RATIO> 1.98<F1>
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0
<FN>
<F1>CLASS C
</FN>
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 6
<CIK> 0000763852
<NAME> THE ONE GROUP FAMILY OF MUTUAL FUNDS
<SERIES>
<NUMBER> 051
<NAME> THE ONE GROUP INCOME BOND FUND
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> JUN-30-1998
<PERIOD-START> JUL-01-1997
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<FN>
<F1>FIDUCIARY CLASS
</FN>
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 6
<CIK> 0000763852
<NAME> THE ONE GROUP FAMILY OF MUTUAL FUNDS
<SERIES>
<NUMBER> 052
<NAME> THE ONE GROUP INCOME BOND FUND
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> JUN-30-1998
<PERIOD-START> JUL-01-1997
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<NUMBER-OF-SHARES-SOLD> 715<F1>
<NUMBER-OF-SHARES-REDEEMED> 768<F1>
<SHARES-REINVESTED> 81<F1>
<NET-CHANGE-IN-ASSETS> 172560
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<GROSS-EXPENSE> 7035
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<PER-SHARE-NAV-BEGIN> 9.41<F1>
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<PER-SHARE-GAIN-APPREC> .10<F1>
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<FN>
<F1>CLASS A
</FN>
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 6
<CIK> 0000763852
<NAME> THE ONE GROUP FAMILY OF MUTUAL FUNDS
<SERIES>
<NUMBER> 053
<NAME> THE ONE GROUP INCOME BOND FUND
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> JUN-30-1998
<PERIOD-START> JUL-01-1997
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<SHARES-REINVESTED> 62<F1>
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<GROSS-EXPENSE> 7035
<AVERAGE-NET-ASSETS> 13785<F1>
<PER-SHARE-NAV-BEGIN> 9.49<F1>
<PER-SHARE-NII> .56<F1>
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<AVG-DEBT-PER-SHARE> 0
<FN>
<F1>CLASS B
</FN>
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 6
<CIK> 0000763852
<NAME> THE ONE GROUP FAMILY OF MUTUAL FUNDS
<SERIES>
<NUMBER> 061
<NAME> THE ONE GROUP INTERMEDIATE TAX-FREE BOND FUND
<MULTIPLIER> 1,000
<S> <C>
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<EXPENSE-RATIO> .60<F1>
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<FN>
<F1>FIDUCIARY CLASS
</FN>
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 6
<CIK> 0000763852
<NAME> THE ONE GROUP FAMILY OF MUTUAL FUNDS
<SERIES>
<NUMBER> 062
<NAME> THE ONE GROUP INTERMEDIATE TAX-FREE BOND FUND
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> YEAR
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<NUMBER-OF-SHARES-REDEEMED> 214<F1>
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<NET-CHANGE-IN-ASSETS> 51007
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<GROSS-EXPENSE> 4054
<AVERAGE-NET-ASSETS> 10941<F1>
<PER-SHARE-NAV-BEGIN> 10.91<F1>
<PER-SHARE-NII> .50<F1>
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<FN>
<F1>CLASS A
</FN>
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 6
<CIK> 0000763852
<NAME> THE ONE GROUP FAMILY OF MUTUAL FUNDS
<SERIES>
<NUMBER> 063
<NAME> THE ONE GROUP INTERMEDIATE TAX-FREE BOND FUND
<MULTIPLIER> 1,000
<S> <C>
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<FN>
<F1>CLASS B
</FN>
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 6
<CIK> 0000763852
<NAME> THE ONE GROUP FAMILY OF MUTUAL FUNDS
<SERIES>
<NUMBER> 071
<NAME> THE ONE GROUP DISCIPLINED VALUE FUND
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<S> <C>
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<FN>
<F1>FIDUCIARY CLASS
</FN>
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 6
<CIK> 0000763852
<NAME> THE ONE GROUP FAMILY OF MUTUAL FUNDS
<SERIES>
<NUMBER> 072
<NAME> THE ONE GROUP DISCIPLINED VALUE FUND
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<S> <C>
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<FN>
<F1>CLASS A
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<TABLE> <S> <C>
<ARTICLE> 6
<CIK> 0000763852
<NAME> THE ONE GROUP FAMILY OF MUTUAL FUNDS
<SERIES>
<NUMBER> 073
<NAME> THE ONE GROUP DISCIPLINED VALUE FUND
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<F1>CLASS B
</FN>
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 6
<CIK> 0000763852
<NAME> THE ONE GROUP FAMILY OF MUTUAL FUNDS
<SERIES>
<NUMBER> 081
<NAME> THE ONE GROUP GROWTH OPPORTUNITIES FUND
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<S> <C>
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<FN>
<F1>FIDUCIARY CLASS
</FN>
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 6
<CIK> 0000763852
<NAME> THE ONE GROUP FAMILY OF MUTUAL FUNDS
<SERIES>
<NUMBER> 082
<NAME> THE ONE GROUP GROWTH OPPORTUNITIES FUND
<MULTIPLIER> 1,000
<S> <C>
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<FISCAL-YEAR-END> JUN-30-1998
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<PER-SHARE-NII> (.08)<F1>
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<FN>
<F1>CLASS A
</FN>
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 6
<CIK> 0000763852
<NAME> THE ONE GROUP FAMILY OF MUTUAL FUNDS
<SERIES>
<NUMBER> 083
<NAME> THE ONE GROUP GROWTH OPPORTUNITIES FUND
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<S> <C>
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<GROSS-EXPENSE> 9688
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<F1>CLASS B
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</TABLE>
<TABLE> <S> <C>
<ARTICLE> 6
<CIK> 0000763852
<NAME> THE ONE GROUP FAMILY OF MUTUAL FUNDS
<SERIES>
<NUMBER> 084
<NAME> THE ONE GROUP GROWTH OPPORTUNITIES FUND
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<S> <C>
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<FN>
<F1>CLASS C
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</TABLE>
<TABLE> <S> <C>
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<CIK> 0000763852
<NAME> THE ONE GROUP FAMILY OF MUTUAL FUNDS
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<NUMBER> 101
<NAME> THE ONE GROUP LIMITED VOLATILITY BOND FUND
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<S> <C>
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<FN>
<F1>FIDUCIARY CLASS
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</TABLE>
<TABLE> <S> <C>
<ARTICLE> 6
<CIK> 0000763852
<NAME> THE ONE GROUP FAMILY OF MUTUAL FUNDS
<SERIES>
<NUMBER> 102
<NAME> THE ONE GROUP LIMITED VOLATILITY BOND FUND
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<S> <C>
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<FN>
<F1>CLASS A
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</TABLE>
<TABLE> <S> <C>
<ARTICLE> 6
<CIK> 0000763852
<NAME> THE ONE GROUP FAMILY OF MUTUAL FUNDS
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<NUMBER> 103
<NAME> THE ONE GROUP LIMITED VOLATILITY BOND FUND
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<S> <C>
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<FN>
<F1>CLASS B
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</TABLE>
<TABLE> <S> <C>
<ARTICLE> 6
<CIK> 0000763852
<NAME> THE ONE GROUP FAMILY OF MUTUAL FUNDS
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<NUMBER> 111
<NAME> THE ONE GROUP EQUITY INDEX FUND
<MULTIPLIER> 1,000
<S> <C>
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<FN>
<F1>FIDUCIARY CLASS
</FN>
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 6
<CIK> 0000763852
<NAME> THE ONE GROUP FAMILY OF MUTUAL FUNDS
<SERIES>
<NUMBER> 112
<NAME> THE ONE GROUP EQUITY INDEX FUND
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<S> <C>
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<FN>
<F1>CLASS A
</FN>
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 6
<CIK> 0000763852
<NAME> THE ONE GROUP FAMILY OF MUTUAL FUNDS
<SERIES>
<NUMBER> 113
<NAME> THE ONE GROUP EQUITY INDEX FUND
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<FN>
<F1>CLASS B
</FN>
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 6
<CIK> 0000763852
<NAME> THE ONE GROUP FAMILY OF MUTUAL FUNDS
<SERIES>
<NUMBER> 114
<NAME> THE ONE GROUP EQUITY INDEX FUND
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<S> <C>
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<FN>
<F1>CLASS C
</FN>
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 6
<CIK> 0000763852
<NAME> THE ONE GROUP FAMILY OF MUTUAL FUNDS
<SERIES>
<NUMBER> 121
<NAME> THE ONE GROUP LARGE COMPANY VALUE FUND
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> JUN-30-1998
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<FN>
<F1>FIDUCIARY CLASS
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</TABLE>
<TABLE> <S> <C>
<ARTICLE> 6
<CIK> 0000763852
<NAME> THE ONE GROUP FAMILY OF MUTUAL FUNDS
<SERIES>
<NUMBER> 122
<NAME> THE ONE GROUP LARGE COMPANY VALUE FUND
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<S> <C>
<PERIOD-TYPE> YEAR
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<GROSS-EXPENSE> 7408
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<FN>
<F1>CLASS A
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</TABLE>
<TABLE> <S> <C>
<ARTICLE> 6
<CIK> 0000763852
<NAME> THE ONE GROUP FAMILY OF MUTUAL FUNDS
<SERIES>
<NUMBER> 123
<NAME> THE ONE GROUP LARGE COMPANY VALUE FUND
<MULTIPLIER> 1,000
<S> <C>
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<FN>
<F1>CLASS B
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</TABLE>
<TABLE> <S> <C>
<ARTICLE> 6
<CIK> 0000763852
<NAME> THE ONE GROUP FAMILY OF MUTUAL FUNDS
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<NUMBER> 131
<NAME> THE ONE GROUP OHIO MUNICIPAL BOND FUND
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<S> <C>
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<NUMBER-OF-SHARES-REDEEMED> 2097<F1>
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<PER-SHARE-GAIN-APPREC> .20<F1>
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<FN>
<F1>FIDUCIARY CLASS
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</TABLE>
<TABLE> <S> <C>
<ARTICLE> 6
<CIK> 0000763852
<NAME> THE ONE GROUP FAMILY OF MUTUAL FUNDS
<SERIES>
<NUMBER> 132
<NAME> THE ONE GROUP OHIO MUNICIPAL BOND FUND
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<S> <C>
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<F1>CLASS A
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<TABLE> <S> <C>
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<CIK> 0000763852
<NAME> THE ONE GROUP FAMILY OF MUTUAL FUNDS
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<NUMBER> 133
<NAME> THE ONE GROUP OHIO MUNICIPAL BOND FUND
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<S> <C>
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<FISCAL-YEAR-END> JUN-30-1998
<PERIOD-START> JUL-01-1997
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<F1>CLASS B
</FN>
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 6
<CIK> 0000763852
<NAME> THE ONE GROUP FAMILY OF MUTUAL FUNDS
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<NUMBER> 141
<NAME> THE ONE GROUP INTERNATIONAL EQUITY INDEX FUND
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<S> <C>
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<F1>FIDUCIARY CLASS
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</TABLE>
<TABLE> <S> <C>
<ARTICLE> 6
<CIK> 0000763852
<NAME> THE ONE GROUP FAMILY OF MUTUAL FUNDS
<SERIES>
<NUMBER> 142
<NAME> THE ONE GROUP INTERNATIONAL EQUITY INDEX FUND
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<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> JUN-30-1998
<PERIOD-START> JUL-01-1997
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<PER-SHARE-NII> .19<F1>
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<F1>CLASS A
</FN>
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 6
<CIK> 0000763852
<NAME> THE ONE GROUP FAMILY OF MUTUAL FUNDS
<SERIES>
<NUMBER> 143
<NAME> THE ONE GROUP INTERNATIONAL EQUITY INDEX FUND
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<S> <C>
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<F1>CLASS B
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</TABLE>
<TABLE> <S> <C>
<ARTICLE> 6
<CIK> 0000763852
<NAME> THE ONE GROUP FAMILY OF MUTUAL FUNDS
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<NUMBER> 144
<NAME> THE ONE GROUP INTERNATIONAL EQUITY INDEX FUND
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<F1>CLASS C
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<TABLE> <S> <C>
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<NAME> THE ONE GROUP FAMILY OF MUTUAL FUNDS
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<NAME> THE ONE GROUP TREASURY ONLY MONEY MARKET FUND
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<TABLE> <S> <C>
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<CIK> 0000763852
<NAME> THE ONE GROUP FAMILY OF MUTUAL FUNDS
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<NAME> THE ONE GROUP GOVERNMENT MONEY MARKET FUND
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<F1>FIDUCIARY CLASS
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<TABLE> <S> <C>
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<CIK> 0000763852
<NAME> THE ONE GROUP FAMILY OF MUTUAL FUNDS
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<NUMBER> 171
<NAME> THE ONE GROUP ASSET ALLOCATION FUND
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<S> <C>
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<F1>FIDUCIARY CLASS
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<CIK> 0000763852
<NAME> THE ONE GROUP FAMILY OF MUTUAL FUNDS
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<NUMBER> 172
<NAME> THE ONE GROUP ASSET ALLOCATION FUND
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<F1>CLASS A
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</TABLE>
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<CIK> 0000763852
<NAME> THE ONE GROUP FAMILY OF MUTUAL FUNDS
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<NUMBER> 173
<NAME> THE ONE GROUP ASSET ALLOCATION FUND
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<F1>CLASS B
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</TABLE>
<TABLE> <S> <C>
<ARTICLE> 6
<CIK> 0000763852
<NAME> THE ONE GROUP FAMILY OF MUTUAL FUNDS
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<NUMBER> 181
<NAME> THE ONE GROUP GOVERNMENT BOND FUND
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<S> <C>
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<F1>FIDUCIARY CLASS
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</TABLE>
<TABLE> <S> <C>
<ARTICLE> 6
<CIK> 0000763852
<NAME> THE ONE GROUP FAMILY OF MUTUAL FUNDS
<SERIES>
<NUMBER> 182
<NAME> THE ONE GROUP GOVERNMENT BOND FUND
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<S> <C>
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<F1>CLASS A
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</TABLE>
<TABLE> <S> <C>
<ARTICLE> 6
<CIK> 0000763852
<NAME> THE ONE GROUP FAMILY OF MUTUAL FUNDS
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<NUMBER> 183
<NAME> THE ONE GROUP GOVERNMENT BOND FUND
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<S> <C>
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<F1>CLASS B
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</TABLE>
<TABLE> <S> <C>
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<CIK> 0000763852
<NAME> THE ONE GROUP FAMILY OF MUTUAL FUNDS
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<NUMBER> 191
<NAME> THE ONE GROUP ULTRA SHORT-TERM INCOME FUND
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<CIK> 0000763852
<NAME> THE ONE GROUP FAMILY OF MUTUAL FUNDS
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<NAME> THE ONE GROUP ULTRA SHORT-TERM INCOME FUND
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<NAME> THE ONE GROUP FAMILY OF MUTUAL FUNDS
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<NAME> THE ONE GROUP ULTRA SHORT-TERM INCOME FUND
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<F1>CLASS B
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<NAME> THE ONE GROUP FAMILY OF MUTUAL FUNDS
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<NAME> THE ONE GROUP MUNICIPAL INCOME BOND FUND
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<NAME> THE ONE GROUP FAMILY OF MUTUAL FUNDS
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<NAME> THE ONE GROUP MUNICIPAL INCOME BOND FUND
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<NAME> THE ONE GROUP FAMILY OF MUTUAL FUNDS
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<NAME> THE ONE GROUP MUNICIPAL INCOME BOND FUND
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<NAME> THE ONE GROUP FAMILY OF MUTUAL FUNDS
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<NAME> THE ONE GROUP MUNICIPAL INCOME BOND FUND
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</TABLE>
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<NAME> THE ONE GROUP FAMILY OF MUTUAL FUNDS
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<NUMBER> 211
<NAME> THE ONE GROUP OHIO MUNICIPAL MONEY MARKT FUND
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<F1>FIDUCIARY CLASS
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<NAME> THE ONE GROUP FAMILY OF MUTUAL FUNDS
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<NUMBER> 212
<NAME> THE ONE GROUP OHIO MUNICIPAL MONEY MARKT FUND
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<S> <C>
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<NAME> THE ONE GROUP FAMILY OF MUTUAL FUNDS
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<NAME> THE ONE GROUP INTERMEDIATE BOND FUND
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<F1>FIDUCIARY CLASS
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<NAME> THE ONE GROUP FAMILY OF MUTUAL FUNDS
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<F1>CLASS A
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<NAME> THE ONE GROUP FAMILY OF MUTUAL FUNDS
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<NUMBER> 223
<NAME> THE ONE GROUP INTERMEDIATE BOND FUND
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<F1>CLASS B
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</TABLE>
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<ARTICLE> 6
<CIK> 0000763852
<NAME> THE ONE GROUP FAMILY OF MUTUAL FUNDS
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<NUMBER> 224
<NAME> THE ONE GROUP INTERMEDIATE BOND FUND
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<S> <C>
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<F1>CLASS C
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</TABLE>
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<ARTICLE> 6
<CIK> 0000763852
<NAME> THE ONE GROUP FAMILY OF MUTUAL FUNDS
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<NUMBER> 231
<NAME> THE ONE GROUP LARGE COMPANY GROWTH FUND
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<S> <C>
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<F1>FIDUCIARY CLASS
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</TABLE>
<TABLE> <S> <C>
<ARTICLE> 6
<CIK> 0000763852
<NAME> THE ONE GROUP FAMILY OF MUTUAL FUNDS
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<NUMBER> 232
<NAME> THE ONE GROUP LARGE COMPANY GROWTH FUND
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<S> <C>
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</TABLE>
<TABLE> <S> <C>
<ARTICLE> 6
<CIK> 0000763852
<NAME> THE ONE GROUP FAMILY OF MUTUAL FUNDS
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<NUMBER> 233
<NAME> THE ONE GROUP LARGE COMPANY GROWTH FUND
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<NAME> THE ONE GROUP FAMILY OF MUTUAL FUNDS
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<NAME> THE ONE GROUP LARGE COMPANY GROWTH FUND
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<NAME> THE ONE GROUP FAMILY OF MUTUAL FUNDS
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<NAME> THE ONE GROUP KENTUCKY MUNICIPAL BOND FUND
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<F1>FIDUCIARY CLASS
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<NAME> THE ONE GROUP FAMILY OF MUTUAL FUNDS
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<PER-SHARE-GAIN-APPREC> .20<F1>
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<AVG-DEBT-PER-SHARE> 0
<FN>
<F1>CLASS A
</FN>
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 6
<CIK> 0000763852
<NAME> THE ONE GROUP FAMILY OF MUTUAL FUNDS
<SERIES>
<NUMBER> 243
<NAME> THE ONE GROUP KENTUCKY MUNICIPAL BOND FUND
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<S> <C>
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<FISCAL-YEAR-END> JUN-30-1998
<PERIOD-START> JUL-01-1997
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<NUMBER-OF-SHARES-REDEEMED> 29<F1>
<SHARES-REINVESTED> 8<F1>
<NET-CHANGE-IN-ASSETS> 10917
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<EXPENSE-RATIO> 1.51<F1>
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<AVG-DEBT-PER-SHARE> 0
<FN>
<F1>CLASS B
</FN>
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 6
<CIK> 0000763852
<NAME> THE ONE GROUP FAMILY OF MUTUAL FUNDS
<SERIES>
<NUMBER> 251
<NAME> THE ONE GROUP LOUISIANA MUNICIPAL BOND FUND
<MULTIPLIER> 1,000
<S> <C>
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<SHARES-COMMON-PRIOR> 11221<F1>
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<NET-CHANGE-IN-ASSETS> (20429)
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<GROSS-EXPENSE> 1502
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<PER-SHARE-NII> .50<F1>
<PER-SHARE-GAIN-APPREC> .16<F1>
<PER-SHARE-DIVIDEND> .50<F1>
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<AVG-DEBT-PER-SHARE> 0
<FN>
<F1>FIDUCIARY CLASS
</FN>
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 6
<CIK> 0000763852
<NAME> THE ONE GROUP FAMILY OF MUTUAL FUNDS
<SERIES>
<NUMBER> 252
<NAME> THE ONE GROUP LOUISIANA MUNICIPAL BOND FUND
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> JUN-30-1998
<PERIOD-START> JUL-01-1997
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<INVESTMENTS-AT-COST> 137584
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<PAID-IN-CAPITAL-COMMON> 137009
<SHARES-COMMON-STOCK> 4589<F1>
<SHARES-COMMON-PRIOR> 4802<F1>
<ACCUMULATED-NII-CURRENT> 0
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<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 7940
<NET-ASSETS> 145242
<DIVIDEND-INCOME> 20
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<APPREC-INCREASE-CURRENT> 1590
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<NUMBER-OF-SHARES-REDEEMED> 872<F1>
<SHARES-REINVESTED> 140<F1>
<NET-CHANGE-IN-ASSETS> (20429)
<ACCUMULATED-NII-PRIOR> 0
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<OVERDIST-NET-GAINS-PRIOR> 675
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<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 1502
<AVERAGE-NET-ASSETS> 48628<F1>
<PER-SHARE-NAV-BEGIN> 10.10<F1>
<PER-SHARE-NII> .47<F1>
<PER-SHARE-GAIN-APPREC> .16<F1>
<PER-SHARE-DIVIDEND> .47<F1>
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<EXPENSE-RATIO> .85<F1>
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<AVG-DEBT-PER-SHARE> 0
<FN>
<F1>CLASS A
</FN>
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 6
<CIK> 0000763852
<NAME> THE ONE GROUP FAMILY OF MUTUAL FUNDS
<SERIES>
<NUMBER> 253
<NAME> THE ONE GROUP LOUISIANA MUNICIPAL BOND FUND
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> JUN-30-1998
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<ACCUM-APPREC-OR-DEPREC> 7940
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<REALIZED-GAINS-CURRENT> 968
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<NET-CHANGE-FROM-OPS> 9895
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<NUMBER-OF-SHARES-REDEEMED> 59<F1>
<SHARES-REINVESTED> 11<F1>
<NET-CHANGE-IN-ASSETS> (20429)
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<OVERDIST-NET-GAINS-PRIOR> 675
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<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 1502
<AVERAGE-NET-ASSETS> 4322<F1>
<PER-SHARE-NAV-BEGIN> 10.10<F1>
<PER-SHARE-NII> .41<F1>
<PER-SHARE-GAIN-APPREC> .16<F1>
<PER-SHARE-DIVIDEND> .41<F1>
<PER-SHARE-DISTRIBUTIONS> 0<F1>
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<PER-SHARE-NAV-END> 10.26<F1>
<EXPENSE-RATIO> 1.50<F1>
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0
<FN>
<F1>CLASS B
</FN>
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 6
<CIK> 0000763852
<NAME> THE ONE GROUP FAMILY OF MUTUAL FUNDS
<SERIES>
<NUMBER> 261
<NAME> THE ONE GROUP SMALL CAPITALIZATION FUND
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> JUN-30-1998
<PERIOD-START> JUL-01-1997
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<INVESTMENTS-AT-COST> 132255
<INVESTMENTS-AT-VALUE> 157845
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<ACCUM-APPREC-OR-DEPREC> 25925
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<APPREC-INCREASE-CURRENT> 1800
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<NUMBER-OF-SHARES-REDEEMED> 2551<F1>
<SHARES-REINVESTED> 724<F1>
<NET-CHANGE-IN-ASSETS> 45790
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<GROSS-EXPENSE> 1454
<AVERAGE-NET-ASSETS> 97062<F1>
<PER-SHARE-NAV-BEGIN> 10.94<F1>
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<PER-SHARE-NAV-END> 12.05<F1>
<EXPENSE-RATIO> 1.06<F1>
<AVG-DEBT-OUTSTANDING> 0
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<FN>
<F1>FIDUCIARY CLASS
</FN>
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 6
<CIK> 0000763852
<NAME> THE ONE GROUP FAMILY OF MUTUAL FUNDS
<SERIES>
<NUMBER> 262
<NAME> THE ONE GROUP SMALL CAPITALIZATION FUND
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> JUN-30-1998
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<NET-ASSETS> 145242
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<NET-INVESTMENT-INCOME> (163)
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<NUMBER-OF-SHARES-REDEEMED> 329<F1>
<SHARES-REINVESTED> 173<F1>
<NET-CHANGE-IN-ASSETS> 45790
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<ACCUMULATED-GAINS-PRIOR> 4697
<OVERDISTRIB-NII-PRIOR> 176
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<GROSS-ADVISORY-FEES> 902
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<GROSS-EXPENSE> 1454
<AVERAGE-NET-ASSETS> 19415<F1>
<PER-SHARE-NAV-BEGIN> 10.94<F1>
<PER-SHARE-NII> (.03)<F1>
<PER-SHARE-GAIN-APPREC> 2.44<F1>
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<AVG-DEBT-PER-SHARE> 0
<FN>
<F1>CLASS A
</FN>
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 6
<CIK> 0000763852
<NAME> THE ONE GROUP FAMILY OF MUTUAL FUNDS
<SERIES>
<NUMBER> 263
<NAME> THE ONE GROUP SMALL CAPITALIZATION FUND
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> YEAR
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<PERIOD-START> JUL-01-1997
<PERIOD-END> JUN-30-1998
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<INVESTMENTS-AT-VALUE> 157845
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<SHARES-REINVESTED> 49<F1>
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<GROSS-EXPENSE> 1454
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<PER-SHARE-NAV-BEGIN> 10.84<F1>
<PER-SHARE-NII> (.03)<F1>
<PER-SHARE-GAIN-APPREC> 2.31<F1>
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<AVG-DEBT-PER-SHARE> 0
<FN>
<F1>CLASS B
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</TABLE>
<TABLE> <S> <C>
<ARTICLE> 6
<CIK> 0000763852
<NAME> THE ONE GROUP FAMILY OF MUTUAL FUNDS
<SERIES>
<NUMBER> 264
<NAME> THE ONE GROUP SMALL CAPITALIZATION FUND
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<S> <C>
<PERIOD-TYPE> YEAR
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<NET-INVESTMENT-INCOME> (163)
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<GROSS-EXPENSE> 1454
<AVERAGE-NET-ASSETS> 19<F1>
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<PER-SHARE-NII> (.02)<F1>
<PER-SHARE-GAIN-APPREC> .29<F1>
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<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0
<FN>
<F1>CLASS C
</FN>
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 6
<CIK> 0000763852
<NAME> THE ONE GROUP FAMILY OF MUTUAL FUNDS
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<NAME> THE ONE GROUP VALUE GROWTH FUND
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<NAME> THE ONE GROUP VALUE GROWTH FUND
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<NAME> THE ONE GROUP FAMILY OF MUTUAL FUNDS
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<NAME> THE ONE GROUP VALUE GROWTH FUND
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<NAME> THE ONE GROUP FAMILY OF MUTUAL FUNDS
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<NAME> THE ONE GROUP VALUE GROWTH FUND
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<NAME> THE ONE GROUP FAMILY OF MUTUAL FUNDS
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<F1>FIDUCIARY CLASS
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<NAME> THE ONE GROUP ARIZONA MUNICIPAL BOND FUND
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<NAME> THE ONE GROUP FAMILY OF MUTUAL FUNDS
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<NAME> THE ONE GROUP INVESTOR GROWTH FUND
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<NAME> THE ONE GROUP FAMILY OF MUTUAL FUNDS
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<NAME> THE ONE GROUP INVESTOR GROWTH FUND
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<NAME> THE ONE GROUP FAMILY OF MUTUAL FUNDS
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<NAME> THE ONE GROUP INVESTOR GROWTH FUND
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<NAME> THE ONE GROUP FAMILY OF MUTUAL FUNDS
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<F1>FIDUCIARY CLASS
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<NAME> THE ONE GROUP INVESTOR CONSERVATIVE GROWTH FUND
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<PER-SHARE-NAV-BEGIN> 10.65<F1>
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<FN>
<F1>CLASS B
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</TABLE>
<TABLE> <S> <C>
<ARTICLE> 6
<CIK> 0000763852
<NAME> THE ONE GROUP FAMILY OF MUTUAL FUNDS
<SERIES>
<NUMBER> 404
<NAME> THE ONE GROUP INVESTOR BALANCED FUND
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<S> <C>
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<F1>CLASS C
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</TABLE>
<TABLE> <S> <C>
<ARTICLE> 6
<CIK> 0000763852
<NAME> THE ONE GROUP FAMILY OF MUTUAL FUNDS
<SERIES>
<NUMBER> 411
<NAME> THE ONE GROUP TREASURY AND AGENCY FUND
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<S> <C>
<PERIOD-TYPE> YEAR
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<FN>
<F1>FIDUCIARY CLASS
</FN>
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 6
<CIK> 0000763852
<NAME> THE ONE GROUP FAMILY OF MUTUAL FUNDS
<SERIES>
<NUMBER> 412
<NAME> THE ONE GROUP TREASURY AND AGENCY FUND
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> JUN-30-1998
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<TOTAL-LIABILITIES> 19991
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<SHARES-REINVESTED> 41<F1>
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<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 833
<AVERAGE-NET-ASSETS> 10758<F1>
<PER-SHARE-NAV-BEGIN> 9.98<F1>
<PER-SHARE-NII> .63<F1>
<PER-SHARE-GAIN-APPREC> .16<F1>
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<FN>
<F1>CLASS A
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</TABLE>
<TABLE> <S> <C>
<ARTICLE> 6
<CIK> 0000763852
<NAME> THE ONE GROUP FAMILY OF MUTUAL FUNDS
<SERIES>
<NUMBER> 413
<NAME> THE ONE GROUP TREASURY AND AGENCY FUND
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> YEAR
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<TOTAL-LIABILITIES> 19991
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<NUMBER-OF-SHARES-REDEEMED> 27<F1>
<SHARES-REINVESTED> 11<F1>
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<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 833
<AVERAGE-NET-ASSETS> 3959<F1>
<PER-SHARE-NAV-BEGIN> 9.99<F1>
<PER-SHARE-NII> .58<F1>
<PER-SHARE-GAIN-APPREC> .14<F1>
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<PER-SHARE-NAV-END> 10.08<F1>
<EXPENSE-RATIO> 1.08<F1>
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0
<FN>
<F1>CLASS B
</FN>
</TABLE>
